From October 1, 2019 through December 13, 2019 the Company issued Convertible notes for a total of $806,750. The notes required 5,000 shares of the Company’s common stock to be issued and included interest at rates ranging from 4% to 8% and are for terms of nine to twelve months. The Company also extended five Convertible notes (see below schedule) and issued 6,200 shares to settle a conversion of a convertible loan. Finally, during this period the Company extended a $170,000 non-convertible loan from a private investor to December 31, 2019 (with no extension or interest paid).

From October 1, 2019 through December 13, 2019 the Company issued 40 shares of Series AA Convertible Preferred Stock at $2,500 per share and received $90,000 net of $10,000 of broker fees. For every $2,500 invested, the investor received one share of Series AA Convertible Preferred Stock convertible into 1,000 shares of Common Stock and 1,000 warrants to purchase Common Stock at $3.50 per share and an expiration period of five years from the original issue date.

On November 15, 2019 and December 3, 2019, the Company entered into two Securities Purchase Agreements (the “SPAs”) with the same private investor (the “Investor”), pursuant to which the Investor purchased from the Company, for a total purchase price of $800,000 (the “Purchase Price”): (i) 10% Senior Secured Convertible Promissory Notes in the total principal amount of $880,000 (the “Notes”); and (ii) common stock purchase warrants permitting the Investor to purchase up to a total of 176,000 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at an exercise price of $3.50 per share (the “Warrants”, and together with the Notes, the “Securities”).

The Notes accrue interest at a rate of ten percent (10%) per annum and mature on November 15, 2020 and December 3, 2020 (the “Maturity Dates”). The Notes contains customary events of default (each an “Event of Default”). If an Event of Default occurs, all outstanding obligations owing under the Notes will become immediately due and payable at the Investor’s election. Any outstanding obligations owing under the Notes which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum. The Notes are convertible into shares of the Company’s Common Stock, subject to the adjustments described therein. The conversion price (the “Conversion Price”) shall equal to $2.50. 

In connection with the issuance of the Notes, the Company entered into a General Security Agreement (the “GSA”) with the Investor whereby the Company granted to the Investor a continuing security interest in, lien upon and a right of setoff against, all of the Company’s right, title and interest in all of the Company’s assets.

In connection with the SPAs, the Company entered into Registration Rights Agreements (the “RRAs”) pursuant to which it shall (i) use its best efforts to file initial registration statement on Form S-1 (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “Commission”) to register the Securities, within thirty (30) calendar days after the final closing date of the Company’s offering of Series AA Convertible Preferred Stock (the “Filing Deadline); and (ii) have the Registration Statement declared effective by the Commission within one hundred fifty (150) days of the Filing Deadline.

In connection with the SPAs, the Company payed a 10% cash fee (a total of $80,000), to Garden State Securities, Inc. (the “Placement Agent”) for acting as placement agent for the sale of the Securities. The Company will also issue a warrant to the Placement Agent for it to purchase shares of Common Stock equal to ten percent (10%) of the Securities.

On November 15, 2019, the Company reached a verbal agreement with its Merchant Agreement lenders to temporarily reduce the Daily Payment Rate from $10,744 to $2,500.

Convertible Loan Modifications and Extinguishments

Subsequent to September 30, 2019, the Company modified or paid off the following loans:

(1) Loan extended after issuance of 50,000 common stock warrants.