Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE LOAN NOTES

v3.10.0.1
CONVERTIBLE LOAN NOTES
9 Months Ended
Sep. 30, 2018
Convertible Loan Notes  
CONVERTIBLE LOAN NOTES

On August 14, 2017, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) under which it agreed to sell an 8% convertible promissory note in an aggregate principal amount of $110,000.00 (the “Initial Note”) to Morningview Financial, LLC (“Morningview”). The net proceeds of the sale of this Initial Note, after deducting the Morningview’s discount and the expenses payable by the Company, were $87,000. The Note will mature on August 14, 2018.

 

At any time on or after the earlier of (i) the date on which the Registration Statement (defined below) has become effective or (ii) 170th calendar day after the issue date of the Initial Note, Morningview has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Initial Note into shares of the Company’s common stock at the Conversion Price. The “Conversion Price” will be the lesser of (i) $0.25 and (ii) 60% of the average of the three lowest trading prices of the Company’s common stock during the twenty-day trading period prior to the conversion. The Conversion Price is subject to further reduction upon certain events specified in the Initial Note.

 

On December 18, 2017, the Company further amended the Initial Note to (i) increase the aggregate principal amount of the Initial Note to $115,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to January 4, 2018. On January 4, 2018, the Company further amended the Initial Note to (i) increase the aggregate principal amount of the Initial Note to $125,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to February 1, 2018. During March 2018, The Company paid $25,000 towards principal of the Initial Note. On May 7, 2018, the Company further amended the Initial Note to (i) increase the aggregate principal amount of the Initial Note to $121,481 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to May 31, 2018. On June 11, 2018, Morningview converted $10,000 of the principal of the Initial Note to 181,818 shares of common stock. On July 13, 2018, Morningview converted $10,500 of the principal of the Initial Note to 9333,334 shares of common stock. On August 30, 2018, Morningview converted $10,500 of the principal of the Initial Note to 1,750,000 shares of common stock.

 

On September 27, 2017, pursuant to Securities Purchase Agreement, the Company issued an 8% convertible promissory note (the “Additional Note,” and together with the Initial Note, the “Notes”) in an aggregate principal amount of $27,500 to Morningview, with terms and conditions identical to the initial Note. The net proceeds of this sale of the Initial Note, after deducting Morningview’s discount and the expenses payable by the Company, were $21,750.

 

The terms of the Notes require the Company to have a registration statement permitting Morningview to resell the shares of the Company’s common stock into which the Notes may be converted (the “Registration Statement”) declared effective by the SEC within 120 days of the issue date of the Initial Note. On December 18, 2017, the Company further amended the Initial Note (the "Second Amendment to Initial Note") to (i) increase the aggregate principal amount of the Initial Note to $115,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to January 4, 2018. On January 4, 2018, the Company further amended the Initial Note (the “Third Amendment to Initial Note”) to (i) increase the aggregate principal amount of the Initial Note to $125,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to February 1, 2018. Starting in March 2018, the Company is repaying the Note $25,000 a month.

 

On December 29, 2017, the Company entered into a Securities Purchase Agreement, dated as of December 21, 2017 (the "EMA Securities Purchase Agreement"), under which it agreed to sell a 12% convertible promissory note in an aggregate principal amount of $65,000 (the "EMA Note") to EMA Financial, LLC ("EMA"). The net proceeds of the sale of the EMA Note, after deducting the expenses payable by the Company, were $62,400

 

The EMA Note and the shares of the Company's common stock issuable upon conversion of the EMA Note have not been, and will not be, registered under the Securities Act. The Company offered and sold the EMA Note to EMA in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

 

The EMA Note is dated December 21, 2017 and provides the terms and conditions of the Company's obligations to EMA.  The EMA Note will bear interest at a rate of 12% per annum and will mature on December 21, 2018.

 

At any time after the 180th calendar day after the issue date of the EMA Note, EMA has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the EMA Note into shares of the Company's common stock at the EMA Conversion Price.  The "EMA Conversion Price" will be the lesser of (i) the closing sale price of the Company's common stock on the trading day immediately preceding the date of conversion and (ii) 60% of either the lowest sale price of the Company's common stock during the twenty-day trading period prior to the conversion, or the closing bid price, whichever is lower. The EMA Conversion Price is subject to further reduction upon certain events specified in the EMA Note.

 

On March 28, 2018, the Company amended the EMA Note to increase the aggregate principal amount of the Initial Note to $71,500 and adjust the conversion price to align the EMA Note with more favorable terms in the Crossover Note dated March 16, 2018

 

              On December 29, 2017, the Company entered into a Securities Purchase Agreement, dated as of December 26, 2017 (the "Auctus Securities Purchase Agreement"), under which it agreed to sell a 12% convertible promissory note in an aggregate principal amount of $125,000 (the "Auctus Note") to Auctus Fund, LLC ("Auctus"). The net proceeds of the sale of the Auctus Note, after deducting the expenses payable by the Company, are expected to be $112,250.

