Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Notes Payable

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Note 4 - Notes Payable
9 Months Ended
Sep. 30, 2018
Notes  
Note 4 - Notes Payable

NOTE 4 – NOTES PAYABLE

 

Short term notes

 

At September 30, 2018 and December 31, 2017, the Company had outstanding short-term debt totaling $45,232 and $50,232, respectively.  These notes bear interest at the rates of between 10% and 12% annually and have maturity dates ranging from January 1, 2012 through December 31, 2014.  As some of these notes have exceeded their initial maturity dates, they are subject to the default interest rate of 15% per annum. 

 

The following table summarizes the Company’s short-term notes payable for the nine months ended September 30, 2018 and the year ended December 31, 2017:

 

 

 

September 30, 2018

 

 

December 31, 2017

Beginning Balance

$

50,232

 

$

89,221

Notes acquired in business acquisition

 

-

 

 

208,811

Repayments – continuing operations

 

(5,000)

 

 

(38,989)

Repayments – discontinued operations

 

-

 

 

(53,132)

Notes divested in disposal of discontinued operations

 

-

 

 

(155,679)

Ending Balance

$

45,232

 

$

50,232

 

Short term notes – related party

 

On January 31, 2018, the Company’s Chief Technology Officer and significant shareholder invested $500,000 via a one year note bearing interest at 8% annually.  In conjunction with this note, the Company issued 5 year detachable warrants to purchase 1,562,500 shares of the Company’s common stock at $0.50 per share.  These warrants were valued at $172,542 using the Black-Scholes pricing model and were recorded as a discount to the note.  The note carries a default rate of 18% for any principal not paid by the maturity date.  On September 30, 2018, the note along with interest of $29,712 was converted into 2,118,849 shares of the Company’s common stock at a rate of $0.25 per share.  Additionally, as part of the conversion, additional warrants to purchase 437,500 shares of common stock were issued and all warrants related to this note were repriced to reflect an exercise price of $0.25 per share.  The value of these additional warrants and the lowered conversion totaled $58,250 which the Company recorded as a loss on extinguishment of debt.

 

Long term notes

 

On November 2, 2016, the Company entered into settlement agreements with two holders of convertible debt and other payables in which the Company agreed to issue new long-term debt agreements as settlement of amounts due.  Pursuant to these agreements, the Company issued two non-interest bearing $600,000 notes payable in 36 equal monthly installments of $16,667 beginning on January 1, 2017 and maturing on December 1, 2019.

 

The following table summarizes the Company’s long-term notes payable for the nine months ended September 30, 2018 and the year ended December 31, 2017:

 

 

 

September 30,   2018

 

 

December 31, 2017

Beginning Balance

$

766,658

 

$

1,200,000

Notes acquired in business acquisition

 

-

 

 

136,830

Repayments – continuing operations

 

(300,001)

 

 

(433,342)

Repayments – discontinued operations

 

-

 

 

(1,603)

Notes divested in disposal of discontinued operations

 

-

 

 

(135,227)

Ending Balance

$

466,567

 

$

766,658

Short Term Portion of Long Term Debt

$

400,000

 

$

400,000

Long Term Debt

$

66,657

 

$

366,658