0001493152-18-007403.txt : 20180518 0001493152-18-007403.hdr.sgml : 20180518 20180518061623 ACCESSION NUMBER: 0001493152-18-007403 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 56 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180518 DATE AS OF CHANGE: 20180518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAMONDHEAD CASINO CORP CENTRAL INDEX KEY: 0000844887 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 592935476 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17529 FILM NUMBER: 18845037 BUSINESS ADDRESS: STREET 1: 1013 PRINCESS STREET CITY: ALEXANDRIA, STATE: VA ZIP: 22314 BUSINESS PHONE: 703-683-6800 MAIL ADDRESS: STREET 1: 1013 PRINCESS STREET CITY: ALEXANDRIA, STATE: VA ZIP: 22314 FORMER COMPANY: FORMER CONFORMED NAME: EUROPA CRUISES CORP DATE OF NAME CHANGE: 19920703 10-Q 1 form10-q.htm

  

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                         to                       

 

Commission File No: 0-17529

 

 

 

DIAMONDHEAD CASINO CORPORATION

(Exact name of registrant as specified in charter)

 

Delaware   59-2935476
(State of Incorporation)   (I.R.S. EIN)

 

1013 Princess Street, Alexandria, Virginia 22314

(Address of principal executive offices)

Registrant’s telephone number, including area code: 703-683-6800

 

Indicate by check mark whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

 

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes[  ] No [X]

 

Indicate the number of shares outstanding of each of the Issuer’s classes of common equity as of the latest practicable date: Number of shares outstanding as of May 14, 2018: 36,297,576.

 

 

 

 
 

 

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

    Page
PART 1: FINANCIAL INFORMATION
     
ITEM 1: Financial Statements (Unaudited)  
     
  Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 1
     
  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and March 31, 2017 (as adjusted) 2
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and March 31, 2017 (as adjusted) 3
     
  Notes to Condensed Consolidated Financial Statements 4
     
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Financial Results 17
     
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk 21
     
ITEM 4: Controls and Procedures 21
     
PART II: OTHER INFORMATION  
     
ITEM 1: Legal Proceedings 22
     
ITEM 1A: Risk Factors 22
     
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds 22
     
ITEM 3: Default Upon Senior Securities 22
     
ITEM 4: Mine Safety Disclosures 22
     
ITEM 5: Other Information 23
     
ITEM 6: Exhibits 23
     
  Signatures 24

 

 i 
 

 

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

  

March 31,

2018

  

December 31,

2017

 
ASSETS          
           
Current assets          
Cash  $46   $65 
Other current assets   2,792    370 
Total current assets   2,838    435 
           
Land held for development (Note 3)   5,476,097    5,476,097 
           
Other assets   80    80 
           
Total assets  $5,479,015   $5,476,612 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
           
Current liabilities          
Convertible notes and line of credit payable (Note 5)  $1,962,500   $1,962,500 
Debenture payable (net of unamortized finance costs of $1,916 at March 31, 2018 And $2,153 at December 31, 2017) (Note 6)   48,084    47,847 
Convertible debentures payable (net of unamortized finance costs of $64,404 at March 31, 2018 and $71,394 at December 31, 2017) (Note 6)   1,735,596    1,728,606 
Short term notes and interest bearing advance (Note 7)   42,394    39,299 
Accounts payable and accrued expenses due related parties (Note 4)   3,614,579    3,427,168 
Accounts payable and accrued expenses – others (Note 4)   2,533,809    2,424,040 
Total current liabilities   9,936,962    9,629,460 
           
Notes payable due related parties (Note 8)   261,443    202,628 
Notes payable due others (Note 8)   87,500    87,500 
           
Total liabilities   10,285,905    9,919,588 
           
Commitments and contingencies (Notes 3 and 11)          
           
Stockholders’ deficiency          
Preferred stock, $.01 par value; shares authorized 5,000,000, outstanding 2,086,000 at March 31, 2018 and December 31, 2017 (aggregate liquidation preference of $2,519,080 at March 31, 2018 and December 31, 2017).   20,860    20,860 
Common stock, $.001 par value; shares authorized 50,000,000, issued: 39,052,472 at March 31, 2018 and December 31, 2017, outstanding: 36,297,576 at March 31, 2018 and December 31, 2017.   39,052    39,052 
Additional paid-in capital   35,547,932    35,526,362 
Unearned ESOP shares   (3,202,274)   (3,202,274)
Accumulated deficit   (37,065,359)   (36,679,875)
Treasury stock, at cost, 607,161 shares at March 31, 2018 and December 31, 2017   (147,101)   (147,101)
           
Total stockholders’ deficiency   (4,806,890)   (4,442,976)
           
Total liabilities and stockholders’ deficiency  $5,479,015   $5,476,612 

 

See the accompanying notes to these condensed consolidated financial statements.

 

 1 
 

 

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

 

       As 
       Adjusted 
   2018   2017 
COSTS AND EXPENSES          
Administrative and general  $170,736   $161,285 
Stock-based compensation   21,570    - 
Other   15,970    16,474 
Total costs and expenses   208,276    177,759 
           
OTHER (EXPENSE) INCOME          
Interest expense   (151,808)   (116,480)
Other   -    20,765 
Total other (expense) income   (151,808)   (95,715)
           
NET LOSS   (360,084)   (273,474)
           
PREFERRED STOCK DIVIDENDS   (25,400)   (25,400)
           
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS  $(385,484)  $(298,874)
           
Net loss per common share, basic and fully diluted  $(.01)  $(.01)
          
Weighted average number of common shares outstanding, basic and fully diluted   36,297,576    36,297,576 

 

See the accompanying notes to these condensed consolidated financial statements

 

 2 
 

 

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

 

       As 
       Adjusted 
   2018   2017 
OPERATING ACTIVITIES          
Net loss  $(360,084)  $(273,474)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization   7,227    9,296 
Stock-based compensation   21,570    - 
Change in assets and liabilities:          
Other assets   (2,422)   (2,544)
Accounts payable and accrued expenses   271,780    225,680 
Net cash used in operating activities   (61,929)   (41,042)
           
FINANCING ACTIVITIES          
Proceeds from notes payable issued to related parties   58,815    - 
Proceeds from interest bearing advance   -    25,000 
Proceeds from short term notes and advances   4,390    2,694 
Payment of short term note   (1,295)   (516)
Net cash provided by financing activities   61,910    27,178 
           
Net decrease in cash   (19)   (13,864)
Cash beginning of period   65    17,606 
Cash end of period  $46   $3,742 
           
Cash paid for interest  $588   $55 
           
Non-cash financing activities:          
Unpaid preferred stock dividends included in accounts payable and accrued expenses  $25,400   $25,400 

 

See the accompanying notes to these condensed consolidated financial statements.

 

 3 
 

 

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 1. Organization and Business

 

Diamondhead Casino Corporation and Subsidiaries (the “Company”) own a total of approximately 400 acres of unimproved land in Diamondhead, Mississippi on which the Company plans, unilaterally, or in conjunction with one or more partners, to construct a casino resort and hotel and associated amenities. Active subsidiaries of the Company include Mississippi Gaming Corporation, which owns the approximate 400-acre site and Casino World, Inc., the development entity.

 

Note 2. Liquidity and Going Concern

 

These unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no operations and generates no operating revenues. During the three months ended March 31, 2018 and 2017, the Company incurred net losses applicable to common shareholders of $385,484 and $298,874 (as adjusted), respectively.

 

The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead Property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort.

 

In the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements of convertible instruments and other means, which are more fully described in Notes 5, 6, 7 and 8 to these unaudited condensed consolidated financial statements. The Company is past due with respect to payment of significant principal and interest on most of these instruments. The Company is also in arrears with respect to payment of franchise taxes due to the State of Delaware for the years 2015, 2016 and 2017. In addition, the Company has also been unable to pay various routine operating expenses. At March 31, 2018, the Company had current liabilities totaling $9,936,962, with $46 of cash on hand and an accumulated deficit of $37,065,359.

 

The above conditions raise substantial doubt as to the Company’s ability to continue as a going concern.

 

Note 3. Summary of Significant Accounting Policies

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2018 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2017, attached to our annual report on Form 10-K.

 

 4 
 

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Land Held for Development

 

Land held for development is carried at cost. Costs directly related to site development, such as permitting, engineering, and other costs, are capitalized.

 

Land development costs, which have been capitalized, consist of the following at March 31, 2018 and December 31, 2017:

 

Land held for development  $4,934,323 
Licenses   77,000 
Engineering and costs associated with permitting   464,774 
      
Total land held for development  $5,476,097 

  

 5 
 

 

Long-Lived Assets

 

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at March 31, 2018.

 

Net Loss per Common Share

 

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met.

 

The table below summarizes the components of potential dilutive securities at March 31, 2018 and 2017.

 

Description  March 31, 2018   March 31, 2017 
         
Convertible Preferred Stock   260,000    260,000 
Options to Purchase Common Shares   3,415,000    3,440,000 
Private Placement Warrants   -    1,036,500 
Convertible Promissory Notes   1,925,000    1,925,000 
           
Total   5,600,000    6,636,500 

 

Stock Based Compensation

 

The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. In the first quarter of 2018, the Board of Directors voted to extend the expiration dates of previously-awarded option grants from March 13, 2018 to December 31, 2020 with respect to the following: i) options previously granted to the President to purchase 750,000 shares of common stock at $0.30 per share, 75,000 shares of common stock at $0.75 per share and 2,000,000 shares of common stock at $0.19 per share; ii) options previously granted to the current Chairman of the Board to purchase 150,000 shares of common stock at $1.25 per share; iii) options previously granted to a Director of the Company to purchase 75,000 shares of common stock at $0.75; and iv) options previously granted to former employees of the Company to purchase a combined total of 65,000 shares of common stock at $0.75 per share. No share-based awards were issued or amended in 2017.

 

In determining the fair value of each option modified, the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718, was used. The valuations were determined using the weighted-average assumptions of 0% dividend yield, expected volatility of 103% and a risk-free interest rate of 2.79%. This resulted in a charge to the statement of loss in the amount of $21,570, decreasing the net income per share of common stock $0.001 for the three months ending March 31, 2018.

 

 6 
 

 

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s options.

 

Accounting Pronouncements Adopted in the Prior Years

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 - Earnings per Share (Topic 260); Distinguishing form Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest with a Scope Exception. Topic 815, Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. The amendments in Part I of this Update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.

 

As a result, a freestanding equity-linked financial instrument (or embedded conversion options) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-linked classified financial instruments, the amendments require entities that present earnings per share in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and a reduction of income available to common shareholders in basic earnings per share.

 

The Company adopted the provisions of the ASU in its December 31, 2017 consolidated financial statements and elected the retrospective transition method whereby comparative consolidated financial statements for the prior year have been recast to reflect the impact of the adoption for comparability reasons. The effect of the recast on net loss for the three months ended March 31, 2017 is more fully discussed in Note 10.

 

Note 4. Accounts Payable and Accrued Expenses

 

The table below outlines the elements included in accounts payable and accrued expenses at March 31, 2018 and December 31, 2017:

 

Description  March 31, 2018   December 31, 2017 
Related parties:          
Accrued payroll due officers  $2,144,711   $2,069,711 
Accrued interest due officers and directors   847,880    767,737 
Accrued director fees   412,500    393,750 
Base rents due to the President   144,836    131,234 
Associated rental costs   47,344    42,731 
Other   17,308    22,005 
Total related parties  $3,614,579   $3,427,168 
           
Non-related parties:          
Accrued interest  $1,546,773   $1,483,923 
Accrued dividends   685,800    660,400 
Accrued fines and penalties   53,350    44,350 
Other accounts payable and accrued expenses   247,886    235,367 
Total non-related parties  $2,533,809   $2,424,040 

 

 7 
 

 

Note 5. Convertible Notes and Line of Credit

 

Line of Credit

 

On October 23, 2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $1,000,000. The Line of Credit provided for funds to be drawn as needed and carries an interest rate on amounts borrowed of 9% per annum, originally payable quarterly, based on the pro rata number of days outstanding. All funds originally advanced under the facility were due and payable by November 1, 2012. As an inducement to provide the facility, the lender was awarded an immediate option to purchase 50,000 shares of common stock of the Company at $1.75 per share. In addition, the lender received an option to purchase a maximum of 250,000 additional shares of common stock of the Company at $1.75 per share. The options expire following repayment in full by the Company of the amount borrowed. At March 31, 2018, the principal and accrued interest due on the obligation, which totals $1,785,860, remains unpaid.

 

Convertible Notes

 

Pursuant to a Private Placement Memorandum dated March 1, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000 with interest at 12% per annum, together with a five year Warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The Promissory Note is convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

 

Pursuant to an additional Private Placement Memorandum dated October 25, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000, together with a five year Warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The Promissory Notes bear interest at 9% per annum and are convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

 

The Convertible Notes issued pursuant to the two Private Placements discussed above total $962,500 in principal and became due and payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, all of the aforementioned debt obligations remain unpaid and in default under the repayment terms of the notes. In addition, a total of $579,660 of accrued interest on the above notes remains outstanding at March 31, 2018.

 

 8 
 

 

The table below summarizes the Company’s debt arising from the above-described sources as of March 31, 2018 and December 31, 2017:

 

Loan Facility 

Principal

Amount

Owed

  

Amount Due

Related Parties

  

Amount Due

Others

 
             
Line of Credit  $1,000,000   $-   $1,000,000 
                
Private Placements:               
March 1, 2010   475,000    75,000    400,000 
October 25, 2010   487,500    -    487,500 
                
Total Private Placements   962,500    75,000    887,500 
                
Total  $1,962,500   $75,000   $1,887,500 

 

Note 6. Convertible Debentures Payable

 

Pursuant to a Private Placement Memorandum dated February 14, 2014 (the “Private Placement”), the Company offered up to a maximum of $3,000,000 of Collateralized Convertible Senior Debentures to accredited or institutional investors. The Offering was conducted contingent on the deposit into Escrow of the purchase price for all of the Debentures offered in the principal amount of $3,000,000. The Debentures, once issued, bear interest at 4% per annum after 180 days, mature six years from the date of issuance, and are secured by a lien on the Company’s Mississippi property. The debentures were offered in three tranches as follows:

 

(a) $1,000,000 of First Tranche Collateralized Convertible Senior Debentures convertible into an aggregate of 3,333,333 shares of Common Stock of the Company at a conversion price of $.30 per share (the “First Tranche Debentures”);

 

(b) $1,000,000 of Second Tranche Collateralized Convertible Senior Debentures, convertible into an aggregate of 2,222,222 shares of Common Stock of the Company at a conversion price of $.45 per share (the “Second Tranche Debentures”); and

 

(c) $1,000,000 of Third Tranche Collateralized Convertible Senior Debentures, convertible into either 1,818,182 shares of Common Stock or 1,333,333 shares of Common Stock of the Company, at a conversion price of $.55 or $.75 per share depending upon certain conditions described in the Private Placement Memorandum (the “Third Tranche Debentures”).

 

The conversion rights on each issued Debenture carry an Anti-Dilution Provision. If the Company issues any shares of Common Stock or other securities after March 31, 2014 at a price per security that is less than the conversion price of a Debenture, then the Debenture shall have a new conversion price equal to the price per security that is less than the Conversion Price of the Debenture. The foregoing provision shall not apply to the following:

 

(a) The issuance of any of the other Debentures in the Offering or the issuance of shares of Common Stock upon conversion of any of the Debentures in the Offering;

 

(b) The issuance of any shares of Common Stock if such issuance relates to an agreement, arrangement or grant to issue shares of Common Stock entered into by the Company prior to the Issue Date of the First Tranche Debentures in the Offering, including but not limited to, for example, previously issued convertible promissory notes, previously issued warrants, previously issued options to purchase Common Stock, or common stock vested or to be issued pursuant to a pre-existing Employee Stock Ownership Plan.

 

 9 
 

 

The Anti-Dilution Provisions with respect to a Debenture terminate the earlier of (a) the date (if ever) the Company receives an “Approval to Proceed” from the Mississippi Gaming Commission to develop a casino/hotel on the Property, (b) the date on which the Debenture is converted in full, (c) the date on which the Debenture is paid in full, or (d) the Final Maturity Date of the Debenture (as defined in the Debenture).

 

Since the issuance of the Debentures, there have been no events that would trigger the above anti dilution provisions. Should an event take place which would trigger the provision, the Company would be required to record dividend expense in an amount equal to the difference in the fair value of the embedded derivatives before the event versus the fair value of the derivative after the triggering event.

 

On March 31, 2014, the First Closing occurred when subscriptions in the amount of $3,000,000 were received in Escrow and accepted by the Company. The Escrow Agent released $1,000,000 to the Company and the Company issued First Tranche Debentures in the aggregate principle amount of $1,000,000.

 

The Company’s stock registration was revoked effective September 4, 2014. Therefore, on December 4, 2014, the Company extended offers to the investors to amend the Private Placement. The Company offered to amend certain terms and conditions, including the conversion terms of the First Tranche Debentures, which were issued on March 31, 2014 (“Amendment I”). The Company separately offered to amend certain terms and conditions, including those relating to issuance and conversion of the Second and Third Tranche Debentures, as well as the period of time within which to perform the Third Tranche Closing Obligations, as amended (“Amendment II”).

 

On December 31, 2014, investors who had purchased $950,000 of First Tranche Debentures consented to the amended conversion terms of Amendment I. The remaining Debenture in the amount of $50,000 remains as originally issued with no conversion rights. Thus, the First Tranche Debentures can be converted into a total of 3,166,666 shares of common stock. On December 31, 2014, the Second Closing occurred when investors representing $850,000 of Second Tranche Debentures consented to Amendment II. The Escrow Agent released $850,000 to the Company and the Company issued Second Tranche Debentures in the aggregate principle amount of $850,000. Thus, the Second Tranche Debentures can be converted into 1,888,889 shares of common stock. The Escrow Agent refunded $300,000 to those investors who did not consent to Amendment II.

 

The Company did not meet the closing obligations for the Third Tranche Debentures as of June 30, 2015, as was required, pursuant to the terms of the Private Placement, as amended. Therefore, in July 2015, the remaining $850,000 then being held in escrow for the purchase of the Third Tranche Debentures was returned to the investors.

 

When originally issued, in the event the Company failed to meet the conditions for conversion of the Debentures, the First Tranche Convertible Debentures, which total $950,000, would have been due on March 31, 2020 and the Second Tranche Convertible Debentures, which total $850,000, would have been due December 31, 2020. The sole remaining non-convertible Debenture in the amount of $50,000 would have been due March 31, 2020. However, the Company is in default with respect to interest payments due under the Debentures.

 

Note 7. Short Term Notes and Interest Bearing Advance

 

Short Term Note

 

In January 2018, the Company financed $2,946 of the premium due for liability insurance on its Mississippi property. The financing requires monthly installments of $286 of principal and interest at a rate of 13.6% through December of 2018. At March 31, 2018, a principal balance of $2,693 remained outstanding on the note.

 

 10 
 

 

Bank Credit Facility

 

Wells Fargo Bank provides an unsecured credit facility of up to $15,000 to the Company. The facility requires a variable monthly payment of amounts borrowed plus interest, which is applied at 11.24% on direct charges and 24.99% on any cash advanced through the facility. At March 31, 2018, a principal balance of $14,701 remained outstanding on the facility.

 

Interest Bearing Advance

 

On February 2, 2017, the Company borrowed $25,000 from an unrelated third party. The Company expects to enter into a formal note for these funds. However, the terms of the note have not been finalized. The Note is expected to carry an annual interest rate of approximately 12.5% with a projected due date of December 31, 2017. The Company is in default and as such, the lender may increase the interest rate due by an amount of up to 3% per annum in excess of the rate then otherwise applicable. The Company does not have the funds to repay the advance. The President of the Company has agreed to personally secure the note with an assignment of proceeds due to her under the first lien on the Diamondhead property.

 

The table below summarizes the short-term notes and interest bearing advance at March 31, 2018 and December 31, 2017.

 

   Interest   March 31,   December 31, 
Description of Facility  Rate   2018   2017 
             
Property Liability Insurance Financing   13.6%  $2,693   $- 
                
Bank Credit Facility   11.24% - 24.99%   14,701    14,299 
                
Interest Bearing Advance   12.50%   25,000    25,000 
                
Total Short Term Notes and Interest               
Bearing Advance       $42,394   $39,299 

 

Note 8. Long Term Notes Payable

 

In the first four months of 2016, the Company received cash advances totaling $47,500 from seven lenders which included $25,000 from three current Directors of the Company. The proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company’s Form 10-Q. On August 25, 2016, the Company issued a Note to the foregoing lenders, which matures four years from the date of issuance and bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid.

 

In the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company an additional $90,000. On August 25, 2016, the Company issued a Note to the Chairman of the Board. The Note bears interest at 14% per annum effective August 1, 2016 and matures four years from the date of issuance. The proceeds of the loan were used for the payment of Mississippi property taxes and auditing, accounting and other corporate expenses.

 

 11 
 

 

The principal due under the two foregoing loan arrangements totals $137,500. The Company has filed a second lien on its Mississippi property in favor of the note holders to secure both principal and interest in the maximum amount of $250,000. The lien is second to the existing first lien on the Mississippi property in the amount of $3.85 million. The first lien is held by holders of previously-issued convertible and non-convertible Debentures ($1.85 million in principle) and certain executives and directors ($2 million), as outlined in Note 11.

 

On June 9, 2017, the Company entered into a Promissory Note with an unrelated lender in exchange for proceeds in the amount of $15,000. Interest on the note is 12.5% per annum and payable March 1 of each year the note remains outstanding. Payment in full of the Note is due June 9, 2019. Mississippi Gaming Corporation, a wholly owned subsidiary of the Company, guaranteed the Note. In addition, the President of the Company agreed to personally guarantee the Note and to personally secure the Note with an assignment of proceeds due to her under the first lien on the Diamondhead property.

 

On July 26, 2017, at the request of the Company, the current Chairman of the Board of Directors, who is also a Vice President of the Company (“the Chairman”), paid all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on an approximate 400-acre tract of land (“the Diamondhead Property”), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company. The total amount advanced was $67,628.

 

The Chairman is one of the secured parties under that Land Deed of Trust recorded on September 26, 2014 in Hancock County, Mississippi, to secure Tranche I and Tranche II Debentures issued by the Company in 2014. Under paragraph 5 of the Land Deed of Trust, a secured party who advances sums for taxes due on the Diamondhead Property is secured by the same Land Deed of Trust, but only at that interest rate specified in the note representing the primary indebtedness, namely 4% per annum.

 

The Chairman advanced the $67,628 on condition that: (i) the advance constitute a lien with interest at 4% per annum under that Land Deed of Trust recorded September 26, 2014; (ii) he be paid additional interest of 11% per annum on the amount advanced and owing and that the full 11% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (iii) this additional interest obligation be treated as a separate and secured debt of the Company, to be evidenced by a separate note and to be secured with a separate and third lien to be placed on the Diamondhead Property (hereafter “the Third Lien”); (iv) the entire obligation will be treated as an advance to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V); and (v) he be indemnified for any losses sustained on the sale of that common stock sold to cover the credit card payments. The Chairman has identified the common stock to be sold and will provide the Company with the documentation required to document the sale of said stock and to calculate the future loss, if any, on said stock.

 

On July 24, 2017, the President of the Company, who is a Director of the Company, agreed to advance the Company up to $20,000 for the payment of expenses. In March of 2018, the Board of Directors voted to increase to up to $100,000 the amount to be secured by a to-be-placed third lien in favor of the President of the Company for amounts advanced by the President under this note, on the following terms and conditions, namely, that (i) she be paid interest of 15% per annum on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the maximum principal amount of $100,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property (“the Third Lien”) together with the Chairman’s Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) that the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) that the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V).

 

 12 
 

 

As of March 31, 2018 and December 31, 2017, the President had advanced a total of $27,518 and $20,000, respectively, under this agreement. The President previously agreed to secure a $25,000 loan and interest due thereon and to secure and guarantee a $15,000 loan and interest due thereon due non-related parties discussed above. The President is also personally liable for certain bank-issued credit cards used by the Company to pay expenses incurred by the Company.

 

In October 2017, the Company entered into a settlement with a holder of $150,000 of convertible notes as described in Note 5, above. The note holder was also a plaintiff in three lawsuits against the Company as is more fully discussed in Note 11. As part of the settlements, the Company agreed to pay legal fees in the amount of $50,000 and issued a four year note at 0% interest to satisfy this obligation.

 

In March of 2018, the Board of Directors voted to increase up to an additional $200,000 the amount to be secured by a to-be-placed third lien in favor of the Chairman of the Board, for amounts advanced by the Chairman on behalf of the Company, on the following terms and conditions, namely, that (i) the advance constitutes a lien on the Diamondhead Property with interest at 15% per annum; (ii) that the full interest of 15% per annum is payable during any calendar year in which all or part of the amount advanced is due and owing or interest due thereon remains unpaid; (iii) that this debt be evidenced by a separate promissory note and is to be included in and secured with a third lien that is to be placed on the Diamondhead Property to secure previous advances made to the Company (hereafter “the Third Lien”); (iv) that he be indemnified for any losses sustained on the sale of his common stock in an unrelated publicly-traded company to be sold to cover this advance based on a sales price of approximately $2.80 per share with a cap on the maximum loss per share to be at a sales price of $10.00 per share; and (v) that the Chairman’s previous indemnification approved by the Board of Directors on July 24, 2017 with respect to any loss on the sale of the same stock also be capped at a maximum of $10.00 per share. The Chairman will provide the Company with the documentation required to document the sale of said stock and to calculate the losses on said stock for all amounts loaned to the Company from the sale of said stock. As of March 31, 2018, the Chairman had advanced a total of $51,297 on behalf of the Company in 2018.

 

The table below summarizes the Company’s long-term notes payable as of March 31, 2018 and December 31, 2017:

 

  

Principal

Amount

  

Amount

Due

  

Amount

Due

 
Loan Facility  Owed   Related Parties   Others 
             
4 Year 8% secured note  $47,500   $25,000   $22,500 
                
4 Year 14% secured note   90,000    90,000    - 
                
2 Year 12.5% secured note   15,000    -    15,000 
                
2 Year 4%/15% secured note due Chairman (2017)   67,628    67,628    - 
                
2 Year 15% secured note due President   20,000    20,000    - 
                
4 Year 0% note   50,000    -    50,000 
                
Balance December 31, 2017  $290,128   $202,628   $87,500 
               
2 Year 15% secured note due Chairman (2018)   51,297    51,297    - 
                
Additional advances 2 year 15% secured note due President   7,518    7,518    - 
                
Balance March 31, 2018  $348,943   $261,443   $87,500 

 

 13 
 

 

Note 9. Related Party Transactions

 

As of March 31, 2018, the President of the Company is owed deferred salary in the amount of $1,941,996 and the Vice President and the current Chairman of the Board of Directors of the Company is owed deferred salary in the amount of $121,140. The Board of directors agreed to pay interest at 9% per annum on the foregoing amounts owed. Interest expense under this agreement amounted to $52,889 and $38,018 for the three months ended March 31, 2018 and 2017, respectively. Total interest accrued under this agreement totaled $737,597 and $588,360 as of March 31, 2018 and March 31, 2017, respectively.

