LONG-TERM DEBT, DEBENTURES AND LINE OF CREDIT

6 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

LONG-TERM DEBT, DEBENTURES AND LINE OF CREDIT

6. LONG-TERM DEBT, DEBENTURES AND LINE OF CREDIT

On November 12, 2015, we acquired certain commercial real estate from a related party that is an entity controlled by a stockholder and officer of the Company for $480,000 consisting of $75,000 of land costs and $405,000 of buildings and improvements. The purchase price was paid by through the assumption by the Company of $265,000 of long-term bank indebtedness (which we refer to as “Note”) plus the issuance of 215 shares of the Company’s newly designated Series A Preferred Stock. The purchase price also included the cost of specific security improvements requested by the lessee.

The Note is dated November 13, 2015 and has a principal amount of $265,000. Monthly payments under the Note are $1,962 including interest accruing at a rate of 5.95% per annum. The Note matures in June 2021 and is secured by the commercial real estate, guarantees by the Company and its real estate subsidiary and the personal guarantee of a stockholder who is also an officer of the Company.

We have authorized the issuance of up to $1 million in principal amount of convertible promissory notes (which we refer to as the “Fixed Rate Convertible Notes”). The Fixed Rate Convertible Notes are secured by certain Company real estate holdings.

The Fixed Rate Convertible Notes issued mature on March 15, 2021, the fifth anniversary of the date of issuance and are convertible into shares of our common stock at a price of $0.015 per share. Interest accrues at a rate of 5% per annum and is payable semi-annually. The Company has the option to issue a notice of its intent to redeem, for cash, an amount equal to the sum of (a) 120% of the then outstanding principal balance, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Fixed Rate Convertible Notes. The Company may only issue the notice of its intent to redeem the Fixed Rate Convertible Notes if the trading average of the Company’s common stock equals or exceeds 300% of the conversion price during each of the five business days immediately preceding the date of the notice of intent to redeem. The holder of the Fixed Rate Convertible Notes has the right to convert all or any portion of the Fixed Rate Convertible Notes at the conversion price at any time prior to redemption.

At December 31, 2018, there were $637,076 ($564,320 net of deferred financing costs and beneficial conversion option) of Fixed Rate Convertible Notes outstanding, including $87,076 of interest paid in kind. The Fixed Rate Convertible Notes (plus accrued interest) are convertible into our common stock at a conversion rate of $0.015 per share or 42,471,729 shares. During the three and six month periods ended December 31, 2018, we paid-in-kind $7,898 and $15,665, respectively, of interest on these convertible notes.

In the year ended June 30, 2018, we also issued $576,000 of convertible notes to third parties with variable conversion rates (“Variable Rate Convertible Notes”). The Variable Rate Convertible Notes mature at various dates between November 2018 and 2019. We received, net of financing costs incurred, $495,850 in cash from the issuance of these notes. These Variable Rate Convertible Notes have interest accruing at rates ranging between 8% - 12%, and redemption. These notes issued to third parties have a variable conversion rate based on the price of the Company’s common stock. $127,978 of the convertible notes are currently convertible into our common stock at a variable conversion rate. During the quarter ended December 31, 2018, we issued new convertible notes of $35,000, paid in full three (3) convertible notes in the amount of $132,728, and notes, including accrued and unpaid interest, totaling $852 were converted into equity. At December 31, 2018, there were $270,978 ($257,303 net of deferred financing costs) of Variable Rate Convertible Notes outstanding.

The Variable Rate Convertible Notes have maturity dates prior to December 31, 2019. It is the Company’s expectation that we will either re-finance these convertible notes to longer terms or permit conversions and, therefore, have classified such notes as non-current.

Also, during the year ended June 30, 2018, we issued $29,250 of convertible notes to our majority stockholder in exchange for 7,450,000 shares of our common stock. The note matures in December 2020 and is convertible into 1,950,000 shares, or $0.015 per share. (See Note 5.)

In February 2018, we obtained a $100,000 line of credit from a bank. The line of credit matures in February 2021 and is collateralized by a $100,000 certificate of deposit at the bank. As of December 31, 2018, approximately $100,000 was drawn under the line of credit. As of December 31, 2018. the interest rate on the line of credit is 7.0% per annum.