12. NOTES PAYABLE AND NOTES PAYABLE TO RELATED PARTIES

6 Months Ended

Jun. 30, 2016

12. NOTES PAYABLE AND NOTES PAYABLE TO RELATED PARTIES

	June 30, 2016		December 31, 2015
Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $546,000. Principal payments of $4,550 and interest at the rate of Libor plus 3% are due monthly. The balance of the principal amount will be due February 28, 2018. During the three months ended June 30, 2016, the Company made payments of principal and interest in the amounts of $13,650 and $3,055, respectively. During the six months ended June 30, 2016, the Company made payments of principal and interest in the amounts of $27,300 and $6,187, respectively.	$	364,000	$	391,300

Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $980,000. Payments of $8,167 including principal and interest at the rate of LIBOR plus 2.75% are due monthly through April 2020, the remaining principal balance in the amount of $490,000 will be due May 29, 2020. During the three months ended June 30, 2016, the Company made payments of principal and interest in the amounts of $24,500 and $6,731, respectively. During the six months ended June 30, 2016, the Company made payments of principal and interest in the amounts of $49,000 and $13,574, respectively.		873,833		922,833

A total of 17 convertible notes payable (the “Convertible Notes Payable”). Certain of the Convertible Notes Payable contain cross default provisions, and are secured by subordinated interest in a majority of the Company’s assets. The Convertible Notes Payable bear interest at the rate of 1.9% per annum; principal and accrued interest are convertible into common stock of the Company at a conversion price of $0.25 per share; however, the interest may be paid in cash by the Company and certain limited amounts of principle may also be prepaid in cash. Effective May 13, 2014, the due date of these notes was extended from May 15, 2014 to December 31, 2015, and a discount to the notes in the aggregate amount of $732,565 was recorded to recognize the value of the beneficial conversion feature embedded in the extension of the term of the notes. In March 2015 the notes were further extended to January 1, 2016. On September 30, 2015, the notes and accrued interest in the amount of $614,465 were further extended to July 1, 2017, and a discount in the amount of $647,565 was recorded to recognize the value of the beneficial conversion featured embedded in the extension of the term of the notes. During the three and six months ended June 30, 2016, $92,509 and $185,018, respectively, of this discount was charged to operations. During the three and six months ended June 30, 2016, the Company accrued interest in the amount of $3,102 and $6,204, respectively, on these notes.		647,565		647,565

An unsecured note to Sam Klepfish for $164,650 which may not be prepaid without Mr. Klepfish’s consent, originally carrying an interest rate of 8% per annum and no due date. As of July 1, 2014, the interest rate was reduced to 1.9% and as of November 17, 2014 the interest rate was further reduced to 0%. During the three months ended December 31, 2015, interest in the amount of $54,150 was capitalized, and the aggregate principal amount of $164,650 was extended to July 1, 2017. This note and accrued interest are convertible into common stock of the Company at a conversion price of $0.25 per share.		164,650		164,650

	June 30, 2016			December 31, 2015
Promissory note in the amount of $200,000 bearing interest at the rate of 1% per annum issued in connection with the OFB acquisition. Principal in the amount of $100,000 was due June 30, 2015; this payment was made in July 2015 within the 5 day grace period stipulated in the note agreement. During the three months ended March 31, 2016, the Company paid accrued interest in the amount of $0 on this note. The note is convertible into shares of the Company’s common stock at the conversion price of $1.54 per share. During the three and six months ended June 30, 2016, the Company accrued interest in the amount of $250 and $500, respectively, on this note. In July 2016, the Company made a principal payment in the amount of $100,000 which satisfied this note in full.		100,000			100,000

Promissory note payable to Alpha Capital in the amount of $469,010 dated November 6, 2015 bearing interest at the rate of 9.9% per annum. This note is unsecured, and became due December 6, 2015. During the six months ended June 30, 2016 the Company accrued interest expense in the amount of $9,525, on this note. During the six months ended June 30, 2016, the Company paid principal and accrued interest in the amounts of $469,010 and $15,798, respectively, which satisfied this note in full.		-			469,010

Promissory note payable to Alpha Capital in the amount of $176,005 dated November 20, 2015 bearing interest at the rate of 9.9% per annum. This note is unsecured, and became due December 20, 2015. During the six months ended June 30, 2016, the Company accrued interest expense in the amount of $3,533 on this note. During the six months ended June 30, 2016, the Company paid principal and accrued interest in the amounts of $176,005 and $5,490, respectively, which satisfied this note in full.		-			176,005

Capital lease obligations under a lease agreement for a forklift payable in thirty-six monthly installments of $274 including interest at the rate of 4.46%. During the three months ended June 30, 2016, the Company made principal and interest payments in the amount of $735 and $87, respectively. During the six months ended June 30, 2016, the Company made principal and interest payments in the amount of $1,463 and $181, respectively.		7,270			-

Total	$	2,157,318		$	2,871,363

Less: Discount		(370,038	)		(555,056	)

Net	$	1,787,280		$	2,316,307

Current maturities, net of discount	$	255,625	$	897,615
Long-term portion, net of discount		1,531,655		1,418,692
Total	$	1,787,280	$	2,316,307

	For the Three Months Ended June 30,
	2016			2015
Discount on Notes Payable amortized to interest expense:		$	92,509		$	99,157

	For the Six Months Ended June 30,
	2016			2015
Discount on Notes Payable amortized to interest expense:		$	185,018		$	198,314

At June 30, 2016 and December 31, 2015, the Company had unamortized discounts to notes payable in the aggregate amount of $370,038 and $555,056, respectively.

Beneficial Conversion Features

The Company calculates the fair value of any beneficial conversion features embedded in its convertible notes via the Black-Scholes valuation method. The Company also calculates the fair value of any detachable warrants offered with its convertible notes via the Black-Scholes valuation method. The instruments were considered discounts to the notes, to the extent the aggregate value of the warrants and conversion features did not exceed the face value of the notes. These discounts were amortized to interest expense via the effective interest method over the term of the notes.