| Long Term Notes Payable | Note 8. Long Term Notes Payable In 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 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 two foregoing loan
arrangements totals $137,500. 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 in principle) and certain executives and directors ($2 million), as outlined in Note 11. On July 26, 2017, at the request of the Company,
the current Chairman of the Board of Directors, who is also 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 400-acre tract
of land (“the Diamondhead Property”), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company.
The total amount advanced was $67,628. 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. Mississippi
Gaming Corporation issued a secured promissory note to the Chairman for an amount up to $100,000 to cover the principal and interest
due on this advance and will place a third lien on the Diamondhead Property to secure this obligation for $100,000. 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. In March of 2018, the
Board of Directors voted to increase to up to $100,000 the amount to be secured by a to-be-placed third lien in favor of the President
of the Company for amounts advanced by the President under this note, on the following terms and conditions, namely, that (i) she
be paid interest of 15% per annum 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 maximum principal amount of $100,000 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) that 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) that 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). As of June 30, 2018 and December 31, 2017,
the President had advanced a total of $31,033 and $20,000, respectively, under this agreement. 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 due non-related
parties discussed above. The President is also personally liable for certain bank-issued credit cards used by the Company to pay
expenses incurred by the Company in the approximate amount of $15,000. Mississippi Gaming Corporation issued a secured promissory
note to the President for an amount up to $100,000 to cover the principal and interest due on these advances and will place a third
lien on the Diamondhead Property to secure this obligation for $100,000. In October 2017, the Company entered into a
settlement with a holder of $150,000 of convertible notes as described in Note 5, above. The note holder was also a plaintiff in
three lawsuits against the Company as is more fully discussed in Note 11. As part of the settlements, the Company agreed to pay
legal fees in the amount of $50,000 and issued a four year note at 0% interest to satisfy this obligation. In March of 2018, the Board of Directors voted
to increase up to an additional $200,000 the amount to be secured by a to-be-placed third lien in favor of the Chairman of the
Board, for amounts advanced by the Chairman on behalf of the Company, on the following terms and conditions, namely, that (i) the
advance constitutes a lien on the Diamondhead Property with interest at 15% per annum; (ii) that the full interest of 15% per annum
is payable during any calendar year in which all or part of the amount advanced is due and owing or interest due thereon remains
unpaid; (iii) that this debt be evidenced by a separate promissory note and is to be included in and secured with a third lien
that is to be placed on the Diamondhead Property to secure previous advances made to the Company (hereafter “the Third Lien”);
(iv) that he be indemnified for any losses sustained on the sale of his common stock in an unrelated publicly-traded company to
be sold to cover this advance based on a sales price of approximately $2.80 per share with a cap on the maximum loss per share
to be at a sales price of $10.00 per share; and (v) that the Chairman’s previous indemnification approved by the Board of
Directors on July 24, 2017 with respect to any loss on the sale of the same stock also be capped at a maximum of $10.00 per share.
The Chairman will provide the Company with the documentation required to document the sale of said stock and to calculate the losses
on said stock for all amounts loaned to the Company from the sale of said stock. As of June 30, 2018, the Chairman had advanced
a total of $150,000 on behalf of the Company in 2018. Mississippi Gaming Corporation issued a secured promissory note to the Chairman
for an amount up to $200,000 to cover the principal and interest on these advances and will place a third lien on the Diamondhead
Property to secure this obligation for $200,000. Therefore, the third lien to be placed on the
Diamondhead Property will secure three promissory notes which total up to $400,000 and which are payable to the Chairman of the
Board ($300,000) and President ($100,000) of the Company. The tables below summarize the Company’s
long-term notes payable as of June 30, 2018 and December 31, 2017: June 30, 2018
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 -
2 Year 4%/15% secured note due Chairman (2017) 67,628 67,628 -
2 Year 15% secured note due President 31,033 31,033 -
4 Year 0% note 50,000 - 50,000
2 Year 15% secured note due Chairman (2018) 150,000 150,000 -
Balance June 30, 2018 $ 436,161 $ 363,661 $ 72,500 December 31, 2017
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 -
2 Year 12.5% secured note 15,000 - 15,000
2 Year 4%/15% secured note due Chairman (2017) 67,628 67,628 -
2 Year 15% secured note due President 20,000 20,000 -
4 Year 0% note 50,000 - 50,000
Balance December 31, 2017 $ 290,128 $ 202,628 $ 87,500 |
