Annual report pursuant to Section 13 and 15(d)

Convertible Notes Payable

v3.7.0.1
Convertible Notes Payable
12 Months Ended
Dec. 31, 2016
Convertible Notes Payable Abstract [Abstract]  
Convertible Notes Payable Disclosure [Text Block]
4.
Convertible Notes Payable
 
On various dates from August 31, 2015 through January 19, 2016, each as amended on March 10, 2016, the Company entered into seven unsecured promissory notes with three separate third party investors. Each note bears interest at 8.0% per annum and was to mature on the earlier of June 30, 2016 or the completion of an IPO of the Company’s securities.
 
 Since the completion of the IPO occurred prior to June 30, 2016, these notes were to be automatically converted according to their terms into shares of the Company’s common stock at applicable conversion price upon the Company’s IPO to the extent and provided that no holder of these notes was or will be permitted to convert such notes to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of our common stock after such conversion. Due to this 4.99% limitation, a portion of these notes was not converted at the time of the IPO and the remaining unconverted principal and accrued interest amounts of the effected notes will remain outstanding and will be converted into shares of our common stock at such time as the 4.99% limitation continues to be met. Until such time as the notes are converted into shares of common stock, the maturity date of the notes will automatically be extended and we will not be required to repay the notes or the accrued interest relating to the notes in cash.
 
The IPO was completed on May 31, 2016. On May 31, 2016, pursuant to the conversion feature of the foregoing notes and with restriction of the 4.99% beneficially owned condition limitation, discussed above, the Company issued 1,166,503   common shares in total, reducing convertible debt principal by $183,356 and accrued interest by $17,699. Subsequent to these transactions and through December 31, 2016, an additional 910,095 common shares were issued due to the number of common shares outstanding allowing for conversion of additional shares under the 4.99% beneficially owned condition limitation. This reduced the convertible debt principal by $155,565 and accrued interest by $7,172. The remaining convertible debt without consideration of accrued interest as of December 31, 2016, if converted on December 31, 2016, would result in an additional 1,821,013 common shares to be issued.
 
The convertible notes were analyzed for a beneficial conversion feature on various issuance dates, at which time it was concluded that a beneficial conversion feature did not exist.
 
The table below represents the shares that are convertible at December 31, 2016 relating to the principal amounts of these convertible notes payable and excludes any shares that are convertible relating to the associated accrued interest:
 
 
 
 
 
 
 
 
 
Shares
 
 
 
 
 
 
 
 
 
Convertible at
 
 
 
December 31,
 
December 31,
 
 
 
Dec 31,
 
Issuance Date
 
2016 (e)
 
2015
 
Conversion Rate
 
2016
 
August 31, 2015(a)
 
$
38,299
 
$
125,000
 
$
0.1299
 
 
294,832
 
September 3, 2015
 
 
125,000
 
 
125,000
 
 
0.1299
 
 
962,279
 
October 6, 2015(a)(c)
 
 
30,280
 
 
147,000
 
 
0.20
 
 
151,402
 
October 6, 2015(b)
 
 
 
 
3,000
 
 
0.20
 
 
 
October 28, 2015(b)
 
 
 
 
50,000
 
 
0.20
 
 
 
January 14, 2016(d)
 
 
 
 
 
 
0.20
 
 
 
January 19, 2016
 
 
82,500
 
 
 
 
0.20
 
 
412,500
 
Total
 
$
276,079
 
$
450,000
 
 
 
 
 
1,821,013
 
 
(a) Debt partially converted on May 31, 2016 and on August 19, 2016.
(b) Debt fully converted to common shares on May 31, 2016.
(c) Debt partially converted on September 1, 2016.
(d) Debt fully converted to common shares effective November 30, 2016. 
(e) Excluded from the $276,079 is $20,333 in accrued interest on the convertible notes payable which is included in the accompanying balance sheet.
 
The common shares relating to the above mentioned convertible notes payable contain the following trading restrictions: (a) beginning 90 days after the initial closing of our IPO and until the one-year anniversary of the initial closing of the IPO, the holder of the note will be able to sell 1% of the number of shares of common stock underlying the note on a monthly basis, subject to a maximum sale on any trading day of 4% of the daily volume; (b) if the common stock price is over $7.00 per share for five consecutive trading days then the holder of the note can sell up to 3% of the number of shares of common stock underlying the note on a monthly basis, subject to a maximum sale on any trading day of 4% of the daily volume; (c) if the common stock price is over $10.00 per share for five consecutive trading days then the holder of the note can sell up to an additional 5% of the number of shares of common stock underlying the note on a monthly basis, subject to a maximum sale on any trading day of 7% of the daily volume; and (d) if the common stock price is over $14.00 per share then the holder of the note is not restricted from making any sales until such time as the common stock price falls back below $14.00 per share; and (b) thereafter, until the two-year anniversary of the initial closing of IPO, the holder of the note can sell on any trading day 10% of the daily volume; provided that if the common stock price is over $10.00 per share then the holder of the note is not restricted from making any sales until such time as the common stock falls back below $10.00 per share. The foregoing lock-up restrictions relate to public sales and do not restrict the transfer of the shares privately, if permitted by applicable law, provided the acquirer of the shares agrees to comply with the above restrictions with respect to any public sales.