Note 7 - Convertible Credit Line Payable - Related Party

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Convertible Debt Disclosure [Text Block]

NOTE

7

– CONVERTIBLE CREDIT LINE PAYABLE – RELATED PARTY

On

September 1, 2017,

the Company entered into a convertible credit line agreement to borrow up to

$500,000.

On the same date, the outstanding balance on a note payable of

$87,366

was exchanged as a draw on the credit line. The loan modification is considered substantial under ASC

470

-

50.

The outstanding balance accrues interest at a rate of

7%

per annum and the outstanding balance is convertible to common stock of the Company at the lesser of the close price of the common stock as quoted on the OTCBB on the day interest is due and payable immediately preceding the conversion or

$1.50.

The Company analyzed the conversion options in the convertible line of credit for derivative accounting consideration under ASC

815,

Derivative and Hedging, and determined that the transaction does qualify for derivative treatment. The Company measured the derivative liability and recorded a debt discount of

$87,366

upon initial measurement. During the year ended

December 31, 2019,

the Company recognized an additional debt discount of

$7,568

and amortized

$39,514

of the discount as interest expense leaving an unamortized discount of

$17,396

as of

December 31, 2019.

During the

six

months ended

June 30, 2020,

the Company recognized an additional debt discount of

$365

and amortized

$10,179

of the discount as interest expense leaving an unamortized discount of

$7,582

as of

June 30, 2020.

See discussion of derivative liability in Note

8

– Derivative Liability.

During the

six

months ended

June 30, 2020

and

2019,

the Company recorded

$4,250

and

$7,750

in cash payment to the outstanding balance on the credit line, respectively. The outstanding principal balance on the convertible credit line as of

June 30, 2020

amounted to

$129,328.