0001185185-15-002948.txt : 20151113 0001185185-15-002948.hdr.sgml : 20151113 20151113154455 ACCESSION NUMBER: 0001185185-15-002948 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20150930 FILED AS OF DATE: 20151113 DATE AS OF CHANGE: 20151113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Guardian 8 Holdings CENTRAL INDEX KEY: 0001429592 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 260674103 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54891 FILM NUMBER: 151228993 BUSINESS ADDRESS: STREET 1: 7432 E. TIERRA BUENA LANE STREET 2: SUITE 102 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 BUSINESS PHONE: 877-659-6007 MAIL ADDRESS: STREET 1: 7432 E. TIERRA BUENA LANE STREET 2: SUITE 102 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 FORMER COMPANY: FORMER CONFORMED NAME: Global Risk Management & Investigative Solutions DATE OF NAME CHANGE: 20080312 10-Q 1 guardian8holdings10q093015.htm 10-Q guardian8holdings10q093015.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
 
 
FORM 10-Q
 
 
x           QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-150954

GUARDIAN 8 HOLDINGS
(Exact name of registrant as specified in its charter)

Nevada
26-0674103
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

7432 East Tierra Buena Lane
Suite 102
Scottsdale, Arizona
 
 
85260
(Address of principal executive offices)
(Zip Code)

(877) 659-6007
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨
Accelerated filer ¨
   
Non-accelerated filer ¨  (Do not check if a smaller reporting company) 
Smaller reporting company x
                                         
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨    No x

The number of shares of Common Stock, $0.001 par value, outstanding on November 10, 2015, was 61,315,071, not including 917,681 shares authorized but unissued. 
 
 
TABLE OF CONTENTS
 
 
 
PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements
GUARDIAN 8 HOLDINGS
Condensed Consolidated Balance Sheets
(Unaudited)
 
   
September 30, 
2015
    
December 31,
2014
  
Assets
            
             
Current assets:
            
Cash
   $ 80,001     $ 491,988  
Accounts receivable, net of allowance for doubtful accounts of
$478 as of September 30, 2015 and $4,978 as of December 31, 2014
     16,698       12,626  
Prepaid loan costs
     138,011       487,271  
Prepaid expenses, other
     35,539       50,809  
Inventory
     1,351,242       1,459,306  
Total current assets
     1,621,491       2,502,000  
                 
Property and equipment:
                
Fixed assets, net of accumulated depreciation of $176,856 and $116,863
as of September 30, 2015 and December 31, 2014
     207,483       255,260  
                 
Patent, net of accumulated amortization of $6,198 and $4,698
as of September 30, 2015 and December 31, 2014
     27,922       29,422  
                 
Rent and utility deposits
     11,180       11,180  
                 
Total assets
   $ 1,868,076     $ 2,797,862  
 
 
GUARDIAN 8 HOLDINGS
Condensed Consolidated Balance Sheets
(Unaudited)
 
   
September 30,
2015
    
December 31,
2014
  
Liabilities and Stockholders’ Deficit
                
                 
Current liabilities:
                
Accounts payable and accrued expenses
  
$
596,191
    
$
235,555
  
Deferred revenue
    
14,544
      
4,513
  
Accrued interest
                
Related
    
5,058
      
14,071
  
Unrelated
    
58,973
      
311,603
  
Convertible senior secured debentures, net of discount of $2,113,383 and $1,120,509 as of September 30, 2015 and December 31, 2014
                
Related
    
402,865
      
246,548
  
Unrelated
    
4,691,252
      
5,457,943
  
Convertible note payable, net of discount of $36,767 as of September 30, 2015
    
83,983
      
-
  
Derivative liability
    
2,193,898
      
-
  
Total current liabilities
    
8,046,764
      
6,270,233
  
                 
                 
Stockholders’ deficit:
                
Preferred stock, $0.001 par value, 10,000,000 shares authorized;
no shares issued and outstanding
    
-
      
-
  
Common stock, $0.001 par value, 100,000,000 shares authorized;
issued and outstanding of 60,515,071 and 41,416,113 at September 30, 2015 and December 31, 2014
    
60,516
      
41,416
  
Common stock owed but not issued: 917,681 and 1,127,859
at September 30, 2015 and December 31, 2014
    
917
      
1,128
  
Paid in capital
    
20,509,400
      
9,997,061
  
Accumulated deficit
    
(26,749,521
)
    
(13,511,976
)
Total stockholders’ deficit
    
(6,178,688
)
    
(3,472,371
)
Total liabilities and stockholders’ deficit
  
$
1,868,076
    
$
2,797,862
  
 
The accompanying notes are an integral part of the consolidated financial statements. 
 

GUARDIAN 8 HOLDINGS
Condensed Consolidated Statement of Operations
(Unaudited)
 
   
For the Three
    
For the Three
    
For the Nine
    
For the Nine
  
   
Months Ended
    
Months Ended
    
Months Ended
    
Months Ended
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
   
2015
    
2014
    
2015
    
2014
  
                         
Revenues
  
$
61,954
    
$
20,334
    
$
157,262
    
$
39,346
  
Cost of sales
    
32,533
      
13,397
      
86,767
      
27,501
  
Gross profit
    
29,421
      
6,937
      
70,495
      
11,845
  
                                 
Depreciation and amortization
    
23,100
      
24,858
      
67,500
      
68,001
  
General and administrative expenses
    
526,377
      
1,184,489
      
2,422,227
      
2,973,393
  
     
549,477
      
1,209,347
      
2,489,727
      
3,041,394
  
Loss from operations
    
(520,056
)
    
(1,202,410
)
    
(2,419,232
)
    
(3,029,549
)
                                 
Other income (expense):
                                
Interest income
    
-
      
1,262
      
-
      
1,999
  
Interest expense
    
   (1,041,025
)
    
(572,155
)
    
(2,506,270
)
    
(1,213,532
)
Loss in extinguishment of debt
    
-
      
-
      
(6,118,145
)
    
-
  
Change in fair value of derivative liability
    
838,603
      
-
      
(2,193,898
)
    
-
  
Total other income (expense)
    
(202,422
)
    
(570,893
)
    
(10,818,313
)
    
(1,211,533
)
Loss before income tax
    
(722,478
)
    
(1,773,303
)
    
(13,237,545
)
    
(4,241,082
)
Provision for income tax expense
    
-
      
 -
      
-
      
 -
  
Net loss
  
$
(722,478
)
  
$
(1,773,303
)
  
$
(13,237,545
)
  
$
(4,241,082
)
                                 
                                 
Net loss per share - basic
  
$
(0.01
)
  
$
(0.04
)
  
$
(0.27
)
  
$
(0.10
)
                                 
Weighted average shares outstanding – basic
    
58,650,456
      
41,172,560
      
49,867,454
      
40,806,423
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
Guardian 8 Holdings
Condensed Consolidated Statement of Stockholders’ Equity
 For the Nine Months Ended September 30, 2014 and the Year Ended December 31, 2013
(Unaudited)
 
   
Common Stock Issued
    
Common Stock Owed but Not Issued
    
Paid in
    
Accumulated
    
Total Stockholders’
  
   
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
    
Equity
  
                                           
Balance January 1, 2014
    
37,274,292
      
37,273
      
2,855,979
      
2,856
      
6,629,143
      
(7,004,557
)
    
(335,285
)
                                                         
Issuance of common stock previously owed
    
2,855,979
      
2,856
      
(2,855,979
)
    
(2,856
)
    
-
      
-
      
-
  
Common stock issued for compensation
    
171,375
      
172
      
362,859
      
363
      
255,735
      
-
      
256,270
  
Common stock issued for services
    
696,960
      
697
      
430,000
      
430
      
533,427
      
-
      
534,554
  
Common stock issued for director fees
    
60,000
      
60
      
335,000
      
335
      
187,397
      
-
      
187,792
  
Conversion of debentures payable and interest into common stock
    
357,507
      
358
      
-
      
-
      
178,396
      
-
      
178,754
  
Discounts on notes payable
            
-
      
-
      
-
      
2,027,088
      
-
      
2,027,088
  
Private placement fees
    
-
      
-
      
  -
      
  -
      
185,875
      
-
      
185,875
  
Net loss for the year
    
-
      
-
      
-
      
-
      
-
      
(6,507,419
)
    
(6,507,419
)
Balance December 31, 2014
    
41,416,113
      
41,416
      
1,127,859
      
1,128
      
9,997,061
      
(13,511,976
)
    
(3,472,371
)
                                                         
Issuance of common stock previously owed
    
802,859
      
803
      
(802,859
)
    
(803
)
    
-
      
-
      
-
  
Common stock issued for services
    
105,000
      
105
      
360,000
      
360
      
137,085
      
-
      
137,550
  
Exercise of warrants
    
90,000
      
90
      
25,000
      
25
      
28,635
      
-
      
28,750
  
Common stock sold for cash
    
7,312,001
      
7,312
      
-
      
-
      
541,088
      
-
      
548,400
  
Common stock issued for debenture interest
    
6,022,432
      
6,023
      
207,681
      
207
      
692,082
      
-
      
698,312
  
Revaluation of Class A and Class B warrants
    
-
      
-
      
-
      
-
      
35,711
      
-
      
35,711
  
Conversion of debentures payable and interest into common stock
    
4,766,666
      
4,767
      
-
      
-
      
352,733
      
-
      
357,500
  
Recognition of discount on changes in fair values of warrants
    
-
      
-
      
-
      
-
      
535,100
      
-
      
535,100
  
Reduction of conversion price of debentures
    
-
      
-
      
-
      
-
      
7,969,780
      
-
      
7,969,780
  
Recognition of discount on June 2015 debenture issuances
    
-
      
-
      
-
      
-
      
220,125
      
-
      
220,125
  
                                                         
Net loss for the nine months
    
-
      
-
      
-
      
-
      
-
      
(13,237,545
)
    
(13,237,545
)
Balance, September 30, 2015
    
60,515,071
    
$
60,516
      
917,681
    
$
917
    
$
20,509,400
    
$
(26,749,521
)
  
$
(6,178,688
)
 
The accompanying notes are an integral part of these consolidated financial statements. 
 
 
Guardian 8 Holdings
Condensed Consolidated Statement of Cash Flows
(Unaudited)
 
   
For the Nine Months Ended
    
For the Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2015
    
2014
  
Cash flows from operating activities:
            
Net loss
  
$
(13,237,545
)
  
$
(4,241,082
)
Adjustments to reconcile net loss to net cash (used) from operating activities:
                
Stock issued for services
    
137,550
      
483,812
  
Stock issued for compensation
    
-
      
80,625
  
Stock issued as debenture interest payments
    
697,669
      
-
  
Depreciation and amortization
    
67,500
      
68,001
  
Revaluation of warrants and convertible debt
    
5,920,078
      
-
  
Amortization of discount on notes payable
    
-
      
154,881
  
Amortization of discount on convertible debentures
    
     1,848,407
      
 377,503
  
Change in fair value of derivative liability
    
2,193,898
      
-
  
Allowance for bad debts
    
       (4,500)
      
        4,978
  
Change in operating assets and liabilities:
                
Accounts receivable
    
428
      
(8,175
)
Prepaid loan costs
    
349,260
      
(303,949
) 
Prepaid expenses
    
15,270
      
149,549
  
Deposits on inventory
    
-
      
89,984
 
Inventory
    
108,064
      
(1,177,463
) 
Rent and security deposits
    
-
      
(11,180
) 
Accounts payable and accrued expenses
    
360,636
      
(39,382
)
Deferred revenue
    
10,031
      
1,175
  
Accrued interest
    
(261,643)
      
148,855
  
Net cash (used) by operating activities
    
(1,794,897
)
    
(4,221,868
)
Cash flows from investing activities:
                
Purchase of property and equipment
    
(18,223
)
    
(105,756
)
Net cash (used) by investing activities
    
(18,223
)
    
(105,756
)
Cash flows from financing activities:
                
Proceeds from common stock sales
    
548,400
      
-
  
Proceeds from exercising warrants
    
28,750
      
-
  
Proceeds from notes payable, related parties
    
-
      
475,000
  
Proceeds from notes payable, unrelated parties
    
83,983
      
25,000
  
Proceeds from bank line of credit
    
-
      
900,000
  
Proceeds from convertible senior secured debentures
    
740,000
      
7,000,000
  
Repayment of notes payable, related parties
    
-
      
(1,498,933
) 
Repayment of notes payable, unrelated parties
    
-
      
(125,000
) 
Repayment of bank line of credit
    
-
      
(900,000
) 
Cash flows from financing activities
    
1,401,133
      
5,876,067
  
                 
Net increase (decrease) in cash and cash equivalents
    
(411,987)
      
1,548,443
  
Cash and cash equivalents, beginning of period
    
491,988
      
305,649
  
                 
Cash and cash equivalents, end of period
  
$
80,001
    
$
1,854,092
  
                 
Supplemental cash flow information:
                
Interest paid in cash
  
$
-
    
$
86,638
  
Number of shares issued for interest
    
6,230,113
      
-
  
Interest paid in common stock
  
$
697,669
          
Income taxes paid
  
$
-
    
$
-
  
Non-cash financing activity:
                
Loan fees incurred in conjunction with warrants granted to placement agent in convertible debenture offering
  
 $
1,477
    
 $
     185,874
  
Stock issued for services
  
$
137,550
    
$
483,812
  
Number of shares issued for services
    
465,000
      
1,023,519
  
Stock issued for compensation
  
$
-
    
$
80,625
  
Number of shares issued for compensation
    
-
      
159,375
  
Discount on notes payable
  
$
36,767
    
$
1,698,766
  
Amount of debt converted
  
$
357,500
      
-
  
Number is shares issued on conversion of debt
    
4,766,666
      
-
  
Discount recognized on debentures payable
  
$
220,125
      
-
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
Guardian 8 Holdings
Notes to Condensed Consolidated Financial Statements

Note 1 – Company Organization and Summary of Significant Accounting Policies
 
Organization

Guardian 8 Corporation (“Guardian 8”) was incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation.  In August of 2009, the Company changed its name to Guardian 8 Corporation.  The Company’s principle offices are located in Scottsdale, Arizona.
 
Effective November 30, 2010, we merged with Global Risk Management & Investigative Solutions (“Global Risk”), a public company with its common stock registered with the United States Securities and Exchange Commission.  The Company merged into a newly formed wholly owned subsidiary of Global Risk, with the Company being the surviving corporation.  Post-merger, Global Risk changed its name to Guardian 8 Holdings.
 
Basis of presentation
 
These interim financial statements are condensed and should be read in conjunction with the Company’s December 31, 2014 annual statements included in the Form 10-K filed on March 31, 2015.
 
Principles of consolidation
 
For the three and nine months ended September 30, 2015 and 2014, and for the year ended December 31, 2014, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.
 
Cash and cash equivalents

Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.  At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.  As of September 30, 2015 and December 31, 2014, there were cash equivalents of $80,001 and $491,988 respectively. 

Inventory

During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its Pro V2 from its contract manufacturer.  These deliveries were part of the Company’s initial purchase orders totaling 11,800 units.  The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States.  The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection.  The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred.  As of September 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders and has reserved $59,510 to offset any units scrapped during inspection of units not yet performed as of this date.  No additional purchase orders are pending.  As of September 30, 2015 there are approximately 10,400 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months. Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or market.  Inventories include the cost of inbound shipping, duty and receiving inspection.  Inventory obsolescence is examined on a regular basis.  Currently there is no inventory considered obsolete.

Accounts receivable
 
Accounts receivable are customers outstanding balances carried on a gross basis less allowance for doubtful accounts.  Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of our customers, and the amount and age of past due accounts.  Receivables are considered past due if full payment is not received by the contractual due date.  Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.  We review these policies on a quarterly basis and based on these reviews, we believe we maintain adequate reserves.  At September 30, 2015 and December 31, 2014, the allowance for doubtful accounts was $478 and $4,978, respectively. Interest is not accrued on overdue accounts receivable.


Revenue recognition

Revenues are recognized in accordance with ASC subtopic 605-10, “Revenue Recognition”.  The company recognizes revenue from sales of product upon delivery to its customers where the fee is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.  Revenues for the nine months ended September 30, 2015 and 2014 were $157,262 and $39,346, respectively.

Warranty

The Company offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device.  These fees are intended to cover the handling and repair costs and include a profit.  One year extended warranties that provide additional coverage beyond the limited warranty are offered for specified fees. Revenue derived from the sale of extended warranties are deferred and amortized over the duration of the warranty period.  As of September 30, 2015 and December 31, 2014, the Company recorded $14,544 and $4,513 as deferred revenue, respectively.  Extended warranty expense for the nine months ended September 30, 2015 and 2014 was $6,579 and $955, respectively.
 
Research and development costs

The Company expenses all costs of research and development as incurred. Research and development expenses included in general and administrative expenses totaling $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014 respectively. 

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.  All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01.  Adjustments include appropriate estimates for arrangements normally determined or settled at year-end.  All adjustments are of a normal and recurring nature.

Property and equipment

Property and equipment are stated at cost.  Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.

The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: 
 
Equipment
2-5 years
Tooling
10 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years
                                                      
Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, debentures payable and related accrued interest, and derivative liability.  Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.  See Note 14 for further details.
 

Impairment of long-lived assets

ASC 360, “Accounting for the Impairment of Long-Lived Assets to be Disposed Of”, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future new cash flows expected to result from the asset, including eventual disposition.  If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.  The Company did not have impaired assets during the nine months ended September 30, 2015 and 2014. 
 
Net loss per share

Net Loss per share is provided in accordance with ASC 260-10, “Earnings Per Share” that requires the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with ASC 260-10, any anti-dilutive effects on net income (loss) per share are excluded.  For the nine months ended September 30, 2015 and 2014, the denominator in the diluted earnings per share computation is the same as the denominator for basic earnings per share due to the anti-dilutive effect of the warrants on the Company’s net loss.  Diluted earnings (loss) per share is not presented since the effect of the assumed conversion of warrants would have an anti-dilutive effect. Potential common shares as of September 30, 2015 that have been excluded from the computation of diluted net loss per share amounted to 23,709,523 from warrants and debt totaling $7,207,500 that is convertible into 96,100,000 common shares.
 
Income taxes

The Company follows ASC subtopic 740-10, “Accounting for Income Taxes”, for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.  See Note 15 for further details.

 Recent pronouncements

The Company has evaluated all new accounting pronouncements as of the issue date of these financial statements and has determined that none have or will have a material impact on the financial statements or disclosures.

Note 2 – Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles and under the assumption that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.  As of September 30, 2015, the Company has an accumulated deficit of $26,749,521, and the Company’s current liabilities exceed current assets by $6,425,273.
 
The Company’s activities since inception have been financially sustained by issuance of common stock, debentures and related party loans. The Company intends to raise additional funding to continue its operations through contributions from the current shareholders and stock issuance to other investors and additional investment in debentures.
 
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock, repay its outstanding debt, and, ultimately, to achieve of significant operating revenues.  The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.
 

Note 3 – Prepaid loan costs

During the year ended December 31, 2013, the Company issued notes payable that include a three-year warrant for each $1.00 of principal covered in the notes.   The warrants are exercisable at $0.40 per share (See Note 7).  The warrants issued were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $296,524.  As of September 30, 2015, the loan costs were fully amortized.

During the nine months ended September 30, 2014, the Company issued notes payable that included a three-year warrant for each $1.00 of principal covered in the notes.  The warrants are exercisable at $0.50 per share (See Note 7).  The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $154,881. As of September 30, 2015, the loan costs were fully amortized.

On May 27, 2014, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $632,786, which are being amortized over eighteen months, which is the period for which the debentures were due. As of September 30, 2015 and December 31, 2014, the balance on these loan costs was $65,910 and $382,305, respectively.

On June 2, 2014, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $177,153, which are being amortized over eighteen months, which is the period for which the debentures were due.  As of September 30, 2015 and December 31, 2014, the balance on these loan costs was $16,631 and $104,966, respectively.

On June 2, 2015, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $77,654, which are being amortized over fourteen months, which is the period for which the debentures are due.  As of September 30, 2015, the balance on these prepaid loan costs was $55,470.
 
Note 4 – Property and equipment

Property and equipment consists of the following:
 
   
September 30,
2015
    
December 31,
2014
  
Equipment
  
$
98,459
    
$
96,379
  
Tooling
    
127,436
      
127,436
  
Computer equipment
    
58,415
      
42,272
  
Warehouse equipment
    
11,649
      
11,649
  
Leasehold Improvements
    
54,452
      
60,459
  
Furniture and fixtures
    
33,928
      
33,928
  
     
384,339
      
372,123
  
Less accumulated depreciation
    
(176,856
)
    
(116,863
) 
   
$
207,483
    
$
255,260
  
 
Note 5 – Deposit on Inventory

As of September 30, 2015 the Company had no outstanding deposits on inventory or prepaid inventory in transit.  On December 31, 2014 the Company had prepaid inventory of $22,674 which was in transit from the manufacturer and received in January 2015.

Note 6 – Bank line of credit

On January 17, 2014, the Company entered into a revolving line of credit agreement with Cornerstone Bank, N.A.  The agreement provided for an aggregate of up to $700,000, which was increased to $900,000 on April 28, 2014, at any time outstanding pursuant to a revolving line of credit and matured on January 16, 2015.  The agreement was secured by inventory, work in process, accounts receivable, a letter of credit, and was personally guaranteed by the Company’s Chief Executive Officer/President.  Interest was at 6% per annum, with monthly interest payments to be paid by the Company.
 

As part of the agreement, the Company entered into a Letter of Credit Rights Control Agreement with F&M Bank & Trust Company.  Per this agreement, if the Company were to default on the line of credit, F&M Bank & Trust Company would then be held liable to Cornerstone Bank, N.A. for the payment of the line of credit.  In addition, the Company would then owe the amount disbursed to F&M Bank & Trust Company.  As of September 30, 2014, the bank line of credit was fully paid and the pledged letter of credit terminated.
 
Note 7 – Notes payable

On September 1, 2013, the Company had a total of $615,000 of the original $650,000 in notes payable outstanding to its CEO and directors, with an additional $33,933 owed in accrued interest.  This debt, previously due on September 1, 2013 through November 30, 2013, was exchanged for three new unsecured notes payable totaling $648,933.  Each of these notes were to mature on April 30, 2014, bearing interest at 12% per annum, and included a three-year warrant for every $1.00 of principal amount of each note.  The warrants were exercisable at $0.40 per share.  The notes were subsequently extended with a due date of July 15, 2014 however, the notes payable and related accrued interest were paid off as of June 30, 2014.
 
Issue Date
  
Interest Rate
    
Current Due Date
  
Amount
  
September 1, 2013
    
12.0
%
  
July 15, 2014
  
$
543,300
  
September 1, 2013
    
12.0
%
  
July 15, 2014
    
52,983
  
September 1, 2013
    
12.0
%
  
July 15, 2014
    
52,650
  
Total
            
$
648,933
  
  
On September 1, 2013 the Company issued a note payable in the amount of $45,000 from a related party in exchange for outstanding invoices owed for engineering services provided in the first nine months of the year.  The note is unsecured, bears interest at 12% per annum, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note was subsequently extended with a due date of July 15, 2014.

On September 18, 2013, the Company issued a note payable to the CEO and president of the Company in the amount of $50,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note was subsequently extended with a due date of July 15, 2014.

On September 19, 2013, the Company issued a note payable to a related party in the amount of $30,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note was subsequently extended with a due date of July 15, 2014.

On September 19, 2013, the Company issued a note payable to a related party in the amount of $250,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share. The note was subsequently extended with a due date of July 15, 2014.

On September 30, 2013, the Company issued a note payable in the amount of $100,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.   The warrants are exercisable at $0.40 per share. The note was subsequently extended with a due date of July 15, 2014.

As of December 31, 2013, the Company had notes payable of $1,123,933 and accrued interest of $42,158.  All amounts were due within twelve months.  The Company also recognized $296,524 of loan fees associated with the notes payable issued during the year ended December 31, 2013.  The loan fees were amortized over the term of the notes payable.

Issue Date
  
Interest Rate
    
Current Due Date
  
Amount
  
September 1, 2013
    
12.0
%
  
April 30, 2014
  
$
543,300
  
September 1, 2013
    
12.0
%
  
April 30, 2014
    
52,983
  
September 1, 2013
    
12.0
%
  
April 30, 2014
    
52,650
  
September 1, 2013
    
12.0
%
  
April 30, 2014
    
45,000
  
September 18, 2013
    
12.0
%
  
April 30, 2014
    
50,000
  
September 19, 2013
    
12.0
%
  
April 30, 2014
    
30,000
  
September 19, 2013
    
12.0
%
  
April 30, 2014
    
250,000
  
September 30, 2013
    
12.0
%
  
April 30, 2014
    
100,000
  
Total
              
$
1,123,933
  
 

These notes payable were paid with proceeds from the sale of debentures in June, 2014.

On February 12, 2014, the Company issued a note payable in the amount of $50,000 to a related party.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On February 24, 2014, the Company issued a note payable in the amount of $25,000 to a related party.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and includes a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On February 24, 2014, the Company issued a note payable in the amount of $400,000 to a related party.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On February 24, 2014, the Company issued a note payable in the amount of $25,000 to an unaffiliated Company.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On April 18, 2014, the Company issued a note payable in the amount of $90,000 to a related party.  The note was unsecured, bearing interest at 12% and was payable on July 15, 2014.  The note and related accrued interest were paid off in June 2014.

On May 9, 2014, the Company issued a note payable in the amount of $25,000 to a related party.  The note was unsecured, bearing interest at 12% and was payable on July 15, 2014.  The note and related accrued interest were paid off in June 2014.

These notes payable were paid June 2, 2014 from proceeds of the sale of debentures.  Notes payable balances were $0 as of June 30, 2015 and December 31, 2014.  Total interest expense on notes payable was $0 and $63,677 for the nine months ended September 30, 2015 and 2014, respectively.
 
On August 13, 2015 we completed the sale of a Convertible Promissory Note in the principal amount of $120,750 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between a New York corporation, and us.  The note matures on August 17, 2016. The VVG Note may be prepaid in whole or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the issue date, beginning at 110% of the outstanding principal and accrued interest increasing by 5% for every 30-day period thereafter until the 180th day following the Closing Date. After the expiration of the 180 days following the Closing Date, we may not prepay the Note for any reason.  At any time after 180 days after the date the note is issued it is convertible into our common stock, at buyer’s option, at a 25% discount to the market price, which is defined as 75% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading days prior to the conversion date.  The conversion price is subject to proportional adjustment in the event of stock splits, stock dividends, and similar corporate events.

Note 8 – Convertible Senior Secured Debentures

Through September 30, 2015, the Company has issued the following convertible Senior Secured Debentures:

The first closing was on May 27, 2014 for $5,250,000 with 8% interest and an amended maturity date of July 31, 2016.

The second closing was on June 2, 2014 for $1,750,000 with 8% interest and an amended maturity date of July 31, 2016.

The third closing was on June 2, 2015 for $625,000 with 8% interest and a maturity date of July 31, 2016.

The fourth closing was on July 31, 2015 for $50,000 with 8% interest and a maturity date of July 31, 2016.  The loan was from the Company’s President/CEO.

The fifth closing was on August 26, 2015 for $50,000 with 8% interest and a maturity date of July 31, 2016.  The loan was from the Company’s President/CEO.
 
 
The sixth closing was on September 14, 2015 for $15,000 with 8% interest and a maturity date of July 31, 2016.  The loan was from the Company’s President/CEO.
 
The maturity date for the first two closings was extended from November 30, 2015 to July 31, 2016 in accordance with the duly exercised First Amendment to Securities Purchase Agreement effective June 2, 2015.  The exercise price was reduced to $0.50 as of March 10, 2015, due to the sale of shares, in accordance with the requirements of the debenture agreements.  The exercise price was again reduced to $0.10 on June 2, 2015 due to the issuance of additional debentures.

Conversion Rights - The debentures may be converted by each buyer at any time through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.075 per share.

The Company may force conversion of the debentures into shares of common stock at $0.075 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $0.20 per share.

In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.20, then on the maturity date, the buyers must convert all remaining principal due under the debentures.

Upon conversion of any debentures, an additional Class C Warrant will be issued under the same terms and same amount as the warrants issued in the debenture sale.

Security of Debentures - The debentures are guaranteed, pursuant to “Secured Guaranty” and “Pledge and Security Agreement by Guardian 8 Corporation and a secured interest in all of the assets of the company and Guardian 8 Corporation.

Registration Rights - The Company agreed to file a “resale” registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144.  The Registrant agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company was obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty-day period up to a maximum of six percent, (i) that the registration statement had not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements.  On October 29, 2014 the Company’s registration statement was declared effective. The registration statement is currently not effective; however, debenture holders are able to utilize Rule 144 for the resale of common stock underlying the debentures.

Valuation of Warrants - The Company valued its Class C warrants based upon the change in terms under the June 2, 2015 amendment. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amounts of $535,100. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14, and exercise price $0.10.  The discount will be amortized over the remaining thirteen months to maturity on July 31, 2016.  Based upon the change in terms of the June 2, 2015 amendment, the Company accounted for the change in terms as an extinguishment of debt pursuant to ASC Topic 470-50 and recorded a loss on the extinguishment of $6,118,145.  Substantially all of the loss was based upon the change in the fair value of conversion feature of the subject debt from $0.50 per share to $0.10 per share.

In connection with the issuance of $625,000 of convertible debt on June 2, 2015, the Company granted 625,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $220,125. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14 per share, and exercise price $0.10.  The discount of $130,861 as of September 30, 2015 will be amortized over the remaining ten months to maturity on July 31, 2016.

In connection with the issuance of $115,000 of convertible debt during the third quarter 2015, the Company granted 115,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $5,247. The assumptions used in the pricing model were:  term 10 to 12 months, risk free interest rate .25%, volatility 198%, trading price of $0.03 to $0.07 per share, and exercise price $0.10. 

Related Parties - $570,000 of the debentures were to related parties.
 
 
Note 9 – Patents

In June of 2009, concurrent with the Company’s incorporation, one of its officers and directors, agreed to transfer all rights, title and interest in the patent he held for a personal security device. The cost of the patent is being amortized over the 20-year life of the patent.

The Company hired a patent attorney specializing in products for the security industry to assist in filing additional utility and technology patents for its new enhanced non-lethal products.  As of September 30, 2015, the costs paid to this attorney for the filings, drawings, and research totaled $23,735.  These costs have been capitalized and are being amortized over a 15-year life.

Note 10 – Stockholders’ equity
 
On January 1, 2014, there were 37,274,292 common shares issued and outstanding, 2,855,979 common shares owed but not issued, and no preferred shares issued.  As of June 30, 2015, all of the shares owed but not issued have been issued to their respective parties.

On February 3, 2014, the Company authorized and recognized the expense for 325,000 shares of common stock, valued at $130,000 to an outside consultant pursuant to an agreement with the consultant.  These shares were owed but not issued as of September 30, 2015.

On February 3, 2014, the Company authorized and recognized the expense for 98,039 shares of common stock, valued at $50,000 to an outside consultant pursuant to an agreement with the consultant.  These shares were issued in May 2014.

On March 31, 2014, the Company authorized and recognized the expense for the issuance of 104,000 shares of common stock, valued at $53,040 to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were issued in May 2014.

On March 31, 2014, the Company authorized and recognized the expense for the issuance of 150,000 shares of common stock, valued at $76,500 to its CEO pursuant to the terms of his employment agreement.  These shares were issued in May 2014.

On May 20, 2014, the Company authorized, issued and recognized the expense for 60,000 shares of common stock, valued at $30,600 to a board member.
 
On June 18, 2014, the Company authorized 200,000 shares of common stock to its interim CFO per the terms of her new employment contract (See Note 15).  The associated expense recognized during the second quarter of 2014 was $96,020.  These shares were issued in the second quarter of 2014.
 
On June 30, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its interim CFO per her new employment contract (See Note 15).  These shares were issued in the third quarter of 2014.

On August 1, 2014 the Company authorized and recognized the expense for the issuance of 9,375 shares of common stock, valued at $4,125 to an employee.  These shares were issued in the fourth quarter of 2014.

On September 8, 2014 the Company authorized and recognized the expense for the issuance of 26,230 shares of common stock, valued at $16,000 to a consultant.  These shares were issued in the fourth quarter of 2014.

On September 30, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $58,800 to its interim CFO per her new employment contract (See Note 15).  These shares were issued in the fourth quarter of 2014.

On October 8, 2014 the Company authorized and recognized the expense for the issuance of 26,667 shares of common stock, valued at $16,000 to a consultant.  These shares were issued in the fourth quarter of 2014.

On November 8, 2014 the Company authorized and recognized the expense for the issuance of 36,774 shares of common stock, valued at $16,000 to a consultant.  These shares were issued in the fourth quarter of 2014.

On November 13, 2014 the Company authorized and recognized the expense for the issuance of 12,000 shares of common stock, valued at $5,100 to an employee.  These shares were issued in the fourth quarter of 2014.
 

During the fourth quarter of 2014, by request from debenture owners that their debentures be converted, the Company issued 350,000 shares pursuant to the terms of the debenture agreements.  The shares valued at $175,000 were issued as of December 31, 2014.  In addition, 7,507 shares valued at $3,754 were issued for accrued interest through the date of conversion.

On December 31, 2014, the Company authorized 335,000 shares of its common stock to six non-employee directors for director fees.  The services were valued at $157,192.  These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.

On December 31, 2014, the Company authorized 200,000 shares of its common stock to its CEO as a bonus for services performed for the Corporation.  These shares were valued at $94,000.  These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.
 
On December 31, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.

Effective December 31, 2014, 162,859 shares of common stock became issuable to members of the Company’s executive and sales teams for their efforts during the fiscal year. The expense associated with these grants totaled $76,544.  These shares were owed but not issued as of December, 31, 2014 and were subsequently issued in February 2015.
 
During the year ended December 31, 2014, the Company corrected an error in a warrant exercise by decreasing 5,000 shares that were unissued.
 
As of December 31, 2014, there were 41,416,113 common shares issued and outstanding, 1,127,859 common shares owed but not issued, and no preferred shares issued.

During the first quarter of 2015, the Company issued 802,859 shares which were previously owed but not issued.

During the first three quarters of 2015, the Company authorized 465,000 shares, valued at $137,550 for services.  315,000 shares were authorized in accordance with the interim CFO agreement and 150,000 were authorized for a consultant.  105,000 shares were issued to the interim CFO in April 2015 and as of September 30, 2015, the consultant shares and the remaining 210,000 CFO shares have not been issued.
 
The Company authorized 115,000 shares upon the exercise of warrants and received $28,750 cash.  90,000 shares were issued in January 2015 and the remaining 25,000 shares are owed as of September 30, 2015.

On March 10, 2015, the Company authorized and subsequently issued 1,096,800 shares for $548,400 cash.  These shares were purchased by and issued to executives and members of the Board of Directors of the Company.  As a result of the cash sale of 1,096,800 shares at $.50 per share and a warrant with an exercise price of $.50, we are required to ratchet down all Class A, B and C warrants.  In addition, on June 2, 2015 the Company revised the share price of this cash investment from $.50 per share to $.075 per share.  As a result, an additional 6,215,201 shares were issued to these investors in June 2015.

In addition, during the first quarter of 2015, the Company authorized 251,182 shares and issued 220,826 shares in payment of interest on debentures due March 1, 2015.  5,041 shares were issued in June 2015 and the remaining 25,315 shares were issued in September, 2015.  The 251,182 shares were valued at $125,591.

On June 1, 2015, the Company authorized 3,125,499 additional shares for payment of interest to debenture holders for interest through June 1, 2015.  2,858,481 shares were issued on June 1, 2015.  59,337 shares were issued on September 1, 2015 and 207,681 shares are owed as of September 30, 2015.  The 3,125,499 shares were valued at $426,006.
 
During June 2015, by request from debenture owners that their debentures be converted, the Company issued 3,566,667 shares pursuant to the terms of the debenture agreements in addition to 4,379 shares for accrued interest.  The conversion shares valued at $267,500 were issued in June 2015.  4,379 interest shares valued at $645 were issued for accrued interest through the date of conversion.
 

The Company valued its Class C warrants based upon the change in terms under the June 2, 2015 amendment. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $535,100. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%%, volatility 119.05%, trading price $0.14, and exercise price $0.10.  The discount will be amortized over the remaining thirteen months to maturity on July 31, 2016. Based upon the change in terms of the June 2, 2015 amendment, the Company accounted for the change in terms as an extinguishment of debt pursuant to ASC Topic 470-50 and recorded a loss on the extinguishment of $6,118,145.  Substantially all of the loss was based upon the change in the fair value of conversion feature of the subject debt from $0.50 per share to $0.10 per share.  The loss in addition to the change in discount of $1,851,635 resulted in $7,969,780 additional paid in capital.

In connection with the issuance of $625,000 of convertible debt on June 2, 2015, the Company granted 625,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $220,125. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14 per share, and exercise price $0.10.  The discount of $130,861 as of September 30, 2015 will be amortized over the remaining ten months to maturity on July 31, 2016.

On August 12, 2015, a debenture holder converted $40,000 in principal amount of its debenture to 533,333 shares common stock, we authorized the issuance of 6,168 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 40,000 warrants.

On September 18, 2015, a debenture holder converted $50,000 in principal amount of its debenture to 666,666 shares common stock, we authorized the issuance of 36,529 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 50,000 warrants.

On September 1, 2015, the Company authorized 2,806,356 shares for payment of interest to debenture holders for interest through September 1, 2015.  2,806,356 shares were issued on September 1, 2015.  The 2,806,356 shares were valued at $144,247.

As of September 30, 2015, there were 60,515,071 common shares issued and outstanding, 917,681 common shares owed but not issued, and no preferred shares issued.
 
Note 11 – Options and warrants

Options

As of September 30, 2015 and December 31, 2014 there were no outstanding options.
 
Warrants

On January 1, 2014, there were 13,376,623 warrants outstanding.

During the year ended December 31, 2014, there were 500,000 warrants issued with notes payable, 7,000,000 warrants issued with debentures, 175,000 warrants issued for debenture conversions, and 560,000 warrants issued for broker fees.  There were no warrants exercised.

As of December 31, 2014, there were 21,611,623 warrants outstanding.
 
   
Number of Options
    
Weighted Average
Exercise Price of Options
    
Number of Warrants
    
Weighted Average
Exercise Price of Warrants
  
Outstanding 1/01/2014
    
-
    
$
-
      
13,376,623
    
$
0.61
  
    Granted
    
-
      
-
      
8,235,000
      
0.59
  
    Cancelled
    
-
      
-
      
-
      
-
  
    Exercised
    
-
      
-
      
-
      
-
  
Outstanding 12/31/2014
    
-
    
$
-
      
21,611,623
    
$
0.60
  
 

During the first quarter of 2015, 115,000 warrants were exercised at $0.25 per share.
 
In conjunction with the sale of 1,096,800 shares of common stock for $548,400 in the first quarter 2015, the Company issued 1,096,800 warrants to purchase common shares at $0.50 for a period of five years.  These shares and warrants were purchased by and issued to executives and members of the Board of Directors of the Company.

In connection with the duly exercised Amendment to Securities Purchase Agreement dated June 2, 2015 the Company reduced the exercise price of all of its Class C Warrants from $0.50 per share to $0.10 per share. The Company valued its Class C warrants on the date of change using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $535,100. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, and a trading price $0.14 per share and exercise price $0.10.  The discount will be amortized over the remaining ten months to maturity on July 31, 2016.  In addition, 18,600 warrants valued at $1,477 were issued to placement agents.

In March 2015, the Company changed its exercise price of its Class A and B warrants from prices ranging from $0.55 to $0.75 per share to $0.50 per share.  The Company valued these warrants at $220,125 on the date of change using the Black-Scholes option pricing model and treated the change in value as additional compensation which is being expensed over the remaining lives of the various warrants. The assumptions used in the pricing model were:  terms ranging from approximately 5 months to four years and three months, risk free interest rate. ranging from 1.10% to 1.62%, volatility ranging from 112.04% to 125.00%, and a trading price $0.45 per share and exercise price $0.50.  The discount will be amortized over the remaining ten months to maturity on July 31, 2016.

Also in connection with the duly exercised Amendment to Securities Purchase Agreement dated June 2, 2015 the Company reduced the exercise price of all of its remaining outstanding warrants from $0.50 per share to $0.10 per share. The Company valued the change in the fair value of these warrants at June 2, 2015 at $512,713, which is being amortized into operations over the remaining terms of the various warrants. The Company valued these warrants on the date of change using the Black-Scholes option pricing model. The assumptions used in the pricing model were:  term ranging from 2 months to 8.5 years, risk free interest rates ranging from 0.28%%, to 2.07%, volatility ranging from 117.73%, to 189.34%, trading price $0.14 per share and exercise price $0.10.  

Amortization charged to operations on the increase in the above warrant values due to the reduction in the exercise prices during the nine months ended September 30, 2015 was $1,649,695.

In June 2015, 267,500 warrants were issued in conjunction with debenture conversions.

In June 2015, 625,000 warrants were issued in conjunction with the sale of additional debentures.

In July 2015, 50,000 warrants were issued in conjunction with the sale of additional debentures.

In August 2015, 40,000 warrants were issued in conjunction with debenture conversions.

In August 2015, 50,000 warrants were issued in conjunction with the sale of additional debentures.

In September 2015, 50,000 warrants were issued in conjunction with debenture conversions.

In September 2015, 15,000 warrants were issued in conjunction with the sales of additional debentures.

As a result of the $0.50 unit offering in February 2015, the Company was required to adjust the exercise price on all of its Class A, B and C warrants (18,532,500 warrants in the aggregate) down to $0.50.  In June 2015 the exercise price of the Class A, B and C warrants were further adjusted down to $0.10 per share.  See Note 10 for the explanation of the revaluation of the Class A, B and C warrants.
 
During the quarter ended September 30, 2015 392,500 warrants expired and were cancelled.
 

A summary of warrants as of September 30, 2015 is as follows:

   
Number of Options
    
Weighted Average
Exercise Price of Options
    
Number of Warrants
    
Weighted Average
Exercise Price of Warrants
  
Outstanding 1/01/2015
    
-
    
$
-
      
21,611,623
    
$
0.15
  
    Granted
    
-
      
-
      
2,212,900
      
0.10
  
    Cancelled
    
-
      
-
      
(392,500)
      
0.55
  
    Exercised
    
-
      
-
      
(115,000
)
    
0.25
  
Outstanding 9/30/2015
    
-
    
$
-
      
23,317,023
    
$
0.14
  

Note 12 – Lease commitments and related party transactions
 
In December of 2011, the Company leased space in Scottsdale, Arizona for its main headquarters. The lease ran from January 2012 to March 2014 at a rate of $1,907 per month. The lease expired on June 30, 2014.  The Company subsequently entered into a new lease on July 1, 2014 (See Note 18).

On July 1, 2014, the Company entered into a forty-month office lease agreement ending on October 31, 2017.  The lease requires monthly payments of $5,988.

Rent expense was $50,746 and $12,520 for the nine months ended September 30, 2015 and 2014, respectively.

During the nine months ended September 30, 2014, as part of a new convertible debenture, the Company issued notes payable totaling $295,000 to related parties.  During the nine months ended September 30, 2015, as part of a new convertible debenture, the Company issued notes payable totaling $275,000.  The maturity date for these notes is July 31, 2016.  See Note 8 for further details.

See Note 15 for details on stock issued to employees and related party consultants per their employment or consulting contracts with the Company.
 
Note 13 – Derivative Liability

At June 30, 2015, the Company recognized a derivative liability and a correlating charge to operations in the amount of $3,032,501 pursuant to ASC Topic 815-25-19 “Contracts in Entity's Own Equity” as the total number of Company’s committed common shares and the number of actual common shares outstanding at June 30, 2015 exceeded the number of common shares the Company currently is authorized to issue. The liability was computed based upon the fair value of the committed and outstanding shares. The committed shares consisted of $7,182,500 of debt convertible into 46,803,566 shares of common stock and 23,485,923 common stock warrants. In the valuation, the Company used the trading price of its common stock at June 30, 2015 of $0.11 per share.

