Short Term Liabilities
|9 Months Ended|
Sep. 30, 2018
|Debt Disclosure [Abstract]|
|Short Term Liabilities||
Note 9 – Short Term Liabilities
The Company entered into a commercial insurance premium finance and security agreement in December 2017. The agreement finances the Company’s annual D&O insurance premium. Payments are due in quarterly installments of approximately $24,000 and carry an annual percentage interest rate of 5.98%.
The Company had paid the yearly premium in full and had no outstanding balance as of September 30, 2018 and 2017 related to the agreement.
On March 26, 2018 the Company issued a promissory note to Steve Gorlin, father of Jarrett Gorlin, the Company’s CEO, for the principal amount of $200,000, plus interest, at a rate of five percent per year. The outstanding principal and all accrued but unpaid interest was originally due on May 15, 2018. The Company issued warrants to purchase an aggregate of 133,333 shares of common stock par value $.001 per share in conjunction with the promissory note to Mr. Gorlin. Each warrant has an exercise price of $0.75 and is exercisable for a period of five years commencing from the date of issuance. The Company recorded the proceeds from the promissory note and the accompanying warrants, which accrete over the period the loan is outstanding, on a relative fair basis of approximately $174,000 and $26,000, respectively.
On May 15, 2018, the Company entered into a modification agreement with Steve Gorlin whereby he agreed to convert $100,000 of the outstanding promissory note into Series B Shares. (See Note 7). Additionally, the due date for the remaining $100,000 of the promissory note was extended to August 31, 2018.
On August 21, 2018, the Company paid the remaining $100,000 plus unpaid accrued interest in the amount of $2,944, which was exclusive of the amortization expense recognized in connection with the accompanying warrants issued with the note, eliminating the Company’s debt obligation. (See Note 7)
In conjunction with the consummation of the Streamline acquisition on March 25, 2015, the Company assumed two promissory notes for approximately $135,000 and $125,000 to the Bank of North Dakota New Venture Capital Program and North Dakota Development Fund, both outside non-related parties. Payments on both notes are due in aggregate monthly installments of approximately $5,700 and carry an interest rate of 5%. Both notes have a maturity date of August 1, 2019. The promissory notes, including interest, had outstanding balances of approximately $62,000 and $104,000 at September 30, 2018 and December 31, 2017, respectively.
The Company incurred interest expense related to the promissory notes for the three and nine months ended September 30, 2018 in the amount of approximately $800 and $3,100, respectively. The Company incurred interest expense related to the promissory notes for the three and nine months ended September 30, 2017 in the amount of approximately $1,700 and $5,500, respectively. The Company had unpaid accrued interest in the amount of approximately $70,000 and $69,000 at September 30, 2018 and December 31, 2017, respectively, related to the promissory notes.
Expected future payments related to the promissory notes as of September 30, 2018, are approximately as follows:
For the year ending:
On January 31, 2018, the Company issued a 5% convertible debenture in exchange for $100,000. The debenture accrued interest at 5% per annum. Principal and interest were due on January 30, 2019. The debenture was convertible at the option of the holder into shares of the Company’s common stock at a conversion rate equivalent to 85% of the average closing price of the Company’s common stock for the 20 days preceding the conversion.
On April 26, 2018, the convertible debenture and unpaid accrued interest was converted into an aggregate of 266,301 shares of common stock, eliminating the Company’s debt obligation (Note 7). Prior to the conversion, the Company recognized approximately $400 and $1,200, respectively, in interest expense related to the convertible debenture during the nine months ending September 30, 2018. The market value of the common stock on the date of the conversion was $0.40. This difference lead to an immaterial amount related to a beneficial conversion feature.
In August and September 2018, the Company entered into a securities purchase agreement with select accredited investors, whereby the Company offered up to $1,000,000 in units at a purchase price of $50,000 per unit. Each unit consists of a 12% senior secured convertible note and a three-year warrant to purchase shares of the Company’s common stock. The notes are secured by all of the assets of the Company. (See Note 7).
In the offering, the Company sold an aggregate of 15 units and issued to investors an aggregate of $750,000 in principal amount of convertible notes and 1,875,000 warrants to purchase common stock, resulting in total gross proceeds of $750,000 to the Company. The convertible notes sold in the offering are convertible into an aggregate of 1,875,000 shares of common stock. The Company recorded the proceeds from the notes and the accompanying warrants, which accrete over the period the notes are outstanding, on a relative fair value basis of approximately $625,000 and $125,000, respectively. Accretion expense for the three and nine month period ending September 30, 2018 was approximately $14,000. The Company recognized $10,700 in unpaid accrued interest expense related to the notes as of September 30, 2018.
The entire disclosure for short-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef