Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Debentures and Notes Payable

v3.10.0.1
Note 4 - Debentures and Notes Payable
9 Months Ended
Sep. 30, 2018
Notes to Financial Statements  
Debt Disclosure [Text Block]
Note
4
– Debentures and Notes Payable
 
   
September
30,
   
December 31,
 
   
2018
   
2017
 
Notes and debentures payable:
 
 
 
 
 
 
 
 
6.05% Insurance premium finance agreement due June 2019
  $
44,413
    $
-
 
5.25% Insurance premium finance agreement due June 2018
   
-
     
21,323
 
9% Promissory note due June 2018
   
-
     
25,341
 
4.75% Convertible debenture due December 2018
   
63,675
     
64,124
 
Total notes and debentures payable
 
$
108,088
   
$
110,788
 
                 
Notes payable - related party:
 
 
 
 
 
 
 
 
14% Term loan due June 2019
  $
374,993
    $
264,993
 
14% Term loan due June 2019
   
596,500
     
596,500
 
14% Term loan due June 2019
   
400,941
     
400,941
 
7% Convertible promissory note due March 2019, net
   
196,017
     
98,187
 
7% Convertible promissory note due June 2019, net
   
63,738
     
26,235
 
Total notes payable - related party
 
 
1,632,189
   
 
1,386,856
 
Less current portion
   
(1,632,189
)
   
(1,262,434
)
Long term debt
 
$
-
   
$
124,422
 
 
6.05
% Insurance premium finance agreement, due Ju
ly
201
9
 
 
The Company entered into an insurance financing agreement in
2018
totaling
$48,855
 due
July 2019
and made payments of
$4,441
during the
nine
months ended
September 30, 2018.
 
5.25%
Insurance premium finance agreement, due
June 2018 
 
The Company entered into an insurance financing agreement in
2017
totaling
$37,711
 due
June 2018
and made payments of
$21,323
during the
nine
months ended
September 30, 2018.
 
9%
Promissory note due
June 2018
 
On
April 26, 2016,
the Company signed a
9%
promissory note with Golden State in the amount of
$40,000.
Golden State advanced the
$40,000
on the note and, on
June 16, 2016,
applied
$14,659
to fund the exercise of warrants under the terms of the
4.75%
convertible debenture (described below) held by Golden State, leaving
$25,341
outstanding on the
9%
promissory note as of
December 31, 2017.
During the
nine
months ended
September 30, 2018,
Golden State applied
$25,341
to fund the exercise of warrants under the terms of the
4.75%
convertible debenture.
 
4.75%
Convertible debenture due
December
2018
 
On
November 3, 2006,
the Company issued to Golden State a
4.75%
convertible debenture in a principal amount of
$100,000,
due
December 31, 2014
and subsequently extended to
December 31, 2018
and warrants to buy
61
post-split equivalent shares of common stock at a post-split exercise price of
$114,450
per share. In connection with each conversion, Golden State is expected to simultaneously exercise a percentage of warrants equal to the percentage of the principal being converted. On
January 8, 2018,
Golden State converted
$225
of the
4.75%
convertible debenture into
244,618
shares of common stock at
$0.0009
per share and exercised
0.2143
warrants at
$114,450
per share for
$24,525.
On
May 24, 2018,
Golden State converted
$225
of the
4.75%
convertible debenture into
396,635
shares of common stock at
$0.0006
per share and exercised
0.2143
warrants at
$114,450
per share and advanced
$23,765
cash for the exercise.
 
 
14%
Term loan due
June 2019,
related party
 
On
April 18, 2016,
the Company entered into an unsecured loan agreement whereby Carlton James North Dakota Limited ("CJNDL”) agreed to provide the Company a loan facility of up to
$100,000.
Under the terms of the agreement, the Company shall pay interest on the outstanding unpaid balance at the rate of
1.167%
per month. The interest is due quarterly, and the principal is due
June 29, 2019.
CJNDL has advanced
$374,993
(
$274,993
in excess of the facility) on the loan as of
September 30, 2018.
During
2017,
CJND agreed that the excess amount funded and any future funding under the loan will be done on the same terms and conditions as the original note.
 
14%
Term loan due
June 2019,
related party
 
On
February 24, 2016,
the Company entered into an unsecured loan agreement whereby Victor Keen, Co-Chairman of the Company (“Keen”) agreed to provide the Company a loan facility of up to
$300,000.
Under the terms of the agreement, the Company shall pay interest on the outstanding unpaid balance at the rate of
1.167%
per month. The interest is due quarterly, and the principal is due
June 29, 2019.
Keen has advanced
$596,500
(
$276,500
in excess of the facility) on the loan through
September 30, 2018.
During
2017,
Keen agreed that the excess amount funded and any future funding under the loan will be done on the same terms and conditions as the original note.  
 
