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Convertible Debentures
12 Months Ended
Dec. 31, 2015
Convertible Debt [Abstract]  
Convertible Debentures

7.

Convertible Debentures


At December 31, 2015, the Company had convertible debentures totaling $127,800 outstanding, of which $32,800 are due during the third quarter of 2016 and $95,000 are due during the third quarter of 2017. The convertible debentures bear interest at 7%. At the option of the lender, $95,000 principal of the debentures and accrued interest are convertible in whole or part into common stock of the Company at $0.025 per share and $32,800 principal of the debentures and accrued interest are convertible in whole or part into common stock of the Company at $0.05 per share. In July 2015, the Company repaid, with interest, a $10,000 convertible debenture that had matured. During the third quarter of 2015, the Company’s Board of Directors approved and the holders of $95,000 of convertible debentures maturing during the third quarter of 2015 accepted an offer of extension whereby the maturity dates of the convertible debentures are extended for two years and the conversion rate of the debentures and accrued interest into Common Stock of the Company is reduced from $0.05 to $0.025. In accordance with FASB ASC 470, this modification of the convertible debentures was recorded as a debt discount to the notes payable of approximately $18,100 with an offsetting credit to additional-paid in capital. In the year ended December 31, 2015, the entire $18,100 was accreted through interest expense.


During the third quarter of 2014, the Company, with the approval of its Board of Directors, exchanged two demand loans totaling $24,500 including one demand loan in the amount of $4,500 held by Herman M. Gerwitz, a Director, along with approximately $3,800 of accrued interest for convertible debentures totaling approximately $28,300. The debentures bear interest at 7% and are due and payable two years from the date of issuance. At option of the lender, the debentures and accrued interest are convertible in whole or part into common stock of the Company at $0.05 per share. The Company also granted warrants to purchase 141,365 shares of common stock of the Company at $0.02 per share to the debenture holders. The warrants are exercisable two years after issuance and expire seven years after issuance.


During the third quarter of 2014, the Company received $5,000 through the issuance of a convertible debenture to an investor. The debenture bears interest at 7% and is due and payable two years from the date of issuance. At option of the lender, the debenture and accrued interest are convertible in whole or part into common stock of the Company at $0.05 per share. The Company also granted warrants to purchase 25,000 shares of the Company’s common stock at $0.02 per share to the holder of the debenture. The warrants are exercisable two years after issuance and expire seven years after issuance.


Additionally, the Company has warrants to purchase 525,000 shares of the Company’s common stock at $0.02 per share outstanding that were granted in conjunction with the issuance of $105,000 of convertible debentures to seven investors in 2013. The warrants are exercisable two years after issuance and expire seven years after issuance.


The fair value of the warrants was determined using the Black-Scholes pricing model. The relative fair value of the warrants was recorded as a discount to the notes payable with an offsetting credit to additional paid-in capital since the Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances is being accreted through interest expense over the term of the notes payable. For the years ended December 31, 2015 and December 31, 2014, approximately $3,100 and $4,600, respectively, was accreted through interest expense.