Debt | NOTE 5 – DEBT Short Term Notes Payable - Related Parties Throughout 2013, the Company issued unsecured short-term notes payable to various related parties, including officers and directors of the Company, with a term of one year, which have since been extended and are coming due June 1, 2018. As of June 30, 2017, there was one consolidated note outstanding to Palm Beach Energy Solutions, LLC. The note has an outstanding principal balance of $71,000 and bears interest at a rate of 5% per annum. As of June 30, 2017 and December 31, 2016, the total interest accrued on the note was $14,356 and $12,596 respectively. In July 2016, the Company issued six (6) short-term notes payable to related parties in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. These notes have a value of $2,002,126 and accrue interest at a rate of six percent (6%) per annum. As of June 30, 2017 and December 31, 2016, the total interest accrued on the notes was $115,903 and $56,333 respectively. All of the notes are coming due on August 4, 2017 and will be extended until the earlier of an additional 12 months or the company records revenue. In January 2017, the Company secured a $20,000 short-term bridge loan from a shareholder of the Company. This note did not bear interest and was repaid in February 2017. Short Term Notes Payable – Other In July 2016, the Company issued a short-term note payable to a third party in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. The note has a principal balance of $96,570 and accrues interest at a rate of six percent (6%) per annum. As of June 30, 2017 and December 31, 2016, the total interest accrued on the note was $5,667 and $2,794 respectively. The note is coming due on August 4, 2017. Convertible Debt On April 25, 2016, the Company entered into a 12-month convertible debenture with JMJ Financial with a principal balance of $555,556. The note carries a 10% one-time interest charge, a 10% original issue discount and a 75% warrant coverage of the amount funded, totaling an aggregate value of $416,666 [$555,556 x 75% = $416,666]. The note may only be paid up to 98% of the balance due within the first 180 days at a 30% premium. After 180 days, the note cannot be repaid without the holders consent. The note is convertible after 180 days at a 25% discount to the lowest trade price in the preceding 10 trading days. Per the warrant coverage feature, the Company issued the investor 1,388,886 warrants with a 5-year term and a cashless exercise price equal to the lesser of $0.30 per share or the lowest trade price in the 10 preceding trading days. The warrant agreement also contains a down-round ratchet provision allowing the holder to increase its warrant count. The number of warrants to issue is calculated by dividing the aggregate value by the lower of $0.30 or the lowest trade price in the 10 preceding trading days. As of March 31, 2017, JMJ Financial has converted $393,892 at $0.135825 per share into 2,900,000 shares of common stock. In addition, JMJ Financial has exercised its warrant agreement ratchet rights, resulting in 3,067,668 [$416,666 / $0.135825 = 3,067,668] warrants outstanding. As of June 30, 2017, the holder had exercised warrants to purchase 11,043 of Company common stock and exercised its cashless conversion feature on the remaining warrants resulting in 1,340,201 shares of common stock issued. As of June 30, 2017 and December 31, 2016, these agreements were valued at $0 and $580,000 along with a total derivative liability of $310,000 and $334,000 respectively. This note is currently in default and is accruing compounding quarterly interest at a rate of eighteen percent (18%) per annum. In January 2017, the Company entered into a convertible debenture with Power Up Lending Group, Ltd. with a principal balance of $153,500 due and payable on or before October 29, 2017. The note carries an original issue discount of $3,500 and accrues interest at a rate of twelve percent (12%) per annum and is convertible into the Company’s common stock at a 39% discount on the average of the lowest three trading prices during the ten trading days prior to conversion, after 180 days, in whole or in part at the option of the holder. The note also carries a prepayment penalty, adjusting every 30 days to a maximum of one hundred thirty percent (130%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days. In February 2017, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $165,000 due and payable on October 2, 2017. The note carries an 8% one-time interest charge, a $15,000 original issue discount and a 35% conversion discount to the lowest trade price in the prior twenty-five trading days, after 180 days, in whole or in part at the option of the holder. In addition, the Company provided 150,000 inducement shares to secure the note, and may have to provide additional shares on the note’s 6-month anniversary if the Company’s share price declines. These inducement shares were valued at $27,000 and are being amortized over the life of the note. The note can be repaid, without prepayment penalties, within the first 90 days. Thereafter, the note will incur a one hundred twenty percent (120%) prepayment penalty of the then outstanding principal and interest due. In February 2017, the Company entered into a convertible debenture with Labry’s Fund LLP, with a principal balance of $140,000 due and payable on August 18, 2017. The note carries an original issue discount of $23,000 and accrues interest at a rate of twelve percent (12%) per annum and is convertible into the Company’s common stock at a 50% discount to the lowest trade price during the previous thirty trading days prior to the date of the note or prior to date of conversion, after 180 days, in whole or in part at the option of the holder. The note can be repaid, without prepayment penalties, within the first 180 days. In addition, the Company provided a warrant agreement to purchase up to 250,000 shares of common stock, with a term of 5 years and an exercise price of $0.35 per share of common stock. Using a Black-Scholes option-pricing model, this agreement was valued at $33,265 and is being amortized over the life of the agreement. In April 2017, the Company entered into a convertible debenture with Auctus Fund, LLC with a principal balance of $117,750 due and payable on or before December 22, 2017. The note carries an original issue discount of $17,750, accrues interest at a rate of twelve percent (12%) per annum and is convertible into the Company’s common stock at a 50% discount on the lowest trading price during the twenty-five trading days prior to conversion, after 180 days, in whole or in part at the option of the holder. The note also carries a prepayment penalty, adjusting after 90 days to a maximum of one hundred thirty-five percent (135%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days. In April 2017, the Company entered into a convertible debenture with EMA Financial, LLC with a principal balance of $150,000 due and payable on or before March 15, 2018. The note carries an original issue discount of $28,000, accrues interest at a rate of ten percent (10%) per annum and is convertible into the Company’s common stock at a 35% discount on the lowest trading price during the fifteen trading days prior to conversion, after 180 days, in whole or in part at the option of the holder. The note also carries a prepayment penalty, adjusting after 90 days to a maximum of one hundred thirty percent (130%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days. In May 2017, the Company entered into a convertible debenture with Crown Bridge Partners, LLC with a principal balance of $58,000 due and payable on or before May 4, 2018. The note carries an original issue discount of $9,500, accrues interest at a rate of ten percent (10%) per annum and is convertible into the Company’s common stock at a 40% discount on the lowest trading price during the ten trading days prior to conversion, after 180 days, in whole or in part at the option of the holder. The note also carries a prepayment penalty, adjusting every 30 days to a maximum of one hundred thirty-five percent (135%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days. In May 2017, the Company entered into a convertible debenture with GS Capital Partners Partners, LLC with a principal balance of $115,000 due and payable on or before May 9, 2018. The note carries an original issue discount of $5,750, accrues interest at a rate of eight percent (8%) per annum and is convertible into the Company’s common stock at a 28% discount on the lowest trading price during the ten trading days prior to conversion, after 180 days, in whole or in part at the option of the holder. The note also carries a prepayment penalty, adjusting after 90 days to a maximum of one hundred twenty-five percent (125%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days. In June 2017, the Company entered into a convertible debenture with Power Up Lending Group, Ltd with a principal balance of $53,000 due and payable on or before March 20, 2018. The note carries an original issue discount of $3,000, accrues interest at a rate of eight percent (8%) per annum and is convertible into the Company’s common stock at a 39% discount on the average lowest three day trading price during the ten trading days prior to conversion, after 180 days, in whole or in part at the option of the holder. The note also carries a prepayment penalty, adjusting after 60 days to a maximum of one hundred thirty percent (130%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days. Derivative Liabilities The embedded conversion features of the above convertible notes payable and warrants contain discounted conversion prices and should be recognized as derivative instruments. Such embedded conversion features should be bifurcated and accounted for at fair value. As of the six months ended June 30, 2017 and the year ended December 31, 2016, the Company had a derivative liability balance of $310,000 and $914,000, respectively. The Company uses the Black-Scholes option-pricing model to calculate derivate liability. Fair Value of Embedded Derivative Liabilities: December 31, 2015 $ - Addition 1,275,547 Converted (494,721 ) Change in Fair Market Value 7,313 As of December 31, 2016 $ 914,000 Addition - Converted (501,195 ) Changes in fair value of derivative liabilities (102,805 ) As of June 30, 2017 $ 310,000 |