| Notes Payable - Related Parties |
| 4. |
NOTES PAYABLE RELATED PARTIES |
The Company has the following related
parties notes payable as of June 30, 2016 and December 31, 2015:
| Note |
|
Issuance Date |
|
Maturity Date |
|
Interest Rate |
|
|
Original Borrowing |
|
|
Balance at June 30, 2016 |
|
|
Balance at
December 31, 2015
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Note 1 |
|
Year 2015 |
|
April 1,2017 |
|
|
12.0 |
% |
|
$ |
1,203,242 |
|
|
$ |
1,198,883 |
|
|
$ |
1,248,883 |
|
| Note 2 |
|
December 2015 |
|
April 1, 2017 |
|
|
12.0 |
% |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
200,000 |
|
| Note 4 |
|
December 1, 2015 |
|
April 1,2017 |
|
|
12.0 |
% |
|
|
189,000 |
|
|
|
189,000 |
|
|
|
189,000 |
|
| Note 5 |
|
December 1, 2015 |
|
April 1, 2017 |
|
|
12.0 |
% |
|
|
111,901 |
|
|
|
111,901 |
|
|
|
111,901 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,499,784 |
|
|
|
1,749,784 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
(239,852 |
) |
|
|
(398,593 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total notes payable related parties, net |
|
|
|
|
|
|
|
|
|
$ |
1,259,932 |
|
|
$ |
1,351,192 |
|
| ● |
On various dates during the year ended December 31, 2015, Rory J. Cutaia, the Companys majority shareholder and Chief Executive Officer, loaned the Company total principal amounts of $1,203,242. The loans were unsecured and all due on demand, bearing interest at 12% per annum. On December 1, 2015, the Company entered into a Secured Convertible Note agreement with Mr. Cutaia whereby all outstanding principal and accrued interest owed to Mr. Cutaia from previous loans amounting to an aggregate total of $1,248,883 and due on demand, was consolidated under a note payable agreement, bearing interest at 12% per annum, and converted from due on demand to due in full on April 1, 2017. In consideration for Mr. Cutaias agreement to consolidate the loans and extend the maturity date, the Company granted Mr. Cutaia a senior security interest in substantially all current and future assets of the Company. Per the terms of the agreement, at Mr. Cutaias discretion, he may convert up to $374,665 of outstanding principal, plus accrued interest thereon, into shares of common stock at a conversion rate of $0.07 per share. |
| |
|
| ● |
During December 2015, Mr. Cutaia loaned the Company an additional $200,000, which is also due on April 1, 2017 and earns interest at 12% per annum under the terms of the agreement. During the six months ended June 30, 2016, Mr. Cutaia loaned the Company an additional $82,446 under the same terms. |
| |
|
| ● |
On December 1, 2015, the Company entered into an Unsecured Convertible Note with Mr. Cutaia in the amount of $189,000, bearing interest at 12% per annum, representing a portion of Mr. Cutaias unpaid salary for 2015. The note extends the payment terms of Mr. Cutaias accrued salary from on-demand to due in full on April 1, 2017. The outstanding principal and accrued interest may be converted at Mr. Cutaias discretion into shares of common stock at a conversion rate of $0.07. |
| |
|
| ● |
On December 1, 2015, the Company entered into an Unsecured Note agreement with a consulting firm owned by Michael Psomas, a former member of the Companys Board of Directors, in the amount of $111,901 representing unpaid fees earned for consulting services previously rendered but unpaid as of November 30, 2015. The outstanding amounts bear interest at 12% per annum, and are due in full on April 1, 2017. |
On December 1, 2015, the Company
granted 8,920,593 warrants to Mr. Cutaia and 799,286 warrants to Mr. Psomas as consideration for agreeing to extend the payment
terms of their respective note payable balances to a maturity date of April 1, 2017. The warrants are immediately vested and have
an exercise price of $0.07 and expire on November 30, 2018. The warrants have been valued using the Black-Scholes valuation model
and have an aggregate value of $424,758. The value has been recorded as a discount to the outstanding notes payable - related
parties on the accompanying consolidated balance sheet, and is being amortized into interest expense over the extended maturity
periods of April 1, 2017. During the three months ended June 30, 2016, the Company recorded amortization of $79,370 of the discount
into interest expense. The remaining discount balance as of June 30, 2016 amounted to $239,852.
|