NOTES PAYABLE AND NOTES PAYABLE - RELATED PARTIES | NOTE 7 – NOTES PAYABLE AND NOTES PAYABLE - RELATED PARTIES At December 31, 2016 and 2015, notes payable consisted of the following: 2016 2015 Notes payable $ 336,283 $ 336,283 Notes payable, convertible 25,000 30,000 Notes payable, related parties — 239,000 Notes payable, related parties, convertible 1,824,633 470,000 Total $ 2,185,916 $ 1,075,283 NOTES PAYABLE At December 31, 2016 and 2015, notes payable consisted of the following: 2016 2015 Note payable to a former shareholder, past due as of January 2012, together with accrued interest at 5% APR and interest on overdue principal accruing at 10% APR. (a) $ 28,783 $ 28,783 Note payable to a shareholder, past due as of August 1, 2015, together with accrued interest at 10% APR. (b) 300,000 300,000 Note payable to a shareholder, payable upon demand, together with imputed interest only, as applicable. (c) 7,500 7,500 Total $ 336,283 $ 336,283 As of December 31, 2016, the Company had outstanding a past due note payable (b) to a shareholder in the amount of $300,000. A previously outstanding note payable to the same party, that had contained a conversion feature in the amount of $250,000, pre-dated this note. However, in March 2015, the Company entered into a loan modification agreement which provided that the original note, along with the attendant conversion feature, be cancelled, and that a replacement note to be issued in its stead at an upwardly adjusted principal amount of $300,000, but without any associated conversion feature. In accordance with ASC 470-50-40, the Company deemed the transaction for accounting purposes to be a debt extinguishment due to the substantially different terms, and, as a result, recorded a gain on debt settlement of $200,000. For the year ended December 31, 2016, the Company recognized a debt discount of $9,900 associated with two notes payable as they each carried a beneficial conversion feature. This debt discount has been fully amortized to interest expense for the year ended December 31, 2016. See Note 12. At December 31, 2016, the Company was in arrears on the unsecured term note payable (a) to a former shareholder, and the unsecured term note payable (b) to a current shareholder. NOTES PAYABLE, CONVERTIBLE At December 31, 2016 and 2015, notes payable, convertible consisted of the following: 2016 2015 Note payable to a shareholder, past due as of October 6, 2015, together with a fixed interest payment of $2,000, and convertible at $0.01 per share of common stock. (a) $ — $ 20,000 Note payable to an investor due as of September 2016, together with accrued interest at 10% APR, and convertible at $0.02 per share of common stock. (b) — 10,000 Note payable to a shareholder, past due as of April 23, 2016, together with a fixed interest payment of $1,000, and convertible at $0.005 per share of common stock. (c) — — Note payable to an investor due as of January 20, 2017, together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (d) 25,000 — Total $ 25,000 $ 30,000 In April 2016, the Company repaid and retired a $10,000 note (c) to a private investor together with $1,000 in then-accrued interest ($11,000 total). During September 2016, a private investor of a convertible note payable (b) opted to convert the note payable plus accrued interest totaling $10,456 into 2,613,963 shares of common stock. The Company repriced the original conversion of $0.02 per share to $0.004 per share which resulted in a loss on conversion in the amount of $13,593. See Note 10. The Company repaid a $10,000 convertible note payable (c) to a current shareholder during October 2016, and the Company also repaid a $20,000 convertible note payable (a) to a current shareholder during December 2016. The accrued interest for both repaid convertible note payables (a) and (c) remain unpaid at a total of $2,000 and $1,000 ($3,000 total), respectively. NOTES PAYABLE, RELATED PARTIES At December 31, 2016 and 2015, notes payable, related parties consisted of the following: 2016 2015 Note payable to a former officer, director and significant shareholder of EcoSmart Surface and Coatings Technology, Inc. prior to the Company’s merger with such firm in July 2014, past due as of August 3, 2016, together with imputed interest only, as applicable. (a) $ --- $ $239,000 Total $ --- $ $239,000 During the year ended December 31, 2016, the Company paid $17,950 to a related party note holder and current shareholder (a) in exchange for the release and discharge in full of a Company note in the amount of $239,000, which had come due August 3, 2016. As a result of this negotiated settlement with the related party, the Company will recognize a contribution of capital of $221,050 for the year ended December 31, 2016. See Note 8. NOTES PAYABLE, RELATED PARTIES, CONVERTIBLE At December 31, 2016 and 2015, notes payable, related parties, convertible consisted of the following: 2016 2015 Note payable to a company controlled by an outside director (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.01 per share of common stock. (a) $ 60,000 $ 60,000 Note payable to the Company’s outside general counsel (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.01 per share of common stock. (b) 150,000 150,000 Note payable to an outside director (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.01 per share of common stock. (c) 30,000 30,000 Note payable to the Company’s outside general counsel (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.007 per share of common stock. (d) 120,000 120,000 Note payable to the Company’s outside general counsel (also a shareholder), due on demand together with accrued interest at 12% APR, and convertible at $0.008 per share of common stock. (e) 10,000 10,000 Note payable to a related party investor (by virtue of shareholding percentage, both actual and on an as-converted basis), due November 13, 2018 together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (f) 100,000 100,000 Note payable to a related party investor (by virtue of shareholding percentage, both actual and on an as-converted basis), due March 4, 2017 together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (g) 50,000 — Note payable to a related party investor (by virtue of shareholding percentage, both actual and on an as-converted basis), due March 18, 2019 together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (h) 100,000 — Note payable to a related party investor (by virtue of shareholding percentage, both actual and on an as-converted basis), due May 12, 2019 together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (i) 50,000 — Note payable to a related party investor (by virtue of shareholding percentage, both actual and on an as-converted basis), due June 7, 2019 together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (j) 200,000 — Note payable to a related party investor (by virtue of shareholding percentage, both actual and on an as-converted basis), due July 28, 2019 together with accrued interest at 10% APR, and convertible at $0.01 per share of common stock. (k) 300,000 — Note payable to an outside director (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.007 per share of common stock. (l) 55,500 — Note payable to an outside director (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.007 per share of common stock. (m) 20,500 — Note payable to the Company’s president and chief executive officer (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.007 per share of common stock. (n) 349,329 — Note payable to the Company’s controller who is also a shareholder, which note is due on demand together with interest at 4.5% APR, and convertible at $0.007 per share of common stock. (o) 134,604 — Note payable to the Company’s vice president of research and development (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.007 per share of common stock. (p) 49,000 — Note payable to an independent contractor (also a shareholder), which note payable is due on demand together with interest at 4.5% APR, and convertible at $0.007 per share of common stock. (q) 25,700 — Note payable in the name of a son of an outside director (also a shareholder), due on demand together with accrued interest at 4.5% APR, and convertible at $0.005 per share of common stock. (r) 20,000 — Total $ 1,824,633 $ 470,000 Notes (a), (c), (l) and (r) reflect amounts due to a single outside director of the Company, who is also a shareholder, based on such director having (i) made certain vendor obligation payments directly on behalf of and for the benefit of the Company, (ii) having advanced certain funds to the Company at various dates for general working capital purposes, and (iii) having accrued director’s fees earned through September 15, 2016. In addition, the Company has recorded accounts payable, related parties, in the amount of $15,421 to the holder of notes (a), (c), (l) and (r). Notes (b) and (d) reflect payment obligations owed to the Company’s outside general counsel for legal services incurred by the Company for the years ended December 31, 2015 and 2014. Note (e) reflects a convertible debt investment made by the Company’s outside general counsel to the Company. Notes (f), (g), (h), (i), (j) and (k) reflect amounts due to a certain related party investor and significant shareholder for convertible debt investments made from time to time as indicated. Note (m) reflects amounts due to an outside director, who is also a shareholder, for accrued director’s fees earned through September 15, 2016. Note (n) reflects amounts due to the Company’s president and chief executive officer, who is also a shareholder, for previously accrued base salary. Note (o) reflects amounts due to the Company’s controller, who is also a shareholder, for previously accrued base salary. Note (p) reflects amounts due to the Company’s vice president of research and development, who is also a shareholder, for previously accrued wages. Note (q) reflects amounts due to an independent contractor who was President of one of EcoSmart’s divisions prior to the merger with EcoSmart and a current shareholder of the Company, for past earnings. See Note 17. For the year ended December 31, 2016, the Company received proceeds from the issuance of convertible notes payable in the amount of $45,000 and an additional $700,000 from the issuance of convertible notes payable to related parties (total $745,000). |