14%
Term loan due
June 2019,
related party
 
On
June 1, 2015,
Coretec obtained a
$500,000
revolving note agreement with CJNDL. The total amount of borrowings by Coretec shall
not
exceed
$500,000.
Coretec accrues interest on the outstanding balance at the rate of
1.167%
per month, payable on a quarterly basis. CJNDL has advanced
$400,941
on the loan. Outstanding borrowings are secured by substantially all assets of the Company. The note is due on
June 29, 2019.
 
7%
Convertible promissory note due
March 2019,
related party 
 
On
March 30, 2017,
the Company issued to Mr. Victor Keen, Co-Chairman of the Board of Directors, a
7%
convertible promissory note in a principal amount of
$250,000,
due
March 1, 2019 (
“Maturity Date”). The promissory note shall automatically convert into
eight
percent (
8%
) of the fully diluted outstanding shares of common stock of the Company calculated after giving effect to (a) the exercise of all outstanding options, warrants or other rights to acquire shares of common stock of the Company, (b) the conversion of all outstanding convertible or exchangeable securities, and (c) after giving effect to the issuance of common stock upon conversion of this note (the “Conversion Shares”). The conversion shall
not
occur until both of the following
two
events shall have occurred (the “Conversion Event”): (i) the consummation of the Reverse Split by the Company as reflected in the Preliminary Information Statement filed with the Securities and Exchange Commission on
March 7, 2017,
and (ii) the conversion of all the Company’s issued and outstanding Series A Convertible Preferred Stock and Series B Convertible Preferred Stock into the Conversion Shares. If the Conversion Event has
not
occurred prior to the earlier to occur of the Maturity Date and the occurrence of an event of default, then this note shall
not
be automatically converted into the Conversion Shares and Mr. Victor Keen
may
elect, at his sole discretion, (i) to have the outstanding principal balance of this note converted into the Conversion Shares; or (ii) to declare the outstanding principal balance of this note, together with all accrued interest, be paid in accordance with the terms of the note. Such election
may
be made at any time on or following the Maturity Date or the occurrence of an event of default. This note is an unsecured obligation of the Company. The embedded conversion option was deemed to be a beneficial conversion feature because the active conversion price was less than the commitment date market price of the common stock. The dollar amount of the beneficial conversion feature is limited to the carrying value of the promissory note, so a
$250,000
debt discount was recorded, with a corresponding credit to additional paid-in capital for the beneficial conversion feature. The debt discount is being amortized over the life of the debt and
$97,830
and
$65,577
was amortized during the
nine
months ended
September 30, 2018
and
2017
respectively.
 
7%
Convertible promissory note due
June 2019,
related party
 
On
June 21, 2017,
the Company issued to Mr. Victor Keen, Co-Chairman of the Board of Directors, a
7%
convertible promissory note in a principal amount of
$100,000,
due
June 21, 2019.
The promissory note shall automatically convert into
four
percent (
4%
) of the fully diluted outstanding shares of common stock of the Company calculated after giving effect to (a) the exercise of all outstanding options, warrants or other rights to acquire shares of common stock of the Company, (b) the conversion of all outstanding convertible or exchangeable securities, and (c) after giving effect to the issuance of common stock upon conversion of this note (the “Conversion Shares”). The conversion shall
not
occur until both of the following
two
events shall have occurred (the “Conversion Event”): (i) the consummation of the Reverse Split by the Company as reflected in the Preliminary Information Statement filed with the Securities and Exchange Commission on
March 7, 2017,
and (ii) the conversion of all of the Company’s issued and outstanding Series A Convertible Preferred Stock and Series B Convertible Preferred Stock into the Conversion Shares. If the Conversion Event has
not
occurred prior to the earlier to occur of the Maturity Date and the occurrence of an event of default, then this note shall
not
be automatically converted into the Conversion Shares and Mr. Victor Keen
may
elect, at his sole discretion, (i) to have the outstanding principal balance of this note converted into the Conversion Shares; or (ii) to declare the outstanding principal balance of this note, together with all accrued interest, be paid in accordance with the terms of the note. Such election
may
be made at any time on or following the Maturity Date or the occurrence of an event of default. This note is an unsecured obligation of the Company. The embedded conversion option was deemed to be a beneficial conversion feature because the active conversion price was less than the commitment date market price of the common stock. The dollar amount of the beneficial conversion feature is limited to the carrying value of the promissory note, so a
$100,000
debt discount was recorded, with a corresponding credit to additional paid-in capital for the beneficial conversion feature. The debt discount is being amortized over the life of the debt and
$37,503
and
$13,734
was amortized during the
nine
months ended
September 30, 2018
and
2017,
respectively.