Note 10 - Subsequent Events
|3 Months Ended|
Mar. 31, 2020
|Note 10 - Subsequent Events||
NOTE 10 - SUBSEQUENT EVENTS
LOAN PAYABLE, RELATED PARTIES
Loan Payable - Related Party
From April 1, 2020 through the date of this filing, HEP Investments LLC funded an additional $6,000. This amount was recorded as Loan Payable, Related Party.
Paycheck Protection Program Loan
On May 7, 2020, The "Company received $121,700 in loan funding from the Paycheck Protection Program (the "PPP") established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act") and administered by the U.S. Small Business Administration ("SBA"). The unsecured loan (the "PPP Loan") is evidenced by a promissory note of the Company, dated April 29, 2020 (the "Note") in the principal amount of $121,700 with Comerica Bank (the "Bank"), the lender.
Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company will be obligated to make equal monthly payments of principal and interest beginning on the date that is seven months from the date of the Note, until the maturity date.
The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for forgiveness for all or a part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including: (i) the amount of loan proceeds that are used by the Company during the eight-week period after the loan origination date for certain specified purposes including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan amount is used for eligible payroll costs; (ii) the Company maintaining or rehiring employees, and maintaining salaries at certain levels; and (iii) other factors established by the SBA. Subject to the other requirements and limitations on loan forgiveness, only that portion of the loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. Although the Company currently intends to use the entire amount of the PPP Loan for qualifying expenses, no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.
The Note may be prepaid in part or in full, at any time, without penalty. The Note contains customary events of default including if the Company does not make a payment when due:
A.Fails to do anything required by this Note and other Loan Documents;
B.Defaults on any other loan with Lender;
C.Is not eligible to receive a loan under the PPP when the Loan is made;
D.Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA;
E.Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA;
F.Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower's ability to pay this Note;
G.Fails to pay any taxes when due;
H.Becomes the subject of a proceeding under any bankruptcy or insolvency law;
I.Has a receiver or liquidator appointed for any part of their business or property;
J.Makes an assignment for the benefit of creditors;
K.Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower's ability to pay this Note, provided that this provision shall not apply to adverse changes or conditions resulting from the Covid-19 pandemic and the circumstances giving rise to the CARES Act;
L.(1) Reorganizes, merges, consolidates, or otherwise changes ownership or business structure, (2) makes any distribution of Borrower's assets that would adversely affect its financial condition, or (3) transfers (including by pledge) or disposes of any assets except in the ordinary course of business, in each case without Lender's prior written consent; or
M.Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower's ability to pay this Note.
Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company.
From April 1, 2020 through the date of this filing, the Company received proceeds of $204,400 from the issuance of 2,425,000 shares of common stock from the exercise of warrants.
License Co-Development Participation Agreement
From April 1, 2020 through the date of this filing, the Company entered into four License Co-Development Participation Agreements (Agreements) for a total of $650,000. The Agreements provide for, among other items, the counterparty (the "Partner") to participate in the fees (the "Fees") from licensing or selling bioactive ingredients or molecules derived from the Company's algae cultures. Based upon the agreements signed to date, the Company will issue to the Partners warrants with a five-year term to purchase 1,950,000 shares of the Company's common stock at an exercise price of $0.12 per share and provide to the Partners a 9.75% "Revenue Share" of all license fees generated by ZIVO from any Licensee (such warrants and Revenue Share to be split among each Partner based on their pro-rata share of amount funded). The Company also has the right, but not the obligation (the "Option"), to purchase all of the Partner's right, title and interest in and to the Revenue Share for the purchase price (the "Option Price") equal to Partner's Funding Portion plus forty percent (40%) of such amount of Partner's Funding Portion.
Financial Consulting Agreement
On May 4, 2020, the Company entered into a Financial Consulting and Corporate Advisory Agreement (Agreement). The Agreement calls for a nonrefundable initial fee of $25,000 and two additional monthly fees of $15,000 per month. To the extent a transaction (defined as the sale of equity securities, hybrid debt and equity securities or the entering into any fund capital, joint venture, buy out, or similar transactions) is entered into, then the Company will pay an 8% fee based on the value of the transaction. A 50% credit of the initial fee and monthly fees will be credited against the 8% fee. This Agreement can be cancelled at any time by either party, however, there is a 24-month period where the 8% transaction will be payable based on identified transaction participants.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef