Quarterly report pursuant to Section 13 or 15(d)

SUBSEQUENT EVENTS

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SUBSEQUENT EVENTS
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

In accordance with authoritative guidance, the Company has evaluated any events or transactions occurring after March 31, 2020, the balance sheet date, through the date of filing of this report and note that there have been no such events or transactions that would require recognition or disclosure in the unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2020, except as disclosed below.

 

Sale of Common Stock

 

Subsequent to the reporting period, and up through June 24, 2020, the Company accepted shareholder subscriptions in the total amount of $250,000 in exchange for issuance of 2,500,000 shares of Common Stock in an offering exempt under Rule 506 of Regulation D.

 

Due to Related party

 

From April 1, 2020 through April 10, 2020, the Company’s Interim Executive Chairman, Bobby Yampolsky, made a series of advances to the Company in the approximate total amount of $12,000. He had previously advanced a total of $85,000 to the Company during the three months ended March 31, 2020 bringing into a total amount of $97,000 to date. These advances are short-term in nature, non-interest bearing and due on demand. On June 11, 2020, Mr. Yampolsky has tendered his resignation as a member and chairman of the board of directors of the Company. Additionally, the Company agreed to pay $12,500 on June 11, 2020 and a monthly installment payment of approximately $7,084 beginning July 15, 2020 to June 15, 2021. On June 11, 2020, the Company paid $12,500 of these related party advances.

 

Restricted Common Stock Grants

 

On April 29, 2020, the Company appointed two new board members and shall each be granted $100,000 worth of restricted common stock under the 2019 Equity Incentive Plan with vesting period of 1/24th upon date of grant and 1/24th per month on the first day of each calendar months thereafter until fully vested so long as they continue in their service as board of directors of the Company.

 

On April 29, 2020, the Company appointed a new advisory board member of the Company and shall be granted $50,000 worth of restricted common stock under the 2019 Equity Incentive Plan with vesting period of 1/24th upon date of grant and 1/24th per month on the first day of each calendar months thereafter until fully vested so long as they continue in their service as member of the Advisory Board of the Company.

 

On April 29, 2020, Derek Du Chesne accepted his appointment to the additional positions of President and a member of our Board of Directors (see Note 11). Pursuant to Mr. Du Chesne’s employment agreement, following his appointment as President, the Company granted 1,000,000 shares of restricted common stock as additional compensation, with vesting and other terms to be decided by the Company’s Compensation Committee.

 

On June 11, 2020, the Company appointed a new board member and shall be granted $100,000 worth of restricted common stock under the 2019 Equity Incentive Plan with vesting period of 1/24th upon date of grant and 1/24th per month on the first day of each calendar months thereafter until fully vested so long as they continue in their service as board of directors of the Company.

 

Notice of Delinquent Payment

 

At this time, the Company is delinquent in its payments under the initial convertible note executed on November 27, 2019 (see Note 9), with the May 1, 2020, April 1, 2020, and a portion of the February 25, 2020 payments currently in arrears. The Company intends to make these payments and the upcoming monthly payments with receipts from product sales and/or the proceeds of additional equity funding. On May 20, 2020, the Company entered into a Forbearance Agreement with the investor (the “Holder”) regarding the initial convertible note. Under the Forbearance Agreement, the investor has agreed to forebear from exercising any default-related rights and remedies subject to the following conditions and material terms:

 

The Company must pay the Holder $60,000 in cash on or before July 1, 2020. Additional monthly payments required under the Amortization Schedule for the note shall continue to be due on or before the first day of each calendar month thereafter, commencing with the $110,000 payment originally due April 1, 2020 now being due on or before August 1, 2020, and the subsequent monthly payments listed on the Amortization Schedule to be paid monthly in the sequence listed. Interest shall continue to accrue on the principal balance of the Note at the rate(s) stated therein, with all additional accrued interest resulting from this extension of payment deadlines to be paid as part of the last monthly payment.

 

The payments that are in arrears from February, April and May can be paid in whole or in part at any time at the sole election of the Holder in shares of common stock at the Amortization Conversion Price (defined as 80% of the lowest volume weighted average price, or VWAP, during the 10 trading days immediately before the applicable date of the amortization redemption payment).

 

Unless or until a default under the Forbearance Agreement occurs, the fixed conversion price under the note will remain $0.50 per share, and the note shall continue to bear interest at the non-default rate of 8% per annum.

 

Unless or until a default under the Forbearance Agreement occurs, the contractual limit on issuances of shares to issue shares of common stock or options to employees, officers, directors, consultants, advisors or contractors will be increased from 5% to 10% or our issued an outstanding common stock.

 

The Company has issued the Holder 500,000 shares of our common stock in consideration for the forbearance.

 

Conversion of Notes

 

On May 27, 2020, the Company issued 247,588 shares of its common stock at a contractual conversion price of $0.130863, as a result of the conversion of principal of $30,000 and interest of $2,400of the convertible note.

 

On June 10, 2020, the Company issued 564,000 shares of its common stock at a contractual conversion price of $0.09, as a result of the conversion of principal of $47,000 and interest of $3,760 of the convertible note.

 

U.S. Small Business Administration Loan

 

On May 28, 2020, the Company received a Secured Disaster Loan in the amount of $99,100 from the U.S. Small Business Administration. The loan carries interest at a rate of 3.75% per year, requires monthly payments of principal and interest, and matures in thirty (30) years. The SBA loan is secured by a security interest in our tangible and intangible assets. The loan proceeds are to be used as working capital to alleviate economic injury caused by the Covid-19 disaster occurring in the month of January 31, 2020 and continuing thereafter.

 

Paycheck Protection Program Funding

 

On May 22, 2020, the Company received federal funding in the amount of $236,410.27 through the Paycheck Protection Program (the “PPP”). PPP funds have certain restrictions on use of the funding proceeds, and generally must be repaid within five (5) years at 1% interest. The PPP loan may, under circumstances, be forgiven.