At September 30, 2015 the fair value of the derivative liability was $2,193,898. The liability was computed based upon the fair value of the committed and outstanding shares. The committed shares consisted of $7,207,500 of debt convertible into 96,100,000 shares of common stock and 23,317,023 common stock warrants. In the valuation, the Company used the trading price of its common stock at September 30, 2015 of $0.03 per share.
 

Note 14 – Fair Value Measurements

The Company adopted ASC Topic 820-10 to measure the fair value of certain of its financial assets that are required to be measured on a recurring basis.  The adoption of ASC Topic 820-10 did not impact the Company’s financial condition or results of operations.  ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.  A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.  The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:
 
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.
 
Level 2 – Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
 
Level 3 – Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.  The Company had no level three assets or liabilities as of September 30, 2015 or December 31, 2014; therefore, a reconciliation of the changes during the year is not shown. 

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of September 30, 2015:
 
   
Level 1
    
Level 2
    
Level 3
    
Fair Value
  
Notes payable and convertible senior secured debentures
    
-
    
$
5,094,117
      
-
    
$
5,094,117
  
 
The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:
 
   
Level 1
    
Level 2
    
Level 3
    
Fair Value
  
Notes payable and convertible senior secured debentures
    
-
    
$
5,704,491
      
-
    
$
5,704,491
  

Note 15 – Income Taxes
 
The Company follows ASC subtopic 740-10 for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
 
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.  Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company’s operations for the nine months ended September 30, 2015 and 2014 resulted in losses, thus no income taxes have been reflected in the accompanying statements of operations.
 
As of December 31, 2014, the Company had net operating loss carry-forwards that may be used to reduce future income taxes payable.  A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to this deferred asset. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.
 

For financial reporting purposes, the Company has incurred a loss since inception to September 30, 2015.  Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2015. Further, management does not believe it has taken the position in the deductibility of its expenses that creates a more likely than not potential for future liability under the guidance of FIN 48.

Note 16 – Employment Contracts

During the year ended December 31, 2012, the Company entered into an amended and restated three-year employment contract with its Chief Operating Officer.  The agreement continues through September 30, 2015.  If the Company meets various goals and criteria during those three years, which have been set forth in the agreement, they will issue a prescribed amount of shares of its common stock to the Chief Operating Officer.  The Company reserved 650,000 shares of its common stock as required by the agreement.  As of December 31, 2014, in accordance with the terms of the agreement, the employee vested 335,000 shares of restricted stock for achieving milestones as set forth in the employment agreement.

Effective January 1, 2015, the Company entered into the second amended and restated employment agreement with its COO.  The COO had the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the COO earned a base salary of $170,000.  This agreement was terminated as of May 1, 2015.

During the year ended December 31, 2012, the Company entered into a three-year contact with its Vice President of Customer Support.  The agreement continued through September 30, 2015.  If the Company meets various goals and criteria during those three years, they will issue a prescribed amount of its common shares to the Vice President of Customer Support.  The Company reserved 288,000 shares of its common stock as required by the agreement.  As of December 31, 2014, in accordance with the terms of the agreement, the employee vested 136,200 shares of restricted stock for achieving milestones as set forth in the employment agreement.  

Effective January 1, 2015, the Company entered into an amended and restated employment agreement with its Vice President of Customer Support.  The Vice President of Customer Support has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the Vice President of Customer Service shall earn an initial base salary of $100,000.

On March 4, 2013, the Company entered into an employment agreement with its CEO/President.  The CEO/President has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.  The Company reserved 750,000 shares of its common stock as required by the agreement.  Per the agreement, the Company issued 150,000 common shares on the last day of every fiscal quarter as compensation through that period.  As of December 31, 2014, all 750,000 common shares had vested.  In addition, the Chief Executive Officer and President shall earn an initial base salary of $250,000, which began on January 1, 2013.   

Effective January 1, 2015, the Company entered into an employment agreement with its CEO/President.  The CEO/President has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the CEO/President shall earn an initial base salary of $250,000.  In April of 2015, the CEO ceased receiving cash compensation, and agreed to accept stock in lieu of cash until (i) the Company becomes profitable (generates a net income from operations) for a quarter of operations, or (ii) July 31, 2016.  As of September 30, 2015, the Company accrued $125,000 of salary, and $9,546 in associated payroll taxes, which will be converted into the common stock at the close of the 2015 fiscal year or in accordance with the above conditions.

On March 4, 2013, the Company amended the agreement with its non-employee interim Chief Financial Officer (CFO).  The CFO has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.  The Company reserved 416,250 shares of its common stock as required by the agreement.  Per the contract, the Company issued a prescribed amount of common shares on the last day of every fiscal quarter, beginning with the second quarter of 2013 and ending on March 31, 2014.   In addition, the Non-Employee Interim Chief Financial Officer will earn a base monthly retainer of $3,000, which began on January 1, 2013 and will continue until the Company completes certain requirements per the agreement.  On May 22, 2014, the Company entered into a second amended agreement with its Non-Employee Interim CFO.  The amendment extended the potential term of the Non-Employee Interim CFO agreement from April 1, 2014 through November 30, 2015.  Further, the amendment provides for compensation to the CFO of up to 935,000 shares of the Company’s common stock, based upon the actual number of months served.  As of December 31, 2014, 515,000 shares have vested, leaving 420,000 shares reserved as of December 31, 2014.  During the first three quarters of 2015, 315,000 shares were authorized under this agreement, and 105,000 remain available under the agreement.  In addition, the Non-Employee Interim CFO will continue to earn a base monthly retainer of $3,000.
 
 
On March 11, 2014, the Company entered into an employment agreement with its Lead Engineer.  The Lead Engineer has the ability to earn shares of common stock over the term of the agreement, which runs through March 30, 2016.  The Company reserved 82,287 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue up to 27,429 common shares per year.  As of December 31, 2014, 60,000 common shares have been authorized and 22,287 shares remain reserved.  In addition, the Lead Engineer shall earn an initial base salary of $96,000, which began on March 11, 2013.   

Effective January 1, 2015, the Company entered into an amended and restated employment agreement with its Lead Engineer.  The Lead Engineer has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the Lead Engineer shall earn an initial base salary of $105,000.
 
On November 1, 2014, the Company entered into an employment agreement with its Vice President of Finance.  The Vice President of Finance has the ability to earn shares of common stock over the term of the agreement, which runs through October 31, 2017.  The Company reserved 540,000 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue up to 180,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.  As of December 31, 2014, 5,000 common shares have been authorized and 510,000 shares remain reserved.  In addition, the VP Finance shall earn an initial base salary of $170,000 beginning on November 1, 2014.   

On November 1, 2014, the Company entered into an employment agreement with its Vice President of Sales.  The Vice President of Sales has the ability to earn shares of common stock over the term of the agreement, which runs through October 31, 2017.  The Company reserved 420,000 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue up to 140,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.  As of December 31, 2014, 5,000 common shares have been authorized and 396,667 shares remain reserved.  In addition, the VP Sales shall earn an initial base salary of $140,000 beginning on November 1, 2014.

On July 29, 2015, the Company approved a stock incentive plan authorizing the issuance of up to 6,750,000 shares of common stock under the plan and granted restricted stock awards to seven of its employees for a total of 4,022,613 shares. These shares will vest and be issued on January 1, 2016 assuming each of the employees remained employed by the Company through such date.

Note 17 – Public and Investor Relations Agreements

On March 1, 2013, the Company entered into a one-year agreement with a public relations firm to assist with public relations as the Company moves into scaled production and distribution.  The contract will be executed on a project-by-project basis, beginning with media assistance provided at an industry conference in April 2013.  All monies paid under this contract were classified in sales, general and administrative expenses as a marketing expenditure. This agreement terminated on February 28, 2014.

On August 30, 2013, the Company entered an agreement with an investor relations firm for a period of 12 months, ending May 26, 2014, with the right to cancel services at the end of each subsequent three-month period.  The terms of the agreement called for the issuance of 142,000 common shares to be issued for the first three-months of service ending November 26, 2013, and then the equivalent number of shares required to compensate for the $50,000 per period thereafter.  This agreement was terminated on May 26, 2014.

On October 29, 2013, the Company entered an agreement with a digital marketing services firm for a period of twelve months and ended October 31, 2014.  The terms of the agreement called for a payment of $70,200 for the twelve months of service.  The agreement was terminated on October 31, 2014.

On September 8, 2014, the Company entered an agreement with a social media firm for a period of six months that ended March 8, 2015.  The agreement provided the right to cancel services upon 30 days-notice. The terms of the agreement called for payment of $4,750 per month.  This agreement was terminated on November 30, 2014.

On September 8, 2014, the Company entered an agreement with digital sales and marketing firm for a period of three months that ended December 8, 2014.  The terms of the agreement called for payment of $32,000 per month paid 50% cash and 50% common stock.

On September 30, 2014, the Company entered into a sales referral agreement with commissions of 5%.
 

On October 1, 2014, the Company entered an agreement with a national distributor for a period of three years which ends September 30, 2017.  The agreement provided the right to cancel services upon 30 days-notice.  The terms of the agreement call for commission of 15%.

On October 14, 2014, the Company entered an agreement with a Federal agency marketing firm for a period of three months that ended January 13, 2015.  The terms of the agreement called for a payment of $57,000 for the three months of service.  This agreement was extended to July 15, 2015.
 
On November 5, 2014, the Company entered an agreement with a digital marketing and public relations firm for a period of six months ending May 5, 2015. The terms of the agreement called for payments of $36,000 per quarter.  On April 12, 2015 this agreement was cancelled.
 
On December 5, 2014, the Company entered into an international sales referral agreement with commissions between 6% and 8%.
  
On January 1, 2015, the Company entered into agreements with Merriman Capital, Inc. to provide Banking and Advisory services. The monthly retainer for these services is $10,000.
 
 On January 1, 2015, the Company entered into agreements with Top Sales and Marketing, Inc. to provide Consulting services.  The monthly fee for these services is $5,000 and the original one month contract was extended through March 2015.

On March 1, 2015, the Company extended an agreement with a Federal agency marketing firm for a period from January 15, 2015 through July 15, 2015.  The terms of the agreement require monthly payments of $12,500 for the term of the agreement and 150,000 shares of the Company’s restricted common stock.  

Note 18 – Interest Expense

The company’s interest expense for the nine months ended September 30, 2015 consisted of the following:

Description
  
Amount
  
Amortization of loan fees
    
426,914
  
Notes payable
    
1,050
  
Convertible senior secured debentures
    
2,078,306
  
Total
    
2,506,270
  
 
Note 19 – Subsequent events

On September 30, 2015, the Company authorized the issuance of 105,000 shares of common stock, which vested pursuant to the terms of the agreement with its Interim CFO (Kathleen Hanrahan) on September 30, 2015. As of the date of this report the shares have not been issued.

On October 5, 2015, by request from a debenture owner that their debentures be converted, the Company issued 800,000 shares pursuant to the terms of the debenture agreements.  The shares valued at $60,000 were issued in October 2015.

On October 29, 2015, the Company conducted the Seventh Closing pursuant to the sale of additional Senior Secured Debentures for $100,000 and issued 100,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to its CEO/President.

On November 10, 2015, the Company entered into a two-month consulting agreement with Uptick Capital LLC. Under the terms of the agreement, the Company was required to issue Uptick 333,333 shares of its restricted common stock immediately for the first month of services under the agreement and an additional 333,333 shares of its restricted common stock on or about December 10, 2015 for the second month of services under the agreement.
 


FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

 
·  
our ability to efficiently manage and repay our debt obligations;
 
·
deterioration in general or global economic, market and political conditions;
 
·  
our ability to diversify our operations;
 
·  
actions and initiatives taken by both current and potential competitors;
 
·  
supply chain disruptions for components used in our product;
 
·  
manufacturers inability to deliver components or products on time;
 
·  
inability to raise additional financing for working capital or the acquisition of capital at terms unfavorable to our investors;
 
·  
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;
 
·  
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
 
·  
changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
 
·  
inability to efficiently manage our operations;
 
·  
inability to achieve future operating results;
 
·  
the unavailability of funds for capital expenditures
 
·  
our ability to recruit, hire and retain key employees;
 
·  
the inability of management to effectively implement our strategies and business plans; and
 
·  
the other risks and uncertainties detailed in this report.

In this form 10-Q references to “Guardian 8”, “G8”, “the Company”, “we,” “us,” “our” and similar terms refer to Guardian 8 Holdings and its wholly owned operating subsidiary, Guardian 8 Corporation.
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this report.
 
Overview
 
We were incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation.  In August of 2009, we changed our name to Guardian 8 Corporation and effective November 30, 2010 we merged with Global Risk Management & Investigative Solutions (“Global Risk”), a public company, with its common stock registered with the United States Securities and Exchange Commission.  Post-merger, Global Risk changed its name to Guardian 8 Holdings. 

Our principle offices are located in Scottsdale, Arizona.  We are engaged in the design and introduction of a new category of personal security devices, Enhanced Non-Lethal Devices (ENL).  Our product, the Pro V2, incorporates a layered defensive approach to help security professionals and consumers protect themselves against personal attacks, while capturing critical images and audio recordings to defend against personal liability.
 
For the nine months ended September 30, 2015 and 2014, we were consolidated with our wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.  

In the second quarter of 2014, we borrowed $7,000,000 in the form of senior secured convertible debentures, with an original maturity date of November 29, 2015 (subsequently extended to July 1, 2016). The debentures require quarterly interest payments which commenced on March 1, 2015.  We recorded interest expense (including amortization of prepaid loan costs and discounts) associated with this debt totaling $2,078,306 during the nine months ended September 30, 2015.  As is provided under the debentures, this interest can be paid with shares of our common stock in lieu of cash.  As a result, 6,230,113 shares of common stock were authorized, of which 6,022,432 shares were issued and 207,681 were owed as of September 30, 2015

Since inception, our team of engineers and executives has been focused on developing and patenting our first commercial product, (the Guardian 8 Pro V2) as well as the key functions that create market differentiation.  We have also been formalizing marketing and manufacturing strategies as well as building customer distribution channels into the Private Security Market.  

We have initiated development efforts on a new consumer product, which is targeted for release in 2017, assuming adequate capital is available for development.  During the year ended December 31, 2014, we expensed $314,000 for these development efforts.  Engineering on the new consumer product was temporarily suspended on March 31, 2015 due to capital constraints.  However, in July, at the request of several potential distributors and investors, our engineering team created a modified version of our Pro V2 for consumer use.  This new consumer version was introduced July 1, 2015 and is currently being sold under a pilot program, as a “Limited Edition” Pro V2.
 
Due to recent capital constraints, we have shifted our sales efforts, and downsized to accommodate the change in sales strategy from an internal sales force approach to sales through national distribution partners.  We are working to develop a new network of distributors and have announced retail price increases to provide distributor margins while preserving existing gross margins.  We are also now using electronic sales lead generation software to target potential customers and evaluate their interest level.   By using this approach, we have been able to target sales efforts to highly interested companies.   To date, this includes the hospital vertical which has led to high brand recognition and heightened interest.  In addition, we have been accepted by several security service companies as an intermediate non-lethal option in their quotes for their existing and new customers.
 
In recent months, Guardian 8’s Pro V2 Enhanced Non-Lethal device has been featured on the evening news with CBS and ABC stations in Arizona, an NBC affiliate in Washington and a CBS affiliate in Texas. Many of the stories focused on the Pro V2’s expanding presence in select school districts across the Country as part of a larger initiative to deploy the device in highly-sensitive facilities like schools. In exchange for donating units and training, the selected school districts serve as a test bed for Guardian 8 to measure the results of the deployments. With a reduction in the number of non-fatal incidents of violence in the partner schools (versus pre-deployment incident statistics), the data is anticipated to help Guardian 8 establish itself as one of the premier options for school safety personnel. 
 
As of September 2015, healthcare facilities are our leading adopter of the technology domestically. Efforts are currently underway to establish a community outreach program between Guardian 8 and select hospitals in the Phoenix Metro area to increase brand awareness in our local market, leveraging the success stories from security staff at hospitals currently involved in test pilots in other states. A recent news story cited an incident in which a hospital security officer successfully defended himself and a nurse from an aggressive, intoxicated subject in the Emergency Room by using the Pro V2 (after hands-on attempts to control the subject actually escalated the incident). A follow-up interview with the officer-in-question revealed that the Pro V2’s presence alone had made a noticeable difference in the number and severity of incidents at the hospital. This reinforces our assertion that providing Pro V2’s to previously unarmed officers would reduce incidents of violence for security officers in general. Although it is often difficult to collect incident data from hospitals due to HIPAA concerns, stories from the front lines like this one support the Pro V2’s legitimacy in the healthcare sector.
 
 
During the third quarter of 2015, Guardian 8 also received press coverage courtesy of Platinum Security in Texas. Platinum’s officers used Pro V2 devices to thwart burglary attempts at a school facility and at a sporting event where they were providing security services.
 
We have continued to focus on developing strategic relationships in the three target markets of: school security, hospital security, and professional security guard industry.  These markets will require longer sales cycles, as they are piloted, budgeted, and rolled out for wider spread deployment.  A key milestone in these efforts was Universal Protection Services recent announcement that they updated their use of force policies authorizing the deployment of the Pro V2. They have also stated that they will begin including our product in new proposals with their customers where appropriate. With Universal Protection Service’s recent acquisition of Guardsmark, it is now the largest U.S.-owned security company. Efforts between Guardian 8 and Universal are underway to ensure their sales staff are trained on the Pro V2’s capability set, and included in future Universal contracts.   We believe this represents a sizeable opportunity to penetrate the private security market.
 
Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require management’s most difficult, subjective judgments.
  
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Net Loss Per Share

            We adopted ASC 260, “Earnings Per Share” that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC 260, any anti-dilutive effects on net income (loss) per share are excluded.
 
Going Concern

Our financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to locate sources of capital, repay our existing debt instruments, and attain future profitable operations. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
 
Revenue Recognition
 
It is the Company’s policy that revenues are recognized in accordance with ASC 605-10, “Revenue Recognition”.  The company therefore recognizes revenue from sales of product upon delivery to its customers where the amount is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.   Extended warranties are recorded as deferred revenue and amortized according to the number of months included in service.  The Company recognized $157,262 and $39,346 in revenues for the nine months ended September 30, 2015 and 2014, respectively.
 

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable and debentures payable.  Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Income Taxes

The Company follows ASC subtopic 740-10, “Accounting for Income Taxes” for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
 
Principles of consolidation
 
For the nine months ended September 30, 2015 and 2014, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.
 
Cash and cash equivalents

Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.  At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.   

Inventory

During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its Pro V2 from its contract manufacturer.  These deliveries were part of the Company’s initial purchase orders totaling 11,800 units.  The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States.  In addition, our purchase agreement also requires our supplier to provide a 2% over allotment of product shipped to replace any units that might fall out during incoming receiving inspection at our facility in Scottsdale.  At the time of receipt, we record the full value of all units received, and record a scrap allowance equivalent to the 2% overallotment provided.  As of September 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders, and has recorded a scrap reserve against the inventory balance of $59,510.  No additional purchase orders are pending and there are approximately 10,400 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months.

Inventory is priced at the lower of cost, determined on a first-in, first-out basis, or market.  Inventories include the cost of inbound shipping, duty and receiving inspection.  Inventory obsolescence is examined on a regular basis.  Currently there is no inventory considered obsolete.

Research and development costs

The Company expenses all costs of research and development as incurred. There are research and development costs included in other general and administrative expenses of $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014, respectively. The Company intends to continue investing in the development of future products, including engineering the current Pro V2 device for use in the consumer market and a potential consumer only product in the future.
 

Property and equipment

Property and equipment are stated at cost.  Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.
 
The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: 
 
Tooling
10 years
Equipment
2-5 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years

Recent Developments
 
On January 13, 2015, we issued a press release disclosing we have over 100 pilot accounts using the Pro V2 device. A copy of the press release is Exhibit 99.25 in our December 31, 2014 Form 10-K.

From January 1, 2015 through March 10, 2015, we sold $548,400 in a private placement of units at $0.50 per unit. Each unit consists of one share of common stock and one five-year warrant to purchase one share of common stock for $0.50 per share.

As a result of the $0.50 unit offering, we were required to adjust the exercise price on all of our Class A, B and C warrants (18,532,500 warrants in the aggregate) down to $0.50.

On February 4, 2015, we issued a press release disclosing that a Texas hospital has agreed to deploy the Pro V2 device. A copy of the press release is Exhibit 99.26 in our December 31, 2014 Form 10-K.

On February 18, 2015, we issued a press release announcing we have distributors in Ecuador, Uruguay and Panama. A copy of the press release is Exhibit 99.27 in our December 31, 2014 Form 10-K.
 
Effective March 1, 2015, we deferred payment of $288,384 in accrued interest due under the debentures until May 1, 2015.
 
On March 6, 2015, we issued a press release disclosing exploring sales opportunities in India. A copy of the press release is Exhibit 99.28 in our December 31, 2014 Form 10-K.

On March 13, 2015, we authorized 251,182 shares and issued 220,826 shares in payment of interest on debentures due March 1, 2015.  5,041 shares were issued in June 2015 and the remaining 25,315 shares were issued September 1, 2015.  The 251,182 shares were valued at $125,591.

On June 2, 2015, we received proceeds from the sale of $625,000 debentures.  Proceeds from the debentures included $77,655 fees and expenses.

During the third quarter 2015 we received $115,000 from the sales of debentures to our CEO/President, C. Stephen Cochennet.

On August 13, 2015, we completed the sale of a Convertible Promissory Note in the principal amount of $120,750 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between a New York corporation, and us.  The note matures on August 17, 2016.
 

Results of Operations for Guardian 8 Corporation for the nine months ended September 30, 2015 and 2014.
 
   
Nine Months Ended
September 30, 2015
    
Nine Months Ended
September 30, 2014
    
Increase/ (Decrease)
  
                   
Revenues
  
$
157,262
    
$
39,346
    
$
117,916
  
Cost of sales
    
86,767
      
27,501
      
59,266
  
Gross Profit
    
70,495
      
11,845
      
58,650
  
Operating Expenses
    
2,489,727
      
3,041,394
      
(551,667
) 
                         
Net (loss) from operations
    
(2,419,232
)
    
(3,029,549
)
    
610,317
  
Interest income
    
-
      
1,999
      
(1,999
) 
Interest expense
    
(2,506,270
)
    
(1,213,532
)
    
(1,292,738
)
Loss on extinguishment of debt
    
(6,118,145
)
    
-
      
(6,118,145
)
Change in fair value of derivative liability
    
(2,193,898
)
    
 -
      
(2,193,898
)
                         
Net (loss)
  
$
(13,237,545
)
  
$
(4,241,082
)
  
$
(8,996,463
)
                         
Net (loss) per share
  
$
(0.27
)
  
$
(0.10
)
  
$
(0.17
) 
Weighted average shares outstanding
    
  49,867,454
      
  40,806,423
          
 
During the nine months ended September 30, 2015 and 2014, we had revenues of $157,262 and $39,346, respectively.  This is an increase of $117,916.  Cost of sales increased $59,266 during the nine months ended September 30, 2015 from the $27,501 recorded in the nine months ended September 30, 2014.  Gross Profit increased $58,650 from $11,845 in the nine months ended September 30, 2014 to $70,495 during the nine months ended September 30, 2015.  Gross profit as a percent of sales increased from 30% in the first nine months of 2014 to 45% in the first nine months of 2015.  Sales increased due to the addition of new customers and follow on orders from existing customers.  Gross profit increased due to efficiencies in fulfillment services and a price increase to accommodate distributor margins.

Operating expenses were $2,489,727 and $3,041,394 for the nine months ended September 30, 2015 and 2014, respectively, a decrease of $551,667.  Included in operating expenses are research and development costs of $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014.  During 2015, payroll increased $185,667 as a result of additional head count in the first half of the year, marketing increased $109,085 and travel increased $33,246.  These expenditures were offset by a reduction in consultant fees of $468,213.  In addition, investor relations decreased $43,589 and other expenses decreased $306,491.  Also included in the increases for 2015, was the accrual of $60,000 in director fees.

Interest expense increased $1,292,738 to $2,506,270 in the first nine months of 2015 from the same period in 2014.  The increase is due to interest payable to debenture holders, amortization of the discount on the debentures and amortization of prepaid loan costs.

The Company recorded a loss on extinguishment of debt in the amount of $6,118,145 during the three months ended June 30, 2015.  This was the result of revaluation of the debentures caused by the change in the stated terms.  Specifically, the debentures were modified to reflect a reduction in conversion rates, a reduced strike price on warrants, and an eight-month extension of the original maturity date.  Also recorded with the revaluation was a non-recurring loss of $2,193,898.  This loss was offset by a derivative liability to account for the lack of authorized shares required to convert the increased common share and warrant count.   

We anticipate continued losses from operations until such time as we generate sufficient revenues through the sale of our device to cover both our cost of manufacturing, and sales, general and administrative expenditures.
 
 
Results of Operations for Guardian 8 Corporation for the three months ended September 30, 2015 and 2014.
 
   
Three Months Ended
September 30, 2015
    
Three Months
September 30, 2014
    
Increase/ (Decrease)
  
                   
Revenues
  
$
61,954
    
$
20,334
    
$
41,620
  
Cost of sales
    
32,533
      
13,397
      
19,136
  
Gross Profit
    
29,421
      
6,937
      
22,484
  
Operating Expenses
    
549,477
      
1,209,347
      
(659,870)
  
                         
Net (loss) from operations
    
(520,056
)
    
(1,202,410
)
    
682,354
  
Interest income
    
-
      
1,262
      
(1,262
)
Interest expense
    
(1,041,025
)
    
(572,155
)
    
 (468,870
)
Loss of extinguishment of debt
    
-
      
-
      
-
  
Change in fair value of derivative liability
    
838,603
      
-
      
838,603
  
                         
Net (loss)
  
$
(722,478
)
  
$
(1,773,303
)
  
$
1,050,825
  
                         
Net (loss) per share
  
$
(0.01
)
  
$
(0.04
)
  
$
0.03
  
Weighted average shares outstanding
    
  58,650,456
      
  41,172,560
          
 
During the three months ended September 30, 2015 and 2014, we had revenues of $61,954 and $20,334, respectively.  This is an increase of $41,620.  Cost of sales increased $19,136 from $13,397 recorded in the three months ended September 30, 2014.  Gross profit increased $22,484 from $6,937 during the three months ended September 30, 2014 to $29,421 during the three months ended September 30, 2015.  Gross profit as a percent of sales increased from 34% in the third quarter of 2014 to 48% in the third quarter of 2015.  Sales increased due to the addition of new customers and follow on orders from existing customers.  Gross Profits increased due to efficiencies in fulfillment services and a price increase to accommodate distributor margins.

Operating expenses totaled $549,477 and $1,209,347 for the three months ended September 30, 2015 and 2014, respectively, a decrease of $659,870.  Included in operating expenses are research and development costs of $29,069 and $137,546 for the three months ended September 30, 2015 and 2014, a reduction of $108,477.  During 2015, payroll increased $72,139 which was offset by a reduction in consultant fees of $130,181, investor relations of $78,666 and marketing of $44,831.  All other operating expense categories netted a reduction of $369,854 from the three months ended September 30, 2014 to the same period in 2015.

Interest expense increased $468,870 to $1,041,025 in the third quarter of 2015 from the third quarter of 2014.  The increase is due to interest payable to debenture holders, amortization of the discount on the debentures and amortization of prepaid loan costs.

The Company recorded a loss on extinguishment of debt in the amount of $6,118,145 during the three months ended June 30, 2015.  This was the result of revaluation of the debentures caused by the change in the stated terms.  Specifically, the debentures were modified to reflect a reduction in conversion rates, a reduced strike price on warrants, and an eight-month extension of the original maturity date.  Also recorded with the revaluation was a non-recurring loss of $3,032,501.  This loss was offset by a gain during the three months ended September 30, 2015 in the amount of $838,603.  This loss and subsequent gain was offset by a derivative liability to account for the lack of authorized shares required to convert the increased common share and warrant count. 

We anticipate continued losses from operations until such time as we generate sufficient revenues through the sale of our device to cover both our cost of manufacturing, and sales, general and administrative expenditures.
 
 
Satisfaction of our cash obligations for the next 12 months.
 
As of September 30, 2015, our cash balance was $80,001. Our plan for satisfying our cash requirements for the next twelve months is through the continued expansion of sales and operating functions, funds from additional offerings of our common stock, sales of additional convertible debentures or other debt instruments, third party financings and revenue generated through the sales of our products and training services.  Although we do not anticipate generating sufficient amounts of revenues to meet our working capital requirements during the next twelve months, we believe we will be able to raise alternate sources of additional capital to fund our operations. However, over the last three months we have relied heavily on investments from our CEO/President, C. Stephen Cochennet, which may not continue.
 
As we continue to expand operational activities, we may continue to experience net negative cash flows from operations pending receipt of revenues from our product sales, and will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings, giving consideration to loans and working diligently to move sales ahead to the extent necessary to provide working capital.
 
We anticipate incurring operating losses over the next twelve months as we continue to grow our distribution channels. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must among other things, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and continue to attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations. As a result of our ongoing need for cash, we have begun to explore merger and acquisition discussions with private and public companies with a desire to enter into the enhanced non-lethal industry. At the time of this Report, we have not entered into any agreements for such a transaction and there can be no assurances we will entire into such an agreement in the future.
 
As a result of our cash requirements and our lack of significant revenues, we anticipate continuing to issue common stock in exchange for loans and/or equity financing, which will have a substantial dilutive impact on our existing stockholders.

Summary of any product research and development that we will perform for the term of our plan of operation.
 
We expense all costs of research and development as incurred. There are research and development costs included in other general and administrative expenses of $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014, respectively.   In order to complete the development of a consumer version of our existing product, we anticipate expending up to $500,000 in the coming year.  This will be contingent upon our ability to raise capital and generate sufficient market support for the product.
 
In addition to investments in research and development expenditures, we have also retained the services of a patent attorney to assist us with the filing and protection of key utility applications, as well as future technologies to be incorporated in next generation products for the commercial security and consumer markets.  Costs associated with the filing of intellectual property have been capitalized and will be amortized over the 20-year life of the original patents.
 
Changes in the number of employees.
 
On April 15, 2015, as part of a downsizing to control operating expenditures, conserve working capital, and redirect our sales efforts, we reduced our headcount by nine employees.   We have retained several of these resources on a contracted basis to drive revenue with existing sales leads and pending transactions.  We have also made agreements with key employees to defer or receive stock in lieu of cash payments until sufficient capital is raised to once again support their salaries.  At such time as the Company can provide compensation to these individuals, we will retain their full time support

As of September 30, 2015 we had nine full-time employees, C. Stephen Cochennet, Chief Executive Officer, Will Grove, Vice President of Finance, Gary Kuty, Vice President of Sales, Jose Rojas, Vice President of Customer Support, our lead manufacturing engineer, a master trainer, a sales and customer service representative, a direct sales person, and one administrative support person for Guardian 8 Corporation.   We utilize the services of several contract personnel, engineers and other professionals on an as needed basis. We are managed by C. Stephen Cochennet with the assistance of our board of directors. We look to Mr. Cochennet and our directors for entrepreneurial, organizational and management skills. We plan to continue to use consultants, legal and patent attorneys, design and mechanical engineers, and accountants as necessary. We may hire sales and operations employees in 2016 to facilitate go-to-market activities. A portion of any employee compensation likely would include direct stock grants, or the right to acquire common stock in the Company, which would dilute the ownership interest of holders of existing shares of our common stock.
 

We have entered into multiple year employment agreements with our executives, which require us to pay significant salaries to such individuals and contain default provisions, which are material to our operations. During the second and third quarters of 2015 we occasionally failed to timely meet our payroll obligations to our employees.  The shortfalls were cured within five days of the usual pay date.  We continue to need additional working capital to sustain our operations and any future failure to pay our employees or comply with the terms of the employment agreements may have a material adverse effect on our business.

Expected purchase or sale of plant and significant equipment.
 
We anticipate no substantial investment in plant of equipment during the remainder of 2015.
 
Liquidity and Capital Resources
 
Working capital is summarized and compared as follows:
 
   
September 30,
2015
    
December 31,
2014
  
         Current assets
  
$
1,621,491
    
$
2,502,000
  
         Current liabilities
    
8,046,764
      
 6,270,233
  
     Working capital (deficit)
  
$
(6,425,273
)
  
$
(3,768,233
) 
 
Changes in cash flows are summarized as follows:
 
We had a net loss of $13,237,545 for the nine months ended September 30, 2015.  This loss was offset by non-cash items such as stock issued for services of $137,550, stock issued as debenture interest payments of $697,669, and depreciation and amortization of $67,500.  Additional non-cash items include the revaluation of debenture discounts and warrants of $5,920,078, amortization of discounts on convertible debentures of $1,848,407 and the change in derivative liability of $2,193,898.  We had cash provided due to the decrease in prepaid loan costs of $349,260, prepaid expenses of $15,270, and inventory of $108,064.  We also had cash provided due to the increase in accounts payable and accrued expenses of $360,636 and in deferred revenue of $10,031.  We had cash used by the increase in net accounts receivable and a decrease in accrued interest of $261,643.  Total cash used by operating activities was $1,794,897 during the nine months ended September 30, 2015.
 
Our investing activities during the nine months ended September 30, 2015 were primarily the purchase of computer equipment in the amount of $18,223.
 
We had cash provided by financing activities of $1,401,133 for the nine months ended September 30, 2015.  This included proceeds from the sales of units consisting of one share of common stock and one warrant.  7,312,001 shares were issued for cash proceeds totaling $548,400.  We also received $28,750 from the exercise of warrants.  In addition, we received $740,000 from the sales of debentures and from proceeds of a convertible note payable of $83,983.
 
We had a net loss of $4,241,082 for the nine months ended September 30, 2014.  This loss was offset by non-cash items such as stock issued for services of $483,812, stock issued for compensation of $80,625, depreciation and amortization of $68,001, and the amortization of discount on notes payable and debentures of $532,384.  We had cash used by the increase in accounts receivable of $3,197, prepaid loan costs of $303,949, increased inventory of $1,177,463, increase in rent and utility deposits of $11,180 associated with our office relocation, and a decrease in accounts payable and accrued expenses of $39,382.  We had cash provided due to the decrease in prepaid expenses of $149,549, decrease in deposits on inventory of $89,984, an increase in deferred revenue of $1,175 and an increase in accrued interest of $148,855.  Net cash used by operating activities during the nine months ended September 30, 2014 was $4,221,868.
 
We had cash used by investing activities of $105,756 for the purchase of property and equipment for the nine months ended September 30, 2014.
 
We had cash provided by financing activities of $5,876,067 for the nine months ended September 30, 2014.  This included proceeds from notes payable to related parties of $475,000 proceeds from notes payable to unrelated parties of $25,000, proceeds from a line of credit with a bank of $900,000, and proceeds from the issuance of convertible senior secured debentures of $7,000,000.  These were offset by a repayment of notes payable to related parties of $1,498,933, repayment of notes payable to unrelated parties of $125,000, and the repayment of a line of credit with a bank of $900,000.
 

As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of revenues from product sales.  We anticipate obtaining financing to fund operations through common stock offerings and obtain additional financing through either convertible or non-convertible notes payable as necessary to augment our working capital. We are also evaluating additional sources of inventory financing that may be available once orders for our product are received.

We anticipate that we will incur operating losses in the next twelve months.  Our lack of operating history makes predictions of future operating results difficult to ascertain.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets.  Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth.  To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our product, respond to competitive developments, and attract, retain and motivate qualified personnel.  There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.  
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, C. Stephen Cochennet and Kathleen Hanrahan, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on the evaluation, Mr. Cochennet and Ms. Hanrahan concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.

Changes in Internal Control Over Financial Reporting
 
There has been no change in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
Internal control systems, no matter how well designed and operated, have inherent limitations.  Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented.  Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
 
 
PART II--OTHER INFORMATION

Item 1. Legal Proceedings.

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this report, there are no material pending legal proceedings to which we are a party or to which any of our property is subject.
 
Item 1A. Risk Factors.

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, 2014 to which reference is made herein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On July 29, 2015, we approved a stock incentive plan authorizing the issuance of up to 6,750,000 shares of common stock under the plan and granted restricted stock awards to seven of our employees for a total of 4,022,613 shares. These shares will vest and be issued on January 1, 2016 assuming each of the employees remained employed by us through such date.
 
On July 29, 2015, we authorized the issuance of 25,000 shares of common stock upon the exercise of warrants for $6,250 in cash received in January of 2015. As of the date of this report the shares have not been issued.
 
On July 31, 2015, we conducted the Fourth Closing pursuant to the sale of additional Senior Secured Debentures for $50,000 and issued 50,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to our CEO/President, C. Stephen Cochennet. A copy of Mr. Cochennet’s senior secured debenture is attached hereto as Exhibit 10.63.

On August 12, 2015, a debenture holder converted $40,000 in principal amount of its debenture to 533,333 shares common stock, we authorized the issuance of 6,168 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 40,000 warrants.

On August 26, 2015, we conducted the Fifth Closing pursuant to the sale of additional Senior Secured Debentures for $50,000 and issued 50,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to our CEO/President, C. Stephen Cochennet. A copy of Mr. Cochennet’s senior secured debenture is attached hereto as Exhibit 10.64.

On September 14, 2015, we conducted the Sixth Closing pursuant to the sale of additional Senior Secured Debentures for $15,000 and issued 15,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to our CEO/President, C. Stephen Cochennet. A copy of Mr. Cochennet’s senior secured debenture is attached hereto as Exhibit 10.65.

On September 1, 2015, we authorized 2,933,705 shares for payment of interest to debenture holders for interest through September 1, 2015.  These shares were issued prior to September 30, 2015.  

On September 18, 2015, a debenture holder converted $50,000 in principal amount of its debenture to 666,666 shares common stock, we authorized the issuance of 36,529 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 50,000 warrants.

Subsequent Issuances After Quarter-End

On October 5, 2015, a debenture holder converted $60,000 in principal amount of its debenture to 800,000 shares common stock.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 60,000 warrants.

On October 29, 2015, we conducted the Seventh Closing pursuant to the sale of additional Senior Secured Debentures for $100,000 and issued 100,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to our CEO/President, C. Stephen Cochennet. A copy of Mr. Cochennet’s senior secured debenture is attached hereto as Exhibit 10.66.
 

All of the above-described issuances were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities, and may not be offered or sold absent registration or pursuant to an exemption therefrom.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter ended September 30, 2015.
 
Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

Press Releases

On September 3, 2015, we issued a press release disclosing several Pro V2 deployments by private security companies and healthcare facilities. A copy of the press release is attached hereto as Exhibit 99.18.

Third Amendment to Outstanding Debentures

Effective October 16, 2015, we entered into the Third Amendment to Securities Purchase Agreement dated October 7, 2015 (the “Third Amendment”) with a majority of the debenture holders holding $7,147,500 in principal amount of debentures pursuant to a Securities Purchase Agreement, and related transaction documents, dated May 27, 2014, as amended (the “Debenture Agreements”). Under the terms of the Third Amendment, the Debenture Agreements were amended to extend the time for us to offer Debentures through March 1, 2016. A copy of the Third Amendment is attached hereto as Exhibit 10.67.

Uptick Capital Consulting Agreement

Effective November 10, 2015, we entered into an agreement with Uptick Capital LLC, a Connecticut Limited Liability Company (“Uptick Capital”) to act as our business consultant. The agreement has an initial term of two months and will renew for subsequent two-month terms unless earlier terminated. The agreement provides that Uptick Capital will use its best efforts to: (a) become familiar with our business and operations and review and analyze our formal and informal strategic, marketing, financial and business plans and (b) advise us in strategic planning matters and assist in the implementation of short- and long-term strategic planning initiatives to enhance and accelerate the commercialization of our business objectives.

In exchange for Uptick Capital’s services, we agreed to pay Uptick Capital $25,000 per month, which is payable in shares of our common stock at $0.075 per share. We agreed to immediately issue 333,333 shares of restricted common stock to Uptick Capital for the first month of services upon the effectiveness of this agreement and we agreed to issue an additional 333,333 shares of restricted common stock to Uptick Capital on or about December 11, 2015 for the second month of services.  The amount of shares to be issued to Uptick for each of the subsequent months, if any, shall be the higher of either $20,000 divided by $0.075 or $20,000 divided by the last 10 day average closing price of the prior month continuing on the 10th business day of every month thereafter (throughout the remainder of every Renewal Term) until the Agreement is terminated. A copy of the Uptick Capital consulting agreement is attached hereto as Exhibit 10.68.
 

Item 6. Exhibits.

Exhibit No.
  
Description
2.1
  
Agreement and Plan of Merger among Global Risk Management & Investigative Solutions, G8 Acquisition Subsidiary, Inc. and Guardian 8 Corporation effective November 30, 2010 (incorporated by reference to Exhibit 2.1 to the Form 10-Q filed on August 6, 2010)
2.2
  
Articles of Merger (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on December 21, 2010)
3.1
  
Amended and Restated Articles of Incorporation, as currently in effect (incorporated by reference to Exhibit 3.1 to Form 10-K filed on March 23, 2011)
3.2
  
Bylaws, as currently in effect (incorporated by reference to Exhibit 3.1(ii) to Form 8-K filed on April 30, 2012)
3.3
  
Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on December 21, 2010)
4.1
  
Article VI of Amended and Restated Articles of Incorporation (included in Exhibit 3.1)
4.2
  
Article II and Article VIII of Bylaws (incorporated by reference to Exhibit 3(ii)(a) to Form S-1 filed on May 16, 2008)
10.1†
  
Hughes Employment Agreement effective December 1, 2011 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 9, 2011)
10.2†
  
Hanrahan Engagement Agreement effective April 30, 2012 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on April 30, 2012)
10.3†
  
Hanrahan Amendment No. 1 to Interim CFO Agreement dated March 4, 2013 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on March 18, 2013)
10.4†
  
Hughes Amended and Restated Employment Agreement with Guardian 8 Corporation effective October 1, 2012 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on March 18, 2013)
10.5†
  
Rojas Employment Agreement with Guardian 8 Corporation effective October 1, 2012 (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on March 18, 2013)
10.6
  
Securities Purchase Agreement dated May 27, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 28, 2014)
10.7
  
Registration Rights Agreement dated May 27, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 28, 2014)
10.8
  
Form of Secured Guaranty dated May 27, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 28, 2014)
10.9
  
Form of Pledge and Security Agreement dated May 27, 2014 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on May 28, 2014)
10.10
  
Form of Class C Warrant (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on May 28, 2014)
10.11
  
Senior Secured Debenture ($1,500,000) Wolverine Flagship Fund Trading Limited dated May 27, 2014 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on May 28, 2014)
10.12
  
Senior Secured Debenture ($1,000,000) Pinnacle Family Office Investments, L.P. dated May 27, 2014 (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on May 28, 2014)
10.13
  
Senior Secured Debenture ($1,000,000) CK Management, LLC dated May 27, 2014 (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on May 28, 2014)
10.14
  
Senior Secured Debenture ($750,000) Atlas Allocation Fund, L.P. dated May 27, 2014 (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on May 28, 2014)
10.15
  
Senior Secured Debenture ($500,000) Calm Waters Partnership dated May 27, 2014 (incorporated by reference to Exhibit 10.9 to the Form 8-K filed on May 28, 2014)
10.16
  
Senior Secured Debenture ($250,000) Hard 4 Holdings LLC dated May 27, 2014 (incorporated by reference to Exhibit 10.10 to the Form 8-K filed on May 28, 2014)
10.17
  
Senior Secured Debenture ($100,000) Carl Feldman dated May 27, 2014 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on May 28, 2014)
10.18
  
Senior Secured Debenture ($50,000) Brett Luskin dated May 27, 2014 (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on May 28, 2014)
10.19
  
Senior Secured Debenture ($50,000) Taylor Luskin dated May 27, 2014 (incorporated by reference to Exhibit 10.13 to the Form 8-K filed on May 28, 2014)
10.20
  
Senior Secured Debenture ($50,000) Cary Luskin dated May 27, 2014 (incorporated by reference to Exhibit 10.14 to the Form 8-K filed on May 28, 2014)
10.21†
  
Hanrahan Amendment No. 2 to Interim CFO Agreement dated May 22, 2014 (incorporated by reference to Exhibit 10.15 to the Form 8-K filed on May 28, 2014)
10.22
  
Senior Secured Debenture ($300,000) Southwell Capital, LP dated June 2, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on June 3, 2014)
10.23
  
Senior Secured Debenture ($250,000) Atlas Allocation Fund, L.P. dated June 2, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on June 3, 2014)
 
 
10.24
  
Senior Secured Debenture ($225,000) Precept Capital Master Fund, GP dated June 2, 2014 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on June 3, 2014)
10.25
  
Senior Secured Debenture ($200,000) Sandor Capital Master Fund dated June 2, 2014 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on June 3, 2014)
10.26
  
Senior Secured Debenture ($125,000) The Precept Fund II, LP dated June 2, 2014 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on June 3, 2014)
10.27
  
Senior Secured Debenture ($100,000) James K. Price dated June 2, 2014 (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on June 3, 2014)
10.28
  
Senior Secured Debenture ($80,000) Vestal Venture Capital dated June 2, 2014 (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on June 3, 2014)
10.29
  
Senior Secured Debenture ($50,000) Helmsbridge Holdings Limited dated June 2, 2014 (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on June 3, 2014)
10.30
  
Senior Secured Debenture ($50,000) JSL Kids Partners dated June 2, 2014 (incorporated by reference to Exhibit 10.9 to the Form 8-K filed on June 3, 2014)
10.31
  
Senior Secured Debenture ($52,680.82) Cranshire Capital Master Fund, Ltd. dated June 13, 2014 (incorporated by reference to Exhibit 10.77 to the Form S-1 filed on August 29, 2014)
10.32
  
Senior Secured Debenture ($170,000) C. Stephen Cochennet dated June 2, 2014 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on June 3, 2014)
10.33
  
Senior Secured Debenture ($50,000) James G. Miller dated June 2, 2014 (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on June 3, 2014)
10.34
  
Senior Secured Debenture ($25,000) Corey Lambrecht dated June 2, 2014 (incorporated by reference to Exhibit 10.13 to the Form 8-K filed on June 3, 2014)
10.35
  
Senior Secured Debenture ($20,372.60) Nolton Enterprises dated August 26, 2014 (incorporated by reference to Exhibit 10.81 to the Form S-1 filed on August 29, 2014)
10.36
  
Senior Secured Debenture ($10,000) William Clough dated June 2, 2014 (incorporated by reference to Exhibit 10.15 to the Form 8-K filed on June 3, 2014)
10.37
  
Senior Secured Debenture ($10,000) Kathleen Hanrahan dated June 2, 2014 (incorporated by reference to Exhibit 10.16 to the Form 8-K filed on June 3, 2014)
10.38
  
Senior Secured Debenture ($10,000) Kyle Edwards dated June 2, 2014 (incorporated by reference to Exhibit 10.17 to the Form 8-K filed on June 3, 2014)
10.39
  
Senior Secured Debenture ($22,500) Equitec Specialists, LLC dated June 13, 2014 (incorporated by reference to Exhibit 10.85 to the Form S-1 filed on August 29, 2014)
10.40†
  
Kuty Executive Employment Agreement effective November 1, 2014 (incorporated by reference to Exhibit 10.86 to the Form 10-Q filed on November 14, 2014)
10.41†
  
Cochennet New Executive Employment Agreement effective January 1, 2015 (incorporated by reference to Exhibit 10.87 to the Form 10-K filed on March 31, 2015)
10.42†
  
Hughes Second Amended and Restated Executive Employment Agreement effective January 1, 2015 (incorporated by reference to Exhibit 10.88 to the Form 10-K filed on March 31, 2015)
10.43†
  
Grove Executive Employment Agreement effective November 1, 2014 (incorporated by reference to Exhibit 10.89 to the Form 10-K filed on March 31, 2015)
10.44†
  
Rojas Amended and Restated Executive Employment Agreement effective January 1, 2015 (incorporated by reference to Exhibit 10.90 to the Form 10-K filed on March 31, 2015)
10.45†
  
Brill Executive Employment Agreement effective January 1, 2015 (incorporated by reference to Exhibit 10.91 to the Form 10-K filed on March 31, 2015)
10.46
  
First Amendment to Securities Purchase Agreement dated April 24, 2015 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on June 8, 2015)
10.47
  
Securities Purchase Agreement dated June 2, 2015 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on June 8, 2015)
10.48
  
Registration Rights Agreement dated June 2, 2015 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on June 8, 2015)
10.49
  
Form of Secured Guaranty dated June 2, 2015 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on June 8, 2015)
10.50
  
Form of Joinder to Pledge and Security Agreement dated June 2, 2015 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on June 8, 2015)
10.51
  
Form of Class C Warrant (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on June 8, 2015)
10.52
  
Senior Secured Debenture ($200,000) First Bank & Trust as Custodian for Ronald L. Chez dated June 2, 2015 (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on June 8, 2015)
10.53
  
Senior Secured Debenture ($160,000) C. Stephen Cochennet dated June 2, 2015 (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on June 8, 2015)
10.54
  
Senior Secured Debenture ($100,000) JT Estate Trust Dtd 7/3/13 dated June 2, 2015 (incorporated by reference to Exhibit 10.9 to the Form 8-K filed on June 8, 2015)
10.55
  
Senior Secured Debenture ($50,000) Coal Creek Energy, LLC dated June 2, 2015 (incorporated by reference to Exhibit 10.10 to the Form 8-K filed on June 8, 2015)
 
 
10.56
  
Senior Secured Debenture ($50,000) Harvey M. Burstein dated June 2, 2015 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on June 8, 2015)
10.57
  
Senior Secured Debenture ($25,000) Cradle Rock LLC dated June 2, 2015 (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on June 8, 2015)
10.58
  
Senior Secured Debenture ($20,000) William M. Stern Revocable Living Trust dated June 2, 2015 (incorporated by reference to Exhibit 10.13 to the Form 8-K filed on June 8, 2015)
10.59
  
Senior Secured Debenture ($10,000) Kent and Lisa Renae Nelson JTWROS dated June 2, 2015 (incorporated by reference to Exhibit 10.14 to the Form 8-K filed on June 8, 2015)
10.60
  
Senior Secured Debenture ($10,000) Gary A. Padjen dated June 2, 2015 (incorporated by reference to Exhibit 10.15 to the Form 8-K filed on June 8, 2015)
10.61
  
Guardian 8 Holdings Stock Incentive Plan (incorporated by reference to Exhibit 10.61 to the Form 10-Q filed on August 14, 2015)
10.62
  
Second Amendment to Securities Purchase Agreement dated August 3, 2015 (incorporated by reference to Exhibit 10.62 to the Form 10-Q filed on August 14, 2015)
10.63
  
10.64
  
10.65
  
10.66
  
10.67
  
10.68
  
31.1
  
31.2
  
32.1
  
32.2
  
99.1
  
Code of Business Conduct and Ethics effective March 23, 2012 (incorporated by reference to Exhibit 99.1 to Form 10-K filed on March 29, 2012)
99.2
  
Related Party Transaction Policy effective March 23, 2012 (incorporated by reference to Exhibit 99.1 to Form 10-K filed on March 29, 2012)
99.3
  
Executive Committee Charter (incorporated by reference to Exhibit 99.1 to Form 10-K filed on March 23, 2011)
99.4
  
Audit Committee Charter (incorporated by reference to Exhibit 99.2 to Form 8-K filed on April 30, 2012)
99.5
  
Governance, Compensation and Nominating Committee Charter (incorporated by reference to Exhibit 99.3 to Form 8-K filed on April 30, 2012)
99.6
  
Presentation as of January 19, 2015 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on January 20, 2015)
99.7
  
ADS Tactical Engagement Press Release dated November 25, 2014 (incorporated by reference to Exhibit 99.23 to the Form 10-K filed on March 31, 2015)
99.8
  
Lessons from Ferguson Press Release dated December 4, 2014 (incorporated by reference to Exhibit 99.24 to the Form 10-K filed on March 31, 2015)
99.9
  
100 Pilot Accounts Press Release dated January 13, 2015 (incorporated by reference to Exhibit 99.25 to the Form 10-K filed on March 31, 2015)
99.10
  
Texas Hospital Pro V2 Deployment Press Release dated February 4, 2015(incorporated by reference to Exhibit 99.26 to the Form 10-K filed on March 31, 2015)
99.11
  
Ecuador, Uruguay and Panama Distributor Press Release dated February 18, 2015 (incorporated by reference to Exhibit 99.27 to the Form 10-K filed on March 31, 2015)
99.12
  
India Sales Opportunities Press Release dated March 6, 2015 (incorporated by reference to Exhibit 99.28 to the Form 10-K filed on March 31, 2015)
99.13
  
Top 50 Most Popular Voices in U.S. Hospital Security Press Release dated April 1, 2015 (incorporated by reference to Exhibit 99.13 to the Form 10-Q filed on May 14, 2015)
99.14
  
Q1 2015 Best Quarter Since Inception Press Release dated April 7, 2015 (incorporated by reference to Exhibit 99.14 to the Form 10-Q filed on May 14, 2015)
99.15
  
UAE 20 Unit Sale Press Release dated June 3, 2015 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on June 8, 2015)
99.16
  
Pro V2 School District Pilot Program Press Release dated June 16, 2015 (incorporated by reference to Exhibit 99.16 to the Form 10-Q filed on August 14, 2015)
99.17
  
Universal Protection Service Endorsement Press Release dated July 7, 2015 (incorporated by reference to Exhibit 99.17 to the Form 10-Q filed on August 14, 2015)
99.18
  
101.INS
  
XBRL Instance Document
101.SCH
  
XBRL Taxonomy Extension Schema
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase 

 † Indicates management contract or compensatory plan or arrangement.
 
 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
GUARDIAN 8 HOLDINGS
(Registrant)
  
       
Date: November 13, 2015
By:
/s/ C. Stephen Cochennet
  
   
C. Stephen Cochennet
  
   
Chief Executive Officer
  
   
(On behalf of the Registrant and as Chief Executive Officer)
  
       
Date: November 13, 2015
By:
/s/ Kathleen Hanrahan
  
   
Kathleen Hanrahan
  
   
Chief Financial Officer
  
   
(On behalf of the Registrant and as Principal Financial Officer)
  

 
 
39
 
 
 
 EX-10.63 2 ex10-63.htm EX-10.63 ex10-63.htm
 
EXHIBIT 10.63
 
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
Guardian 8 holdings
 
Convertible Senior Secured Debenture
 
Issuance Date:  July 31, 2015
Principal:  U.S. $50,000.00
 
FOR VALUE RECEIVED, Guardian 8 Holdings, a Nevada corporation (“Company”), hereby promises to pay to the order of C. Stephen Cochennet or its registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate equal to 8.00% per annum (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below) or, the Maturity Date, acceleration, redemption, conversion, or otherwise (in each case in accordance with the terms hereof).  This Senior Debenture (including all Senior Debentures issued in exchange, transfer or replacement hereof, this “Debenture”) is one of an issue of Senior Debentures issued pursuant to the Securities Purchase Agreement (as defined below) on the Initial Closing Date (collectively, the “Debentures”, Prior Debentures and such other Senior Debentures, the “Other Debentures”).  Certain capitalized terms used herein are defined in Section 21.
 
(1) PAYMENTS OF PRINCIPAL.  On the Maturity Date, the Company shall pay to the Holder an amount equal to the Principal, as well as all accrued but unpaid Interest.  The “Maturity Date” shall be July 31, 2016, or (a) such earlier date as may be accelerated by the Required Holders upon an Event of Default in accordance with the terms hereof, or (b) such later date as may be extended at the option of the Required Holders, (i) in the event that, and for so long as, an Event of Default (as defined in Section 3(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default.
 
 
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(2) INTEREST; INTEREST RATE.  Interest on this Debenture shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears for each Payment Quarter on the first day of the succeeding Payment Quarter during the period beginning on September 1, 2015 and ending on, and including, the Maturity Date (each, an “Interest Date”). Interest shall be payable on each Interest Date, to the record holder of this Debenture on the applicable Interest Date, in shares of restricted Common Stock (“Interest Shares”).  Interest to be paid on an Interest Date in Interest Shares shall be paid in a number of fully paid and nonassessable shares (provided, that if the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share) of Common Stock equal to the quotient of (a) the amount of Interest payable on such Interest Date less any Cash Interest paid and (b) the Interest Conversion Price in effect on the applicable Interest Date.  When Interest Shares are paid on an Interest Date, then the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and such action is not prohibited by applicable law or regulation or any applicable policy of DTC, credit such aggregate number of Interest Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal At Custodian system, or (Y) if the foregoing shall not apply, issue and deliver within three Trading Days after the applicable Interest Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Securities Purchase Agreement or to such address as specified by the Holder in writing to the Company at least two Business Days prior to the applicable Interest Date, a certificate, registered in the name of the Holder or its designee, for the number of Interest Shares to which the Holder shall be entitled. Upon the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to thirteen percent (13.00%) (the “Default Rate”).  In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.  The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Interest Shares; provided that the Company shall not be required to pay any tax that may be payable in respect of any issuance of Interest Shares to any Person other than the Holder or with respect to any income tax due by the Holder with respect to such Interest Shares.
 
(3) RIGHTS UPON EVENT OF DEFAULT.
 
(a) Event of Default.  Each of the following events shall constitute an “Event of Default”:
 
(i) the suspension from trading or failure of the Common Stock to be listed on an Eligible Market for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period;
 
 
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(ii) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Debenture (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business Days;
 
(iii) any default occurs and is continuing under, or any redemption of or acceleration prior to maturity occurs in respect of any Indebtedness of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any redemption of the Other Debentures in accordance with their terms; provided, that in the event that any such acceleration of indebtedness is rescinded by the holders thereof prior to acceleration of this Debenture or the Other Debentures, no Event of Default shall exist as a result of such rescinded acceleration;
 
(iv) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;
 
(v) creditors of the Company or any of its Subsidiaries file an action for relief under any Bankruptcy Law against such entity in an involuntary case and such action is not dismissed within thirty (30) days of such filing or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries;
 
(vi) a final judgment or judgments for the payment of money aggregating in excess of $50,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $50,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;
 
(vii) the Company or any of its Subsidiaries breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition of any Transaction Document which is curable, only if such breach continues for a period of at least five (5) consecutive Business Days, and except for breaches that are not reasonably likely to result in liability to the Company of more than $25,000 in any single instance or $100,000 in the aggregate;
 
 
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(viii) any breach or failure in any respect to comply with Section 8 of this Debenture;
 
(ix) any Event of Default (as defined in the Other Debentures) occurs and is continuing with respect to any Other Debentures; or
 
(x) any Event of Default (as defined in the Security Agreement) occurs and is continuing under the Security Documents, the repudiation by the Company or any of its Subsidiaries of any of its obligations under the Security Documents or the unenforceability of the Security Documents against the Company or any of its Subsidiaries for any reason.
 
(b) Redemption Right.  Promptly after the occurrence of an Event of Default with respect to this Debenture or any Other Debenture, which could not be cured by the Company within ten (10) Business Days, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder.  At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Required Holders may require the Company to redeem all or any portion of the Debentures  (as “Event of Default Redemption”) by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of the Debentures the Required Holders are electing to redeem; provided that upon the occurrence of any default described in Section 3(a)(v) and 3(a)(vi), the Debentures shall automatically, and without any action on behalf of the Holders, be redeemed by the Company.  Each portion of the Debentures subject to redemption by the Company pursuant to this Section 3(b) shall be redeemed by the Company at a price equal to 110% of the outstanding Principal amount and accrued and unpaid Interest and accrued and unpaid Late Charges and Interest with respect to such portion of the Debentures subject to redemption (the “Event of Default Redemption Price”).  Redemptions required by this Section 3(b) shall be made in accordance with the provisions of Section 7.
 
(4) CONVERSION OF DEBENTURE.
 
(a) Conversion; Conversion Price; Valuation Event.  Subject to the limitations set forth in Section 5 hereof, this Debenture may be converted, either in whole or in part, up to the full Principal Amount and accrued Interest hereof (the “Conversion Amount”) into shares of Common Stock (calculated as to each such conversion to the nearest whole share), at any time and from time to time on any Business Day, subject to compliance with this Section 4 and Section 5. The number of shares of Common Stock into which this Debenture may be converted is equal to the dollar amount of the Debenture being converted divided by the Conversion Price. The “Conversion Price” shall be equal to $0.075, subject to adjustment as provided for herein.  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Agreement shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
 
 
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(i) In the event that the Company shall at any time after the date of this Debenture and prior to its conversion or Maturity:  (i) declare a dividend or make a distribution on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock into a greater number of shares of Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Conversion Price in effect at the time of the record date for the determination of Stockholders entitled to receive such dividend or distribution or of the effective date of such subdivision, combination, or reclassification shall be adjusted so that it shall equal the price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action, and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action.  Such adjustment shall be made successively whenever any event listed above shall occur and shall become effective at the close of business on such record date or at the close of business on the date immediately preceding such effective date, as applicable. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment in the Conversion Price shall be required if such adjustment is less than $0.01; provided, however, that any adjustments which by reason of this Section 4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
 
(ii) In case of any reclassification or change of the shares of Common Stock issuable upon conversion of this Debenture (other than a change in par value or from a specified par value to no par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder of this Debenture shall have the right thereafter to receive upon conversion of this Debenture solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments set forth herein. The above provisions shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
 
 
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(b) Exercise of Conversion Privilege.
 
(i) Voluntary Conversion.  Beginning on the 91st day following the Closing Date, this Debenture may be converted by Holder by delivery of the Conversion Notice to the Company.  The date on which the Company actually receives a Conversion Notice in accordance with the provisions of this Section 4(b)(i) shall constitute a Conversion Date.  The Company shall convert, subject to the redemption provisions set forth in Section 5, this Debenture and issue the shares of Common Stock at Conversion in the manner provided below in this Section 4(b)(i), and all voting and other rights associated with the beneficial ownership of the shares of Common Stock at Conversion shall vest with the Holder, effective as of the Conversion Date at the time specified in the Conversion Notice.  The Conversion Notice also shall state the name or names (with addresses) of the persons who are to become the holders of the shares of Common Stock at Conversion in connection with such conversion. As promptly as practicable following the Conversion Date as aforesaid, but in any event not more than three (3) Business Days after the Conversion Date, the Company shall (i) issue the shares of Common Stock at Conversion in accordance with the provisions of this Section 4 and (ii) cause to be either: (A) provided that the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit the aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system; or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, mailed for delivery by overnight courier to Holder a certificate or certificate(s) representing the number of shares of Common Stock to which the Holder is entitled by virtue of such conversion. Further, the Company shall pay to the Holder (i) cash, as provided in Section 3.3, in respect of any fraction of a share of Common Stock deliverable upon such conversion and (ii) cash or shares of Common Stock, as applicable, representing the amount of accrued and unpaid Interest on this Debenture as of the Conversion Date.  Such conversion shall be deemed to have been effected on the Conversion Date, and at such time the rights of the Holder of this Debenture, as such (except if and to the extent that any Principal Amount thereof remains unconverted), shall cease and the Person and Persons in whose name or names the shares of Common Stock at Conversion shall be issuable shall be deemed to have become the holder or holders of record of the Common Stock represented thereby, and all voting and other rights associated with the beneficial ownership of such Common Stock shall at such time vest with such Person or Persons.
 
(ii) The Holder shall be entitled to exercise its conversion privilege notwithstanding the commencement of any case under the Bankruptcy Code.  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the Holder’s conversion privilege.  The Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the conversion of this Debenture.  The Company agrees, without cost or expense to the Holder, to take or consent to any and all action necessary to effectuate relief under 11 U.S.C. § 362.
 
 
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(iii) Forced Conversion. If the Closing Sale Price of shares of Common Stock during the ten consecutive Trading Days period ending and including the applicable Forced Conversion Notice Date (as defined below) has been at or above $0.20 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events) and no Equity Conditions Failure shall then exist (collectively, the “Forced Conversion Conditions”), then the Company shall have the right to require the Holder to convert all, or any part, of this Debenture for shares of Common Stock in accordance with this Section 4(iii) and the mechanics set forth in Section 4(i) hereof (the “Forced Conversion”) on the Forced Conversion Date (as defined below).  If the Forced Conversion Conditions have been satisfied, the Company may exercise its right to require a Forced Conversion by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Forced Conversion Notice” and the date all of the holders of Debentures received such notice is referred to as the “Forced Conversion Notice Date”).  The Forced Conversion Notice shall (x) state the date on which the Forced Conversion shall occur (the “Forced Conversion Date”) which date shall not be less than ten (10) calendar days nor more than twenty (20) calendar days following the Forced Conversion Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being converted in such Forced Conversion from the Holder and all of the other holders of the Debentures pursuant to this Section 4(b)(iii) (and analogous provisions under the other Debentures) on the Forced Conversion Date.  If the Company has elected a Forced Conversion, the mechanics of conversion set forth in Section 4(i) shall apply, to the extent applicable, as if the Company had received from the Holder on the third (3rd) Trading Day immediate prior to the applicable Forced Conversion Date, a Conversion Notice with respect to the Conversion Amount subject to the Forced Conversion as set forth in such Forced Conversion Notice.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Forced Conversion Notice Date but an Equity Conditions Failure occurs at any time prior to the Forced Conversion Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions, the Forced Conversion shall be cancelled and the applicable Forced Conversion Notice shall be null and void and (ii) at any time prior to the Forced Conversion Date, the Conversion Amount subject to such Forced Conversion may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4.  All such Conversion Amounts converted by the Holder after the Forced Conversion Notice Date shall reduce the Conversion Amount of this Debenture required to be converted on the Forced Conversion Date.   In the event the average closing price of the Common Stock for the ten trading days immediately preceding, but not including, the Maturity Date is equal to or greater than $0.20 (subject to adjustment for stock splits, dividends, etc.), then on the Maturity Date, Holder must convert all remaining Principal due under the Debenture.  If the Company elects to cause a Forced Conversion of this Debenture pursuant to Section 4(b)(iii) then it must simultaneously take the same action with respect to all of the other Debentures then outstanding on a pro rata basis.
 
(c) Fractional Shares.  No fractional shares of Common Stock or scrip representing fractional shares of Common Stock shall be delivered upon conversion of this Debenture.  Instead of any fractional shares of Common Stock which otherwise would be delivered upon conversion of this Debenture, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to $0.075 per share.
 
(d) Surrender of Debentures.  Upon any redemption or conversion of the entire remaining Principal amount under this Debenture, the Holder shall either deliver this Debenture by hand to the Company at its principal executive offices or surrender the same to the Company at such address by nationally recognized overnight courier.
 
 
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(e) Beneficial Ownership Conversion Limitation.  Notwithstanding anything to the contrary contained in this Debenture, this Debenture shall not be convertible by the Holder hereof, and the Company shall not effect any conversion of this Debenture or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder the Holder (together with its affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock.  To the extent the above limitation applies, the determination of whether this Debenture shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Debenture, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Debenture. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not amend or waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Debenture or securities issued pursuant to the Securities Purchase Agreement.  By written notice to the Company, at any time the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of Debentures.
 
(f) Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any reason or for no reason, to issue to the Holder within three (3) Trading Days after receipt of the applicable Conversion Notice, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of this Debenture (a “Delivery Failure”), and if on or after such third (3rd) Trading Day the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the Buy-In Price.
 
 
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(5) COMPANY REDEMPTION.  So long as no Equity Conditions Failure then exists, the Company shall have the right to redeem all, or any part, of the Conversion Amount (then remaining under this Debenture (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (each as defined below) (a “Company Optional Redemption”).  The portion of this Debenture subject to redemption pursuant to this Section (5) shall be redeemed by the Company in cash at a price (the “Company Optional Redemption Price”) equal to the Conversion Amount being redeemed as of the Company Optional Redemption Date.  The Company may exercise its right to require redemption under this Section (5) by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Company Optional Redemption Notice” and the date all of the holders of Debentures received such notice is referred to as the “Company Optional Redemption Notice Date”).  Each Company Optional Redemption Notice shall be irrevocable.  The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall not be less than ten (10) calendar days nor more than twenty-five (25) calendar days following the Company Optional Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being redeemed in such Company Optional Redemption from the Holder and all of the other holders of the Debentures pursuant to this Section (5) (and analogous provisions under the other Debentures) on the Company Optional Redemption Date.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions Failure, the Company Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4(i).  All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Debenture required to be redeemed on the Company Optional Redemption Date.   If the Company elects to cause a Company Optional Redemption of this Debenture pursuant to Section (5), then it must simultaneously take the same action with respect to all of the Other Debentures then outstanding on a pro rata basis. If by the Maturity Date, the Company does not redeem the Debenture in accordance with this Section (5), then on the Maturity Date, the Class C Warrant, substantially in the form attached as Exhibit I to the Securities Purchase Agreement, shall automatically and without further action by any party adjust such that it is exercisable into twice the number of shares it was exercisable into on its Issuance Date, which such share amount shall be equitably adjusted for any stock splits, dividends, recapitalization, or transaction having a similar effect.
 
 
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(6) NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, and will at all times in good faith carry out all of the provisions of this Debenture and take all action as may be required to protect the rights of the Holder of this Debenture.
 
(7) HOLDER’S REDEMPTIONS.
 
(a) Mechanics.  The Company shall deliver the applicable Event of Default Redemption Price to the Holder within one Business Day after the Company’s receipt of the Required Holders’ Event of Default Redemption Notice.  In the event of a redemption of less than all of the Principal of this Debenture, the Company shall promptly cause to be issued and delivered to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal which has not been redeemed.
 
(b) Redemption by Other Holders.  Any Event of Default Redemption Notice for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 3(b) or Section 8 is to be delivered to the Company by the Required Holders.  If the Company receives any Event of Default Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice, then the Company shall redeem a pro rata amount from each holder of the Debentures (including the Holder) based on the principal amount of the Debentures submitted for redemption pursuant to such Event of Default Redemption Notice received by the Company from the Required Holders.
 
(8) COVENANTS.
 
(a) Rank.  All payments due under this Debenture (a) shall rank pari passu with all Other Debentures and (b) shall be senior in right of payment to all other Indebtedness of the Company and its Subsidiaries.
 
(b) Incurrence of Indebtedness.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Debenture and the Other Debentures and (ii) Permitted Indebtedness.
 
(c) Existence of Liens.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
 
(d) Restricted Payments.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly,
 
 
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(i) declare or pay any dividend or make any other payment or distribution on account of the Company’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such;
 
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; or
 
(iii) make any payment on or with respect to, accelerate the maturity of, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company, except a payment of interest, principal or other amounts due at the stated maturity thereof and except for payments of principal, interest and other amounts under the Other Debentures.
 
(e) Asset Sales.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consummate any Asset Sale unless:
 
(A)           Company (or the applicable Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; and
 
(B)           at least 85% of the consideration received in the Asset Sale by the Company or such Subsidiary is in the form of cash.
 
(f) Use of Proceeds.  The Company estimates the use of the proceeds from the sale of the Securities to be substantially as set forth in Schedule 4(d) of the Securities Purchase Agreement.
 
(9) VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES.  The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Debenture or the Other Debentures.
 
(10) TRANSFER.  This Debenture may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) and 2(g) of the Securities Purchase Agreement.
 
(11) REISSUANCE OF THIS DEBENTURE.
 
(a) Transfer.  If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 12(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.
 
 
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(b) Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal.
 
(c) Debenture Exchangeable for Different Denominations.  This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 12(d) and in principal amounts of at least $50,000) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
 
(d) Issuance of New Debentures.  Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Debenture, from the Issuance Date.
 
(12) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture.  Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
 
(13) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Debenture is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Debenture or to enforce the provisions of this Debenture or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Debenture, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.
 
 
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(14) CONSTRUCTION; HEADINGS.  This Debenture shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any Person as the drafter hereof.  The headings of this Debenture are for convenience of reference and shall not form part of, or affect the interpretation of, this Debenture.
 
(15) FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
 
(16) DISPUTE RESOLUTION.
 
(a) Disputes Over Closing Bid Price, Closing Sale Price, Conversion Price or Fair Market Value.
 
(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, or fair market value (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute via facsimile (I) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (II) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price or such fair market value (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder shall select an independent, reputable investment bank to resolve such dispute.
 
(ii) The Holder and the Company shall each deliver to such investment bank (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
 
 
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(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
 
(b) Disputes Over Arithmetic Calculation of the Conversion Rate, the applicable redemption price.
 
(i) In the case of a dispute as to the arithmetic calculation of a Conversion Rate or the applicable redemption price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed arithmetic calculation via facsimile (i) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such disputed arithmetic calculation of such Conversion Rate or the applicable redemption price (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such disputed arithmetic calculation, then the Holder shall select an independent, reputable accountant or accounting firm to perform such disputed arithmetic calculation.
 
(ii) The Holder and the Company shall each deliver to such accountant or accounting firm (as the case may be) (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such disputed arithmetic calculation, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such accountant or accounting firm (as the case may be) (the “Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Documentation by the Submission Deadline, then the party who fails to so submit all of the Required Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) with respect to such disputed arithmetic calculation and such accountant or accounting firm (as the case may be) shall perform such disputed arithmetic calculation based solely on the Required Documentation that was delivered to such accountant or accounting firm (as the case may be) prior to the Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such accountant or accounting firm (as the case may be), neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) in connection with such disputed arithmetic calculation of the Conversion Rate or the applicable Redemption Price (as the case may be) (other than the Required Documentation).
 
(iii) The Company and the Holder shall cause such accountant or accounting firm (as the case may be) to perform such disputed arithmetic calculation and notify the Company and the Holder of the results no later than ten (10) Business Days immediately following the Submission Deadline. The fees and expenses of such accountant or accounting firm (as the case may be) shall be borne solely by the Company, and such accountant’s or accounting firm’s (as the case may be) arithmetic calculation shall be final and binding upon all parties absent manifest error.
 
 
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(c) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 16 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that each party shall be entitled to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 16, (ii) a dispute relating to a Conversion Price, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iv) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected accountant’s or accounting firm’s performance of the applicable arithmetic calculation, (v) for clarification purposes and without implication that the contrary would otherwise be true, disputes relating to matters described in Section 16(a) shall be governed by Section 16(a) and not by Section 16(a), and (vi) nothing in this Section 16 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in Section 16(a) or Section 16(a)).
 
(17) NOTICES; PAYMENTS.
 
(a) Notices.  Whenever notice is required to be given under this Debenture, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Debenture, including in reasonable detail a description of such action and the reason therefor.
 
(b) Payments.  Whenever any payment of cash is to be made by the Company to any Person pursuant to this Debenture, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.  Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Debenture is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.  Any amount of Principal or other amounts due under the Transaction Documents, other than Interest, which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of ten percent (10.00%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).
 
 
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(18) RIGHTS UPON FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Debenture and the other Transaction Documents in accordance with the provisions of this Section (18) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Debentures in exchange for such Debentures a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Debentures, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Debentures held by such holder, having similar conversion rights as the Debentures and having similar ranking to the Debentures, and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein immediately following the applicable Fundamental Transaction. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall also be issued upon conversion or redemption of this Debenture at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock or other securities, cash, assets or other property issuable upon the conversion or redemption of the Debentures prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Debenture been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Debenture), as adjusted in accordance with the provisions of this Debenture. The provisions of this Section (18) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Debenture.
 
(19) CANCELLATION.  After all Principal, accrued Interest and other amounts at any time owed on this Debenture have been paid in full in cash, this Debenture shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
 
(20) WAIVER OF NOTICE.  To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Debenture and the Securities Purchase Agreement.
 
 
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(21) GOVERNING LAW.  This Debenture shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Debenture and all disputes arising hereunder shall be governed by, the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
 
(22) CERTAIN DEFINITIONS.  For purposes of this Debenture, the following terms shall have the following meanings:
 
(a) “Asset Sale” means (i) the sale, lease, conveyance or other disposition of any assets or rights other than in the ordinary course of business consistent with past practice, and (ii) the sale of Equity Interests in any of the Company’s Subsidiaries.
 
(b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of Scottsdale are authorized or required by law to remain closed.
 
(c) “Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP.
 
(d) “Capital Stock” means:  (1)  in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;  (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
 
(e) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing trade price, respectively, is reported for such security by Bloomberg, the average closing price of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 16. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
 
 
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(f)  “Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
 
(g) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the American Stock Exchange, The Nasdaq National Market or The Nasdaq Capital Market.
 
(h)  “Equity Conditions” means that each of the following conditions is satisfied as of the date of determination:  (i) the Common Stock is designated for quotation on the Principal Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (ii) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Principal Market; (iii) the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document; (iv) there shall not then exist (A) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated, (B) an Event of Default or (C) an event that with the passage of time or giving of notice would constitute an Event of Default; (v) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document; (vi) there shall either be an effective Registration Statement available to the Holder for the resale of all Registrable Securities, except for Interest Shares (as defined in the Registration Rights Agreement) or all Registrable Securities shall be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); (vii) the Common Stock is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring) or pending either (A) in writing by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (viii) the Company shall have delivered all shares of Common Stock issuable upon conversion of this Debenture on a timely basis as set forth herein and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (ix) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section (4)(f) hereof; (x) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (xi) no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (xii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); and (xiii) the Holder shall not be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like.
 
 
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(i) “Equity Conditions Failure” means, with respect to a particular date of determination, that on any day during the period commencing ten (10) Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
 
(j) “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
 
(k) “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Debenture.
 
 
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(l) “GAAP” means United States generally accepted accounting principles, consistently applied.
 
(m) “Indebtedness” means, any indebtedness (excluding accrued expenses and trade payables), whether or not contingent:
 
(i)           in respect of borrowed money;
 
(ii)           evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
 
(iii)           in respect of banker’s acceptances;
 
(iv)           representing Capital Lease Obligations; or
 
(v)           representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed.
 
if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the Company prepared in accordance with GAAP.  In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the Company or its Subsidiaries (whether or not such Indebtedness is assumed by the Company or such Subsidiary) and, to the extent not otherwise included, the guarantee by the Company or any of its Subsidiaries of any Indebtedness of any other Person.
 
(n) “Initial Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued the Debentures pursuant to the terms of the Securities Purchase Agreement.
 
(o) “Interest Conversion Price” means, with respect to any Interest Date, that price which shall be computed as 100.0% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the ten (10) consecutive Trading Days immediately preceding the applicable Interest Date (each, an “Interest Measuring Period”).  All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.
 
 
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(p) “Mortgage” means a Mortgage in form and substance reasonably satisfactory to the Holder, as it may be amended, supplemented or otherwise modified from time to time.
 
(q) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
 
(r)  “Payment Quarter” means each of: the period beginning on and including June 1, 2015 and ending on and including August 31, 2015; the period beginning on and including September 1, 2015 and ending on and including November 30, 2015; the period beginning on and including December 1, 2015 and ending on and including February 29, 2016; the period beginning on and including March 1, 2016 and ending on and including May 31, 2016; and the period beginning on and including June 1, 2016 and ending on and including the Maturity Date.
 
(s) “Permitted Indebtedness” means (a) purchase money debt, Capital Lease Obligations or other Indebtedness incurred in connection with the acquisition of an interest in property, equipment, entities or other assets, provided that such purchase money debt, Capital Lease Obligations or other Indebtedness is recourse only to the interests in property, equipment, entities or other assets so acquired, and (b) Indebtedness described in Schedule 3(s) of the Securities Purchase Agreement.
 
(t) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) Liens securing the Company’s obligations under the Debentures, (v) Liens securing purchase money debt, Capital Lease Obligations or other Indebtedness incurred pursuant to clause (a) of the definition of Permitted Indebtedness, provided that such Liens do not extend and otherwise are not recourse to any assets of the Company or its Subsidiaries other than the interests in property, equipment, entities or other assets acquired with such purchase money debt, Capital Lease Obligations or other Indebtedness.
 
(u) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
 
 
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(v) “Principal Market” means the Over-the-Counter Quotation Bureau (OTC:QB).
 
(w) “Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, capital stock.
 
(x) “Registrable Securities” shall have the meaning set forth in the Registration Rights Agreement.
 
(y) “Registration Rights Agreement” means that certain registration rights agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures relating to, among other things, the registration of the resale of the Common Stock.
 
(z) “Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.
 
(aa) “Required Holders” means the holders of Debentures representing at least fifty-one percent of the aggregate principal amount of the Debentures then outstanding.
 
(bb) “SEC” means the United States Securities and Exchange Commission.
 
(cc) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures pursuant to which the Company issued the Debentures.
 
(dd) “Security Agreement” means the Pledge and Security Agreement dated as of the Subscription Date among the Company and the holder of the Debentures.
 
(ee) “Security Documents” means the Security Agreement, the Mortgages, if any, and all other instruments, documents and agreements delivered by the Company or any of its Subsidiaries in order to grant to any holder of a Debenture or Other Debenture, a Lien on any real, personal or mixed property of the Company or one of its Subsidiaries as security for the obligations under the Debentures.
 
(ff) “Subscription Date” means July 31, 2015.
 
(gg) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York Time).
 
 
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(hh) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
 
(23) DISCLOSURE.  Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise.  In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
 
(23)           USURY.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Buyer in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Buyer with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Buyer’s election.
 

 
[Signature Page Follows]
 
 
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as of the Issuance Date set out above.
 
Guardian 8 Holdings,
a Nevada corporation

By: /s/ Kathleen Hanrahan                                                              
       Kathleen Hanrahan, interim CFO
 
 
 
 
 
 
 
 
 
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EX-10.64 3 ex10-64.htm EX-10.64 ex10-64.htm
 
EXHIBIT 10.64
 
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
Guardian 8 holdings
 
Convertible Senior Secured Debenture
 
Issuance Date:  August 26, 2015
Principal:  U.S. $50,000.00
 
FOR VALUE RECEIVED, Guardian 8 Holdings, a Nevada corporation (“Company”), hereby promises to pay to the order of C. Stephen Cochennet or its registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate equal to 8.00% per annum (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below) or, the Maturity Date, acceleration, redemption, conversion, or otherwise (in each case in accordance with the terms hereof).  This Senior Debenture (including all Senior Debentures issued in exchange, transfer or replacement hereof, this “Debenture”) is one of an issue of Senior Debentures issued pursuant to the Securities Purchase Agreement (as defined below) on the Initial Closing Date (collectively, the “Debentures”, Prior Debentures and such other Senior Debentures, the “Other Debentures”).  Certain capitalized terms used herein are defined in Section 21.
 
(1) PAYMENTS OF PRINCIPAL.  On the Maturity Date, the Company shall pay to the Holder an amount equal to the Principal, as well as all accrued but unpaid Interest.  The “Maturity Date” shall be July 31, 2016, or (a) such earlier date as may be accelerated by the Required Holders upon an Event of Default in accordance with the terms hereof, or (b) such later date as may be extended at the option of the Required Holders, (i) in the event that, and for so long as, an Event of Default (as defined in Section 3(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default.
 
 
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(2) INTEREST; INTEREST RATE.  Interest on this Debenture shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears for each Payment Quarter on the first day of the succeeding Payment Quarter during the period beginning on September 1, 2015 and ending on, and including, the Maturity Date (each, an “Interest Date”). Interest shall be payable on each Interest Date, to the record holder of this Debenture on the applicable Interest Date, in shares of restricted Common Stock (“Interest Shares”).  Interest to be paid on an Interest Date in Interest Shares shall be paid in a number of fully paid and nonassessable shares (provided, that if the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share) of Common Stock equal to the quotient of (a) the amount of Interest payable on such Interest Date less any Cash Interest paid and (b) the Interest Conversion Price in effect on the applicable Interest Date.  When Interest Shares are paid on an Interest Date, then the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and such action is not prohibited by applicable law or regulation or any applicable policy of DTC, credit such aggregate number of Interest Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal At Custodian system, or (Y) if the foregoing shall not apply, issue and deliver within three Trading Days after the applicable Interest Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Securities Purchase Agreement or to such address as specified by the Holder in writing to the Company at least two Business Days prior to the applicable Interest Date, a certificate, registered in the name of the Holder or its designee, for the number of Interest Shares to which the Holder shall be entitled. Upon the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to thirteen percent (13.00%) (the “Default Rate”).  In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.  The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Interest Shares; provided that the Company shall not be required to pay any tax that may be payable in respect of any issuance of Interest Shares to any Person other than the Holder or with respect to any income tax due by the Holder with respect to such Interest Shares.
 
(3) RIGHTS UPON EVENT OF DEFAULT.
 
(a) Event of Default.  Each of the following events shall constitute an “Event of Default”:
 
(i) the suspension from trading or failure of the Common Stock to be listed on an Eligible Market for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period;
 
 
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(ii) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Debenture (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business Days;
 
(iii) any default occurs and is continuing under, or any redemption of or acceleration prior to maturity occurs in respect of any Indebtedness of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any redemption of the Other Debentures in accordance with their terms; provided, that in the event that any such acceleration of indebtedness is rescinded by the holders thereof prior to acceleration of this Debenture or the Other Debentures, no Event of Default shall exist as a result of such rescinded acceleration;
 
(iv) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;
 
(v) creditors of the Company or any of its Subsidiaries file an action for relief under any Bankruptcy Law against such entity in an involuntary case and such action is not dismissed within thirty (30) days of such filing or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries;
 
(vi) a final judgment or judgments for the payment of money aggregating in excess of $50,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $50,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;
 
(vii) the Company or any of its Subsidiaries breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition of any Transaction Document which is curable, only if such breach continues for a period of at least five (5) consecutive Business Days, and except for breaches that are not reasonably likely to result in liability to the Company of more than $25,000 in any single instance or $100,000 in the aggregate;
 
 
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(viii) any breach or failure in any respect to comply with Section 8 of this Debenture;
 
(ix) any Event of Default (as defined in the Other Debentures) occurs and is continuing with respect to any Other Debentures; or
 
(x) any Event of Default (as defined in the Security Agreement) occurs and is continuing under the Security Documents, the repudiation by the Company or any of its Subsidiaries of any of its obligations under the Security Documents or the unenforceability of the Security Documents against the Company or any of its Subsidiaries for any reason.
 
(b) Redemption Right.  Promptly after the occurrence of an Event of Default with respect to this Debenture or any Other Debenture, which could not be cured by the Company within ten (10) Business Days, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder.  At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Required Holders may require the Company to redeem all or any portion of the Debentures  (as “Event of Default Redemption”) by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of the Debentures the Required Holders are electing to redeem; provided that upon the occurrence of any default described in Section 3(a)(v) and 3(a)(vi), the Debentures shall automatically, and without any action on behalf of the Holders, be redeemed by the Company.  Each portion of the Debentures subject to redemption by the Company pursuant to this Section 3(b) shall be redeemed by the Company at a price equal to 110% of the outstanding Principal amount and accrued and unpaid Interest and accrued and unpaid Late Charges and Interest with respect to such portion of the Debentures subject to redemption (the “Event of Default Redemption Price”).  Redemptions required by this Section 3(b) shall be made in accordance with the provisions of Section 7.
 
(4) CONVERSION OF DEBENTURE.
 
(a) Conversion; Conversion Price; Valuation Event.  Subject to the limitations set forth in Section 5 hereof, this Debenture may be converted, either in whole or in part, up to the full Principal Amount and accrued Interest hereof (the “Conversion Amount”) into shares of Common Stock (calculated as to each such conversion to the nearest whole share), at any time and from time to time on any Business Day, subject to compliance with this Section 4 and Section 5. The number of shares of Common Stock into which this Debenture may be converted is equal to the dollar amount of the Debenture being converted divided by the Conversion Price. The “Conversion Price” shall be equal to $0.075, subject to adjustment as provided for herein.  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Agreement shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
 
 
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(i) In the event that the Company shall at any time after the date of this Debenture and prior to its conversion or Maturity:  (i) declare a dividend or make a distribution on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock into a greater number of shares of Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Conversion Price in effect at the time of the record date for the determination of Stockholders entitled to receive such dividend or distribution or of the effective date of such subdivision, combination, or reclassification shall be adjusted so that it shall equal the price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action, and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action.  Such adjustment shall be made successively whenever any event listed above shall occur and shall become effective at the close of business on such record date or at the close of business on the date immediately preceding such effective date, as applicable. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment in the Conversion Price shall be required if such adjustment is less than $0.01; provided, however, that any adjustments which by reason of this Section 4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
 
(ii) In case of any reclassification or change of the shares of Common Stock issuable upon conversion of this Debenture (other than a change in par value or from a specified par value to no par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder of this Debenture shall have the right thereafter to receive upon conversion of this Debenture solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments set forth herein. The above provisions shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
 
 
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(b) Exercise of Conversion Privilege.
 
(i) Voluntary Conversion.  Beginning on the 91st day following the Closing Date, this Debenture may be converted by Holder by delivery of the Conversion Notice to the Company.  The date on which the Company actually receives a Conversion Notice in accordance with the provisions of this Section 4(b)(i) shall constitute a Conversion Date.  The Company shall convert, subject to the redemption provisions set forth in Section 5, this Debenture and issue the shares of Common Stock at Conversion in the manner provided below in this Section 4(b)(i), and all voting and other rights associated with the beneficial ownership of the shares of Common Stock at Conversion shall vest with the Holder, effective as of the Conversion Date at the time specified in the Conversion Notice.  The Conversion Notice also shall state the name or names (with addresses) of the persons who are to become the holders of the shares of Common Stock at Conversion in connection with such conversion. As promptly as practicable following the Conversion Date as aforesaid, but in any event not more than three (3) Business Days after the Conversion Date, the Company shall (i) issue the shares of Common Stock at Conversion in accordance with the provisions of this Section 4 and (ii) cause to be either: (A) provided that the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit the aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system; or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, mailed for delivery by overnight courier to Holder a certificate or certificate(s) representing the number of shares of Common Stock to which the Holder is entitled by virtue of such conversion. Further, the Company shall pay to the Holder (i) cash, as provided in Section 3.3, in respect of any fraction of a share of Common Stock deliverable upon such conversion and (ii) cash or shares of Common Stock, as applicable, representing the amount of accrued and unpaid Interest on this Debenture as of the Conversion Date.  Such conversion shall be deemed to have been effected on the Conversion Date, and at such time the rights of the Holder of this Debenture, as such (except if and to the extent that any Principal Amount thereof remains unconverted), shall cease and the Person and Persons in whose name or names the shares of Common Stock at Conversion shall be issuable shall be deemed to have become the holder or holders of record of the Common Stock represented thereby, and all voting and other rights associated with the beneficial ownership of such Common Stock shall at such time vest with such Person or Persons.
 
(ii) The Holder shall be entitled to exercise its conversion privilege notwithstanding the commencement of any case under the Bankruptcy Code.  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the Holder’s conversion privilege.  The Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the conversion of this Debenture.  The Company agrees, without cost or expense to the Holder, to take or consent to any and all action necessary to effectuate relief under 11 U.S.C. § 362.
 
 
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(iii) Forced Conversion. If the Closing Sale Price of shares of Common Stock during the ten consecutive Trading Days period ending and including the applicable Forced Conversion Notice Date (as defined below) has been at or above $0.20 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events) and no Equity Conditions Failure shall then exist (collectively, the “Forced Conversion Conditions”), then the Company shall have the right to require the Holder to convert all, or any part, of this Debenture for shares of Common Stock in accordance with this Section 4(iii) and the mechanics set forth in Section 4(i) hereof (the “Forced Conversion”) on the Forced Conversion Date (as defined below).  If the Forced Conversion Conditions have been satisfied, the Company may exercise its right to require a Forced Conversion by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Forced Conversion Notice” and the date all of the holders of Debentures received such notice is referred to as the “Forced Conversion Notice Date”).  The Forced Conversion Notice shall (x) state the date on which the Forced Conversion shall occur (the “Forced Conversion Date”) which date shall not be less than ten (10) calendar days nor more than twenty (20) calendar days following the Forced Conversion Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being converted in such Forced Conversion from the Holder and all of the other holders of the Debentures pursuant to this Section 4(b)(iii) (and analogous provisions under the other Debentures) on the Forced Conversion Date.  If the Company has elected a Forced Conversion, the mechanics of conversion set forth in Section 4(i) shall apply, to the extent applicable, as if the Company had received from the Holder on the third (3rd) Trading Day immediate prior to the applicable Forced Conversion Date, a Conversion Notice with respect to the Conversion Amount subject to the Forced Conversion as set forth in such Forced Conversion Notice.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Forced Conversion Notice Date but an Equity Conditions Failure occurs at any time prior to the Forced Conversion Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions, the Forced Conversion shall be cancelled and the applicable Forced Conversion Notice shall be null and void and (ii) at any time prior to the Forced Conversion Date, the Conversion Amount subject to such Forced Conversion may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4.  All such Conversion Amounts converted by the Holder after the Forced Conversion Notice Date shall reduce the Conversion Amount of this Debenture required to be converted on the Forced Conversion Date.   In the event the average closing price of the Common Stock for the ten trading days immediately preceding, but not including, the Maturity Date is equal to or greater than $0.20 (subject to adjustment for stock splits, dividends, etc.), then on the Maturity Date, Holder must convert all remaining Principal due under the Debenture.  If the Company elects to cause a Forced Conversion of this Debenture pursuant to Section 4(b)(iii) then it must simultaneously take the same action with respect to all of the other Debentures then outstanding on a pro rata basis.
 
(c) Fractional Shares.  No fractional shares of Common Stock or scrip representing fractional shares of Common Stock shall be delivered upon conversion of this Debenture.  Instead of any fractional shares of Common Stock which otherwise would be delivered upon conversion of this Debenture, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to $0.075 per share.
 
(d) Surrender of Debentures.  Upon any redemption or conversion of the entire remaining Principal amount under this Debenture, the Holder shall either deliver this Debenture by hand to the Company at its principal executive offices or surrender the same to the Company at such address by nationally recognized overnight courier.
 
 
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(e) Beneficial Ownership Conversion Limitation.  Notwithstanding anything to the contrary contained in this Debenture, this Debenture shall not be convertible by the Holder hereof, and the Company shall not effect any conversion of this Debenture or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder the Holder (together with its affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock.  To the extent the above limitation applies, the determination of whether this Debenture shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Debenture, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Debenture. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not amend or waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Debenture or securities issued pursuant to the Securities Purchase Agreement.  By written notice to the Company, at any time the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of Debentures.
 
(f) Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any reason or for no reason, to issue to the Holder within three (3) Trading Days after receipt of the applicable Conversion Notice, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of this Debenture (a “Delivery Failure”), and if on or after such third (3rd) Trading Day the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the Buy-In Price.
 
 
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(5) COMPANY REDEMPTION.  So long as no Equity Conditions Failure then exists, the Company shall have the right to redeem all, or any part, of the Conversion Amount (then remaining under this Debenture (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (each as defined below) (a “Company Optional Redemption”).  The portion of this Debenture subject to redemption pursuant to this Section (5) shall be redeemed by the Company in cash at a price (the “Company Optional Redemption Price”) equal to the Conversion Amount being redeemed as of the Company Optional Redemption Date.  The Company may exercise its right to require redemption under this Section (5) by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Company Optional Redemption Notice” and the date all of the holders of Debentures received such notice is referred to as the “Company Optional Redemption Notice Date”).  Each Company Optional Redemption Notice shall be irrevocable.  The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall not be less than ten (10) calendar days nor more than twenty-five (25) calendar days following the Company Optional Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being redeemed in such Company Optional Redemption from the Holder and all of the other holders of the Debentures pursuant to this Section (5) (and analogous provisions under the other Debentures) on the Company Optional Redemption Date.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions Failure, the Company Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4(i).  All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Debenture required to be redeemed on the Company Optional Redemption Date.   If the Company elects to cause a Company Optional Redemption of this Debenture pursuant to Section (5), then it must simultaneously take the same action with respect to all of the Other Debentures then outstanding on a pro rata basis. If by the Maturity Date, the Company does not redeem the Debenture in accordance with this Section (5), then on the Maturity Date, the Class C Warrant, substantially in the form attached as Exhibit I to the Securities Purchase Agreement, shall automatically and without further action by any party adjust such that it is exercisable into twice the number of shares it was exercisable into on its Issuance Date, which such share amount shall be equitably adjusted for any stock splits, dividends, recapitalization, or transaction having a similar effect.
 
 
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(6) NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, and will at all times in good faith carry out all of the provisions of this Debenture and take all action as may be required to protect the rights of the Holder of this Debenture.
 
(7) HOLDER’S REDEMPTIONS.
 
(a) Mechanics.  The Company shall deliver the applicable Event of Default Redemption Price to the Holder within one Business Day after the Company’s receipt of the Required Holders’ Event of Default Redemption Notice.  In the event of a redemption of less than all of the Principal of this Debenture, the Company shall promptly cause to be issued and delivered to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal which has not been redeemed.
 
(b) Redemption by Other Holders.  Any Event of Default Redemption Notice for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 3(b) or Section 8 is to be delivered to the Company by the Required Holders.  If the Company receives any Event of Default Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice, then the Company shall redeem a pro rata amount from each holder of the Debentures (including the Holder) based on the principal amount of the Debentures submitted for redemption pursuant to such Event of Default Redemption Notice received by the Company from the Required Holders.
 
(8) COVENANTS.
 
(a) Rank.  All payments due under this Debenture (a) shall rank pari passu with all Other Debentures and (b) shall be senior in right of payment to all other Indebtedness of the Company and its Subsidiaries.
 
(b) Incurrence of Indebtedness.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Debenture and the Other Debentures and (ii) Permitted Indebtedness.
 
(c) Existence of Liens.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
 
(d) Restricted Payments.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly,
 
 
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(i) declare or pay any dividend or make any other payment or distribution on account of the Company’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such;
 
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; or
 
(iii) make any payment on or with respect to, accelerate the maturity of, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company, except a payment of interest, principal or other amounts due at the stated maturity thereof and except for payments of principal, interest and other amounts under the Other Debentures.
 
(e) Asset Sales.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consummate any Asset Sale unless:
 
(A)           Company (or the applicable Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; and
 
(B)           at least 85% of the consideration received in the Asset Sale by the Company or such Subsidiary is in the form of cash.
 
(f) Use of Proceeds.  The Company estimates the use of the proceeds from the sale of the Securities to be substantially as set forth in Schedule 4(d) of the Securities Purchase Agreement.
 
(9) VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES.  The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Debenture or the Other Debentures.
 
(10) TRANSFER.  This Debenture may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) and 2(g) of the Securities Purchase Agreement.
 
(11) REISSUANCE OF THIS DEBENTURE.
 
(a) Transfer.  If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 12(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.
 
 
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(b) Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal.
 
(c) Debenture Exchangeable for Different Denominations.  This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 12(d) and in principal amounts of at least $50,000) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
 
(d) Issuance of New Debentures.  Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Debenture, from the Issuance Date.
 
(12) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture.  Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
 
(13) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Debenture is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Debenture or to enforce the provisions of this Debenture or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Debenture, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.
 
 
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(14) CONSTRUCTION; HEADINGS.  This Debenture shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any Person as the drafter hereof.  The headings of this Debenture are for convenience of reference and shall not form part of, or affect the interpretation of, this Debenture.
 
(15) FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
 
(16) DISPUTE RESOLUTION.
 
(a) Disputes Over Closing Bid Price, Closing Sale Price, Conversion Price or Fair Market Value.
 
(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, or fair market value (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute via facsimile (I) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (II) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price or such fair market value (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder shall select an independent, reputable investment bank to resolve such dispute.
 
(ii) The Holder and the Company shall each deliver to such investment bank (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
 
 
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(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
 
(b) Disputes Over Arithmetic Calculation of the Conversion Rate, the applicable redemption price.
 
(i) In the case of a dispute as to the arithmetic calculation of a Conversion Rate or the applicable redemption price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed arithmetic calculation via facsimile (i) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such disputed arithmetic calculation of such Conversion Rate or the applicable redemption price (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such disputed arithmetic calculation, then the Holder shall select an independent, reputable accountant or accounting firm to perform such disputed arithmetic calculation.
 
(ii) The Holder and the Company shall each deliver to such accountant or accounting firm (as the case may be) (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such disputed arithmetic calculation, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such accountant or accounting firm (as the case may be) (the “Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Documentation by the Submission Deadline, then the party who fails to so submit all of the Required Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) with respect to such disputed arithmetic calculation and such accountant or accounting firm (as the case may be) shall perform such disputed arithmetic calculation based solely on the Required Documentation that was delivered to such accountant or accounting firm (as the case may be) prior to the Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such accountant or accounting firm (as the case may be), neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) in connection with such disputed arithmetic calculation of the Conversion Rate or the applicable Redemption Price (as the case may be) (other than the Required Documentation).
 
(iii) The Company and the Holder shall cause such accountant or accounting firm (as the case may be) to perform such disputed arithmetic calculation and notify the Company and the Holder of the results no later than ten (10) Business Days immediately following the Submission Deadline. The fees and expenses of such accountant or accounting firm (as the case may be) shall be borne solely by the Company, and such accountant’s or accounting firm’s (as the case may be) arithmetic calculation shall be final and binding upon all parties absent manifest error.
 
 
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(c) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 16 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that each party shall be entitled to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 16, (ii) a dispute relating to a Conversion Price, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iv) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected accountant’s or accounting firm’s performance of the applicable arithmetic calculation, (v) for clarification purposes and without implication that the contrary would otherwise be true, disputes relating to matters described in Section 16(a) shall be governed by Section 16(a) and not by Section 16(a), and (vi) nothing in this Section 16 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in Section 16(a) or Section 16(a)).
 
(17) NOTICES; PAYMENTS.
 
(a) Notices.  Whenever notice is required to be given under this Debenture, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Debenture, including in reasonable detail a description of such action and the reason therefor.
 
(b) Payments.  Whenever any payment of cash is to be made by the Company to any Person pursuant to this Debenture, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.  Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Debenture is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.  Any amount of Principal or other amounts due under the Transaction Documents, other than Interest, which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of ten percent (10.00%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).
 
 
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(18) RIGHTS UPON FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Debenture and the other Transaction Documents in accordance with the provisions of this Section (18) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Debentures in exchange for such Debentures a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Debentures, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Debentures held by such holder, having similar conversion rights as the Debentures and having similar ranking to the Debentures, and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein immediately following the applicable Fundamental Transaction. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall also be issued upon conversion or redemption of this Debenture at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock or other securities, cash, assets or other property issuable upon the conversion or redemption of the Debentures prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Debenture been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Debenture), as adjusted in accordance with the provisions of this Debenture. The provisions of this Section (18) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Debenture.
 
(19) CANCELLATION.  After all Principal, accrued Interest and other amounts at any time owed on this Debenture have been paid in full in cash, this Debenture shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
 
(20) WAIVER OF NOTICE.  To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Debenture and the Securities Purchase Agreement.
 
 
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(21) GOVERNING LAW.  This Debenture shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Debenture and all disputes arising hereunder shall be governed by, the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
 
(22) CERTAIN DEFINITIONS.  For purposes of this Debenture, the following terms shall have the following meanings:
 
(a) “Asset Sale” means (i) the sale, lease, conveyance or other disposition of any assets or rights other than in the ordinary course of business consistent with past practice, and (ii) the sale of Equity Interests in any of the Company’s Subsidiaries.
 
(b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of Scottsdale are authorized or required by law to remain closed.
 
(c) “Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP.
 
(d) “Capital Stock” means:  (1)  in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;  (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
 
(e) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing trade price, respectively, is reported for such security by Bloomberg, the average closing price of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 16. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
 
 
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(f)  “Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
 
(g) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the American Stock Exchange, The Nasdaq National Market or The Nasdaq Capital Market.
 
(h)  “Equity Conditions” means that each of the following conditions is satisfied as of the date of determination:  (i) the Common Stock is designated for quotation on the Principal Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (ii) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Principal Market; (iii) the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document; (iv) there shall not then exist (A) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated, (B) an Event of Default or (C) an event that with the passage of time or giving of notice would constitute an Event of Default; (v) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document; (vi) there shall either be an effective Registration Statement available to the Holder for the resale of all Registrable Securities, except for Interest Shares (as defined in the Registration Rights Agreement) or all Registrable Securities shall be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); (vii) the Common Stock is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring) or pending either (A) in writing by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (viii) the Company shall have delivered all shares of Common Stock issuable upon conversion of this Debenture on a timely basis as set forth herein and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (ix) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section (4)(f) hereof; (x) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (xi) no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (xii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); and (xiii) the Holder shall not be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like.
 
 
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(i) “Equity Conditions Failure” means, with respect to a particular date of determination, that on any day during the period commencing ten (10) Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
 
(j) “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
 
(k) “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Debenture.
 
 
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(l) “GAAP” means United States generally accepted accounting principles, consistently applied.
 
(m) “Indebtedness” means, any indebtedness (excluding accrued expenses and trade payables), whether or not contingent:
 
(i)           in respect of borrowed money;
 
(ii)           evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
 
(iii)           in respect of banker’s acceptances;
 
(iv)           representing Capital Lease Obligations; or
 
(v)           representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed.
 
if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the Company prepared in accordance with GAAP.  In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the Company or its Subsidiaries (whether or not such Indebtedness is assumed by the Company or such Subsidiary) and, to the extent not otherwise included, the guarantee by the Company or any of its Subsidiaries of any Indebtedness of any other Person.
 
(n) “Initial Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued the Debentures pursuant to the terms of the Securities Purchase Agreement.
 
(o) “Interest Conversion Price” means, with respect to any Interest Date, that price which shall be computed as 100.0% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the ten (10) consecutive Trading Days immediately preceding the applicable Interest Date (each, an “Interest Measuring Period”).  All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.
 
 
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(p) “Mortgage” means a Mortgage in form and substance reasonably satisfactory to the Holder, as it may be amended, supplemented or otherwise modified from time to time.
 
(q) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
 
(r)  “Payment Quarter” means each of: the period beginning on and including June 1, 2015 and ending on and including August 31, 2015; the period beginning on and including September 1, 2015 and ending on and including November 30, 2015; the period beginning on and including December 1, 2015 and ending on and including February 29, 2016; the period beginning on and including March 1, 2016 and ending on and including May 31, 2016; and the period beginning on and including June 1, 2016 and ending on and including the Maturity Date.
 
(s) “Permitted Indebtedness” means (a) purchase money debt, Capital Lease Obligations or other Indebtedness incurred in connection with the acquisition of an interest in property, equipment, entities or other assets, provided that such purchase money debt, Capital Lease Obligations or other Indebtedness is recourse only to the interests in property, equipment, entities or other assets so acquired, and (b) Indebtedness described in Schedule 3(s) of the Securities Purchase Agreement.
 
(t) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) Liens securing the Company’s obligations under the Debentures, (v) Liens securing purchase money debt, Capital Lease Obligations or other Indebtedness incurred pursuant to clause (a) of the definition of Permitted Indebtedness, provided that such Liens do not extend and otherwise are not recourse to any assets of the Company or its Subsidiaries other than the interests in property, equipment, entities or other assets acquired with such purchase money debt, Capital Lease Obligations or other Indebtedness.
 
(u) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
 
 
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(v) “Principal Market” means the Over-the-Counter Quotation Bureau (OTC:QB).
 
(w) “Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, capital stock.
 
(x) “Registrable Securities” shall have the meaning set forth in the Registration Rights Agreement.
 
(y) “Registration Rights Agreement” means that certain registration rights agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures relating to, among other things, the registration of the resale of the Common Stock.
 
(z) “Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.
 
(aa) “Required Holders” means the holders of Debentures representing at least fifty-one percent of the aggregate principal amount of the Debentures then outstanding.
 
(bb) “SEC” means the United States Securities and Exchange Commission.
 
(cc) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures pursuant to which the Company issued the Debentures.
 
(dd) “Security Agreement” means the Pledge and Security Agreement dated as of the Subscription Date among the Company and the holder of the Debentures.
 
(ee) “Security Documents” means the Security Agreement, the Mortgages, if any, and all other instruments, documents and agreements delivered by the Company or any of its Subsidiaries in order to grant to any holder of a Debenture or Other Debenture, a Lien on any real, personal or mixed property of the Company or one of its Subsidiaries as security for the obligations under the Debentures.
 
(ff) “Subscription Date” means August 26, 2015.
 
(gg) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York Time).
 
 
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(hh) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
 
(23) DISCLOSURE.  Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise.  In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
 
(23) USURY.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Buyer in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Buyer with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Buyer’s election.
 

 
[Signature Page Follows]
 
 
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as of the Issuance Date set out above.
 
Guardian 8 Holdings,
a Nevada corporation

By: /s/ Kathleen Hanrahan                                                               
       Kathleen Hanrahan, interim CFO
 
 
 
 
 
 
 
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EX-10.65 4 ex10-65.htm EX-10.65 ex10-65.htm
 
EXHIBIT 10.65
 
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
Guardian 8 holdings
 
Convertible Senior Secured Debenture
 
Issuance Date:  September 14, 2015
Principal:  U.S. $15,000.00
 
FOR VALUE RECEIVED, Guardian 8 Holdings, a Nevada corporation (“Company”), hereby promises to pay to the order of C. Stephen Cochennet or its registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate equal to 8.00% per annum (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below) or, the Maturity Date, acceleration, redemption, conversion, or otherwise (in each case in accordance with the terms hereof).  This Senior Debenture (including all Senior Debentures issued in exchange, transfer or replacement hereof, this “Debenture”) is one of an issue of Senior Debentures issued pursuant to the Securities Purchase Agreement (as defined below) on the Initial Closing Date (collectively, the “Debentures”, Prior Debentures and such other Senior Debentures, the “Other Debentures”).  Certain capitalized terms used herein are defined in Section 21.
 
(1) PAYMENTS OF PRINCIPAL.  On the Maturity Date, the Company shall pay to the Holder an amount equal to the Principal, as well as all accrued but unpaid Interest.  The “Maturity Date” shall be July 31, 2016, or (a) such earlier date as may be accelerated by the Required Holders upon an Event of Default in accordance with the terms hereof, or (b) such later date as may be extended at the option of the Required Holders, (i) in the event that, and for so long as, an Event of Default (as defined in Section 3(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default.
 
 
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(2) INTEREST; INTEREST RATE.  Interest on this Debenture shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears for each Payment Quarter on the first day of the succeeding Payment Quarter during the period beginning on September 1, 2015 and ending on, and including, the Maturity Date (each, an “Interest Date”). Interest shall be payable on each Interest Date, to the record holder of this Debenture on the applicable Interest Date, in shares of restricted Common Stock (“Interest Shares”).  Interest to be paid on an Interest Date in Interest Shares shall be paid in a number of fully paid and nonassessable shares (provided, that if the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share) of Common Stock equal to the quotient of (a) the amount of Interest payable on such Interest Date less any Cash Interest paid and (b) the Interest Conversion Price in effect on the applicable Interest Date.  When Interest Shares are paid on an Interest Date, then the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and such action is not prohibited by applicable law or regulation or any applicable policy of DTC, credit such aggregate number of Interest Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal At Custodian system, or (Y) if the foregoing shall not apply, issue and deliver within three Trading Days after the applicable Interest Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Securities Purchase Agreement or to such address as specified by the Holder in writing to the Company at least two Business Days prior to the applicable Interest Date, a certificate, registered in the name of the Holder or its designee, for the number of Interest Shares to which the Holder shall be entitled. Upon the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to thirteen percent (13.00%) (the “Default Rate”).  In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.  The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Interest Shares; provided that the Company shall not be required to pay any tax that may be payable in respect of any issuance of Interest Shares to any Person other than the Holder or with respect to any income tax due by the Holder with respect to such Interest Shares.
 
(3) RIGHTS UPON EVENT OF DEFAULT.
 
(a) Event of Default.  Each of the following events shall constitute an “Event of Default”:
 
(i) the suspension from trading or failure of the Common Stock to be listed on an Eligible Market for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period;
 
 
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(ii) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Debenture (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business Days;
 
(iii) any default occurs and is continuing under, or any redemption of or acceleration prior to maturity occurs in respect of any Indebtedness of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any redemption of the Other Debentures in accordance with their terms; provided, that in the event that any such acceleration of indebtedness is rescinded by the holders thereof prior to acceleration of this Debenture or the Other Debentures, no Event of Default shall exist as a result of such rescinded acceleration;
 
(iv) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;
 
(v) creditors of the Company or any of its Subsidiaries file an action for relief under any Bankruptcy Law against such entity in an involuntary case and such action is not dismissed within thirty (30) days of such filing or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries;
 
(vi) a final judgment or judgments for the payment of money aggregating in excess of $50,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $50,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;
 
(vii) the Company or any of its Subsidiaries breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition of any Transaction Document which is curable, only if such breach continues for a period of at least five (5) consecutive Business Days, and except for breaches that are not reasonably likely to result in liability to the Company of more than $25,000 in any single instance or $100,000 in the aggregate;
 
 
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(viii) any breach or failure in any respect to comply with Section 8 of this Debenture;
 
(ix) any Event of Default (as defined in the Other Debentures) occurs and is continuing with respect to any Other Debentures; or
 
(x) any Event of Default (as defined in the Security Agreement) occurs and is continuing under the Security Documents, the repudiation by the Company or any of its Subsidiaries of any of its obligations under the Security Documents or the unenforceability of the Security Documents against the Company or any of its Subsidiaries for any reason.
 
(b) Redemption Right.  Promptly after the occurrence of an Event of Default with respect to this Debenture or any Other Debenture, which could not be cured by the Company within ten (10) Business Days, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder.  At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Required Holders may require the Company to redeem all or any portion of the Debentures  (as “Event of Default Redemption”) by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of the Debentures the Required Holders are electing to redeem; provided that upon the occurrence of any default described in Section 3(a)(v) and 3(a)(vi), the Debentures shall automatically, and without any action on behalf of the Holders, be redeemed by the Company.  Each portion of the Debentures subject to redemption by the Company pursuant to this Section 3(b) shall be redeemed by the Company at a price equal to 110% of the outstanding Principal amount and accrued and unpaid Interest and accrued and unpaid Late Charges and Interest with respect to such portion of the Debentures subject to redemption (the “Event of Default Redemption Price”).  Redemptions required by this Section 3(b) shall be made in accordance with the provisions of Section 7.
 
(4) CONVERSION OF DEBENTURE.
 
(a) Conversion; Conversion Price; Valuation Event.  Subject to the limitations set forth in Section 5 hereof, this Debenture may be converted, either in whole or in part, up to the full Principal Amount and accrued Interest hereof (the “Conversion Amount”) into shares of Common Stock (calculated as to each such conversion to the nearest whole share), at any time and from time to time on any Business Day, subject to compliance with this Section 4 and Section 5. The number of shares of Common Stock into which this Debenture may be converted is equal to the dollar amount of the Debenture being converted divided by the Conversion Price. The “Conversion Price” shall be equal to $0.075, subject to adjustment as provided for herein.  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Agreement shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
 
 
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(i) In the event that the Company shall at any time after the date of this Debenture and prior to its conversion or Maturity:  (i) declare a dividend or make a distribution on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock into a greater number of shares of Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Conversion Price in effect at the time of the record date for the determination of Stockholders entitled to receive such dividend or distribution or of the effective date of such subdivision, combination, or reclassification shall be adjusted so that it shall equal the price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action, and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action.  Such adjustment shall be made successively whenever any event listed above shall occur and shall become effective at the close of business on such record date or at the close of business on the date immediately preceding such effective date, as applicable. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment in the Conversion Price shall be required if such adjustment is less than $0.01; provided, however, that any adjustments which by reason of this Section 4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
 
(ii) In case of any reclassification or change of the shares of Common Stock issuable upon conversion of this Debenture (other than a change in par value or from a specified par value to no par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder of this Debenture shall have the right thereafter to receive upon conversion of this Debenture solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments set forth herein. The above provisions shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
 
 
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(b) Exercise of Conversion Privilege.
 
(i) Voluntary Conversion.  Beginning on the 91st day following the Closing Date, this Debenture may be converted by Holder by delivery of the Conversion Notice to the Company.  The date on which the Company actually receives a Conversion Notice in accordance with the provisions of this Section 4(b)(i) shall constitute a Conversion Date.  The Company shall convert, subject to the redemption provisions set forth in Section 5, this Debenture and issue the shares of Common Stock at Conversion in the manner provided below in this Section 4(b)(i), and all voting and other rights associated with the beneficial ownership of the shares of Common Stock at Conversion shall vest with the Holder, effective as of the Conversion Date at the time specified in the Conversion Notice.  The Conversion Notice also shall state the name or names (with addresses) of the persons who are to become the holders of the shares of Common Stock at Conversion in connection with such conversion. As promptly as practicable following the Conversion Date as aforesaid, but in any event not more than three (3) Business Days after the Conversion Date, the Company shall (i) issue the shares of Common Stock at Conversion in accordance with the provisions of this Section 4 and (ii) cause to be either: (A) provided that the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit the aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system; or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, mailed for delivery by overnight courier to Holder a certificate or certificate(s) representing the number of shares of Common Stock to which the Holder is entitled by virtue of such conversion. Further, the Company shall pay to the Holder (i) cash, as provided in Section 3.3, in respect of any fraction of a share of Common Stock deliverable upon such conversion and (ii) cash or shares of Common Stock, as applicable, representing the amount of accrued and unpaid Interest on this Debenture as of the Conversion Date.  Such conversion shall be deemed to have been effected on the Conversion Date, and at such time the rights of the Holder of this Debenture, as such (except if and to the extent that any Principal Amount thereof remains unconverted), shall cease and the Person and Persons in whose name or names the shares of Common Stock at Conversion shall be issuable shall be deemed to have become the holder or holders of record of the Common Stock represented thereby, and all voting and other rights associated with the beneficial ownership of such Common Stock shall at such time vest with such Person or Persons.
 
(ii) The Holder shall be entitled to exercise its conversion privilege notwithstanding the commencement of any case under the Bankruptcy Code.  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the Holder’s conversion privilege.  The Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the conversion of this Debenture.  The Company agrees, without cost or expense to the Holder, to take or consent to any and all action necessary to effectuate relief under 11 U.S.C. § 362.
 
 
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(iii) Forced Conversion. If the Closing Sale Price of shares of Common Stock during the ten consecutive Trading Days period ending and including the applicable Forced Conversion Notice Date (as defined below) has been at or above $0.20 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events) and no Equity Conditions Failure shall then exist (collectively, the “Forced Conversion Conditions”), then the Company shall have the right to require the Holder to convert all, or any part, of this Debenture for shares of Common Stock in accordance with this Section 4(iii) and the mechanics set forth in Section 4(i) hereof (the “Forced Conversion”) on the Forced Conversion Date (as defined below).  If the Forced Conversion Conditions have been satisfied, the Company may exercise its right to require a Forced Conversion by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Forced Conversion Notice” and the date all of the holders of Debentures received such notice is referred to as the “Forced Conversion Notice Date”).  The Forced Conversion Notice shall (x) state the date on which the Forced Conversion shall occur (the “Forced Conversion Date”) which date shall not be less than ten (10) calendar days nor more than twenty (20) calendar days following the Forced Conversion Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being converted in such Forced Conversion from the Holder and all of the other holders of the Debentures pursuant to this Section 4(b)(iii) (and analogous provisions under the other Debentures) on the Forced Conversion Date.  If the Company has elected a Forced Conversion, the mechanics of conversion set forth in Section 4(i) shall apply, to the extent applicable, as if the Company had received from the Holder on the third (3rd) Trading Day immediate prior to the applicable Forced Conversion Date, a Conversion Notice with respect to the Conversion Amount subject to the Forced Conversion as set forth in such Forced Conversion Notice.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Forced Conversion Notice Date but an Equity Conditions Failure occurs at any time prior to the Forced Conversion Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions, the Forced Conversion shall be cancelled and the applicable Forced Conversion Notice shall be null and void and (ii) at any time prior to the Forced Conversion Date, the Conversion Amount subject to such Forced Conversion may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4.  All such Conversion Amounts converted by the Holder after the Forced Conversion Notice Date shall reduce the Conversion Amount of this Debenture required to be converted on the Forced Conversion Date.   In the event the average closing price of the Common Stock for the ten trading days immediately preceding, but not including, the Maturity Date is equal to or greater than $0.20 (subject to adjustment for stock splits, dividends, etc.), then on the Maturity Date, Holder must convert all remaining Principal due under the Debenture.  If the Company elects to cause a Forced Conversion of this Debenture pursuant to Section 4(b)(iii) then it must simultaneously take the same action with respect to all of the other Debentures then outstanding on a pro rata basis.
 
(c) Fractional Shares.  No fractional shares of Common Stock or scrip representing fractional shares of Common Stock shall be delivered upon conversion of this Debenture.  Instead of any fractional shares of Common Stock which otherwise would be delivered upon conversion of this Debenture, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to $0.075 per share.
 
(d) Surrender of Debentures.  Upon any redemption or conversion of the entire remaining Principal amount under this Debenture, the Holder shall either deliver this Debenture by hand to the Company at its principal executive offices or surrender the same to the Company at such address by nationally recognized overnight courier.
 
 
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(e) Beneficial Ownership Conversion Limitation.  Notwithstanding anything to the contrary contained in this Debenture, this Debenture shall not be convertible by the Holder hereof, and the Company shall not effect any conversion of this Debenture or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder the Holder (together with its affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock.  To the extent the above limitation applies, the determination of whether this Debenture shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Debenture, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Debenture. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not amend or waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Debenture or securities issued pursuant to the Securities Purchase Agreement.  By written notice to the Company, at any time the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of Debentures.
 
(f) Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any reason or for no reason, to issue to the Holder within three (3) Trading Days after receipt of the applicable Conversion Notice, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of this Debenture (a “Delivery Failure”), and if on or after such third (3rd) Trading Day the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the Buy-In Price.
 
 
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(5) COMPANY REDEMPTION.  So long as no Equity Conditions Failure then exists, the Company shall have the right to redeem all, or any part, of the Conversion Amount (then remaining under this Debenture (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (each as defined below) (a “Company Optional Redemption”).  The portion of this Debenture subject to redemption pursuant to this Section (5) shall be redeemed by the Company in cash at a price (the “Company Optional Redemption Price”) equal to the Conversion Amount being redeemed as of the Company Optional Redemption Date.  The Company may exercise its right to require redemption under this Section (5) by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Company Optional Redemption Notice” and the date all of the holders of Debentures received such notice is referred to as the “Company Optional Redemption Notice Date”).  Each Company Optional Redemption Notice shall be irrevocable.  The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall not be less than ten (10) calendar days nor more than twenty-five (25) calendar days following the Company Optional Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being redeemed in such Company Optional Redemption from the Holder and all of the other holders of the Debentures pursuant to this Section (5) (and analogous provisions under the other Debentures) on the Company Optional Redemption Date.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions Failure, the Company Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4(i).  All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Debenture required to be redeemed on the Company Optional Redemption Date.   If the Company elects to cause a Company Optional Redemption of this Debenture pursuant to Section (5), then it must simultaneously take the same action with respect to all of the Other Debentures then outstanding on a pro rata basis. If by the Maturity Date, the Company does not redeem the Debenture in accordance with this Section (5), then on the Maturity Date, the Class C Warrant, substantially in the form attached as Exhibit I to the Securities Purchase Agreement, shall automatically and without further action by any party adjust such that it is exercisable into twice the number of shares it was exercisable into on its Issuance Date, which such share amount shall be equitably adjusted for any stock splits, dividends, recapitalization, or transaction having a similar effect.
 
 
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(6) NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, and will at all times in good faith carry out all of the provisions of this Debenture and take all action as may be required to protect the rights of the Holder of this Debenture.
 
(7) HOLDER’S REDEMPTIONS.
 
(a) Mechanics.  The Company shall deliver the applicable Event of Default Redemption Price to the Holder within one Business Day after the Company’s receipt of the Required Holders’ Event of Default Redemption Notice.  In the event of a redemption of less than all of the Principal of this Debenture, the Company shall promptly cause to be issued and delivered to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal which has not been redeemed.
 
(b) Redemption by Other Holders.  Any Event of Default Redemption Notice for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 3(b) or Section 8 is to be delivered to the Company by the Required Holders.  If the Company receives any Event of Default Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice, then the Company shall redeem a pro rata amount from each holder of the Debentures (including the Holder) based on the principal amount of the Debentures submitted for redemption pursuant to such Event of Default Redemption Notice received by the Company from the Required Holders.
 
(8) COVENANTS.
 
(a) Rank.  All payments due under this Debenture (a) shall rank pari passu with all Other Debentures and (b) shall be senior in right of payment to all other Indebtedness of the Company and its Subsidiaries.
 
(b) Incurrence of Indebtedness.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Debenture and the Other Debentures and (ii) Permitted Indebtedness.
 
(c) Existence of Liens.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
 
(d) Restricted Payments.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly,
 
 
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(i) declare or pay any dividend or make any other payment or distribution on account of the Company’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such;
 
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; or
 
(iii) make any payment on or with respect to, accelerate the maturity of, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company, except a payment of interest, principal or other amounts due at the stated maturity thereof and except for payments of principal, interest and other amounts under the Other Debentures.
 
(e) Asset Sales.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consummate any Asset Sale unless:
 
(A)           Company (or the applicable Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; and
 
(B)           at least 85% of the consideration received in the Asset Sale by the Company or such Subsidiary is in the form of cash.
 
(f) Use of Proceeds.  The Company estimates the use of the proceeds from the sale of the Securities to be substantially as set forth in Schedule 4(d) of the Securities Purchase Agreement.
 
(9) VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES.  The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Debenture or the Other Debentures.
 
(10) TRANSFER.  This Debenture may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) and 2(g) of the Securities Purchase Agreement.
 
(11) REISSUANCE OF THIS DEBENTURE.
 
(a) Transfer.  If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 12(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.
 
 
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(b) Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal.
 
(c) Debenture Exchangeable for Different Denominations.  This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 12(d) and in principal amounts of at least $50,000) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
 
(d) Issuance of New Debentures.  Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Debenture, from the Issuance Date.
 
(12) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture.  Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
 
(13) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Debenture is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Debenture or to enforce the provisions of this Debenture or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Debenture, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.
 
 
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(14) CONSTRUCTION; HEADINGS.  This Debenture shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any Person as the drafter hereof.  The headings of this Debenture are for convenience of reference and shall not form part of, or affect the interpretation of, this Debenture.
 
(15) FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
 
(16) DISPUTE RESOLUTION.
 
(a) Disputes Over Closing Bid Price, Closing Sale Price, Conversion Price or Fair Market Value.
 
(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, or fair market value (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute via facsimile (I) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (II) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price or such fair market value (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder shall select an independent, reputable investment bank to resolve such dispute.
 
(ii) The Holder and the Company shall each deliver to such investment bank (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
 
 
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(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
 
(b) Disputes Over Arithmetic Calculation of the Conversion Rate, the applicable redemption price.
 
(i) In the case of a dispute as to the arithmetic calculation of a Conversion Rate or the applicable redemption price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed arithmetic calculation via facsimile (i) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such disputed arithmetic calculation of such Conversion Rate or the applicable redemption price (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such disputed arithmetic calculation, then the Holder shall select an independent, reputable accountant or accounting firm to perform such disputed arithmetic calculation.
 
(ii) The Holder and the Company shall each deliver to such accountant or accounting firm (as the case may be) (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such disputed arithmetic calculation, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such accountant or accounting firm (as the case may be) (the “Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Documentation by the Submission Deadline, then the party who fails to so submit all of the Required Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) with respect to such disputed arithmetic calculation and such accountant or accounting firm (as the case may be) shall perform such disputed arithmetic calculation based solely on the Required Documentation that was delivered to such accountant or accounting firm (as the case may be) prior to the Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such accountant or accounting firm (as the case may be), neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) in connection with such disputed arithmetic calculation of the Conversion Rate or the applicable Redemption Price (as the case may be) (other than the Required Documentation).
 
 
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(iii) The Company and the Holder shall cause such accountant or accounting firm (as the case may be) to perform such disputed arithmetic calculation and notify the Company and the Holder of the results no later than ten (10) Business Days immediately following the Submission Deadline. The fees and expenses of such accountant or accounting firm (as the case may be) shall be borne solely by the Company, and such accountant’s or accounting firm’s (as the case may be) arithmetic calculation shall be final and binding upon all parties absent manifest error.
 
(c) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 16 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that each party shall be entitled to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 16, (ii) a dispute relating to a Conversion Price, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iv) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected accountant’s or accounting firm’s performance of the applicable arithmetic calculation, (v) for clarification purposes and without implication that the contrary would otherwise be true, disputes relating to matters described in Section 16(a) shall be governed by Section 16(a) and not by Section 16(a), and (vi) nothing in this Section 16 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in Section 16(a) or Section 16(a)).
 
(17) NOTICES; PAYMENTS.
 
(a) Notices.  Whenever notice is required to be given under this Debenture, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Debenture, including in reasonable detail a description of such action and the reason therefor.
 
(b) Payments.  Whenever any payment of cash is to be made by the Company to any Person pursuant to this Debenture, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.  Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Debenture is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.  Any amount of Principal or other amounts due under the Transaction Documents, other than Interest, which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of ten percent (10.00%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).
 
 
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(18) RIGHTS UPON FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Debenture and the other Transaction Documents in accordance with the provisions of this Section (18) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Debentures in exchange for such Debentures a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Debentures, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Debentures held by such holder, having similar conversion rights as the Debentures and having similar ranking to the Debentures, and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein immediately following the applicable Fundamental Transaction. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall also be issued upon conversion or redemption of this Debenture at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock or other securities, cash, assets or other property issuable upon the conversion or redemption of the Debentures prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Debenture been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Debenture), as adjusted in accordance with the provisions of this Debenture. The provisions of this Section (18) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Debenture.
 
(19) CANCELLATION.  After all Principal, accrued Interest and other amounts at any time owed on this Debenture have been paid in full in cash, this Debenture shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
 
(20) WAIVER OF NOTICE.  To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Debenture and the Securities Purchase Agreement.
 
 
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(21) GOVERNING LAW.  This Debenture shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Debenture and all disputes arising hereunder shall be governed by, the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
 
(22) CERTAIN DEFINITIONS.  For purposes of this Debenture, the following terms shall have the following meanings:
 
(a) “Asset Sale” means (i) the sale, lease, conveyance or other disposition of any assets or rights other than in the ordinary course of business consistent with past practice, and (ii) the sale of Equity Interests in any of the Company’s Subsidiaries.
 
(b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of Scottsdale are authorized or required by law to remain closed.
 
(c) “Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP.
 
(d) “Capital Stock” means:  (1)  in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;  (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
 
(e) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing trade price, respectively, is reported for such security by Bloomberg, the average closing price of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 16. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
 
 
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(f)  “Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
 
(g) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the American Stock Exchange, The Nasdaq National Market or The Nasdaq Capital Market.
 
(h)  “Equity Conditions” means that each of the following conditions is satisfied as of the date of determination:  (i) the Common Stock is designated for quotation on the Principal Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (ii) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Principal Market; (iii) the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document; (iv) there shall not then exist (A) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated, (B) an Event of Default or (C) an event that with the passage of time or giving of notice would constitute an Event of Default; (v) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document; (vi) there shall either be an effective Registration Statement available to the Holder for the resale of all Registrable Securities, except for Interest Shares (as defined in the Registration Rights Agreement) or all Registrable Securities shall be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); (vii) the Common Stock is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring) or pending either (A) in writing by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (viii) the Company shall have delivered all shares of Common Stock issuable upon conversion of this Debenture on a timely basis as set forth herein and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (ix) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section (4)(f) hereof; (x) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (xi) no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (xii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); and (xiii) the Holder shall not be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like.
 
 
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(i) “Equity Conditions Failure” means, with respect to a particular date of determination, that on any day during the period commencing ten (10) Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
 
(j) “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
 
(k) “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Debenture.
 
 
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(l) “GAAP” means United States generally accepted accounting principles, consistently applied.
 
(m) “Indebtedness” means, any indebtedness (excluding accrued expenses and trade payables), whether or not contingent:
 
(i)           in respect of borrowed money;
 
(ii)           evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
 
(iii)           in respect of banker’s acceptances;
 
(iv)           representing Capital Lease Obligations; or
 
(v)           representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed.
 
if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the Company prepared in accordance with GAAP.  In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the Company or its Subsidiaries (whether or not such Indebtedness is assumed by the Company or such Subsidiary) and, to the extent not otherwise included, the guarantee by the Company or any of its Subsidiaries of any Indebtedness of any other Person.
 
(n) “Initial Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued the Debentures pursuant to the terms of the Securities Purchase Agreement.
 
(o) “Interest Conversion Price” means, with respect to any Interest Date, that price which shall be computed as 100.0% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the ten (10) consecutive Trading Days immediately preceding the applicable Interest Date (each, an “Interest Measuring Period”).  All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.
 
 
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(p) “Mortgage” means a Mortgage in form and substance reasonably satisfactory to the Holder, as it may be amended, supplemented or otherwise modified from time to time.
 
(q) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
 
(r)  “Payment Quarter” means each of: the period beginning on and including June 1, 2015 and ending on and including August 31, 2015; the period beginning on and including September 1, 2015 and ending on and including November 30, 2015; the period beginning on and including December 1, 2015 and ending on and including February 29, 2016; the period beginning on and including March 1, 2016 and ending on and including May 31, 2016; and the period beginning on and including June 1, 2016 and ending on and including the Maturity Date.
 
(s) “Permitted Indebtedness” means (a) purchase money debt, Capital Lease Obligations or other Indebtedness incurred in connection with the acquisition of an interest in property, equipment, entities or other assets, provided that such purchase money debt, Capital Lease Obligations or other Indebtedness is recourse only to the interests in property, equipment, entities or other assets so acquired, and (b) Indebtedness described in Schedule 3(s) of the Securities Purchase Agreement.
 
(t) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) Liens securing the Company’s obligations under the Debentures, (v) Liens securing purchase money debt, Capital Lease Obligations or other Indebtedness incurred pursuant to clause (a) of the definition of Permitted Indebtedness, provided that such Liens do not extend and otherwise are not recourse to any assets of the Company or its Subsidiaries other than the interests in property, equipment, entities or other assets acquired with such purchase money debt, Capital Lease Obligations or other Indebtedness.
 
(u) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
 
 
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(v) “Principal Market” means the Over-the-Counter Quotation Bureau (OTC:QB).
 
(w) “Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, capital stock.
 
(x) “Registrable Securities” shall have the meaning set forth in the Registration Rights Agreement.
 
(y) “Registration Rights Agreement” means that certain registration rights agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures relating to, among other things, the registration of the resale of the Common Stock.
 
(z) “Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.
 
(aa) “Required Holders” means the holders of Debentures representing at least fifty-one percent of the aggregate principal amount of the Debentures then outstanding.
 
(bb) “SEC” means the United States Securities and Exchange Commission.
 
(cc) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures pursuant to which the Company issued the Debentures.
 
(dd) “Security Agreement” means the Pledge and Security Agreement dated as of the Subscription Date among the Company and the holder of the Debentures.
 
(ee) “Security Documents” means the Security Agreement, the Mortgages, if any, and all other instruments, documents and agreements delivered by the Company or any of its Subsidiaries in order to grant to any holder of a Debenture or Other Debenture, a Lien on any real, personal or mixed property of the Company or one of its Subsidiaries as security for the obligations under the Debentures.
 
(ff) “Subscription Date” means September 14, 2015.
 
(gg) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York Time).
 
 
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(hh) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
 
(23) DISCLOSURE.  Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise.  In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
 
(23) USURY.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Buyer in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Buyer with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Buyer’s election.
 

 
[Signature Page Follows]
 
 
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as of the Issuance Date set out above.
 
Guardian 8 Holdings,
a Nevada corporation

By: /s/ Kathleen Hanrahan                                                               
       Kathleen Hanrahan, interim CFO
 
 
 
 
 
 
 
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EX-10.66 5 ex10-66.htm EX-10.66 ex10-66.htm
 
EXHIBIT 10.66
 
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
Guardian 8 holdings
 
Convertible Senior Secured Debenture
 
Issuance Date:  October 29, 2015
Principal:  U.S. $100,000.00
 
FOR VALUE RECEIVED, Guardian 8 Holdings, a Nevada corporation (“Company”), hereby promises to pay to the order of C. Stephen Cochennet or its registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate equal to 8.00% per annum (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below) or, the Maturity Date, acceleration, redemption, conversion, or otherwise (in each case in accordance with the terms hereof).  This Senior Debenture (including all Senior Debentures issued in exchange, transfer or replacement hereof, this “Debenture”) is one of an issue of Senior Debentures issued pursuant to the Securities Purchase Agreement (as defined below) on the Initial Closing Date (collectively, the “Debentures”, Prior Debentures and such other Senior Debentures, the “Other Debentures”).  Certain capitalized terms used herein are defined in Section 21.
 
(1) PAYMENTS OF PRINCIPAL.  On the Maturity Date, the Company shall pay to the Holder an amount equal to the Principal, as well as all accrued but unpaid Interest.  The “Maturity Date” shall be July 31, 2016, or (a) such earlier date as may be accelerated by the Required Holders upon an Event of Default in accordance with the terms hereof, or (b) such later date as may be extended at the option of the Required Holders, (i) in the event that, and for so long as, an Event of Default (as defined in Section 3(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default.
 
 
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(2) INTEREST; INTEREST RATE.  Interest on this Debenture shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears for each Payment Quarter on the first day of the succeeding Payment Quarter during the period beginning on September 1, 2015 and ending on, and including, the Maturity Date (each, an “Interest Date”). Interest shall be payable on each Interest Date, to the record holder of this Debenture on the applicable Interest Date, in shares of restricted Common Stock (“Interest Shares”).  Interest to be paid on an Interest Date in Interest Shares shall be paid in a number of fully paid and nonassessable shares (provided, that if the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share) of Common Stock equal to the quotient of (a) the amount of Interest payable on such Interest Date less any Cash Interest paid and (b) the Interest Conversion Price in effect on the applicable Interest Date.  When Interest Shares are paid on an Interest Date, then the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and such action is not prohibited by applicable law or regulation or any applicable policy of DTC, credit such aggregate number of Interest Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal At Custodian system, or (Y) if the foregoing shall not apply, issue and deliver within three Trading Days after the applicable Interest Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Securities Purchase Agreement or to such address as specified by the Holder in writing to the Company at least two Business Days prior to the applicable Interest Date, a certificate, registered in the name of the Holder or its designee, for the number of Interest Shares to which the Holder shall be entitled. Upon the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to thirteen percent (13.00%) (the “Default Rate”).  In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.  The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Interest Shares; provided that the Company shall not be required to pay any tax that may be payable in respect of any issuance of Interest Shares to any Person other than the Holder or with respect to any income tax due by the Holder with respect to such Interest Shares.
 
(3) RIGHTS UPON EVENT OF DEFAULT.
 
(a) Event of Default.  Each of the following events shall constitute an “Event of Default”:
 
(i) the suspension from trading or failure of the Common Stock to be listed on an Eligible Market for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period;
 
 
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(ii) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Debenture (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business Days;
 
(iii) any default occurs and is continuing under, or any redemption of or acceleration prior to maturity occurs in respect of any Indebtedness of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any redemption of the Other Debentures in accordance with their terms; provided, that in the event that any such acceleration of indebtedness is rescinded by the holders thereof prior to acceleration of this Debenture or the Other Debentures, no Event of Default shall exist as a result of such rescinded acceleration;
 
(iv) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;
 
(v) creditors of the Company or any of its Subsidiaries file an action for relief under any Bankruptcy Law against such entity in an involuntary case and such action is not dismissed within thirty (30) days of such filing or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries;
 
(vi) a final judgment or judgments for the payment of money aggregating in excess of $50,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $50,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;
 
(vii) the Company or any of its Subsidiaries breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition of any Transaction Document which is curable, only if such breach continues for a period of at least five (5) consecutive Business Days, and except for breaches that are not reasonably likely to result in liability to the Company of more than $25,000 in any single instance or $100,000 in the aggregate;
 
 
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(viii) any breach or failure in any respect to comply with Section 8 of this Debenture;
 
(ix) any Event of Default (as defined in the Other Debentures) occurs and is continuing with respect to any Other Debentures; or
 
(x) any Event of Default (as defined in the Security Agreement) occurs and is continuing under the Security Documents, the repudiation by the Company or any of its Subsidiaries of any of its obligations under the Security Documents or the unenforceability of the Security Documents against the Company or any of its Subsidiaries for any reason.
 
(b) Redemption Right.  Promptly after the occurrence of an Event of Default with respect to this Debenture or any Other Debenture, which could not be cured by the Company within ten (10) Business Days, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder.  At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Required Holders may require the Company to redeem all or any portion of the Debentures  (as “Event of Default Redemption”) by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of the Debentures the Required Holders are electing to redeem; provided that upon the occurrence of any default described in Section 3(a)(v) and 3(a)(vi), the Debentures shall automatically, and without any action on behalf of the Holders, be redeemed by the Company.  Each portion of the Debentures subject to redemption by the Company pursuant to this Section 3(b) shall be redeemed by the Company at a price equal to 110% of the outstanding Principal amount and accrued and unpaid Interest and accrued and unpaid Late Charges and Interest with respect to such portion of the Debentures subject to redemption (the “Event of Default Redemption Price”).  Redemptions required by this Section 3(b) shall be made in accordance with the provisions of Section 7.
 
(4) CONVERSION OF DEBENTURE.
 
(a) Conversion; Conversion Price; Valuation Event.  Subject to the limitations set forth in Section 5 hereof, this Debenture may be converted, either in whole or in part, up to the full Principal Amount and accrued Interest hereof (the “Conversion Amount”) into shares of Common Stock (calculated as to each such conversion to the nearest whole share), at any time and from time to time on any Business Day, subject to compliance with this Section 4 and Section 5. The number of shares of Common Stock into which this Debenture may be converted is equal to the dollar amount of the Debenture being converted divided by the Conversion Price. The “Conversion Price” shall be equal to $0.075, subject to adjustment as provided for herein.  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Agreement shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
 
 
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(i) In the event that the Company shall at any time after the date of this Debenture and prior to its conversion or Maturity:  (i) declare a dividend or make a distribution on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock into a greater number of shares of Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Conversion Price in effect at the time of the record date for the determination of Stockholders entitled to receive such dividend or distribution or of the effective date of such subdivision, combination, or reclassification shall be adjusted so that it shall equal the price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action, and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action.  Such adjustment shall be made successively whenever any event listed above shall occur and shall become effective at the close of business on such record date or at the close of business on the date immediately preceding such effective date, as applicable. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment in the Conversion Price shall be required if such adjustment is less than $0.01; provided, however, that any adjustments which by reason of this Section 4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
 
(ii) In case of any reclassification or change of the shares of Common Stock issuable upon conversion of this Debenture (other than a change in par value or from a specified par value to no par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder of this Debenture shall have the right thereafter to receive upon conversion of this Debenture solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments set forth herein. The above provisions shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
 
 
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(b) Exercise of Conversion Privilege.
 
(i) Voluntary Conversion.  Beginning on the 91st day following the Closing Date, this Debenture may be converted by Holder by delivery of the Conversion Notice to the Company.  The date on which the Company actually receives a Conversion Notice in accordance with the provisions of this Section 4(b)(i) shall constitute a Conversion Date.  The Company shall convert, subject to the redemption provisions set forth in Section 5, this Debenture and issue the shares of Common Stock at Conversion in the manner provided below in this Section 4(b)(i), and all voting and other rights associated with the beneficial ownership of the shares of Common Stock at Conversion shall vest with the Holder, effective as of the Conversion Date at the time specified in the Conversion Notice.  The Conversion Notice also shall state the name or names (with addresses) of the persons who are to become the holders of the shares of Common Stock at Conversion in connection with such conversion. As promptly as practicable following the Conversion Date as aforesaid, but in any event not more than three (3) Business Days after the Conversion Date, the Company shall (i) issue the shares of Common Stock at Conversion in accordance with the provisions of this Section 4 and (ii) cause to be either: (A) provided that the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit the aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system; or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, mailed for delivery by overnight courier to Holder a certificate or certificate(s) representing the number of shares of Common Stock to which the Holder is entitled by virtue of such conversion. Further, the Company shall pay to the Holder (i) cash, as provided in Section 3.3, in respect of any fraction of a share of Common Stock deliverable upon such conversion and (ii) cash or shares of Common Stock, as applicable, representing the amount of accrued and unpaid Interest on this Debenture as of the Conversion Date.  Such conversion shall be deemed to have been effected on the Conversion Date, and at such time the rights of the Holder of this Debenture, as such (except if and to the extent that any Principal Amount thereof remains unconverted), shall cease and the Person and Persons in whose name or names the shares of Common Stock at Conversion shall be issuable shall be deemed to have become the holder or holders of record of the Common Stock represented thereby, and all voting and other rights associated with the beneficial ownership of such Common Stock shall at such time vest with such Person or Persons.
 
(ii) The Holder shall be entitled to exercise its conversion privilege notwithstanding the commencement of any case under the Bankruptcy Code.  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the Holder’s conversion privilege.  The Company hereby waives to the fullest extent permitted any rights to relief they may have under 11 U.S.C. § 362 in respect of the conversion of this Debenture.  The Company agrees, without cost or expense to the Holder, to take or consent to any and all action necessary to effectuate relief under 11 U.S.C. § 362.
 
 
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(iii) Forced Conversion. If the Closing Sale Price of shares of Common Stock during the ten consecutive Trading Days period ending and including the applicable Forced Conversion Notice Date (as defined below) has been at or above $0.20 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events) and no Equity Conditions Failure shall then exist (collectively, the “Forced Conversion Conditions”), then the Company shall have the right to require the Holder to convert all, or any part, of this Debenture for shares of Common Stock in accordance with this Section 4(iii) and the mechanics set forth in Section 4(i) hereof (the “Forced Conversion”) on the Forced Conversion Date (as defined below).  If the Forced Conversion Conditions have been satisfied, the Company may exercise its right to require a Forced Conversion by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Forced Conversion Notice” and the date all of the holders of Debentures received such notice is referred to as the “Forced Conversion Notice Date”).  The Forced Conversion Notice shall (x) state the date on which the Forced Conversion shall occur (the “Forced Conversion Date”) which date shall not be less than ten (10) calendar days nor more than twenty (20) calendar days following the Forced Conversion Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being converted in such Forced Conversion from the Holder and all of the other holders of the Debentures pursuant to this Section 4(b)(iii) (and analogous provisions under the other Debentures) on the Forced Conversion Date.  If the Company has elected a Forced Conversion, the mechanics of conversion set forth in Section 4(i) shall apply, to the extent applicable, as if the Company had received from the Holder on the third (3rd) Trading Day immediate prior to the applicable Forced Conversion Date, a Conversion Notice with respect to the Conversion Amount subject to the Forced Conversion as set forth in such Forced Conversion Notice.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Forced Conversion Notice Date but an Equity Conditions Failure occurs at any time prior to the Forced Conversion Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions, the Forced Conversion shall be cancelled and the applicable Forced Conversion Notice shall be null and void and (ii) at any time prior to the Forced Conversion Date, the Conversion Amount subject to such Forced Conversion may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4.  All such Conversion Amounts converted by the Holder after the Forced Conversion Notice Date shall reduce the Conversion Amount of this Debenture required to be converted on the Forced Conversion Date.   In the event the average closing price of the Common Stock for the ten trading days immediately preceding, but not including, the Maturity Date is equal to or greater than $0.20 (subject to adjustment for stock splits, dividends, etc.), then on the Maturity Date, Holder must convert all remaining Principal due under the Debenture.  If the Company elects to cause a Forced Conversion of this Debenture pursuant to Section 4(b)(iii) then it must simultaneously take the same action with respect to all of the other Debentures then outstanding on a pro rata basis.
 
(c) Fractional Shares.  No fractional shares of Common Stock or scrip representing fractional shares of Common Stock shall be delivered upon conversion of this Debenture.  Instead of any fractional shares of Common Stock which otherwise would be delivered upon conversion of this Debenture, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to $0.075 per share.
 
(d) Surrender of Debentures.  Upon any redemption or conversion of the entire remaining Principal amount under this Debenture, the Holder shall either deliver this Debenture by hand to the Company at its principal executive offices or surrender the same to the Company at such address by nationally recognized overnight courier.
 
 
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(e) Beneficial Ownership Conversion Limitation.  Notwithstanding anything to the contrary contained in this Debenture, this Debenture shall not be convertible by the Holder hereof, and the Company shall not effect any conversion of this Debenture or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder the Holder (together with its affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock.  To the extent the above limitation applies, the determination of whether this Debenture shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Debenture, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Debenture. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not amend or waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Debenture or securities issued pursuant to the Securities Purchase Agreement.  By written notice to the Company, at any time the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of Debentures.
 
(f) Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any reason or for no reason, to issue to the Holder within three (3) Trading Days after receipt of the applicable Conversion Notice, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of this Debenture (a “Delivery Failure”), and if on or after such third (3rd) Trading Day the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the Buy-In Price.
 
 
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(5) COMPANY REDEMPTION.  So long as no Equity Conditions Failure then exists, the Company shall have the right to redeem all, or any part, of the Conversion Amount (then remaining under this Debenture (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (each as defined below) (a “Company Optional Redemption”).  The portion of this Debenture subject to redemption pursuant to this Section (5) shall be redeemed by the Company in cash at a price (the “Company Optional Redemption Price”) equal to the Conversion Amount being redeemed as of the Company Optional Redemption Date.  The Company may exercise its right to require redemption under this Section (5) by delivering a written notice thereof by facsimile or overnight courier to all, but not less than all, of the holders of Debentures (the “Company Optional Redemption Notice” and the date all of the holders of Debentures received such notice is referred to as the “Company Optional Redemption Notice Date”).  Each Company Optional Redemption Notice shall be irrevocable.  The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall not be less than ten (10) calendar days nor more than twenty-five (25) calendar days following the Company Optional Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Conversion Amount of the Debentures which are being redeemed in such Company Optional Redemption from the Holder and all of the other holders of the Debentures pursuant to this Section (5) (and analogous provisions under the other Debentures) on the Company Optional Redemption Date.  Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the Equity Conditions Failure, the Company Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holders into Common Shares pursuant to Section 4(i).  All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Debenture required to be redeemed on the Company Optional Redemption Date.   If the Company elects to cause a Company Optional Redemption of this Debenture pursuant to Section (5), then it must simultaneously take the same action with respect to all of the Other Debentures then outstanding on a pro rata basis. If by the Maturity Date, the Company does not redeem the Debenture in accordance with this Section (5), then on the Maturity Date, the Class C Warrant, substantially in the form attached as Exhibit I to the Securities Purchase Agreement, shall automatically and without further action by any party adjust such that it is exercisable into twice the number of shares it was exercisable into on its Issuance Date, which such share amount shall be equitably adjusted for any stock splits, dividends, recapitalization, or transaction having a similar effect.
 
 
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(6) NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, and will at all times in good faith carry out all of the provisions of this Debenture and take all action as may be required to protect the rights of the Holder of this Debenture.
 
(7) HOLDER’S REDEMPTIONS.
 
(a) Mechanics.  The Company shall deliver the applicable Event of Default Redemption Price to the Holder within one Business Day after the Company’s receipt of the Required Holders’ Event of Default Redemption Notice.  In the event of a redemption of less than all of the Principal of this Debenture, the Company shall promptly cause to be issued and delivered to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal which has not been redeemed.
 
(b) Redemption by Other Holders.  Any Event of Default Redemption Notice for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 3(b) or Section 8 is to be delivered to the Company by the Required Holders.  If the Company receives any Event of Default Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice, then the Company shall redeem a pro rata amount from each holder of the Debentures (including the Holder) based on the principal amount of the Debentures submitted for redemption pursuant to such Event of Default Redemption Notice received by the Company from the Required Holders.
 
(8) COVENANTS.
 
(a) Rank.  All payments due under this Debenture (a) shall rank pari passu with all Other Debentures and (b) shall be senior in right of payment to all other Indebtedness of the Company and its Subsidiaries.
 
(b) Incurrence of Indebtedness.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Debenture and the Other Debentures and (ii) Permitted Indebtedness.
 
(c) Existence of Liens.  So long as this Debenture is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
 
(d) Restricted Payments.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly,
 
 
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(i) declare or pay any dividend or make any other payment or distribution on account of the Company’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such;
 
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; or
 
(iii) make any payment on or with respect to, accelerate the maturity of, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company, except a payment of interest, principal or other amounts due at the stated maturity thereof and except for payments of principal, interest and other amounts under the Other Debentures.
 
(e) Asset Sales.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consummate any Asset Sale unless:
 
(A)           Company (or the applicable Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; and
 
(B)           at least 85% of the consideration received in the Asset Sale by the Company or such Subsidiary is in the form of cash.
 
(f) Use of Proceeds.  The Company estimates the use of the proceeds from the sale of the Securities to be substantially as set forth in Schedule 4(d) of the Securities Purchase Agreement.
 
(9) VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES.  The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Debenture or the Other Debentures.
 
(10) TRANSFER.  This Debenture may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) and 2(g) of the Securities Purchase Agreement.
 
(11) REISSUANCE OF THIS DEBENTURE.
 
(a) Transfer.  If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 12(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.
 
 
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(b) Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 12(d)) representing the outstanding Principal.
 
(c) Debenture Exchangeable for Different Denominations.  This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 12(d) and in principal amounts of at least $50,000) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
 
(d) Issuance of New Debentures.  Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Debenture, from the Issuance Date.
 
(12) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture.  Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
 
(13) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Debenture is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Debenture or to enforce the provisions of this Debenture or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Debenture, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.
 
 
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(14) CONSTRUCTION; HEADINGS.  This Debenture shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any Person as the drafter hereof.  The headings of this Debenture are for convenience of reference and shall not form part of, or affect the interpretation of, this Debenture.
 
(15) FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
 
(16) DISPUTE RESOLUTION.
 
(a) Disputes Over Closing Bid Price, Closing Sale Price, Conversion Price or Fair Market Value.
 
(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, or fair market value (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute via facsimile (I) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (II) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price or such fair market value (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder shall select an independent, reputable investment bank to resolve such dispute.
 
(ii) The Holder and the Company shall each deliver to such investment bank (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
 
 
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(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
 
(b) Disputes Over Arithmetic Calculation of the Conversion Rate, the applicable redemption price.
 
(i) In the case of a dispute as to the arithmetic calculation of a Conversion Rate or the applicable redemption price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed arithmetic calculation via facsimile (i) within two (2) Business Days after delivery of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to resolve such disputed arithmetic calculation of such Conversion Rate or the applicable redemption price (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day following such delivery by the Company or the Holder (as the case may be) of such disputed arithmetic calculation, then the Holder shall select an independent, reputable accountant or accounting firm to perform such disputed arithmetic calculation.
 
(ii) The Holder and the Company shall each deliver to such accountant or accounting firm (as the case may be) (x) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 16(a) and (y) written documentation supporting its position with respect to such disputed arithmetic calculation, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such accountant or accounting firm (as the case may be) (the “Submission Deadline”) (the documents referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Documentation by the Submission Deadline, then the party who fails to so submit all of the Required Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) with respect to such disputed arithmetic calculation and such accountant or accounting firm (as the case may be) shall perform such disputed arithmetic calculation based solely on the Required Documentation that was delivered to such accountant or accounting firm (as the case may be) prior to the Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such accountant or accounting firm (as the case may be), neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) in connection with such disputed arithmetic calculation of the Conversion Rate or the applicable Redemption Price (as the case may be) (other than the Required Documentation).
 
(iii) The Company and the Holder shall cause such accountant or accounting firm (as the case may be) to perform such disputed arithmetic calculation and notify the Company and the Holder of the results no later than ten (10) Business Days immediately following the Submission Deadline. The fees and expenses of such accountant or accounting firm (as the case may be) shall be borne solely by the Company, and such accountant’s or accounting firm’s (as the case may be) arithmetic calculation shall be final and binding upon all parties absent manifest error.
 
 
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(c) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 16 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that each party shall be entitled to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 16, (ii) a dispute relating to a Conversion Price, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iv) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected accountant’s or accounting firm’s performance of the applicable arithmetic calculation, (v) for clarification purposes and without implication that the contrary would otherwise be true, disputes relating to matters described in Section 16(a) shall be governed by Section 16(a) and not by Section 16(a), and (vi) nothing in this Section 16 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in Section 16(a) or Section 16(a)).
 
(17) NOTICES; PAYMENTS.
 
(a) Notices.  Whenever notice is required to be given under this Debenture, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Debenture, including in reasonable detail a description of such action and the reason therefor.
 
(b) Payments.  Whenever any payment of cash is to be made by the Company to any Person pursuant to this Debenture, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.  Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Debenture is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.  Any amount of Principal or other amounts due under the Transaction Documents, other than Interest, which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of ten percent (10.00%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).
 
 
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(18) RIGHTS UPON FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Debenture and the other Transaction Documents in accordance with the provisions of this Section (18) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Debentures in exchange for such Debentures a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Debentures, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Debentures held by such holder, having similar conversion rights as the Debentures and having similar ranking to the Debentures, and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein immediately following the applicable Fundamental Transaction. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall also be issued upon conversion or redemption of this Debenture at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock or other securities, cash, assets or other property issuable upon the conversion or redemption of the Debentures prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Debenture been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Debenture), as adjusted in accordance with the provisions of this Debenture. The provisions of this Section (18) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Debenture.
 
(19) CANCELLATION.  After all Principal, accrued Interest and other amounts at any time owed on this Debenture have been paid in full in cash, this Debenture shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
 
(20) WAIVER OF NOTICE.  To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Debenture and the Securities Purchase Agreement.
 
 
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(21) GOVERNING LAW.  This Debenture shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Debenture and all disputes arising hereunder shall be governed by, the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
 
(22) CERTAIN DEFINITIONS.  For purposes of this Debenture, the following terms shall have the following meanings:
 
(a) “Asset Sale” means (i) the sale, lease, conveyance or other disposition of any assets or rights other than in the ordinary course of business consistent with past practice, and (ii) the sale of Equity Interests in any of the Company’s Subsidiaries.
 
(b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of Scottsdale are authorized or required by law to remain closed.
 
(c) “Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP.
 
(d) “Capital Stock” means:  (1)  in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;  (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
 
(e) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing trade price, respectively, is reported for such security by Bloomberg, the average closing price of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 16. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
 
 
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(f)  “Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
 
(g) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the American Stock Exchange, The Nasdaq National Market or The Nasdaq Capital Market.
 
(h)  “Equity Conditions” means that each of the following conditions is satisfied as of the date of determination:  (i) the Common Stock is designated for quotation on the Principal Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (ii) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Principal Market; (iii) the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document; (iv) there shall not then exist (A) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated, (B) an Event of Default or (C) an event that with the passage of time or giving of notice would constitute an Event of Default; (v) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document; (vi) there shall either be an effective Registration Statement available to the Holder for the resale of all Registrable Securities, except for Interest Shares (as defined in the Registration Rights Agreement) or all Registrable Securities shall be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); (vii) the Common Stock is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring) or pending either (A) in writing by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (viii) the Company shall have delivered all shares of Common Stock issuable upon conversion of this Debenture on a timely basis as set forth herein and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (ix) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section (4)(f) hereof; (x) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (xi) no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (xii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Debentures, other issuance of securities with respect to the Debentures); and (xiii) the Holder shall not be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like.
 
 
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(i) “Equity Conditions Failure” means, with respect to a particular date of determination, that on any day during the period commencing ten (10) Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
 
(j) “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
 
(k) “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Debenture.
 
 
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(l) “GAAP” means United States generally accepted accounting principles, consistently applied.
 
(m) “Indebtedness” means, any indebtedness (excluding accrued expenses and trade payables), whether or not contingent:
 
(i)           in respect of borrowed money;
 
(ii)           evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
 
(iii)           in respect of banker’s acceptances;
 
(iv)           representing Capital Lease Obligations; or
 
(v)           representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed.
 
if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the Company prepared in accordance with GAAP.  In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the Company or its Subsidiaries (whether or not such Indebtedness is assumed by the Company or such Subsidiary) and, to the extent not otherwise included, the guarantee by the Company or any of its Subsidiaries of any Indebtedness of any other Person.
 
(n) “Initial Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued the Debentures pursuant to the terms of the Securities Purchase Agreement.
 
(o) “Interest Conversion Price” means, with respect to any Interest Date, that price which shall be computed as 100.0% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the ten (10) consecutive Trading Days immediately preceding the applicable Interest Date (each, an “Interest Measuring Period”).  All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.
 
 
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(p) “Mortgage” means a Mortgage in form and substance reasonably satisfactory to the Holder, as it may be amended, supplemented or otherwise modified from time to time.
 
(q) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
 
(r)  “Payment Quarter” means each of: the period beginning on and including June 1, 2015 and ending on and including August 31, 2015; the period beginning on and including September 1, 2015 and ending on and including November 30, 2015; the period beginning on and including December 1, 2015 and ending on and including February 29, 2016; the period beginning on and including March 1, 2016 and ending on and including May 31, 2016; and the period beginning on and including June 1, 2016 and ending on and including the Maturity Date.
 
(s) “Permitted Indebtedness” means (a) purchase money debt, Capital Lease Obligations or other Indebtedness incurred in connection with the acquisition of an interest in property, equipment, entities or other assets, provided that such purchase money debt, Capital Lease Obligations or other Indebtedness is recourse only to the interests in property, equipment, entities or other assets so acquired, and (b) Indebtedness described in Schedule 3(s) of the Securities Purchase Agreement.
 
(t) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) Liens securing the Company’s obligations under the Debentures, (v) Liens securing purchase money debt, Capital Lease Obligations or other Indebtedness incurred pursuant to clause (a) of the definition of Permitted Indebtedness, provided that such Liens do not extend and otherwise are not recourse to any assets of the Company or its Subsidiaries other than the interests in property, equipment, entities or other assets acquired with such purchase money debt, Capital Lease Obligations or other Indebtedness.
 
(u) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
 
 
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(v) “Principal Market” means the Over-the-Counter Quotation Bureau (OTC:QB).
 
(w) “Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, capital stock.
 
(x) “Registrable Securities” shall have the meaning set forth in the Registration Rights Agreement.
 
(y) “Registration Rights Agreement” means that certain registration rights agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures relating to, among other things, the registration of the resale of the Common Stock.
 
(z) “Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.
 
(aa) “Required Holders” means the holders of Debentures representing at least fifty-one percent of the aggregate principal amount of the Debentures then outstanding.
 
(bb) “SEC” means the United States Securities and Exchange Commission.
 
(cc) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Debentures pursuant to which the Company issued the Debentures.
 
(dd) “Security Agreement” means the Pledge and Security Agreement dated as of the Subscription Date among the Company and the holder of the Debentures.
 
(ee) “Security Documents” means the Security Agreement, the Mortgages, if any, and all other instruments, documents and agreements delivered by the Company or any of its Subsidiaries in order to grant to any holder of a Debenture or Other Debenture, a Lien on any real, personal or mixed property of the Company or one of its Subsidiaries as security for the obligations under the Debentures.
 
(ff) “Subscription Date” means October 29, 2015.
 
(gg) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York Time).
 
 
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(hh) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
 
(23) DISCLOSURE.  Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise.  In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
 
(23) USURY.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Buyer in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Buyer with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Buyer’s election.
 

 
[Signature Page Follows]
 
 
23
 
 
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as of the Issuance Date set out above.
 
Guardian 8 Holdings,
a Nevada corporation

By: /s/ Kathleen Hanrahan                                                               
       Kathleen Hanrahan, interim CFO
 
 
 
 
 
 
24
 
EX-10.67 6 ex10-67.htm EX-10.67 ex10-67.htm
 
EXHIBIT 10.67
 
THIRD AMENDMENT TO
SECURITIES PURCHASE AGREEMENT

This Third Amendment to Securities Purchase Agreement, dated as of October 7, 2015 (this “Amendment”), is entered into by and among Guardian 8 Corporation, a Nevada corporation (the “Company”), Guardian 8 Holdings, a Nevada corporation (“Parent”), and the investors listed on the signatory pages hereto (each individually, a “Buyer”, and collectively the “Buyers”).

RECITALS:

A. The Company and the Buyers entered into that certain Securities Purchase Agreement (the “Agreement”) dated May 27, 2014, and other Transaction Documents, whereby Parent agreed to sell to Buyers, and Buyers agreed to purchase from Parent, $7,000,000 of convertible senior secured Debentures.

B. On or about March 27, 2015, Buyers holding in excess of 65% of the outstanding Debentures consented to amend the Agreement and other Transaction Documents to (i) allow for up to an additional $5,000,000 of Debentures to be issued by Parent pursuant to the Agreement, (ii) reduce the Debenture Conversion Share price and Warrant Share price to $0.25, and (iii) otherwise conform the Agreement and other Transaction Documents to reflect the intentions of the resolutions made by the Buyers.
 
C. Effective June 2, 2015, Buyers holding in excess of 65% of the outstanding Debentures consented to amend certain terms of the Agreement, Debentures and other Transaction Documents to (i) extend the Maturity Date of the Debentures to July 31, 2016, (ii) allow for the payment of Interest under the Debentures to be made in restricted shares of Parent’s Common Stock, (iii) reduce the Debenture Conversion Share price to $0.075, (iv) reduce the Warrant Share price to $0.10, and (v) reduce the price per share relating to Forced Conversion Conditions to $0.20 as relates to all Forced Conversions set forth in the Debenture Agreements.

D. From June 2, 2015 through October 1, 2015, the Parent has sold $740,000 in additional Debentures.
 
E. Effective August 3, 2015, Buyers holding in excess of 65% of the outstanding Debentures consented to amend certain terms of the Agreement, Debentures and other Transaction Documents to allow for the Parent to (i) raise up to $1,000,000 in unsecured debt, in addition to continuing to seek investors to purchase additional Debentures, and (ii) extend the time for the Parent and Company to offer Debentures through September 30, 2015.

F. The parties to this Amendment wish to amend certain terms of the Agreement, Debentures and other Transaction Documents to extend the time for the Parent and Company to offer Debentures through March 1, 2016.
 
 
1
 
 
G. Section 9(e) of the Agreement, as amended, requires Parent to receive the consent of the Majority Holders of the aggregate number of Registrable Securities issued pursuant to the Agreement and other Transaction Documents.

H. This Amendment shall become effective upon receipt of signatures from a minimum of the Majority Holders.

NOW, THEREFORE, in consideration of the premises and mutual promises set forth herein, the parties, intending to be legally bound, agree as follows:

1. Definitions. For the purposes of this Amendment, all capitalized terms used in this Amendment that are not defined herein shall have the meanings ascribed to such terms in the Agreement and other Transaction Documents.

2. Extension of Offering Expiration Date. The Buyers hereby consent to the Parent and Company continuing to offer and sale up to the remaining Debentures through March 1, 2016.
 
3. Enforceable Documents. Except as modified herein, the parties agree that all terms and conditions of the Agreement and other Transaction Documents are and shall remain in full force and effect.
 
4. Severability. If any provision of this Amendment is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Amendment will remain in full force and effect. Any provision of this Amendment held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
 
5. Applicable Law. This Amendment shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to the conflicts of laws principles.
 
6. Counterparts. This Amendment may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Amendment and all of which, when taken together, will be deemed to constitute one and the same agreement. The exchange of copies of this Amendment and of signature pages by facsimile or electronic transmission shall constitute effective execution and delivery of this Amendment as to the parties and may be used in lieu of the original Amendment for all purposes. Signatures of the parties transmitted by facsimile or electronically shall be deemed to be their original signatures for all purposes.
 
7. Effective Date. This Amendment shall be effective upon receipt of signatures from the Majority Holders.

 
SIGNATURE PAGES TO FOLLOW
 
 
2
 
 
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the Company, Parent and Buyers hereto as of the date first herein above written.

PARENT:
 
GUARDIAN 8 HOLDINGS,
a Nevada corporation

By: /s/ C. Stephen Cochennet                                                                
       C. Stephen Cochennet, CEO/President
 
COMPANY:
 
GUARDIAN 8 CORPORATION,
a Nevada corporation

By: /s/ C. Stephen Cochennet                                                                  
 C. Stephen Cochennet, CEO/President


Buyers Signature Pages to Follow
 
 
3
 
 
Buyers:
 
/s/ C. Stephen Cochennet                                      
/s/ James G. Miller                                                   
C. Stephen Cochennet
James G. Miller
($445,000 = 5.53%)
($50,000 = 0.70%)
   
   
/s/ Jim Nolton                                                          
 
Jim Nolton for Nolton Enterprises
  
 ($20,372.60 = 0.29%)
  

 




(Additional signatures to follow)
 
 
 
4
 

Pinnacle Family Office Investments, L.P.
  
($962,500 = 13.47%)
  
   
By: /s/ Barry M. Kitt                                               
 
   
Name: Barry M. Kitt                                                
 
   
Title:   Manager, Pinnacle Family Office              
 
L.L.C. the General Partner of                     
 
Pinnacle Family Office Investments, L.P.
  
dba Pinnacle III Investments                    
 
   
   
CK Management, LLC
Atlas Allocation Fund, L.P.
($1,000,000 = 13.99%)
($1,000,000 = 13.99%)
   
By: /s/ Cary Luskin                                                 
By: /s/ Robert Alpert                                               
   
Name: Cary Luskin                                                  
Name: Robert Alpert                                                
   
Title:   Managing Member                                     
Title:   President of GP                                             
   
   
Calm Waters Partnership
Hard 4 Holdings LLC
($500,000 = 7.00%)
($250,000 = 3.50%)
   
By: /s/ Richard S. Strong                                       
By: /s/ Reid S. Walker                                             
   
Name: Richard S. Strong                                        
Name: Reid S. Walker                                              
   
Title:   Managing Partner                                       
Title:   Member                                                         
   
   
Brett Luskin
  
($50,000 = 0.70%)
  
   
/s/ Brett Luskin                                                        
  
   
   
Taylor Luskin
Cary Luskin
($50,000 = 0.70%)
($50,000 = 0.70%)
   
/s/ Taylor Luskin                                                     
/s/ Cary Luskin                                                         
                                                        
(Additional signatures to follow)
 
 
5
 

Sandor Capital Master Fund
  
($200,000 = 2.80%)
  
   
By: /s/ John S. Lemak                                             
  
   
Name: John S. Lemak                                              
  
   
Title:   General Partner                                            
  
   
   
Vestal Venture Capital
  
($80,000 = 1.12%)
  
   
By: /s/ Allan R. Lyons                                            
 
   
Name: Allan R. Lyons                                             
 
   
Title:   Managing Member of the Managing GP 
 
   
   
JSL Kids Partners
  
($50,000 = 0.70%)
  
   
By: /s/ John S. Lemak                                              
  
   
Name: John S. Lemak                                              
 
   
Title:   General Partner                                            
  
   
   
Cradle Rock LLC
William M. Stern Revocable Trust
($25,000 = 0.35%)
($20,000 = 0.28%)
   
By: /s/ William M. Stern                                         
By: /s/ William M. Stern                                          
   
Name: William M. Stern                                          
Name: William M. Stern TTEE                               
   
Title:   M.P.                                                               
Title:   TTEE                                                             

 
6
 
EX-10.68 7 ex10-68.htm EX-10.68 ex10-68.htm
 
EXHIBIT 10.68
 
UPTICK CAPITAL LLC.  CONSULTING AGREEMENT
 
 
November 10th, 2015
 
 
Guardian 8 Holdings (GRDH) (the “Company”)
 
 
On behalf of Uptick Capital, LLC. (“Uptick”), we look forward to working with you as an outside business consultant. The purpose of this letter (the “Agreement”) is to set forth the terms and conditions under which Uptick agrees to serve the Company as an outside business consultant. 
 
1.     Services. Uptick shall use its best efforts to perform the following services in a timely manner:  (a) become familiar with the business and operations of the Company and review and analyze the Company’s formal and informal strategic, marketing, financial and business plans and (b) advise the Company in strategic planning matters and assist in the implementation of short- and long-term strategic planning initiatives to enhance and accelerate the commercialization of the Company’s business objectives.
 
2.     Term.   The term of this Agreement shall commence on the date hereof and shall continue until the date that is two (2) months from the date (“Effective Date”) set forth above (the “Initial Term”). Unless either party has advised the other party with written notice by the date that is fifteen days prior to the last day of the Initial Term or, if applicable, the Renewal Term (as hereinafter defined), of such party’s intent that this Agreement terminate immediately upon expiration of such term, then this Agreement shall be extended for subsequent two-month terms (each, a “Renewal Term”).
 
3.     Consideration. For the valuable advice and services to be provided by Uptick to the Company under this Agreement, the Company shall immediately issue $25,000 worth of shares at a price of .075 (333,333 Shares per month) of restricted common stock to Uptick upon the effectiveness of this agreement and the Company shall immediately issue $25,000 worth of shares at a price of .075 (333,333 Shares per month) of restricted common stock to Uptick one month from the effectiveness of this Agreement.  The amount of shares to be issued to Uptick for each of the subsequent months shall be the higher of either $20,000 divided by .075c or $20,000 divided by the last 10 day average closing price of the prior month continuing on the 10th business day of every month thereafter (throughout the remainder of every Renewal Term) until this Agreement is properly terminated (each a “Payment Date”). The shares to be issued to Uptick under this Agreement shall be considered fully earned, fully paid, non-assessable, non-refundable and beneficially owned by Uptick as of the date in which the Company is required to issue such shares under this Agreement.
 
 
 
 
 
4.     Representations and Warranties. The Company represents and warrants to Uptick that the statements contained in this paragraph 4 are correct and complete as of the Effective Date:
 
(a) The Company is a corporation duly organized, validly existing and active under the laws of the State of its incorporation.
 
(b) The Company has full corporate power and authority to (i) conduct its business as now conducted and as proposed to be conducted and to own, use, license, and lease its assets and properties and (ii) enter into this Agreement and to consummate the transactions contemplated herein.
 
5.     Expenses. In addition to the consideration set forth in paragraph 3, the Company shall reimburse Uptick and its affiliates, upon request, for all reasonable out-of-pocket expenses incurred in connection with the performance by Uptick of its obligations under this Agreement. Out-of-pocket expenses may include necessary out-of-town travel agreed to by the Company (including meals and lodging), database services, courier charges, and fees and expenses of third parties such as legal counsel, etc. The Company shall approve such expenses in advance; provide, however, such prior approval shall not be required for expenses in amounts less than $250. Out-of-pocket expenses shall be paid within 15 days of the Company receiving an invoice containing approved expenses from Uptick.
 
6.     Indemnity. The Company and Uptick agrees to indemnify, defend, and hold harmless each other and its affiliates, directors, officers, counsel, employees, agents, members, managers, successors, assigns, and controlling persons (as defined in the Act) (each, an “Indemnified Party”) from and against any and all losses, claims, damages, costs, expenses, and liabilities (including any investigatory, legal, and other expenses incurred as they are incurred by an Indemnified Party in connection with preparing for or defending any action, claim, or proceeding, whether or not resulting in any liability) (collectively, “Indemnifiable Losses”) to which any Indemnified Party may become subject or liable relating to or arising out of (a) the Agreement or the services to be performed under the Agreement or any agreement between the parties to this Agreement, (b) any transactions referred to in the Agreement or any transactions arising out of the transactions contemplated by the Agreement, (c) any inaccuracy in or breach in the representations and warranties of the Company contained in this Agreement, and (d) any failure of the Company to perform its obligations under this Agreement, provided that the Company and Uptick shall not be liable to an Indemnified Party in any such case to the extent that any  such Indemnifiable Loss is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted as a direct and proximate cause from the willful misconduct or gross negligence of an Indemnified Party.  No Indemnified Party shall be liable, responsible, or accountable in damages and costs and expenses (including attorneys’ fees) under this Agreement except for any liability for losses, claims, damages, or liabilities finally judicially determined to have resulted solely and exclusively from actions taken or omitted to be taken as a direct result of such Indemnified Party’s gross negligence or willful misconduct.  If for any reason, except as specifically provided herein, the foregoing indemnity for Indemnifiable Losses is unavailable to an Indemnified Party or insufficient to fully hold any Indemnified Party harmless, then the Company agrees to contribute to the amount paid or payable by such Indemnified Party as a result of such Indemnifiable Losses in such proportion as is appropriate to reflect the relative benefits received by and fault of the Company, on the one hand, and the relative benefits received by and fault of Uptick, on the other hand. In the event that the Company brings suit against Uptick, the Company agrees to provide to Uptick amounts necessary for a customary and reasonable retainer.
 
 
 
 
 
7.     Opinion. The Company agrees that anytime after 6 months, at the request of Uptick and at the expense of Uptick, counsel selected by Uptick shall issue an opinion letter with regard to the restricted shares, the form and substance of which shall be reasonably satisfactory to the Company’s transfer agent, to the effect that the restrictive legend may be removed from the Shares in accordance with Rule 144 of the United States Securities Act of 1933, as amended (the “Securities Act”) and other applicable securities laws.  The Rule 144 clock begins upon signature of this agreement not the date on the certificate issued.
 
8.     Legal Matters. This Agreement shall be interpreted under and governed by the laws of the State of New York. Any controversy, dispute, or claim between the parties relating to this Agreement shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association.  
 
9.     Additional Company Representations.  The Company acknowledges that Uptick has advised the Company that Uptick is not a licensed securities broker-dealer and, accordingly, Uptick is not required under this Agreement or any other agreement, whether verbal or in writing, to sell securities on behalf of the Company or any issuer affiliated with the Company. Moreover, the Company acknowledges that (a) Uptick does not intend to participate in the negotiation of transactions to raise capital for the Company, (b) Uptick does not intend to directly solicit purchasers of the Company's common stock, (c) Uptick will not hold any funds or securities in a capital raising transaction, and (d) the compensation due to Uptick is not based on a specified percentage of any actual or proposed funds raised.  The Company acknowledges that Uptick has informed it that neither Uptick nor any of its members or employees provides any legal advice or counsel. The duties of Uptick shall not include auditing, valuation, accounting, computer network design or appraisal services, all of which shall be procured by the Company at its own expense.
 
10.   Independent Contractor. Uptick is an independent contractor and may engage in other business activities. Since Uptick is an independent contractor, nothing in this Agreement shall be interpreted to constitute that Uptick is an agent, employee, or partner of the Company, nor shall either party have any authority to bind the other.
 
11.   Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes and cancels any prior communications, representations, understandings, and agreements between the parties. No modifications of or changes to this Agreement shall be binding, nor can any of its provisions be waived, unless agreed to in writing by the parties. There are no side agreements, whether verbally or in writing, between the Company and Uptick.
 
 
 
 
 
13.2 Confidentiality. The parties agree that the terms and conditions of this Agreement shall be kept confidential, unless this information is required to be disclosed pursuant to any inquiries by federal, state, or local law enforcement.
 
If the foregoing is acceptable to you, please execute this Agreement in the place provided below.
 
 
 
 
 
 
 
 
 
 
 
Uptick Capital, LLC
 
 
By:  /s/ Simeon Wohlberg                                                               
 
Name: Simeon Wohlberg
 
Title: Partner
 
 
 
 
ACCEPTED AND AGREED  
 
 
 
By: /s/ C. Stephen Cochennet                                                              
 
Name: C. Stephen Cochennet
 
Title:    CEO
 

 
 
 
EX-31.1 8 ex31-1.htm EX-31.1 ex31-1.htm
 
EXHIBIT 31.1
 
CERTIFICATION

I, C. Stephen Cochennet, Chief Executive Officer of Guardian 8 Holdings, certify that:

 
1.
I have reviewed this Quarterly Report on Form 10-Q of Guardian 8 Holdings;

 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: November 13, 2015

/s/ C. Stephen Cochennet                                                                                                                              
C. Stephen Cochennet,
Chief Executive Officer
(Principal Executive Officer)

 
 
 
 
 
 
EX-31.2 9 ex31-2.htm EX-31.2 ex31-2.htm
 
EXHIBIT 31.2
 
CERTIFICATION

I, Kathleen Hanrahan, Chief Financial Officer of Guardian 8 Holdings, certify that:

 
1.
I have reviewed this Quarterly Report on Form 10-Q of Guardian 8 Holdings;

 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 Date: November 13, 2015

/s/ Kathleen Hanrahan                                       
Kathleen Hanrahan,
Chief Financial Officer
(Principal Financial and Accounting Officer)

 
 
 
 
 
 
 
EX-32.1 10 ex32-1.htm EX-32.1 ex32-1.htm
 
EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Guardian 8 Holdings (the “Company”) on Form 10-Q for the period ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, C. Stephen Cochennet, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/ C. Stephen Cochennet                                                                          
C. Stephen Cochennet
Chief Executive Officer and
Principal Financial Officer
November 13, 2015

 

 
 
 
 
 
 
EX-32.2 11 ex32-2.htm EX-32.2 ex32-2.htm
 
EXHIBIT 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Guardian 8 Holdings (the “Company”) on Form 10-Q for the period ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kathleen Hanrahan, Chief Financial and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/ Kathleen Hanrahan                                                                                 
Kathleen Hanrahan
Chief Financial Officer and
Principal Financial Officer
November 13, 2015

 
 
 
 
 
 
 
EX-99.18 12 ex99-18.htm EX-99.18 ex99-18.htm
 
EXHIBIT 99.18
 
Pro V2 Deployments Avert Burglaries and Violent Assaults
 
Private Security Company and Healthcare Facility Assert Successful De-escalations of Three Separate Incidents Using Guardian 8's Pro V2 Device
 
SCOTTSDALE, AZ--(Marketwired - September 03, 2015) - Guardian 8 Corporation, the wholly owned operating subsidiary of Guardian 8 Holdings (OTCQB: GRDH), a leading provider of Enhanced Non-Lethal (ENL) defense technologies, today announced that its Pro V2 device was utilized by private security officers in Texas and healthcare security staff in Ohio to successfully de-escalate and document three different and potentially violent incidents.
 
The first incident involved security officers working for Platinum Event Services, Inc., a Dallas-based security firm. The officers used their Pro V2 devices to thwart a burglary attempt at the site of the now-closed Prime Prep Academy in Dallas (a Texas charter school co-founded by former Dallas Cowboy's star Deion Sanders). The perpetrator intentionally crashed through a locked gate on the property with his vehicle. The security officers began documenting the scene with their Pro V2s and, upon contacting the driver of the vehicle, deployed the device's disorienting strobe and siren. At the same time, the officers were able to initiate the two-way communication feature on the device so they could request assistance through their supervisor. No injuries were reported and the subject was detained using the Pro V2 until authorities arrived to take the individual into custody.
 
Steve Cochennet, CEO of Guardian 8 stated, "The Pro V2 served as the perfect intermediate tool for the situation at hand. If these officers had nothing on their belts, they would have been forced to potentially get hands-on with the trespasser who already demonstrated aggressive and unreasonable behavior by crashing his vehicle through a locked gate. Someone could have easily been injured in that situation. "
 
A second incident involved two officers from the same Dallas-based security company. The officers were assigned to patrol large parking lots outside of a stadium where a major league soccer tournament was taking place. The officers noticed multiple subjects acting suspiciously and looking into car windows in the parking lot, so they suspected that the subjects were intending to burglarize some of the parked vehicles. The officers approached the subjects and provided verbal commands for them to leave the premises. When the subjects refused, the officers drew their Pro V2 Enhanced Non-Lethal devices and activated the unit's laser spotter and audio and video recording capabilities. Once notified that their actions were being recorded, the subjects departed the area without further incident.
 
Regarding this incident, Cochennet added, "The fact that the subjects failed to obey the officers' initial commands shows that the security officers' presence alone was not enough to deter them. When the Pro V2 was deployed and the subjects knew they were being recorded, compliance was gained and the situation was de-escalated. This illustrates why it is so important for private security officers to have non-lethal and documentation tools at their disposal."
 
Joe Mata, President of Platinum Event Services, said that the Pro V2, "Has been a game-changer for our guys." He added, "This new technology makes sense for our clients financially in reducing the costs associated with managing their risk as well the risks to our company and our employees. The 24-hour day-to-day mission in the security business is to reduce risks and eliminate threats. This incredible defense tool allows us to do that and more at a surprising low cost."
 
 
 
 
 
In the third incident, the Pro V2 successfully protected its user and others from harm during a confrontation with an aggravated and aggressive subject at a healthcare facility in Ohio. According to a source at the healthcare facility, an intoxicated subject came into the Emergency Room area to visit a patient. The subject was behaving in a disorderly manner and began approaching a nurse while screaming at her. A security officer who was in the area at the time attempted to physically restrain the visitor. In the process of trying to remove the subject from the area, a struggle ensued.
 
The officer recognized trying to physically restrain the intoxicated subject wasn't working, so he disengaged from the visitor and drew his Pro V2 device. He immediately activated the unit to Level 1, deploying the laser spotter and engaging the audio/video recording capability of the unit. Upon realizing his actions were being recorded, the visitor ceased his aggressive behavior and obeyed the officer's verbal commands to leave the premises.
 
As the source from the healthcare facility relayed to Guardian 8, "The G8 Pro V2 did its intended job and de-escalated a potentially violent situation."
 
There were no reported injuries to any parties involved and no indication that a complaint or possible excessive force claims would come from the intoxicated subject.
 
Eric Myers, Training Headmaster of Guardian 8, stated, "This is yet another story that proves the Pro V2's effectiveness in its target markets. On top of the successful deployment stories from the private security group in Texas, we now have a successful deployment story from a healthcare facility. These stories validate our claims about the Pro V2 and give us real-world deployments to discuss in training."
 
About Guardian 8 Holdings
Guardian 8 Holdings, through its wholly owned operating subsidiary, Guardian 8 Corporation, is the developer and manufacturer of the Pro V2, an enhanced ENL response to threats that revolutionizes how companies keep workplaces safe and mitigate risk. The Pro V2 is a defensive device that provides any operator with non-lethal means to protect themselves and others, allowing time for law enforcement response, while initiating communication and incident recording. The Pro V2 is an intermediate option for response to aggressive subjects, developed as a solution for security professionals seeking a flexible tool with a layered defense approach. Guardian 8 was awarded the "Campus Safety BEST Award" for 2014 in the personal gear and equipment category, one of "Ten Companies to Watch" in March 2014 by the Phoenix Business Journal, and an ASIS Accolades Award for "Security's Best." To learn more about the company and its personal protection product line, visit www.Guardian8.com. Follow Guardian 8 on LinkedIn, YouTube, Facebook and Twitter.
 
 
 
 
 
About Platinum Event Services, Inc.
Platinum Event Services, Inc., dba Platinum Security and Consulting, is an MBE company with its Corporate Headquarters located in Dallas, Texas, USA. Platinum provides security staffing & event services, as well as sophisticated security systems, to Fortune 500 and regional companies, organizations, concert & entertainment venues, sporting events and commercial & government properties throughout the US. In addition, Platinum exhibits an enhanced menu of security services, including consulting services, security technology services, and training services, which extends a "value-add" to the clientele it serves. Through its method of "bundled services," Platinum allows its clients to determine the right mix of technical systems and security personnel -- integrating all security services under one security solution, offering a merged set of services at a reduced cost. Platinum provides Security and Crowd Management staffing services, for many of the largest facilities in Texas. Platinum is the premier choice for event staffing services. Platinum strives to exceed the expectations of its clients, and to exceed the level of professionalism, expertise, and service of its competitors. For more information, please go to http://www.platinumesi.com to discover all services offered.
 
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact and may be "forward-looking statements."
 
Such statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Such statements involve risks and uncertainties, including but not limited to: any implied or perceived benefits resulting from successful deployments of the Pro V2 in the field; actual international or domestic sales revenue to be derived from the Pro V2 device; Guardian 8's and its subsidiaries business prospects; the ability of Guardian 8 to execute its business plan; benefits of the G8 Pro V2 device; any other effects resulting from the information disclosed above; risks and effects of legal and administrative proceedings and government regulation; future financial and operational results; competition; general economic conditions; and the ability to manage and continue growth. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.
 
Important factors that could cause actual results to differ materially from the forward-looking statements Guardian 8 makes in this press release include market conditions and those set forth in reports or documents it files from time to time with the SEC. Guardian 8 undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
 
Embedded Video Available: https://www.youtube.com/watch?v=DZuXr1Yi7aw
 
 
 
 
 
Media Contact:
 
Dan Hill
7432 E Tierra Buena Ln, Suite 102
Scottsdale, AZ 85260
dan@guardian8.com
(480)426-1005
 
Investor Contact:
 
Will Grove
7432 E Tierra Buena Ln, Suite 102
Scottsdale, AZ 85260
will@guardian8.com
(480)426-1014
 

 
 
 
 
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MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Guardian 8 Corporation (&#x201c;Guardian 8&#x201d;) was incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation.&nbsp;&nbsp;In August of 2009, the Company changed its name to Guardian 8 Corporation.&nbsp;&nbsp;The Company&#x2019;s principle offices are located in Scottsdale, Arizona.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Effective November 30, 2010, we merged with Global Risk Management &amp; Investigative Solutions (&#x201c;Global Risk&#x201d;), a public company with its common stock registered with the United States Securities and Exchange Commission.&nbsp;&nbsp;The Company merged into a newly formed wholly owned subsidiary of Global Risk, with the Company being the surviving corporation.&nbsp;&nbsp;Post-merger, Global Risk changed its name to Guardian 8 Holdings.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Basis of presentation</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">These interim financial statements are condensed and should be read in conjunction with the Company&#x2019;s December 31, 2014 annual statements included in the Form 10-K filed on March 31, 2015.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Principles of consolidation</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">For the three and nine months ended September 30, 2015 and 2014, and for the year ended December 31, 2014, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.&nbsp;&nbsp;All material intercompany transactions and accounts have been eliminated.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Cash and cash equivalents</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.&nbsp;&nbsp;At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.&nbsp;&nbsp;As of September 30, 2015 and December 31, 2014, there were cash equivalents of $80,001 and $491,988 respectively.&nbsp;</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Inventory</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its Pro V2 from its contract manufacturer.&nbsp;&nbsp;These deliveries were part of the Company&#x2019;s initial purchase orders totaling 11,800 units.&nbsp;&nbsp;The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States.&nbsp;&nbsp;The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection.&nbsp;&nbsp;The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred.&nbsp;&nbsp;As of September 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders and has reserved $59,510 to offset any units scrapped during inspection of units not yet performed as of this date.&nbsp;&nbsp;No additional purchase orders are pending.&nbsp;&nbsp;As of September 30, 2015 there are approximately 10,400 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months. Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or market.&nbsp;&nbsp;Inventories include the cost of inbound shipping, duty and receiving inspection.&nbsp;&nbsp;Inventory obsolescence is examined on a regular basis.&nbsp;&nbsp;Currently there is no inventory considered obsolete.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Accounts receivable</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Accounts receivable are customers outstanding balances carried on a gross basis less allowance for doubtful accounts.&nbsp;&nbsp;Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of our customers, and the amount and age of past due accounts.&nbsp;&nbsp;Receivables are considered past due if full payment is not received by the contractual due date.&nbsp;&nbsp;Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.&nbsp;&nbsp;We review these policies on a quarterly basis and based on these reviews, we believe we maintain adequate reserves.&nbsp;&nbsp;At September 30, 2015 and December 31, 2014, the allowance for doubtful accounts was $478 and $4,978, respectively. Interest is not accrued on overdue accounts receivable.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Revenue recognition</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Revenues are recognized in accordance with ASC subtopic 605-10, &#x201c;Revenue Recognition&#x201d;.&nbsp;&nbsp;The company recognizes revenue from sales of product upon delivery to its customers where the fee is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.&nbsp;&nbsp;Revenues for the nine months ended September 30, 2015 and 2014 were $157,262 and $39,346, respectively.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Warranty</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device.&nbsp;&nbsp;These fees are intended to cover the handling and repair costs and include a profit.&nbsp;&nbsp;One year extended warranties that provide additional coverage beyond the limited warranty are offered for specified fees. Revenue derived from the sale of extended warranties are deferred and amortized over the duration of the warranty period.&nbsp;&nbsp;As of September 30, 2015 and December 31, 2014, the Company recorded $14,544 and $4,513 as deferred revenue, respectively.&nbsp;&nbsp;Extended warranty expense for the nine months ended September 30, 2015 and 2014 was $6,579 and $955, respectively.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Research and development costs</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company expenses all costs of research and development as incurred. Research and development expenses included in general and administrative expenses totaling $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014 respectively.&nbsp;</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Use of estimates</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.&nbsp;&nbsp;Actual results could differ from those estimates.&nbsp;&nbsp;All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01.&nbsp;&nbsp;Adjustments include appropriate estimates for arrangements normally determined or settled at year-end.&nbsp;&nbsp;All adjustments are of a normal and recurring nature.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Property and equipment</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Property and equipment are stated at cost.&nbsp;&nbsp;Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets:&nbsp;</font> </div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Equipment</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2-5 years</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Tooling</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">10 years</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Leasehold improvements</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Life of lease</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Furniture and fixtures</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5&nbsp;years</font> </div> </td> </tr> </table><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Fair value of financial instruments</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, debentures payable and related accrued interest, and derivative liability.&nbsp;&nbsp;Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.&nbsp;&nbsp;See Note 14 for further details.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Impairment of long-lived assets</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">ASC 360, &#x201c;Accounting for the Impairment of Long-Lived Assets to be Disposed Of&#x201d;, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.&nbsp;&nbsp;The Company assesses recoverability of the carrying value of an asset by estimating the future new cash flows expected to result from the asset, including eventual disposition.&nbsp;&nbsp;If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset&#x2019;s carrying value and fair value.&nbsp;&nbsp;The Company did not have impaired assets during the nine months ended September 30, 2015 and 2014.&nbsp;</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Net loss per share</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Net Loss per share is provided in accordance with ASC 260-10, &#x201c;Earnings Per Share&#x201d; that requires the reporting of both basic and diluted earnings (loss) per share.&nbsp;&nbsp;Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.&nbsp;&nbsp;Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.&nbsp;&nbsp;In accordance with ASC 260-10, any anti-dilutive effects on net income (loss) per share are excluded.&nbsp;&nbsp;For the nine months ended September 30, 2015 and 2014, the denominator in the diluted earnings per share computation is the same as the denominator for basic earnings per share due to the anti-dilutive effect of the warrants on the Company&#x2019;s net loss.&nbsp;&nbsp;Diluted earnings (loss) per share is not presented since the effect of the assumed conversion of warrants would have an anti-dilutive effect. Potential common shares as of September 30, 2015 that have been excluded from the computation of diluted net loss per share amounted to 23,709,523 from warrants and debt totaling $7,207,500 that is convertible into 96,100,000 common shares.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Income taxes</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company follows ASC subtopic 740-10, &#x201c;Accounting for Income Taxes&#x201d;, for recording the provision for income taxes.&nbsp;&nbsp;ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.&nbsp;&nbsp;Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.&nbsp;&nbsp;Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.&nbsp;&nbsp;If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.&nbsp;&nbsp;Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.&nbsp;&nbsp;See Note 15 for further details.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">&nbsp;<font style="TEXT-DECORATION: underline; DISPLAY: inline">Recent pronouncements</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company has evaluated all new accounting pronouncements as of the issue date of these financial statements and has determined that none have or will have a material impact on the financial statements or disclosures.</font> </div><br/> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Basis of presentation</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">These interim financial statements are condensed and should be read in conjunction with the Company&#x2019;s December 31, 2014 annual statements included in the Form 10-K filed on March 31, 2015.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Principles of consolidation</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">For the three and nine months ended September 30, 2015 and 2014, and for the year ended December 31, 2014, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.&nbsp;&nbsp;All material intercompany transactions and accounts have been eliminated.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Cash and cash equivalents</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.&nbsp;&nbsp;At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.&nbsp;&nbsp;As of September 30, 2015 and December 31, 2014, there were cash equivalents of $80,001 and $491,988 respectively.</font></div> 80001 491988 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Inventory</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its Pro V2 from its contract manufacturer.&nbsp;&nbsp;These deliveries were part of the Company&#x2019;s initial purchase orders totaling 11,800 units.&nbsp;&nbsp;The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States.&nbsp;&nbsp;The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection.&nbsp;&nbsp;The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred.&nbsp;&nbsp;As of September 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders and has reserved $59,510 to offset any units scrapped during inspection of units not yet performed as of this date.&nbsp;&nbsp;No additional purchase orders are pending.&nbsp;&nbsp;As of September 30, 2015 there are approximately 10,400 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months. Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or market.&nbsp;&nbsp;Inventories include the cost of inbound shipping, duty and receiving inspection.&nbsp;&nbsp;Inventory obsolescence is examined on a regular basis.&nbsp;&nbsp;Currently there is no inventory considered obsolete.</font></div> 1396 11800 The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States. The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection. The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred. 59510 10400 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Accounts receivable</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Accounts receivable are customers outstanding balances carried on a gross basis less allowance for doubtful accounts.&nbsp;&nbsp;Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of our customers, and the amount and age of past due accounts.&nbsp;&nbsp;Receivables are considered past due if full payment is not received by the contractual due date.&nbsp;&nbsp;Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.&nbsp;&nbsp;We review these policies on a quarterly basis and based on these reviews, we believe we maintain adequate reserves.&nbsp;&nbsp;At September 30, 2015 and December 31, 2014, the allowance for doubtful accounts was $478 and $4,978, respectively. Interest is not accrued on overdue accounts receivable.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Revenue recognition</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Revenues are recognized in accordance with ASC subtopic 605-10, &#x201c;Revenue Recognition&#x201d;.&nbsp;&nbsp;The company recognizes revenue from sales of product upon delivery to its customers where the fee is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.&nbsp;&nbsp;Revenues for the nine months ended September 30, 2015 and 2014 were $157,262 and $39,346, respectively.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Warranty</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device.&nbsp;&nbsp;These fees are intended to cover the handling and repair costs and include a profit.&nbsp;&nbsp;One year extended warranties that provide additional coverage beyond the limited warranty are offered for specified fees. Revenue derived from the sale of extended warranties are deferred and amortized over the duration of the warranty period.&nbsp;&nbsp;As of September 30, 2015 and December 31, 2014, the Company recorded $14,544 and $4,513 as deferred revenue, respectively.&nbsp;&nbsp;Extended warranty expense for the nine months ended September 30, 2015 and 2014 was $6,579 and $955, respectively.</font></div> offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device 6579 955 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Research and development costs</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company expenses all costs of research and development as incurred. Research and development expenses included in general and administrative expenses totaling $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014 respectively.</font></div> 123422 244794 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Use of estimates</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.&nbsp;&nbsp;Actual results could differ from those estimates.&nbsp;&nbsp;All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01.&nbsp;&nbsp;Adjustments include appropriate estimates for arrangements normally determined or settled at year-end.&nbsp;&nbsp;All adjustments are of a normal and recurring nature.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Property and equipment</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Property and equipment are stated at cost.&nbsp;&nbsp;Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets:&nbsp;</font> </div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Equipment</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2-5 years</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Tooling</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">10 years</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Leasehold improvements</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Life of lease</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Furniture and fixtures</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5&nbsp;years</font> </div> </td> </tr> </table> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Fair value of financial instruments</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, debentures payable and related accrued interest, and derivative liability.&nbsp;&nbsp;Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.&nbsp;&nbsp;See Note 14 for further details.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Impairment of long-lived assets</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">ASC 360, &#x201c;Accounting for the Impairment of Long-Lived Assets to be Disposed Of&#x201d;, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.&nbsp;&nbsp;The Company assesses recoverability of the carrying value of an asset by estimating the future new cash flows expected to result from the asset, including eventual disposition.&nbsp;&nbsp;If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset&#x2019;s carrying value and fair value.&nbsp;&nbsp;The Company did not have impaired assets during the nine months ended September 30, 2015 and 2014.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Net loss per share</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Net Loss per share is provided in accordance with ASC 260-10, &#x201c;Earnings Per Share&#x201d; that requires the reporting of both basic and diluted earnings (loss) per share.&nbsp;&nbsp;Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.&nbsp;&nbsp;Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.&nbsp;&nbsp;In accordance with ASC 260-10, any anti-dilutive effects on net income (loss) per share are excluded.&nbsp;&nbsp;For the nine months ended September 30, 2015 and 2014, the denominator in the diluted earnings per share computation is the same as the denominator for basic earnings per share due to the anti-dilutive effect of the warrants on the Company&#x2019;s net loss.&nbsp;&nbsp;Diluted earnings (loss) per share is not presented since the effect of the assumed conversion of warrants would have an anti-dilutive effect. Potential common shares as of September 30, 2015 that have been excluded from the computation of diluted net loss per share amounted to 23,709,523 from warrants and debt totaling $7,207,500 that is convertible into 96,100,000 common shares.</font></div> 23709523 7207500 96100000 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Income taxes</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company follows ASC subtopic 740-10, &#x201c;Accounting for Income Taxes&#x201d;, for recording the provision for income taxes.&nbsp;&nbsp;ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.&nbsp;&nbsp;Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.&nbsp;&nbsp;Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.&nbsp;&nbsp;If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.&nbsp;&nbsp;Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.&nbsp;&nbsp;See Note 15 for further details.</font></div> <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Recent pronouncements</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company has evaluated all new accounting pronouncements as of the issue date of these financial statements and has determined that none have or will have a material impact on the financial statements or disclosures.</font></div> The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: <br /> <br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Equipment</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2-5 years</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Tooling</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">10 years</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Leasehold improvements</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Life of lease</font> </div> </td> </tr> <tr> <td align="left" valign="middle" width="40%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Furniture and fixtures</font> </div> </td> <td align="left" valign="middle" width="35%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5&nbsp;years</font> </div> </td> </tr> </table> P2Y P5Y P10Y Life of lease P5Y <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 2 &#x2013; Going Concern</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles and under the assumption that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.&nbsp;&nbsp;As of September 30, 2015, the Company has an accumulated deficit of $26,749,521, and the Company&#x2019;s current liabilities exceed current assets by $6,425,273.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company&#x2019;s activities since inception have been financially sustained by issuance of common stock, debentures and related party loans. The Company intends to raise additional funding to continue its operations through contributions from the current shareholders and stock issuance to other investors and additional investment in debentures.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock, repay its outstanding debt, and, ultimately, to achieve of significant operating revenues.&nbsp;&nbsp;The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.</font> </div><br/> -6425273 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 3 &#x2013; Prepaid loan costs</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the year ended December 31, 2013, the Company issued notes payable that include a three-year warrant for each $1.00 of principal covered in the notes.&nbsp;&nbsp;&nbsp;The warrants are exercisable at $0.40 per share (See Note 7).&nbsp;&nbsp;The warrants issued were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $296,524.&nbsp;&nbsp;As of September 30, 2015, the loan costs were fully amortized.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the nine months ended September 30, 2014, the Company issued notes payable that included a three-year warrant for each $1.00 of principal covered in the notes.&nbsp;&nbsp;The warrants are exercisable at $0.50 per share (See Note 7).&nbsp;&nbsp;The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $154,881. As of September 30, 2015, the loan costs were fully amortized.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On May 27, 2014, the Company issued convertible senior secured debentures (See Note 8).&nbsp;&nbsp;From these debentures, the Company incurred loan costs in the amount of $632,786, which are being amortized over eighteen months, which is the period for which the debentures were due. As of September 30, 2015 and December 31, 2014, the balance on these loan costs was $65,910 and $382,305, respectively.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On June 2, 2014, the Company issued convertible senior secured debentures (See Note 8).&nbsp;&nbsp;From these debentures, the Company incurred loan costs in the amount of $177,153, which are being amortized over eighteen months, which is the period for which the debentures were due.&nbsp;&nbsp;As of September 30, 2015 and December 31, 2014, the balance on these loan costs was $16,631 and $104,966, respectively.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On June 2, 2015, the Company issued convertible senior secured debentures (See Note 8).&nbsp;&nbsp;From these debentures, the Company incurred loan costs in the amount of $77,654, which are being amortized over fourteen months, which is the period for which the debentures are due.&nbsp;&nbsp;As of September 30, 2015, the balance on these prepaid loan costs was $55,470.</font> </div><br/> issued notes payable that include a three-year warrant for each $1.00 of principal covered in the notes 0.40 296524 issued notes payable that included a three-year warrant for each $1.00 of principal covered in the notes 0.50 154881 632786 P18M 65910 382305 177153 P18M 16631 104966 77654 P14M 55470 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 4 &#x2013; Property and equipment</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Property and equipment consists of the following:</font> </div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">September 30,</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">2015</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">December 31,</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">2014</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Equipment</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">98,459</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">96,379</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Tooling</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">127,436</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">127,436</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Computer equipment</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">58,415</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">42,272</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Warehouse equipment</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">11,649</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">11,649</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Leasehold Improvements</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">54,452</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">60,459</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Furniture and fixtures</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">33,928</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">33,928</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">384,339</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">372,123</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Less accumulated depreciation</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(176,856</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">)</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(116,863</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">)&nbsp;</font> </div> </div> </td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">207,483</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">255,260</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/> Property and equipment consists of the following: <br /> <br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">September 30,</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">2015</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">December 31,</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">2014</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Equipment</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">98,459</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">96,379</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Tooling</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">127,436</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">127,436</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Computer equipment</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">58,415</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">42,272</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Warehouse equipment</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">11,649</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">11,649</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Leasehold Improvements</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">54,452</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">60,459</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Furniture and fixtures</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">33,928</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">33,928</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">384,339</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">372,123</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Less accumulated depreciation</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(176,856</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">)</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(116,863</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">)&nbsp;</font> </div> </div> </td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="47%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">207,483</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">255,260</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table> 98459 96379 127436 127436 58415 42272 11649 11649 54452 60459 33928 33928 384339 372123 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 5 &#x2013; Deposit on Inventory</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of September 30, 2015 the Company had no outstanding deposits on inventory or prepaid inventory in transit.&nbsp;&nbsp;On December 31, 2014 the Company had prepaid inventory of $22,674 which was in transit from the manufacturer and received in January 2015.</font> </div><br/> 22674 <div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 6 &#x2013; Bank line of credit</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On January 17, 2014, the Company entered into a revolving line of credit agreement with Cornerstone Bank, N.A.&nbsp;&nbsp;The agreement provided for an aggregate of up to $700,000, which was increased to $900,000 on April 28, 2014, at any time outstanding pursuant to a revolving line of credit and matured on January 16, 2015.&nbsp;&nbsp;The agreement was secured by inventory, work in process, accounts receivable, a letter of credit, and was personally guaranteed by the Company&#x2019;s Chief Executive Officer/President.&nbsp;&nbsp;Interest was at 6% per annum, with monthly interest payments to be paid by the Company.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As part of the agreement, the Company entered into a Letter of Credit Rights Control Agreement with F&amp;M Bank &amp; Trust Company.&nbsp;&nbsp;Per this agreement, if the Company were to default on the line of credit, F&amp;M Bank &amp; Trust Company would then be held liable to Cornerstone Bank, N.A. for the payment of the line of credit.&nbsp;&nbsp;In addition, the Company would then owe the amount disbursed to F&amp;M Bank &amp; Trust Company.&nbsp;&nbsp;As of September 30, 2014, the bank line of credit was fully paid and the pledged letter of credit terminated.</font> </div><br/> 700000 900000 2015-01-16 The agreement was secured by inventory, work in process, accounts receivable, a letter of credit, and was personally guaranteed by the Company&#x2019;s Chief Executive Officer/President. 0.06 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 7 &#x2013; Notes payable</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 1, 2013, the Company had a total of $615,000 of the original $650,000 in notes payable outstanding to its CEO and directors, with an additional $33,933 owed in accrued interest.&nbsp;&nbsp;This debt, previously due on September 1, 2013 through November 30, 2013, was exchanged for three new unsecured notes payable totaling $648,933.&nbsp;&nbsp;Each of these notes were to mature on April 30, 2014, bearing interest at 12% per annum, and included a three-year warrant for every $1.00 of principal amount of each note.&nbsp;&nbsp;The warrants were exercisable at $0.40 per share.&nbsp;&nbsp;The notes were subsequently extended with a due date of July 15, 2014 however, the notes payable and related accrued interest were paid off as of June 30, 2014.</font> </div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="26%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Issue Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Interest Rate</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Current Due Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Amount</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">July 15, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">543,300</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">July 15, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,983</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">July 15, 2014</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,650</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Total</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">648,933</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 1, 2013 the Company issued a note payable in the amount of $45,000 from a related party in exchange for outstanding invoices owed for engineering services provided in the first nine months of the year.&nbsp;&nbsp;The note is unsecured, bears interest at 12% per annum, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.40 per share.&nbsp;&nbsp;The note was subsequently extended with a due date of July 15, 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 18, 2013, the Company issued a note payable to the CEO and president of the Company in the amount of $50,000.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.40 per share.&nbsp;&nbsp;The note was subsequently extended with a due date of July 15, 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 19, 2013, the Company issued a note payable to a related party in the amount of $30,000.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.40 per share.&nbsp;&nbsp;The note was subsequently extended with a due date of July 15, 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 19, 2013, the Company issued a note payable to a related party in the amount of $250,000.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.40 per share. The note was subsequently extended with a due date of July 15, 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 30, 2013, the Company issued a note payable in the amount of $100,000.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.&nbsp;&nbsp;&nbsp;The warrants are exercisable at $0.40 per share. The note was subsequently extended with a due date of July 15, 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of December 31, 2013, the Company had notes payable of $1,123,933 and accrued interest of $42,158.&nbsp;&nbsp;All amounts were due within twelve months.&nbsp;&nbsp;The Company also recognized $296,524 of loan fees associated with the notes payable issued during the year ended December 31, 2013.&nbsp;&nbsp;The loan fees were amortized over the term of the notes payable.</font> </div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="26%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Issue Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Interest Rate</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Current Due Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Amount</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">543,300</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,983</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,650</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">45,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 18, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">50,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 19, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">30,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 19, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">250,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 30, 2013</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">100,000</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Total</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">1,123,933</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">These notes payable were paid with proceeds from the sale of debentures in June, 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On February 12, 2014, the Company issued a note payable in the amount of $50,000 to a related party.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.50 per share.&nbsp;&nbsp;The note and related accrued interest were paid off in June 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On February 24, 2014, the Company issued a note payable in the amount of $25,000 to a related party.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and includes a three-year warrant for each of $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.50 per share.&nbsp;&nbsp;The note and related accrued interest were paid off in June 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On February 24, 2014, the Company issued a note payable in the amount of $400,000 to a related party.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.50 per share.&nbsp;&nbsp;The note and related accrued interest were paid off in June 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On February 24, 2014, the Company issued a note payable in the amount of $25,000 to an unaffiliated Company.&nbsp;&nbsp;The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.&nbsp;&nbsp;The warrants are exercisable at $0.50 per share.&nbsp;&nbsp;The note and related accrued interest were paid off in June 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On April 18, 2014, the Company issued a note payable in the amount of $90,000 to a related party.&nbsp;&nbsp;The note was unsecured, bearing interest at 12% and was payable on July 15, 2014. &nbsp;The note and related accrued interest were paid off in June 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On May 9, 2014, the Company issued a note payable in the amount of $25,000 to a related party.&nbsp;&nbsp;The note was unsecured, bearing interest at 12% and was payable on July 15, 2014. &nbsp;The note and related accrued interest were paid off in June 2014.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">These notes payable were paid June 2, 2014 from proceeds of the sale of debentures.&nbsp;&nbsp;Notes payable balances were $0 as of June 30, 2015 and December 31, 2014.&nbsp;&nbsp;Total interest expense on notes payable was $0 and $63,677 for the nine months ended September 30, 2015 and 2014, respectively.</font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On August 13, 2015 we completed the sale of a Convertible Promissory Note in the principal amount of $120,750 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between a New York corporation, and us. &nbsp;The note matures on August 17, 2016. The VVG Note may be prepaid in whole or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the issue date, beginning at 110% of the outstanding principal and accrued interest increasing by 5% for every 30-day period thereafter until the 180<font style="FONT-SIZE: 10pt; DISPLAY: inline">th</font> day following the Closing Date. After the expiration of the 180 days following the Closing Date, we may not prepay the Note for any reason.&nbsp;&nbsp;At any time after 180 days after the date the note is issued it is convertible into our common stock, at buyer&#x2019;s option, at a 25% discount to the market price, which is defined as 75% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading days prior to the conversion date. &nbsp;The conversion price is subject to proportional adjustment in the event of stock splits, stock dividends, and similar corporate events.</font> </div><br/> 615000 650000 33933 3 648933 0.12 included a three-year warrant for every $1.00 of principal amount of each note P3Y 0.40 45000 0.12 included a three-year warrant for each $1.00 of principal included in the note P3Y 0.40 50000 0.12 0.40 30000 0.12 0.40 250000 0.12 included a three-year warrant for each $1.00 of principal included in the note included a three-year warrant for each $1.00 of principal included in the note included a three-year warrant for each $1.00 of principal included in the note P3Y P3Y P3Y 0.40 100000 0.12 included a three-year warrant for each of $1.00 of principal included in the note P3Y 0.40 2014-07-15 2014-07-15 2014-07-15 2014-07-15 2014-07-15 2014-07-15 1123933 42158 296524 50000 0.12 0.50 25000 0.12 2014-07-15 0.50 400000 0.12 0.50 25000 0.12 2014-07-15 2014-07-15 2014-07-15 2014-07-15 included a three-year warrant for each of $1.00 of principal included in the note included a three-year warrant for each of $1.00 of principal included in the note included a three-year warrant for each of $1.00 of principal included in the note included a three-year warrant for each of $1.00 of principal included in the note P3Y P3Y P3Y P3Y 0.50 90000 0.12 25000 0.12 2014-07-15 2014-07-15 0 0 0 63677 120750 0.08 2016-08-17 The VVG Note may be prepaid in whole or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the issue date, beginning at 110% of the outstanding principal and accrued interest increasing by 5% for every 30-day period thereafter until the 180th day following the Closing Date. After the expiration of the 180 days following the Closing Date, we may not prepay the Note for any reason. At any time after 180 days after the date the note is issued it is convertible into our common stock, at buyer&#x2019;s option, at a 25% discount to the market price, which is defined as 75% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading days prior to the conversion date. <table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="26%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Issue Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Interest Rate</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Current Due Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Amount</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">July 15, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">543,300</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">July 15, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,983</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">July 15, 2014</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,650</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Total</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">648,933</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table> 0.120 2014-07-15 543300 0.120 2014-07-15 52983 0.120 2014-07-15 52650 648933 <table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="26%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Issue Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Interest Rate</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Current Due Date</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Amount</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">543,300</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,983</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">52,650</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 1, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">45,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 18, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">50,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 19, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">30,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 19, 2013</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">250,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">September 30, 2013</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">12.0</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">%</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">April 30, 2014</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">100,000</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="26%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Total</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;</font></td> <td valign="bottom" width="20%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">1,123,933</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table> 0.120 2014-04-30 543300 0.120 2014-04-30 52983 0.120 2014-04-30 52650 0.120 2014-04-30 45000 0.120 2014-04-30 50000 0.120 2014-04-30 30000 0.120 2014-04-30 250000 0.120 2014-04-30 100000 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 8 &#x2013; Convertible Senior Secured Debentures</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Through September 30, 2015, the Company has issued the following convertible Senior Secured Debentures:</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The first closing was on May 27, 2014 for $5,250,000 with 8% interest and an amended maturity date of July 31, 2016.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The second closing was on June 2, 2014 for $1,750,000 with 8% interest and an amended maturity date of July 31, 2016.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The third closing was on June 2, 2015 for $625,000 with 8% interest and a maturity date of July 31, 2016.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The fourth closing was on July 31, 2015 for $50,000 with 8% interest and a maturity date of July 31, 2016.&nbsp;&nbsp;The loan was from the Company&#x2019;s President/CEO.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The fifth closing was on August 26, 2015 for $50,000 with 8% interest and a maturity date of July 31, 2016.&nbsp;&nbsp;The loan was from the Company&#x2019;s President/CEO.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The sixth closing was on September 14, 2015 for $15,000 with 8% interest and a maturity date of July 31, 2016.&nbsp;&nbsp;The loan was from the Company&#x2019;s President/CEO.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The maturity date for the first two closings was extended from November 30, 2015 to July 31, 2016 in accordance with the duly exercised First Amendment to Securities Purchase Agreement effective June 2, 2015.<font style="FONT-FAMILY: Times New Roman; DISPLAY: inline">&nbsp;</font> The exercise price was reduced to $0.50 as of March 10, 2015, due to the sale of shares, in accordance with the requirements of the debenture agreements.&nbsp;&nbsp;The exercise price was again reduced to $0.10 on June 2, 2015 due to the issuance of additional debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="FONT-WEIGHT: bold; DISPLAY: inline">Conversion Rights</font> - The debentures may be converted by each buyer at any time through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.075 per share.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company may force conversion of the debentures into shares of common stock at $0.075 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $0.20 per share.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.20, then on the maturity date, the buyers must convert all remaining principal due under the debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Upon conversion of any debentures, an additional Class C Warrant will be issued under the same terms and same amount as the warrants issued in the debenture sale.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="FONT-WEIGHT: bold; DISPLAY: inline">Security of Debentures</font> -<font style="FONT-WEIGHT: bold; DISPLAY: inline">&nbsp;</font>The debentures are guaranteed, pursuant to &#x201c;Secured Guaranty&#x201d; and &#x201c;Pledge and Security Agreement by Guardian 8 Corporation and a secured interest in all of the assets of the company and Guardian 8 Corporation.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="FONT-WEIGHT: bold; DISPLAY: inline">Registration Rights - </font>The Company agreed to file a &#x201c;resale&#x201d; registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144.&nbsp;&nbsp;The Registrant agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company was obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty-day period up to a maximum of six percent, (i) that the registration statement had not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements.&nbsp;&nbsp;On October 29, 2014 the Company&#x2019;s registration statement was declared effective. The registration statement is currently not effective; however, debenture holders are able to utilize Rule 144 for the resale of common stock underlying the debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="FONT-WEIGHT: bold; DISPLAY: inline">Valuation of Warrants</font> -&nbsp;The Company valued its Class C warrants based upon the change in terms under the June 2, 2015 amendment. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amounts of $535,100. The assumptions used in the pricing model were:&nbsp;&nbsp;term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14, and exercise price $0.10.&nbsp;&nbsp;The discount will be amortized over the remaining thirteen months to maturity on July 31, 2016.&nbsp;&nbsp;Based upon the change in terms of the June 2, 2015 amendment, the Company accounted for the change in terms as an extinguishment of debt pursuant to ASC Topic 470-50 and recorded a loss on the extinguishment of $6,118,145.&nbsp;&nbsp;Substantially all of the loss was based upon the change in the fair value of conversion feature of the subject debt from $0.50 per share to $0.10 per share.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In connection with the issuance of $625,000 of convertible debt on June 2, 2015, the Company granted 625,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $220,125. The assumptions used in the pricing model were:&nbsp;&nbsp;term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14 per share, and exercise price $0.10.&nbsp;&nbsp;The discount of $130,861 as of September 30, 2015 will be amortized over the remaining ten months to maturity on July 31, 2016.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In connection with the issuance of $115,000 of convertible debt during the third quarter 2015, the Company granted 115,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $5,247. The assumptions used in the pricing model were:&nbsp;&nbsp;term 10 to 12 months, risk free interest rate .25%, volatility 198%, trading price of $0.03 to $0.07 per share, and exercise price $0.10.&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="FONT-WEIGHT: bold; DISPLAY: inline">Related Parties</font> - $570,000 of the debentures were to related parties.</font> </div><br/> 5250000 0.08 2016-07-31 1750000 0.08 2016-07-31 625000 0.08 2016-07-31 50000 0.08 2016-07-31 50000 0.08 2016-07-31 15000 0.08 2016-07-31 0.50 0.10 The debentures may be converted by each buyer at any time through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.075 per share.The Company may force conversion of the debentures into shares of common stock at $0.075 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $0.20 per share.In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.20, then on the maturity date, the buyers must convert all remaining principal due under the debentures. Registration Rights - The Company agreed to file a &#x201c;resale&#x201d; registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144. The Registrant agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company was obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty-day period up to a maximum of six percent, (i) that the registration statement had not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements. 535100 P1Y62D 1.1905 0.14 0.10 P13M 2016-07-31 6118145 0.10 625000 220125 P1Y62D 1.1905 0.14 0.10 130861 P10M 115000 5247 5247 P10M P12M 0.25 1.98 0.03 0.07 0.10 570000 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 9 &#x2013; Patents</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In June of 2009, concurrent with the Company&#x2019;s incorporation, one of its officers and directors, agreed to transfer all rights, title and interest in the patent he held for a personal security device. The cost of the patent is being amortized over the 20-year life of the patent.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company hired a patent attorney specializing in products for the security industry to assist in filing additional utility and technology patents for its new enhanced non-lethal products.&nbsp;&nbsp;As of September 30, 2015, the costs paid to this attorney for the filings, drawings, and research totaled $23,735.&nbsp;&nbsp;These costs have been capitalized and are being amortized over a 15-year life.</font> </div><br/> one of its officers and directors, agreed to transfer all rights, title and interest in the patent he held for a personal security device. P20Y 23735 P15Y <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 10 &#x2013; Stockholders&#x2019; equity</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On January 1, 2014, there were 37,274,292 common shares issued and outstanding, 2,855,979 common shares owed but not issued, and no preferred shares issued.&nbsp;&nbsp;As of June 30, 2015, all of the shares owed but not issued have been issued to their respective parties.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On February 3, 2014, the Company authorized and recognized the expense for 325,000 shares of common stock, valued at $130,000 to an outside consultant pursuant to an agreement with the consultant.&nbsp;&nbsp;These shares were owed but not issued as of September 30, 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On February 3, 2014, the Company authorized and recognized the expense for 98,039 shares of common stock, valued at $50,000 to an outside consultant pursuant to an agreement with the consultant.&nbsp;&nbsp;These shares were issued in May 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 31, 2014, the Company authorized and recognized the expense for the issuance of 104,000 shares of common stock, valued at $53,040 to its Interim CFO pursuant to the terms of her consulting agreement.&nbsp;&nbsp;These shares were issued in May 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 31, 2014, the Company authorized and recognized the expense for the issuance of 150,000 shares of common stock, valued at $76,500 to its CEO pursuant to the terms of his employment agreement.&nbsp;&nbsp;These shares were issued in May 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On May 20, 2014, the Company authorized, issued and recognized the expense for 60,000 shares of common stock, valued at $30,600 to a board member.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On June 18, 2014, the Company authorized 200,000 shares of common stock to its interim CFO per the terms of her new employment contract (See Note 15).&nbsp;&nbsp;The associated expense recognized during the second quarter of 2014 was $96,020.&nbsp;&nbsp;These shares were issued in the second quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On June 30, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its interim CFO per her new employment contract (See Note 15).&nbsp;&nbsp;These shares were issued in the third quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On August 1, 2014 the Company authorized and recognized the expense for the issuance of 9,375 shares of common stock, valued at $4,125 to an employee.&nbsp;&nbsp;These shares were issued in the fourth quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 8, 2014 the Company authorized and recognized the expense for the issuance of 26,230 shares of common stock, valued at $16,000 to a consultant.&nbsp;&nbsp;These shares were issued in the fourth quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 30, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $58,800 to its interim CFO per her new employment contract (See Note 15).&nbsp;&nbsp;These shares were issued in the fourth quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On October 8, 2014 the Company authorized and recognized the expense for the issuance of 26,667 shares of common stock, valued at $16,000 to a consultant.&nbsp;&nbsp;These shares were issued in the fourth quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On November 8, 2014 the Company authorized and recognized the expense for the issuance of 36,774 shares of common stock, valued at $16,000 to a consultant.&nbsp;&nbsp;These shares were issued in the fourth quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On November 13, 2014 the Company authorized and recognized the expense for the issuance of 12,000 shares of common stock, valued at $5,100 to an employee.&nbsp;&nbsp;These shares were issued in the fourth quarter of 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the fourth quarter of 2014, by request from debenture owners that their debentures be converted, the Company issued 350,000 shares pursuant to the terms of the debenture agreements.&nbsp;&nbsp;The shares valued at $175,000 were issued as of December 31, 2014.&nbsp;&nbsp;In addition, 7,507 shares valued at $3,754 were issued for accrued interest through the date of conversion.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On December 31, 2014, the Company authorized 335,000 shares of its common stock to six non-employee directors for director fees.&nbsp;&nbsp;The services were valued at $157,192.&nbsp;&nbsp;These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On December 31, 2014, the Company authorized 200,000 shares of its common stock to its CEO as a bonus for services performed for the Corporation.&nbsp;&nbsp;These shares were valued at $94,000.&nbsp;&nbsp;These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On December 31, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its Interim CFO pursuant to the terms of her consulting agreement.&nbsp;&nbsp;These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Effective December 31, 2014, 162,859 shares of common stock became issuable to members of the Company&#x2019;s executive and sales teams for their efforts during the fiscal year. The expense associated with these grants totaled $76,544.&nbsp;&nbsp;These shares were owed but not issued as of December, 31, 2014 and were subsequently issued in February 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the year ended December 31, 2014, the Company corrected an error in a warrant exercise by decreasing 5,000 shares that were unissued.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of December 31, 2014, there were 41,416,113 common shares issued and outstanding, 1,127,859 common shares owed but not issued, and no preferred shares issued.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the first quarter of 2015, the Company issued 802,859 shares which were previously owed but not issued.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the first three quarters of 2015, the Company authorized 465,000 shares, valued at $137,550 for services.&nbsp;&nbsp;315,000 shares were authorized in accordance with the interim CFO agreement and 150,000 were authorized for a consultant.&nbsp;&nbsp;105,000 shares were issued to the interim CFO in April 2015 and as of September 30, 2015, the consultant shares and the remaining 210,000 CFO shares have not been issued.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company authorized 115,000 shares upon the exercise of warrants and received $28,750 cash.&nbsp;&nbsp;90,000 shares were issued in January 2015 and the remaining 25,000 shares are owed as of September 30, 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 10, 2015, the Company authorized and subsequently issued 1,096,800 shares for $548,400 cash.&nbsp;&nbsp;These shares were purchased by and issued to executives and members of the Board of Directors of the Company.&nbsp;&nbsp;As a result of the cash sale of 1,096,800 shares at $.50 per share and a warrant with an exercise price of $.50, we are required to ratchet down all Class A, B and C warrants.&nbsp;&nbsp;In addition, on June 2, 2015 the Company revised the share price of this cash investment from $.50 per share to $.075 per share.&nbsp;&nbsp;As a result, an additional 6,215,201 shares were issued to these investors in June 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In addition, during the first quarter of 2015, the Company authorized 251,182 shares and issued 220,826 shares in payment of interest on debentures due March 1, 2015.&nbsp;&nbsp;5,041 shares were issued in June 2015 and the remaining 25,315 shares were issued in September, 2015. &nbsp;The 251,182 shares were valued at $125,591.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On June 1, 2015, the Company authorized 3,125,499 additional shares for payment of interest to debenture holders for interest through June 1, 2015.&nbsp;&nbsp;2,858,481 shares were issued on June 1, 2015.&nbsp;&nbsp;59,337 shares were issued on September 1, 2015 and 207,681 shares are owed as of September 30, 2015.&nbsp;&nbsp;The 3,125,499 shares were valued at $426,006.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During June 2015, by request from debenture owners that their debentures be converted, the Company issued 3,566,667 shares pursuant to the terms of the debenture agreements in addition to 4,379 shares for accrued interest.&nbsp;&nbsp;The conversion shares valued at $267,500 were issued in June 2015.&nbsp;&nbsp;4,379 interest shares valued at $645 were issued for accrued interest through the date of conversion.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company valued its Class C warrants based upon the change in terms under the June 2, 2015 amendment. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $535,100. The assumptions used in the pricing model were:&nbsp;&nbsp;term 1.17 years, risk free interest rate .26%%, volatility 119.05%, trading price $0.14, and exercise price $0.10.&nbsp;&nbsp;The discount will be amortized over the remaining thirteen months to maturity on July 31, 2016. Based upon the change in terms of the June 2, 2015 amendment, the Company accounted for the change in terms as an extinguishment of debt pursuant to ASC Topic 470-50 and recorded a loss on the extinguishment of $6,118,145.&nbsp;&nbsp;Substantially all of the loss was based upon the change in the fair value of conversion feature of the subject debt from $0.50 per share to $0.10 per share.&nbsp;&nbsp;The loss in addition to the change in discount of $1,851,635 resulted in $7,969,780 additional paid in capital.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In connection with the issuance of $625,000 of convertible debt on June 2, 2015, the Company granted 625,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $220,125. The assumptions used in the pricing model were:&nbsp;&nbsp;term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14 per share, and exercise price $0.10.&nbsp;&nbsp;The discount of $130,861 as of September 30, 2015 will be amortized over the remaining ten months to maturity on July 31, 2016.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On August 12, 2015, a debenture holder converted $40,000 in principal amount of its debenture to 533,333 shares common stock, we authorized the issuance of 6,168 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.&nbsp;&nbsp;As a result of the conversion, the holders currently issued warrants automatically increased by an additional 40,000 warrants.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 18, 2015, a debenture holder converted $50,000 in principal amount of its debenture to 666,666 shares common stock, we authorized the issuance of 36,529 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.&nbsp;&nbsp;As a result of the conversion, the holders currently issued warrants automatically increased by an additional 50,000 warrants.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 1, 2015, the Company authorized 2,806,356 shares for payment of interest to debenture holders for interest through September 1, 2015.&nbsp;&nbsp;2,806,356 shares were issued on September 1, 2015.&nbsp;&nbsp;The 2,806,356 shares were valued at $144,247.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of September 30, 2015, there were 60,515,071 common shares issued and outstanding, 917,681 common shares owed but not issued, and no preferred shares issued.</font> </div><br/> 37274292 37274292 2855979 325000 130000 98039 50000 104000 53040 150000 76500 60000 30600 200000 96020 105000 49350 9375 4125 26230 16000 105000 58800 26667 16000 36774 16000 12000 5100 350000 175000 7507 3754 335000 6 157192 200000 94000 105000 49350 162859 76544 5000 802859 465000 137550 315000 150000 105000 115000 90000 25000 1096800 548400 1096800 0.50 0.50 0.075 6215201 251182 220826 5041 25315 125591 3125499 2858481 59337 207681 426006 3566667 4379 267500 645 P1Y62D 0.26 1.1905 0.14 0.10 P13M 1851635 625000 625000 P1Y62D 0.26 1.1905 0.14 0.10 130861 P10M 40000 533333 6168 40000 50000 666666 36529 50000 2806356 2806356 144247 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 11 &#x2013; Options and warrants</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Options</font></font> </div><br/><div style="TEXT-ALIGN: left; MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of September 30, 2015 and December 31, 2014 there were no outstanding options.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline"><font style="TEXT-DECORATION: underline; DISPLAY: inline">Warrants</font></font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On January 1, 2014, there were 13,376,623 warrants outstanding.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the year ended December 31, 2014, there were 500,000 warrants issued with notes payable, 7,000,000 warrants issued with debentures, 175,000 warrants issued for debenture conversions, and 560,000 warrants issued for broker fees.&nbsp;&nbsp;There were no warrants exercised.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of December 31, 2014, there were 21,611,623 warrants outstanding.</font> </div><br/><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 1/01/2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">13,376,623</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.61</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Granted</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">8,235,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.59</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Cancelled</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Exercised</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 12/31/2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">21,611,623</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.60</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/><div style="DISPLAY: block; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the first quarter of 2015, 115,000 warrants were exercised at $0.25 per share.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In conjunction with the sale of 1,096,800 shares of common stock for $548,400 in the first quarter 2015, the Company issued 1,096,800 warrants to purchase common shares at $0.50 for a period of five years.&nbsp;&nbsp;These shares and warrants were purchased by and issued to executives and members of the Board of Directors of the Company.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In connection with the duly exercised Amendment to Securities Purchase Agreement dated June 2, 2015 the Company reduced the exercise price of all of its Class C Warrants from $0.50 per share to $0.10 per share. The Company valued its Class C warrants on the date of change using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $535,100. The assumptions used in the pricing model were:&nbsp;&nbsp;term 1.17 years, risk free interest rate .26%, volatility 119.05%, and a trading price $0.14 per share and exercise price $0.10.&nbsp;&nbsp;The discount will be amortized over the remaining ten months to maturity on July 31, 2016.&nbsp;&nbsp;In addition, 18,600 warrants valued at $1,477 were issued to placement agents.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In March 2015, the Company changed its exercise price of its Class A and B warrants from prices ranging from $0.55 to $0.75 per share to $0.50 per share.&nbsp;&nbsp;The Company valued these warrants at $220,125 on the date of change using the Black-Scholes option pricing model and treated the change in value as additional compensation which is being expensed over the remaining lives of the various warrants. The assumptions used in the pricing model were:&nbsp;&nbsp;terms ranging from approximately 5 months to four years and three months, risk free interest rate. ranging from 1.10% to 1.62%, volatility ranging from 112.04% to 125.00%, and a trading price $0.45 per share and exercise price $0.50.&nbsp;&nbsp;The discount will be amortized over the remaining ten months to maturity on July 31, 2016.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Also in connection with the duly exercised Amendment to Securities Purchase Agreement dated June 2, 2015 the Company reduced the exercise price of all of its remaining outstanding warrants from $0.50 per share to $0.10 per share. The Company valued the change in the fair value of these warrants at June 2, 2015 at $512,713, which is being amortized into operations over the remaining terms of the various warrants. The Company valued these warrants on the date of change using the Black-Scholes option pricing model. The assumptions used in the pricing model were:&nbsp;&nbsp;term ranging from 2 months to 8.5 years, risk free interest rates ranging from&nbsp;0.28%%, to 2.07%, volatility ranging from 117.73%, to 189.34%, trading price $0.14 per share and exercise price $0.10.&nbsp;&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Amortization charged to operations on the increase in the above warrant values due to the reduction in the exercise prices during the nine months ended September 30, 2015 was $1,649,695.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In June 2015, 267,500 warrants were issued in conjunction with debenture conversions.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In June 2015, 625,000 warrants were issued in conjunction with the sale of additional debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In July 2015, 50,000 warrants were issued in conjunction with the sale of additional debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In August 2015, 40,000 warrants were issued in conjunction with debenture conversions.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In August 2015, 50,000 warrants were issued in conjunction with the sale of additional debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In September 2015, 50,000 warrants were issued in conjunction with debenture conversions.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In September 2015, 15,000 warrants were issued in conjunction with the sales of additional debentures.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As a result of the $0.50 unit offering in February 2015, the Company was required to adjust the exercise price on all of its Class A, B and C warrants (18,532,500 warrants in the aggregate) down to $0.50.&nbsp;&nbsp;In June 2015 the exercise price of the Class A, B and C warrants were further adjusted down to $0.10 per share.&nbsp;&nbsp;See Note 10 for the explanation of the revaluation of the Class A, B and C warrants.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the quarter ended September 30, 2015 392,500 warrants expired and were cancelled.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">A summary of warrants as of September 30, 2015 is as follows:</font> </div><br/><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 1/01/2015</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">21,611,623</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.15</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Granted</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2,212,900</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.10</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Cancelled</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(392,500)</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.55</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Exercised</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(115,000</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">)</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.25</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 9/30/2015</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">23,317,023</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.14</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/> 0 0 13376623 500000 7000000 175000 560000 21611623 115000 0.25 1096800 1096800 0.50 P5Y 0.50 0.10 535100 P1Y62D 0.0026 1.1905 0.14 0.10 P10M 18600 1477 0.55 0.75 0.50 220125 P5M P4Y3M 0.0110 0.0162 1.1204 1.2500 0.45 0.50 P10Y 0.50 512713 P2M P8Y6M 0.0028 0.0207 1.1773 1.8934 0.14 0.10 267500 625000 50000 40000 50000 50000 15000 18532500 0.50 0.10 392500 <table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 1/01/2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">13,376,623</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.61</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Granted</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">8,235,000</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.59</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Cancelled</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Exercised</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 12/31/2014</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">21,611,623</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.60</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Options</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Number of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Weighted Average</font> </div> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Exercise Price of Warrants</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 1/01/2015</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">21,611,623</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.15</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Granted</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2,212,900</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.10</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Cancelled</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(392,500)</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.55</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="44%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp;&nbsp;&nbsp;&nbsp;Exercised</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">(115,000</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">)</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.25</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Outstanding 9/30/2015</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">23,317,023</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">0.14</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table> 0 0 0.61 0 0 8235000 0.59 0 0 0 0 0 0 0 0 0 0.60 0 0 2212900 0.10 0 0 -392500 0.55 0 0 -115000 0.25 0 0 23317023 0.14 <div style="DISPLAY: block; TEXT-INDENT: 0pt"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 12 &#x2013; Lease commitments and related party transactions</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">In December of 2011, the Company leased space in Scottsdale, Arizona for its main headquarters. The lease ran from January 2012 to March 2014 at a rate of $1,907 per month. The lease expired on June 30, 2014.&nbsp;&nbsp;The Company subsequently entered into a new lease on July 1, 2014 (See Note 18).</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On July 1, 2014, the Company entered into a forty-month office lease agreement ending on October 31, 2017.&nbsp;&nbsp;The lease requires monthly payments of $5,988.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Rent expense was $50,746 and $12,520 for the nine months ended September 30, 2015 and 2014, respectively.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the nine months ended September 30, 2014, as part of a new convertible debenture, the Company issued notes payable totaling $295,000 to related parties.&nbsp; During the nine months ended September 30, 2015, as part of a new convertible debenture, the Company issued notes payable totaling $275,000.&nbsp;&nbsp;The maturity date for these notes is July 31, 2016.&nbsp;&nbsp;See Note 8 for further details.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">See Note 15 for details on stock issued to employees and related party consultants per their employment or consulting contracts with the Company.</font> </div><br/> The lease ran from January 2012 to March 2014 1907 2017-10-31 5988 50746 12520 295000 275000 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 13 &#x2013; Derivative Liability</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">At June 30, 2015, the Company recognized a derivative liability and a correlating charge to operations in the amount of $3,032,501 pursuant to ASC Topic 815-25-19 &#x201c;Contracts in Entity's Own Equity&#x201d; as the total number of Company&#x2019;s committed common shares and the number of actual common shares outstanding at June 30, 2015 exceeded the number of common shares the Company currently is authorized to issue. The liability was computed based upon the fair value of the committed and outstanding shares. The committed shares consisted of $7,182,500 of debt convertible into 46,803,566 shares of common stock and 23,485,923 common stock warrants. In the valuation, the Company used the trading price of its common stock at June 30, 2015 of $0.11 per share.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">At September 30, 2015 the fair value of the derivative liability was $2,193,898.&nbsp;The liability was computed based upon the fair value of the committed and outstanding shares. The committed shares consisted of $7,207,500 of debt convertible into 96,100,000 shares of common stock and 23,317,023 common stock warrants. In the valuation, the Company used the trading price of its common stock at September 30, 2015 of $0.03 per share.</font> </div><br/> 3032501 7182500 46803566 23485923 0.11 2193898 7207500 96100000 23317023 0.03 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 14 &#x2013; Fair Value Measurements</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company adopted ASC Topic 820-10 to measure the fair value of certain of its financial assets that are required to be measured on a recurring basis.&nbsp;&nbsp;The adoption of ASC Topic 820-10 did not impact the Company&#x2019;s financial condition or results of operations.&nbsp;&nbsp;ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.&nbsp;&nbsp;The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).&nbsp;&nbsp;ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.&nbsp;&nbsp;A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.&nbsp;&nbsp;The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:</font> </div><br/><div style="MARGIN-LEFT: 18pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Level 1&nbsp;&#x2013; Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.</font> </div><br/><div style="MARGIN-LEFT: 18pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Level 2&nbsp;&#x2013; Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.</font> </div><br/><div style="MARGIN-LEFT: 18pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Level 3&nbsp;&#x2013; Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.&nbsp;&nbsp;The Company had no level three assets or liabilities as of September 30, 2015 or December 31, 2014; therefore, a reconciliation of the changes during the year is not shown.&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of September 30, 2015:</font> </div><br/><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 1</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 2</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 3</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Fair Value</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Notes payable and convertible senior secured debentures</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,094,117</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,094,117</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:</font> </div><br/><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 1</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 2</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 3</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Fair Value</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Notes payable and convertible senior secured debentures</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,704,491</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,704,491</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/> The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis <br /> <br /><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 1</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 2</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 3</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Fair Value</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Notes payable and convertible senior secured debentures</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,094,117</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,094,117</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 1</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 2</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Level 3</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Fair Value</font> </div> </td> <td align="left" valign="bottom" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="44%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Notes payable and convertible senior secured debentures</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,704,491</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">-</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">$</font> </div> </div> </td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">5,704,491</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table> 0 5094117 0 5094117 0 5704491 0 5704491 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 15 &#x2013; Income Taxes</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company follows ASC subtopic 740-10 for recording the provision for income taxes.&nbsp;&nbsp;ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.&nbsp;&nbsp;Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.&nbsp;&nbsp;Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.&nbsp;&nbsp;If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.&nbsp;&nbsp;Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.&nbsp;&nbsp;Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.&nbsp;&nbsp;Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The Company&#x2019;s operations for the nine months ended September 30, 2015 and 2014 resulted in losses, thus no income taxes have been reflected in the accompanying statements of operations.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">As of December 31, 2014, the Company had net operating loss carry-forwards that may be used to reduce future income taxes payable.&nbsp;&nbsp;A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to this deferred asset. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">For financial reporting purposes, the Company has incurred a loss since inception to September 30, 2015.&nbsp;&nbsp;Based on the available objective evidence, including the Company&#x2019;s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2015. Further, management does not believe it has taken the position in the deductibility of its expenses that creates a more likely than not potential for future liability under the guidance of FIN 48.</font> </div><br/> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 16 &#x2013; Employment Contracts</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the year ended December 31, 2012, the Company entered into an amended and restated three-year employment contract with its Chief Operating Officer.&nbsp;&nbsp;The agreement continues through September 30, 2015.&nbsp;&nbsp;If the Company meets various goals and criteria during those three years, which have been set forth in the agreement, they will issue a prescribed amount of shares of its common stock to the Chief Operating Officer.&nbsp;&nbsp;The Company reserved 650,000 shares of its common stock as required by the agreement.&nbsp;&nbsp;As of December 31, 2014, in accordance with the terms of the agreement, the employee vested 335,000 shares of restricted stock for achieving milestones as set forth in the employment agreement.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Effective January 1, 2015, the Company entered into the second amended and restated employment agreement with its COO.&nbsp;&nbsp;The COO had the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.&nbsp;&nbsp;In addition, the COO earned a base salary of $170,000.&nbsp;&nbsp;This agreement was terminated as of May 1, 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">During the year ended December 31, 2012, the Company entered into a three-year contact with its Vice President of Customer Support.&nbsp;&nbsp;The agreement continued through September 30, 2015.&nbsp;&nbsp;If the Company meets various goals and criteria during those three years, they will issue a prescribed amount of its common shares to the Vice President of Customer Support.&nbsp;&nbsp;The Company reserved 288,000 shares of its common stock as required by the agreement.&nbsp;&nbsp;As of December 31, 2014, in accordance with the terms of the agreement, the employee vested 136,200 shares of restricted stock for achieving milestones as set forth in the employment agreement.&nbsp;&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Effective January 1, 2015, the Company entered into an amended and restated employment agreement with its Vice President of Customer Support.&nbsp;&nbsp;The Vice President of Customer Support has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.&nbsp;&nbsp;In addition, the Vice President of Customer Service shall earn an initial base salary of $100,000.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 4, 2013, the Company entered into an employment agreement with its CEO/President.&nbsp;&nbsp;The CEO/President has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.&nbsp;&nbsp;The Company reserved 750,000 shares of its common stock as required by the agreement.&nbsp;&nbsp;Per the agreement, the Company issued 150,000 common shares on the last day of every fiscal quarter as compensation through that period.&nbsp;&nbsp;As of December 31, 2014, all 750,000 common shares had vested. &nbsp;In addition, the Chief Executive Officer and President shall earn an initial base salary of $250,000, which began on January 1, 2013.&nbsp;&nbsp;&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Effective January 1, 2015, the Company entered into an employment agreement with its CEO/President.&nbsp;&nbsp;The CEO/President has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.&nbsp;&nbsp;In addition, the CEO/President shall earn an initial base salary of $250,000.&nbsp;&nbsp;In April of 2015, the CEO ceased receiving cash compensation, and agreed to accept stock in lieu of cash until (i) the Company becomes profitable (generates a net income from operations) for a quarter of operations, or (ii) July 31, 2016.&nbsp;&nbsp;As of September 30, 2015, the Company accrued $125,000 of salary, and $9,546 in associated payroll taxes, which will be converted into the common stock at the close of the 2015 fiscal year or in accordance with the above conditions.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 4, 2013, the Company amended the agreement with its non-employee interim Chief Financial Officer (CFO).&nbsp;&nbsp;The CFO has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.&nbsp;&nbsp;The Company reserved 416,250 shares of its common stock as required by the agreement.&nbsp;&nbsp;Per the contract, the Company issued a prescribed amount of common shares on the last day of every fiscal quarter, beginning with the second quarter of 2013 and ending on March 31, 2014.&nbsp;&nbsp;&nbsp;In addition, the Non-Employee Interim Chief Financial Officer will earn a base monthly retainer of $3,000, which began on January 1, 2013 and will continue until the Company completes certain requirements per the agreement.&nbsp;&nbsp;On May 22, 2014, the Company entered into a second amended agreement with its Non-Employee Interim CFO.&nbsp;&nbsp;The amendment extended the potential term of the Non-Employee Interim CFO agreement from April 1, 2014 through November 30, 2015.&nbsp;&nbsp;Further, the amendment provides for compensation to the CFO of up to 935,000 shares of the Company&#x2019;s common stock, based upon the actual number of months served.&nbsp;&nbsp;As of December 31, 2014, 515,000 shares have vested, leaving 420,000 shares reserved as of December 31, 2014.&nbsp;&nbsp;During the first three quarters of 2015, 315,000 shares were authorized under this agreement, and 105,000 remain available under the agreement.&nbsp;&nbsp;In addition, the Non-Employee Interim CFO will continue to earn a base monthly retainer of $3,000.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 11, 2014, the Company entered into an employment agreement with its Lead Engineer.&nbsp;&nbsp;The Lead Engineer has the ability to earn shares of common stock over the term of the agreement, which runs through March 30, 2016.&nbsp;&nbsp;The Company reserved 82,287 shares of its common stock as required by the agreement.&nbsp;&nbsp;Per the agreement, the Company will issue up to 27,429 common shares per year.&nbsp;&nbsp;As of December 31, 2014, 60,000 common shares have been authorized and 22,287 shares remain reserved. &nbsp;In addition, the Lead Engineer shall earn an initial base salary of $96,000, which began on March 11, 2013.&nbsp;&nbsp;&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">Effective January 1, 2015, the Company entered into an amended and restated employment agreement with its Lead Engineer.&nbsp;&nbsp;The Lead Engineer has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.&nbsp;&nbsp;In addition, the Lead Engineer shall earn an initial base salary of $105,000.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On November 1, 2014, the Company entered into an employment agreement with its Vice President of Finance.&nbsp;&nbsp;The Vice President of Finance has the ability to earn shares of common stock over the term of the agreement, which runs through October 31, 2017.&nbsp;&nbsp;The Company reserved 540,000 shares of its common stock as required by the agreement.&nbsp;&nbsp;Per the agreement, the Company will issue up to 180,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.&nbsp;&nbsp;As of December 31, 2014, 5,000 common shares have been authorized and 510,000 shares remain reserved. &nbsp;In addition, the VP Finance shall earn an initial base salary of $170,000 beginning on November 1, 2014.&nbsp;&nbsp;&nbsp;</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On November 1, 2014, the Company entered into an employment agreement with its Vice President of Sales.&nbsp;&nbsp;The Vice President of Sales has the ability to earn shares of common stock over the term of the agreement, which runs through October 31, 2017.&nbsp;&nbsp;The Company reserved 420,000 shares of its common stock as required by the agreement.&nbsp;&nbsp;Per the agreement, the Company will issue up to 140,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.&nbsp;&nbsp;As of December 31, 2014, 5,000 common shares have been authorized and 396,667 shares remain reserved. &nbsp;In addition, the VP Sales shall earn an initial base salary of $140,000 beginning on November 1, 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On July 29, 2015, the Company approved a stock incentive plan authorizing the issuance of up to 6,750,000 shares of common stock under the plan and granted restricted stock awards to seven of its employees for a total of 4,022,613 shares. These shares will vest and be issued on January 1, 2016 assuming each of the employees remained employed by the Company through such date.</font> </div><br/> 2015-09-30 P3Y 650000 335000 P3Y 288000 136200 2017-12-31 100000 2014-03-31 750000 Per the agreement, the Company issued 150,000 common shares on the last day of every fiscal quarter as compensation through that period. 750000 250000 2017-12-31 250000 125000 9546 2014-03-31 416250 Per the contract, the Company issued a prescribed amount of common shares on the last day of every fiscal quarter, beginning with the second quarter of 2013 and ending on March 31, 2014. 3000 935000 515000 420000 315000 105000 3000 2016-03-30 82287 Per the agreement, the Company will issue up to 27,429 common shares per year. 60000 22287 96000 2017-12-31 105000 540000 Per the agreement, the Company will issue up to 180,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors. 5000 510000 170000 420000 Per the agreement, the Company will issue up to 140,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors. 5000 396667 140000 6750000 7 4022613 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 17 &#x2013; Public and Investor Relations Agreements</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 1, 2013, the Company entered into a one-year agreement with a public relations firm to assist with public relations as the Company moves into scaled production and distribution.&nbsp;&nbsp;The contract will be executed on a project-by-project basis, beginning with media assistance provided at an industry conference in April 2013.&nbsp;&nbsp;All monies paid under this contract were classified in sales, general and administrative expenses as a marketing expenditure. This agreement terminated on February 28, 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On August 30, 2013, the Company entered an agreement with an investor relations firm for a period of 12 months, ending May 26, 2014, with the right to cancel services at the end of each subsequent three-month period.&nbsp;&nbsp;The terms of the agreement called for the issuance of 142,000 common shares to be issued for the first three-months of service ending November 26, 2013, and then the equivalent number of shares required to compensate for the $50,000 per period thereafter.&nbsp;&nbsp;This agreement was terminated on May 26, 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On October 29, 2013, the Company entered an agreement with a digital marketing services firm for a period of twelve months and ended October 31, 2014.&nbsp;&nbsp;The terms of the agreement called for a payment of $70,200 for the twelve months of service.&nbsp;&nbsp;The agreement was terminated on October 31, 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 8, 2014, the Company entered an agreement with a social media firm for a period of six months that ended March 8, 2015.&nbsp;&nbsp;The agreement provided the right to cancel services upon 30 days-notice. The terms of the agreement called for payment of $4,750 per month.&nbsp;&nbsp;This agreement was terminated on November 30, 2014.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 8, 2014, the Company entered an agreement with digital sales and marketing firm for a period of three months that ended December 8, 2014.&nbsp;&nbsp;The terms of the agreement called for payment of $32,000 per month paid 50% cash and 50% common stock.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 30, 2014, the Company entered into a sales referral agreement with commissions of 5%.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On October 1, 2014, the Company entered an agreement with a national distributor for a period of three years which ends September 30, 2017.&nbsp;&nbsp;The agreement provided the right to cancel services upon 30 days-notice.&nbsp;&nbsp;The terms of the agreement call for commission of 15%.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On October 14, 2014, the Company entered an agreement with a Federal agency marketing firm for a period of three months that ended January 13, 2015.&nbsp;&nbsp;The terms of the agreement called for a payment of $57,000 for the three months of service.&nbsp;&nbsp;This agreement was extended to July 15, 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On November 5, 2014, the Company entered an agreement with a digital marketing and public relations firm for a period of six months ending May 5, 2015.&nbsp;The terms of the agreement called for payments of $36,000 per quarter.&nbsp;&nbsp;On April 12, 2015 this agreement was cancelled.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On December 5, 2014, the Company entered into an international sales referral agreement with commissions between 6% and 8%.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On January 1, 2015, the Company entered into agreements with Merriman Capital, Inc. to provide Banking and Advisory services. The monthly retainer for these services is $10,000.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">&nbsp;On January 1, 2015, the Company entered into agreements with Top Sales and Marketing, Inc. to provide Consulting services.&nbsp;&nbsp;The monthly fee for these services is $5,000 and the original one month contract was extended through March 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On March 1, 2015, the Company extended an agreement with a Federal agency marketing firm for a period from January 15, 2015 through July 15, 2015.&nbsp;&nbsp;The terms of the agreement require monthly payments of $12,500 for the term of the agreement and 150,000 shares of the Company&#x2019;s restricted common stock.&nbsp;&nbsp;</font> </div><br/> entered into a one-year agreement with a public relations firm to assist with public relations as the Company moves into scaled production and distribution. entered an agreement with an investor relations firm for a period of 12 months, ending May 26, 2014, with the right to cancel services at the end of each subsequent three-month period. The terms of the agreement called for the issuance of 142,000 common shares to be issued for the first three-months of service ending November 26, 2013, and then the equivalent number of shares required to compensate for the $50,000 per period thereafter. P12M 70200 P6M payment of $4,750 per month P3Y payment of $32,000 per month paid 50% cash and 50% common stock commissions of 5% P3Y commission of 15% P3M 57000 P6M terms of the agreement called for payments of $36,000 per quarter commissions between 6% and 8% 10000 5000 12500 150000 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 18 &#x2013; Interest Expense</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">The company&#x2019;s interest expense for the nine months ended September 30, 2015 consisted of the following:</font> </div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="61%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Description</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Amount</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="61%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Amortization of loan fees</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">426,914</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="61%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Notes payable</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">1,050</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="61%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Convertible senior secured debentures</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2,078,306</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="61%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Total</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2,506,270</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table><br/> The company&#x2019;s interest expense for the nine months ended September 30, 2015 consisted of the following: <br /> <br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="61%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Description</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-WEIGHT: bold; DISPLAY: inline">Amount</font> </div> </td> <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="61%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Amortization of loan fees</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">426,914</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="61%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Notes payable</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">1,050</font> </div> </div> </td> <td valign="bottom" width="1%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr style="background-color: #cceeff;"> <td valign="bottom" width="61%" style="PADDING-BOTTOM: 2px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Convertible senior secured debentures</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2,078,306</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> <tr> <td valign="bottom" width="61%" style="PADDING-BOTTOM: 4px"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="center"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">Total</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt"> <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="right"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">2,506,270</font> </div> </div> </td> <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; DISPLAY: inline">&nbsp; </font></td> </tr> </table> 426914 1050 2078306 <div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="justify"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-WEIGHT: bold; DISPLAY: inline">Note 19 &#x2013; Subsequent events</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On September 30, 2015, the Company authorized the issuance of 105,000 shares of common stock, which vested pursuant to the terms of the agreement with its Interim CFO (Kathleen Hanrahan) on September 30, 2015. As of the date of this report the shares have not been issued.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On October 5, 2015, by request from a debenture owner that their debentures be converted, the Company issued 800,000 shares pursuant to the terms of the debenture agreements.&nbsp;&nbsp;The shares valued at $60,000 were issued in October 2015.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On October 29, 2015, the Company conducted the Seventh Closing pursuant to the sale of additional Senior Secured Debentures for $100,000 and issued 100,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to its CEO/President.</font> </div><br/><div style="MARGIN-LEFT: 0pt; DISPLAY: block; MARGIN-RIGHT: 0pt; TEXT-INDENT: 0pt" align="left"> <font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; DISPLAY: inline">On November 10, 2015, the Company entered into a two-month consulting agreement with Uptick Capital LLC. Under the terms of the agreement, the Company was required to issue Uptick 333,333 shares of its restricted common stock immediately for the first month of services under the agreement and an additional 333,333 shares of its restricted common stock on or about December 10, 2015 for the second month of services under the agreement.</font> </div><br/> 105000 800000 60000 100000 100000 P5Y 0.10 333333 333333 EX-101.SCH 14 grdh-20150930.xsd EX-101.SCH 001 - Statement - Condensed Consolidated Balance Sheets (Unaudited) link:presentationLink link:definitionLink link:calculationLink 002 - Statement - Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) link:presentationLink link:definitionLink link:calculationLink 003 - Statement - Condensed Consolidated Statement of Operations (Unaudited) link:presentationLink link:definitionLink link:calculationLink 004 - Statement - Condensed Consolidated Statement of Stockholders' Equity (Unaudited) link:presentationLink link:definitionLink link:calculationLink 005 - 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Note 6 - Bank line of credit (Details) - Line of Credit [Member] - USD ($)
Jan. 17, 2014
Apr. 28, 2014
Note 6 - Bank line of credit (Details) [Line Items]    
Line of Credit Facility, Maximum Borrowing Capacity $ 700,000 $ 900,000
Line of Credit Facility, Expiration Date Jan. 16, 2015  
Line of Credit Facility, Collateral The agreement was secured by inventory, work in process, accounts receivable, a letter of credit, and was personally guaranteed by the Company’s Chief Executive Officer/President.  
Line of Credit Facility, Interest Rate at Period End 6.00%  
XML 20 R54.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 19 - Subsequent events (Details) - USD ($)
 9 Months Ended 12 Months Ended
Nov. 10, 2015
Oct. 29, 2015
Oct. 05, 2015
Sep. 30, 2015
Mar. 10, 2015
Nov. 08, 2014
Oct. 08, 2014
Sep. 08, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Jun. 02, 2015
Mar. 31, 2015
May. 09, 2014
Apr. 18, 2014
Note 19 - Subsequent events (Details) [Line Items]                              
Debt Conversion, Original Debt, Amount (in Dollars)                 $ 357,500 $ 0          
Debt Instrument, Face Amount (in Dollars)                           $ 25,000 $ 90,000
Class of Warrant or Rights Granted         1,096,800       2,212,900   8,235,000        
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)         $ 0.50             $ 0.10 $ 0.50    
Stock Issued During Period, Shares, Issued for Services           36,774 26,667 26,230              
Subsequent Event [Member]                              
Note 19 - Subsequent events (Details) [Line Items]                              
Debt Conversion, Converted Instrument, Shares Issued     800,000                        
Debt Conversion, Original Debt, Amount (in Dollars)     $ 60,000                        
Debt Instrument, Face Amount (in Dollars)   $ 100,000                          
Stock Issued During Period, Shares, Issued for Services 333,333                            
Stock Granted, Value, Share-based Compensation, Gross (in Dollars) $ 333,333                            
Class C [Member]                              
Note 19 - Subsequent events (Details) [Line Items]                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)                       $ 0.10 $ 0.50    
Class C [Member] | Subsequent Event [Member]                              
Note 19 - Subsequent events (Details) [Line Items]                              
Class of Warrant or Rights Granted   100,000                          
Warrant Term   5 years                          
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)   $ 0.10                          
Chief Financial Officer [Member] | Subsequent Event [Member]                              
Note 19 - Subsequent events (Details) [Line Items]                              
Stock To Be Issued       105,000                      
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Note 12 - Lease commitments and related party transactions (Details) - USD ($)
 1 Months Ended 9 Months Ended
Jul. 01, 2014
Dec. 31, 2011
Sep. 30, 2015
Sep. 30, 2014
Lease Commitments And Related Party Transactions [Abstract]        
Description of Lessee Leasing Arrangements, Operating Leases   The lease ran from January 2012 to March 2014    
Operating Leases, Rent Expense, Minimum Rentals $ 5,988 $ 1,907    
Lease Expiration Date Oct. 31, 2017      
Operating Leases, Rent Expense     $ 50,746 $ 12,520
Notes Payable, Related Parties     $ 295,000 $ 275,000

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Note 11 - Options and warrants (Details) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Jun. 02, 2015
Mar. 10, 2015
Sep. 30, 2015
Aug. 31, 2015
Jul. 31, 2015
Jun. 30, 2015
Mar. 31, 2015
Sep. 30, 2015
Mar. 31, 2015
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Feb. 28, 2015
Mar. 31, 2014
Dec. 31, 2013
Note 11 - Options and warrants (Details) [Line Items]                              
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number     0       0 0 0 0   0     0
Class of Warrant or Right, Outstanding     23,317,023         23,317,023   23,317,023   21,611,623     13,376,623
Class of Warrant or Rights Granted   1,096,800               2,212,900   8,235,000      
Class of Warrant or Rights, Exercised                   (115,000)   0      
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) $ 0.10 $ 0.50         $ 0.50   $ 0.50            
Proceeds from Issuance of Common Stock (in Dollars)                 $ 548,400 $ 548,400 $ 0        
Warrant, Fair Value (in Dollars) $ 512,713                            
Share Price (in Dollars per share) $ 0.14                            
Fair Value Assumptions, Exercise Price (in Dollars per share) 0.10                            
Class of Warrant or Rights, Cancelled               392,500   (392,500)   0      
Common Stock [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Stock Issued During Period, Shares, New Issues                 1,096,800 7,312,001          
Warrants Exercised Between $0.25 and $0.40 [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights, Exercised                 115,000            
Warrants Issued with Notes Payable [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights Granted                       500,000      
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) $ 0.10                         $ 0.50 $ 0.40
Warrant, Fair Value (in Dollars) $ 535,100                            
Fair Value Assumptions, Expected Term 1 year 62 days                            
Fair Value Assumptions, Expected Volatility Rate 119.05%                            
Share Price (in Dollars per share) $ 0.14                            
Fair Value Assumptions, Exercise Price (in Dollars per share) $ 0.10                            
Debt Instrument, Term 13 months                            
Warrants Issued for Debenture [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights Granted     15,000 50,000 50,000 267,500           7,000,000      
Warrants Issued for Debenture Conversion [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights Granted     50,000 40,000   625,000           175,000      
Warrants Issued for Borker Fees [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights Granted                       560,000      
Warrants at $0.50 [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights Granted                 1,096,800            
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)             0.50   $ 0.50            
Warrant Term                 5 years            
Class C [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) $ 0.10           0.50   $ 0.50            
Warrant, Fair Value (in Dollars) $ 535,100                            
Fair Value Assumptions, Expected Term 1 year 62 days                 1 year 62 days          
Fair Value Assumptions, Risk Free Interest Rate 0.26%                 26.00%          
Fair Value Assumptions, Expected Volatility Rate 119.05%                 119.05%          
Share Price (in Dollars per share) $ 0.14   $ 0.14         $ 0.14   $ 0.14          
Fair Value Assumptions, Exercise Price (in Dollars per share) $ 0.10   $ 0.10         $ 0.10   $ 0.10          
Debt Instrument, Term 10 months                            
Class C [Member] | Warrants Issued to Placement Agents [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Rights Granted 18,600                            
Warrant, Fair Value (in Dollars) $ 1,477                            
Class A and B Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)             $ 0.50   0.50            
Warrant, Fair Value (in Dollars)             $ 220,125                
Share Price (in Dollars per share)             $ 0.45   0.45            
Fair Value Assumptions, Exercise Price (in Dollars per share)             $ 0.50   0.50            
Debt Instrument, Term             10 years                
Class A, B and C Warrants [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Right, Outstanding                         18,532,500    
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) $ 0.10                       $ 0.50    
Minimum [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Fair Value Assumptions, Expected Term 2 months                            
Fair Value Assumptions, Risk Free Interest Rate 0.28%                            
Fair Value Assumptions, Expected Volatility Rate 117.73%                            
Minimum [Member] | Warrants Exercised Between $0.25 and $0.40 [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)             $ 0.25   0.25            
Minimum [Member] | Class A and B Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)             $ 0.55   0.55            
Fair Value Assumptions, Expected Term             5 months                
Fair Value Assumptions, Risk Free Interest Rate             1.10%                
Fair Value Assumptions, Expected Volatility Rate             112.04%                
Maximum [Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Fair Value Assumptions, Expected Term 8 years 6 months                            
Fair Value Assumptions, Risk Free Interest Rate 2.07%                            
Fair Value Assumptions, Expected Volatility Rate 189.34%                            
Maximum [Member] | Class A and B Member]                              
Note 11 - Options and warrants (Details) [Line Items]                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)             $ 0.75   $ 0.75            
Fair Value Assumptions, Expected Term             4 years 3 months                
Fair Value Assumptions, Risk Free Interest Rate             1.62%                
Fair Value Assumptions, Expected Volatility Rate             125.00%                

XML 25 R33.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details)
 3 Months Ended 9 Months Ended
Sep. 30, 2015
USD ($)
Sep. 30, 2014
USD ($)
Mar. 31, 2014
Sep. 30, 2015
USD ($)
shares
Sep. 30, 2014
USD ($)
Dec. 31, 2014
USD ($)
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details) [Line Items]            
Cash Equivalents, at Carrying Value $ 80,001     $ 80,001   $ 491,988
Purchase Commitment, Description     The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States. The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection. The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred.      
Inventory Valuation Reserves 59,510     59,510    
Allowance for Doubtful Accounts Receivable, Current 478     478   4,978
Revenues 61,954 $ 20,334   $ 157,262 $ 39,346  
Standard Product Warranty Description       offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device    
Deferred Revenue, Current 14,544     $ 14,544   $ 4,513
Product Warranty Expense       6,579 955  
Research and Development Expense       $ 123,422 $ 244,794  
Warrant [Member]            
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details) [Line Items]            
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares) | shares       23,709,523    
Convertible Debt Securities [Member]            
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details) [Line Items]            
Convertible Debt $ 7,207,500     $ 7,207,500    
Debt Conversion, Converted Instrument, Shares Issued (in Shares) | shares       96,100,000    
ProV2 [Member]            
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details) [Line Items]            
Inventory, Number of Units     1,396 10,400    
ProV2 [Member] | Initial Purchase Order [Member]            
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details) [Line Items]            
Inventory, Number of Units     11,800      
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Note 19 - Subsequent events
 9 Months Ended
Sep. 30, 2015
Subsequent Events [Abstract]  
Subsequent Events [Text Block]
Note 19 – Subsequent events

On September 30, 2015, the Company authorized the issuance of 105,000 shares of common stock, which vested pursuant to the terms of the agreement with its Interim CFO (Kathleen Hanrahan) on September 30, 2015. As of the date of this report the shares have not been issued.

