Debt |
6 Months Ended | |
|---|---|---|
Jun. 30, 2018 | ||
| Debt Disclosure [Abstract] | ||
| Debt Disclosure [Text Block] |
Note 6. Debt
Notes Payable
In December 2017, the Company issued a promissory note to an individual for $300,000 of borrowings for operating capital leading up to our public offering in January 2018. The note had a maturity of 30 days and was paid in full at maturity in January 2018 including interest of $45,000. The note was personally guaranteed by Joseph Gamberale, one of our board members. In May 2018, the Company issued a promissory note to an individual for $90,000 of borrowings for operating capital. The note had a maturity of June 30, 2018 and was paid in full in June 2018, including interest of $625. The note was secured by our common shares in Round Table Creative, Inc., (d/b/a “SuckerPunch Entertainment”). On May 9, 2018, the Company borrowed $200,000 from an individual pursuant to a promissory note. The note bears interest at 40% annually and initially matured on June 25, 2018. In June 2018, the note holder agreed to extend the maturity to December 31, 2018. Mr. Gamberale personally guaranteed the note and Mr. Gamberale and Mr. Tracy agreed to subordinate their existing notes to the repayment of this note. On June 28, 2018, the Company entered into a Securities Purchase Agreement (“SPA”) with SCWorx Acquisition Corp. (“Purchaser”), under which the Company agreed to sell up to $1M in principal amount of convertible notes and Warrants to purchase up to 671,142 shares of common stock. The Note is convertible into shares of common stock at a conversion price of $0.3725 and the Warrants are exercisable for shares of common stock at an exercise price of $0.3725. On June 29, 2018, the Company sold the Purchaser convertible notes in the principal amount of $500,000 and warrants to purchase 335,570 shares of common stock, for an aggregate purchase price of $500,000. The Note bears interest at 10% annually and matures on June 27, 2019. The Purchaser has agreed in the SPA to fund (i) a second tranche of $250,000 upon the signing of a merger agreement with the Purchaser and (ii) a third tranche of $250,000 upon mutual agreement of the Purchaser and Company. Refer to Note 11 - Subsequent Events.
Repayment of the note is subject to acceleration in certain circumstances. In the event of a default under the Note, the Company is required to pay an amount equal to 110% of all amounts due under the Note. Negative covenants in the Note include restrictions on incurring additional indebtedness and sales of assets without approval of the outside directors. The note may be prepaid at any time following issuance, subject to payment of a variable premium ranging between 10% (redemption within 90 days of issuance) and 20% (redemption after 90 days). If the Company enters into a merger/acquisition transaction or change of control transaction with a party other than the Purchaser, then the Purchaser shall have the option to have the outstanding Notes and Warrants redeemed for an amount of cash equal to their “Black Scholes Value.” The Company applied a portion of the proceeds of the $500,000 note to repay the aforementioned $90,000 promissory note. Accordingly, the lien on the capital stock of SuckerPunch Entertainment has been released and the Company now owns that capital stock free and clear of all liens. As of June 30, 2018, the Company received $554,375 under the agreement, of which $54,375 was remitted back to the purchaser in July 2018 as it was erroneously funded. Related Party Promissory Notes On April 10, 2018, the Company borrowed a total of $300,000 from two of its board members, Joseph Gamberale and Joel Tracy, pursuant to promissory notes of $150,000, respectively. The notes bear interest at 12% annually and mature May 21, 2018. Mr. Gamberale personally guaranteed Mr. Tracy’s Note.
On May 21, 2018 Mr. Gamberale agreed to extend the maturity to August 31, 2018. The repayment of this note is subordinate to the $200,000 promissory note of May 9, 2018. In July 2018, Mr. Gamberale agreed to convert his note to common shares (at a rate of $.3725 per share) and warrants (25% warrant coverage with an exercise price of $.3725 per share) (same terms as the SCWorx investment).
On May 21, 2018 Mr. Tracy agreed to extend the maturity to December 31, 2018. |