Quarterly report pursuant to Section 13 or 15(d)

Debt, Commitments and Contingencies

v3.19.1
Debt, Commitments and Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Debt, Commitments and Contingencies

NOTE 5 - DEBT, COMMITMENTS AND CONTINGENCIES

 

Debt consists of the following:

 

    Maturity     Interest     March 31,     December 31,  
    Date     Rate     2019     2018  
Convertible Note     12/31/2019       5 %   $ 999,106     $ 999,106  
Less: debt discount     and 12/31/2019               -       -  
Total Convertible notes, net of discount                   $ 999,106     $ 999,106  
                                 
Total                   $ 999,106     $ 999,106  
Less: current portion                     (999,106 )     (999,106 )
Total, net of current portion                   $ -     $ -  

 

On August 14, 2017, the Company entered into a unit purchase agreement (the “Unit Purchase Agreement”) with certain accredited investors providing for the sale of up to $5,500,000 of 5% secured convertible promissory notes (the “Convertible Notes”), which are convertible into shares of the Corporation’s common stock, and the issuance of warrants to purchase 1,718,750 shares of the Company’s Common Stock (the “Warrants”). The Convertible Notes are convertible into shares of the Company’s Common Stock at the lesser of (i) $3.20 per share or (ii) the closing bid price of the Company’s common stock on the day prior to conversion of the Convertible Note; provided that such conversion price may not be less than $1.60 per share. The Warrants have an exercise price of $4.80 per share. In two closings of the Unit Purchase Agreement, the Company issued $5,500,000 in Convertible Notes to the investors. The remaining balance of the Convertible Notes were due to mature on May 31, 2018. The investor agreed to extend the maturity date to December 31, 2019. The note bears interest at the rate of 5% per annum and accrues but is not paid in cash. As of March 31, 2019, the Company had an outstanding obligation pursuant to the Convertible Notes in the amount of $999,106. Accrued interest as of March 31, 2019 was $157,298. During the three months ended March 31, 2019 and 2018, the interest expense were $12,317 and $40,295, respectively.

 

During the three months ended March 31, 2019 and 2018, the amortization of debt discount were $0 and $1.9 million, respectively.

 

Leases

 

Effective June 1, 2018, the Company rented its corporate office at 1180 North Town Center Drive, Suite 100, Las Vegas, Nevada 89144, on a month to month basis. The monthly rent is $1,907. A security deposit of $3,815 has been paid.

 

The Company also assumed a lease in connection with the mining operations in Quebec, Canada. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and noncurrent operating lease liabilities on the balance sheets.

 

Operation lease costs are recorded on a straight-line basis within operating expenses. The Company’s total lease expense is comprised of the following:

 

   

For the Three

Months Ended
March 31, 2019

 
Operating leases        
Operating lease cost   $ 26,246  
Operating lease expense     26,246  
Short-term lease rent expense     4,107  
Total rent expense   $ 30,353  

 

Additional information regarding the Company’s leasing activities as a lessee is as follow:

 

   

For the Three

Months Ended
March 31, 2019

 
Operating cash flows from operating leases   $ 25,892  
Weighted-average remaining lease term – operating leases     2.0  
Weighted-average discount rate – operating leases     6.5 %

 

As of March 31, 2019, contractual minimal lease payments are as follows:

 

2019   $ 69,372  
2020     95,386  
2021     95,386  
2022     26,014  
Total     286,158  
Less present value discount     (107,584 )
Operating lease liabilities   $ 178,574  

 

Legal Proceedings

 

Feinberg Litigation

 

On March 27, 2018, Jeffrey Feinberg, purportedly joined by the Jeffrey L. Feinberg Personal Trust and the Jeffrey L. Feinberg Family Trust, filed a complaint against the Company and certain of its former officers and directors. The complaint was filed in the Supreme Court of the State of New York, County of New York. The plaintiffs purported to state claims under Sections 11, 12(a)(2) and 15 of the federal Securities Act of 1933 and common law claims for “actual fraud and fraudulent concealment,” constructive fraud, and negligent misrepresentation, seeking unspecified money damages (including punitive damages), as well as costs and attorneys’ fees, and equitable or injunctive relief. On June 15, 2018, the defendants filed a motion to dismiss all claims asserted in the complaint and, on July 27, 2018, the plaintiffs filed an opposition to that motion. The court heard argument on the motion and, on January 15, 2019, the court granted the motion to dismiss, allowing 30 days for the filing of an amended complaint. On February 15, 2019, Jeffrey Feinberg, individually and as trustee of the Jeffrey L. Feinberg Personal Trust, and Terrence K. Ankner, as trustee of the Jeffrey L. Feinberg Family Trust, filed an amended complaint that purports to state the same claims and seeks the same relief sought in the original complaint. On March 7 and 22, 2019, defendants filed motions to dismiss the amended complaint and on April 5, 2019, plaintiffs filed an opposition to those motions. The court has tentatively scheduled oral argument on the motions to dismiss on July 1, 2019.

 

Ramirez Litigation

 

On July 20, 2018, Tony Ramirez filed a complaint against the Company and certain of its former directors. The complaint was filed in the United States District Court for the Central District of California. Mr. Ramirez alleged that he was a shareholder of the Company and purported to assert a single claim under Section 14(a) of the Securities and Exchange Act of 1934 and SEC Rule 14a-9 promulgated thereunder. The parties entered into a “Settlement Agreement and Mutual Release” and the case was voluntarily dismissed with prejudice on December 17, 2018.