 

Effective September 1, 2011, the Company entered into a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space in a furnished and fully equipped townhouse office building owned by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $4,534 and payment of associated costs of insurance, real estate taxes, utilities and other expenses. Rent expense associated with this lease amounted to base rent in the amount of $13,602 and associated rental costs of $4,613 for a total of $18,215 for the three months ended March 31, 2018 and base rent in the amount of $13,602 and associated rental costs of $3,763 for a total of $17,365 for the three months ended March 31, 2017. No payments associated with the base rents were made in the first three months of 2018. At March 31, 2018 and December 31, 2017, amounts owing for base rent and associated rental costs totaled $192,180 and $173,965, respectively.

 

Directors of the Company are entitled to a director’s fee of $15,000 per year for their services. The Company has been unable to pay directors’ fees to date. A total of $412,500 and $393,750 was due and owing to the Company’s current and former directors as of March 31, 2018 and December 31, 2017, respectively. Directors have previously been compensated and may, in the future, be compensated for their services with cash, common stock, or options to purchase common stock of the Company.

 

See Notes 8 and 11 for other related party transactions.

 

 14 
 

 

Note 10. Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11

 

The Company elected to adopt the provisions of ASU 2017-11 effective for its December 31, 2017 consolidated financial statements. The effect of the adoption eliminated the fair value presentation for the value of the embedded derivatives included in the convertible terms of the Debentures. In addition, the Company elected the retrospective transition method, whereby results for the three months ended March 31, 2017 were recast to reflect the impact of the adoption for comparability.

 

In addition, since the convertible Debentures are no longer stated at fair value, the related unamortized portion of finance costs incurred at the time of issuance of each Tranche of Debentures is reported as an offset to the stated value of the Debenture. The related amortization of the deferred finance costs is now included in interest expense.

 

Amortization of deferred finance costs to interest expense amounted to $236 and $303 for the non-convertible debenture for the three months ended March 31, 2018 and 2017, respectively, and $6,991 and $8,993 for convertible debentures for the three months ended March 31, 2018 and 2017, respectively. The table below summarizes the effect of the adoption on net loss for the three months ended March 31, 2017.

 

   Net   Net Loss Per 
   Loss   Share 
Net loss as originally reported  $88,665   $.003 
           
Decrease (increase) to net loss:          
Change in fair value of derivative liability   212,658      
Amortization of debt discount   (27,849)     
           
Net loss as adjusted  $273,474   $.010 

 

   Amortization of   Interest 
   Finance Costs   Expense 
As originally reported  $9,296   $107,184 
           
Reclassification of amortization of finance costs          
To interest expense   (9,296)   9,296 
           
As adjusted  $-   $116,480 

 

Note 11. Commitments and Contingencies

 

Liens

 

The Company’s obligations under the Collateralized Convertible Senior Debentures are secured by a lien on the Company’s Mississippi property (the “Investors Lien”). On March 31, 2014, the Company issued $1 million of First Tranche Collateralized Convertible Senior Debentures and on December 31, 2014 the Company issued $850,000 of Second Tranche Collateralized Convertible Senior Debentures. Thus, liens were placed on the Property in favor of the Investors for $1,850,000. The Investors Lien is in pari passu with a lien placed on the Property in favor of the President of the Company, the Vice President of the Company, and certain directors of the Company, for past due wages, compensation, and expenses owed to them in the maximum aggregate amount of $2,000,000 (the “Executives Lien”). The CEO will serve as Lien Agent for the Executives Lien.

 

 15 
 

 

The Company has filed a second lien in the maximum amount of $250,000 on the Diamondhead property to secure certain notes payable totaling $137,500 in principal and accrued interest incurred. A third lien will also be filed to secure related party notes arising in the third quarter of 2017 and the first quarter of 2018. Details of these notes are more fully described in Note 8.

 

Litigation

 

CASE PENDING

 

Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-LPS)

 

On October 25, 2016, the above-named Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million, plus interest from January 1, 2015, together with costs and fees. The Company was served with the Complaint on October 31, 2016. On November 21, 2016, the Company filed a motion to dismiss for lack of subject matter jurisdiction due to failure to plead diversity. On February 21, 2017, the plaintiffs filed a motion for leave to amend their complaint based upon declarations of citizenship filed with the court. On September 26, 2017, the motion for leave to amend was granted and the Company’s motion to dismiss was granted in part and denied in part. The Court also granted plaintiffs leave to file a Second Amended Complaint which was filed on October 2, 2017. On October 16, 2017, the Company filed Defendant’s Answer and Affirmative Defenses and Counterclaim. On November 2, 2017, the Plaintiffs filed an Answer to the Counterclaim. The parties have exchanged discovery in the case. Trial in this matter is currently scheduled for March 22, 2019.

 

Other

 

On July 26, 2017, the Chairman paid $67,628 for all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on an approximate 400-acre tract of land (“the Diamondhead Property”), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company. The taxes had to be paid by July 31, 2017 to avoid a tax sale. The conditions of the note under which the Chairman agreed to make this payment are discussed in full detail in Note 6 of these consolidated financial statements.

 

Of particular note to those conditions, item (v) calls for the Chairman to be indemnified for any losses sustained on the sale of that common stock sold to cover the above payments. The Chairman has identified the common stock sold and has provided the Company with the documentation required to document the sale of said stock and to calculate the contingent future loss, if any, on said stock.

 

Had the Company paid the note in full at March 31, 2018, in addition to the principal and interest due, the company would have been additionally liable for approximately $209,760 in additional funds to indemnify the Chairman for his lost equity on the stock sale.

 

 16 
 

 

The Company is currently delinquent in filing those documents and forms required to be filed in connection with its Employee Stock Ownership Plan (“ESOP”) for the year ended December 31, 2016 and 2015. The Company did not have the funds to pay professionals to prepare, audit and file these documents and forms when due. Although these required filings normally do not result in any tax due to an agency of the government, the Company could be subject to significant penalties for failure to file these forms when due. Penalties are assessed by the Department of Labor on a per diem basis from the original due dates for the required informational filings until the filings are actually made. The Company has accrued $53,350 on the current delinquent filings. The Company intends to bring its ESOP-required filings current and when current, will attempt to enroll in a voluntary compliance program with the Department of Labor with respect to any penalties or fines incurred. However, there can be no assurance the Company will be able to enroll in any such program or obtain a reduction of the fines and penalties that may be due.

 

The Company has not filed its consolidated federal tax return for the year ended December 31, 2016. The Company believes no tax is due with that return. Diamondhead Casino Corporation and its two active subsidiaries, Mississippi Gaming Corporation and Casino World, Inc., are delinquent with respect to the filing of their franchise tax annual reports for 2017, 2016 and 2015 with the state of Delaware. Mississippi Gaming Corporation and Casino World, Inc. are also delinquent with respect to the filing of their annual franchise tax returns for the year ended December 31, 2016 and 2017 with the state of Mississippi.

 

The Company has made provision for the expected taxes due on these state filings in their unaudited condensed consolidated financial statements for the three months ending March 31, 2018 and 2017.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND FINANCIAL RESULTS

 

Forward Looking Statements

 

This section should be read together with the consolidated financial statements and related notes thereto, for the year ended December 31, 2017 included with our annual report filed on Form 10-K.

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, for which the Private Securities Litigation Reform Act of 1995 provides a safe harbor. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and intentions and are not historical facts and typically are identified by use of terms such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given,” or “there is no way to anticipate with certainty.” These statements include, among other things, statements regarding our ability to implement our business plan and business strategy, our ability to obtain financing to sustain the Company, our ability to finance any future development, construction or operations, our ability to attract key personnel, and our ability to operate profitably in the future. These forward-looking statements are based on current expectations and assumptions that are subject to substantial risks and uncertainties which could cause our actual results to differ materially from those reflected in the forward-looking statements. In evaluating these forward-looking statements, you should consider risks and uncertainties relating to various factors, including, but not limited to, financing, licensing, construction and development, competition, legal actions, federal, state, county and/or city government actions, general financing conditions, and general economic conditions.

 

The Company’s actual results may differ significantly from results projected in the forward-looking statements. We undertake no obligation to revise or update forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

 17 
 

 

Throughout this Annual Report references to “we,” “our,” “us,” “Diamondhead Casino Corporation,” the “Company,” and similar terms refer to Diamondhead Casino Corporation and its wholly-owned subsidiaries, unless the context indicates otherwise.

 

The Company’s current priority is the development of a casino resort on its Property located in Diamondhead, Mississippi. The Company’s management, financial resources and assets will be devoted towards the development of this property. There can be no assurance that the property can be developed or, that if developed, that the project will be successful.

 

Liquidity

 

The Company has incurred continued losses over the years and certain conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company has no operations, generates no revenues and has been dependent on various financing arrangements to raise sufficient cash to satisfy the expenses it incurs. The Company is concentrating its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort. In the past, the Company has been able to sustain itself through various short term borrowing, however, at March 31, 2018, the Company had an accumulated deficit of $37,065,359 and cash on hand of $46, while current liabilities totaled $9,936,962. Therefore, in order to sustain itself, it is imperative that the Company secures a source of funds to provide further working capital. There can be no assurance the Company will be able to obtain such funding.

 

In addition, a line of credit in the principle amount of $1,000,000 obtained in October 2008, was payable in November 2012. Also, convertible notes issued pursuant to two Private Placements offered in 2010, totaling $962,500 in principle at September 30, 2017, had become payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, none of the aforementioned debt obligations or the accrued interest thereon has been paid and, therefore, the Company is in default with respect to the repayment terms of the notes. Also, accrued interest on Tranche I and Tranche II Debentures issued in 2014, totaled $223,480, of which payment of $205,233 is delinquent. The Company is also in arrears with respect to payment of franchise taxes due to the State of Delaware for the years 2015, 2016 and 2017. In addition, the Company has also been unable to pay various routine operating expenses. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

Financial Results and Analysis

 

During the three months ended March 31, 2018 and 2017, the Company incurred net losses applicable to common stockholders of $385,484 and $298,874 (as adjusted), respectively.

 

Administrative and general expenses incurred totaled $170,736 and $161,285 for the three months ending March 31, 2018 and 2017, respectively. The table below depicts the major categories comprising these expenses:

 

DESCRIPTION  March 31, 2018   March 31, 2017 
Payroll and related taxes  $75,000   $75,000 
Director fees   18,750    22,500 
Professional services   41,444    34,088 
Rents and insurances   19,065    18,245 
Fines and penalties   9,000    4,500 
All other expenses   7,477    6,952 
           
Total administrative and general expenses  $170,736   $161,285 

 

 18 
 

 

Other Income and Expense

 

Interest expense incurred totaled $151,808 and $116,480 for the three months ended March 31, 2018 and 2017, respectively, an increase of $35,328. The increase in 2018 is primarily attributable to the impact of accrued interest on unpaid wages which continue to accrue quarterly as well as the impact from new borrowings arising in the first three months of 2018.

 

Off-Balance Sheet Arrangements

 

Management Agreement

 

On June 19, 1993, two subsidiaries of the Company, Casino World Inc. and Mississippi Gaming Corporation, entered into a Management Agreement with Casinos Austria Maritime Corporation (“CAMC”). Subject to certain conditions, under the Management Agreement, CAMC would operate, on an exclusive basis, all of the Company’s proposed dockside gaming casinos in the State of Mississippi, including any operation fifty percent (50%) or more of which is owned by the Company or its affiliates. Unless terminated earlier pursuant to the provisions of the Agreement, the Agreement terminates five years from the first day of actual Mississippi gaming operations and provides for the payment of an annual operational term management fee of 1.2% of all gross gaming revenues between zero and $100,000,000; plus 0.75% of gross gaming revenue between $100,000,000 and $140,000,000; plus 0.5% of gross gaming revenue above $140,000,000; plus two percent of the net gaming revenue between zero and $25,000,000; plus three percent of the net gaming revenue above $25,000,000. The Company believes this Agreement is no longer in effect. However, there can be no assurance that CAMC will not attempt to maintain otherwise which would lead to litigation.

 

There are no other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures, or capital resources, that are material to our stockholders.

 

Critical Accounting Policies

 

Estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

 19 
 

 

Long-Lived Assets

 

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at March 31, 2018.

 

Stock Based Compensation Expense

 

In determining the fair value of options and warrants granted or modified, the Company uses the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718. Valuations are determined using the weighted-average assumptions of dividend yield, expected volatility and risk-free interest rates.

 

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s options.

 

Accounting Pronouncements Adopted in the Prior Years

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 - Earnings per Share (Topic 260); Distinguishing form Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest with a Scope Exception. Topic 815, Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. The amendments in Part I of this Update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.

 

 20 
 

 

As a result, a freestanding equity-linked financial instrument (or embedded conversion options) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-linked classified financial instruments, the amendments require entities that present earnings per share in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and a reduction of income available to common shareholders in basic earnings per share.

 

The Company adopted the provisions of the Update in its December 31, 2017 consolidated financial statements and elected the retrospective transition method whereby comparative consolidated financial statements for the prior year have been recast to reflect the impact of the adoption for comparability reasons.

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

 

The Company currently is not subject to any trading or non-trading market risk-sensitive instruments. The note payable and the long-term debt listed on the Company’s balance sheet are at fixed interest rates and, therefore, are not market risk-sensitive.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

In connection with the preparation of this quarterly report on Form 10-Q, our management, with the participation of our Chief Executive Officer, who also serves as Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2018. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls and other procedures that are designed to ensure that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s Rules and Forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on the results of this evaluation, the Chief Executive Officer/Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2018.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended) during the quarter ended March 31, 2018 that are expected to materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 21 
 

 

PART II: OTHER INFORMATION

 

Item 1. Legal Proceedings

 

CASE PENDING

 

Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-LPS)

 

On October 25, 2016, the above-named Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million, plus interest from January 1, 2015, together with costs and fees. The Company was served with the Complaint on October 31, 2016. On November 21, 2016, the Company filed a motion to dismiss for lack of subject matter jurisdiction due to failure to plead diversity. On February 21, 2017, the plaintiffs filed a motion for leave to amend their complaint based upon declarations of citizenship filed with the court. On September 26, 2017, the motion for leave to amend was granted and the Company’s motion to dismiss was granted in part and denied in part. The Court also granted plaintiffs leave to file a Second Amended Complaint which was filed on October 2, 2017. On October 16, 2017, the Company filed Defendant’s Answer and Affirmative Defenses and Counterclaim. On November 2, 2017, the Plaintiffs filed an Answer to the Counterclaim. The parties have exchanged discovery in the case. Trial in this matter is currently scheduled for March 22, 2019.

 

Item 1A. Risk Factors

 

As a smaller reporting company, information under this item is not required to be presented.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Default Upon Senior Securities

 

The Company is in arrears on the payment of dividends due on its three series of preferred stock currently issued and outstanding. The Company has not paid preferred dividends due in the first three months of 2018 in the amount of i) $7,500 on its Series S preferred stock; ii) $7,500 on its Series S-NR preferred stock; and iii) $10,400 on its Series S-PIK preferred stock. The table below summarizes total preferred stock dividends in arrears at March 31, 2018.

 

   Total Amount 
Description  In Arrears 
     
Series S  $202,500 
Series S-NR   202,500 
Series S-PIK   280,800 
      
Total In Arrears  $685,800 

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

 22 
 

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibits 31.1 and 31.2

 

Attached to this report is the certification of the Chief Executive Officer/Chief Financial Officer of the Company pursuant to Rule 13a-14 and Rule15d-14.

 

Exhibits 32.1 and 32.2

 

Attached to this report is the certification of the Chief Executive Officer/Chief Financial Officer of the Company as required by 18 U.S.C. Section 1350.

 

101.INS XBRL Instance Document
101.SHC XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

 23 
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  DIAMONDHEAD CASINO CORPORATION
     
Date: May 18, 2018   /s/ Deborah A. Vitale
  By: Deborah A. Vitale
    Chief Executive Officer

 

 24 
 

 

EX-31.1 2 ex31-1.htm

 

CERTIFICATIONS Exhibit 31.1

 

I, Deborah A. Vitale, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Diamondhead Casino Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

 

4. As the Issuer’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and I have:

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent function):

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

 

Date: May 18, 2018  
   
/s/ Deborah A. Vitale  
Deborah A. Vitale  
Chief Executive Officer

 

 
 

EX-31.2 3 ex31-2.htm

 

CERTIFICATIONS Exhibit 31.2

 

I, Deborah A Vitale, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Diamondhead Casino Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

 

4. As the issuer’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the issuer and I have:

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent function):

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

 

Date: May 18, 2018  
   
/s/ Deborah A. Vitale  
Deborah A. Vitale  
Chief Financial Officer

 

 
 

EX-32.1 4 ex32-1.htm

 

EXHIBIT 32.1

 

CERTIFICATION

 

In connection with the Quarterly Report of Diamondhead Casino Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deborah A. Vitale, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 18, 2018 /s/ Deborah A. Vitale
  Deborah A. Vitale
  Chief Executive Officer

 

 
 

EX-32.2 5 ex32-2.htm

 

EXHIBIT 32.2

CERTIFICATION

 

In connection with the Quarterly Report of Diamondhead Casino Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deborah A. Vitale, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial  condition and results of operations of the Company.

 

Date: May 18, 2018 /s/ DEBORAH A. VITALE
  Deborah A. Vitale
  Chief Financial Officer

 

 
 

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The amendments also clarify existing disclosure requirements for equity-classified instruments.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result, a freestanding equity-linked financial instrument (or embedded conversion options) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-linked classified financial instruments, the amendments require entities that present earnings per share in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and a reduction of income available to common shareholders in basic earnings per share.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted the provisions of the ASU in its December 31, 2017 consolidated financial statements and elected the retrospective transition method whereby comparative consolidated financial statements for the prior year have been recast to reflect the impact of the adoption for comparability reasons. 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 14, 2018
Document And Entity Information    
Entity Registrant Name DIAMONDHEAD CASINO CORP  
Entity Central Index Key 0000844887  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   36,297,576
Trading Symbol DHCC  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
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Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Current assets    
Cash $ 46 $ 65
Other current assets 2,792 370
Total current assets 2,838 435
Land held for development (Note 3) 5,476,097 5,476,097
Other assets 80 80
Total assets 5,479,015 5,476,612
Current liabilities    
Convertible notes and line of credit payable (Note 5) 1,962,500 1,962,500
Debenture payable (net of unamortized finance costs of $1,916 at March 31, 2018 And $2,153 at December 31, 2017) (Note 6) 48,084 47,847
Convertible debentures payable (net of unamortized finance costs of $64,404 at March 31, 2018 and $71,394 at December 31, 2017) (Note 6) 1,735,596 1,728,606
Short term notes and interest bearing advance (Note 7) 42,394 39,299
Accounts payable and accrued expenses due related parties (Note 4) 3,614,579 3,427,168
Accounts payable and accrued expenses – others (Note 4) 2,533,809 2,424,040
Total current liabilities 9,936,962 9,629,460
Notes payable due related parties (Note 8) 261,443 202,628
Notes payable due others (Note 8) 87,500 87,500
Total liabilities 10,285,905 9,919,588
Commitments and contingencies (Notes 3 and 11)
Stockholders’ deficiency    
Preferred stock, $.01 par value; shares authorized 5,000,000, outstanding 2,086,000 at March 31, 2018 and December 31, 2017 (aggregate liquidation preference of $2,519,080 at March 31, 2018 and December 31, 2017). 20,860 20,860
Common stock, $.001 par value; shares authorized 50,000,000, issued: 39,052,472 at March 31, 2018 and December 31, 2017, outstanding: 36,297,576 at March 31, 2018 and December 31, 2017. 39,052 39,052
Additional paid-in capital 35,547,932 35,526,362
Unearned ESOP shares (3,202,274) (3,202,274)
Accumulated deficit (37,065,359) (36,679,875)
Treasury stock, at cost, 607,161 shares at March 31, 2018 and December 31, 2017 (147,101) (147,101)
Total stockholders’ deficiency (4,806,890) (4,442,976)
Total liabilities and stockholders’ deficiency $ 5,479,015 $ 5,476,612
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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Preferred stock, par or stated value per share $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares outstanding 2,086,000 2,086,000
Preferred stock, liquidation preference, value $ 2,519,080 $ 2,519,080
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 39,052,472 39,052,472
Common stock, shares outstanding 36,297,576 36,297,576
Treasury stock, shares 607,161 607,161
Corporate Debt Securities    
Unamortized discount $ 1,916 $ 2,153
Convertible Debt Securities    
Unamortized discount $ 64,404 $ 71,394
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
COSTS AND EXPENSES    
Administrative and general $ 170,736 $ 161,285
Stock-based compensation 21,570
Other 15,970 16,474
Total costs and expenses 208,276 177,759
OTHER (EXPENSE) INCOME    
Interest expense (151,808) (116,480)
Other 20,765
Total other (expense) income (151,808) (95,715)
NET LOSS (360,084) (273,474)
PREFERRED STOCK DIVIDENDS (25,400) (25,400)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (385,484) $ (298,874)
Net loss per common share, basic and fully diluted $ (0.01) $ (0.01)
Weighted average number of common shares outstanding, basic and fully diluted 36,297,576 36,297,576
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
OPERATING ACTIVITIES    
Net loss $ (360,084) $ (273,474)
Adjustments to reconcile net loss to net cash used in operating activities:    
Amortization 7,227 9,296
Stock-based compensation 21,570
Change in assets and liabilities:    
Other assets (2,422) (2,544)
Accounts payable and accrued expenses 271,780 225,680
Net cash used in operating activities (61,929) (41,042)
FINANCING ACTIVITIES    
Proceeds from notes payable issued to related parties 58,815
Proceeds from interest bearing advance 25,000
Proceeds from short term notes and advances 4,390 2,694
Payment of short term note (1,295) (516)
Net cash provided by financing activities 61,910 27,178
Net decrease in cash (19) (13,864)
Cash beginning of period 65 17,606
Cash end of period 46 3,742
Cash paid for interest 588 55
Non-cash financing activities:    
Unpaid preferred stock dividends included in accounts payable and accrued expenses $ 25,400 $ 25,400
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Organization and Business
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business

Note 1. Organization and Business

 

Diamondhead Casino Corporation and Subsidiaries (the “Company”) own a total of approximately 400 acres of unimproved land in Diamondhead, Mississippi on which the Company plans, unilaterally, or in conjunction with one or more partners, to construct a casino resort and hotel and associated amenities. Active subsidiaries of the Company include Mississippi Gaming Corporation, which owns the approximate 400-acre site and Casino World, Inc., the development entity.

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Liquidity and Going Concern
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Liquidity and Going Concern

Note 2. Liquidity and Going Concern

 

These unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no operations and generates no operating revenues. During the three months ended March 31, 2018 and 2017, the Company incurred net losses applicable to common shareholders of $385,484 and $298,874 (as adjusted), respectively.

 

The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead Property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort.

 

In the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements of convertible instruments and other means, which are more fully described in Notes 5, 6, 7 and 8 to these unaudited condensed consolidated financial statements. The Company is past due with respect to payment of significant principal and interest on most of these instruments. The Company is also in arrears with respect to payment of franchise taxes due to the State of Delaware for the years 2015, 2016 and 2017. In addition, the Company has also been unable to pay various routine operating expenses. At March 31, 2018, the Company had current liabilities totaling $9,936,962, with $46 of cash on hand and an accumulated deficit of $37,065,359.

 

The above conditions raise substantial doubt as to the Company’s ability to continue as a going concern.

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Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2018 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2017, attached to our annual report on Form 10-K.

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Land Held for Development

 

Land held for development is carried at cost. Costs directly related to site development, such as permitting, engineering, and other costs, are capitalized.

 

Land development costs, which have been capitalized, consist of the following at March 31, 2018 and December 31, 2017:

 

Land held for development   $ 4,934,323  
Licenses     77,000  
Engineering and costs associated with permitting     464,774  
         
Total land held for development   $ 5,476,097  

  

Long-Lived Assets

 

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at March 31, 2018.

 

Net Loss per Common Share

 

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met.

 

The table below summarizes the components of potential dilutive securities at March 31, 2018 and 2017.

 

Description   March 31, 2018     March 31, 2017  
             
Convertible Preferred Stock     260,000       260,000  
Options to Purchase Common Shares     3,415,000       3,440,000  
Private Placement Warrants     -       1,036,500  
Convertible Promissory Notes     1,925,000       1,925,000  
                 
Total     5,600,000       6,636,500  

 

Stock Based Compensation

 

The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. In the first quarter of 2018, the Board of Directors voted to extend the expiration dates of previously-awarded option grants from March 13, 2018 to December 31, 2020 with respect to the following: i) options previously granted to the President to purchase 750,000 shares of common stock at $0.30 per share, 75,000 shares of common stock at $0.75 per share and 2,000,000 shares of common stock at $0.19 per share; ii) options previously granted to the current Chairman of the Board to purchase 150,000 shares of common stock at $1.25 per share; iii) options previously granted to a Director of the Company to purchase 75,000 shares of common stock at $0.75; and iv) options previously granted to former employees of the Company to purchase a combined total of 65,000 shares of common stock at $0.75 per share. No share-based awards were issued or amended in 2017.

 

In determining the fair value of each option modified, the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718, was used. The valuations were determined using the weighted-average assumptions of 0% dividend yield, expected volatility of 103% and a risk-free interest rate of 2.79%. This resulted in a charge to the statement of loss in the amount of $21,570, decreasing the net income per share of common stock $0.001 for the three months ending March 31, 2018.

 

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s options.

 

Accounting Pronouncements Adopted in the Prior Years

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 - Earnings per Share (Topic 260); Distinguishing form Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest with a Scope Exception. Topic 815, Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. The amendments in Part I of this Update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.

 

As a result, a freestanding equity-linked financial instrument (or embedded conversion options) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-linked classified financial instruments, the amendments require entities that present earnings per share in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and a reduction of income available to common shareholders in basic earnings per share.

