Quarterly report pursuant to Section 13 or 15(d)

Convertible Debt and Other Debt

v3.22.2.2
Convertible Debt and Other Debt
 6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Convertible Debt and Other Debt

5) Convertible Debt and Other Debt

 

Convertible Debt

 

On various dates during the six months ended June 30, 2022, the Company issued convertible notes for a total of $2,624,738 which contained varied terms and conditions including the following: a) 5-12 month maturity date; b) interest rates of 12%; c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon the Company’s up-listing to NASDAQ or NYSE or an event of default. These notes were issued with either shares of common stock or warrants to purchase common stock that were fair valued at issuance date. The aggregate relative fair value of the shares of common stock and warrants issued with the notes of $265,764 was recorded as a debt discount to be amortized over the term of the notes. We also evaluated the convertible notes for derivative liability treatment and determined that the notes did not qualify for derivative accounting treatment at June 30, 2022.

 

 

The specific terms of the convertible notes and outstanding balances as of June 30, 2022 are listed in the tables below.

Inception Date   Term   Loan Amount   Outstanding balance with OID   Original Issue Discount (OID)   Interest Rate   Conversion Price   Deferred Finance Fees   Discount for conversion feature and warrants/shares
                                 
May 17, 2018 (1)(2)   12 months   $ 380,000     $ 98,544     $ 15,200       8 %   $ 2.50     $ 15,200     $ 332,407  
January 3, 2019 (1)(4)   6 months   $ 50,000     $ 50,000     $ 2,500       24 %   $ 7.50     $ 2,500     $ -  
June 4, 2019 (1)(2)   9 months   $ 500,000     $ 302,484     $ -       8 %   $ 2.50     $ 40,500     $ 70,631  
July 19, 2019 (1) (2)   12 months   $ 115,000     $ 115,000     $ -       4 %   $ 2.50     $ 5,750     $ 15,460  
September 27,2019 (1) (2)   12 months   $ 78,750     $ 78,750     $ -       4 %   $ 2.50     $ 3,750     $ 13,759  
October 24, 2019 (1) (2)   12 months   $ 78,750     $ 78,750     $ -       4 %   $ 2.50     $ 3,750     $ -  
November 15,2019 (1)   12 months   $ 385,000     $ 320,000     $ 35,000       10 %   $ 2.50     $ 35,000     $ 90,917  
January 2,2020 (1)   12 months   $ 330,000     $ 330,000     $ 30,000       10 %   $ 2.50     $ 30,000     $ 91,606  
January 24,2020 (1)   12 months   $ 247,500     $ 247,500     $ 22,500       10 %   $ 2.50     $ 22,500     $ 89,707  
January 29, 2020 (1)   12 months   $ 363,000     $ 363,000     $ 33,000       10 %   $ 2.50     $ 33,000     $ 297,000  
February 12, 2020 (1)   12 months   $ 275,000     $ 275,000     $ 25,000       10 %   $ 2.50     $ 25,000     $ 225,000  
February 19,2020 (1)   12 months   $ 165,000     $ 165,000     $ 15,000       10 %   $ 2.50     $ 15,000     $ 135,000  
