• Filing Date: 2018-04-17
  • Form Type: 10-K
  • Description: Annual report
v3.8.0.1
4. CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES (Tables)
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Summary of Convertible Promissory Notes

   2017   2016 
Arnost Note  $   $322,000 
CAVU Notes, net of $0 for 2017 and $8,379 for 2016   100,000    241,621 
Berg Notes (a)   50,000    3,722,000 
Investor Notes, net of discounts of $0 and $529,107, respectively       6,546,654 
Secured Notes (b) net of discounts of $234,502 for 2017 and $0 for 2016   2,999,498     
Total Debt   3,149,498    10,832,275 
Current portion of debt   3,149,498    10,832,275 
Long-term portion of debt  $   $ 

 

 

(a)

Between August and December 2015, the Company borrowed $3,675,000 from accredited investors. These loans are due and payable the earlier of December 31, 2016 or the completion of an equity financing of at least $2,500,000. Upon the sale of the unsecured promissory notes, the Company issued $1 of principal, one share of common stock and a warrant to purchase one share of common stock at an exercise price of $0.40 per share through August 31, 2017. Accordingly, an aggregate of 3,675,000 shares of common stock and warrants to purchase a like amount were issued in the last six months of 2015. Each noteholder has the right to convert the principal of their note and accrued interest thereon at a conversion price of $0.30 per share or at the noteholder’s option, into equity securities of the Company on the same terms as the last equity transaction completed by the Company prior to each respective conversion date.
     
  (b) On February 28, 2017, the Company entered into an agreement with two non-affiliated persons to provide $1.6 million of short term secured debt financing in three monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible promissory note. In connection with this transaction, the Company agreed to issue an origination fee of 3,200,000 warrants. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction. In August, September and October 2017, the noteholders exchanged their $1,600,000 of notes that were coming due in August through October 2017 plus a 30% premium and accrued interest for new six-month notes in the principal amount of $2,184,000. As additional consideration for the exchange, the Company issued 533,334 shares of common stock..

 

Schedule of Derivative Instruments

Derivative Liability 2016
Beginning balance  $(576,557)
New Issuances   (1,079,016)
Discount on new derivative in excess of note face value   (565,780)
Gain on revaluation of derivatives   1,870,653 
Ending balance  $(350,700)

 

Derivative Liability 2017
Beginning balance  $(350,700)
Discount on new issuances   (1,867,287)
Discount on new derivatives in excess of note face value   (1,284,704)
Gain on revaluation of derivatives   3,376,620 
Conversions   229,939 
Effect of debt extinguishment   (769,991
Ending balance  $(666,123)