 

The Company adopted the provisions of the ASU in its December 31, 2017 consolidated financial statements and elected the retrospective transition method whereby comparative consolidated financial statements for the prior year have been recast to reflect the impact of the adoption for comparability reasons. The effect of the recast on net loss for the three months ended March 31, 2017 is more fully discussed in Note 10.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accounts Payable and Accrued Expenses
3 Months Ended
Mar. 31, 2018
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Expenses

Note 4. Accounts Payable and Accrued Expenses

 

The table below outlines the elements included in accounts payable and accrued expenses at March 31, 2018 and December 31, 2017:

 

Description   March 31, 2018     December 31, 2017  
Related parties:                
Accrued payroll due officers   $ 2,144,711     $ 2,069,711  
Accrued interest due officers and directors     847,880       767,737  
Accrued director fees     412,500       393,750  
Base rents due to the President     144,836       131,234  
Associated rental costs     47,344       42,731  
Other     17,308       22,005  
Total related parties   $ 3,614,579     $ 3,427,168  
                 
Non-related parties:                
Accrued interest   $ 1,546,773     $ 1,483,923  
Accrued dividends     685,800       660,400  
Accrued fines and penalties     53,350       44,350  
Other accounts payable and accrued expenses     247,886       235,367  
Total non-related parties   $ 2,533,809     $ 2,424,040

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes and Line of Credit
3 Months Ended
Mar. 31, 2018
Other Liabilities Disclosure [Abstract]  
Convertible Notes and Line of Credit

Note 5. Convertible Notes and Line of Credit

 

Line of Credit

 

On October 23, 2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $1,000,000. The Line of Credit provided for funds to be drawn as needed and carries an interest rate on amounts borrowed of 9% per annum, originally payable quarterly, based on the pro rata number of days outstanding. All funds originally advanced under the facility were due and payable by November 1, 2012. As an inducement to provide the facility, the lender was awarded an immediate option to purchase 50,000 shares of common stock of the Company at $1.75 per share. In addition, the lender received an option to purchase a maximum of 250,000 additional shares of common stock of the Company at $1.75 per share. The options expire following repayment in full by the Company of the amount borrowed. At March 31, 2018, the principal and accrued interest due on the obligation, which totals $1,785,860, remains unpaid.

 

Convertible Notes

 

Pursuant to a Private Placement Memorandum dated March 1, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000 with interest at 12% per annum, together with a five year Warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The Promissory Note is convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

 

Pursuant to an additional Private Placement Memorandum dated October 25, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000, together with a five year Warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The Promissory Notes bear interest at 9% per annum and are convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

 

The Convertible Notes issued pursuant to the two Private Placements discussed above total $962,500 in principal and became due and payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, all of the aforementioned debt obligations remain unpaid and in default under the repayment terms of the notes. In addition, a total of $579,660 of accrued interest on the above notes remains outstanding at March 31, 2018.

 

The table below summarizes the Company’s debt arising from the above-described sources as of March 31, 2018 and December 31, 2017:

 

Loan Facility  

Principal

Amount

Owed

   

Amount Due

Related Parties

   

Amount Due

Others

 
                   
Line of Credit   $ 1,000,000     $ -     $ 1,000,000  
                         
Private Placements:                        
March 1, 2010     475,000       75,000       400,000  
October 25, 2010     487,500       -       487,500  
                         
Total Private Placements     962,500       75,000       887,500  
                         
Total   $ 1,962,500     $ 75,000     $ 1,887,500

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures Payable
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Convertible Debentures Payable

Note 6. Convertible Debentures Payable

 

Pursuant to a Private Placement Memorandum dated February 14, 2014 (the “Private Placement”), the Company offered up to a maximum of $3,000,000 of Collateralized Convertible Senior Debentures to accredited or institutional investors. The Offering was conducted contingent on the deposit into Escrow of the purchase price for all of the Debentures offered in the principal amount of $3,000,000. The Debentures, once issued, bear interest at 4% per annum after 180 days, mature six years from the date of issuance, and are secured by a lien on the Company’s Mississippi property. The debentures were offered in three tranches as follows:

 

(a) $1,000,000 of First Tranche Collateralized Convertible Senior Debentures convertible into an aggregate of 3,333,333 shares of Common Stock of the Company at a conversion price of $.30 per share (the “First Tranche Debentures”);

 

(b) $1,000,000 of Second Tranche Collateralized Convertible Senior Debentures, convertible into an aggregate of 2,222,222 shares of Common Stock of the Company at a conversion price of $.45 per share (the “Second Tranche Debentures”); and

 

(c) $1,000,000 of Third Tranche Collateralized Convertible Senior Debentures, convertible into either 1,818,182 shares of Common Stock or 1,333,333 shares of Common Stock of the Company, at a conversion price of $.55 or $.75 per share depending upon certain conditions described in the Private Placement Memorandum (the “Third Tranche Debentures”).

 

The conversion rights on each issued Debenture carry an Anti-Dilution Provision. If the Company issues any shares of Common Stock or other securities after March 31, 2014 at a price per security that is less than the conversion price of a Debenture, then the Debenture shall have a new conversion price equal to the price per security that is less than the Conversion Price of the Debenture. The foregoing provision shall not apply to the following:

 

(a) The issuance of any of the other Debentures in the Offering or the issuance of shares of Common Stock upon conversion of any of the Debentures in the Offering;

 

(b) The issuance of any shares of Common Stock if such issuance relates to an agreement, arrangement or grant to issue shares of Common Stock entered into by the Company prior to the Issue Date of the First Tranche Debentures in the Offering, including but not limited to, for example, previously issued convertible promissory notes, previously issued warrants, previously issued options to purchase Common Stock, or common stock vested or to be issued pursuant to a pre-existing Employee Stock Ownership Plan.

 

The Anti-Dilution Provisions with respect to a Debenture terminate the earlier of (a) the date (if ever) the Company receives an “Approval to Proceed” from the Mississippi Gaming Commission to develop a casino/hotel on the Property, (b) the date on which the Debenture is converted in full, (c) the date on which the Debenture is paid in full, or (d) the Final Maturity Date of the Debenture (as defined in the Debenture).

 

Since the issuance of the Debentures, there have been no events that would trigger the above anti dilution provisions. Should an event take place which would trigger the provision, the Company would be required to record dividend expense in an amount equal to the difference in the fair value of the embedded derivatives before the event versus the fair value of the derivative after the triggering event.

 

On March 31, 2014, the First Closing occurred when subscriptions in the amount of $3,000,000 were received in Escrow and accepted by the Company. The Escrow Agent released $1,000,000 to the Company and the Company issued First Tranche Debentures in the aggregate principle amount of $1,000,000.

 

The Company’s stock registration was revoked effective September 4, 2014. Therefore, on December 4, 2014, the Company extended offers to the investors to amend the Private Placement. The Company offered to amend certain terms and conditions, including the conversion terms of the First Tranche Debentures, which were issued on March 31, 2014 (“Amendment I”). The Company separately offered to amend certain terms and conditions, including those relating to issuance and conversion of the Second and Third Tranche Debentures, as well as the period of time within which to perform the Third Tranche Closing Obligations, as amended (“Amendment II”).

 

On December 31, 2014, investors who had purchased $950,000 of First Tranche Debentures consented to the amended conversion terms of Amendment I. The remaining Debenture in the amount of $50,000 remains as originally issued with no conversion rights. Thus, the First Tranche Debentures can be converted into a total of 3,166,666 shares of common stock. On December 31, 2014, the Second Closing occurred when investors representing $850,000 of Second Tranche Debentures consented to Amendment II. The Escrow Agent released $850,000 to the Company and the Company issued Second Tranche Debentures in the aggregate principle amount of $850,000. Thus, the Second Tranche Debentures can be converted into 1,888,889 shares of common stock. The Escrow Agent refunded $300,000 to those investors who did not consent to Amendment II.

 

The Company did not meet the closing obligations for the Third Tranche Debentures as of June 30, 2015, as was required, pursuant to the terms of the Private Placement, as amended. Therefore, in July 2015, the remaining $850,000 then being held in escrow for the purchase of the Third Tranche Debentures was returned to the investors.

 

When originally issued, in the event the Company failed to meet the conditions for conversion of the Debentures, the First Tranche Convertible Debentures, which total $950,000, would have been due on March 31, 2020 and the Second Tranche Convertible Debentures, which total $850,000, would have been due December 31, 2020. The sole remaining non-convertible Debenture in the amount of $50,000 would have been due March 31, 2020. However, the Company is in default with respect to interest payments due under the Debentures.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Short Term Notes and Interest Bearing Advance
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Short Term Notes and Interest Bearing Advance

Note 7. Short Term Notes and Interest Bearing Advance

 

Short Term Note

 

In January 2018, the Company financed $2,946 of the premium due for liability insurance on its Mississippi property. The financing requires monthly installments of $286 of principal and interest at a rate of 13.6% through December of 2018. At March 31, 2018, a principal balance of $2,693 remained outstanding on the note.

 

Bank Credit Facility

 

Wells Fargo Bank provides an unsecured credit facility of up to $15,000 to the Company. The facility requires a variable monthly payment of amounts borrowed plus interest, which is applied at 11.24% on direct charges and 24.99% on any cash advanced through the facility. At March 31, 2018, a principal balance of $14,701 remained outstanding on the facility.

 

Interest Bearing Advance

 

On February 2, 2017, the Company borrowed $25,000 from an unrelated third party. The Company expects to enter into a formal note for these funds. However, the terms of the note have not been finalized. The Note is expected to carry an annual interest rate of approximately 12.5% with a projected due date of December 31, 2017. The Company is in default and as such, the lender may increase the interest rate due by an amount of up to 3% per annum in excess of the rate then otherwise applicable. The Company does not have the funds to repay the advance. The President of the Company has agreed to personally secure the note with an assignment of proceeds due to her under the first lien on the Diamondhead property.

 

The table below summarizes the short-term notes and interest bearing advance at March 31, 2018 and December 31, 2017.

 

    Interest     March 31,     December 31,  
Description of Facility   Rate     2018     2017  
                   
Property Liability Insurance Financing     13.6 %   $ 2,693     $ -  
                         
Bank Credit Facility     11.24% - 24.99 %     14,701       14,299  
                         
Interest Bearing Advance     12.50 %     25,000       25,000  
                         
Total Short Term Notes and Interest                        
Bearing Advance           $ 42,394     $ 39,299

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Long Term Notes Payable
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Long Term Notes Payable

Note 8. Long Term Notes Payable

 

In the first four months of 2016, the Company received cash advances totaling $47,500 from seven lenders which included $25,000 from three current Directors of the Company. The proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company’s Form 10-Q. On August 25, 2016, the Company issued a Note to the foregoing lenders, which matures four years from the date of issuance and bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid.

 

In the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company an additional $90,000. On August 25, 2016, the Company issued a Note to the Chairman of the Board. The Note bears interest at 14% per annum effective August 1, 2016 and matures four years from the date of issuance. The proceeds of the loan were used for the payment of Mississippi property taxes and auditing, accounting and other corporate expenses.

 

The principal due under the two foregoing loan arrangements totals $137,500. The Company has filed a second lien on its Mississippi property in favor of the note holders to secure both principal and interest in the maximum amount of $250,000. The lien is second to the existing first lien on the Mississippi property in the amount of $3.85 million. The first lien is held by holders of previously-issued convertible and non-convertible Debentures ($1.85 million in principle) and certain executives and directors ($2 million), as outlined in Note 11.

 

On June 9, 2017, the Company entered into a Promissory Note with an unrelated lender in exchange for proceeds in the amount of $15,000. Interest on the note is 12.5% per annum and payable March 1 of each year the note remains outstanding. Payment in full of the Note is due June 9, 2019. Mississippi Gaming Corporation, a wholly owned subsidiary of the Company, guaranteed the Note. In addition, the President of the Company agreed to personally guarantee the Note and to personally secure the Note with an assignment of proceeds due to her under the first lien on the Diamondhead property.

 

On July 26, 2017, at the request of the Company, the current Chairman of the Board of Directors, who is also a Vice President of the Company (“the Chairman”), paid all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on an approximate 400-acre tract of land (“the Diamondhead Property”), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company. The total amount advanced was $67,628.

 

The Chairman is one of the secured parties under that Land Deed of Trust recorded on September 26, 2014 in Hancock County, Mississippi, to secure Tranche I and Tranche II Debentures issued by the Company in 2014. Under paragraph 5 of the Land Deed of Trust, a secured party who advances sums for taxes due on the Diamondhead Property is secured by the same Land Deed of Trust, but only at that interest rate specified in the note representing the primary indebtedness, namely 4% per annum.

 

The Chairman advanced the $67,628 on condition that: (i) the advance constitute a lien with interest at 4% per annum under that Land Deed of Trust recorded September 26, 2014; (ii) he be paid additional interest of 11% per annum on the amount advanced and owing and that the full 11% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (iii) this additional interest obligation be treated as a separate and secured debt of the Company, to be evidenced by a separate note and to be secured with a separate and third lien to be placed on the Diamondhead Property (hereafter “the Third Lien”); (iv) the entire obligation will be treated as an advance to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V); and (v) he be indemnified for any losses sustained on the sale of that common stock sold to cover the credit card payments. The Chairman has identified the common stock to be sold and will provide the Company with the documentation required to document the sale of said stock and to calculate the future loss, if any, on said stock.

 

On July 24, 2017, the President of the Company, who is a Director of the Company, agreed to advance the Company up to $20,000 for the payment of expenses. In March of 2018, the Board of Directors voted to increase to up to $100,000 the amount to be secured by a to-be-placed third lien in favor of the President of the Company for amounts advanced by the President under this note, on the following terms and conditions, namely, that (i) she be paid interest of 15% per annum on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the maximum principal amount of $100,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property (“the Third Lien”) together with the Chairman’s Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) that the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) that the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V).

 

As of March 31, 2018 and December 31, 2017, the President had advanced a total of $27,518 and $20,000, respectively, under this agreement. The President previously agreed to secure a $25,000 loan and interest due thereon and to secure and guarantee a $15,000 loan and interest due thereon due non-related parties discussed above. The President is also personally liable for certain bank-issued credit cards used by the Company to pay expenses incurred by the Company.