March 11,2020 (1)   12 months   $ 330,000     $ 330,000     $ 30,000       10 %   $ 2.50     $ 30,000     $ 232,810  
March 13, 2020 (1)   12 months   $ 165,000     $ 165,000     $ 15,000       10 %   $ 2.50     $ 15,000     $ 60,705  
March 26, 2020 (1)   12 months   $ 111,100     $ 111,100     $ 10,100       10 %   $ 2.50     $ 10,100     $ 90,900  
April 8, 2020 (1)   12 months   $ 276,100     $ 276,100     $ 25,100       10 %   $ 2.50     $ 25,000     $ 221,654  
April 17,2020 (1)   12 months   $ 143,750     $ 143,750     $ 18,750       10 %   $ 2.50     $ -     $ 96,208  
April 30,2020 (1)   12 months   $ 546,250     $ 546,250     $ 71,250       10 %   $ 2.50     $ 47,500     $ 427,500  
May 6, 2020 (1)   12 months   $ 460,000     $ 460,000     $ 60,000       10 %   $ 2.50     $ 40,000     $ 360,000  
May 18,2020 (1)   12 months   $ 546,250     $ 221,250     $ 46,250       10 %   $ 2.50     $ 35,500     $ 439,500  
June 2, 2020 (1)   12 months   $ 902,750     $ 652,750     $ 92,750       10 %   $ 2.50     $ 58,900     $ 708,500  
June 12,2020 (1)   12 months   $ 57,500     $ 57,500     $ 7,500       10 %   $ 2.50     $ 5,000     $ 45,000  
June 22, 2020 (1)   12 months   $ 138,000     $ 138,000     $ 18,000       10 %   $ 2.50     $ 12,000     $ 108,000  
July 7, 2020 (1)   12 months   $ 586,500     $ 586,500     $ 76,500       10 %   $ 2.50     $ 51,000     $ 400,234  
July 17, 2020 (1)   12 months   $ 362,250     $ 362,250     $ 47,250       10 %   $ 2.50     $ 31,500     $ 185,698  
July 29, 2020 (1)   12 months   $ 345,000     $ 345,000     $ 45,000       10 %   $ 2.50     $ 30,000     $ 241,245  
July 21, 2020 (1) (5)   12 months   $ 115,000     $ 115,000     $ 15,000       10 %   $ 2.50     $ 10,000     $ 24,875  
August 14, 2020 (1)   12 months   $ 762,450     $ 462,450     $ 69,450       10 %   $ 2.50     $ 66,300     $ 580,124  
September 10, 2020 (1)   12 months   $ 391,000     $ 391,000     $ 51,000       10 %   $ 2.50     $ 34,000     $ 231,043  
September 21, 2020 (1) (5)   12 months   $ 345,000     $ 345,000     $ 45,000       10 %   $ 2.50     $ 30,000     $ 66,375  
September 23, 2020 (1)   12 months   $ 115,000     $ 15,000     $ 15,000       10 %   $ 2.50     $ 10,000     $ 20,500  
December 3, 2020 (1)   12 months   $ 299,000     $ 299,000     $ 39,000       10 %   $ 2.50     $ 26,000     $ 197,882  
October 22, 2020 (1) (5)   12 months   $ 115,000     $ 115,000     $ 15,000       10 %   $ 2.50     $ 10,000     $ 18,875  
February 17, 2021 (1)   12 months   $ 230,000     $ 230,000     $ 30,000       10 %   $ 2.50     $ 20,000     $ 180,000  
March 23, 2021 (1)   12 months   $ 55,000     $ 55,000     $ 5,000       10 %   $ 2.50     $ -     $ 36,431  
May 6, 2021 (1)   12 months   $ 402,500     $ 402,500     $ 52,500       10 %   $ 2.50     $ 35,000     $ 312,551  
June 17, 2021 (1)   12 months   $ 230,000     $ 230,000     $ 30,000       10 %   $ 2.50     $ 20,000     $ 144,760  
June 25, 2021 (1)   12 months   $ 977,500     $ 977,500     $ 127,500       10 %   $ 2.50     $ -     $ 773,802  
