NOTES PAYABLE, NET

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

NOTES PAYABLE, Net

NOTE 7 - NOTES PAYABLE, NET

On January 31, 2017, the Company entered into Conversion Agreements with several accredited investors (the “Investors”) pursuant to which substantially all Investors agreed to convert all amounts of notes payable and convertible notes payable due and payable to such persons including interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per share. Certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The Conversion Agreements resulted in the conversion of notes and convertible notes amounting to approximately $6,331,000 into 84,822,006 shares of Company common stock with a fair value of approximately $21,610,000. The Investors also agreed to waive any existing rights with respect to certain anti-dilution rights contained in their Stock Purchase Warrants. The Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share.

As a result of the above agreements associated with the conversion Agreements, the Company recorded a loss on the conversion of debt of approximately $6.0 million (including the effect of the elimination of related conversion feature derivative liabilities – see Note 7), a loss on the modification of warrants of approximately $0.2 million, and a loss on the modification of the derivatives of approximately $0.3 million.

On February 22, 2017, the Company entered into an Agreement and Release the (“February 22, 2017 Agreement”) with a holder of certain debentures that represented final and full payment of all amounts owed under these debentures which included debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants previously accounted for as derivative liabilities as well as certain pledged shares (2,500,000 shares) in exchange for $300,000 in cash which was paid in May 2017. As a result of the February 22, 2017 Agreement, the Company recorded a gain on the extinguishment of notes payable of approximately $2.8 million.

See notes 8 and 9.  

The following is a summary of notes payable as of December 31, 2017 and December 31, 2016:

	2017		2016
In connection with the acquisition of MultiPay in 2016, the Company assumed three promissory notes. Payments of $6,300 including principal and interest are due monthly. The interest rate at December 31, 2017 is 15.47% per annum. Total outstanding principal and interest was repaid in September 16, 2017.	$	—	$	46,210
In November 2016, the Company issued a 12% promissory note due in January 2017 to an officer and principal stockholder in the amount of $13,609. The noteholder also received 20,414 shares of the Company’s common stock with a fair value of $2,041. This amount was repaid in April 2017.		—		13,609
The below section of notes payable were all converted to common stock at $0.10 per share, in connection with the January 2017, conversion agreements described above except for the January 2017 Senior Unsecured Note that remains outstanding at December 31, 2017.
In September 2015, the Company issued 12% notes totaling $973,000. The notes are secured by the assets of the Company, matured in September 2017, and accrued interest is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,486,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years. The Company also incurred debt issuance costs of $77,840, which are presented as a discount against the notes and amortized into interest expense over the term of the notes.		—		963,000
In October 2015, the Company issued 12% notes in the amount of $225,000. The notes are secured by the assets of the Company, matured in October 2017, and accrued interest is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years. The Company also incurred debt issuance costs of $36,400, which are presented as a discount against the notes and amortized into interest expense over the term of the notes.		—		225,000

In November 2015, the Company issued a 12% note in the amount of $25,000. The note is secured by the assets of the Company, matured in October 2017, and accrued interest is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of this note, the Company also issued warrants for the purchase of 166,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years. The Company also incurred debt issuance costs of $94,400, which are presented as a discount against the note and amortized into interest expense over the term of the note.	—	25,000
In December 2015, the Company issued 12% notes totaling $850,000. The notes are secured by the assets of the Company and matured in December 2017. Any unpaid accrued interest on the note is convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,770,834 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities. See Note 8. The Company also incurred debt issuance costs of $165,300 which are presented as a discount against the notes and amortized into interest expense over the term of the notes.	—	850,000

In January 2016, the Company issued 12% notes totaling of $100,000. These notes are secured by the assets of the Company, matured in January 2017, and accrued interest is convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 208,332 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities. See Note 8.		—			100,000
In December 2016, the Company issued promissory notes with an aggregate face value of $1,275,000 which are payable one year from the date of issuance and bear interest of 10% per annum for the initial six months of the term of the Notes and 15% per annum for the remaining six months of the term of the Notes. The note holders also received 1,912,500 shares of common stock, with a fair value of $191,250. The Company allocated the proceeds to the notes and common stock based on their relative fair values, resulting in a discount against the notes for the common stock of $166,304, which will be amortized into expense over the one-year term of the notes. In connection with the issuance of the notes and common stock, the Company also incurred debt issuance costs of $212,427 of which $184,719 was recorded as debt issuance cost against the notes to be amortized over the term of the notes.		—			1,275,000
In January 2017, the Company issued a Senior Unsecured Note with a face value of $3,000,000, payable two years from issuance, along with aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,170,000. The loan is due to a Board Member upon his election in September 2017. The Company allocated the proceeds to common stock based upon the fair value and recorded a discount of $841,727 to be amortized into interest expense over the two-year term of the note. The Company also paid issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $312,000, and a total of $310,790 was recorded as debt issuance costs to be amortized into interest expense over the two-year term of the note.		3,000,000			—
Total Principal Outstanding	$	3,000,000		$	3,497,819
Less Current Maturities		—			(109,819	)
		3,000,000			3,388,000
Unamortized Deferred Discounts		(455,935	)		(159,375	)
Unamortized Debt Issuance Costs		(168,345	)		(177,072	)
Notes Payable, net of current maturities	$	2,375,720		$	3,051,603

The following is a roll-forward of the Company’s notes payable and related discounts for the years ended December 31, 2017 and 2016:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2015	$	2,196,669			(368,653	)		(1,193,947	)		634,069
New issuances		1,388,609			(260,719	)		(233,134	)		894,756
Payments		(87,459	)		—			—			(87,459	)
Amortization		—			452,350			1,267,706			1,720,056
Balance at December 31, 2016		3,497,819			(177,022	)		(159,375	)		3,161,422
New issuances		3,000,000			(310,790	)		(841,727	)		1,847,483
Payments/Conversions		(3,497,819	)		—			—			(3,497,819	)
Amortization		—			319,467			545,167			864,634
Balance at December 31, 2017	$	3,000,000		$	(168,345	)	$	(455,935	)	$	2,375,720

Future maturities of notes payable are as follows for the calendar years 2018 and 2019: 

2018	$	—
2019		3,000,000
	$	3,000,000