Quarterly report pursuant to Section 13 or 15(d)

Notes Payable and Convertible Notes Payable Disclosure

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Notes Payable and Convertible Notes Payable Disclosure
9 Months Ended
Sep. 30, 2018
Notes  
Notes Payable and Convertible Notes Payable Disclosure

NOTE 9 - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE, NET OF UNAMORTIZED DISCOUNT

 

Notes Payable

 

The following table is a summary of the changes of our Promissory Note liabilities as of September 30, 2018:

 

Balance at December 31, 2017

$

44,552

Repayments on notes

 

--

Balance at September 30, 2018

$

44,552

 

On December 15, 2011, we issued a Promissory Grid Note (“Grid Note”) to a former director of the Company under various terms and at September 30, 2018, the Grid Note had a balance of $44,552. The Grid Note included warrants to purchase up to 250,000 shares of our common stock at a price per share of $1.00. No related warrants have been exercised as of September 30, 2018, nor were any principal payments made on the Grid Note during the three and nine months ended September 30, 2018. During the three and nine months ended September 30, 2017, the Company repaid $0 and $4,000 of the Grid Note principal balance, respectively. During the three and nine months ended September 30, 2018, interest expense of $557 and $1,671 was recorded, respectively. During the three and nine months ended September 30, 2017, interest expense of $557 and $1,771 was recorded, respectively.

 

Convertible Notes Payable

 

Convertible notes payable consists of the following:

 

September 30, 2018

December 31, 2017

Convertible notes payable, interest free to annual interest rate of 10%, due date ranges from May 2018 to April 2019 and convertible into common stock at prices ranging from $0.03 to $0.135 per share.

$

651,500

$

317,000

Unamortized debt discount

(148,709)

(61,878)

Balance at end of period

$

502,791

$

255,122

 

The following table is a summary of the changes of our Convertible Notes Payable as of September 30, 2018:

 

Balance at December 31, 2017

$

255,122

Issuance of notes

462,000

Repayment of notes in cash

(22,500)

Repayment of notes in shares

 

 

(105,000)

Issuance of replacement notes

 

 

37,500

Replacement of notes

 

 

(37,500)

Increase in debt discount

(377,260)

Amortization of debt discount

290,429

Balance at September 30, 2018

$

502,791

 

On September 11, 2018, we entered into a Bridge Note Agreement totaling $7,500 with one of our investors. This Bridge Note is interest free, secured by the Company’s assets, convertible to shares of the Company’s restricted stock at $0.03 per share and has a maturity date of February 16, 2019.  There was no discount attributable to this note.

 

On August 16, 2018, we entered into two Bridge Note Agreements totaling $25,000 with two of our investors. These Bridge Notes are interest free, secured by the Company’s assets, convertible to shares of the Company’s restricted stock at $0.035 per share and have maturity dates of February 16, 2019.  The total discount attributable to these notes was $3,572. During the three and nine months ended September 30, 2018, interest expense related to the beneficial conversion features totaled $815.

 

On May 3, 2018, we entered into two Bridge Note Agreements totaling $22,500 with one of our investors. The two Bridge Notes are interest free, secured by the Company’s assets, convertible to shares of the Company’s restricted stock at $0.05 per share and had original maturity dates of November 3, 2018.  The holder of the Notes has waived the maturity dates to January 31, 2019.  The total discount attributable to these notes was $13,500. During the three and nine months ended September 30, 2018, interest expense related to the beneficial conversion features totaled $6,750 and $11,005, respectively.

 

On April 13, 2018, we signed a convertible promissory note (the “Convertible Note”) with Labrys Fund, LP, a Delaware limited partnership (the “Holder”). The principal amount of the Convertible Note is $200,000 and matures on April 13, 2019. The Convertible Note carries an original issue discount of $20,000 and accrues interest at the rate of 10% per annum. The Convertible Note may be prepaid by the Company with various redemption premiums applicable depending on when the Company prepays the principal balance. The Convertible Note is convertible into shares of the Company’s common stock at a conversion price of 35% discount to the lowest trading price during the previous twenty trading days to the date of a notice of conversion. The Convertible Note is convertible, at the Holder’s election, only after 180 days after issuance. The debt discount and derivative liability recorded at issuance were $200,000 and $448,165, respectively. The Convertible Note discount is amortized to interest expense over the term of the note and at September 30, 2018 had an unamortized balance of $106,849. During the three and nine months ended September 30, 2018, interest expense of $5,041 and $9,315 was recorded, respectively. During the three and nine months ended September 30, 2018, interest expense related to amortization of the discount on the unpaid note of $50,411 and $93,151 was recorded, respectively.

 

On January 30, 2018, we signed a convertible promissory note (“Convertible Note”) with a third party (“Holder”). The Convertible Note is subordinate to the convertible note owed to Michael Kelly which the Company filed with its Current Report on Form 8-K on February 1, 2018 and amended on February 6, 2018. The principal amount of the Convertible Note is $152,000 and matures on January 30, 2019. The Convertible Note bears an annual interest rate of 10% per annum.  Upon an event of default, the interest rate shall increase to 18% for as long as the event of default is continuing (“Default Interest”). The Convertible Note may be converted, at the Holder’s discretion, into the Company’s common stock at any time after 180 days at a 35% discount to the lowest trading price during the previous 20 trading days to the date of a conversion notice. Until the 90th day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 120%, in addition to outstanding interest, without the Holder’s consent; from the 91st day to the 120th day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 125%, in addition to outstanding interest, without the Holder’s consent; from the 121st day to the Prepayment Date, the Company may pay the principal at a cash redemption premium of 130%, in addition to outstanding interest, without the Holder’s consent. After the 180th up to the Maturity Date this Note shall have a cash redemption premium of 135% of the then outstanding principal amount of the Note, plus accrued interest and Default Interest, if any, which may only be paid by the Company upon Holder’s prior written consent. At any time on or after the Maturity Date, the Company may repay the then outstanding principal plus accrued interest and Default Interest, if any, to the Holder and may be converted to stock under certain circumstances. The total value of the Convertible Note balance, if converted to stock at September 30, 2018, would be $254,224. The debt discount and derivative liability recorded at issuance were $152,000 and $174,234, respectively. The Convertible Note discount is amortized to interest expense over the term of the note and at September 30, 2018 has an unamortized balance of $38,274. During the three and nine months ended September 30, 2018, interest expense of $3,322 and $9,610, and interest expense related to amortization of the discount on the unpaid note of $51,261 and $113,726 were recorded, respectively. During the three and nine months ended September 30, 2018, the holder of the note converted $50,000 of debt to 3,032,329 shares of the Company’s common stock.

 

During the three months ended March 31, 2018, we entered into two Bridge Note Agreements totaling $37,500 with one of our investors. These Bridge Notes were rolled into a new Bridge Note (the “New Note”) with a total of $55,000, maturing September 15, 2018. The New Note was secured by a copy of the Company’s Payment Service Provider (“PSP”) software code, and convertible to shares of the Company’s restricted stock at a price of $0.08 per share. The discounts attributable to the two Bridge Notes rolled into the New Note totaled $8,188 which was expensed as interest at the date of the New Note. There was no discount attributable to the New Note, as the conversion price of $0.08 was the same as the share price on the date the New Note was issued. The New Note was converted into 687,500 shares of Spindle common stock in April 2018.

 

During the three months ended March 31, 2017, we entered into three Bridge Note Agreements totaling $46,000 with one of our investors. These three Bridge Notes were paid in full during 2017. The Bridge Notes also included warrants to purchase two shares of the Company’s common stock, at a price of $0.135, for each dollar loaned to Spindle. The total discount attributable to these transactions was $32,716.  During the three and nine months ended September 30, 2017, interest expense related to the warrants and the beneficial conversion feature totaled $14,142 and $32,716, respectively. During the three and nine months ended September 30, 2017, $15,000 and $46,000 was paid on these Bridge Notes. No warrants related to these three Bridge Notes have been exercised.

 

During the twelve months ended December 31, 2017, we entered into seven Bridge Note Agreements totaling $145,000 with one of our investors. The seven Bridge Notes were interest free, secured by the Company’s assets, convertible to shares of the Company’s restricted stock at $0.10 and $0.135 per share and had maturity dates ranging from June 30, 2017 to June 29, 2018. The holder has waived the maturity dates for all of the Notes to January 31, 2019.  Three of the seven Bridge Notes included warrants to purchase two shares of the Company’s common stock, at an exercise price of $0.135 or $0.20 per share, for each dollar loaned to Spindle. The total discount attributable to the seven transactions was $98,457, which was fully amortized at September 30, 2018. During the three and nine months ended September 30, 2018, interest expense related to the warrants and the amortization of the discount on the unpaid note balances totaled $0 and $16,904, respectively. During the three and nine months ended September 30, 2018, we repaid $0 and $15,000, respectively, on one of these notes.

 

In December 2016, we entered into a $5,000 Bridge Note Agreement with one of our investors. The Bridge Note was secured by the Company’s assets, had a maturity date of February 12, 2017 and included warrants to purchase two shares of the Company’s common stock for each dollar loaned to Spindle. The total discount attributable to this transaction was $525, which was expensed to interest during the three months ended March 31, 2017. At September 30, 2018, the $5,000 Bridge Note was paid in full, though none of the warrants related to this Note have been exercised.

 

On May 18, 2016, we entered into a $182,000 Convertible Promissory Note (the “Note”) with an investor in the Company. The Note bears an interest rate of 6% per annum and had a maturity date of May 18, 2018. The Holder of the Note waived the maturity date while the Company and the Holder are negotiating new terms for the Note. The total value of the Note, if converted to stock, would be $404,444, therefore a discount in the amount of $182,000 was recorded, which was amortized to interest expense over the original term of the Note. During the three and nine months ended September 30, 2018, interest expense of $2,488 and $7,440 and interest expense related to amortization of the discount on the unpaid notes of $0 and $44,974 was recorded, respectively. The discount was fully amortized at September 30, 2018. During the three and nine months ended September 30, 2017, interest expense of $2,525 and $7,494 and interest expense related to amortization of the discount on the unpaid notes of $21,047 and $62,453 was recorded, respectively. The Company made principal payments of $0 and $2,500 on the Note during the three and nine months ended September 30, 2018, respectively.

 

In December 2016, we entered into a $5,000 Bridge Note Agreement with one of our investors. The Bridge Note was paid in full during the quarter ended March 31, 2018. The Bridge Note included warrants to purchase two shares of the Company’s common stock for each dollar loaned to Spindle. None of the warrants have been exercised. The total discount attributable to this transaction was $525, which was fully amortized in 2017.