Quarterly report pursuant to Section 13 or 15(d)

NOTE 5: DEBT

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NOTE 5: DEBT
9 Months Ended
Sep. 30, 2016
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
NOTE 5: DEBT

Convertible Debt

During the nine months ended September 30, 2016, the Company borrowed an aggregate of $2,053,603, net of original issue discounts and fees of $231,350, under convertible notes payable and repaid $277,891 in principal of convertible debt. Additional discounts of $1,975,986 were recognized during the nine months ended September 30, 2016 due to derivative liabilities. As of September 30, 2016 and December 31, 2015, the Company had outstanding convertible notes payable of $6,215,940 and $5,605,287, net of unamortized discounts of $2,208,714 and $1,142,241, respectively. The outstanding convertible notes of the Company are unsecured, bear interest between 6% and 12% per annum, mature between November 2014 and September 2019 and are convertible at variable rates between 60% and 65% of the quoted market price of the Company’s common stock. All notes that were convertible during the nine months ended September 30, 2016 were accounted for as derivative liabilities (see Note 6). Aggregate amortization of the debt discounts on convertible debt for the nine months ended September 30, 2016 and 2015 was $1,142,865 and $376,950, respectively.

During the September 2016, the Company entered into a Debt Settlement Agreement with a convertible note holder of two past due notes with outstanding principal balances of $100,000 each. The settlement agreement provides for the payment of $250,000 to settle the notes, payable in four monthly installments of $62,500 beginning September 16, 2016. In connection with this settlement agreement, the Company transferred $50,000 accrued interest into principal of the note. The first payment of $62,500 was made on September 16, 2016.

During the September 2016, the Company entered into a Debt Settlement Agreement with a convertible note holder of a past due note with an outstanding principal balance of $100,000. The settlement agreement provides for the payment of $125,000 to settle the note, payable in three monthly installments of $31,250 beginning September 20, 2016. In connection with this settlement agreement, the Company transferred $25,000 accrued interest into principal of the note. The first payment of $31,250 was made on September 28, 2016.

During the nine months ended September 30, 2016, the Company incurred loan standstill expenses added to debt principal of $77,492. Also during the nine months ended September 30, 2016, the Company issued an aggregate of 2,557,693 shares to note holders to suspend the conversion of certain outstanding convertible notes. The fair value of these shares of $1,487,308 was recognized as a debt standstill expense.

During the nine months ended September 30, 2016, holders of eight convertible notes payable elected to convert a total of $428,250 principal and $18,595 accrued interest in principal into a total of 4,967,617 shares of the Company’s common stock.  During the nine months ended September 30, 2016, the Company repaid $277,891 in principal on convertible debt.

Nonconvertible Debt

During the nine months ended September 30, 2016, the Company issued a note payable in the aggregate amount of $100,000, net of original discount of $2,000. The note is due in one month, accrues interest at 12% per annum and is secured by 434,244 shares of the Company’s common stock.

As of September 30, 2016 and December 31, 2015, the Company had outstanding notes payable to former affiliates of the Company of $413,185. These notes payable of the Company are unsecured, bear no interest and are due on demand.