 

In October 2017, the Company entered into a settlement with a holder of $150,000 of convertible notes as described in Note 5, above. The note holder was also a plaintiff in three lawsuits against the Company as is more fully discussed in Note 11. As part of the settlements, the Company agreed to pay legal fees in the amount of $50,000 and issued a four year note at 0% interest to satisfy this obligation.

 

In March of 2018, the Board of Directors voted to increase up to an additional $200,000 the amount to be secured by a to-be-placed third lien in favor of the Chairman of the Board, for amounts advanced by the Chairman on behalf of the Company, on the following terms and conditions, namely, that (i) the advance constitutes a lien on the Diamondhead Property with interest at 15% per annum; (ii) that the full interest of 15% per annum is payable during any calendar year in which all or part of the amount advanced is due and owing or interest due thereon remains unpaid; (iii) that this debt be evidenced by a separate promissory note and is to be included in and secured with a third lien that is to be placed on the Diamondhead Property to secure previous advances made to the Company (hereafter “the Third Lien”); (iv) that he be indemnified for any losses sustained on the sale of his common stock in an unrelated publicly-traded company to be sold to cover this advance based on a sales price of approximately $2.80 per share with a cap on the maximum loss per share to be at a sales price of $10.00 per share; and (v) that the Chairman’s previous indemnification approved by the Board of Directors on July 24, 2017 with respect to any loss on the sale of the same stock also be capped at a maximum of $10.00 per share. The Chairman will provide the Company with the documentation required to document the sale of said stock and to calculate the losses on said stock for all amounts loaned to the Company from the sale of said stock. As of March 31, 2018, the Chairman had advanced a total of $51,297 on behalf of the Company in 2018.

 

The table below summarizes the Company’s long-term notes payable as of March 31, 2018 and December 31, 2017:

 

   

Principal

Amount

   

Amount

Due

   

Amount

Due

 
Loan Facility   Owed     Related Parties     Others  
                   
4 Year 8% secured note   $ 47,500     $ 25,000     $ 22,500  
                         
4 Year 14% secured note     90,000       90,000       -  
                         
2 Year 12.5% secured note     15,000       -       15,000  
                         
2 Year 4%/15% secured note due Chairman (2017)     67,628       67,628       -  
                         
2 Year 15% secured note due President     20,000       20,000       -  
                         
4 Year 0% note     50,000       -       50,000  
                         
Balance December 31, 2017   $ 290,128     $ 202,628     $ 87,500  
                         
2 Year 15% secured note due Chairman (2018)     51,297       51,297       -  
                         
Additional advances 2 year 15% secured note due President     7,518       7,518       -  
                         
Balance March 31, 2018   $ 348,943     $ 261,443     $ 87,500

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions
3 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

Note 9. Related Party Transactions

 

As of March 31, 2018, the President of the Company is owed deferred salary in the amount of $1,941,996 and the Vice President and the current Chairman of the Board of Directors of the Company is owed deferred salary in the amount of $121,140. The Board of directors agreed to pay interest at 9% per annum on the foregoing amounts owed. Interest expense under this agreement amounted to $52,889 and $38,018 for the three months ended March 31, 2018 and 2017, respectively. Total interest accrued under this agreement totaled $737,597 and $588,360 as of March 31, 2018 and March 31, 2017, respectively.

 

Effective September 1, 2011, the Company entered into a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space in a furnished and fully equipped townhouse office building owned by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $4,534 and payment of associated costs of insurance, real estate taxes, utilities and other expenses. Rent expense associated with this lease amounted to base rent in the amount of $13,602 and associated rental costs of $4,613 for a total of $18,215 for the three months ended March 31, 2018 and base rent in the amount of $13,602 and associated rental costs of $3,763 for a total of $17,365 for the three months ended March 31, 2017. No payments associated with the base rents were made in the first three months of 2018. At March 31, 2018 and December 31, 2017, amounts owing for base rent and associated rental costs totaled $192,180 and $173,965, respectively.

 

Directors of the Company are entitled to a director’s fee of $15,000 per year for their services. The Company has been unable to pay directors’ fees to date. A total of $412,500 and $393,750 was due and owing to the Company’s current and former directors as of March 31, 2018 and December 31, 2017, respectively. Directors have previously been compensated and may, in the future, be compensated for their services with cash, common stock, or options to purchase common stock of the Company.

 

See Notes 8 and 11 for other related party transactions.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11
3 Months Ended
Mar. 31, 2018
Effect Of Recast On Prior Period Reporting Due To Adoption Of Asu 2017-11  
Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11

Note 10. Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11

 

The Company elected to adopt the provisions of ASU 2017-11 effective for its December 31, 2017 consolidated financial statements. The effect of the adoption eliminated the fair value presentation for the value of the embedded derivatives included in the convertible terms of the Debentures. In addition, the Company elected the retrospective transition method, whereby results for the three months ended March 31, 2017 were recast to reflect the impact of the adoption for comparability.

 

In addition, since the convertible Debentures are no longer stated at fair value, the related unamortized portion of finance costs incurred at the time of issuance of each Tranche of Debentures is reported as an offset to the stated value of the Debenture. The related amortization of the deferred finance costs is now included in interest expense.

 

Amortization of deferred finance costs to interest expense amounted to $236 and $303 for the non-convertible debenture for the three months ended March 31, 2018 and 2017, respectively, and $6,991 and $8,993 for convertible debentures for the three months ended March 31, 2018 and 2017, respectively. The table below summarizes the effect of the adoption on net loss for the three months ended March 31, 2017.

 

    Net     Net Loss Per  
    Loss     Share  
Net loss as originally reported   $ 88,665     $ .003  
                 
Decrease (increase) to net loss:                
Change in fair value of derivative liability     212,658          
Amortization of debt discount     (27,849 )        
                 
Net loss as adjusted   $ 273,474     $ .010  

 

    Amortization of     Interest  
    Finance Costs     Expense  
As originally reported   $ 9,296     $ 107,184  
                 
Reclassification of amortization of finance costs                
To interest expense     (9,296 )     9,296  
                 
As adjusted   $ -     $ 116,480

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 11. Commitments and Contingencies

 

Liens

 

The Company’s obligations under the Collateralized Convertible Senior Debentures are secured by a lien on the Company’s Mississippi property (the “Investors Lien”). On March 31, 2014, the Company issued $1 million of First Tranche Collateralized Convertible Senior Debentures and on December 31, 2014 the Company issued $850,000 of Second Tranche Collateralized Convertible Senior Debentures. Thus, liens were placed on the Property in favor of the Investors for $1,850,000. The Investors Lien is in pari passu with a lien placed on the Property in favor of the President of the Company, the Vice President of the Company, and certain directors of the Company, for past due wages, compensation, and expenses owed to them in the maximum aggregate amount of $2,000,000 (the “Executives Lien”). The CEO will serve as Lien Agent for the Executives Lien.

 

The Company has filed a second lien in the maximum amount of $250,000 on the Diamondhead property to secure certain notes payable totaling $137,500 in principal and accrued interest incurred. A third lien will also be filed to secure related party notes arising in the third quarter of 2017 and the first quarter of 2018. Details of these notes are more fully described in Note 8.

 

Litigation

 

CASE PENDING

 

Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-LPS)

 

On October 25, 2016, the above-named Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million, plus interest from January 1, 2015, together with costs and fees. The Company was served with the Complaint on October 31, 2016. On November 21, 2016, the Company filed a motion to dismiss for lack of subject matter jurisdiction due to failure to plead diversity. On February 21, 2017, the plaintiffs filed a motion for leave to amend their complaint based upon declarations of citizenship filed with the court. On September 26, 2017, the motion for leave to amend was granted and the Company’s motion to dismiss was granted in part and denied in part. The Court also granted plaintiffs leave to file a Second Amended Complaint which was filed on October 2, 2017. On October 16, 2017, the Company filed Defendant’s Answer and Affirmative Defenses and Counterclaim. On November 2, 2017, the Plaintiffs filed an Answer to the Counterclaim. The parties have exchanged discovery in the case. Trial in this matter is currently scheduled for March 22, 2019.

 

Other

 

On July 26, 2017, the Chairman paid $67,628 for all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on an approximate 400-acre tract of land (“the Diamondhead Property”), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company. The taxes had to be paid by July 31, 2017 to avoid a tax sale. The conditions of the note under which the Chairman agreed to make this payment are discussed in full detail in Note 6 of these consolidated financial statements.

 

Of particular note to those conditions, item (v) calls for the Chairman to be indemnified for any losses sustained on the sale of that common stock sold to cover the above payments. The Chairman has identified the common stock sold and has provided the Company with the documentation required to document the sale of said stock and to calculate the contingent future loss, if any, on said stock.

 

Had the Company paid the note in full at March 31, 2018, in addition to the principal and interest due, the company would have been additionally liable for approximately $209,760 in additional funds to indemnify the Chairman for his lost equity on the stock sale.

 

The Company is currently delinquent in filing those documents and forms required to be filed in connection with its Employee Stock Ownership Plan (“ESOP”) for the year ended December 31, 2016 and 2015. The Company did not have the funds to pay professionals to prepare, audit and file these documents and forms when due. Although these required filings normally do not result in any tax due to an agency of the government, the Company could be subject to significant penalties for failure to file these forms when due. Penalties are assessed by the Department of Labor on a per diem basis from the original due dates for the required informational filings until the filings are actually made. The Company has accrued $53,350 on the current delinquent filings. The Company intends to bring its ESOP-required filings current and when current, will attempt to enroll in a voluntary compliance program with the Department of Labor with respect to any penalties or fines incurred. However, there can be no assurance the Company will be able to enroll in any such program or obtain a reduction of the fines and penalties that may be due.

 

The Company has not filed its consolidated federal tax return for the year ended December 31, 2016. The Company believes no tax is due with that return. Diamondhead Casino Corporation and its two active subsidiaries, Mississippi Gaming Corporation and Casino World, Inc., are delinquent with respect to the filing of their franchise tax annual reports for 2017, 2016 and 2015 with the state of Delaware. Mississippi Gaming Corporation and Casino World, Inc. are also delinquent with respect to the filing of their annual franchise tax returns for the year ended December 31, 2016 and 2017 with the state of Mississippi.

 

The Company has made provision for the expected taxes due on these state filings in their unaudited condensed consolidated financial statements for the three months ending March 31, 2018 and 2017.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Estimates

Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Land Held for Development

Land Held for Development

 

Land held for development is carried at cost. Costs directly related to site development, such as permitting, engineering, and other costs, are capitalized.

 

Land development costs, which have been capitalized, consist of the following at March 31, 2018 and December 31, 2017:

 

Land held for development   $ 4,934,323  
Licenses     77,000  
Engineering and costs associated with permitting     464,774  
         
Total land held for development   $ 5,476,097

Long-Lived Assets

Long-Lived Assets

 

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at March 31, 2018.

Net Loss Per Common Share

Net Loss per Common Share

 

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met.

 

The table below summarizes the components of potential dilutive securities at March 31, 2018 and 2017.

 

Description   March 31, 2018     March 31, 2017  
             
Convertible Preferred Stock     260,000       260,000  
Options to Purchase Common Shares     3,415,000       3,440,000  
Private Placement Warrants     -       1,036,500  
Convertible Promissory Notes     1,925,000       1,925,000  
                 
Total     5,600,000       6,636,500

Stock Based Compensation

Stock Based Compensation

 

The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. In the first quarter of 2018, the Board of Directors voted to extend the expiration dates of previously-awarded option grants from March 13, 2018 to December 31, 2020 with respect to the following: i) options previously granted to the President to purchase 750,000 shares of common stock at $0.30 per share, 75,000 shares of common stock at $0.75 per share and 2,000,000 shares of common stock at $0.19 per share; ii) options previously granted to the current Chairman of the Board to purchase 150,000 shares of common stock at $1.25 per share; iii) options previously granted to a Director of the Company to purchase 75,000 shares of common stock at $0.75; and iv) options previously granted to former employees of the Company to purchase a combined total of 65,000 shares of common stock at $0.75 per share. No share-based awards were issued or amended in 2017.

 

In determining the fair value of each option modified, the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718, was used. The valuations were determined using the weighted-average assumptions of 0% dividend yield, expected volatility of 103% and a risk-free interest rate of 2.79%. This resulted in a charge to the statement of loss in the amount of $21,570, decreasing the net income per share of common stock $0.001 for the three months ending March 31, 2018.

 

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s options.

 

Accounting Pronouncements Adopted in the Prior Years

Accounting Pronouncements Adopted in the Prior Years

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 - Earnings per Share (Topic 260); Distinguishing form Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest with a Scope Exception. Topic 815, Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. The amendments in Part I of this Update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.

 

As a result, a freestanding equity-linked financial instrument (or embedded conversion options) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-linked classified financial instruments, the amendments require entities that present earnings per share in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and a reduction of income available to common shareholders in basic earnings per share.

 

The Company adopted the provisions of the ASU in its December 31, 2017 consolidated financial statements and elected the retrospective transition method whereby comparative consolidated financial statements for the prior year have been recast to reflect the impact of the adoption for comparability reasons. The effect of the recast on net loss for the three months ended March 31, 2017 is more fully discussed in Note 10.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Schedule of Land Development Cost Capitalized

Land development costs, which have been capitalized, consist of the following at March 31, 2018 and December 31, 2017:

 

Land held for development   $ 4,934,323  
Licenses     77,000  
Engineering and costs associated with permitting     464,774  
         
Total land held for development   $ 5,476,097

Schedule of Components of Potential Dilutive Securities

The table below summarizes the components of potential dilutive securities at March 31, 2018 and 2017.

