Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.19.3
Debt
9 Months Ended
Sep. 30, 2019
Debt  
Debt

Note 6 — Debt

As of September 30, 2019 and December 31, 2018, debt consisted of the following:

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

    

2019

    

2018

Line of credit:

 

 

  

 

 

  

Asset backed line of credit

 

$

471,553

 

$

561,804

Debt issuance costs

 

 

(19,466)

 

 

(30,000)

Total line of credit

 

 

452,087

 

 

531,804

 

 

 

 

 

 

  

Senior convertible notes payable:

 

 

 

 

 

  

Senior convertible notes payable

 

 

2,539,273

 

 

1,428,161

Debt issuance costs

 

 

(439,818)

 

 

(466,667)

Total long-term senior convertible notes payable

 

 

2,099,455

 

 

961,494

Less: current portion of long-term notes payable

 

 

 —

 

 

 —

Noncurrent portion of long-term convertible  notes payable

 

 

2,099,455

 

 

961,494

 

 

 

 

 

 

 

Notes payable:

 

 

 

 

 

  

Notes payable

 

 

1,470,137

 

 

370,250

Debt issuance costs

 

 

(153,793)

 

 

 —

Total long-term debt

 

 

1,316,344

 

 

370,250

Less: current portion of long-term debt

 

 

(1,270,243)

 

 

(313,572)

Noncurrent portion of long-term debt

 

 

46,101

 

 

56,678

 

 

 

 

 

 

  

Notes payable – related parties:

 

 

 

 

 

  

Notes payable

 

 

3,381,579

 

 

3,464,191

Less: current portion of long-term debt – related parties

 

 

(1,039,330)

 

 

(932,701)

Noncurrent portion of long-term debt – related parties

 

$

2,342,249

 

$

2,531,490

 

Convertible Notes

On March 6, 2019, Edison Nation entered into a securities purchase agreement (the “FirstFire SPA”) with an accredited investor (the “Investor”) pursuant to which the Investor purchased a 2% unsecured, senior convertible promissory note (the “FirstFire Note”) from the Company. The FirstFire Note was in the amount of $560,000 with an original issue discount of $60,000. The Company issued 15,000 shares of its common stock valued at $74,100 based on the share price on the date of issuance to the Investor as additional consideration for the purchase of the FirstFire Note. The Under the terms of the FirstFire SPA, the Investor will have “piggyback” registration rights in the event the Company files a Form S‑1 or Form S‑3 within six months from March 6, 2019, as well as a pro rata right of first refusal in respect of participation in any debt or equity financings undertaken by the Company during the 18 months following March 6, 2019. The Company is also subject to certain customary negative covenants under the FirstFire SPA, including but not limited to, the requirement to maintain its corporate existence and assets subject to certain exceptions, and to not to make any offers or sales of any security under circumstances that would have the effect of establishing rights or otherwise benefitting other investors in a manner more favorable in any material respect than those rights and benefits established in favor of the Investor under the terms of the FirstFire SPA and the FirstFire Note. The maturity date of the FirstFire Note is six months from March 6, 2019. All principal amounts and the interest thereon are convertible into shares of the Company’s common stock only in the event that an event of default occurs. The FirstFire note was paid in full in May 2019.

On May 13, 2019, the Company entered into a series of 2% senior secured, senior convertible promissory notes of $1,111,111 with an original issue discount of $111,111. The Company issued 20,000 shares of its common stock to the note holders as additional consideration for the purchase of the notes in July 2019. The Company accrued $78,800 as a debt discount as of September 30, 2019 related to the value of the shares to be issued. The notes are convertible upon default and mature on November 13, 2019. Under the terms of the notes, the note holders will have “piggyback” registration rights. Alexander Capital placed the notes and received warrants to purchase 24,366 shares of the Company’s common stock, at an exercise price of $2.85 per share. The notes were converted into 560,185 shares of common stock in October 2019 at $2.00 per share.

Receivables Financing

In April 2019, we entered into a receivables financing arrangement for certain receivables of the Company. The agreement allows for borrowings up to 80% of the outstanding receivable based on the credit quality of the customer. The fee is between 1% and 2% of the total invoices financed.

Notes Payable

On May 16, 2019, the Company entered into a non-interest bearing promissory note of $300,000, with an original issue discount of $50,000. The Company issued 20,000 shares of its common stock to the note holder as additional consideration for the purchase of the note. The Company recorded $62,000 as a debt discount as of September 30, 2019 related to the value of the shares issued. The note matures on November 16, 2019.

On June 11, 2019, the Company entered into 1.5% promissory note of $250,000. The interest and principal is due upon 30 days’ notice from the Lender, which cannot be issued before August 11, 2019. The Lender has not exercised their option for repayment yet.

On August 26, 2019, the Company entered into a securities purchase agreement with Labrys Fund, LP (the “Investor”) pursuant to which the Investor purchased a 12% Convertible Promissory Note (the “Note”) from the Company. Unless there is a specific Event of Default (as such term is defined in the Note) or the Note remains unpaid by the Maturity Date, then the Investor shall not have the ability to convert the principal and interest under the Notes into shares of the Company’s common stock. The Company agreed to issue and sell to the Investor the Note, in the principal amount of $560,000, with an original issue discount in the amount of $60,000. The Note is due and payable February 26, 2020 (the “Maturity Date”). Additionally, the Company issued 181,005 shares of Common Stock to the Investor as a commitment fee, of which 153,005 shares of Common Stock must be returned to the Company in the event the Note is fully paid and satisfied prior to the Maturity Date.

The scheduled maturities of the debt for the next five years as of December 31, 2018, are as follows:

 

 

 

 

 

For the Years Ended December 31, 

    

Amount

2019

 

$

2,175,092

2020

 

 

828,426

2021

 

 

871,916

2022

 

 

218,266

2023

 

 

1,229,569

Thereafter

 

 

2,539,273

 

 

 

7,862,542

Less: debt discount

 

 

(613,077)

 

 

$

7,249,465

 

For the three and nine months ended September 30, 2019, interest expense was $349,172 and $875,036, of which $78,475 and $238,111 was related party interest expense, respectively. For the three and nine months ended September 30, 2018, interest expense was $42,130 and $407,267, of which $42,714 and $145,656 was related party interest expense, respectively.