Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt and Other Financing Arrangements

v3.10.0.1
Long-Term Debt and Other Financing Arrangements
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Long-Term Debt and Other Financing Arrangements

Note 5. Long-Term Debt and Other Financing Arrangements  

 

 

September 30, 2018

 

 

December 31, 2017 (Audited)

 

Financing agreement with FlatIron capital that is unsecured.  Down payment of $16,500 was required upfront and equal installment payments of $9,610 were made over a 10 month period. The note matured May 31, 2018. Annualized interest rate was 5.25%

 

$

-

 

 

$

39,028

 

Financing agreement with FlatIron capital that is unsecured.  Down payment of $28,125 was required upfront and equal installment payments of $8,701 to be made over a 10 month period. The note matures May 1, 2019. Annualized interest is 5.99%

 

$

69,610

 

 

$

-

 

Senior secured convertible promissory note issued to Esousa Holdings LLC bearing interest at 10.5% that matures October 2, 2018. The interest is payable upon maturity. The note is secured by a lien on all of the assets of the Company.

 

 

500,000

 

 

 

 

 

 

 

 

569,610

 

 

 

39,028

 

Less: debt issuance costs

 

 

-

 

 

 

-

 

         debt discount

 

 

-

 

 

 

 

 

 

 

$

569,610

 

 

$

39,028

 

 

On April 2, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with a New York-based family office (“Investor”), which was subsequently amended on July 23, 2018, pursuant to which the Company issued to Investor a Senior Convertible Promissory Note (“Note”) in the original principal amount of $500,000 in exchange for a purchase price of $500,000.  The maturity date of the Note is nine months after the date of issuance (subject to acceleration upon an event of default).  The Note carries a 10.5% interest rate, with accrued but unpaid interest being payable on the Note’s maturity date (see Note 8. Subsequent Events).  Investor was also issued pursuant to the SPA five- year warrants exercisable at a per-share exercise price of $6.605 to purchase 40,000 shares of the Company’s common stock (the “Warrants”) (see section entitled “Debt Discount” under Note 1.). Due to the subsequent issuance of stock and warrants, these warrants now have the right to purchase 143,587 shares at an exercise price of $1.84 per share (See Note 8 Subsequent Events).

 

The Note originally allowed the Investor the option at any time on or after the maturity date to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Note into fully paid and non-assessable shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at a conversion price equal to 85% of the lowest daily volume weighted average price of the Common Stock in the 10 trading days immediately prior to conversion.  This conversion feature was removed upon a subsequent amendment on July 23, 2018.

 

On April 2, 2018, the Company also entered into a Common Stock Purchase Agreement (“Purchase Agreement”) with Investor relating to the purchase by Investor from the Company up to $5,000,000 of the Company’s Common Stock.  The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, Investor has committed to purchase up to $5,000,000 worth of the Company’s Common Stock (“Purchase Shares”) over a 2-year period beginning on the date on which a registration statement relating to the resale of the Purchase Shares (the “Registration Statement”) is first declared effective by the U.S. Securities and Exchange Commission (the “Commission”).

The Purchase Agreement requires the Company to pay the Investor a commitment fee equal to $200,000 on the earlier of the first draw on the Purchase Agreement or October 3, 2018 which was unpaid as of September 30, 2018. This amount was expensed as interest expense as of September 30, 2018 since the Company cancelled this Purchase Agreement on October 5, 2018.

 

As contemplated by the Purchase Agreement, on April 2, 2018, the Company entered into registration rights agreement with the Investor (the “Registration Rights Agreement”).  The Registration Rights Agreement, as amended on July 23, 2018, requires that an initial registration statement for the Purchase Shares be filed by August 13, 2018 (the “Filing Deadline”) and be declared effective by September 13, 2018 (the “Effectiveness Deadline”).  If the Company fails to meet the Filing Deadline or the Effectivness Deadline, subject to certain terms provided for in the Registration Rights Agreement, the Company will be required to pay liquidated damages to the Investor. The Registration Rights Agreement also provides for customary indemnification and contribution provisions. This Agreement was cancelled at the same time the Purchase Agreement was cancelled on October 5, 2018.