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7. SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2017
Subsequent Events [Abstract]  
7. SUBSEQUENT EVENTS

In July 2017, the Company entered into notes payable totaling $190,000 with Mr. Steffens. The notes bear interest at 10% per annum. The notes are unsecured and mature on June 30, 2018. The Company is obligated to repay the note with the collection of any accounts receivables.

 

In August 2017, the Company issued 5,083 of its Series A preferred stock to its Chairman, John Steffens as part of a conversion of debt and interest totaling $5,083,405. (See Note 2). The Company accounted for the transaction pursuant to Topic ASC 470-50, Modification and Extinguishment of Debt. Due to the fact that the transaction was with Mr. Steffens, the Company’s Chairman of the Board, the Company determined that this was not an arm’s length agreement and as such has recorded the entire transaction through additional paid in capital.

 

In August 2017, the Company issued a Warrant to purchase up to 20,333,620 shares of the Company’s Common Stock at an exercise price of $0.07 per share to its Chairman, John L. Steffens, as part of his debt conversion of principal and interest totaling $5,083,405. The Warrant is exercisable for a period of ten years, and subject to customary anti-dilution provisions. The Company is obligated to reserve a sufficient number of shares of the Company’s common stock to enable the exercise of the Warrant.

 

The Company’s management, in consultation with its outside tax professionals, have determined that the stock conversion will not trigger an Internal Revenue Code Section 382 limitation.