June 3, 2021 (1)   6 months   $ 50,000     $ 50,000     $ 1,500       12 %   $ 2.50     $ -     $ 7,948  
March 1, 2022 (13)   8 months   $ 700,000     $ 700,000     $ 84,000       12 %     (6 )   $ -     $ -
July 3, 2021 (1)   12 months   $ 115,000     $ 115,000     $ 15,000       10 %   $ 2.50     $ 10,000     $ 90,000  
February 1,2022 (1) (13)   6 months   $ 260,000     $ 210,000     $ 10,000       12 %   (7 )   $ 2,000     $ -  
February 4, 2022 (13)   8 months   $ 500,000     $ 500,000     $ 30,000       12 %   (11 )   $ -     $ -  
May 13, 2022 (13)   7 months   $ 500,000     $ 500,000     $ 25,000       12 %   (11 )   $ -     $ -  
January 19,2022 (1) (13)   6 months   $ 52,000     $ 52,000     $ 2,000       12 %   $ 2.50     $ 2,000     $ -  
January 20,2022 (1) (3) (13)   6 months   $ 352,188     $ 12,690     $ 45,938       (3 )     (8 )   $ -     $ -  
January 20,2022 (1) (3) (13)   6 months   $ 352,188     $ 352,188     $ 45,938       (3 )     (8 )   $ -     $ -  
January 20,2022 (1) (3) (13)   6 months   $ 140,875     $ 140,875     $ 18,375       (3 )     (8 )   $ -     $ -  
August 31, 2021   12 months   $ 189,750     $ 189,750     $ 24,750       10 %     (9 )   $ 16,500     $ 148,500  
September 10, 2021 (1)   8 months   $ 100,000     $ 100,000     $ 4,000       12 %     (7 )   $ -     $ 43,520  
September 15, 2021 (1)   6 months   $ 250,000     $ 250,000     $ 12,500       12 %     (7 )   $ -     $ 108,801  
September 16, 2021 (1)   6 months   $ 250,000     $ 250,000     $ 12,500       12 %     (7 )   $ -     $ 112,337  
September 24, 2021 (1)   8 months   $ 125,000     $ 125,000     $ 6,250       12 %     (7 )   $ -     $ 61,876  
September 15, 2021 (1)   6 months   $ 250,000     $ 250,000     $ 37,500       12 %     (7 )   $ 30,000     $ -  
October 21, 2021 (5)   12 months   $ 189,750     $ 189,750     $ 24,750       12 %   $ 2.50     $ 16,500     $ 87,332  
November 1, 2021 (5)   12 months   $ 189,750     $ 189,750     $ 24,750       12 %   $ 2.50     $ -     $ 96,991  
December 7, 2021   12 months   $ 169,500     $ 67,800     $ 19,500       12 %     (10 )   $ 3,750     $ -  
March 23, 2022   8 months   $ 56,500     $ 35,312     $ 6,500       12 %     (12 )   $ -     $ -  
March 29, 2022   8 months   $ 112,000     $ 67,144     $ 13,000       12 %     (12 )   $ -     $ -  
February 9, 2022   12 months   $ 88,987     $ 53,487     $ 10,237       12 %     (10 )   $ -     $ -  
March 30, 2022   12 months   $ 100,000     $ 100,000     $ 5,000       12 %   $ 2.50   $ -     $ 19,614  
April 19, 2022   12 months   $ 95,000     $ 95,000     $ -       12 %   (12 )   $ -     $ 16,234  
May 23, 2022   8 months   $ 950,000     $ 950,000     $ 57,000       12 %   $ 2.50     $ 16,165     $ -  
May 8, 2022 (13) (14)   8 months   $ 65,000     $ 65,000     $ 3,000       12 %   (7 )   $ -     $ -  
                $ 16,067,674     $ 1,775,088                     $ 981,665     $ 8,359,812  

