8. NOTE PAYABLE

9 Months Ended

Sep. 30, 2019

Notes Payable [Abstract]

NOTE PAYABLE

8. NOTE PAYABLE

During the quarter ended June 30, 2019, the Company used proceeds from its public offering to pay off the entire balance of this Notes Payable, along with all accrued and unpaid interest. As of September 30, 2019, the following summarizes this note payable:

On August 27, 2018, the Company entered into an unsecured promissory note (the “Note”) in the amount of $750,000 (the “Principal Amount”) with Gemini Special Opportunities Fund, LP (“Gemini”). The Note bears simple interest at an annual rate of 10% and is subject to a Securities Purchase Agreement, dated August 27, 2018. This Note was due and payable on February 28, 2019 (the “Maturity Date”). Effective February 28, 2019, a forbearance agreement was granted by Gemini lender for any defaults, confirmed in writing, until Gemini and the Company complete an amendment extending the maturity date of the note, or the note is repaid by the Company. If the Company repays the Note after November 28, 2018, the Company shall pay 115% of the Principal Amount plus accrued interest. During the year ending December 31, 2018, the Company recorded an increase in the Note Payable balance of $112,500 with offsetting debt discount related to this repayment premium which is being amortized to interest expense over the term of the note. Additionally, the Company paid $5,000 of lender fees which were also recorded as debt discount and are also being amortized to interest expense over the term of the note.

As additional consideration for the loan evidenced by the Note, the Company issued to Gemini warrants to purchase up to 18,000 shares of common stock for a period of five years from the date of issuance with an exercise price equal to $12.50 per share. These warrants had a fair value of $115,521 using the Black-Sholes valuation methodology. As a result of this transaction, the Company recorded $100,102 of debt discount consisting of the relative fair value of the warrants which is being amortized to interest expense over the term of the note.

As of March 31, 2019, this note had a balance amounting to $862,500 with accrued interest amounting to $44,589.

During the quarter ended June 30, 2019, the Company repaid the note balance of $862,500, and unpaid interest of $47,466, of which $2,877 was expensed in that quarter. In addition, the Company paid $75,000 for an extension fee, which was recorded as interest expense in that quarter.