Note 7 - Lines of Credit Notes Payable, and Liquidity

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 7: LINE OF CREDIT, NOTES PAYABLE AND LIQUIDITY

On March 18, 2013, the Company entered into a $2,000,000 revolving Line of Credit (“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. On February 3, 2015 the Company renewed the Line of Credit and increased the available balance to $5,000,000. The Line of Credit matures on February 2, 2018 and carries a variable interest rate based on the prime rate. At March 31, 2016, $4,200,000 was outstanding on the Line of Credit at an interest rate of 2.5%.

Our primary sources of working capital are funds from operations and borrowings under our revolving Line of Credit. In the event that the Line of Credit is called for any reason, Mr. Wit has pledged to replace the borrowing capacity under the Line of Credit with a promissory note that utilizes the same maturity date and interest rate as the Line of Credit.  

To satisfy our capital requirements, we may seek additional financing. There can be no assurance that any such funding will be available to us on favorable terms or at all. If adequate funds are not available when needed, we may be required to delay, scale back or eliminate some or all of our research and product development and marketing programs. If we are successful in obtaining additional financings, the terms of such financings may have the effect of diluting or adversely affecting the holdings or the rights of the holders of our common and preferred stock or result in increased interest expense in future periods.

At March 31, 2016, the Company owed $1,262,500 in notes payable all of which are unsecured. The table below provides details as to the terms and conditions of the notes payable.

				Ending		Non related party				Related party
Origination	Maturity	Interest		principal				Long				Long
date	date	rate		March 31, 2016		Current		term		Current		term
4/4/2014	4/1/2017		12%		45,000		-0-		45,000		-0-		-0-
4/4/2014	4/1/2017		12%		137,500		-0-		137,500		-0-		-0-
4/4/2014	4/1/2017		10%		120,000		-0-		120,000		-0-		-0-
12/1/2014	4/1/2017		10%		300,000		-0-		300,000		-0-		-0-
12/1/2014	4/1/2017		12%		90,000		-0-		90,000		-0-		-0-
12/1/2014	4/1/2017		12%		100,000		-0-		100,000		-0-		-0-
4/1/2015	4/1/2018		12%		20,000		-0-		-0-		-0-		20,000
2/29/2016	4/1/2019		12%		450,000		-0-		-0-		-0-		450,000
Discount on note payable							-0-		-0-		-0-		(316,885	)
Total				$	1,262,500	$	-0-	$	792,500	$	-0-	$	153,115

At December 31, 2015, the Company owed $812,500 in notes payable all of which were unsecured. The table below provides details as to the terms and conditions of the notes payable.

				Ending		Non related party				Related party
Origination	Maturity	Interest		principal				Long				Long
date	date	rate		December 31, 2015		Current		term		Current		term
4/4/2014	4/1/2017		12%		45,000		-0-		45,000		-0-		-0-
4/4/2014	4/1/2017		12%		137,500		-0-		137,500		-0-		-0-
4/4/2014	4/1/2017		10%		120,000		-0-		120,000		-0-		-0-
12/1/2014	4/1/2017		10%		300,000		-0-		300,000		-0-		-0-
12/1/2014	4/1/2017		12%		90,000		-0-		90,000		-0-		-0-
12/1/2014	4/1/2017		12%		100,000		-0-		100,000		-0-		-0-
4/1/2015	4/1/2018		12%		20,000		-0-		-0-		-0-		20,000
Discount on note payable							-0-		-0-		-0-		-0-
Total				$	812,500	$	-0-	$	792,500	$	-0-	$	20,000

On February 29, 2016, the Company issued a promissory note in the principal amount of $450,000 and warrants to purchase 1,800,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of April 1, 2019 to our Chief Executive Officer and Director, Cornelis F. Wit (“Mr. Wit”), in exchange for accrued interest in the amount of $450,000. The note carries an interest rate of 12% per annum and has a maturity date of April 1, 2019.

This issuance caused us to calculate and record a derivative liability for the warrant liability. The warrants were valued using the Black Scholes option pricing model. A value of $325,689 was calculated and allocated to the warrants and recorded as a liability to the issuance of the note payable. As a result of the liability we recorded a discount to the note payable. The carrying amount of the note at the time of issuance was therefore $124,311. The warrant liability (discount) will be amortized over the 37 month duration of the note payable. The Company will continue to perform a fair value calculation quarterly on the warrant liability and accordingly the warrant liability is increased or decreased based on the fair value calculation. The resulting increase or decrease is reflected in operations as an unrealized gain or loss on changes in derivative liabilities.

On October 15, 2015 the Company issued a promissory note in the amount of $980,000 to Mr. Wit in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2019. The expiration date of the warrants associated with the promissory note was also extended to January 1, 2019. On November 19, 2015 the promissory note and the related warrants were cancelled in exchange for 3,920,000 shares of our common stock.

On October 15, 2015 the Company issued a promissory note in the amount of $1,600,000 to Mr. Wit in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2019. The expiration date of the warrants associated with the promissory note was also extended to January 1, 2019. On November 19, 2015 the promissory note, 400,000 related warrants and 6,000,000 unrelated warrants were cancelled in exchange for 6,400,000 shares of our common stock. On November 23, 2015 Mr. Wit sold 4,000,000 of the related warrants to three employees of the Company. On December 17, 2015 Mr. Wit sold 2,000,000 of the related warrants to a fourth employee of the Company.

On April 1, 2015 the Company issued a promissory note in the amount of $20,000 to our Chairman and Chief Technology Officer, Randall G. Smith (“Mr. Smith”) in exchange for an existing promissory note in the same amount. The promissory note carries an interest rate of 12% and has a maturity date of April 1, 2018.

On January 31, 2015 the Company issued a promissory note in the amount of $529,000 to Mr. Wit in exchange for an 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. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017. On October 15, 2015 the Company issued a promissory note in the amount of $529,000 to Mr. Wit 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 January 1, 2019. The expiration date of the warrants associated with the promissory note was also extended to January 1, 2019. On November 19, 2015 the promissory note and the related warrants were cancelled in exchange for 2,116,000 shares of our common stock.

On January 31, 2015 the Company issued a promissory note in the amount of $2,860,000 and paid $6,879 in principal to Mr. Wit in exchange for an 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. The expiration date of the warrants associated with the promissory note was also extended to April 1, 2017. On October 15, 2015 the Company issued a promissory note in the amount of $2,860,000 to Mr. Wit 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 January 1, 2019. The expiration date of the warrants associated with the promissory note was also extended to January 1, 2019. On November 19, 2015 the Company and Mr. Wit agreed to cancel the promissory note and 11,440,000 warrants related to the promissory note in exchange for 11,440,000 shares of our common stock.

On January 31, 2015, the Company issued a promissory note in the principal amount of $950,000 and warrants to purchase 3,800,000 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 an existing promissory note in the amount of $280,000 and accrued interest in the amount of $670,000. The note carries an interest rate of 12% per annum and is due on April 1, 2017. On October 15, 2015 the Company issued a promissory note in the amount of $950,000 to Mr. Wit 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 January 1, 2019. The expiration date of the warrants associated with the promissory note was also extended to January 1, 2019. On November 19, 2015 the Company and Mr. Wit agreed to cancel the promissory note and the warrants related to the promissory note in exchange for 3,800,000 shares of our common stock.