 

Description   March 31, 2018     March 31, 2017  
             
Convertible Preferred Stock     260,000       260,000  
Options to Purchase Common Shares     3,415,000       3,440,000  
Private Placement Warrants     -       1,036,500  
Convertible Promissory Notes     1,925,000       1,925,000  
                 
Total     5,600,000       6,636,500

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accounts Payable and Accrued Expenses (Tables)
3 Months Ended
Mar. 31, 2018
Payables and Accruals [Abstract]  
Schedule of Accounts Payable and Accrued Expenses

The table below outlines the elements included in accounts payable and accrued expenses at March 31, 2018 and December 31, 2017:

 

Description   March 31, 2018     December 31, 2017  
Related parties:                
Accrued payroll due officers   $ 2,144,711     $ 2,069,711  
Accrued interest due officers and directors     847,880       767,737  
Accrued director fees     412,500       393,750  
Base rents due to the President     144,836       131,234  
Associated rental costs     47,344       42,731  
Other     17,308       22,005  
Total related parties   $ 3,614,579     $ 3,427,168  
                 
Non-related parties:                
Accrued interest   $ 1,546,773     $ 1,483,923  
Accrued dividends     685,800       660,400  
Accrued fines and penalties     53,350       44,350  
Other accounts payable and accrued expenses     247,886       235,367  
Total non-related parties   $ 2,533,809     $ 2,424,040

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes and Line of Credit (Tables)
3 Months Ended
Mar. 31, 2018
Other Liabilities Disclosure [Abstract]  
Schedule of Convertible Notes

The table below summarizes the Company’s debt arising from the above-described sources as of March 31, 2018 and December 31, 2017:

 

Loan Facility  

Principal

Amount

Owed

   

Amount Due

Related Parties

   

Amount Due

Others

 
                   
Line of Credit   $ 1,000,000     $ -     $ 1,000,000  
                         
Private Placements:                        
March 1, 2010     475,000       75,000       400,000  
October 25, 2010     487,500       -       487,500  
                         
Total Private Placements     962,500       75,000       887,500  
                         
Total   $ 1,962,500     $ 75,000     $ 1,887,500

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Short Term Notes and Interest Bearing Advance (Tables)
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of Short Term Notes and Interest Bearing Advance

The table below summarizes the short-term notes and interest bearing advance at March 31, 2018 and December 31, 2017.

 

    Interest     March 31,     December 31,  
Description of Facility   Rate     2018     2017  
                   
Property Liability Insurance Financing     13.6 %   $ 2,693     $ -  
                         
Bank Credit Facility     11.24% - 24.99 %     14,701       14,299  
                         
Interest Bearing Advance     12.50 %     25,000       25,000  
                         
Total Short Term Notes and Interest                        
Bearing Advance           $ 42,394     $ 39,299

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Long Term Notes Payable (Tables)
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of Long Term Notes Payable

The table below summarizes the Company’s long-term notes payable as of March 31, 2018 and December 31, 2017:

 

   

Principal

Amount

   

Amount

Due

   

Amount

Due

 
Loan Facility   Owed     Related Parties     Others  
                   
4 Year 8% secured note   $ 47,500     $ 25,000     $ 22,500  
                         
4 Year 14% secured note     90,000       90,000       -  
                         
2 Year 12.5% secured note     15,000       -       15,000  
                         
2 Year 4%/15% secured note due Chairman (2017)     67,628       67,628       -  
                         
2 Year 15% secured note due President     20,000       20,000       -  
                         
4 Year 0% note     50,000       -       50,000  
                         
Balance December 31, 2017   $ 290,128     $ 202,628     $ 87,500  
                         
2 Year 15% secured note due Chairman (2018)     51,297       51,297       -  
                         
Additional advances 2 year 15% secured note due President     7,518       7,518       -  
                         
Balance March 31, 2018   $ 348,943     $ 261,443     $ 87,500

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11 (Tables)
3 Months Ended
Mar. 31, 2018
Effect Of Recast On Prior Period Reporting Due To Adoption Of Asu 2017-11  
Schedule of Income Restated

The table below summarizes the effect of the adoption on net loss for the three months ended March 31, 2017.

 

    Net     Net Loss Per  
    Loss     Share  
Net loss as originally reported   $ 88,665     $ .003  
                 
Decrease (increase) to net loss:                
Change in fair value of derivative liability     212,658          
Amortization of debt discount     (27,849 )        
                 
Net loss as adjusted   $ 273,474     $ .010  

 

    Amortization of     Interest  
    Finance Costs     Expense  
As originally reported   $ 9,296     $ 107,184  
                 
Reclassification of amortization of finance costs                
To interest expense     (9,296 )     9,296  
                 
