On January 15, 2014, the Company issued 3,401,360 shares of unregistered common stock in a private placement to Lone Star Value Investors, LP, an entity controlled by a former director and officer of the Company, for cash proceeds of $50,000
. The proceeds of this issuance were used to assist in funding the Company's operating expenses.
On June 6, 2014, a shareholder, Lone Star Value Investors, LP, issued a promissory note to the Company in the amount of $50,000 (2014 Note). The proceeds of the note are being used for ongoing operating expenses. The loan bears interest at 10% per annum. Interest on the loan and the full amount of the principal is to be repaid on June 30, 2019.
On August 2, 2016, the Company issued a promissory note to an affiliate of a shareholder in the amount of $40,000 (2016 Note). The proceeds of the 2016 Note will be used for ongoing operating expenses. The 2016 Note bears interest at 10% per annum. Interest and principal on the 2016 Note is to be repaid on August 31, 2021, and all payments are subordinate to the payment of all outstanding amounts due under the 2014 Note.
During the three months ended March 31, 2018 and March 31, 2017, the Company recognized aggregate interest expense in the amount of $2,219 and $2,213 respectively. Total accrued interest on the 2014 Loan and 2016 Loan is $25,743 as of March 31, 2018, and is included as a component of long-term liabilities on the accompanying balance sheets.
5. SUBSEQUENT EVENTS
Effective May 11, 2018 Alexander Rosenbluth resigned from his Director position on the Board of Directors. Mr. Rosenbluth's resignation was for personal reasons and not the result of any disagreement. Effective upon Mr. Rosenbluth's resignation on May 11, 2018, Mrs. Julia Dayton and Mr. Shawn Miles were appointed to the Company's Board of Directors to fill vacancies on the Board of Directors.
Also immediately following the effectiveness of Mr. Rosenbluth's resignation. Mrs. Dayton, was appointed, to the executive position of Secretary, and Mr. Miles, a new Director was appointed to the executive position of Treasurer.
The Company filed a Public Information Report with the Office of the Secretary of the State of Texas to identify the directors as Hannah Bible, Julia Dayton, and Shawn Miles, each with an address c/o Reliability, Inc., 53 Forest Avenue, First Floor, Old Greenwich, Connecticut 06870.
No other material subsequent events have occurred since March 31, 2018 that require recognition or disclosure in the financial statements.