The Ehrlich Promissory Note C is an unsecured demand note with Mr. Ehrlich, the Company’s Chairman and CEO, that originated in 2010, bears 9% simple interest per annum and is convertible into the Company’s Class A common stock at $0.50 per share.

On May 8, 2012, the Company did not have the ability to repay the Ehrlich Promissory Note C loan of approximately $2,022,000 and agreed to change the interest rate from 9% simple interest to 10% simple interest, and the Company issued 2,000,000 Equity Incentive Options exercisable at $0.51 per share equal to 110% of the closing bid price of $0.46 per share on May 7, 2012. Options are valid for ten years from the date of issuance.

On January 29, 2019, the Company issued 909,090 shares of Class B common stock at the option exercise price of $0.11 per share to Mr. Ehrlich, the Company’s Chairman and CEO, for his partial exercise of his option, paid by the cancellation of debt to Mr. Ehrlich of $100,000 to satisfy the exercise price (as permitted pursuant to the terms of the option agreement).

As of December 31, 2019 and June 30, 2019, the principal balance of this convertible note payable to Mr. Ehrlich, the Company’s Chairman and CEO was approximately $1,922,000 after the above mentioned cancellation of debt of $100,000 to satisfy the exercise price of his option on January 29, 2019.

During the six months ended December 31, 2019 and 2018, the Company accrued interest of $96,000 and $101,000 to Mr. Ehrlich, respectively and paid the interests in cash of $66,000 and $114,000 to Mr. Ehrlich, respectively. As of December 31, 2019 and June 30, 2019, the balance of accrued interest payable were $67,000 and $36,000, respectively (see Note 5. Accrued Expenses – Related Parties and Other to the condensed consolidated financial statements).

As of December 31, 2019 and June 30, 2019, the total outstanding balances of principal and interest were approximately $1,989,000 and $1,959,000, respectively.