Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 11, 2017 | |
Details | ||
Registrant Name | DIAMONDHEAD CASINO CORPORATION | |
Registrant CIK | 844,887 | |
SEC Form | 10-Q | |
Period End date | Jun. 30, 2017 | |
Fiscal Year End | --12-31 | |
Trading Symbol | dhcc | |
Tax Identification Number (TIN) | 592,935,476 | |
Number of common stock shares outstanding | 36,297,576 | |
Filer Category | Smaller Reporting Company | |
Current with reporting | Yes | |
Voluntary filer | No | |
Well-known Seasoned Issuer | No | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Contained File Information, File Number | 0-17529 | |
Entity Incorporation, State Country Name | Delaware | |
Entity Address, Address Line One | 1013 Princess Street | |
Entity Address, City or Town | Alexandria | |
Entity Address, State or Province | Virginia | |
Entity Address, Postal Zip Code | 22,314 | |
City Area Code | 703 | |
Local Phone Number | 683-6800 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash | $ 6,955 | $ 17,606 |
Other current assets | 2,015 | 352 |
Total current assets | 8,970 | 17,958 |
Land held for development (Note 3) | 5,476,097 | 5,476,097 |
Deferred financing costs (net of amortization of $111,266 at June 30, 2017 and $93,918 at December 31, 2016) | 89,834 | 107,182 |
Other assets | 80 | 80 |
Total assets | 5,574,981 | 5,601,317 |
Current liabilities | ||
Convertible notes and line of credit payable (Note 5) | 1,962,500 | 1,962,500 |
Debenture payable (net of unamortized discount of $43,199 at June 30, 2017 and $45,252 at December 31, 2016) (Note 6) | 6,801 | 4,748 |
Convertible debentures payable (net of unamortized discount of $1,602,566 at June 30, 2017 and $1,662,041 at December 31, 2016) (Note 6) | 197,434 | 137,959 |
Derivative liability (Note 6) | 1,584,487 | 2,030,289 |
Short term notes and interest bearing advance (Note 7) | 40,588 | 0 |
Accounts payable and accrued expenses due related parties (Note 4) | 3,091,537 | 2,772,164 |
Accounts payable and accrued expenses - other (Note 4) | 2,230,545 | 2,012,526 |
Total current liabilities | 9,113,892 | 8,920,186 |
Notes payable due related parties (Note 8) | 115,000 | 115,000 |
Notes payable due others (Note 8) | 37,500 | 22,500 |
Total liabilities | 9,266,392 | 9,057,686 |
Stockholders' deficiency | ||
Preferred stock, $.01 par value; shares authorized 5,000,000, outstanding 2,086,000 at June 30, 2017 and December 31, 2016 (aggregate liquidation preference of $2,519,080 at June 30, 2017 and December 31, 2016). | 20,860 | 20,860 |
Common stock, $.001 par value; shares authorized 50,000,000, issued: 39,052,472 at June 30, 2017 and December 31, 2016, outstanding: 36,297,576 at June 30, 2017 and December 31, 2016. | 39,052 | 39,052 |
Additional paid-in capital | 35,643,373 | 35,643,373 |
Unearned ESOP shares | (3,320,875) | (3,320,875) |
Accumulated deficit | (35,928,310) | (35,693,268) |
Treasury stock, at cost, 527,616 shares at June 30, 2017 and December 31, 2016 | (145,511) | (145,511) |
Total stockholders' deficiency | (3,691,411) | (3,456,369) |
Total liabilities and stockholders' deficiency | $ 5,574,981 | $ 5,601,317 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS - Parenthetical - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Deferred financing costs, amortization | $ 111,266 | $ 93,918 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Shares Outstanding | 2,086,000 | 2,086,000 |
Preferred Stock, Liquidation Preference, Value | $ 2,519,080 | $ 2,519,080 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares, Issued | 39,052,472 | 39,052,472 |
Common Stock, Shares, Outstanding | 36,297,576 | 36,297,576 |
Treasury Stock, Shares | 527,616 | 527,616 |
Corporate Debt Securities | ||
Unamortized discount | $ 43,199 | $ 45,252 |
Convertible Debt Securities | ||
Unamortized discount | $ 1,602,566 | $ 1,662,041 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
COSTS AND EXPENSES | ||||
Administrative and general | $ 156,251 | $ 166,021 | $ 317,536 | $ 340,786 |
Amortization | 8,052 | 9,399 | 17,348 | 18,695 |
Other | 16,420 | 17,447 | 32,894 | 33,105 |
Total costs and expenses | 180,723 | 192,867 | 367,778 | 392,586 |
OTHER INCOME (EXPENSE) | ||||
Amortization of debt discount | (33,679) | (16,348) | (61,528) | (30,000) |
Interest expense | (114,318) | (99,877) | (221,502) | (199,980) |
Change in fair value of derivative liability | 233,144 | (144,526) | 445,802 | (190,100) |
Net proceeds from litigation settlement | 0 | 150,000 | 20,000 | 150,000 |
Reversal of previously accrued DOL penalties | 0 | 240,050 | 0 | 240,050 |
Total other income (expense) | 85,147 | 129,299 | 183,537 | (30,030) |
Other income | 765 | 0 | ||
NET LOSS | (95,576) | (63,568) | (184,241) | (422,616) |
PREFERRED STOCK DIVIDENDS | (25,400) | (25,400) | (50,800) | (50,800) |
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS | $ (120,976) | $ (88,968) | $ (235,041) | $ (473,416) |
Net loss per common share, basic and fully diluted | $ (0.003) | $ (0.002) | $ (0.006) | $ (0.013) |
Weighted average number of common shares outstanding, basic and fully diluted | 36,297,575 | 36,297,576 | 36,297,575 | 36,297,576 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
OPERATING ACTIVITIES | ||
Net loss | $ (184,241) | $ (422,616) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization | 17,348 | 18,695 |
Change in fair value of derivative liability | (445,802) | 190,100 |
Amortization of debt discount | 61,528 | 30,000 |
Change in assets and liabilities: | ||
Other assets | (1,663) | (1,653) |
Accounts payable and accrued expenses | 486,591 | 175,524 |
Net cash used in operating activities | (66,239) | (9,950) |
FINANCING ACTIVITIES | ||
Proceeds from long term note | 15,000 | 0 |
Proceeds from interest bearing advances from related parties | 0 | 25,000 |
Proceeds from non-interest bearing advances from related parties | 0 | 15,000 |
Proceeds from other interest bearing advances | 25,000 | 22,500 |
Proceeds from short term Notes | 17,368 | 2,946 |
Payment of non-interest bearing advances from related parties | 0 | (15,000) |
Payment of short term note | (1,780) | (1,445) |
Net cash provided by financing activities | 55,588 | 49,001 |
Net (decrease) increase in cash | (10,651) | 39,051 |
Cash beginning of period | 17,606 | 15,655 |
Cash end of period | 6,955 | 54,706 |
Cash paid for interest | 392 | 80 |
Non-cash financing activities: | ||
Unpaid preferred stock dividends included in accounts payable and accrued expenses | $ 50,800 | $ 50,800 |
Note 1. Organization and Busine
Note 1. Organization and Business | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 1. Organization and Business | Note 1. Organization and Business Diamondhead Casino Corporation and Subsidiaries (the “Company”) own a total of approximately 404.5 acres of unimproved land in Diamondhead, Mississippi on which the Company plans, unilaterally, or in conjunction with one or more partners, to construct a casino resort and hotel and associated amenities. |
Note 2. Liquidity and Going Con
Note 2. Liquidity and Going Concern | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 2. Liquidity and Going Concern | Note 2. Liquidity and Going Concern These unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no operations and generates no operating revenues. During the six months ended June 30, 2017, the Company incurred net losses applicable to common shareholders, exclusive of the recording of change in the fair value of derivatives, of $680,843. The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead Property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort. In the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements of convertible instruments and other means, which are more fully described in Notes 5, 6, 7 and 8 to these unaudited condensed consolidated financial statements. The Company is past due with respect to payment of significant principal and interest on most of these instruments. The Company is also in arrears with respect to payment of franchise taxes due to the State of Delaware for the years 2015 and 2016. In addition, the Company has also been unable to pay various routine operating expenses. At June 30, 2017, the Company had current liabilities totaling $9,113,892 and only $6,955 cash on hand. The above conditions raise substantial doubt as to the Company’s ability to continue as a going concern. |
Note 3. Summary of Significant