 

 

  (1) The Note is past due. The Company and the lender are negotiating in good faith to extend the loan.
  (2) The Company and lenders have entered into Standstill and Forbearance Agreements (as described below).
  (3) Note is secured by the assets of the Company’s subsidiary, PBI Agrochem, Inc. and interest rate is 40.9% OID.
  (4) During the year ended December 31, 2020, the Company entered into a Rate Modification Agreement with this lender. In this agreement the lender agreed to reduce their interest rate and were granted the right to convert loans using a variable conversion price if more than one other variable rate lender converted at a variable rate.
  (5) The Company has agreed to issue shares of its common stock to lenders if their notes are not repaid by a defined date.
  (6) Loan is not convertible until 180 days from the date of issuance of the Note and following an Event of Default will be convertible at the lowest trading price of the 20 days prior to conversion. The loan is guaranteed by the Company’s Chief Executive Officer, but the lender may only enforce this guarantee after certain conditions have been met, specifically after (i) the occurrence of an Event of Default (as defined in the Note), (ii) the failure of the Company to cure the Default in 10 business days, and (iii) a failure by the Company to issue, or cause to be issued, shares of its common stock upon submission by the lender of a notice of conversion.
  (7) Notes are convertible before maturity at $2.50 per share or mandatorily convertible when the Company up-lists to the NASDAQ at the lower of $2.50 or the up-list price.
  (8) Notes can be converted at the lesser of $2.50 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of original conversion price or the product of the VWAP of the common stock for the 5 trading dates immediately prior to the maturity date multiplied by 0.75.
  (9) Conversion price of this note is $2.50 and will be adjusted to, upon an Event of Default, the lower of (i) the conversion price or (ii) a 25% discount to the 5-day average VWAP of the stock prior to default. Additionally, if an up-list to a national exchange occurs while this note is outstanding, the conversion price shall be changed to the lower of (i) the conversion price or (ii) a 25% discount to the up-list price.
  (10) Notes are convertible upon an Event of Default at 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
  (11) Loans can be voluntarily converted before maturity at $2.50 per share. Lender retains the option upon an Up-list to convert at the lower of $2.50 or the 10% off Up-list price.
  (12) Notes are convertible at $2.50 per share except that following an Event of Default the conversion price will be adjusted to 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
  (13) During the six months ended June 30, 2022, the Company extended nine loans totaling $1,650,000 and increased the principal to $2,872,251. The Company issued 320,900 shares of common stock for these extensions and added principal.
  (14)

Lender is a related party.

 

As of June 30, 2022, one lender holds approximately $9.4 million of the $16.1 million convertible notes outstanding.

 

For the six months ended June 30, 2022, the Company recognized amortization expense related to the debt discounts indicated above of $1,363,151. The unamortized debt discounts as of June 30, 2022 related to the convertible debentures and other convertible notes amounted to $381,223.

 

Standstill and Forbearance Agreements

 

In recent years, the Company entered into Standstill and Forbearance Agreements with lenders who hold variable-rate convertible notes. Pursuant to these agreements the lenders agreed to not convert any portion of their notes into shares of common stock at a variable rate. The Company and two lenders ($673,528 outstanding principal at June 30, 2022) are negotiating in good faith to resolve the remaining loans.

 

In connection to these agreements, the Company incurred interest, penalties, and fees of approximately $202,050 and $404,100 in the three and six months ended June 30, 2022, respectively.

 

Convertible Loan Modifications and Extinguishments

 

We refinanced certain convertible loans during the six months ended June 30, 2022 at substantially the same terms for extensions ranging over a period of five to eight months. We amortized any remaining unamortized debt discount as of the modification date over the remaining, extended term of the new loans. We applied ASC 470 of modification accounting to the debt instruments which were modified during the quarter or those settled with new notes issued concurrently for the same amounts but different maturity dates. The terms such as the interest rate, prepayment penalties, and default rates will be the same over the new extensions. According to ASC 470, an exchange of debt instruments between or a modification of a debt instrument by a debtor and a creditor in a nontroubled debt situation is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different and will be accounted for as modifications.

 

The cash flows of new debt exceeded 10% of the remaining cash flows of the original debt on several loans. During the six months ended June 30, 2022 we recorded losses on extinguishment of liabilities of approximately $0.8 million by calculating the difference of the fair value of the new debt and the carrying value of the old debt.

