LONG-TERM DEBT, DEBENTURES AND LINES OF CREDIT

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

LONG-TERM DEBT, DEBENTURES AND LINES OF CREDIT

7. LONG-TERM DEBT, DEBENTURES AND LINES 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 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.

In March 2016, we 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 2016 Fixed Rate Convertible Notes 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. Holders of Fixed Rate Convertible Notes have the right to convert all or any portion of the Fixed Rate Convertible Notes at the conversion price at any time prior to redemption.

During the year ended June 30, 2019, concurrent with the execution of the Exchange Agreement more fully described in Note 9, holders of $515,247 aggregate principal amount of the Company’s 5% convertible promissory notes (“Notes”), including accrued interest, converted their Notes into 103,132,226 shares of Common Stock. During the six month period ended December 31, 2019, $17,480 of Notes were converted by the holders into 3,495,943 shares of Common Stock. At December 31, 2019, there was one remaining 2016 Fixed Rate Convertible Note outstanding with principal and accrued interest approximates $60,301. The one remaining 2016 Fixed Rate Convertible Note (plus accrued interest) is convertible into our common stock at a conversion rate of $0.015 per share or 4,020,092 shares. During the six month period ended December 31, 2019 and 2018, we paid-in-kind $1,471 and $15,665, respectively, of interest on these convertible notes. 

In August 2019, we authorized the issuance of up to $1.25 million in principal amount of new convertible promissory notes (which we refer to as the “2019 Fixed Rate Convertible Notes”). The 2019 Fixed Rate Convertible Notes are secured by certain Company real estate holdings. As of December 31, 2019, $762,000 ($739,500 net of deferred loan costs) of 2019 Fixed Rate Convertible Notes were outstanding.

The 2019 Fixed Rate Convertible Notes mature on 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 and include 25% warrant coverage at $0.01 per share (which we refer to as the “2019 Warrants”). Interest accrues at a rate of 7% 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 2019 Fixed Rate Convertible Notes. The Company may only issue the notice of its intent to redeem the 2019 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 2019 Fixed Rate Convertible Notes has the right to convert all or any portion of the 2019 Fixed Rate Convertible Notes at the conversion price at any time prior to redemption. 

During the six months ended December 31, 2019, we also issued $578,125 of convertible notes to third parties with variable conversion rates (“2019 Variable Rate Convertible Notes”). The 2019 Variable Rate Convertible Notes mature at various dates between September 2020 and December 2020. We received, net of financing costs incurred, $505,696 in cash from the issuance of these notes. These 2019 Variable Rate Convertible Notes have interest accruing at rates ranging between 10% - 12%. These notes issued to third parties have a variable conversion rate based on the price of the Company’s common stock. None of the 2019 Variable Rate Convertible Notes have been converted into shares of common stock. During the quarter ended September 30, 2019, a holder of certain Variable Rate Convertible Notes issued in February 2018 converted $41,250 of notes, including accrued interest, into 41,250,000 shares of common stock as part of a settlement agreement between the parties. 

At December 31, 2019, $243,125 of the 2019 Variable Rate Convertible Notes were convertible into common stock beginning in the quarter ending March 31, 2020. Subsequent to December 31, 2019, we repaid in full the entire outstanding principal amount of $243,125, plus accrued interest, under these 2019 Variable Convertible Notes. 

Certain of the 2019 Variable Rate Convertible Notes have maturity dates prior to December 31, 2020 and could be classified as a current liability. However, it is the Company’s expectation that we will either re-finance these convertible notes to longer terms, pay off such amounts with the proceeds of long-term financing, or permit a limited amount of conversions. Therefore, we have classified these notes as noncurrent. If we do not re-finance these convertible notes to longer terms, however, the holders of the convertible notes have the option to convert these notes into equity or hold the convertible notes to maturity. 

During the year ended June 30, 2019, we issued $29,250 of convertible notes to our majority stockholder in exchange for 7,450,000 shares of our common stock. 

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, 2019, approximately $100,000 was drawn under the line of credit. The interest rate on the line of credit is 7.0% per annum. Subsequent to December 31, 2019, proceeds from the certificate of deposit were used to repay the outstanding balance under the line of credit plus accrued interest. 

On March 12, 2019, we obtained a $180,000 real estate loan from a financial institution. The note matures on April 1, 2020 and is secured by certain real estate property and the personal guarantee of an officer and director of the Company. Interest only is payable monthly and accrues at an interest rate of 12%. 

In the quarter ended June 30, 2019, we entered into a series of credit financing arrangements from financing institutions by pledging future accounts receivable. The proceeds from these credit agreements were used to pay the initial amount due under the Schreiber settlement agreement. As of June 30, 2019, we had drawn approximately $153,000 under these agreements. During the six month period ended December 31, 2019, additional draws of approximately $6,000 occurred and payments of approximately $56,000 were made. As of December 31, 2019, approximately $103,000 remained outstanding on these loans.