Long Term Convertible Notes Payable Net |
NOTE 6 LONG-TERM NOTES PAYABLE, net
The
Companys notes payable outstanding were as follows as of:
|
|
June
30, 2014 |
|
|
December
31, 2013 |
|
2008
Unsecured promissory note. Originated on November 12, 2008. Principal of $100,000 with $45,000 to be repaid by June 30, 2009,
with $10,000 in monthly payments thereafter until repaid in full. Required a one-time interest payment of $15,000. This note
was paid in full on February 7, 2014. |
|
$ |
- |
|
|
$ |
55,000 |
|
|
|
|
|
|
|
|
|
|
2009 Non-mandatorily
convertible, unsecured note. Originated on March 31, 2009, principal of $500,000 accrues interest at 8% per annum. Principal
and interest were due in full on March 31, 2014 or convertible at the option of the note holder into Series B preferred stock
at a rate of $0.45 per share. A warrant to purchase 222,222 shares of preferred Series B stock was issued in conjunction with
this note. This note was paid in full on February 7, 2014. |
|
|
- |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
2013 Bridge Loan.
Principal from existing notes in the amount of $3,180,806 (comprised of $2,621,195 in principal outstanding as of December
31, 2012 and $559,611 in new principal issued from January through April 2013) along with accrued interest of $467,438 were
converted into a 2013 Bridge Loan along with $4,840,792 of new principal. These notes accrued interest at 10% per annum with
outstanding principal and interest due in 2014. These notes converted into common shares as part of the February 7, 2014 reverse
acquisition transaction. |
|
|
- |
|
|
|
8,489,036 |
|
|
|
|
|
|
|
|
|
|
2014 Bridge Loan.
Originated in January 2014. Principal of $2,076,000 issued in January 2014. These notes accrued interest at 10% per annum
with outstanding principal and interest due in 2014. These notes converted into common shares as part of the February 7, 2014
reverse acquisition transaction. |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total notes payable |
|
|
- |
|
|
|
9,044,036 |
|
|
|
|
|
|
|
|
|
|
Current maturities
of long-term, net of discount |
|
|
- |
|
|
|
9,039,444 |
|
|
|
|
|
|
|
|
|
|
Discount attributable
to current maturities |
|
|
- |
|
|
|
4,592 |
|
|
|
|
|
|
|
|
|
|
Total current maturities |
|
|
- |
|
|
|
9,044,036 |
|
|
|
|
|
|
|
|
|
|
Long-term notes
payable, less current maturities |
|
$ |
- |
|
|
$ |
- |
|
Interest
Interest
expense on these notes was $0 and $112,450, for the three and six-month periods ended June 30, 2014, respectively. Interest expense
on these notes was $136,432 and $249,847, for the three and six-month periods ended June 30, 2013, respectively.
Interest
accrued on these notes as of June 30, 2014 and December 31, 2013, was $0 and $657,092, respectively.
Note
conversion
Management
tested the conversion of the 2012 short-term unsecured promissory notes and 2010 to 2012 secured promissory notes to bridge
loans in 2013 for potential extinguishment accounting. Because the fair market value of the notes prior to conversion
as compared to the fair market value of the notes subsequent the conversion was less than a 10% difference, management concluded
to apply modification accounting and are accruing interest based on the new note terms.
Discount
A
discount on these notes of $0 and $4,592, as of June 30, 2014 and December 31, 2013, respectively, was based on the fair value
of detachable warrants issued at the time of funding. This discount is being amortized straight-line over the underlying term
of the note. Interest expense of $0 and $4,592, for the three and six-month periods ended June 30, 2014, respectively, was recognized
as amortization of this discount. Interest expense of $2,669 and $34,813, for the three and six-month periods ended June 30, 2013,
respectively, was recognized as amortization of this discount.