As adjusted   $ -     $ 116,480

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Organization and Business (Details Narrative)
Mar. 31, 2018
a
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Area of land, owned 400
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Liquidity and Going Concern (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]        
Net loss applicable to common stockholders $ 385,484 $ 298,874    
Current liabilities 9,936,962   $ 9,629,460  
Cash on hand 46 $ 3,742 65 $ 17,606
Accumulated deficit $ 37,065,359   $ 36,679,875  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Stock Based Compensation $ 21,570
Common stock price per share $ 0.01  
Valuation Technique, Option Pricing Model [Member] | Measurement Input, Expected Dividend Rate [Member]    
Fair value assumptions of options valuation percentage 0.00%  
Valuation Technique, Option Pricing Model [Member] | Measurement Input, Price Volatility [Member]    
Fair value assumptions of options valuation percentage 103.00%  
Valuation Technique, Option Pricing Model [Member] | Measurement Input, Risk Free Interest Rate [Member]    
Fair value assumptions of options valuation percentage 2.79%  
Employee Stock Option One [Member] | President [Member]    
Number of options previously granted to purchase of common stock 750,000  
Exercise price of options granted $ 0.30  
Employee Stock Option One [Member] | Chairman of Board [Member]    
Number of options previously granted to purchase of common stock 150,000  
Exercise price of options granted $ 1.25  
Employee Stock Option One [Member] | Director [Member]    
Number of options previously granted to purchase of common stock 75,000  
Exercise price of options granted $ 0.75  
Employee Stock Option One [Member] | Former Employees [Member]    
Number of options previously granted to purchase of common stock 65,000  
Exercise price of options granted $ 0.75  
Employee Stock Option Two [Member] | President [Member]    
Number of options previously granted to purchase of common stock 75,000  
Exercise price of options granted $ 0.75  
Employee Stock Option Three [Member] | President [Member]    
Number of options previously granted to purchase of common stock 2,000,000  
Exercise price of options granted $ 0.19  
Convertible Debentures [Member]    
Antidilutive securities excluded from computation of earnings per share 5,055,555  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies - Schedule of Land Development Cost Capitalized (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Land held for development $ 5,476,097 $ 5,476,097
Land Held for Development [Member]    
Land held for development 4,934,323 4,934,323
Licenses [Member]    
Land held for development 77,000 77,000
Engineering and Costs Associated With Permitting [Member]    
Land held for development $ 464,774 $ 464,774
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies - Schedule of Components of Potential Dilutive Securities (Details) - shares
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Accounting Policies [Abstract]    
Convertible Preferred Stock 260,000 260,000
Options to Purchase Common Shares 3,415,000 3,440,000
Private Placement Warrants 1,036,500
Convertible Promissory Notes 1,925,000 1,925,000
Total 5,600,000 6,636,500
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accounts Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Payables and Accruals [Abstract]    
Accrued payroll due officers $ 2,144,711 $ 2,069,711
Accrued interest due officers and directors 847,880 767,737
Accrued director fees 412,500 393,750
Base rents due to the President 144,836 131,234
Associated rental costs 47,344 42,731
Other 17,308 22,005
Total related parties 3,614,579 3,427,168
Accrued interest 1,546,773 1,483,923
Accrued dividends 685,800 660,400
Accrued fines and penalties 53,350 44,350
Other accounts payable and accrued expenses 247,886 235,367
Total non-related parties $ 2,533,809 $ 2,424,040
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes and Line of Credit (Details Narrative)
3 Months Ended
Oct. 25, 2010
USD ($)
Integer
$ / shares
shares
Mar. 01, 2010
USD ($)
Integer
$ / shares
shares
Oct. 23, 2008
USD ($)
Mar. 31, 2018
USD ($)
$ / shares
shares
Jan. 31, 2018
Dec. 31, 2017
USD ($)
Sep. 26, 2014
Line of credit facility, maximum borrowing capacity     $ 1,000,000        
Debt instrument, interest rate, stated percentage         13.60%   4.00%
Debt instrument, face amount       $ 209,760      
Note payable       1,962,500   $ 1,962,500  
Line of Credit [Member]              
Debt instrument, interest rate, stated percentage     9.00%        
Debt instrument, maturity date     Nov. 01, 2012        
Note payable       $ 1,000,000   1,000,000  
Line of Credit [Member] | October 23, 2008 [Member] | Employee Stock Option [Member]              
Options, granted | shares       50,000      
Share-based compensation arrangement by share-based payment award, options, vested, weighted average grant date fair value | $ / shares       $ 1.75      
Line of credit       $ 1,785,860      
Line of Credit [Member] | October 23 2008 Private Placement [Member] | Employee Stock Option [Member]              
Options, granted | shares       250,000      
Share-based compensation arrangement by share-based payment award, options, vested, weighted average grant date fair value | $ / shares       $ 1.75      
Convertible Promissory Note [Member]              
Note payable       $ 962,500   962,500  
Debt outstanding amount       579,660      
Convertible Promissory Note [Member] | March 1 2010 Private Placement [Member]              
Debt instrument, interest rate, stated percentage   12.00%          
Debt instrument, face amount   $ 25,000          
Warrant exercise price | $ / shares   $ 1.00          
Number of warrants to purchase shares of common stock | shares   50,000          
Note payable       475,000   475,000  
Convertible Promissory Note [Member] | March 1 2010 Private Placement              
Warrant term   5 years          
Debt instrument, convertible, number of equity instruments | Integer   50,000          
Debt instrument, convertible, terms of conversion feature   convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor.          
Convertible Promissory Note [Member] | October 25 2010 Private Placement [Member]              
Debt instrument, interest rate, stated percentage 9.00%            
Debt instrument, face amount $ 25,000            
Warrant exercise price | $ / shares $ 1.00            
Warrant term 5 years            
Number of warrants to purchase shares of common stock | shares 50,000            
Debt instrument, convertible, number of equity instruments | Integer 50,000            
Debt instrument, convertible, terms of conversion feature convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor.            
Note payable       $ 487,500   $ 487,500  
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Notes and Line of Credit - Schedule of Convertible Notes (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Mar. 31, 2017
Notes and line of credit payable (Note 5) $ 1,962,500 $ 1,962,500  
Related Parties [Member]      
Notes and line of credit payable (Note 5) 75,000 75,000  
Others [Member]      
Notes and line of credit payable (Note 5) 1,887,500 1,887,500  
Line of Credit [Member]      
Notes and line of credit payable (Note 5) 1,000,000 1,000,000  
Line of Credit [Member] | Related Parties [Member]      
Notes and line of credit payable (Note 5)  
Line of Credit [Member] | Others [Member]      
Notes and line of credit payable (Note 5) 1,000,000 1,000,000  
Convertible Promissory Note [Member]      
Notes and line of credit payable (Note 5) 962,500 962,500  
Convertible Promissory Note [Member] | Related Parties [Member]      
Notes and line of credit payable (Note 5) 75,000 75,000  
Convertible Promissory Note [Member] | Others [Member]      
Notes and line of credit payable (Note 5) 887,500 887,500  
March 1 2010 Private Placement [Member] | Convertible Promissory Note [Member]      
Notes and line of credit payable (Note 5) 475,000 475,000  
March 1 2010 Private Placement [Member] | Convertible Promissory Note [Member] | Related Parties [Member]      
Notes and line of credit payable (Note 5) 75,000 75,000  
March 1 2010 Private Placement [Member] | Convertible Promissory Note [Member] | Others [Member]      
Notes and line of credit payable (Note 5) 400,000 400,000  
October 25 2010 Private Placement [Member] | Convertible Promissory Note [Member]      
Notes and line of credit payable (Note 5) 487,500 487,500  
October 25 2010 Private Placement [Member] | Convertible Promissory Note [Member] | Related Parties [Member]      
Notes and line of credit payable (Note 5)  
October 25 2010 Private Placement [Member] | Convertible Promissory Note [Member] | Others [Member]      
Notes and line of credit payable (Note 5) $ 487,500 $ 487,500  
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures Payable (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Mar. 31, 2014
Jul. 31, 2015
Mar. 31, 2018
Dec. 31, 2014
Jan. 31, 2018
Sep. 26, 2014
Debt instrument, interest rate, stated percentage         13.60% 4.00%
Subscription received in escrow $ 3,000,000          
Proceeds from release of subscriptions 1,000,000          
Debt instrument face amount     $ 209,760      
February 14, 2014 Private Placement [Member] | Convertible Debt Securities            
Maximum offering amount     $ 3,000,000      
Debt instrument, interest rate, stated percentage     4.00%      
Debt instrument, maturity date, description     Mature six years from the date of issuance      
February 14, 2014 Private Placement [Member] | Convertible Debt Securities            
Debt instrument, convertible, conversion price     $ 0.75      
February 14, 2014 Private Placement [Member] | Convertible Debt Securities | Tranche 1 [Member]            
Investors that consented to amended conversion terms, amount of offering     $ 1,000,000      
Conversion of debenture into shares of common stock     3,333,333      
Debt instrument, convertible, conversion price     $ 0.30      
February 14, 2014 Private Placement [Member] | Convertible Debt Securities | Tranche 2 [Member]            
Investors that consented to amended conversion terms, amount of offering     $ 1,000,000      
Conversion of debenture into shares of common stock     2,222,222      
Debt instrument, convertible, conversion price     $ 0.45      
February 14, 2014 Private Placement [Member] | Convertible Debt Securities | Tranche Three [Member]            
Investors that consented to amended conversion terms, amount of offering     $ 1,000,000      
Conversion of debenture into shares of common stock     1,818,182      
Debt instrument, convertible, conversion price     $ 0.55      
February 14, 2014 Private Placement [Member] | Convertible Debt Securities | Tranche Three [Member] | Common Stock [Member]            
Conversion of debenture into shares of common stock     1,333,333      
First Tranche Debentures [Member]            
Debt instrument face amount $ 1,000,000          
Proceeds from issuance of debentures       $ 950,000    
Debt maturity date     Mar. 31, 2020      
First Tranche Remaining Debentures [Member]            
Conversion of debenture into shares of common stock       3,166,666    
Proceeds from issuance of debentures       $ 50,000    
Second Tranche Debentures [Member]            
Debt maturity date     Dec. 31, 2020      
Second Tranche Debentures [Member] | Second Closing [Member]            
Conversion of debenture into shares of common stock       1,888,889    
Proceeds from release of subscriptions       $ 850,000    
Proceeds from issuance of debentures       850,000    
Investors that did not consent to amended conversion terms, amount of offering       $ 300,000    
Third Tranche Debentures [Member]            
Number of debentures returned   $ 850,000        
Debt maturity date     Mar. 31, 2020      
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Short Term Notes and Interest Bearing Advance (Details Narrative) - USD ($)
1 Months Ended
Feb. 02, 2017
Jan. 31, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 26, 2014
Oct. 23, 2008
Financed premium liability insurance amount   $ 2,946        
Debt monthly installments of principal and interest   $ 286        
Debt interest rate   13.60%     4.00%  
Short term note     $ 2,693      
Line of credit facility, maximum borrowing capacity           $ 1,000,000
Debt instrument, face amount     $ 209,760      
Lender [Member]            
Debt interest rate     3.00%      
Unrelated Third Party [Member]            
Debt interest rate 12.50%          
Debt instrument, face amount $ 25,000          
Debt instrument, maturity date Dec. 31, 2017          
Bank Credit Facility [Member]            
Line of credit facility, maximum borrowing capacity     $ 15,000      
Long-term line of credit     $ 14,701      
Bank Credit Facility [Member] | Minimum [Member]            
Debt interest rate     11.24% 11.24%    
Bank Credit Facility [Member] | Maximum [Member]            
Debt interest rate     24.99% 24.99%    
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Short Term Notes and Interest Bearing Advance - Schedule of Short Term Notes and Interest Bearing Advance (Details) - USD ($)
Mar. 31, 2018
Jan. 31, 2018
Dec. 31, 2017
Sep. 26, 2014
Total Short Term Notes and Interest Bearing Advance $ 42,394   $ 39,299  
Interest Rate   13.60%   4.00%
Property Liability Insurance Financing [Member]        
Total Short Term Notes and Interest Bearing Advance $ 2,693    
Interest Rate 13.60%      
Bank Credit Facility [Member]        
Total Short Term Notes and Interest Bearing Advance $ 14,701   $ 14,299  
Bank Credit Facility [Member] | Minimum [Member]        
Interest Rate 11.24%   11.24%  
Bank Credit Facility [Member] | Maximum [Member]        
Interest Rate 24.99%   24.99%  
Interest Bearing Advance [Member]        
Total Short Term Notes and Interest Bearing Advance $ 25,000   $ 25,000  
Interest Rate 12.50%      
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Long Term Notes Payable (Details Narrative)
1 Months Ended 3 Months Ended
Jul. 26, 2017
USD ($)
a
Jul. 24, 2017
USD ($)
Jun. 09, 2017
USD ($)
Oct. 31, 2017
USD ($)
Mar. 31, 2018
USD ($)
a
Mar. 31, 2017
USD ($)
Sep. 30, 2016
USD ($)
Jan. 31, 2018
Dec. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
Aug. 25, 2016
Sep. 26, 2014
Oct. 23, 2008
USD ($)
Debt instrument, face amount         $ 209,760                
Debt instrument, interest rate, stated percentage               13.60%       4.00%  
Proceeds from related parties         $ 58,815              
Area of land, owned | a         400                
Credit facilities, maximum amount                         $ 1,000,000
President [Member]                          
Debt instrument, interest rate, stated percentage         9.00%                
Proceeds from related parties   $ 20,000     $ 20,000                
Line of credit interest rate         15.00%                
Related party transaction, terms and manner of settlement         (i) interest of 15% per annum be paid on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the principal amount of $20,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property ("the Third Lien") together with the Chairman's Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V).                
Due from officers         $ 27,518       $ 20,000        
President [Member] | Loan and Interest [Member]                          
Loan and interest secured         25,000                
President [Member] | Loan and Interest One [Member]                          
Loan and interest secured         15,000                
President [Member] | Two Loans [Member]                          
Credit facilities, maximum amount                 15,000        
President [Member] | Loan One [Member]                          
Loan amount                 25,000        
President [Member] | Loan Two [Member]                          
Loan amount                 $ 15,000        
Note Holder [Member] | Convertible Notes [Member]                          
Debt instrument, face amount       $ 150,000                  
Debt instrument, interest rate, stated percentage       0.00%                  
Legal fees       $ 50,000                  
Debt instrument term       4 years                  
Chairman [Member]                          
Debt instrument, face amount         $ 200,000                
Debt instrument, interest rate, stated percentage         15.00%                
Due from officers         $ 51,297                
Terms on advances from chairman description         (i) the advance constitutes a lien on the Diamondhead Property with interest at 15% per annum; (ii) that the full interest of 15% per annum is payable during any calendar year in which all or part of the amount advanced is due and owing or interest due thereon remains unpaid; (iii) that this debt be evidenced by a separate promissory note and is to be included in and secured with a third lien that is to be placed on the Diamondhead Property to secure previous advances made to the Company (hereafter “the Third Lien”); (iv) that he be indemnified for any losses sustained on the sale of his common stock in an unrelated publicly-traded company to be sold to cover this advance based on a sales price of approximately $2.80 per share with a cap on the maximum loss per share to be at a sales price of $10.00 per share; and (v) that the Chairman’s previous indemnification approved by the Board of Directors on July 24, 2017 with respect to any loss on the sale of the same stock also be capped at a maximum of $10.00 per share. The Chairman will provide the Company with the documentation required to document the sale of said stock and to calculate the losses on said stock for all amounts loaned to the Company from the sale of said stock.                
Payable During any Calendar Year [Member]                          
Debt instrument, interest rate, stated percentage                       11.00%  
Third Lien [Member] | President [Member]                          
Loan and interest secured         $ 100,000                
Mississippi Property [Member]                          
Area of land, owned | a 400                        
Chairman of the Board of Directors [Member]                          
Debt instrument, interest rate, stated percentage                     14.00%    
Proceeds from related parties             $ 90,000            
Increase (decrease) in property and other taxes payable $ 67,628                        
President [Member] | Unrelated Third Parties [Member]                          
Loan and interest secured         15,000                
Long-Term Notes Payable [Member] | Seven Lenders [Member]                          
Debt instrument, face amount                   $ 47,500      
Debt instrument, interest rate, stated percentage                     8.00%    
Long-Term Notes Payable [Member] | Three Current Directors [Member]                          
Debt instrument, face amount                   $ 25,000      
Notes Payable Principal Due [Member]                          
Debt instrument, face amount         137,500                
Notes Payable Principal Due [Member] | Mississippi Property [Member]                          
Debt instrument, face amount         137,500                
Notes Payable Principal Due [Member] | Mississippi Property [Member] | Junior Lien [Member]                          
Lien amount         250,000                
Notes Payable Principal Due [Member] | Mississippi Property [Member] | Junior Lien Second [Member]                          
Lien amount         3,850,000                
Notes Payable Principal Due [Member] | Convertible and NonConvertible Debenture Holders [Member] | Mississippi Property [Member] | Junior Lien Second [Member]                          
Lien amount         1,850,000                
Notes Payable Principal Due [Member] | Executives and Directors [Member] | Mississippi Property [Member] | Junior Lien Second [Member]                          
Lien amount         $ 2,000,000                
Promissory Note [Member]                          
Debt instrument, interest rate, stated percentage     12.50%                    
Proceeds from notes payable     $ 15,000                    
Debt maturity date     Jun. 09, 2019                    
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Long Term Notes Payable - Schedule of Long Term Notes Payable (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Principal Amount Owed $ 348,943 $ 290,128
Amount Due Related Parties 261,443 202,628
Amount Due Others 87,500 87,500
2 Year 15% Secured Note [Member] | Board of Directors Chairman [Member]    
Principal Amount Owed 51,297  
Amount Due Related Parties 51,297  
Amount Due Others  
2 Year 15% Secured Note [Member] | President [Member]    
Principal Amount Owed 7,518 20,000
Amount Due Related Parties 7,518 20,000
Amount Due Others
4 Year 8% Secured Note [Member]    
Principal Amount Owed   47,500
Amount Due Related Parties   25,000
Amount Due Others   22,500
4 Year 14% Secured Note [Member]    
Principal Amount Owed   90,000
Amount Due Related Parties   90,000
Amount Due Others  
2 Year 12.5% Secured Note [Member]    
Principal Amount Owed   15,000
Amount Due Related Parties  
Amount Due Others   15,000
2 Year 4%/15% Secured Note [Member] | Board of Directors Chairman [Member]    
Principal Amount Owed   67,628
Amount Due Related Parties   67,628
Amount Due Others  
4 Year 0% Secured Note [Member]    
Principal Amount Owed   50,000
Amount Due Related Parties  
Amount Due Others   $ 50,000
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions (Details) - USD ($)
1 Months Ended 3 Months Ended
Jan. 31, 2018
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Sep. 26, 2014
Accrued payroll due officers   $ 2,144,711   $ 2,069,711  
Debt instrument, interest rate, stated percentage 13.60%       4.00%
Interest expense   151,808 $ 116,480    
Accrued interest   1,546,773   1,483,923  
Debt instrument, periodic payment $ 286        
Accrued director fees   412,500   393,750  
President [Member]          
Accrued payroll due officers   $ 1,941,996      
Debt instrument, interest rate, stated percentage   9.00%      
Accrued rents   $ 192,180   $ 173,965  
Vice President and Current Chairman of Board of Directors [Member]          
Accrued payroll due officers   121,140      
Management [Member]          
Interest expense   52,889 38,018    
Accrued interest   737,597 558,360    
Director [Member]          
Directors fees   15,000      
Office Space Lease [Member]          
Debt instrument, periodic payment   4,534      
Base rent expense   13,602 13,602    
Associated rental costs   4,613 3,763    
Operating leases, rent expense, net   $ 18,215 $ 17,365    
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11 (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Non-Convertible Debenture [Member]    
Amortization of deferred charges $ 236 $ 303
Convertible Debenture [Member]    
Amortization of deferred charges $ 6,991 $ 8,993
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Effect of Recast on Prior Period Reporting Due to Adoption of ASU 2017-11 - Schedule of Income Restated (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Net loss $ (360,084) $ (273,474)
Net loss per share $ (0.01) $ (0.01)
Amortization of Finance Costs  
Interest Expense $ 151,808 116,480
Previously Reported [Member]    
Net loss   $ 88,665
Net loss per share   $ .003
Amortization of Finance Costs   $ 9,296
Interest Expense   107,184
Restatement Adjustment [Member]    
Change in fair value of derivative liability   212,658
Amortization of debt discount   (27,849)
Amortization of Finance Costs   (9,296)
Interest Expense   $ 9,296
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details Narrative)
3 Months Ended
Jul. 26, 2017
USD ($)
a
Mar. 31, 2014
USD ($)
Mar. 31, 2018
USD ($)
a
Dec. 31, 2014
USD ($)
Debt instrument, face amount     $ 209,760  
Loss contingency, damages sought, value     $ 1,400,000  
Area of land, owned | a     400  
Employee stock ownership plan penalties     $ 53,350  
Notes Payable Principal Due [Member]        
Debt instrument, face amount     137,500  
Mississippi Property [Member]        
Area of land, owned | a 400      
Mississippi Property [Member] | Notes Payable Principal Due [Member]        
Debt instrument, face amount     137,500  
Mississippi Property [Member] | Notes Payable Principal Due [Member] | Junior Lien [Member]        
Lien amount     250,000  
Chairman [Member]        
Debt instrument, face amount     $ 200,000  
Chairman [Member] | Diamondhead Property [Member]        
Real estate tax $ 67,628      
Area of land, owned | a 400      
Collateralized Convertible Senior Debentures [Member] | Investor [Member] | Mississippi Property [Member]        
Lien amount   $ 1,850,000    
Collateralized Convertible Senior Debentures [Member] | Management [Member] | Mississippi Property [Member]        
Lien amount   2,000,000    
Collateralized Convertible Senior Debentures [Member] | Tranche 1 [Member] | Investor [Member]        
Debt instrument, face amount   $ 1,000,000    
Collateralized Convertible Senior Debentures [Member] | Tranche 2 [Member] | Investor [Member]        
Debt instrument, face amount       $ 850,000
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