Note 3. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 3. Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the six months ended June 30, 2017 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2016, attached as Exhibit 99.1 to our annual report on Form 10-K. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Land Held for Development Land held for development is carried at cost. Costs directly related to site development, such as licenses, permitting, engineering, and other costs, are capitalized. Land development costs, which have been capitalized, consist of the following at June 30, 2017 and December 31, 2016: Land under development $ 4,934,323 Licenses 77,000 Engineering and costs associated with permitting 464,774 Total land held for development $ 5,476,097 Fair Value Measurements The Company follows the provisions of ASC Topic 820 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable input that reflects The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at June 30, 2017 and December 31, 2016: June 30, December 31, 2017 2016 Beginning balance $ 2,030,289 $ 1,704,570 Total unrealized (appreciation) depreciation (445,802) 325,719 Ending balance $ 1,584,487 $ 2,030,289 Sensitivity Analysis to Changes in Level 3 Assumptions Significant inputs include the dates when required conditions are expected to be met under the conversion terms of the debentures, the underlying market cap due to borrowings and losses and discount for lack of marketability while the stock was delisted and reversed when the Company's stock became publicly listed again on or about October 26, 2015. In addition, use of different ranges of bond discount rates and changes in historical volatility rates would also result in a higher or lower fair value. Current assets and current liabilities are financial instruments and management believes that their carrying amounts are reasonable estimates of their fair values due to their short term nature. The convertible debentures and derivative liability approximate fair value based on Level 3 inputs, as further discussed in Note 7. Long-Lived Assets The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of longlived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at June 30, 2017. Net Loss per Common Share Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met. The table below summarizes the components of potential dilutive securities at June 30, 2017 and 2016. June 30, June 30, Description 2017 2016 Convertible Preferred Stock 260,000 260,000 Options to Purchase Common Shares 3,415,000 3,440,000 Private Placement Warrants 1,036,500 1,061,500 Convertible Promissory Notes 1,925,000 1,925,000 Total 6,636,500 6,686,500 |
Note 4. Accounts Payable and Ac
Note 4. Accounts Payable and Accrued Expenses | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 4. Accounts Payable and Accrued Expenses | Note 4 Accounts Payable and Accrued Expenses The table below outlines the elements included in accounts payable and accrued expenses at June 30, 2017 and December 31, 2016: June 30, December 31, Description 2017 2016 Related Parties: Accrued payroll due officers 1,919,711 1,769,711 Accrued interest due officers and directors 659,012 568,161 Accrued director fees 356,250 311,250 Base rents due to the President 104,030 76,826 Associated rental costs 35,226 28,908 Other 17,308 17,308 Total Related Parties 3,091,537 2,772,164 Non-Related Parties: Accrued interest 1,350,580 1,220,516 Accrued dividends 609,600 558,800 Accrued fines and penalties 16,700 7,650 Other accounts payable and accrued expenses 253,665 225,560 Total Non-related Parties 2,230,545 2,012,526 Total accounts payable and accrued expenses 5,322,082 4,784,690 |
Note 5. Convertible Notes and L
Note 5. Convertible Notes and Line of Credit | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 5. Convertible Notes and Line of Credit | Note 5. Convertible Notes and Line of Credit Line of Credit On October 23, 2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $1,000,000. The Line of Credit provided for funds to be drawn as needed and carries an interest rate on amounts borrowed of 9% per annum, originally payable quarterly, based on the pro rata number of days outstanding. All funds originally advanced under the facility were due and payable by November 1, 2012. As an inducement to provide the facility, the lender was awarded an immediate option to purchase 50,000 shares of common stock of the Company at $1.75 per share. In addition, the lender received an option to purchase a maximum of 250,000 additional shares of common stock of the Company at $1.75 per share. The options expire following repayment in full by the Company of the amount borrowed. At June 30, 2017, the principal and accrued interest due on the obligation, which totals $1,718,299, remains unpaid. Convertible Notes Pursuant to a Private Placement Memorandum dated March 1, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000 with interest at 12% per annum, together with a five year Warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The Promissory Note is convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired. Pursuant to an additional Private Placement Memorandum dated October 25, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000, together with a five year Warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The Promissory Notes bear interest at 9% per annum and are convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired. The Convertible Notes issued pursuant to the two Private Placements discussed above total $962,500 in principal and became due and payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, all of the aforementioned debt obligations remain unpaid and in default under the repayment terms of the notes. In addition, a total of $504,375 of accrued interest on the above notes remains outstanding at June 30, 2017. The table below summarizes the Company’s debt arising from the above-described sources as of June 30, 2017 and December 31, 2016: Principal Amount Amount Due Amount Due Loan Facility Owed Related Parties Others Line of Credit $ 1,000,000 $ - $ 1,000,000 Private Placements: March 1, 2010 475,000 75,000 400,000 October 25, 2010 487,500 - 487,500 Total Private Placements 962,500 75,000 887,500 Total $ 1,962,500 $ 75,000 $ 1,887,500 |
Note 6. Convertible Debentures
Note 6. Convertible Debentures and Derivative Liability | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 6. Convertible Debentures and Derivative Liability | Note 6. Convertible Debentures and Derivative Liability Pursuant to a Private Placement Memorandum dated February 14, 2014 (the "Private Placement"), the Company offered up to a maximum of $3,000,000 of Collateralized Convertible Senior Debentures in three tranches of $1,000,000 each, to accredited or institutional investors. The Offering was conducted contingent on the deposit into Escrow of the purchase price for all of the Debentures offered in the principal amount of $3,000,000. The Debentures, once issued, bear interest at 4% per annum after 180 days, mature six years from the date of issuance, and are secured by a lien on the Company’s Mississippi property. On March 31, 2014, the First Closing occurred when subscriptions in the amount of $3,000,000 were received in Escrow and accepted by the Company. The Escrow Agent released $1,000,000 to the Company and the Company issued First Tranche Debentures in the aggregate principle amount of $1,000,000. On December 31, 2014, investors who had purchased $950,000 of First Tranche Debentures consented to Amendment I to the Private Placement, which amended certain terms and conditions, including the conversion terms of the First Tranche Debentures. The remaining First Tranche Debenture in the amount of $50,000 remains as originally issued with no conversion rights. Thus, the First Tranche Debentures can be converted into a total of 3,166,666 shares of common stock. On December 31, 2014, the Second Closing occurred when investors representing $850,000 of Second Tranche Debentures consented to Amendment II to the Private Placement, which amended certain terms and conditions, including those relating to issuance and conversion of the Second and Third Tranche Debentures, as well as the period of time within which to perform the Third Tranche Closing Obligations, as amended. The Escrow Agent released $850,000 to the