A
summary of the debt discount activity for the six-month period ended June 30, 2014 and year ended December 31, 2013 is as follows:
Balance January 1, 2013 |
|
$ |
65,173 |
|
Amortization of debt discount |
|
|
(60,581 |
) |
Balance December 31, 2013 |
|
|
4,592 |
|
Amortization of debt discount |
|
|
(4,592 |
) |
Balance at June 30, 2014 |
|
$ |
- |
|
|
NOTE 6 LONG-TERM CONVERTIBLE NOTES PAYABLE,
net
The
Companys notes payable outstanding as of December 31, 2013 and 2012, were as follows:
|
|
2013 |
|
|
2012 |
|
2008
Unsecured promissory note. Originated on November 12, 2008. Principal of $100,000 with $45,000 to be repaid by June 30, 2009,
with $10,000 in monthly payments thereafter until repaid in full. Required a one-time interest payment of $15,000. This note
was paid in full on February 7, 2014. |
|
$ |
55,000 |
|
|
$ |
55,000 |
|
|
|
|
|
|
|
|
|
|
2012 Short-term
unsecured promissory notes. Originated at various dates in 2012 with maturities ranging from three months to one year and
interest rates ranging from 8% to 12%. All of these notes were subsequently either converted into Bridge Loans or repaid in
2013. Warrants to purchase 224,220 shares of preferred Series B stock were issued in conjunction with these notes. |
|
|
- |
|
|
|
829,047 |
|
|
|
|
|
|
|
|
|
|
2009 Non-mandatorily
convertible, unsecured note. Originated on March 31, 2009, principal of $500,000 accrues interest at 8% per annum. Principal
and interest were due in full on March 31, 2014 or convertible at the option of the note holder into Series B preferred stock
at a rate of $0.45 per share. A warrant to purchase 222,222 shares of preferred Series B stock was issued in conjunction with
this note. This note was paid in full on February 7, 2014. |
|
|
500,000 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
2010 Secured promissory
notes. Principal of $549,450 originated on September 23, 2010 and $62,438 originated on November 12, 2010. Accrued interest
at 10% or 14% per annum. Maturity of all notes was extended from September 23, 2012 to March 23, 2013 by majority note holder
approval. Interest rate was 2% higher during the period of extension. These notes were secured by all of the Companys
intellectual property. Warrants to purchase 339,937 shares of preferred Series B stock were issued in conjunction with these
notes for $612. All of these notes were subsequently either converted into the Bridge Loans or repaid in 2013. |
|
|
- |
|
|
|
611,888 |
|
|
|
|
|
|
|
|
|
|
2011 Secured promissory
notes. Principal of $1,828,686 originated at various dates of 2011. Accrued interest at 10% per annum. Maturity of all notes
was extended from September 23, 2012 to March 23, 2013 by majority note holder approval. Interest rate was 2% higher during
the period of extension. These notes were secured by all of the Companys intellectual property. Warrants to purchase
1,015,934 shares of preferred Series B stock were issued in conjunction with the debt for $1,829. All of these notes were
subsequently either converted into the Bridge Loans or repaid in 2013. |
|
|
- |
|
|
|
1,828,686 |
|
|
|
|
|
|
|
|
|
|
2012 Secured promissory
notes. Principal of $349,650 originated in February and March of 2012. Accrued interest at 10% per annum. Maturity of all
notes was extended from September 23, 2012 to March 23, 2013 by majority note holder approval. Interest rate was 2% higher
during the period of extension. These notes were secured by all of the Companys intellectual property. Warrants to purchase
194,250 shares of preferred Series B stock were issued in conjunction with the debt for $350. All of these notes were subsequently
either converted into the Bridge Loans or repaid in 2013. |
|
|
- |
|
|
|
349,650 |
|
|
|
|
|
|
|
|
|
|
2013 Bridge Loan.
Principal from existing notes in the amount of $3,180,806 (comprised of $2,621,195 in principal outstanding as of December
31, 2012 and $559,611 in new principal issued from January through April 2013) along with accrued interest of $467,438 were
converted into a 2013 Bridge Loan along with $4,840,792 of new principal. These notes accrued interest at 10% per annum with
outstanding principal and interest due in 2014. These notes converted into common shares as part of the February 7, 2014,
merger with Koffee Korner at the rate of $0.625 per share. See Note 17. |
|
|
8,489,036 |
|
|
|
- |
|
Total notes payable |
|
|
9,044,036 |
|
|
|
4,174,271 |
|
|
|
|
|
|
|
|
|
|
Current maturities
of long-term notes, net of discount |
|
|
9,039,444 |
|
|
|
3,609,098 |
|
Discount attributable
to current maturities |
|
|
4,592 |
|
|
|
65,173 |
|
Total current maturities |
|
|
9,044,036 |
|
|
|
3,674,271 |
|
Notes payable, less
current maturities |
|
$ |
- |
|
|
$ |
500,000 |
|
Interest
Interest
expense on these notes was $681,335, $370,310, and $2,658,927, for the years ended December 31, 2013 and 2012, and for the period
from inception (March 23, 2006) to December 31, 2013, respectively. Interest accrued on these notes as of December 31, 2013 and
2012, was $657,092 and $673,975, respectively.
Note
conversions
Management
tested the conversion of the 2012 short-term unsecured promissory notes and 2010 to 2012 secured promissory notes to bridge
loans in 2013 for potential extinguishment accounting. Because the fair market value of the notes prior to conversion as
compared to the fair market value of the notes subsequent to the conversion was less than a 10% difference, management is
applying modification accounting and is accruing interest based on the new note terms.
Discount
A
discount on these notes of $4,592 and $65,173, at December 31, 2013 and 2012, respectively, was based on the fair value of detachable
warrants issued at the time of funding. This discount is being amortized straight-line over the term of the underlying note. Discount
amortization of $60,581, $363,858, and $1,648,452 for the years ended December 31, 2013 and 2012, and from inception to December
31, 2013, respectively, was recognized as a part of interest expense.
A
summary of the debt discount activity for the years ended December 31, 2013 and 2012, is as follows:
Balance January 1, 2012 |
|
$ |
288,439 |
|
Debt discount recorded on 2011 notes |
|
|
140,592 |
|
Amortization of debt discount |
|
|
(363,858 |
) |
Balance December 31, 2012 |
|
|
65,173 |
|
Amortization of debt discount |
|
|
(60,581 |
) |
Balance at December 31, 2013 |
|
$ |
4,592 |
|
Maturities
As
of December 31, 2013, all of the Companys notes payables have a maturity date in 2014.
|