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Short-Term Convertible Notes Payable to Related Parties
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES

NOTE 9 – SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES

 

On February 11, 2014 the Company entered into an agreement with Edward B. Smith III, a Director and Shareholder of the Company, pursuant to which Mr. Smith agreed to lend the Company $200,000 in a convertible senior secured note. The note matures in two years (February 11, 2016) and bears interest at 12.5% computed based on a 365-day year. Accrued interest is payable either at maturity or quarterly at the option of Mr. Smith in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under the note is $2.25, subject to adjustment as provided in the note. If on the maturity date of the note, the thirty day trailing average closing price of the Company’s common stock (the “Trailing Average Price”) is below $2.25, the Conversion Price on the maturity date will be reduced to the Trailing Average Price, but to not less than $1.25. The Conversion Price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note. The note is subordinated to the Senior Secured Notes.

 

On April 25, 2014, the Company entered into an agreement with Edward B. Smith III, a Director and Shareholder of the Company, pursuant to which Mr. Smith agreed to lend the Company $300,000 in a convertible subordinated secured note. The note matures in two years (April 25, 2016) and bears interest at 14% computed based on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under the note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note. The note is subordinated to the Senior Secured Notes.

 

Notes for $19,000 issued to each of the then four directors, $12,567 of each $75,000 note issued to Morris Garfinkle and CKS Warehouse on May 12, 2014, the $264,000 note issued to Edward B. Smith III on August 6, 2014 and the $21,266 accrued interest related to these notes as of December 31, 2014 were converted into 96,590 units in connection with January 2015 private placement offering which is described in detail in Note #14.

 

On December 23, 2015, the company executed an amendment to the 200,000 12.5% convertible subordinated secured note dated February 11, 2014, the 300,000 14% convertible subordinated secured notes (dated April 25, 2014, and the note issued to Mr. Garfinkle dated May 12, 2014) whereby the maturity date for each note was extended to July 1, 2016.

 

On May 22, 2016 the Company executed an amendment to the note issued to CKS Warehouse dated May 12, 2014 whereby the maturity date was extended to October 1, 2016.

 

On June 29, 2016, the Company executed an amendment to the $200,000 12.5% convertible subordinated secured note dated February 11, 2014, the $300,000 14% convertible subordinated secured notes dated April 25, 2014, and the note issued to Mr. Garfinkle dated May 12, 2014) whereby the maturity date for each note was extended to October 1, 2016.

 

On September 30, 2016 the Company executed an amendment to the note issued to CKS Warehouse dated May 12, 2014 whereby the maturity date was extended to April 3, 2017.

 

On September 30, 2016, the Company executed an amendment to the $200,000 12.5% convertible subordinated secured note dated February 11, 2014, the $300,000 14% convertible subordinated secured notes dated April 25, 2014, and the note issued to Mr. Garfinkle dated May 12, 2014 whereby the maturity date for each note was extended to April 3, 2017.

 

The outstanding amount of convertible notes payable to related parties was $624,866 at March 31, 2017 and December 31, 2016. The amount of accrued and unpaid interest was $256,342 at March 31, 2017.