  

The Auctus Note and the shares of the Company's common stock issuable upon conversion of the Auctus Note have not been, and will not be, registered under the Securities Act. The Company offered and sold the Auctus Note to Auctus in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

 

The Auctus Note is dated December 26, 2017 and provides the terms and conditions of the Company's obligations to Auctus.  The Auctus Note will bear interest at a rate of 12% per annum and will mature on September 26, 2018. On July 11, 2018, Auctus converted $3,120 of the principal of the Note to 120,000 shares of common stock.

 

At any time after the 180th calendar day after the issue date of the Auctus Note, Auctus has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Auctus Note into shares of the Company's common stock at the Auctus Conversion Price.  The "Auctus Conversion Price" will be the lesser of (i) the lowest trading price of the Company's common stock during the twenty-five-day trading period prior to the issue date of the Auctus Note and (ii) 50% of the lowest trading price of the Company's common stock during the twenty-five-day trading period prior to the conversion. The Auctus Conversion Price is subject to further reduction upon certain events specified in the Auctus Note.

 

On March 22, 2018, the Company entered into a securities purchase agreement, effective March 16, 2018, with an investor pursuant to which the Company issued and sold a convertible promissory note (the “Crossover Note”) to the investor in the aggregate principal amount of $58,500 and received net proceeds of $41,050 due to original issue discount of $10,500 and debt issuance costs of $6,950. The Crossover Note matures on the earlier of (i) December 16, 2018, or (ii) the date in which a registration statement for the shares underlying the Note is declared effective. The Note bears interest at 9% per annum. Beginning June 16, 2018, the investor may elect to convert the Note into shares of common stock of the Company at the lower of (i) $0.25 per share or (ii) 51% of the lowest trading price of the Company’s common stock during the 25 day period prior to the conversion, subject to adjustment.

 

On June 29, 2018, the Company entered into a securities purchase agreement with an investor pursuant to which the Company issued and sold the June Investor a convertible promissory note (the “June Note”) in the aggregate principal amount of $60,000 and received net proceeds of $51,900 due to debt issuance costs of $8,100. The June Note matures on June 29, 2019. The June Note bears interest at 12% per annum, to be paid in shares of the Company’s common stock. Beginning December 29, 2018, the June Investor may elect to convert the June Note into shares of common stock of the Company at a conversion price equal to 50% of the lowest price of the Company’s common stock for the 20 days prior to, and including, the date of the applicable conversion, subject to adjustment. The June Investor may cause the Company to redeem the June Note in the event of certain triggering events including the transfer or sale of all of the Company’s assets, reorganization, or merger. The Company may prepay the June Note until the 180th day after the June Effective Date subject to the prepayment amount being 135% of the June Principal for the first 60 days, 145% of the June Principal from the 61st day until the 120th day, and 150% of the June Principal from the 120th day until the 180th day.

 

 On July 3, 2018, the Company, entered into a securities purchase agreement with an investor (the “July Investor”) pursuant to which the Company agreed to issue the July Investor two convertible promissory notes (the “July Notes”), each for a principal amount of $30,000, for an aggregate principal amount of $60,000 (the “Principal”). On the July Effective Date, the Company issued the July Investor the July Notes, in the principal amount of $30,000, and received $28,000 from the July Investor. In connection with the issuance of one of the July Notes (the “Second Note”) the July Investor issued the Company a $30,000 promissory note (the “Buyer Note”). The July Notes mature on July 3, 2019. The July Notes bears interest at 12% per annum, to be paid in shares of the Company’s common stock. The July Investor may elect to convert the July Notes into shares of common stock of the Company at a conversion price equal to 50% of the lowest price of the Company’s common stock for the 20 days prior to, and including, the date of the applicable conversion, subject to adjustment. Provided that the July Investor may not convert any of the Second Note until the July Investor has paid off the balance of the Buyer Note to the Company, less $2,000 in legal fees incurred by the July Investor. The July Investor may redeem the July Notes in the event of certain triggering events including the transfer or sale of all of the Company’s assets, reorganization, or merger. The Company may prepay until the 180th day after the July Effective Date subject to the prepayment amount being 135% of the Principal for the first 60 days, 145% of the principal from the 61st day until the 120th day, and 150% of the principal from the 120th day until the 180th day.

 

    September 30,     December 31,  
    2018     2017  
Convertible Loan Notes            
Principal Amount   $ 438,380     $ 332,500  
Less unamortized debt discount and debt issuance costs     (92,740 )     (274,704 )
Current debt less unamortized debt discount and debt issuance costs   $ 345,640     $ 57,796  

 

During the three and nine month periods ended September 30, 2018, the Company recognized $90,726 and $278,483, respectively, for the amortization of debt discounts and $21,599 and $66,530, respectively, for the amortization of deferred issuance costs for the Notes issued on August 14, 2017, September 27, 2017, December 21, 2017, December 26, 2017, March 16, 2018, June 29, 2018, and July 3, 2018.