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Notes Payable – Stockholders
12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
Notes Payable – Stockholders

5.     Notes Payable - Stockholders

 

Effective July 2, 2007, the Company entered into a note payable agreement with a related party that provided for borrowings up to the principal amount of $64,871.  The note was uncollateralized and bears interest at an annual rate of 8%.  The Company issued 945,987 shares of its common stock as additional consideration for the note payable.  As of December 31, 2015, the outstanding balance of the note payable was $64,871.  The original due date of June 30, 2008 was extended to June 30, 2009, and effective June 30, 2009, the stockholder agreed to modify the terms of the note to make it due on demand.

 

Effective November 14, 2007, the Company entered into a revolving convertible loan agreement with the President and a stockholder.  The agreement provided for borrowings up to the principal amount of $133,333.  The note was due on demand, was uncollateralized, bears interest at an annual rate of 8%, and was convertible into restricted common stock at $0.10 per share.  The Company issued 10,000,000 shares of its common stock as additional consideration for the note payable.  The stock was valued at $10,000 and the Company recorded the $10,000 expense as financing costs of $1,971 and consulting fees of $8,029.  As of December 31, 2015, outstanding borrowings under the agreement totaled $133,395

 

The Company accrued interest expense of $14,094 and $15,861 on the two notes payable to stockholders during 2016 and 2015 respectively.

 

On December 14, 2016, the Company owed $318,696 in related party debt and related accrued interest payable. On December 14, 2016 two shareholders of the Company entered into an agreement to sell 475,679 (11,891,976 pre-split) shares of the Company's common stock, which they owned, to an unrelated party, and ceded control of the Company.  As part of this transaction they assigned the related party debt and related accrued interest totaling $318,696. In conjunction with this transaction, an unrelated third party provided $25,000 to the Company for the change of control transaction, by acquiring and agreeing to forgive the $318,696 debt, and in exchange the Company agreed to issue unrelated third party 500,000 shares post-split restricted common shares, after the 1-for-25 reverse stock split.  The stock price on the date of the agreement was $0.05 and the fair value of this stock adjusted for post-split pricing would be $1.25, with a total fair value of $625,000. This amount was recognized as stock issuance liability at December 31, 2016 since the stock was not issued until March 2017. Based on the substance of the nature of the transactions being interrelated, the gain on the settlement of debt of $318,696 was offset with the issuance expense of $625,000 to provide for the net expense, shown as financing expense, of $306,304.