Convertible Debt - Related Parties

6 Months Ended

Jun. 30, 2017

Convertible Debt - Related Parties [Abstract]

CONVERTIBLE DEBT - RELATED PARTIES

NOTE 7 – CONVERTIBLE DEBT – RELATED PARTIES

On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders, for a total of $600,000. The notes bore interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes are convertible at a rate of $0.70 per share. On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash.

The Company failed to repay the loan in full on the November 30, 2012, 2013, 2014, 2015 and 2016 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. In 2014, 2015 and 2016, the stock was valued at an estimated $0.04 (total $12,000) and was accounted for as financing expense. As part of this agreement, the due date of the notes was extended each year and has now been extended to November 30, 2018. Interest was paid with shares of common stock through November 30, 2014 and was to be paid in cash thereafter. Interest has not been paid since November 2014 and accrued interest payable on these notes at June 30, 2017 and December 31, 2016 is $232,500 and $187,500 respectively. Per the revised terms of these notes, interest is not convertible to common stock.

On October 14, 2016, the Company issued convertible promissory notes, convertible at $0.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Note), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and quarterly thereafter. Accrued interest payable on these notes at June 30, 2017 and December 31, 2016 was $17,740 and $5,342, respectively. Interest on these notes is convertible to common stock.

On November 15, 2016, a short-term loan in the amount of $25,000 was obtained from West C Street, one of the Company’s convertible debt holders. Funds were used for operating capital. This amount was repaid to West C Street on January 18, 2017 along with accrued interest of $438.