Annual report pursuant to Section 13 and 15(d)

DEBT

v3.20.1
DEBT
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
DEBT

NOTE 7 – DEBT


Notes Payable - Financing Agreements


The Company’s notes payable relating to financing agreements classified as current liabilities consist of the following as of:


 

 

December 31, 2019

 

December 31, 2018

 

Notes Payable

 

Principal

 

 

 

Interest

 

Principal

 

 

 

Interest

 

Third Party - Insurance Note 1

 

$

28,500

 

 

 

7.31

%

 

$

25,066

 

 

 

9.29

%

 

Third Party - Insurance Note 2

 

 

—

 

 

 

6.36

%

 

 

8,501

 

 

 

10.25

%

 

Third Party - Insurance Note 3

 

 

13,799

 

 

 

—

 

 

 

14,763

 

 

 

10.75

%

 

Total

 

$

42,299

 

 

 

 

 

 

$

48,330

 

 

 

 

 

 


The Company entered into an agreement on December 23, 2018 with its insurance provider by issuing a $25,066 note payable (Insurance Note 1) for the purchase of an insurance policy, secured by that policy with an annual interest rate of 9.29% payable in monthly installments of principal and interest totaling $2,172 through September 23, 2019.  The policy renewed on December 23, 2019 in the amount of $28,500 with an annual interest rate of 7.31% payable in monthly installments of principal and interest totaling $2,218 through October 23, 2020.  The balance of Insurance Note 1 as of December 31, 2019 and December 31, 2018 was $28,500 and $25,066, respectively.


The Company entered into an agreement on April 15, 2018 with its insurance provider by issuing a $49,000 note payable (Insurance Note 2) for the purchase of an insurance policy, secured by that policy with an annual interest rate of 10.25% payable in monthly installments of principal and interest totaling $4,378 through February 15, 2019. The policy renewed on April 15, 2019 in the amount of $51,940 with an annual interest rate of 6.36% payable in monthly installments of principal and interest totaling $5,326. At December 31, 2019 and December 31, 2018, the balance of Insurance Note 2 was zero and $8,501, respectively.


The Company entered into an agreement on September 15, 2018 renewing with its insurance provider by issuing a $15,810 note payable (Insurance Note 3), secured by that policy, with an annual interest rate of 10.75% payable in monthly installments of principal and interest totaling $1,660 through July 15, 2019. The policy renewed on September 15, 2019 in the amount of $13,799 payable in 5 installment payments.  At December 31, 2019 and December 31, 2018, the balance of Insurance Note 3 was $13,799 and $14,763, respectively.


Finance Lease


The Company entered into an agreement on August 26, 2019 with an equipment leasing provider by issuing a $147,810 equipment finance lease payable, secured by that note, with an annual interest rate of 12.72% payable in monthly installments of principal and interest totaling $4,963 through August 1, 2022.  At December 31, 2019 and 2018, the balance of the note was $134,098 and zero, respectively.


At December 31, 2019, future minimum lease payments due under Finance Lease is as follows:


As of December 31,

Amount

 

2020

 

$

59,558

 

2021

 

 

59,558

 

2022

 

 

39,705

 

Total minimum financial lease payments

 

$

158,821

 

Less:  interest

 

 

(24,723

)

Total lease liability at December 31, 2019

 

$

134,098

 

Less: current portion of Finance Lease

 

 

(45,072

)

Long Term portion of Finance Lease

 

$

89,026

 


Notes Payable – Related Parties


 

 

 

 

 

 

 

 

December 31, 2019

 

 

December 31, 2018

 

Payable To

 

 

 

 

 

 

 

Principal

 

 

Interest

 

 

Principal

 

 

Interest*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related party

 

 

 

 

 

 

 

 

 

$

267,000

 

 

 

3%

 

 

$

—

 

 

 

—

 

Related party

 

 

 

 

 

 

 

 

 

 

733,000

 

 

 

3%

 

 

 

—

 

 

 

—

 

Total

 

 

 

 

 

 

 

 

 

 

1,000,000

 

 

 

 

 

 

 

—

 

 

 

 

 

Less unamortized discounts

 

 

 

 

 

 

 

 

 

 

(94,627)

 

 

 

 

 

 

 

—

 

 

 

 

 

Total, net

 

 

 

 

 

 

 

 

 

$

905,373

 

 

 

 

 

 

$

—

 

 

 

 

 


The Company entered into an agreement with a related party on September 25, 2019 whereby the related party loaned the Company an aggregate principal amount of $267,000, pursuant to a note, repayable on June 25, 2020. The note carries an annual interest rate of 3%. In addition, the Company issued warrants permitting the related party to purchase for cash 11,920 shares of the Company’s common stock at a price of $7.70 per share. The balance of this note as of December 31, 2019 was $267,000.


The Company entered into an agreement with a related party on September 25, 2019 whereby the related party loaned the Company the principal aggregate in the amount of $733,000, pursuant to a note, repayable on June 25, 2020. The note carries an annual interest rate of 3%. In addition, the Company issued warrants permitting the related party to purchase for cash 32,724 shares of the Company’s common stock at a price of $7.70 per share. The balance of this note as of December 31, 2019 was $733,000.


The Company determined the relative fair value between the note and the warrants on the issue date utilizing the Bi-nominal Lattice Pricing Model for the warrants. As a result, the Company allocated $146,779 to the warrants and was recorded as a debt discount with an offset to additional paid in capital in the accompanying consolidated financial statements. The fair value pricing model used the following assumptions; stock price $7.00, warrant exercise price $7.70, expected term of 5 years, expected volatility of 86% and discount rate of 1.609%.


For the year ended December 31, 2019, the Company recorded $52,152 for amortization of the debt discount discussed above to interest expense in the accompanying consolidated financial statements.


The Company entered into an agreement with a related party on August 29, 2019 whereby the related party loaned the Company an aggregate principal amount of $80,000. The note carries an annual percentage rate of 8% which was repaid on September 25, 2019 in addition to $456 in accrued interest.


Notes Payable


The Company entered into an agreement on August 12, 2019 with a shareholder by executing a short-term $262,500 note repayable on November 11, 2019. The note was issued with a 5% original issue discount and the Company received a net amount of $250,000. No other consideration was given.  On November 12, 2019, the Company repaid the short-term note in the amount of $262,500.  The original issue discount of $12,500 was fully amortized in 2019.