Company and the Company issued Second Tranche Debentures in the aggregate principle amount of $850,000. Thus, the Second Tranche Debentures can be converted into a total of 1,888,889 shares of common stock. The Escrow Agent refunded $300,000 to those investors who did not consent to Amendment II. The Company did not meet the closing obligations for the Third Tranche Debentures as of June 30, 2015, as was required, pursuant to the terms of the Private Placement, as amended. Therefore, the remaining $850,000 being held in escrow for the purchase of the Third Tranche Debentures was returned to the investors in July 2015. For purposes of determining the proper accounting treatment and valuation of the instruments, the Company applied the provisions set forth in ASC Topic 820, "Fair Value in Financial Instruments" and ASC Topic 815, "Accounting for Derivative Instruments and Hedging Activities." Since the Notes issued have derivative features, the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the debt host and treated as a liability. In addition, the valuation is required to be conducted for each reporting period the instrument is in existence. The Company's stock was not trading from approximately September 4, 2014, when its stock registration was revoked, through approximately October 26, 2015, when its' stock began to trade again. The Company engaged an independent valuation expert to determine the fair value of its shares of common stock for each quarter beginning with the quarter ended September 30, 2014. For periods from September 30, 2014 through September 30, 2015, the fair value of the common stock was estimated by adjusting the most recent market price by changes in the underlying market cap due to changes in the value of net assets and applying a discount for lack of marketability inasmuch as the stock was not trading. After the stock began to trade again on or about October 26, 2015, the closing price of the stock was used in the valuation beginning with the quarter ending December 31, 2015 through this most recent valuation at June 30, 2017. Monte Carlo models were developed to value the derivative liability within the Notes using a historical volatility rate, based on comparable companies, of 148% at June 30, 2017 and 179% at December 31, 2016, and using discount bond rates based on the expected remaining term of each instrument ranging from 8.21% to 7.75% at June 30, 2017 and 5.26% at December 31, 2016. In addition, the June 30, 2017 valuation included that the conversion requirements for Tranche 1 Debentures, exclusive of price, were met as of September 30, 2017 and continue to be met at June 30, 2017, while conversion requirements for Tranche 2 Debentures were expected to be met by October 24, 2017. The estimated fair value for the derivative liability relating to each Debenture at the balance sheet dates is as follows: June 30, 2017 December 31, 2016 Tranche 1 $ 876,685 $ 1,008,068 Tranche 2 707,802 1,022,221 Derivative Liability $ 1,584,487 $ 2,030,289 At the initial valuation date of each Tranche, a portion of the derivative liability was allocated to the Convertible Debentures as debt discount, with the remainder being recorded as other income/expense. At March 31, 2014, the initial valuation of the First Tranche Debentures, $1,000,000 was allocated to debt discount and, at December 31, 2014, the initial valuation of the Second Tranche Debentures, $850,000 was allocated to debt discount. The debt discount is subsequently amortized to expense using an effective interest methodology. Amortization of debt discount amounted to $59,475 and $29,001 for Convertible Debentures and $2,053 and $999 for the non-convertible Debenture for the six months ended June 30, 2017 and 2016, respectively. The interest payment on the Tranche 1 and Tranche 2 Debentures for the calendar year 2015, in the amount of $57,233, was due March 1, 2016. The interest payment on the Tranche 1 and Tranche 2 Debentures for the calendar year 2016, in the amount of $74,000, was due March 1, 2017. The Company failed to make these interest payments and, therefore, is in default under the terms of the Debentures. On October 25, 2016, certain Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware On November 21, 2016, the Company filed a motion to dismiss the case for lack of subject matter jurisdiction due to failure to plead diversity. On February 21, 2017, the plaintiffs filed a motion for leave to amend their Complaint based upon declarations of citizenship previously filed with the court. |
Note 7. Short Term Notes and In
Note 7. Short Term Notes and Interest Bearing Advance | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 7. Short Term Notes and Interest Bearing Advance | Note 7. Short Term Notes and Interest Bearing Advance Short Term Note In January 2017, the Company financed $2,694 of the premium due for liability insurance on its Mississippi property. The financing requires monthly installments of $285 of principal and interest at a rate of 12.75%. At June 30, 2017, a principal balance of $1,383 remained outstanding on the note. Bank Credit Facility Wells Fargo Bank provided an unsecured credit facility of up to $15,000 to the Company. The facility requires a variable monthly payment of amounts borrowed plus interest, which is applied at 11.24% on direct charges and 24.99% on any cash advanced through the facility. At June 30, 2017, a principle balance of $14,205 remained outstanding on the facility. Interest Bearing Advance On February 2, 2017, the Company borrowed $25,000 from an unrelated third party. The Company expects to enter into a formal note for these funds. However the terms of the note have not been finalized. The Note is expected to carry an annual interest rate of approximately 12.5% with a projected due date of December 31, 2017. The President of the Company has agreed to personally secure the note with an assignment of proceeds due to her under the first lien on the Diamondhead property. The table below summarizes the short term notes and interest bearing advance at June 30, 2017. Balance Owing Description of Facility Interest Rate June 30,2017 Property Liability Insurance Financing 12.75% $ 1,383 Bank Credit Facility 11.24% - 24.99% 14,205 Interest Bearing Advance 12.50% 25,000 Total Short Term Notes and Interest Bearing Advance $ 40,588 |
Note 8. Long -Term Notes Payabl
Note 8. Long -Term Notes Payable | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 8. Long -Term Notes Payable | Note 8. Long Term Notes Payable In the first four months of 2016, the Company received cash advances totaling $47,500 from seven lenders which included $25,000 from three current Directors of the Company. The proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company's Form 10-Q. On August 25, 2016, the Company issued a Note to the foregoing lenders, which matures four years from the date of issuance and bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid. In the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company an additional $90,000. On August 25, 2016, the Company issued a Note to the Chairman of the Board. The Note bears interest at 14% per annum effective August 1, 2016 and matures four years from the date of issuance. The proceeds of the loan were used for the payment of Mississippi property taxes and auditing, accounting and other corporate expenses. The principal due under the foregoing loans totals $135,500. The Company has filed a second lien on its Mississippi property in favor of the note holders to secure both principal and interest in the maximum amount of $250,000. The lien is second to the existing first lien on the Mississippi property in the amount of $3.85 million. The first lien is held by holders of previously-issued convertible and non-convertible Debentures ($1.85 million) and certain executives and directors ($2 million) as outlined in Note 10. On June 9, 2017, the Company entered into a Promissory Note with an unrelated lender in exchange for proceeds in the amount of $15,000. Interest on the note is 12.5% per annum and payable March 1 of each year the note remains outstanding. Payment in full of the Note is due June 9, 2019. Mississippi Gaming Corporation, a wholly owned subsidiary of the Company, guaranteed the Note. In addition, the President of the Company agreed to personally guarantee the Note and to personally secure the Note with an assignment of proceeds due to her under the first lien on the Diamondhead property. The table below summarizes the Company’s long term notes payable as of June 30, 2017 and December 31, 2016: Principal Amount Amount Due Amount Due Loan Facility Owed Related Parties Others 4 Year 8% secured note $ 47,500 $ 25,000 $ 22,500 4 Year 14% secured note 90,000 90,000 - Total Due December 31, 2016 $ 137,500 $ 115,000 $ 22,500 2 Year 12.5% secured note 15,000 - 15,000 Total Due June 30, 2017 $ 152,500 $ 115,000 $ 37,500 |
Note 9. Related Party Transacti
Note 9. Related Party Transactions | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 9. Related Party Transactions | Note 9. Related Party Transactions As of June 30, 2017, the President of the Company is owed deferred salary in the amount of $1,716,996 and the Vice President and the current Chairman of the Board of Directors of the Company is owed deferred salary in the amount of $121,140. The Board of directors agreed to pay interest at 9% per annum on the foregoing amounts owed. Interest expense under this agreement amounted to $78,140 and $64,751 for the six months ended June 30, 2017 and 2016, respectively. Total interest accrued under this agreement totaled $598,482 and $520,342 as of June 30, 2017 and December 31, 2016, respectively. Effective September 1, 2011, the Company entered into a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space in a furnished and fully equipped townhouse office building owned by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $4,534 and payment of associated costs of insurance, real estate taxes, utilities and other expenses. Rent expense associated with this lease amounted to base rent in the amount of $27,204 and associated rental costs of $7,300 for a total of $34,504 for the six months ended June 30, 2017 and base rent in the amount of $27,204 and associated rental costs of $5,953 for a total of $33,157 for the six months ended June 30, 2016. No payments associated with the base rents were made in the first six months of 2017. At June 30, 2017 and December 31, 2016, amounts owing for base rent and associated rental costs totaled $139,256 and $105,734, respectively. Directors of the Company are entitled to a director's fee of $15,000 per year for their services. The Company has been unable to pay directors' fees to date. A total of $356,250 and $311,250 was due and owing to the Company’s current and former directors as of June 30, 2017 and December 31, 2016, respectively. Directors have previously been compensated and may, in the future, be compensated for their services with cash, common stock, or options to purchase common stock of the Company. See Notes 8 and 11 for other related party transactions. |
Note 10. Commitments and Contin
Note 10. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 10. Commitments and Contingencies | Note 10. Commitments and Contingencies The Company’s obligations under the Collateralized Convertible Senior Debentures are secured by a lien on the Company’s Mississippi property (the “Investors Lien”). On March 31, 2014, the Company issued $1 million of First Tranche Collateralized Convertible Senior Debentures and on December 31, 2014 the Company issued $850,000 of Second Tranche Collateralized Convertible Senior Debentures. Thus, liens were placed on the Property in favor of the Investors for $1,850,000. The Investors Lien is in pari passu The Company has filed a second lien in the maximum amount of $250,000 on the Diamondhead property to secure certain notes payable totaling $137,500 in principal and accrued interest incurred. Details of these notes are more fully described in Note 8. Litigation College Health & Investment, L.P. v. Diamondhead Casino Corporation (Delaware Superior Court)(C.A. No. N15C-01-119-WCC) On January 15, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed suit for breach of a Promissory Note issued March 25, 2010, in the principle amount of $150,000, with interest payable at 12% per annum, with a maturity date of March 25, 2012. Plaintiff seeks payment of principle of $150,000, interest due through December 31, 2014 in the amount of $45,000, and interest due of 12% per annum from December 31, 2014 until entry of judgment. The Note, as well as the accrued interest thereon, are shown as current liabilities on the Company’s current balance sheet. On January 22, 2015, the defendant forwarded a Notice of Conversion to plaintiff, exercising the Borrower's right to convert the principal and any interest due on the Note into common stock. On February 11, 2015, the Company moved to dismiss the complaint as moot. The plaintiff filed an opposition to the motion to dismiss alleging that the Note was convertible only prior to its maturity date. On July 2, 2015, the Court agreed with the Plaintiff and denied the Company's motion to dismiss. On July 16, 2015, the Company filed an Answer and Grounds of Defense. On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed due to the below-referenced bankruptcy action (Case No. 15-11647) College Health & Investment, L.P. v. Diamondhead Casino Corporation (In the Court of Chancery of the State of Delaware (C.A. No. 10663-CB) On February 13, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint Pursuant to 8 Del.C.§211(c), with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn, seeking an order compelling the Company to hold an annual meeting. The Company agreed to entry of an Order setting a new date for an annual meeting of June 8, 2015, a Record Date of April 24, 2015, and to clarify that there is no advance notice requirement for the submission of stockholder proposals at the Company's annual stockholders' meetings. The plaintiff sought costs and expenses, including attorneys' fees. On or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 for both this case and the following case. The Company filed an opposition to this motion. On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed due to the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded. No further activity has occurred in this case. College Health & Investment, L.P. v. Edson R. Arneault, Deborah A. Vitale, Gregory A. Harrison, Martin Blount and Benjamin Harrell(In the Court of Chancery of the State of Delaware)(C.A. No. 10793-CB) On March 14, 2015, the plaintiff, a beneficial owner in excess of 5% of the common stock of the Company, filed a Verified Complaint, with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn. In Count I, the plaintiff alleges that the defendants breached their fiduciary duty of disclosure. In Count II, the plaintiff alleges that defendants breached their fiduciary duties of loyalty and care. The plaintiff sought injunctive relief, but no monetary damages other than attorney’s fees. The defendants believe that plaintiff's claims are without merit and intend to vigorously defend this lawsuit. In addition, on or about July 30, 2015, the defendant directors filed Defendants' Answer and Verified Counterclaims for defamation, breach of fiduciary duty and aiding and abetting a breach of fiduciary duty. On August 19, 2015, the plaintiff filed a Motion to Dismiss the Counterclaims. As noted above, on or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 in this case and the above-referenced case. On or about August 26, 2015, the defendants filed an Opposition to Plaintiff's Motion for an Award of Fees and Reimbursement of Expenses. On September 25, 2015, the parties entered into a Stipulation and [Proposed] Order Staying Litigation pending the below-referenced bankruptcy action (Case No. 15-11647) . In re Diamondhead Casino Corporation (United States Bankruptcy Court)(District of Delaware)(Case No. 15-11647- LSS) On August 6, 2015, an Involuntary Petition was filed in the United States Bankruptcy Court by three promissory note holders under title 11, United States Code, requesting an order for relief under chapter 7 of the Bankruptcy Code. The three creditors listed combined claims of $150,000 in principal, plus interest due on certain promissory notes. On August 28, 2015, the Company filed a Motion to Dismiss the Involuntary Petition or, in the Alternative, to Convert the Case to Chapter 11 (the "Motion to Dismiss"). The Company maintained that the Petition was filed in bad faith by supporters of the dissident slate which lost the proxy contest that was decided by the stockholders on June 8, 2015 and that it was filed in retaliation for the Company's refusal, following the stockholders' vote, to place several of the losing dissident's nominees on the Board of Directors. On September 11, 15 and 17, 2015, three additional promissory note holders filed Joinders to the Involuntary Petition listing additional combined claims of $237,500 plus interest. The Company does not recognize one of the joining petitioners as a bona fide creditor of the Company. On September 17, 2015, six Petitioners, who were represented by the same attorneys, filed an Objection to the Company's Motion to Dismiss. On September 18, 2015, the six Petitioners filed an Emergency Motion for Entry of an Order Directing the Appointment of (I) an Interim Chapter 7 Trustee, or (II) alternatively, a Chapter 11 Trustee Should the Involuntary Case be converted (the "Emergency Motion"). The Court held an evidentiary hearing on the Emergency Motion in October 2015. On November 13, 2015, the Court denied the Petitioners' Emergency Motion as it related to the request for an interim Chapter 7 trustee. On January 15, 2016, the Court held an evidentiary hearing on the Company's Motion to Dismiss the Involuntary Petitions. The parties filed briefs in support of and in opposition to the motion. On June 7, 2016, the Court entered an Order granting the Company's Motion to Dismiss the Involuntary Petitions. In its accompanying Opinion, the Court found, in part, that based on the totality of the circumstances, the Creditors' primary concern in filing the involuntary petition was to effect a change in management to benefit their investments as stockholders, which was not a proper purpose for filing an involuntary bankruptcy petition. On June 30, 2016, the Company filed a Motion for an Award of Fees and Expenses and Punitive Damages. On August 11, 2016, the Petitioning Creditors filed an Opposition to the Company's Motion for an Award of Fees and Expenses and Punitive Damages. On August 31, 2016, the Court entered an Order awarding judgment to the Company for attorneys’ fees and expenses against the Petitioners, jointly and severally, in the amount of $54,886. On September 1, 2016, the Court filed an Amended Order in which it further stated that the amounts awarded were not subject to any setoff against amounts owed by the Company to the Petitioners. The Company has filed a collection action against the Petitioners to collect the attorneys' fees and expenses incurred in defending this action. In the first quarter of 2017, the Company collected $20,000 from one petitioner in connection with the collection action. Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-UNA) On October 25, 2016, the above-named Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million, plus interest from January 1, 2015, together with costs and fees. The Company was served with the Complaint on October 31, 2016. On November 21, 2016, the Company filed a motion to dismiss for lack of subject matter jurisdiction due to failure to plead diversity. On February 21, 2017, the plaintiffs filed a motion for leave to amend their complaint based upon declarations of citizenship previously filed with the court. Employee Stock Ownership Plan The Company failed to file information returns required to be filed in connection with its Employee Stock Ownership Plan (“ESOP”) for the 2015 calendar year in a timely fashion. The filings were due to be filed with the Department of Labor by October 15, 2016. The Company did not have sufficient funds to pay professionals to audit its ESOP and/or prepare and file required documents and forms when due. Although these required filings normally do not result in any tax due to an agency of the government, the Company could be subject to penalties for failure to file these forms when due. The Company intends to bring its ESOP-required filings current and when current, will attempt to enroll in a voluntary compliance program with the Department of Labor and the Internal Revenue Service with respect to any penalties or fines incurred. However, there can be no assurance the Company will be able to enroll in any such program or obtain a reduction of the fines and penalties that may be due. The Company has accrued $16,200 in anticipation of penalties as of June 30, 2017. Previously delinquent filings for the Plan for the years 2010 through 2014 were filed in 2016. |
Note 11. Subsequent Events
Note 11. Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Notes | |
Note 11. Subsequent Events | Note 11. Subsequent Events On July 26, 2017, at the request of the Company, the current Chairman of the Board of Directors and a Vice President of the Company ("the Chairman"), paid all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on an approximate 404-acre tract of land ("the Diamondhead Property"), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company. The taxes had to be paid by July 31, 2017 to avoid a tax sale. The taxes paid, together with interest due thereon, totaled $66,133. The credit card fees incurred in paying these taxes totaled $1,495. Thus, the total amount advanced was $67,628. The Chairman is selling common stock in another publicly-held company, the name of which has been disclosed to the Board of Directors, to cover the amounts billed to his credit cards. The Chairman is one of the secured parties under that Land Deed of Trust recorded on September 26, 2014 in Hancock County, Mississippi, to secure Tranche I and Tranche II Debentures issued by the Company in 2014. Under paragraph 5 of the Land Deed of Trust, a secured party who advances sums for taxes due on the Diamondhead Property is secured by the same Land Deed of Trust, but only at that interest rate specified in the note representing the primary indebtedness, namely 4% per annum. The Chairman advanced the $67,628 on condition that: (i) the advance constitute a lien with interest at 4% per annum under that Land Deed of Trust recorded September 26, 2014; (ii) he be paid additional interest of 11% per annum on the amount advanced and owing and that the full 11% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (iii) this additional interest obligation be treated as a separate and secured debt of the Company, to be evidenced by a separate note and to be secured with a separate and third lien to be placed on the Diamondhead Property (hereafter "the Third Lien"); (iv) the entire obligation will be treated as an advance to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V); and (v) he be indemnified for any losses sustained on the sale of that common stock sold to cover the credit card payments. The Chairman has identified the common stock to be sold and will provide the Company with the documentation required to document the sale of said stock and to calculate the future loss, if any, on said stock. On July 24, 2017, the President of the Company, who is a Director of the Company, agreed to advance the Company up to $20,000 for the payment of expenses. The President previously agreed to secure a $25,000 loan and interest due thereon and to secure and guarantee a $15,000 loan and interest due thereon. The President is also personally liable for certain bank-issued credit cards used by the Company to pay expenses incurred by the Company. The president is advancing the foregoing funds on condition that: (i) interest of 15% per annum be paid on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the principal amount of $20,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property ("the Third Lien") together with the Chairman's Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V). |
Note 3. Summary of Significan17
Note 3. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Policies | |
Principles of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Estimates | Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Land Held For Development | Land Held for Development Land held for development is carried at cost. Costs directly related to site development, such as licenses, permitting, engineering, and other costs, are capitalized. Land development costs, which have been capitalized, consist of the following at June 30, 2017 and December 31, 2016: Land under development $ 4,934,323 Licenses 77,000 Engineering and costs associated with permitting 464,774 Total land held for development $ 5,476,097 |
Fair Value Measurements | Fair Value Measurements The Company follows the provisions of ASC Topic 820 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable input that reflects The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at June 30, 2017 and December 31, 2016: June 30, December 31, 2017 2016 Beginning balance $ 2,030,289 $ 1,704,570 Total unrealized (appreciation) depreciation (445,802) 325,719 Ending balance $ 1,584,487 $ 2,030,289 |
Sensitivity Analysis To Changes in Level 3 Assumptions | Sensitivity Analysis to Changes in Level 3 Assumptions Significant inputs include the dates when required conditions are expected to be met under the conversion terms of the debentures, the underlying market cap due to borrowings and losses and discount for lack of marketability while the stock was delisted and reversed when the Company's stock became publicly listed again on or about October 26, 2015. In addition, use of different ranges of bond discount rates and changes in historical volatility rates would also result in a higher or lower fair value. Current assets and current liabilities are financial instruments and management believes that their carrying amounts are reasonable estimates of their fair values due to their short term nature. The convertible debentures and derivative liability approximate fair value based on Level 3 inputs, as further discussed in Note 7. |
Long-lived Assets | Long-Lived Assets The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of longlived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at June 30, 2017. |
Net Loss Per Common Share | Net Loss per Common Share Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met. The table below summarizes the components of potential dilutive securities at June 30, 2017 and 2016. June 30, June 30, Description 2017 2016 Convertible Preferred Stock 260,000 260,000 Options to Purchase Common Shares 3,415,000 3,440,000 Private Placement Warrants 1,036,500 1,061,500 Convertible Promissory Notes 1,925,000 1,925,000 Total 6,636,500 6,686,500 |
Note 3. Summary of Significan18
Note 3. Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Tables/Schedules | |
Land development costs | Land development costs, which have been capitalized, consist of the following at June 30, 2017 and December 31, 2016: Land under development $ 4,934,323 Licenses 77,000 Engineering and costs associated with permitting 464,774 Total land held for development $ 5,476,097 |
Schedule of Derivative Liability Reconciliation | The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at June 30, 2017 and December 31, 2016: June 30, December 31, 2017 2016 Beginning balance $ 2,030,289 $ 1,704,570 Total unrealized (appreciation) depreciation (445,802) 325,719 Ending balance $ 1,584,487 $ 2,030,289 |
Schedule of Components of Potential Dilutive Securities | The table below summarizes the components of potential dilutive securities at June 30, 2017 and 2016. June 30, June 30, Description 2017 2016 Convertible Preferred Stock 260,000 260,000 Options to Purchase Common Shares 3,415,000 3,440,000 Private Placement Warrants 1,036,500 1,061,500 Convertible Promissory Notes 1,925,000 1,925,000 Total 6,636,500 6,686,500 |
Note 4. Accounts Payable and 19
Note 4. Accounts Payable and Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Tables/Schedules | |
Schedule of Accounts Payable and Accrued Expenses | The table below outlines the elements included in accounts payable and accrued expenses at June 30, 2017 and December 31, 2016: June 30, December 31, Description 2017 2016 Related Parties: Accrued payroll due officers 1,919,711 1,769,711 Accrued interest due officers and directors 659,012 568,161 Accrued director fees 356,250 311,250 Base rents due to the President 104,030 76,826 Associated rental costs 35,226 28,908 Other 17,308 17,308 Total Related Parties 3,091,537 2,772,164 Non-Related Parties: Accrued interest 1,350,580 1,220,516 Accrued dividends 609,600 558,800 Accrued fines and penalties 16,700 7,650 Other accounts payable and accrued expenses 253,665 225,560 Total Non-related Parties 2,230,545 2,012,526 Total accounts payable and accrued expenses 5,322,082 4,784,690 |
Note 5. Convertible Notes and20
Note 5. Convertible Notes and Line of Credit (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Tables/Schedules | |
Schedule of Convertible Notes and Line of Credit | The table below summarizes the Company’s debt arising from the above-described sources as of June 30, 2017 and December 31, 2016: Principal Amount Amount Due Amount Due Loan Facility Owed Related Parties Others Line of Credit $ 1,000,000 $ - $ 1,000,000 Private Placements: March 1, 2010 475,000 75,000 400,000 October 25, 2010 487,500 - 487,500 Total Private Placements 962,500 75,000 887,500 Total $ 1,962,500 $ 75,000 $ 1,887,500 |
Note 6. Convertible Debenture21
Note 6. Convertible Debentures and Derivative Liability (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Tables/Schedules | |
Schedule of Derivative Liabilities at Fair Value | The estimated fair value for the derivative liability relating to each Debenture at the balance sheet dates is as follows: June 30, 2017 December 31, 2016 Tranche 1 $ 876,685 $ 1,008,068 Tranche 2 707,802 1,022,221 Derivative Liability $ 1,584,487 $ 2,030,289 |
Note 7. Short Term Notes and 22
Note 7. Short Term Notes and Interest Bearing Advance (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Tables/Schedules | |
Schedule of Short Term Notes and Interest Bearing Advance | The table below summarizes the short term notes and interest bearing advance at June 30, 2017. Balance Owing Description of Facility Interest Rate June 30,2017 Property Liability Insurance Financing 12.75% $ 1,383 Bank Credit Facility 11.24% - 24.99% 14,205 Interest Bearing Advance 12.50% 25,000 Total Short Term Notes and Interest Bearing Advance $ 40,588 |
Note 8. Long -Term Notes Paya23
Note 8. Long -Term Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Tables/Schedules | |
Schedule of Long Term Notes Payable | The table below summarizes the Company’s long term notes payable as of June 30, 2017 and December 31, 2016: Principal Amount Amount Due Amount Due Loan Facility Owed Related Parties Others 4 Year 8% secured note $ 47,500 $ 25,000 $ 22,500 4 Year 14% secured note 90,000 90,000 - Total Due December 31, 2016 $ 137,500 $ 115,000 $ 22,500 2 Year 12.5% secured note 15,000 - 15,000 Total Due June 30, 2017 $ 152,500 $ 115,000 $ 37,500 |
Note 1. Organization and Busi24
Note 1. Organization and Business (Details) | Jun. 30, 2017a |
Details | |
Area of Land, owned | 404.5 |
Note 2. Liquidity and Going C25
Note 2. Liquidity and Going Concern (Details) - USD ($) | 6 Months Ended | |||
Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Details | ||||
Net losses applicable to common shareholders, exclusive of recording of change in derivatives | $ (680,843) | |||
Total current liabilities | 9,113,892 | $ 8,920,186 | ||
Cash | $ 6,955 | $ 17,606 | $ 54,706 | $ 15,655 |
Note 3. Summary of Significan26
Note 3. Summary of Significant Accounting Policies: Land Held For Development: Land development costs (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Details | ||
Land under development | $ 4,934,323 | |
Licenses | 77,000 | |
Engineering and costs associated with permitting | 464,774 | |
Total land held for development | $ 5,476,097 | $ 5,476,097 |
Note 3. Summary of Significan27
Note 3. Summary of Significant Accounting Policies: Fair Value Measurements: Schedule of Derivative Liability Reconciliation (Details) - Derivative Financial Instruments, Liabilities - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Beginning balance | $ 2,030,289 | $ 1,704,570 |
Total unrealized (appreciation) depreciation | (445,802) | 325,719 |
Ending balance | $ 1,584,487 | $ 2,030,289 |
Note 3. Summary of Significan28
Note 3. Summary of Significant Accounting Policies: Net Loss Per Common Share (Details) | 6 Months Ended |
Jun. 30, 2017shares | |
Convertible Debt Securities | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 5,055,555 |
Note 3. Summary of Significan29
Note 3. Summary of Significant Accounting Policies: Net Loss Per Common Share: Schedule of Components of Potential Dilutive Securities (Details) - shares | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Details | ||
Convertible Preferred Stock | 260,000 | 260,000 |
Options to Purchase Common Shares | 3,415,000 | 3,440,000 |
Private Placement Warrants | 1,036,500 | 1,061,500 |
Convertible Promissory Notes | 1,925,000 | 1,925,000 |
Total | 6,636,500 | 6,686,500 |
Note 4. Accounts Payable and 30
Note 4. Accounts Payable and Accrued Expenses: Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Related Parties: | ||
Accrued payroll due officers | $ 1,919,711 | $ 1,769,711 |
Accrued interest due officers and directors | 659,012 | 568,161 |
Accrued director fees | 356,250 | 311,250 |
Base rents due to the President | 104,030 | 76,826 |
Associated rental costs | 35,226 | 28,908 |
Other | 17,308 | 17,308 |
Total Related Parties | 3,091,537 | 2,772,164 |
Non-Related Parties | ||
Accrued interest | 1,350,580 | 1,220,516 |
Accrued dividends | 609,600 | 558,800 |
Accrued fines and penalties | 16,700 | 7,650 |
Other accounts payable and accrued expenses | 253,665 | 225,560 |
Total Non-related Parties | 2,230,545 | 2,012,526 |
Total accounts payable and accrued expenses | $ 5,322,082 | $ 4,784,690 |
Note 5. Convertible Notes and31
Note 5. Convertible Notes and Line of Credit (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |
Oct. 31, 2008 | Jun. 30, 2017 | Oct. 23, 2008 | |
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,000,000 | ||
Corporate Debt Securities | |||
Debt Instrument, Debt Default, Amount | $ 504,375 | ||
Line of Credit | |||
Debt Instrument, Interest Rate, Stated Percentage | 9.00% | ||
Debt Instrument, Maturity Date | Nov. 1, 2012 | ||
Line of Credit | Employee Stock Option | October 23 2008 | |||
Options, Granted | 50,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value | $ 1.75 | ||
Line of Credit, Current | $ 1,718,299 | ||
Line of Credit | Employee Stock Option | October 23 2008 2 | |||
Options, Granted | 250,000 | ||
Convertible Promissory Note | |||
Debt Instrument, Face Amount | $ 962,500 | ||
Convertible Promissory Note | March 1 2010 Private Placement | |||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | ||
Debt Instrument, Face Amount | $ 25,000 | ||
Warrants per unit | 50,000 | ||
Warrant Exercise Price | $ 1 | ||
Debt Instrument, Convertible, Terms of Conversion Feature | convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor | ||
Convertible Promissory Note | October 25 2010 Private Placement | |||
Debt Instrument, Interest Rate, Stated Percentage | 9.00% | ||
Debt Instrument, Face Amount | $ 25,000 | ||
Warrants per unit | 50,000 | ||
Warrant Exercise Price | $ 1 | ||
Debt Instrument, Convertible, Terms of Conversion Feature | convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. |
Note 5. Convertible Notes and32
Note 5. Convertible Notes and Line of Credit: Schedule of Convertible Notes and Line of Credit (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Convertible notes and line of credit payable (Note 5) | $ 1,962,500 | $ 1,962,500 |
Related Parties | ||
Convertible notes and line of credit payable (Note 5) | 75,000 | |
Others | ||
Convertible notes and line of credit payable (Note 5) | 1,887,500 | |
Line of Credit | ||
Convertible notes and line of credit payable (Note 5) | 1,000,000 | |
Line of Credit | Related Parties | ||
Convertible notes and line of credit payable (Note 5) | 0 | |
Line of Credit | Others | ||
Convertible notes and line of credit payable (Note 5) | 1,000,000 | |
Convertible Promissory Note | ||
Convertible notes and line of credit payable (Note 5) | 962,500 | |
Convertible Promissory Note | March 1 2010 Private Placement | ||
Convertible notes and line of credit payable (Note 5) | 475,000 | |
Convertible Promissory Note | October 25 2010 Private Placement | ||
Convertible notes and line of credit payable (Note 5) | 487,500 | |
Convertible Promissory Note | Related Parties | ||
Convertible notes and line of credit payable (Note 5) | 75,000 | |
Convertible Promissory Note | Related Parties | March 1 2010 Private Placement | ||
Convertible notes and line of credit payable (Note 5) | 75,000 | |
Convertible Promissory Note | Related Parties | October 25 2010 Private Placement | ||
Convertible notes and line of credit payable (Note 5) | 0 | |
Convertible Promissory Note | Others | ||
Convertible notes and line of credit payable (Note 5) | 887,500 | |
Convertible Promissory Note | Others | March 1 2010 Private Placement | ||
Convertible notes and line of credit payable (Note 5) | 400,000 | |
Convertible Promissory Note | Others | October 25 2010 Private Placement | ||
Convertible notes and line of credit payable (Note 5) | $ 487,500 |
Note 6. Convertible Debenture33
Note 6. Convertible Debentures and Derivative Liability (Details) | 1 Months Ended | 6 Months Ended | 12 Months Ended | |||
Dec. 31, 2014USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | Mar. 01, 2016USD ($) | Mar. 31, 2014USD ($) | |
Amortization of debt discount | $ 61,528 | $ 30,000 | ||||
Tranche 1 | ||||||
Unamortized discount | $ 1,000,000 | |||||
Tranche 2 | ||||||
Unamortized discount | $ 850,000 | |||||
Convertible Debt Securities | ||||||
Unamortized discount | 1,602,566 | $ 1,662,041 | ||||
Amortization of debt discount | 59,475 | 29,001 | ||||
Convertible Debt Securities | February 14 2014 Private Placement | ||||||
Maximum Offering Amount | 3,000,000 | |||||
Debt Instrument, Face Amount | $ 1,000,000 | |||||
Debt Instrument, Interest Rate, Stated Percentage | 4.00% | |||||
Debt Instrument, Maturity Date, Description | mature six years from the date of issuance | |||||
Convertible Debt Securities | February 14 2014 Private Placement | Derivative Financial Instruments, Liabilities | ||||||
Fair Value Measurements, Valuation Techniques | Monte Carlo models | |||||
Fair Value Assumptions, Expected Volatility Rate | 148.00% | 179.00% | ||||
Fair Value Inputs, Discount Rate | 5.26% | |||||
Convertible Debt Securities | February 14 2014 Private Placement | Derivative Financial Instruments, Liabilities | Minimum | ||||||
Fair Value Inputs, Discount Rate | 8.21% | |||||
Convertible Debt Securities | February 14 2014 Private Placement | Derivative Financial Instruments, Liabilities | Maximum | ||||||
Fair Value Inputs, Discount Rate | 7.75% | |||||
Convertible Debt Securities | February 14 2014 Private Placement | Tranche 1 | ||||||
Investors that consented to amended conversion terms, amount of offering | $ 950,000 | |||||
Investors that did not consent to amended conversion terms, amount of offering | $ 50,000 | |||||
Debt Instrument, Convertible, Number of Equity Instruments | 3,166,666 | |||||
Convertible Debt Securities | February 14 2014 Private Placement | Tranche 2 | ||||||
Investors that consented to amended conversion terms, amount of offering | $ 850,000 | |||||
Investors that did not consent to amended conversion terms, amount of offering | $ 300,000 | |||||
Debt Instrument, Convertible, Number of Equity Instruments | 1,888,889 | |||||
Non Convertible Debenture | ||||||
Amortization of debt discount | $ 2,053 | $ 999 | ||||
Corporate Debt Securities | ||||||
Unamortized discount | 43,199 | $ 45,252 | ||||
Interest payable | $ 74,000 | $ 57,233 |
Note 6. Convertible Debenture34
Note 6. Convertible Debentures and Derivative Liability: Schedule of Derivative Liabilities at Fair Value (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Derivative liability (Note 6) | $ 1,584,487 | $ 2,030,289 |
Tranche 1 | ||
Derivative liability (Note 6) | 876,685 | 1,008,068 |
Tranche 2 | ||
Derivative liability (Note 6) | $ 707,802 | $ 1,022,221 |
Note 7. Short Term Notes and 35
Note 7. Short Term Notes and Interest Bearing Advance (Details) - USD ($) | 6 Months Ended | ||||
Jun. 30, 2017 | Feb. 02, 2017 | Jan. 31, 2017 | Dec. 31, 2016 | Oct. 23, 2008 | |
Short term notes and interest bearing advance (Note 7) | $ 40,588 | $ 0 | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,000,000 | ||||
Unrelated third party | |||||
Debt Instrument, Face Amount | $ 25,000 | ||||
Debt Instrument, Interest Rate, Stated Percentage | 12.50% | 12.50% | |||
Short term notes and interest bearing advance (Note 7) | $ 25,000 | ||||
Liability Insurance Financing | |||||
Debt Instrument, Interest Rate, Stated Percentage | 12.75% | ||||
Short term notes and interest bearing advance (Note 7) | $ 1,383 | ||||
Liability Insurance Financing | Mississippi Property | |||||
Debt Instrument, Face Amount | $ 2,694 | ||||
Debt Instrument, Periodic Payment | 285 | ||||
Debt Instrument, Interest Rate, Stated Percentage | 12.75% | ||||
Short term notes and interest bearing advance (Note 7) | 1,383 | ||||
Bank Credit Facility | |||||
Short term notes and interest bearing advance (Note 7) | 14,205 | ||||
Line of Credit Facility, Maximum Borrowing Capacity | 15,000 | ||||
Long-term Line of Credit | $ 14,205 | ||||
Bank Credit Facility | Minimum | |||||
Debt Instrument, Interest Rate, Stated Percentage | 11.24% | ||||
Bank Credit Facility | Maximum | |||||
Debt Instrument, Interest Rate, Stated Percentage | 24.99% |
Note 7. Short Term Notes and 36
Note 7. Short Term Notes and Interest Bearing Advance: Schedule of Short Term Notes and Interest Bearing Advance (Details) - USD ($) | Jun. 30, 2017 | Feb. 02, 2017 | Dec. 31, 2016 |
Short term notes and interest bearing advance (Note 7) | $ 40,588 | $ 0 | |
Unrelated third party | |||
Debt Instrument, Interest Rate, Stated Percentage | 12.50% | 12.50% | |
Short term notes and interest bearing advance (Note 7) | $ 25,000 | ||
Liability Insurance Financing | |||
Debt Instrument, Interest Rate, Stated Percentage | 12.75% | ||
Short term notes and interest bearing advance (Note 7) | $ 1,383 | ||
Bank Credit Facility | |||
Short term notes and interest bearing advance (Note 7) | $ 14,205 | ||
Minimum | Bank Credit Facility | |||
Debt Instrument, Interest Rate, Stated Percentage | 11.24% | ||
Maximum | Bank Credit Facility | |||
Debt Instrument, Interest Rate, Stated Percentage | 24.99% |
Note 8. Long -Term Notes Paya37
Note 8. Long -Term Notes Payable (Details) - USD ($) | Jun. 09, 2017 | Mar. 31, 2014 | Jun. 30, 2017 |
Investor | Mississippi Property | Collateralized Convertible Senior Debentures | |||
Lien Amount | $ 1,850,000 | $ 1,850,000 | |
Management | |||
Lien Amount | 2,000,000 | ||
Management | Mississippi Property | Collateralized Convertible Senior Debentures | |||
Lien Amount | $ 2,000,000 | ||
4 Year 8 Secured Note | |||
Debt Instrument, Face Amount | 47,500 | ||
4 Year 8 Secured Note | Director | |||
Debt Instrument, Face Amount | $ 25,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | ||
4 Year 14 Secured Note | |||
Debt Instrument, Face Amount | $ 90,000 | ||
4 Year 14 Secured Note | Director | |||
Debt Instrument, Interest Rate, Stated Percentage | 14.00% | ||
Notes Payable Principal Due | |||
Debt Instrument, Face Amount | $ 135,500 | ||
Notes Payable Principal Due | Mississippi Property | Junior Lien | |||
Lien Amount | 250,000 | ||
Notes Payable Principal Due | Mississippi Property | Senior Lien | |||
Lien Amount | $ 3,850,000 | ||
2 Year 12.5% Secured Note | |||
Debt Instrument, Face Amount | $ 15,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 12.50% | ||
Debt Instrument, Maturity Date | Jun. 9, 2019 |
Note 8. Long -Term Notes Paya38
Note 8. Long -Term Notes Payable: Schedule of Long Term Notes Payable (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Notes Payable, Noncurrent | $ 152,500 | $ 137,500 |
Notes payable due related parties (Note 8) | 115,000 | 115,000 |
Notes payable due others (Note 8) | 37,500 | $ 22,500 |
4 Year 8 Secured Note | ||
Notes Payable, Noncurrent | 47,500 | |
4 Year 8 Secured Note | Related Parties | ||
Notes Payable, Noncurrent | 25,000 | |
4 Year 8 Secured Note | Others | ||
Notes Payable, Noncurrent | 22,500 | |
4 Year 14 Secured Note | ||
Notes Payable, Noncurrent | 90,000 | |
4 Year 14 Secured Note | Related Parties | ||
Notes Payable, Noncurrent | 90,000 | |
4 Year 14 Secured Note | Others | ||
Notes Payable, Noncurrent | 0 | |
2 Year 12.5% Secured Note | ||
Notes Payable, Noncurrent | 15,000 | |
2 Year 12.5% Secured Note | Related Parties | ||
Notes Payable, Noncurrent | 0 | |
2 Year 12.5% Secured Note | Others | ||
Notes Payable, Noncurrent | $ 15,000 |
Note 9. Related Party Transac39
Note 9. Related Party Transactions (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Accrued payroll due officers | $ 1,919,711 | $ 1,919,711 | $ 1,769,711 | ||
Interest Expense | 114,318 | $ 99,877 | 221,502 | $ 199,980 | |
Accrued interest | 1,350,580 | 1,350,580 | 1,220,516 | ||
Accrued director fees | 356,250 | 356,250 | 311,250 | ||
Office Space Lease | |||||
Debt Instrument, Periodic Payment | 4,534 | ||||
Base rent expense | 27,204 | 27,204 | |||
Associated rental costs | 7,300 | 5,953 | |||
Operating Leases, Rent Expense, Net | 34,504 | 33,157 | |||
President | |||||
Accrued payroll due officers | $ 1,716,996 | $ 1,716,996 | |||
Debt Instrument, Interest Rate, Stated Percentage | 9.00% | 9.00% | |||
Accrued rents | $ 139,256 | $ 139,256 | 105,734 | ||
Vice President | |||||
Accrued payroll due officers | 121,140 | 121,140 | |||
Management | |||||
Interest Expense | 78,140 | $ 64,751 | |||
Accrued interest | $ 598,482 | 598,482 | $ 520,342 | ||
Director | |||||
Directors Fees | $ 15,000 |
Note 10. Commitments and Cont40
Note 10. Commitments and Contingencies (Details) - USD ($) | Mar. 31, 2014 | Jun. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2014 |
Notes Payable, Noncurrent | $ 152,500 | $ 137,500 | ||
Accrued fines and penalties | 16,700 | $ 7,650 | ||
ESOP Plan | ||||
Accrued fines and penalties | $ 16,200 | |||
College Health Investment LP V Diamondhead Casino Corporation | ||||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | |||
College Health Investment LP V Diamondhead Casino Corporation | Principal | ||||
Loss Contingency, Damages Sought, Value | $ 150,000 | |||
College Health Investment LP V Diamondhead Casino Corporation | Interest | ||||
Loss Contingency, Damages Sought, Value | $ 45,000 | |||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | |||
College Health Investment LP V Diamondhead Casino Corporation 2 | ||||
Loss Contingency, Damages Sought, Value | $ 150,000 | |||
CollegeHealthInvestmentLP V 5 Others | ||||
Loss Contingency, Damages Sought, Value | 150,000 | |||
United States Bankruptcy Court | ||||
Loss Contingency, Damages Sought, Value | 237,500 | |||
Litigation Settlement, Amount Awarded from Other Party | $ 54,886 | |||
College Health Investment LP | ||||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 5.00% | |||
Mississippi Property | ||||
Secured Debt | $ 250,000 | |||
Management | ||||
Lien Amount | 2,000,000 | |||
Collateralized Convertible Senior Debentures | Investor | Mississippi Property | ||||
Lien Amount | $ 1,850,000 | $ 1,850,000 | ||
Collateralized Convertible Senior Debentures | Investor | Tranche 2 | ||||
Debt Instrument, Face Amount | $ 850,000 | |||
Collateralized Convertible Senior Debentures | Management | Mississippi Property | ||||
Lien Amount | $ 2,000,000 |
Note 11. Subsequent Events (Det
Note 11. Subsequent Events (Details) - USD ($) | Jul. 26, 2017 | Jul. 24, 2017 | Jun. 30, 2017 |
President | |||
Debt Instrument, Face Amount | $ 20,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 9.00% | ||
Debt Instrument, Covenant Description | The president is advancing the foregoing funds on condition that: (i) interest of 15% per annum be paid on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the principal amount of $20,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property ("the Third Lien") together with the Chairman's Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V) | ||
Loan to obtain | $ 25,000 | ||
Loan to obtain 2 | $ 15,000 | ||
Property Tax Loan | Board of Directors Chairman | |||
Payments for Other Taxes | $ 66,133 | ||
Debt Instrument, Fee Amount | 1,495 | ||
Debt Instrument, Face Amount | $ 67,628 | ||
Debt Instrument, Interest Rate, Stated Percentage | 4.00% | ||
Debt Instrument, Covenant Description | (i) the advance constitute a lien with interest at 4% per annum under that Land Deed of Trust recorded September 26, 2014; (ii) he be paid additional interest of 11% per annum on the amount advanced and owing and that the full 11% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (iii) this additional interest obligation be treated as a separate and secured debt of the Company, to be evidenced by a separate note and to be secured with a separate and third lien to be placed on the Diamondhead Property (hereafter "the Third Lien"); (iv) the entire obligation will be treated as an advance to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland (Case No. 426962-V); and (v) he be indemnified for any losses sustained on the sale of that common stock sold to cover the credit card payments. The Chairman has identified the common stock to be sold and will provide the Company with the documentation required to document the sale of said stock and to calculate the future loss, if any, on said stock |