Short Term Liabilities
|6 Months Ended|
Jun. 30, 2019
|Debt Disclosure [Abstract]|
|Short Term Liabilities||
Note 11 - Short Term Liabilities
Short-term notes payable relates to financing arrangements for Directors and Officers and general liability insurance premiums that were financed at various points throughout 2018 and first quarter 2019 and two promissory notes assumed in the merger transaction.
These insurance financing arrangements require aggregate monthly payments of approximately $18,000 reflect interest rates ranging from 7% to 12.8% and are to be paid in full by April 2020 and had balances of approximately $95,000 at June 30, 2019 and $31,000 at December 31, 2018. Interest expense related to these insurance financing arrangements was approximately $2,000 and $2,300 for the three and six months ended June 30, 2019 and was $0 for the three and six months ended June 30, 2018 respectively.
Both of the promissory notes payable assumed in the merger are due in aggregate monthly installments of approximately $5,700 and carry an interest rate of 5%. The Promissory Notes had outstanding balances of approximately $99,000 at date of merger transaction and approximately $99,000 at June 30, 2019. No scheduled payments have been made on these notes since the scheduled payment for January, 2018 except for a $5,700 payment made in June 2019. Both of the notes have a maturity date of August 1, 2019. The Company is in the process of finalizing an eighteen month extension on the notes.
The Company incurred interest expense related to the promissory notes for the three and six months ended June 30, 2019 in the amount of approximately $1,300 and $2,100, respectively; no interest expense was incurred during 2018 as these notes were assumed on January 8, 2019.
The Company’s interest expense of approximately $42,000 and $71,000 for the three and six months ended June 30, 2018 was related to convertible debt not assumed in the RMS acquisition as of January 8, 2019.
The Convertible notes payable represents a securities purchase agreement with select accredited investors, which were assumed in the merger transaction. The debt consisted of $750,000 in units at a purchase price of $50,000 per unit were assumed. Each Unit consists of (i) a 12% senior secured convertible note, initially convertible into shares of the Company’s common stock, par value $0.001 per share, at a conversion price equal to the lesser of $0.40 or ninety percent (90%) of the per share purchase price of any shares of common stock or common stock equivalents issued in future private placements of equity and/or debt securities completed by the Company following this offering, and (ii) a three-year warrant to purchase such number of shares of the Company’s common stock equal to one hundred percent (100%) of the number of shares of common stock issuable upon conversion of the notes at $0.40. The Warrants were initially exercisable at a price equal to the lesser of $0.75 or ninety percent (90%) of the per share purchase price of any shares of common stock or common stock equivalents issued in future private placements of the debt and/or equity securities completed by the Company following the issuance of warrants. The notes are secured by all of the assets of the Company.
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 $505,424 and $244,576, respectively. Interest expense related to the discount on these convertible notes for the three and six month period ending June 30, 2019 was approximately $63,600 and $127,900, respectively. The Company recognized approximately $21,500 and $41,200, respectively, in unpaid accrued interest expense related to the notes for the three and six months ended June 30, 2019.
The convertible notes sold in the offering were initially convertible into an aggregate of 1,875,000 shares of common stock. The down round feature was triggered on January 8, 2019, and the conversion price of the convertible debt were adjusted to $0.36. The Company recognized the down round as a deemed dividend of approximately $288,000 which reduced the income available to common stockholders.
On February 6, 2019, $100,000 of the Company’s $750,000 outstanding convertible notes was converted into an aggregate of 277,778 shares of common stock, eliminating $100,000 of the Company’s debt obligation. The debt was converted into shares at $0.36 per share, which was the conversion price per the SPA subsequent to the trigger of the down round feature. The convertible notes have maturity dates between August and September 2019. The Company is in the process of negotiating a 30-day extension of the maturity dates. If the Company is unable to extend the maturity date, the notes will go into default until additional funding is received to payoff these notes and the mandatory default amounts will have to be paid. The mandatory default amount means the sum of (a) 120% of the outstanding principal amount of this Note, plus 100% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of these notes.
The entire disclosure for short-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef