| Notes Payable and Current Portion of Notes Payable |
NOTE 9 – NOTES PAYABLE AND CURRENT
PORTION OF NOTES PAYABLE
Unsecured note payable balances totaled
$3,478,869 and $488,000 at December 31, 2018 and December 31, 2017, respectively. Interest expense incurred on the unsecured notes
payable was $119,961 and $216,576 for the years ended December 31, 2018 and 2017, respectively.
The following is a summary of notes payable
excluding related party notes payable:
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December 31, |
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December 31, |
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2018 |
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2017 |
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| Unsecured, interest-free, note payable with JW Properties, LLC. Principal is re-paid monthly with a maturity date of May 31, 2018. |
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$ |
– |
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$ |
8,000 |
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| Unsecured, interest only, note payable with Chris Parkes. Interest payments due monthly at an annual rate of 20.4%. Note payable revised in December 2018 amending principal due and extending maturity date to June 30, 2019. On May 9, 2017, as part of the private placement offering of the Company's common stock, the individual converted part of this note into 300,000 common shares of the Company at $1.00 per share. |
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80,000 |
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80,000 |
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| Unsecured, interest only, note payable with David Parkes. Interest payments due monthly at an annual rate of 18.0%. Note payable revised in December 2018 amending principal due and extending maturity date to June 30, 2019. On May 9, 2017, as part of the private offering of the Company's common stock, the individual converted part of this note into 200,000 common shares of the Company at $1.00 per share. |
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100,000 |
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|
100,000 |
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| Unsecured,
interest only, note payable with Michael S. Bank. Interest at 19.8% per year is paid twice per month. The note contains a
demand re-payment provision that can be executed by Mr. Bank at any time by providing a one-time notice. The Company may
re-pay any part or the entire principal sum at any time with penalty and abatement of interest expense from date of early
payment. The note includes six thousand warrants, each exercisable to purchase one share of the Company's common stock at a
price of $1.00 per share. In March, 2019, the Company repaid $35,000 of the principle and extended the maturity date to April
30, 2019. |
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298,869 |
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300,000 |
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| Unsecured, interest only, note payable with Cloud9 Support Inc. The note is personally
guaranteed by the Company’s two majority shareholders who are also the Company’s CEO and COO. Interest
at 12.0% per year is paid monthly. The note includes additional consideration of 30,000 options at an exercise price of
$1.20. The note matures on April 30, 2019. |
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1,000,000 |
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– |
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| Note Payable with Hydrofarm Holdings Group. Interest accrues at 8.0% per year and is paid quarterly. The note matures on the earlier of: (a) 90 days after the date that the Company and Hydrofarm abandon the Merger; (b) acceleration of the note payable due to the Company being in default; or (c) December 2023. |
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2,000,000 |
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– |
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| Total |
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$ |
3,478,869 |
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$ |
488,000 |
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| Less current maturities |
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(3,478,869 |
) |
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(188,000 |
) |
| Long Term |
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$ |
– |
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|
$ |
300,000 |
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Effective November 20, 2018,
the Company entered into a letter of intent (“LOI”) with Hydrofarm Holdings Group, Inc. (“Hydrofarm”)
whereby Hydrofarm agreed to acquire all of the Company’s issued and outstanding common stock (the “Merger”).
Pursuant to the terms of the LOI Hydrofarm extended to the Company a secured, interest only note in the principal amount of $5
million. The note is secured by all of our currently existing and future assets Although the Merger has not been abandoned and
the LOI has not been terminated by either party, there are currently no discussions between the parties pertaining to the Merger
and the Company believes the note payable should be classified as a current maturity. The Hydrofarm note requires the Company
to obtain the permission of Hydrofarm to engage in various activities, including additional financing. In February 2019 the Company
provided applicable notice of an agreement to raise additional debt and/or equity. Hydrofarm provided their consent, which reaffirms
the belief that the relevant note remains in good standing.
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