Quarterly report pursuant to Section 13 or 15(d)

Note 10 - Convertible Notes Payable - Related Party Disclosure

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Note 10 - Convertible Notes Payable - Related Party Disclosure
9 Months Ended
Sep. 30, 2018
Notes  
Note 10 - Convertible Notes Payable - Related Party Disclosure

NOTE 10 - CONVERTIBLE NOTES PAYABLE - RELATED PARTY, NET OF UNAMORTIZED DISCOUNT

 

Convertible notes payable to related parties consists of the following:

 

September 30, 2018

December 31, 2017

Convertible notes payable, annual interest rate of 6% to 10%, due date ranges from October 2018 to March 2019 and convertible into common stock at a price of $0.10 to $0.135 per share.

$

319,000

$

319,000

Unamortized debt discount

(13,235)

(192,294)

Balance at end of period

$

305,765

$

126,706

 

 

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

 

Balance at December 31, 2017

$

126,706

Amortization of debt discount

179,059

Balance at September 30, 2018

$

305,765

 

On October 17, 2017, we entered into a Convertible Note Agreement with a stockholder of over 5% of the Company. The Note was revised and amended on November 27, 2017, and is for a promissory note up to $359,000, convertible to stock under certain circumstances. At September 30, 2018, the Company had borrowed $219,000 under this agreement. The Note bears an interest rate of 10% per annum and had a maturity date of October 17, 2018. The Note has not been renewed as it is subject to litigation as described in Part II, Item 1. Legal Proceedings in this Form 10-Q.  The total value of the Note balance, if converted to stock at September 30, 2018, would be $498,456.  The discount and derivative liability recorded at issuance were $219,000 and $311,125, respectively. The Note discount is amortized to interest expense - related party over the term of the note and at September 30, 2018 has an unamortized balance of $13,235. During the three and nine months ended September 30, 2018, interest expense of $5,520 and $16,380 and interest expense related to amortization of the discount on the unpaid note of $59,050 and $175,223 were recorded, respectively.

 

On March 3, 2017, we entered into a $100,000 Bridge Note Agreement with a stockholder of over 5% of the Company. The Bridge Note was secured by the Company’s assets, was convertible to shares of the Company’s restricted stock at $0.10 per share and included warrants to purchase two shares of the Company’s common stock, at a price of $0.15, for each dollar loaned to Spindle. This Bridge Note had no stated maturity date.  The total discount attributable to this transaction was $100,000. The Bridge Note was converted to Spindle stock on March 3, 2017, and interest expense related to the warrants and the beneficial conversion factor totaling $100,000 was recorded.  At September 30, 2018, the warrants related to the Bridge Loan had not been exercised.

 

On March 25, 2016, we entered into a $100,000 Note Purchase Agreement with a stockholder of over 5% of the Company. The note is convertible to stock under certain circumstances, bears an interest rate of 6% per annum and has a maturity date of March 25, 2019. The total value of the note, if converted to stock, would be $133,333 and therefore a discount in the amount of $33,333 was recorded. This amount is amortized to interest expense - related party over the term of the note. During the three and nine months ended September 30, 2018, interest expense related to amortization of the discount on the unpaid note of zero and $3,856 was recorded, respectively.  During the three and nine months ended September 30, 2017, interest expense of $1,512 and $4,488, and interest expense related to amortization of the discount on the unpaid note of $4,201 and $12,466 was recorded, respectively. The discount was fully amortized at September 30, 2018.

 

In December 2016, we entered into a $10,500 Bridge Note Agreement with one of our directors. The Bridge Note was secured by the Company’s assets 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 $1,102 and was fully expensed to interest in the three months ended March 31, 2017. At September 30, 2017, the $10,500 Bridge Note had been paid in full. No warrants related to this Bridge Note have been exercised.