|6 Months Ended|
Jun. 30, 2017
|Notes to Financial Statements|
|NOTE 7. NOTES PAYABLE||
During 2016, the Company conducted a private offering of up to $2,500,000 in principal amount of the Companys convertible promissory notes (the Private Placement), which bear interest at the rate of 7.5% per annum. The notes are convertible into shares of common stock of the Company at a price per share equal to 90% of the closing bid price of the common stock during the 20 consecutive trading days immediately preceding such conversion. The notes mature 24 months after issuance, if not converted prior to the maturity date, the notes automatically convert into shares of common stock of the Company at a per share price equal to 80% of the closing bid price of the common stock of the Company during the 20 consecutive trading days immediately preceding the maturity date. The holders of the notes will receive, in the aggregate, pro rata based on investment, a total of five percent of the revenues of Caretta Therapeutics, LLC during the years ending December 31, 2017, 2018, 2019 and 2020. The investors shall also receive warrants to purchase a number of shares equal to 30% of the amount invested, for a period of two years, at an exercise price per share equal to 110% of the closing bid price of the common stock of the Company on the six-month anniversary of the date of issuance of such warrant. During the year ended December 31, 2016, the Company issued convertible notes in the aggregate principal amount of $1,382,000, under the Private Placement.
During the six months ended June 30, 2017, the Company increased the Private Placement offering principal amount from $2.5 million to $11.5 million.
During the six months ended June 30, 2017, under the Private Placement, the Company issued convertible notes in the aggregate principal amount of $1,515,000. During the six months ended June 30, 2017, the Company recorded $288,676 and $991,386 of derivative liability and royalty liability, respectively, associated with these convertible notes. In addition, the Company also recorded debt discount related to the relative fair value of the warrants in the amount of $39,231. As of June 30, 2017, the convertible notes converted into shares 948,079 of common stock, fair valued at $446,564, and stock payable of $400,082. The Company also recorded a gain on extinguishment of debt and related derivative liability in the amount of $243,716. For the six months ended June 30, 2017, the Company recorded an unrealized loss on the change of present value of the royalty liabilities in the amount of $50,901.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef