Note 10 - Notes Payable

6 Months Ended

Jun. 30, 2019

Disclosure Text Block [Abstract]

Note 10 - Notes Payable

NOTE 10 – NOTES PAYABLE

As of June 30, 2019, the Company’s notes payable consisted of bank loans of $343,901 on the Mad Creek property, which is collateralized by the Mad Creek property and $383,737 on the 10^th Street property, which was assumed when the property was deeded to the Company on September 12, 2018 and is collateralized by the 10^th Street property. The Mad Creek loan had a variable interest rate of 4.75% as of June 30, 2019 that adjusts on May 1 and November 1 each year. The loan matures on November 1, 2036. The 10^th Street loan has a fixed interest rate of 9.66% and a maturity date of July 1, 2036.

On May 13, 2019, the Company signed a $1,657,609 note payable with Gravity Capital, LLC. The note is collateralized by the Timothy Lane and 11^th Street properties. The note has a one year term maturing on May 13, 2020. Monthly payments are due by the first day of each month beginning July 1, 2019 with the principal due at maturity. The Company paid discount points and loan fees of $178,771, which have been recorded as a discount and amortized over the term of the note. The amortization of the discount is classified as interest expense. The interest rate on the note is 15%. The default interest rate is 24% and there is a 10% late payment penalty for any late payments. The effective interest rate is 17%. As of June 30, 2019, the Company had accrued interest of $33,152. For the six months ended June 30, 2019, the Company recognized amortization of the discount of $23,510. Subsequent to June 30, the Company defaulted on the loan since it did not make the first two payments that were due on July 1 and August 1. As a result, the Company began accruing interest at the 24% default rate and accruing the 10% penalty on the missed payments.

As a result of the default on several related party promissory notes as of April 1, 2019, the Company’s promissory notes in the aggregate principal and interest amount of $2,418,400 are deemed to be in default as they contain cross-default provisions. Accordingly, the Company is accruing interest in such notes at their default rates since the date of the default. In addition, the holders of such notes may request that such notes be accelerated as a result of such cross-default. 

The notes payable consist of the following:

	June 30,	December 31,
	2019	2018
Note payable	$ 2,418,400	$ 734,327
Less debt discount	(155,261)	-

Notes payable, net of discount	2,263,139	734,327
Less current portion	(1,553,525)	(23,355)
Note payable, net of current portion and discount	$ 709,614	$ 710,972