Convertible Debt Obligations
|3 Months Ended|
Mar. 31, 2019
|Debt Disclosure [Abstract]|
|Convertible Debt Obligations||
8. CONVERTIBLE DEBT OBLIGATIONS
The Company’s convertible debt obligations are summarized below:
During an offering that ended on September 30, 2010, IPG issued convertible notes with an interest rate of 8% and an amended maturity date of March 31, 2011 (the “2010 Debt Obligations”). During 2017, the Company repaid the remaining principal balance of $162,500, such that as of December 31, 2017, there is no principal balance owed on the 2010 Debt Obligations. Accrued interest of $287,932 and $279,735 owed on the 2010 Debt Obligations remained outstanding as of March 31, 2019 and December 31, 2018, respectively. The Company incurred interest expense of $8,197 and $9,153 during the three months ended March 31, 2019 and 2018, respectively, on the 2010 Debt Obligations. Accrued interest on the 2010 Debt Obligations is not convertible.
On December 31, 2017, the Company sold a convertible promissory note in the amount of $20,000 to an accredited investor. During 2018, the Company sold additional convertible promissory notes in the aggregate principal amount of $2,026,730 (together, the “Convertible Notes”). The Convertible Notes mature 90 days from the date of issuance, bear interest at 8% per annum and are convertible into the Company’s common stock at $0.63 per share, which represented a 10% discount to the price used for the sale of the Company’s common stock at the commitment date. The conversion option represented a beneficial conversion feature in the amount of $227,414 which was recorded as a debt discount with a corresponding credit to additional paid-in capital. Debt discount is amortized over the term of the loan using the effective interest method. During 2018, principal and interest of $794,875 and $15,000, respectively, were converted into 1,285,517 shares of common stock at a conversion price of $0.63 per share. During the three months ended March 31, 2019, the Company repaid principal and interest of $30,000 and $2,151, respectively. The Company incurred total interest expense of $25,205 and $4,225 related to this debt during the three months ended March 31, 2019 and 2018, respectively. The remaining principal balance owed on the Convertible Notes of $1,221,854 is past due as of March 31, 2019.
During 2018, the Company’s subsidiary, Gaucho Group, Inc., sold convertible promissory notes in the amount of $1,480,800 to accredited investors. Between January 1, 2019 and March 12, 2019, Gaucho Group, Inc. sold convertible promissory notes in the amount of $786,000 to accredited investors (together, the “Gaucho Notes”). In January 2019, management of GG gave the option to the noteholders of extending the maturity date from December 31, 2018 to March 31, 2019 of their specific Gaucho Notes. The Gaucho Notes, as amended, bear interest at 7% per annum and mature and became due on March 31, 2019. All holders of Gaucho Notes agreed to extend the maturity date to March 31, 2019. The Gaucho Notes and related accrued interest are convertible into GG common stock at the option of the holder, at a price representing 20% discount to the share price in a future offering of GG common stock. The Company is currently in the process of obtaining consent to convert the Gaucho Notes into shares of common stock of GG at a price per share of $0.40. The Company incurred total interest expense of $34,615 related to the Gaucho Notes during the three months ended March 31, 2019.
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://fasb.org/us-gaap/role/ref/legacyRef