Quarterly report pursuant to Section 13 or 15(d)

NOTES PAYABLE

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NOTES PAYABLE
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
NOTES PAYABLE

Notes Payable

 

Notes payable to unrelated parties is summarized below:

        As of
June 30, 2020
    As of December 31, 2019  
        (Unaudited)        
Principal amount       $ 335,510     $ -  
Less: current portion         (90,755 )     -  
Notes payable - long term portion       $ 244,755     $ -  

 

Minimum principal payments under notes payable to unrelated parties at June 30, 2020 are as follows:

 

Year ended December 31, 2020   $ 11,859  
Year ended December 31, 2021     155,501  
Year ended December 31, 2022     68,392  
Year ended December 31, 2023     2,091  
Year ended December 31, 2024 and thereafter     97,667  
Total principal payments    $ 335,510  

 

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. Installment payments, including principal and interest, of $483 monthly, will begin Twelve (12) months from the date of the promissory Note. 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. As of June 30, 2020, the principal balance of this note amounted to $99,100 and accrued interest of $326. During the six months ended June 30, 2020, the Company recognized $326 of interest expense.

 

Paycheck Protection Program Funding

 

On May 22, 2020, the Company received federal funding in the amount of $236,410 through the Paycheck Protection Program (the “PPP”). PPP funds have certain restrictions on use of the funding proceeds, and generally must be repaid within two (2) years at 1% interest. The PPP loan may, under circumstances, be forgiven. There shall be no payment due by the Company during the six months period beginning on the date of this note (“Deferral Period”). Commencing one month after the expiration of the Deferral Period, the Company shall pay the lender monthly payments of principal and interest, each in equal amount required to fully amortize by the maturity date. If a payment on this note is more than ten days late, the lender shall charge a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. As of June 30, 2020, the principal balance of this note amounted to $236,410 and accrued interest of $253. During the six months ended June 30, 2020, the Company recognized $253 of interest expense.

 

Notes Payable – Related Parties

 

During October 2019, the Company entered into two short-term promissory notes (the “Notes”) for an aggregate principal amount of $94,056 and gross cash proceeds of $85,000 (original issue discount of $9,056). A note with principal amount of $55,556 was subscribed by Andrew Johnson, an officer of the Company. The Notes became due and payable between October 18, 2019 and December 16, 2019 and bear interest at a rate of twelve (12%) percent per annum prior to the maturity date, and eighteen (18%) per annum if unpaid following the maturity date. The Notes are unsecured obligations of the Company. In addition, the Notes carry a 10% original issue discount of $9,056 which have been amortized and recorded in interest expense on the accompanying consolidated statements of operations. In December 2019, the Company repaid one of the notes with principal amount of $38,500 and accrued interest of $770. The Company is currently negotiating to extend the maturity date of the related party note. As of June 30, 2020, the principal balance of this note amounted $55,556 and is currently in default.

 

During February 2020, the Company entered into a short-term promissory note for principal amount of $22,461 and gross cash proceeds of $20,419 (original issue discount of $2,042) with a certain stockholder of the Company. The note became due and payable on March 8, 2020 and bears interest at a rate of eighteen (18%) percent per annum prior to the maturity date, and eighteen (18%) per annum if unpaid following the maturity date. The note is unsecured obligation of the Company. In addition, the note carries a 10% original issue discount of $2,042 which have been amortized and recorded in interest expense on the accompanying unaudited condensed consolidated statements of operations. The Company is currently negotiating to extend the maturity date of the related party note. As of June 30, 2020, the principal balance of this note amounted to $22,461 and is currently in default.

 

During the six months ended June 30, 2020 and 2019, the Company recognized $5,495 and $1,072, respectively, of interest expense. During the three months ended June 30, 2020 and 2019, the Company recognized $3,256 and $548, respectively, of interest expense. As of June 30, 2020 and December 31, 2019, the notes had accrued interest balances of $6,195 and $1,278, respectively. As of June 30, 2020 and December 31, 2019, the principal balance under the notes was $78,017 and $55,556, respectively.