Note 7 - Convertible Notes Payable - Affiliates |
12 Months Ended |
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Jun. 30, 2020 | |
Notes to Financial Statements | |
Convertible Debt [Text Block] | 7. CONVERTIBLE NOTES PAYABLE - AFFILIATES: 2020 Convertible Obligations (formerly January 2015 Convertible Notes and 2019 Convertible Note)The 2020 Convertible Obligations (formerly named January 2015 Convertible Notes and 2019 Convertible Notes) which accrue interest at either 4% per annum or 1% compounded quarterly and effective January 1, 2020 are due and payable on July 1, 2024. The 2020 Convertible Obligations (including accrued interest, plus all future deferred compensation added subsequently), are convertible, at the sole election of the holder, into Units consisting of one share of the Company's common stock and one half to three quarters warrant to purchase a share of the Company's common stock, at a price of $0.50 per Unit until July 1, 2024. The warrant contained in the Unit was originally exercisable at $1.00 per unit but was modified to $0.75 during the year ended June 30, 2020 and is exercisable until a date three years after the date of the conversion. The original conversion price of $0.50 per Unit approximated the fair value of the Units at the date of the agreements; therefore, no beneficial conversion feature exists. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815 -15 “Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company's limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815 -10, “Derivatives and Hedging”.As of June 30, 2020, the 2020 Convertible Obligation balances, including accrued interest, owed Bassani (and his donees), Smith and Edward Schafer (“Schafer”), the Company's Vice Chairman, were $2,408,432, $1,123,736 and $462,963, respectively. As of June 30, 2019, the 2020 Convertible Obligation balances, including accrued interest, owed Bassani, Smith and Schafer were $1,878,314, $897,287 and $446,320, respectively. The Company recorded interest expense of $137,130 and $104,525 for the years ended June 30, 2020 and 2019, respectively.During the year ended June 30, 2020, Bassani and Smith elected to transfer $436,508 and $199,573, respectively, from deferred compensation owed them to their 2020 Convertible Obligations.During the year ended June 30, 2019, the Company agreed to sell Bassani and Smith, 3,000,000 and 300,000 warrants, respectively, exercisable at $0.60 per share until June 30, 2025 and June 30, 2023, respectively. The purchase price for the warrants is $0.10 per warrant and is represented by secured promissory notes of $300,000 and $30,000 from Bassani and Smith, respectively, both of which are secured by portions of their 2020 Convertible Obligations (Note 9 ). The promissory notes accrue interest at 4% per annum and as of June 30, 2020 the accrued interest owed by Bassani and Smith is $22,948 and $2,295, respectively. September 2015 Convertible NotesDuring the year ended June 30, 2016, the Company entered into September 2015 Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The September 2015 Convertible Notes bear interest at 4% per annum, originally had maturity dates of December 31, 2017 but during the year ended June 30, 2019 the maturity dates were extended to July 1, 2021, and may be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of $0.60 per share. During the year ended June 30, 2020, the maturity dates of the September 2015 Convertible Notes were further extended until July 1, 2024. As the conversion price of $0.60 approximated the fair value of the common shares at the date of the September 2015 Convertible Notes, no beneficial conversion feature exists. During the year ended June 30, 2018, Bassani and the Company agreed to split his original September 2015 Convertible Note into two replacement notes with all the terms remaining the same. One of the replacement notes' original principal is $130,000, which is being held by the Company as collateral for a subscription receivable promissory note from Bassani. During the year ended June 30, 2019, with the Company's approval, Bassani sold $300,000 of his second replacement note to a Shareholder with all the terms remaining the same.The balances of the September 2015 Convertible Notes as of June 30, 2020, including accrued interest owed Bassani, Schafer and Shareholder, are $165,653, $19,535 and $415,522, respectively. The balances of the September 2015 Convertible Notes as of June 30, 2019, including accrued interest, were $159,963, $18,879 and $400,405, respectively.The Company recorded interest expense of $21,462 and $21,428 for the years ended June 30, 2020 and 2019, respectively. |