Quarterly report pursuant to Section 13 or 15(d)

Convertible Debt

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Convertible Debt
9 Months Ended
Sep. 30, 2018
Long-Term Debt /Convertible Debt [Abstract]  
CONVERTIBLE DEBT
6. CONVERTIBLE DEBT

 

On January 12, 2018, the Company completed a private placement of a total of 36 units (the “Units”) of the Company’s securities at the price of $250,000 per Unit pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated under the Securities Act. Each Unit consisted of (i) a .1% unsecured convertible promissory note of the principal amount of $250,000 (each, a “Note”), and (ii) a 3-year warrant entitling the holder to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”), at a price of $.01 per share or through cashless exercise.

 

The convertible debt has a maturity date of January 12, 2021 and the principal balance and any accrued interest is convertible by the holder at any time into Common Stock of the Company at conversion price of $3.00 a share the (“Conversion Price”).  Principal due and interest accrued on the Note will automatically convert into shares of Common Stock, at the Conversion Price, if at any time during the term of the Notes, commencing twelve (12) months from the date of issuance, the Common Stock trades minimum daily volume of at least 50,000 shares for twenty (20) consecutive days with a volume weighted average price of at least $4.00 per share.

 

In relation to this transaction, the Company recorded a debt discount of $4,239,000 related to the fair market value of warrants issued as noted above. The debt discount, which was based on an imputed interest rate, is being amortized on a straight-line basis over the life of the convertible debt.

 

During the nine months ended September 30, 2018, convertible debt and accrued interest of $5,301,751, net of unamortized debt discount of $2,092,651, was converted into 1,767,295 shares of common stock at the conversion rate of $3.00 per share.

 

      September 30,     December 31,  
      2018     2017  
  Convertible debt   $ 3,700,000       -  
  Remaining unamortized debt discount and debt issue costs     (1,363,095 )     -  
  Convertible debt, net of debt discount and debt issue costs   $ 2,336,905       -