Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Debentures and Notes Payable

v3.19.3
Note 4 - Debentures and Notes Payable
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Debt Disclosure [Text Block]
Note
4
– Debentures and Notes Payable
 
   
September
30,
   
December 31,
 
   
2019
   
2018
 
Notes and debentures payable:
 
 
 
 
 
 
 
 
6.05% Insurance premium finance agreement due July 2019
  $
-
    $
31,089
 
6.30% Insurance premium finance agreement due July 2020
   
55,911
     
-
 
4.75% Convertible debenture due September 2019 (see Note 6)
   
63,675
     
63,675
 
Total notes and debentures payable
 
$
119,586
   
$
94,764
 
                 
Notes payable - related party:
 
 
 
 
 
 
 
 
14% Term loan due December 2019
  $
374,993
    $
374,993
 
14% Term loan due December 2019
   
756,500
     
621,500
 
14% Term loan due December 2019
   
535,941
     
400,941
 
7% Convertible promissory note due December 2019, net
   
250,000
     
228,627
 
7% Convertible promissory note due December 2019, net
   
100,000
     
76,239
 
Total notes payable - related party
 
$
2,017,434
   
$
1,702,300
 
 
 
6.05%
Insurance premium finance agreement, due
July 2019 
 
The Company entered into an insurance financing agreement in
September 2018
totaling
$48,855.
 The agreement was due in
eleven
installments of
$4,441
through
July 2019.
The Company made installment payments of
$31,089
during the
nine
months ended
September 30, 2019. 
 
6.
3
% Insurance premium finance agreement, due
July 20
20
 
 
The Company entered into an insurance financing agreement in
September 2019
totaling
$61,503.
 The agreement was due in
eleven
installments of
$5,591
through
July 2020.
The Company made installment payments of
$5,591
during the
nine
months ended
September 30, 2019. 
 
4.75%
Convertible debenture due
September 2019
 
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
September 30, 2019
and warrants to buy
61
post-split equivalent shares of common stock at a post-split exercise price of
$114,450
per share. The convertible debenture was subsequently paid in full on
October 15, 2019 (
see Note
6
).
 
14%
Term loan due
December
2019,
related party
 
On
April 18, 2016,
the Company entered into an unsecured loan agreement whereby Carlton James North Dakota Limited ("CJNDL”), a company owned by Mr. Simon Calton, a director of the Company, 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 was due
September 30, 2019
and subsequently extended to
December 31, 2019.
CJNDL has advanced
$374,993
(
$274,993
in excess of the facility) on the loan as of
September 30, 2019.
During
2017,
CJNDL 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
December
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 was due
September 30, 2019
and subsequently extended to
December 31, 2019.
Keen has advanced
$756,500
(
$456,500
in excess of the facility) on the loan through
September 30, 2019.
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
December
2019,
related party
 
On
June 1, 2015,
Coretec obtained a
$500,000
revolving note agreement with CJNDL. Coretec accrues interest on the outstanding balance at the rate of
1.167%
per month, payable on a quarterly basis. CJNDL has advanced
$535,941
on the loan (
$35,941
in excess of the facility) through
September 30, 2019.
During
2019,
CJNDL 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.  Outstanding borrowings are secured by substantially all assets of the Company. The note was due on
September 30, 2019
and subsequently extended to
December 31, 2019.
 
7%
Convertible promissory note due
December
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”), subsequently extended to
December 31, 2019.
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 was amortized over the original life of the debt and
$21,373
and
$97,830
was amortized during the
nine
months ended
September 30, 2019
and
2018
respectively.
 
7%
Convertible promissory note due
December
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
and subsequently extended to
December 31, 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 was amortized over the original life of the debt and
$23,761and
$37,503
was amortized during the
nine
months ended
September 30, 2019
and
2018
respectively.