NOTE 11: CONVERTIBLE NOTES PAYABLE

2019

During the year ended December 31, 2019, the Company entered into three convertible notes payable, borrowing an aggregate of $618, net of original issuance discounts of $40 and deferred financing costs of $28, recognized paid-in kind interest principal additions of $7, late fees, prepayment and settlement expenses of $3,439; and, as inducement, the Company issued a total of 35,056 shares of the Company’s common stock valued at $94. During the year ended December 31, 2019, the Company repaid convertible note principal of $902, prepayment penalties of $50 and accrued interest of $16 on five convertible notes and issued a total of 3,123,548 shares of the Company’s common stock for the conversion of $2,988 in convertible debt principal and $57 in accrued interest.

During April 2019, a convertible note with a principal balance of $525 was restructured to remove all conversion rights and replace it with a new non-convertible promissory note requiring twelve equal monthly payments of $44 beginning April 2019 and ending February 2020. As a result of the restructure, the Company derecognized the related conversion option derivative liability of $554 and accrued interest payable of $22, resulting in a $576 gain during the year ended December 31, 2019. The balance of the note is $88 as of December 31, 2019.

During April 2019, a holder agreed to terminate two convertible notes with principal balances totaling $337 in exchange for a termination fee of $17 for accrued and interim default interest through April 1, 2019 and a new note payable in the amount of $337. The new note payable bears interest at the rate of 23% per annum and is due in monthly payments of interest and principal through October 2021, including lump sum principal payments of $84 due May 1, 2020 and a final balloon payment of $251 due October 1, 2021. As a result of the convertible notes debt modification, the Company derecognized the related conversion option derivative liability in the amount of $335 and recognized a $88 gain on extinguishment during the year ended December 31, 2019. The balance of the note is $336 at December 31, 2019.

During September 2019, holders of three convertible notes with principal balances totaling $1,521 were restructured to remove all conversion rights and replace the existing convertible notes and accrued interest and penalties with new non-convertible promissory notes having principal balances totaling $1,693. As a result of the restructure, the Company derecognized the related conversion option derivative liabilities totaling $1,510 and accrued interest payable of $182 resulting in a $1,520 gain during the year ended December 31, 2019. The balance of the notes total $974 at December 31, 2019.

During October 2019, holders of eight convertible notes with principal balances totaling $2,629 were restructured to remove all conversion rights and replace the existing convertible notes and accrued interest and penalties with new non-convertible promissory notes having principal balances totaling $2,956. Additionally, the holders were issued a total of 353,202 shares of common stock as inducement valued at $156. As a result of the restructure, the Company derecognized related conversion option derivative liabilities totaling $2,616, accrued interest payable of $327, and recognized new debt discounts totaling $156. As a result of the convertible note debt modifications, The Company recognized gains of $2,616 during the year ended December 31, 2019. The balance of the notes totals $2,324 at December 31, 2019.

As of December 31, 2019, the Company has two past-due outstanding convertible notes payable with principal balances totaling $4,147. The outstanding convertible notes of the Company are unsecured, bear interest at 4% per annum, with default rates of 22% and 24% per annum. The convertible notes had original maturity terms of six months and one year, are past-due and are convertible at variable rates of 50% and 65% of the quoted market prices of the Company’s common stock. The conversion options contained in the convertible notes were evaluated for derivative accounting (see Note 15). Aggregate amortization of the debt discounts and deferred financing costs on convertible debt for the year ended December 31, 2019 was $2,731.

2018

During the year ended December 31, 2018, the Company entered into 39 convertible notes payable, borrowing an aggregate of $17,307, net of original issuance discounts of $1,556 and deferred financing costs of $526. Additionally, as inducement, the Company issued a total of 198,746 shares of the Company’s common stock valued at $2,563. During the year ended December 31, 2018, the Company repaid $5,231 of the convertible notes in cash and issued a total of 1,889,144 shares of the Company’s common stock for the conversion of $6,668 in convertible debt principal and $242 in accrued interest.

As of December 31, 2018, the Company had 25 outstanding convertible notes payable totaling $9,042, net of unamortized original issuance discounts and deferred financing costs of $4,544. The outstanding convertible notes of the Company are unsecured, bear interest between 4% and 12% per annum or require a one-time payment of 4% of principal in the form of shares of the Company’s common stock. The convertible notes have original maturity terms between six months and one year and are convertible at variable rates between 50% and 75% of the quoted market price of the Company’s common stock. All notes that contained convertible terms during the year ended December 31, 2018 were evaluated for derivative accounting (see Note 15). Aggregate amortization of the debt discounts and deferred financing costs on convertible debt for the year ended December 31, 2018 was $17,304.

During February 2018, the Company entered into an amendment to extend two past due convertible promissory notes held by one holder with an outstanding principal balance of $900. The amendment extended the maturity date and provided a conversion standstill for 72 days in exchange for a principal payment of $150. During February 2018, the Company entered into a second amendment to the convertible promissory notes extending the maturity date another 89 days in exchange for imposing a floor price of no less than 50% of the closing trade price of the Company’s common stock and a cash payment right to elect to pay conversion notices in cash, for a 10% cash payment premium.

During August 2018, the Company entered into a settlement agreement with a holder of a convertible promissory note in the amount of $556, whereby, the Company agreed to a $44 increase in the principal balance and allowing immediate conversion by the holder in the exchange for waivers of certain events of default and a leak-out provision, limiting the holder’s sale of the Company’s common stock to 10% of the average daily share trading volume. As a result of the modification, the Company recognized a derivative liability of $99 as a result of the conversion allowance and a loss on debt modification of $408.

Outstanding convertible notes payable consist of the following at December 31, 2019 and 2018: