Note 12 - Related Party Transactions

9 Months Ended

Sep. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 12: RELATED PARTY TRANSACTIONS

On February 1, 2013, our Chairman and Chief Technology Officer, Randall G. Smith extended the maturity date of his $20,000 promissory note until January 1, 2016. The promissory note bears interest at 12% per annum. On December 31, 2011, Mr. Smith extended the maturity date of his promissory note until April 1, 2013. The note was originally issued on December 16, 2010 with a maturity date of December 31, 2011.     

On February 22, 2013, our Director, Guus van Kesteren, extended the maturity date of his $150,000 of convertible debentures to January 1, 2015. The debentures bear interest at 10% per annum. The convertible debentures were originally issued in August 2008. The expiration date of the warrants associated with the debentures was also extended to January 1, 2015.     

On February 22, 2013, our Chief Operating Officer and President, Stephen E. Johnson extended the maturity date of his $25,000 of convertible debentures to January 1, 2016. The debentures bear interest at 12% per annum. The convertible debentures were originally issued in December 2008. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

On February 22, 2013, our Chairman and Chief Technology Officer, Randall G. Smith extended the maturity date of his $5,000 of convertible debentures to January 1, 2016. The debentures bear interest at 12% per annum. The convertible debentures were originally issued in December 2008. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

On December 5, 2013, our Director, Guus van Kesteren, extended the maturity date of his $160,000 of convertible debentures to January 1, 2016. The debentures bear interest at 12% per annum. The convertible debentures were originally issued in December 2008. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $160,000 was reclassified from Related Party to Non-Related Party.

On April 21, 2014, our Director, Guus van Kesteren, extended the maturity date of his $150,000 of convertible debentures to April 1, 2016. The debentures bear an interest rate of 10% per annum. The convertible debentures were originally issued in August 2008. The expiration date of the warrants associated with the debentures was also extended to April 1, 2016. On July 31, 2014 Mr. van Kesteren’s term on the Board of Directors ended. Effective on the same date, his convertible note in the amount of $150,000 was reclassified from Related Party to Non-Related Party.

As of September 30, 2014, we have an aggregate of $14,760,879 principal amount of convertible debentures and promissory notes outstanding to Cornelis F. Wit, our Chief Executive Officer and Director, and have issued certain warrants to Mr. Wit, as follows:

● In June 2008, Mr. Wit invested $510,000 in convertible notes. On August 29, 2008, Mr. Wit converted the $510,000 and invested an additional $1,260,000 in a private placement of convertible debentures and warrants to purchase 3,540,000 shares of our common stock. The convertible debentures, which bear interest at 10% per annum, were due on August 29, 2010. The convertible debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share. On September 30, 2009, the Company and Mr. Wit extended the $1,770,000 of convertible debentures until August 29, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. On February 22, 2013, the Company and Mr. Wit extended the maturity date of the $1,770,000 of convertible debentures to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

● In February 2008, Mr. Wit invested $150,000 in promissory notes and from September 2008 to December 2008, Mr. Wit invested $4,200,000 in convertible notes. On December 16, 2008, Mr. Wit converted the $4,350,000 into a private placement of convertible debentures and warrants to purchase 8,700,000 shares of our common stock. The convertible debentures, which bear interest at 12% per annum, were due on December 16, 2010. The convertible debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.50 per share. On September 30, 2009, the Company and Mr. Wit extended the $4,350,000 of convertible debentures until December 16, 2013 in accordance with the terms of a Secured Convertible Debenture issued on that date. In a private transaction on October 16, 2012, Mr. Wit purchased $125,000 of the December 2008 convertible debentures and the related 250,000 warrants from Mr. Ronald Linares, the Company’s former Chief Financial Officer. On February 22, 2013, the Company and Mr. Wit extended the maturity date of the $4,475,000 of convertible debentures to January 1, 2016. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

● From July 2009 to September 2009, Mr. Wit invested $1,100,000 which amount was aggregated under the terms of one convertible note dated September 30, 2009.  On September 30, 2009, Mr. Wit agreed to convert this convertible note into a private placement of secured convertible debentures bearing interest at a rate of 12% per annum with a maturity date of March 30, 2011. The convertible debentures were convertible into 4,400,000 shares of common stock and Mr. Wit received 4,400,000 warrants to purchase common stock of the Company at a price of $0.25. On March 30, 2011, the Company and Mr. Wit extended the maturity date of his convertible note until April 1, 2013 in accordance with the terms of Amendment Number One To Securities Purchase Agreement. The Company also extended the expiration date of the 4,400,000 warrants issued with convertible note by two years to September 30, 2015. On February 22, 2013, the Company and Mr. Wit extended the maturity date of his convertible debentures to January 1, 2016 in accordance with the terms of Amendment Number Two To Securities Purchase Agreement. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

