Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.20.2
DEBT
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
DEBT

NOTE 4 – DEBT


Notes Payable - Financing Agreements



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


 

 

September 30, 2020

 

December 31, 2019

 

Notes Payable

 

Principal

 

 

 

Interest

 

Principal

 

 

 

Interest

 

Third Party - Insurance Note 1

 

$

2,129

 

 

 

7.31

%

 

$

28,500

 

 

 

7.31

%

 

Third Party - Insurance Note 2

 

 

25,970

 

 

 

5.26

%

 

 

—

 

 

 

6.36

%

 

Third Party - Insurance Note 3

 

 

15,437

 

 

 

—

%

 

 

13,799

 

 

 

—

 

 

Third Party - Insurance Note 4

 

 

27,455

 

 

 

—

 

 

 

—

 

 

 

6.36

%

 

Total

 

$

70,991

 

 

 

 

 

 

$

42,299

 

 

 

 

 

 


The Company entered into an agreement on December 23, 2019 with its insurance provider by issuing a $28,500 note payable (Insurance Note 1) for the purchase of an insurance policy, secured by that policy 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 September 30, 2020 and December 31, 2019 was $2,129 and $28,500, respectively.


The Company entered into an agreement on April 15, 2019 in the amount of $51,940 with an annual interest rate of 6.36% payable (Insurance Note 2) with monthly installments of principal and interest totaling $5,326 through December 15, 2019 and the Company renewed the policy on April 15, 2020 in the amount of $51,379 with an annual interest rate of 5.26% payable in monthly installments of principal and interest totaling $5,263 through December 15, 2020. At September 30, 2020 and December 31, 2019, the balance of Insurance Note 2 was $25,970 and zero, respectively.


The Company entered into an agreement on September 15, 2019 in the amount of $13,799 with its insurance provider by issuing a note payable (Insurance Note 3) for the purchase of an insurance policy, secured by 5 installment payments.  The Company renewed the policy on September 15, 2020, secured by 12 monthly installments.  At September 30, 2020 and December 31, 2019, the balance of Insurance Note 3 was $15,437 and $13,799, respectively.


The Company entered into an agreement on February 3, 2019 in the amount of $141,058 with an annual interest rate of 6.36% payable in monthly installments of principal and interest totaling $14,520 (Insurance Note 4) through December 3, 2019. The policy renewed on February 3, 2020 in the amount of $165,375 with seven monthly installments of $13,726. At September 30, 2020 and December 31, 2019, the balance of Insurance Note 4 was $27,455 and zero, 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 a note, with an annual interest rate of 12.72% payable in monthly installments of principal and interest totaling $4,963 through August 1, 2022.  The Company entered into an additional agreement on May 22, 2020 with same equipment leasing provider by issuing a $121,637 equipment finance lease payable, secured by a note, with an annual interest rate of 9.90% payable in monthly installments of principal and interest totaling $3,919 through June 1, 2023. At September 30, 2020 and December 31, 2019, the balance of the notes was $213,688 and $134,098 respectively.


At September 30, 2020, future minimum lease payments due under Finance Lease is as follows:


As of December 31,

Amount

 

2020

 

$

26,647

 

2021

 

 

106,588

 

2022

 

 

86,735

 

2023

 

 

23,515

 

Total minimum financial lease payments

 

$

243,485

 

Less:  interest

 

 

(29,797

)

Total lease liability at September 30, 2020

 

$

213,688

 

Less: current portion of Finance Lease

 

 

(87,091

)

Long Term portion of Finance Lease

 

$

126,597

 


Notes Payable – Related Parties


 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Payable To

 

 

 

 

 

 

 

Principal

 

 

Interest

 

 

Principal

 

 

Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related party

 

 

 

 

 

 

 

 

 

$

—

 

 

 

3%

 

 

$

267,000

 

 

 

3%

 

Related party

 

 

 

 

 

 

 

 

 

 

—

 

 

 

3%

 

 

 

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 the 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. On June 22, 2020 the Company repaid this short-term note in the amount of $267,000. The balance of this note as of September 30, 2020 was zero. 


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% per annum. 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. On June 22, 2020 the Company repaid this short-term note in the amount of $733,000.  The balance of this note as of September 30, 2020 was zero.


The Company determined the relative fair value between the notes 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 unaudited 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 nine months ended September 30, 2020, the Company recorded $94,627 for amortization of the debt discount discussed above to interest expense in the accompanying unaudited consolidated financial statements.


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. This 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 this short-term note in the amount of $262,500.  The original issue discount of $12,500 was fully amortized in 2019.


Notes Payable – SBA Loan


 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Payable To

 

 

 

 

 

 

 

Principal

 

 

Interest

 

 

Principal

 

 

Interest*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBA loan

 

 

 

 

 

 

 

 

 

$

1,410,270

 

 

 

1%

 

 

$

—

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

1,410,270

 

 

 

 

 

 

 

—

 

 

 

 

 

Less current portion

 

 

 

 

 

 

 

 

 

 

(863,845)

 

 

 

 

 

 

 

—

 

 

 

 

 

Long term portion

 

 

 

 

 

 

 

 

 

$

    546,425

 

 

 

 

 

 

$

—

 

 

 

 

 


On April 23, 2020, the Company entered into a promissory note (the “Note”) with BBVA USA, which provides for a loan in the amount of $1,410,270 (the “Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan has a two-year term and bears interest at a rate of 1.00% per annum (APR 1.014%). Monthly principal and interest payments are deferred for nine months after the date of disbursement. The Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Company will apply for the PPP loan forgiveness as soon as the application is available.