5. Current Liabilities
 3 Months Ended
Mar. 31, 2017
Current Liabilities  
Current Liabilities

As of March 31, 2017 and December 31, 2016, current liabilities consisted of the following:

 

   March 31, 2017  December 31, 2016
Accounts payable  $303,172   $227,744 
Accrued payroll   187,758    105,258 
Accrued employee benefits   32,063    29,552 
Accrued interest   100,136    71,998 
Notes payable   50,000    50,000 
Convertible notes, related party, net of discount   102,562    99,804 
Convertible notes, net of discount   1,149,141    800,172 
Total  $1,924,832   $1,384,528 

 

On January 28, 2016, the Company entered into promissory notes with three investors for a total amount of $50,000.  The notes matured one year from the issue date, accrue no interest and are payable at maturity. The Company accounted for imputed interest of $986 for the three months ended March 31, 2017, which was calculated at a rate of 8% per annum, consistent with other notes issued by the Company. During the period ending March 31, 2017, the Company and the promissory note holders agreed to extend the maturity date of all three notes to July 31, 2017 on the same terms as previously agreed. Subsequent to the period ended March 31, 2017, the promissory notes were repaid in full to all holders.

 

During 2016, the Company entered into convertible promissory notes with approximately 60 investors for a total principal amount of $1,386,448, $132,000 of which were purchased by related parties (the “2016 Notes”).   On March 15, 2017, the Company extended the 2016 Notes offering by $250,000. The extension was made available only to existing noteholders and obtained subscriptions for $225,000. Pursuant to the terms of the 2016 Notes, noteholders holding a majority of the outstanding principal amount of the 2016 Notes elected to convert the principal and accrued interest on all outstanding 2016 Notes into shares of the Company’s common stock at a conversion price of $1.40 per share immediately prior to the Company’s initial public offering. 1,232,859 shares of the Company’s common stock were issued upon such conversion (see Note 9). In connection with the issuance of the 2016 Notes, the Company recorded a debt discount at an initial aggregate value of $1,611,448, of which $351,727 was amortized during the three months ended March 31, 2017, resulting in a debt discount balance of $359,745 as of March 31, 2017.

 

The Company accrued interest expense of $28,138 for the period ended March 31, 2017, $2,604 of which was payable for the notes due to related parties.