RELATED PARTY DEBT AGREEMENTS |
9 Months Ended | |
|---|---|---|
Mar. 31, 2016 | ||
| Debt Disclosure [Abstract] | ||
| RELATED PARTY DEBT AGREEMENTS |
NOTE 4 - RELATED PARTY DEBT AGREEMENTS Between October 2011 and September 2012, the Company entered into three debt agreement with Esenjay Investments, LLC (“Esenjay”). Esenjay is deemed to be a related party as Mr. Michael Johnson, the sole shareholder and a director of Esenjay is a current member of our board of directors and a major shareholder of the Company (with beneficial ownership of approximately 65% as of March 31, 2016). The three debt agreements consisted of a Bridge Loan Promissory Note, a Secondary Revolving Promissory Note and an Unrestricted Line of Credit (collectively, the “Loan Agreements”). On December 31, 2015, the Bridge Loan Promissory Note and the Secondary Revolving Promissory Note expired leaving the Unrestricted Line of Credit, with a maximum borrowing amount of $2,500,000, available for future draws. As discussed below, on March 29, 2016, the Unrestricted Line of Credit was amended resulting in an increase in the maximum borrowing amount to $3,500,000. Additional borrowings under the Unrestricted Line of Credit are subject to pre-approval by Esenjay and Esenjay has no obligation to loan additional funds under such agreements. The borrowings bear an interest rate at 6% per annum and mature on July 30, 2016. Between July 1, 2014 and March 31, 2016, we borrowed an aggregate of $4,475,000 pursuant to these various debt agreements with Esenjay. On September 3, 2015, we entered into a Loan Conversion Agreement with Esenjay (“Conversion Agreement”), as amended on October 6, 2015 and November 13, 2015, pursuant to which we agreed to issue 51,171,025 shares of our common stock (based on $0.04 per share) in exchange for the cancellation of $2,000,000 (“Principal Amount”) of the total $2,200,000 outstanding under the Loan Agreements, plus $46,841 in accrued interest on such Principal Amount as of September 3, 2015 (the accrued interest together with the Principal Amount referred to as the “Debt”). In connection with the Conversion Agreement, as amended, on September 9, 2015, we issued 51,171,025 shares (“Esenjay Shares”) to Esenjay in exchange for cancellation of the Debt. The Esenjay Shares have not been registered under the Securities Act. The Esenjay Shares were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act. The debt conversion has been accounted for as a capital transaction in accordance with FASB ASC Topic No. 470-50, “Debt, Modifications and Extinguishments”. Accordingly, no gain or loss has been recognized. On December 29, 2015, we entered into a Second Amendment to the Unrestricted Line of Credit (“Second Amendment”), with Esenjay, pursuant to which we agreed to amend certain terms of the Unrestricted Line of Credit agreement dated September 24, 2012 and amended on October 16, 2013. Under the Second Amendment, the agreement was modified and amended to (i) extend the maturity date to July 30, 2016; (ii) increase the maximum principal amount available from $2,000,000 to $2,500,000; and (iii) reduce the conversion price from $0.30 to $0.06. The estimated change in fair value of the conversion price of approximately $310,000 was determined to be a debt issuance cost, and accordingly, was recorded as a deferred financing cost at the date of the Second Amendment to be amortized over the remaining seven-month term of the amended Unrestricted Line of Credit agreement. During the nine months ended March 31, 2016, we recorded $133,000 of deferred financing amortization costs, which are included in interest expense in the accompanying condensed consolidated statements of operations. On March 29, 2016, we entered into a Third Amendment to the Unrestricted Line of Credit with Esenjay, pursuant to which the maximum principal amount available was increased to $3,500,000. As of March 31, 2016, the net amount owed to Esenjay under the Unrestricted Line of Credit was $2,475,000. In April 2016, $1,350,000 of the outstanding debt under this agreement was settled via the issuance of 33,750,000 shares of our common stock and during the period April 1, 2016 through May 13, 2016, the Company borrowed an aggregate of $370,000 (See Note 12).
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