 

 

The following table provides a summary of the changes in convertible debt, net of unamortized discounts, during 2022:

    2022  
Balance at January 1,   $ 12,839,813  
Early adoption of ASU 2020-06     473,027  
Issuance of convertible debt, face value     2,624,738  
Deferred financing cost     (414,988 )
Debt discount from shares and warrants issued with debt     (265,764 )
Payments     (865,367 )
Conversion of debt into equity     (68,159 )
Accretion of interest and amortization of debt discount to interest expense     1,363,151  
Balance at June 30,     15,686,451  
Less: current portion     15,686,451  
Convertible debt, long-term portion   $ –  

 

Other Notes

 

On April 29, 2022, the Company borrowed $50,000 under a note from a lender which requires 52 weekly payments of $1,250. As of June 30, 2022, the loan has an outstanding balance of $42,308. 

As of June 30, 2022 the Company owes $691,500 on two notes to a private investor. During the six months ended June 30, 2022, the Company issued 100,000 warrants (3 year term, $3.50 strike price) to the lender. The Company and the lender are negotiating in good faith to extend these loans.

 

On October 1, 2019, the Company and the holder of the $170,000 non-convertible loan issued in May 2017 agreed to extend the term of the loan to December 31, 2019. The Company agreed to issue 1,200 shares of its common stock per month while the note remains outstanding. The note will continue to earn 10% annual interest. The loan is currently past due and the Company and the investor are negotiating in good faith to extend the loan.

 

Merchant Agreements

 

We have signed various Merchant Agreements which are secured by second position rights to all customer receipts until the loan has been repaid in full and subject to interest rates of 2.5-5.9% per month. As illustrated in the following table, under the terms of these agreements, we received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the Merchant lenders at the disclosed Daily Payment Rate. The Company’s Chief Executive Officer (“Guarantor”) is guaranteeing that the Company will perform its obligations under the Agreement. In no circumstance will Guarantor be asked or obligated to repay or be liable for the payment of any amount paid by Buyer to Seller, including, but not limited to, the Purchase Price.

 

The following table shows our Merchant Agreements as of June 30, 2022:

  Purchase Price     Purchased Amount     Outstanding Balance     Payment frequency   Payment
Rate		     Deferred Finance Fees  
June 28, 2022   $ 250,000     $ 337,250     $ 248,295     Daily   $ 2,595     $       -  
June 15, 2022   $ 150,000     $ 197,850     $ 141,280     Daily   $ 1,522     $ -  
May 11, 2022   $ 225,000     $ 308,250     $ 181,467     Weekly   $ 11,009     $ -  
January 11, 2022   $ 240,000     $ 300,000     $ 2,456     Weekly   $ 11,112     $ -  
December 21, 2021   $ 400,000     $ 520,000     $ 161,449     Weekly   $ 11,305     $ 6,000  
    $ 1,265,000     $ 1,663,350     $ 734,947                 $ 6,000  

 

The following table shows our Merchant Agreements as of December 31, 2021:

 

Inception Date  

Purchase

Price

     Purchased Amount     Outstanding Balance    

Payment

frequency

  

Payment

Rate

    

Deferred
Finance

Fees

  
December 21, 2021   $ 400,000     $ 520,000     $ 390,120     Weekly     11,305.00     $ 6,000  
July 6, 2021     125,000       166,250       8,790     Daily     1,279.00       2,500  
    $ 525,000     $ 686,250     $ 398,910                 $ 8,500  

 

We have accounted for the Merchant Agreements as loans under ASC 860 because while we provided rights to current and future receipts, we still had control over the receipts. The difference between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid each day.

 

 

Related Party Notes

 

During the six months ended June 30, 2022, we received short-term non-convertible loans of $516,450 from related parties, which bear interest rates of 12%, have a 10% OID and are due upon demand. During this period we repaid $209,000 of these loans.

 

Long term debt

 

The Company entered into a COVID-19 government loan in 2020, the Economic Injury Disaster Loan (or “EIDL”). The Company’s EIDL loan, $150,000, accrues interest at 3.75% and requires monthly payments of $731 for principal and interest beginning in December 2022. The balance of the principal will be due in 30 years. In connection with the EIDL loan the Company entered into a security agreement with the SBA, whereby the Company granted the SBA a security interest in all of the Company’s right, title and interest in all of the Company’s assets.