● From October 2009 to December 2009, Mr. Wit invested $1,440,000, which amount was aggregated under the terms of one convertible note dated December 31, 2009. On December 31, 2009, Mr. Wit agreed to convert this Convertible Note into a private placement of unsecured convertible debentures bearing interest at a rate of 12% per annum, which Convertible Debentures were due on June 30, 2011. The Company and Mr. Wit extended the maturity date of his convertible note until October 1, 2013 in accordance with the terms of Amendment Number One To Securities Purchase Agreement. The Company also extended the expiration date of the 5,760,000 warrants issued with convertible note by two years to December 31, 2015. On February 22, 2013, the Company and Mr. Wit extended the maturity date of his convertible debentures to January 1, 2016 in accordance with the terms of Amendment Number Two To Securities Purchase Agreement. The expiration date of the warrants associated with the debentures was also extended to January 1, 2016.

● On March 31, 2011, the Company issued a note payable in the principal amount of $2,866,879 and warrants to purchase 11,467,517 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of March 31, 2016 to Mr. Wit. The note accrues interest at a rate of 12% per annum and had a maturity date of April 1, 2014. On April 1, 2013, the Company and Mr. Wit extended the maturity date of the promissory note to March 31, 2016.

The Promissory Note consolidates the amounts owed as detailed below:

i.	Promissory Note issued on April 13, 2010 for $450,000 with a maturity date of December 31, 2011;
ii.	Promissory Note issued on June 29, 2010 for $115,000 with a maturity date of December 31, 2011;
iii.	Promissory Note issued on September 30, 2010 for $695,000 with a maturity date of December 31, 2011;
iv.	Promissory Note issued on December 31, 2010 for $1,197,500 with a maturity date of December 31, 2011; and
v.	Promissory Note issued on December 31, 2010 for $409,379 with a maturity date of April 01, 2012.

● On December 31, 2011, the Company issued a promissory note in the principal amount of $1,600,000 and warrants to purchase 6,400,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of December 31, 2015 to Mr. Wit. The note carried an interest rate of 12% per annum and had a maturity date of January 1, 2015.

The promissory note consolidates the amounts owed as detailed below: 

i.	Promissory Note issued on May 13, 2011 for $96,000 with a maturity date of January 01, 2013;
ii.	Promissory Note issued on September 30, 2011 for $342,000 with a maturity date of April 01, 2014;
iii.	Promissory Note issued on October 05, 2011 for $130,000 with a maturity date of April 01, 2014;
iv.	Promissory Note issued on October 28, 2011 for $123,000 with a maturity date of April 01, 2014;
v.	Promissory Note issued on October 31, 2011 for $82,000 with a maturity date of April 01, 2014;
vi.	Promissory Note issued on November 23, 2011 for $60,000 with a maturity date of January 1, 2013; and
vii.	Accrued and unpaid interest in the amount of $767,000.

On April 4, 2014 the Company issued a promissory note payable to Mr. Wit, in the amount of $1,600,000 in exchange for the existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2017.

● On January 1, 2013, the Company issued a promissory note in the principal amount of $529,000 and warrants to purchase 2,116,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of January 31, 2016 to Mr. Wit. The note carries an interest rate of 12% per annum and is due on January 1, 2016.

● On January 1, 2014, the Company issued a promissory note in the principal amount of $980,000 and warrants to purchase 3,920,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2017 to Mr. Wit in exchange for accrued interest in the amount of $980,000. The note carries an interest rate of 12% per annum and is due on April 1, 2017.

On March 18, 2013, the Company entered into a $2,000,000 revolving Line of Credit with The Northern Trust Company guaranteed by our Chief Executive Officer and Director, Cornelis F. Wit. Mr. Wit receives 2.0% interest (approximately $9,500 per month) from the Company on the assets pledged for the Line of Credit. On December 18, 2013 the Company renewed the Line of Credit and increased the available balance to $4,000,000. The Line of Credit matures on December 17, 2014 and carries a variable interest rate based on the prime rate. At September 30, 2014, $3,700,000 was outstanding on the Line of Credit at an interest rate of 2.25%.

For the nine months ended September 30, 2014 and September 30, 2013 we incurred $1,818,911 and $1,750,327, respectively, in interest expense payable to related parties.