On October 5, 2015, by request from a debenture owner that their debentures be converted, the Company issued 800,000 shares pursuant to the terms of the debenture agreements.  The shares valued at $60,000 were issued in October 2015.

On October 29, 2015, the Company conducted the Seventh Closing pursuant to the sale of additional Senior Secured Debentures for $100,000 and issued 100,000 Class C warrants to purchase shares of common stock for five years at $0.10 per share to its CEO/President.

On November 10, 2015, the Company entered into a two-month consulting agreement with Uptick Capital LLC. Under the terms of the agreement, the Company was required to issue Uptick 333,333 shares of its restricted common stock immediately for the first month of services under the agreement and an additional 333,333 shares of its restricted common stock on or about December 10, 2015 for the second month of services under the agreement.

XML 28 R50.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 14 - Fair Value Measurements (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Note 14 - Fair Value Measurements (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]    
Notes payable and convertible senior secured debentures $ 5,094,117 $ 5,704,491
Fair Value, Inputs, Level 1 [Member]    
Note 14 - Fair Value Measurements (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]    
Notes payable and convertible senior secured debentures 0 0
Fair Value, Inputs, Level 2 [Member]    
Note 14 - Fair Value Measurements (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]    
Notes payable and convertible senior secured debentures 5,094,117 5,704,491
Fair Value, Inputs, Level 3 [Member]    
Note 14 - Fair Value Measurements (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]    
Notes payable and convertible senior secured debentures $ 0 $ 0
XML 29 R42.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 7 - Notes payable (Details) - Schedule of Debt - USD ($)
May. 09, 2014
Apr. 18, 2014
Feb. 24, 2014
Feb. 12, 2014
Sep. 30, 2013
Sep. 19, 2013
Sep. 18, 2013
Sep. 01, 2013
Sep. 30, 2015
Jun. 30, 2015
Dec. 31, 2014
Dec. 31, 2013
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate                 $ 58,973   $ 311,603  
Notes Payable, Current Due Date Jul. 15, 2014 Jul. 15, 2014                    
Notes Payable, Amount                   $ 0 $ 0 $ 1,123,933
Loans Payable [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate         $ 0.120              
Notes Payable, Current Due Date     Jul. 15, 2014   Apr. 30, 2014              
Notes Payable, Amount         $ 100,000              
CEO and Director [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate               $ 0.120        
Notes Payable, Current Due Date               Apr. 30, 2014        
Notes Payable, Amount               $ 45,000        
CEO and Director [Member] | Note Payable One [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate               $ 0.120        
Notes Payable, Current Due Date               Apr. 30, 2014        
Notes Payable, Amount               $ 543,300        
CEO and Director [Member] | Note Payable Two [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate               $ 0.120        
Notes Payable, Current Due Date               Apr. 30, 2014        
Notes Payable, Amount               $ 52,983        
CEO and Director [Member] | Note Payable Three [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate               $ 0.120        
Notes Payable, Current Due Date               Apr. 30, 2014        
Notes Payable, Amount               $ 52,650        
Chief Executive Officer [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate             $ 0.120          
Notes Payable, Current Due Date             Apr. 30, 2014          
Notes Payable, Amount             $ 50,000          
Related Party [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate           $ 0.120            
Notes Payable, Current Due Date     Jul. 15, 2014 Jul. 15, 2014   Apr. 30, 2014            
Notes Payable, Amount           $ 30,000            
Related Party Two [Member]                        
Note 7 - Notes payable (Details) - Schedule of Debt [Line Items]                        
Notes Payable, Interest Rate           $ 0.120            
Notes Payable, Current Due Date     Jul. 15, 2014     Apr. 30, 2014            
Notes Payable, Amount           $ 250,000            
XML 30 R37.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 4 - Property and equipment (Details) - Schedule of Property and Equipment - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross $ 384,339 $ 372,123
Less accumulated depreciation (176,856) (116,863)
207,483 255,260
Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross 98,459 96,379
Tooling [Member]    
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross 127,436 127,436
Computer Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross 58,415 42,272
Warehouse Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross 11,649 11,649
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross 54,452 60,459
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Property and Equipment, Gross $ 33,928 $ 33,928
XML 31 R52.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 17 - Public & Investor Relations Agreements (Details) - USD ($)
Jul. 29, 2015
Jan. 01, 2015
Dec. 05, 2014
Nov. 05, 2014
Oct. 14, 2014
Oct. 01, 2014
Sep. 30, 2014
Sep. 08, 2014
Oct. 29, 2013
Aug. 30, 2013
Mar. 01, 2013
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Stock Issued During Period, Shares, Restricted Stock Award, Gross 4,022,613                    
Digital Marketing Services [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Service Period                 12 months    
Social Media [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description               payment of $4,750 per month      
Service Period               6 months      
Sales and Marketing [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description               payment of $32,000 per month paid 50% cash and 50% common stock      
Service Period               3 years      
Marketing [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Service Period         3 months            
Marketing and Advertising Expense         $ 57,000            
Public Relations Agreement [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description                     entered into a one-year agreement with a public relations firm to assist with public relations as the Company moves into scaled production and distribution.
Investor Relations Agreement [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description                   entered an agreement with an investor relations firm for a period of 12 months, ending May 26, 2014, with the right to cancel services at the end of each subsequent three-month period. The terms of the agreement called for the issuance of 142,000 common shares to be issued for the first three-months of service ending November 26, 2013, and then the equivalent number of shares required to compensate for the $50,000 per period thereafter.  
Investor Relations Agreement [Member] | Digital Marketing Services [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Marketing and Advertising Expense                 $ 70,200    
Sales Referral Agreement [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description             commissions of 5%        
National Distributor Agreement [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description           commission of 15%          
Service Period           3 years          
Digital Marketing and Public Relations Agreement [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description       terms of the agreement called for payments of $36,000 per quarter              
Service Period       6 months              
International Sales Referral Agreement [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Other Commitments, Description     commissions between 6% and 8%                
Banking and Advisory Services [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Contractual Obligation   $ 10,000                  
Sales and Marketing [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Contractual Obligation   5,000                  
Marketing [Member]                      
Note 17 - Public & Investor Relations Agreements (Details) [Line Items]                      
Contractual Obligation   $ 12,500                  
Stock Issued During Period, Shares, Restricted Stock Award, Gross   150,000                  
XML 32 R47.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 11 - Options and warrants (Details) - Schedule of Stockholders' Equity Note, Warrants or Rights - $ / shares
 3 Months Ended 9 Months Ended 12 Months Ended
Mar. 10, 2015
Sep. 30, 2015
Mar. 31, 2015
Sep. 30, 2015
Dec. 31, 2014
Schedule of Stockholders' Equity Note, Warrants or Rights [Abstract]          
Number of Options, Outstanding     0 0 0
Weighted Average Exercise Price of Options, Outstanding     $ 0 $ 0 $ 0
Number of Warrants, Outstanding     21,611,623 21,611,623 13,376,623
Weighted Average Exercise Price of Warrants, Outstanding     $ 0.60 $ 0.60 $ 0.61
Number of Options, Granted       0 0
Weighted Average Exercise Price of Options, Granted       $ 0 $ 0
Number of Warrants, Granted 1,096,800     2,212,900 8,235,000
Weighted Average Exercise Price of Warrants, Granted       $ 0.10 $ 0.59
Number of Options, Cancelled       0 0
Weighted Average Exercise Price of Options, Cancelled       $ 0 $ 0
Number of Warrants, Cancelled   392,500   (392,500) 0
Weighted Average Exercise Price of Warrants, Cancelled       $ 0.55 $ 0
Number of Options, Exercised       0 0
Weighted Average Exercise Price of Options, Exercised       $ 0 $ 0
Number of Warrants, Exercised       (115,000) 0
Weighted Average Exercise Price of Warrants, Exercised       $ 0.25 $ 0
Number of Options, Outstanding   0 0 0 0
Weighted Average Exercise Price of Options, Outstanding   $ 0   $ 0 $ 0
Number of Warrants, Outstanding   23,317,023   23,317,023 21,611,623
Weighted Average Exercise Price of Warrants, Outstanding   $ 0.14   $ 0.14 $ 0.60
XML 33 R9.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 3 - Prepaid loan costs
 9 Months Ended
Sep. 30, 2015
Disclosure Text Block Supplement [Abstract]  
Other Current Assets [Text Block]
Note 3 – Prepaid loan costs

During the year ended December 31, 2013, the Company issued notes payable that include a three-year warrant for each $1.00 of principal covered in the notes.   The warrants are exercisable at $0.40 per share (See Note 7).  The warrants issued were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $296,524.  As of September 30, 2015, the loan costs were fully amortized.

During the nine months ended September 30, 2014, the Company issued notes payable that included a three-year warrant for each $1.00 of principal covered in the notes.  The warrants are exercisable at $0.50 per share (See Note 7).  The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $154,881. As of September 30, 2015, the loan costs were fully amortized.

On May 27, 2014, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $632,786, which are being amortized over eighteen months, which is the period for which the debentures were due. As of September 30, 2015 and December 31, 2014, the balance on these loan costs was $65,910 and $382,305, respectively.

On June 2, 2014, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $177,153, which are being amortized over eighteen months, which is the period for which the debentures were due.  As of September 30, 2015 and December 31, 2014, the balance on these loan costs was $16,631 and $104,966, respectively.

On June 2, 2015, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $77,654, which are being amortized over fourteen months, which is the period for which the debentures are due.  As of September 30, 2015, the balance on these prepaid loan costs was $55,470.

XML 34 R43.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 8 - Convertible Senior Secured Debentures (Details) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 18, 2015
Sep. 14, 2015
Aug. 26, 2015
Aug. 12, 2015
Jul. 31, 2015
Jun. 02, 2015
Mar. 10, 2015
Jun. 02, 2014
May. 27, 2014
May. 09, 2014
Apr. 18, 2014
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Mar. 31, 2015
Mar. 31, 2014
Dec. 31, 2013
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Debt Instrument, Face Amount                   $ 25,000 $ 90,000                
Debt Instrument, Interest Rate, Stated Percentage                   12.00% 12.00%                
Debt Instrument, Maturity Date                   Jul. 15, 2014 Jul. 15, 2014                
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)           $ 0.10 $ 0.50                   $ 0.50    
Warrant, Fair Value           $ 512,713                          
Share Price (in Dollars per share)           $ 0.14                          
Fair Value Assumptions, Exercise Price (in Dollars per share)           $ 0.10                          
Gains (Losses) on Extinguishment of Debt                       $ 0 $ 0 $ (6,118,145) $ 0        
Class of Warrant or Rights Granted (in Shares)             1,096,800             2,212,900   8,235,000      
Notes Payable, Related Parties                       295,000 $ 275,000 $ 295,000 $ 275,000        
Warrants Issued with Notes Payable [Member]                                      
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Debt Instrument, Maturity Date           Jul. 31, 2016                          
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)           $ 0.10                       $ 0.50 $ 0.40
Warrant, Fair Value           $ 535,100                          
Fair Value Assumptions, Expected Term           1 year 62 days                          
Fair Value Assumptions, Expected Volatility Rate           119.05%                          
Share Price (in Dollars per share)           $ 0.14                          
Fair Value Assumptions, Exercise Price (in Dollars per share)           $ 0.10                          
Debt Instrument, Term           13 months                          
Gains (Losses) on Extinguishment of Debt           $ 6,118,145                          
Class of Warrant or Rights Granted (in Shares)                               500,000      
Convertible Debt [Member]                                      
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Debt Instrument, Face Amount   $ 15,000 $ 50,000   $ 50,000 $ 625,000   $ 1,750,000 $ 5,250,000     $ 115,000   $ 115,000          
Debt Instrument, Interest Rate, Stated Percentage   8.00% 8.00%   8.00% 8.00%   8.00% 8.00%                    
Debt Instrument, Maturity Date   Jul. 31, 2016 Jul. 31, 2016   Jul. 31, 2016 Jul. 31, 2016   Jul. 31, 2016 Jul. 31, 2016                    
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)                       $ 0.10   $ 0.10          
Debt Instrument, Convertible, Terms of Conversion Feature                               The debentures may be converted by each buyer at any time through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.075 per share.The Company may force conversion of the debentures into shares of common stock at $0.075 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $0.20 per share.In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.20, then on the maturity date, the buyers must convert all remaining principal due under the debentures.      
Registration Rights, Description                               Registration Rights - The Company agreed to file a “resale” registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144. The Registrant agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company was obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty-day period up to a maximum of six percent, (i) that the registration statement had not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements.      
Warrant, Fair Value           $ 220,125           $ 5,247              
Fair Value Assumptions, Expected Term           1 year 62 days                          
Fair Value Assumptions, Expected Volatility Rate           119.05%           198.00%              
Share Price (in Dollars per share)           $ 0.14                          
Fair Value Assumptions, Exercise Price (in Dollars per share)           $ 0.10                          
Debt Instrument, Term           10 months                          
Class of Warrant or Rights Granted (in Shares) 50,000     40,000   625,000                          
Debt Instrument, Unamortized Discount           $ 130,861           $ 5,247   $ 5,247          
Fair Value Assumptions, Risk Free Interest Rate                       25.00%              
Notes Payable, Related Parties           $ 570,000                          
Minimum [Member]                                      
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Fair Value Assumptions, Expected Term           2 months                          
Fair Value Assumptions, Expected Volatility Rate           117.73%                          
Fair Value Assumptions, Risk Free Interest Rate           0.28%                          
Minimum [Member] | Convertible Debt [Member]                                      
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Fair Value Assumptions, Expected Term                       10 months              
Share Price (in Dollars per share)                       $ 0.03   $ 0.03          
Maximum [Member]                                      
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Fair Value Assumptions, Expected Term           8 years 6 months                          
Fair Value Assumptions, Expected Volatility Rate           189.34%                          
Fair Value Assumptions, Risk Free Interest Rate           2.07%                          
Maximum [Member] | Convertible Debt [Member]                                      
Note 8 - Convertible Senior Secured Debentures (Details) [Line Items]                                      
Fair Value Assumptions, Expected Term                       12 months              
Share Price (in Dollars per share)                       $ 0.07   $ 0.07          
XML 35 R29.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 7 - Notes payable (Tables)
 9 Months Ended
Sep. 30, 2015
Note 7 - Notes payable (Tables) [Line Items]  
Schedule of Debt [Table Text Block]
Issue Date
 
Interest Rate
   
Current Due Date
 
Amount
 
September 1, 2013
   
12.0
%
 
April 30, 2014
 
$
543,300
 
September 1, 2013
   
12.0
%
 
April 30, 2014
   
52,983
 
September 1, 2013
   
12.0
%
 
April 30, 2014
   
52,650
 
September 1, 2013
   
12.0
%
 
April 30, 2014
   
45,000
 
September 18, 2013
   
12.0
%
 
April 30, 2014
   
50,000
 
September 19, 2013
   
12.0
%
 
April 30, 2014
   
30,000
 
September 19, 2013
   
12.0
%
 
April 30, 2014
   
250,000
 
September 30, 2013
   
12.0
%
 
April 30, 2014
   
100,000
 
Total
             
$
1,123,933
 
Chief Executive Officer and Directors [Member]  
Note 7 - Notes payable (Tables) [Line Items]  
Schedule of Debt [Table Text Block]
Issue Date
 
Interest Rate
   
Current Due Date
 
Amount
 
September 1, 2013
   
12.0
%
 
July 15, 2014
 
$
543,300
 
September 1, 2013
   
12.0
%
 
July 15, 2014
   
52,983
 
September 1, 2013
   
12.0
%
 
July 15, 2014
   
52,650
 
Total
           
$
648,933
 
XML 36 R28.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 4 - Property and equipment (Tables)
 9 Months Ended
Sep. 30, 2015
Property, Plant and Equipment [Member]  
Note 4 - Property and equipment (Tables) [Line Items]  
Property, Plant and Equipment [Table Text Block] Property and equipment consists of the following:

   
September 30,
2015
   
December 31,
2014
 
Equipment
 
$
98,459
   
$
96,379
 
Tooling
   
127,436
     
127,436
 
Computer equipment
   
58,415
     
42,272
 
Warehouse equipment
   
11,649
     
11,649
 
Leasehold Improvements
   
54,452
     
60,459
 
Furniture and fixtures
   
33,928
     
33,928
 
     
384,339
     
372,123
 
Less accumulated depreciation
   
(176,856
)
   
(116,863
) 
   
$
207,483
   
$
255,260
 
XML 37 R44.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 9 - Patents (Details) - Patents [Member] - USD ($)
 1 Months Ended 9 Months Ended
Jun. 30, 2009
Sep. 30, 2015
Note 9 - Patents (Details) [Line Items]    
Noncash or Part Noncash Acquisition, Description one of its officers and directors, agreed to transfer all rights, title and interest in the patent he held for a personal security device.  
Finite-Lived Intangible Asset, Useful Life 20 years 15 years
Payments to Acquire Intangible Assets (in Dollars)   $ 23,735
XML 38 R30.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 11 - Options and warrants (Tables)
 9 Months Ended
Sep. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]
   
Number of Options
   
Weighted Average
Exercise Price of Options
   
Number of Warrants
   
Weighted Average
Exercise Price of Warrants
 
Outstanding 1/01/2014
   
-
   
$
-
     
13,376,623
   
$
0.61
 
    Granted
   
-
     
-
     
8,235,000
     
0.59
 
    Cancelled
   
-
     
-
     
-
     
-
 
    Exercised
   
-
     
-
     
-
     
-
 
Outstanding 12/31/2014
   
-
   
$
-
     
21,611,623
   
$
0.60
 
   
Number of Options
   
Weighted Average
Exercise Price of Options
   
Number of Warrants
   
Weighted Average
Exercise Price of Warrants
 
Outstanding 1/01/2015
   
-
   
$
-
     
21,611,623
   
$
0.15
 
    Granted
   
-
     
-
     
2,212,900
     
0.10
 
    Cancelled
   
-
     
-
     
(392,500)
     
0.55
 
    Exercised
   
-
     
-
     
(115,000
)
   
0.25
 
Outstanding 9/30/2015
   
-
   
$
-
     
23,317,023
   
$
0.14
 
XML 39 R31.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 14 - Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis

   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
Notes payable and convertible senior secured debentures
   
-
   
$
5,094,117
     
-
   
$
5,094,117
 
   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
Notes payable and convertible senior secured debentures
   
-
   
$
5,704,491
     
-
   
$
5,704,491
 
XML 40 R8.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 2 - Going Concern
 9 Months Ended
Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Substantial Doubt about Going Concern [Text Block]
Note 2 – Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles and under the assumption that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.  As of September 30, 2015, the Company has an accumulated deficit of $26,749,521, and the Company’s current liabilities exceed current assets by $6,425,273.

The Company’s activities since inception have been financially sustained by issuance of common stock, debentures and related party loans. The Company intends to raise additional funding to continue its operations through contributions from the current shareholders and stock issuance to other investors and additional investment in debentures.

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock, repay its outstanding debt, and, ultimately, to achieve of significant operating revenues.  The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.

XML 41 R32.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 18 - Interest Expense (Tables)
 9 Months Ended
Sep. 30, 2015
Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract]  
Interest Income and Interest Expense Disclosure [Table Text Block] The company’s interest expense for the nine months ended September 30, 2015 consisted of the following:

Description
 
Amount
 
Amortization of loan fees
   
426,914
 
Notes payable
   
1,050
 
Convertible senior secured debentures
   
2,078,306
 
Total
   
2,506,270
 
XML 42 R40.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 7 - Notes payable (Details)
 9 Months Ended 12 Months Ended
Aug. 13, 2015
USD ($)
May. 09, 2014
USD ($)
Apr. 18, 2014
USD ($)
Feb. 24, 2014
USD ($)
$ / shares
Feb. 12, 2014
USD ($)
$ / shares
Sep. 30, 2013
USD ($)
$ / shares
Sep. 19, 2013
USD ($)
$ / shares
Sep. 18, 2013
USD ($)
$ / shares
Sep. 01, 2013
USD ($)
$ / shares
Aug. 26, 2013
Sep. 30, 2015
USD ($)
Sep. 30, 2014
USD ($)
Dec. 31, 2013
USD ($)
Jun. 30, 2015
USD ($)
Jun. 02, 2015
$ / shares
Mar. 31, 2015
$ / shares
Mar. 10, 2015
$ / shares
Dec. 31, 2014
USD ($)
Aug. 31, 2013
USD ($)
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount   $ 25,000 $ 90,000                                
Debt Instrument, Interest Rate, Stated Percentage   12.00% 12.00%                                
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares                             $ 0.10 $ 0.50 $ 0.50    
Debt Instrument, Maturity Date   Jul. 15, 2014 Jul. 15, 2014                                
Notes Payable, Including Related Party, Current                         $ 1,123,933 $ 0       $ 0  
Interest Payable, Including Related Party, Current                         42,158            
Debt Instrument, Convertible, Beneficial Conversion Feature                     $ 220,125 $ 0 $ 296,524            
Interest Expense, Debt                     $ 0 $ 63,677              
Loans Payable [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount       $ 25,000   $ 100,000                          
Debt Instrument, Interest Rate, Stated Percentage       12.00%   12.00%                          
Debt Instrument, Description       included a three-year warrant for each of $1.00 of principal included in the note   included a three-year warrant for each of $1.00 of principal included in the note                          
Warrant Term       3 years   3 years                          
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares       $ 0.50   $ 0.40                          
Debt Instrument, Maturity Date       Jul. 15, 2014   Apr. 30, 2014                          
Notes Payable, Including Related Party, Current           $ 100,000                          
Convertible Notes Payable [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount $ 120,750                                    
Debt Instrument, Interest Rate, Stated Percentage 8.00%                                    
Debt Instrument, Maturity Date Aug. 17, 2016                                    
Debt Instrument, Payment Terms The VVG Note may be prepaid in whole or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the issue date, beginning at 110% of the outstanding principal and accrued interest increasing by 5% for every 30-day period thereafter until the 180th day following the Closing Date. After the expiration of the 180 days following the Closing Date, we may not prepay the Note for any reason.                                    
Debt Instrument, Convertible, Terms of Conversion Feature At any time after 180 days after the date the note is issued it is convertible into our common stock, at buyer’s option, at a 25% discount to the market price, which is defined as 75% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading days prior to the conversion date.                                    
Subsequently Extended [Member] | Loans Payable [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Maturity Date           Jul. 15, 2014                          
CEO and Director [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount                 $ 648,933                   $ 650,000
Number of Note Agreements                 3                    
Debt Instrument, Interest Rate, Stated Percentage                 12.00%                    
Debt Instrument, Description                 included a three-year warrant for every $1.00 of principal amount of each note                    
Warrant Term                 3 years                    
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares                 $ 0.40                    
Debt Instrument, Maturity Date                 Apr. 30, 2014                    
Notes Payable, Including Related Party, Current                 $ 45,000                    
CEO and Director [Member] | Subsequently Extended [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Maturity Date                 Jul. 15, 2014                    
Related Party [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount       $ 25,000 $ 50,000   $ 30,000   $ 45,000                    
Debt Instrument, Interest Rate, Stated Percentage       12.00% 12.00%   12.00%   12.00%                    
Debt Instrument, Description       included a three-year warrant for each of $1.00 of principal included in the note included a three-year warrant for each of $1.00 of principal included in the note   included a three-year warrant for each $1.00 of principal included in the note   included a three-year warrant for each $1.00 of principal included in the note                    
Warrant Term       3 years 3 years   3 years   3 years                    
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares       $ 0.50 $ 0.50   $ 0.40   $ 0.40                    
Debt Instrument, Maturity Date       Jul. 15, 2014 Jul. 15, 2014   Apr. 30, 2014                        
Notes Payable, Including Related Party, Current             $ 30,000                        
Related Party [Member] | Subsequently Extended [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Maturity Date             Jul. 15, 2014   Jul. 15, 2014                    
Chief Executive Officer [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount               $ 50,000                      
Debt Instrument, Interest Rate, Stated Percentage               12.00%                      
Debt Instrument, Description               included a three-year warrant for each $1.00 of principal included in the note                      
Warrant Term               3 years                      
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares               $ 0.40                      
Debt Instrument, Maturity Date               Apr. 30, 2014                      
Notes Payable, Including Related Party, Current               $ 50,000                      
Chief Executive Officer [Member] | Notes Payable, Other Payables [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Maturity Date                   Jul. 15, 2014                  
Chief Executive Officer [Member] | Subsequently Extended [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Maturity Date               Jul. 15, 2014                      
Related Party Two [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Face Amount       $ 400,000     $ 250,000                        
Debt Instrument, Interest Rate, Stated Percentage       12.00%     12.00%                        
Debt Instrument, Description       included a three-year warrant for each of $1.00 of principal included in the note     included a three-year warrant for each $1.00 of principal included in the note                        
Warrant Term       3 years     3 years                        
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares       $ 0.50     $ 0.40                        
Debt Instrument, Maturity Date       Jul. 15, 2014     Apr. 30, 2014                        
Notes Payable, Including Related Party, Current             $ 250,000                        
Related Party Two [Member] | Subsequently Extended [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Debt Instrument, Maturity Date             Jul. 15, 2014                        
Principal [Member] | CEO and Director [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Extinguishment of Debt, Amount                 $ 615,000                    
Accrued Interest [Member] | CEO and Director [Member]                                      
Note 7 - Notes payable (Details) [Line Items]                                      
Extinguishment of Debt, Amount                 $ 33,933                    
XML 43 R53.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 18 - Interest Expense (Details) - Interest Income and Interest Expense Disclosure - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Note 18 - Interest Expense (Details) - Interest Income and Interest Expense Disclosure [Line Items]        
Amortization of loan fees     $ 426,914  
Interest expense, debt     0 $ 63,677
Total $ 1,041,025 $ 572,155 2,506,270 $ 1,213,532
Notes Payable, Other Payables [Member]        
Note 18 - Interest Expense (Details) - Interest Income and Interest Expense Disclosure [Line Items]        
Interest expense, debt     1,050  
Convertible Debt [Member]        
Note 18 - Interest Expense (Details) - Interest Income and Interest Expense Disclosure [Line Items]        
Interest expense, debt     $ 2,078,306  
XML 44 R2.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Current assets:    
Cash $ 80,001 $ 491,988
Accounts receivable, net of allowance for doubtful accounts of $478 as of September 30, 2015 and $4,978 as of December 31, 2014 16,698 12,626
Prepaid loan costs 138,011 487,271
Prepaid expenses, other 35,539 50,809
Inventory 1,351,242 1,459,306
Total current assets 1,621,491 2,502,000
Property and equipment:    
Fixed assets, net of accumulated depreciation of $176,856 and $116,863 as of September 30, 2015 and December 31, 2014 207,483 255,260
Patent, net of accumulated amortization of $6,198 and $4,698 as of September 30, 2015 and December 31, 2014 27,922 29,422
Rent and utility deposits 11,180 11,180
Total assets 1,868,076 2,797,862
Current liabilities:    
Accounts payable and accrued expenses 596,191 235,555
Deferred revenue 14,544 4,513
Accrued interest    
Related 5,058 14,071
Unrelated $ 58,973 $ 311,603
Convertible senior secured debentures, net of discount of $2,113,383 and $1,120,509 as of September 30, 2015 and December 31, 2014
Related $ 402,865 $ 246,548
Unrelated 4,691,252 5,457,943
Convertible note payable, net of discount of $36,767 as of September 30, 2015 83,983 0
Derivative liability 2,193,898 0
Total current liabilities 8,046,764 6,270,233
Stockholders’ deficit:    
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding 0 0
Common stock, $0.001 par value, 100,000,000 shares authorized; issued and outstanding of 60,515,071 and 41,416,113 at September 30, 2015 and December 31, 2014 60,516 41,416
Common stock owed but not issued: 917,681 and 1,127,859 at September 30, 2015 and December 31, 2014 917 1,128
Paid in capital 20,509,400 9,997,061
Accumulated deficit (26,749,521) (13,511,976)
Total stockholders’ deficit (6,178,688) (3,472,371)
Total liabilities and stockholders’ deficit $ 1,868,076 $ 2,797,862
XML 45 R45.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 10 - Stockholders' equity (Details)
 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 18, 2015
USD ($)
shares
Sep. 01, 2015
USD ($)
shares
Aug. 12, 2015
USD ($)
shares
Jun. 02, 2015
USD ($)
$ / shares
shares
Jun. 01, 2015
USD ($)
shares
Mar. 10, 2015
$ / shares
shares
Mar. 01, 2015
shares
Dec. 31, 2014
USD ($)
shares
Nov. 13, 2014
USD ($)
shares
Nov. 08, 2014
USD ($)
shares
Oct. 08, 2014
USD ($)
shares
Sep. 30, 2014
USD ($)
shares
Sep. 08, 2014
USD ($)
shares
Aug. 01, 2014
USD ($)
shares
Jun. 30, 2014
USD ($)
shares
Jun. 18, 2014
USD ($)
shares
May. 20, 2014
USD ($)
shares
Mar. 31, 2014
USD ($)
shares
Feb. 03, 2014
USD ($)
shares
Jun. 30, 2015
USD ($)
$ / shares
shares
Apr. 30, 2015
shares
Sep. 30, 2015
USD ($)
$ / shares
shares
Mar. 31, 2015
USD ($)
$ / shares
shares
Dec. 31, 2014
USD ($)
shares
Sep. 30, 2014
USD ($)
Sep. 30, 2015
USD ($)
$ / shares
shares
Sep. 30, 2014
USD ($)
shares
Dec. 31, 2014
USD ($)
shares
Dec. 31, 2013
USD ($)
shares
Sep. 14, 2015
USD ($)
Aug. 26, 2015
USD ($)
Jul. 31, 2015
USD ($)
Jun. 02, 2014
USD ($)
May. 27, 2014
USD ($)
May. 09, 2014
USD ($)
Apr. 18, 2014
USD ($)
Sep. 18, 2013
USD ($)
$ / shares
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Common Stock, Shares, Issued               41,416,113                           60,515,071   41,416,113   60,515,071   41,416,113 37,274,292                
Common Stock, Shares, Outstanding               41,416,113                           60,515,071   41,416,113   60,515,071   41,416,113 37,274,292                
Common Stock, Shares Subscribed but Unissued               1,127,859                           917,681   1,127,859   917,681   1,127,859 2,855,979                
Stock Authorized to be Issued, Shares                                             1,096,800                            
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures                 12,000     105,000   9,375                                              
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures (in Dollars) | $                 $ 5,100     $ 58,800   $ 4,125                                              
Stock Issued During Period, Shares, Issued for Services                   36,774 26,667   26,230                                                
Stock Issued During Period, Value, Issued for Services (in Dollars) | $                   $ 16,000 $ 16,000   $ 16,000                         $ 137,550   $ 534,554                  
Debt Conversion, Original Debt, Amount (in Dollars) | $                                                   $ 357,500 $ 0                    
Warrant, Decrease in Warrant Exercise Unissued                                                       5,000                  
Preferred Stock, Shares Issued               0                           0   0   0   0                  
Stock Issued During Period, Shares, Previously Owed                                             802,859                            
Proceeds from Warrant Exercises (in Dollars) | $                                                   $ 28,750 $ 0                    
Stock Issued During Period, Shares, Conversion of Convertible Securities                                                   6,230,113 0                    
Proceeds from Issuance of Common Stock (in Dollars) | $                                             $ 548,400     $ 548,400 $ 0                    
Class of Warrant or Rights Granted           1,096,800                                       2,212,900   8,235,000                  
Sale of Stock, Price Per Share (in Dollars per share) | $ / shares       $ 0.50   $ 0.50                                                              
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) | $ / shares       0.10   $ 0.50                                 $ 0.50                            
Adjustments to Additional Paid in Capital, Warrant Issued (in Dollars) | $                                                   $ 535,100                      
Share Price (in Dollars per share) | $ / shares       0.14                                                                  
Fair Value Assumptions, Exercise Price (in Dollars per share) | $ / shares       $ 0.10                                                                  
Gains (Losses) on Extinguishment of Debt (in Dollars) | $                                           $ 0     $ 0 (6,118,145) 0                    
Increase (Decrease) in Derivative Liabilities (in Dollars) | $                                                   1,851,635                      
Adjustments to Additional Paid in Capital, Other (in Dollars) | $                                                   7,969,780                      
Debt Instrument, Face Amount (in Dollars) | $                                                                     $ 25,000 $ 90,000  
Adjustments to Additional Paid in Capital, Convertible Debt with Conversion Feature (in Dollars) | $                                                   220,125   $ 2,027,088                  
Debt Instrument, Convertible, Beneficial Conversion Feature (in Dollars) | $                                                   $ 220,125 $ 0   $ 296,524                
Convertible Debt [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Fair Value Assumptions, Expected Term                                                   1 year 62 days                      
Fair Value Assumptions, Risk Free Interest Rate                                                   26.00%                      
Fair Value Assumptions, Expected Volatility Rate                                                   119.05%                      
Share Price (in Dollars per share) | $ / shares                                           $ 0.14       $ 0.14                      
Fair Value Assumptions, Exercise Price (in Dollars per share) | $ / shares                                           $ 0.10       $ 0.10                      
Debt Instrument, Face Amount (in Dollars) | $                                           $ 625,000       $ 625,000                      
Debt Instrument, Convertible, Beneficial Conversion Feature (in Dollars) | $                                                   $ 130,861                      
Debt Instrument, Convertible, Remaining Discount Amortization Period                                                   10 months                      
Chief Financial Officer [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares               105,000                   104,000     105,000                                
Stock Authorized to be Issued, Value (in Dollars) | $               $ 49,350                   $ 53,040                                      
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures                             105,000 200,000                                          
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures (in Dollars) | $                             $ 49,350 $ 96,020                                          
Chief Executive Officer [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares               200,000                   150,000                                      
Stock Authorized to be Issued, Value (in Dollars) | $               $ 94,000                   $ 76,500                                      
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) | $ / shares                                                                         $ 0.40
Debt Instrument, Face Amount (in Dollars) | $                                                                         $ 50,000
Director [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares               335,000                                                          
Stock Authorized to be Issued, Value (in Dollars) | $               $ 157,192                                                          
Number of Directors               6                                                          
Executives and Sales Teams [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares               162,859                                                          
Stock Authorized to be Issued, Value (in Dollars) | $               $ 76,544                                                          
Stock Issued for Services [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares                                     325,000             465,000                      
Stock Authorized to be Issued, Value (in Dollars) | $                                     $ 130,000             $ 137,550                      
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures                                 60,000                                        
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures (in Dollars) | $                                 $ 30,600                                        
Stock Issued for Services [Member] | Consulting Services [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares                                                   150,000                      
Stock Issued for Services [Member] | Chief Financial Officer [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares                                                   315,000                      
Stock Issued for Services 2 [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares                                     98,039                                    
Stock Authorized to be Issued, Value (in Dollars) | $                                     $ 50,000                                    
Stock Issued for Exercise of Warrants [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares                                                   115,000                      
Stock Issued During Period, Shares, Conversion of Convertible Securities                                                   90,000                      
Stock To Be Issued                                                   25,000                      
Stock Issued for Revision of Cash Investment [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Sale of Stock, Price Per Share (in Dollars per share) | $ / shares                                       $ 0.075                                  
Stock Issued During Period, Shares, Other                                       6,215,201                                  
Stock Issued for Interest on Debentures [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares         3,125,499                                   251,182                            
Stock Authorized to be Issued, Value (in Dollars) | $         $ 426,006                                   $ 125,591                            
Stock Issued During Period, Shares, Conversion of Convertible Securities         59,337   2,858,481                         5,041     220,826                            
Stock To Be Issued         207,681                             25,315                                  
Class of Warrant or Rights Granted                                                   625,000                      
Stock Issued During Period, Value, Conversion of Convertible Securities (in Dollars) | $                                       $ 645           $ 698,312                      
Stock Issued for Conversion of Debentures Payable and Interest [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Issued During Period, Value, Conversion of Convertible Securities (in Dollars) | $                                       $ 267,500           $ 357,500   $ 178,754                  
Principal [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Converted Instrument, Shares Issued                                       3,566,667                                  
Accrued Interest [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Converted Instrument, Shares Issued                                       4,379                                  
Convertible Debt [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Original Debt, Amount (in Dollars) | $ $ 50,000   $ 40,000                                                                    
Class of Warrant or Rights Granted 50,000   40,000 625,000                                                                  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) | $ / shares                                           $ 0.10       $ 0.10                      
Fair Value Assumptions, Expected Term       1 year 62 days                                                                  
Fair Value Assumptions, Risk Free Interest Rate                                           25.00%                              
Fair Value Assumptions, Expected Volatility Rate       119.05%                                   198.00%                              
Share Price (in Dollars per share) | $ / shares       $ 0.14                                                                  
Fair Value Assumptions, Exercise Price (in Dollars per share) | $ / shares       $ 0.10                                                                  
Debt Instrument, Face Amount (in Dollars) | $       $ 625,000                                   $ 115,000       $ 115,000       $ 15,000 $ 50,000 $ 50,000 $ 1,750,000 $ 5,250,000      
Convertible Debt [Member] | Stock Issued for Interest on Debentures [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Stock Authorized to be Issued, Shares   2,806,356                                                                      
Stock Authorized to be Issued, Value (in Dollars) | $   $ 144,247                                                                      
Debt Conversion, Converted Instrument, Shares Issued   2,806,356                                                                      
Convertible Debt [Member] | Principal [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Converted Instrument, Shares Issued 666,666   533,333                                                                    
Convertible Debt [Member] | Accrued Interest [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Converted Instrument, Shares Issued 36,529   6,168                                                                    
Convertible Debt [Member] | Principal [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Converted Instrument, Shares Issued                                               350,000                          
Debt Conversion, Original Debt, Amount (in Dollars) | $                                               $ 175,000                          
Convertible Debt [Member] | Accrued Interest [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Debt Conversion, Converted Instrument, Shares Issued                                               7,507                          
Debt Conversion, Original Debt, Amount (in Dollars) | $                                               $ 3,754                          
Class C [Member]                                                                          
Note 10 - Stockholders' equity (Details) [Line Items]                                                                          
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) | $ / shares       $ 0.10                                     $ 0.50                            
Fair Value Assumptions, Expected Term       1 year 62 days                                           1 year 62 days                      
Fair Value Assumptions, Risk Free Interest Rate       0.26%                                           26.00%                      
Fair Value Assumptions, Expected Volatility Rate       119.05%                                           119.05%                      
Share Price (in Dollars per share) | $ / shares       $ 0.14                                   $ 0.14       $ 0.14                      
Fair Value Assumptions, Exercise Price (in Dollars per share) | $ / shares       $ 0.10                                   $ 0.10       $ 0.10                      
Class of Warrant, Interest Expense, Amortization Period                                                   13 months                      
XML 46 R6.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities:    
Net loss $ (13,237,545) $ (4,241,082)
Adjustments to reconcile net loss to net cash (used) from operating activities:    
Stock issued for services 137,550 483,812
Stock issued for compensation 0 80,625
Stock issued as debenture interest payments 697,669 0
Depreciation and amortization 67,500 68,001
Revaluation of warrants and convertible debt 5,920,078 0
Amortization of discount on notes payable 0 154,881
Amortization of discount on convertible debentures 1,848,407 377,503
Change in fair value of derivative liability 2,193,898 0
Allowance for bad debts (4,500) 4,978
Change in operating assets and liabilities:    
Accounts receivable 428 (8,175)
Prepaid loan costs 349,260 (303,949)
Prepaid expenses 15,270 149,549
Deposits on inventory 0 89,984
Inventory 108,064 (1,177,463)
Rent and security deposits 0 (11,180)
Accounts payable and accrued expenses 360,636 (39,382)
Deferred revenue 10,031 1,175
Accrued interest (261,643) 148,855
Net cash (used) by operating activities (1,794,897) (4,221,868)
Cash flows from investing activities:    
Purchase of property and equipment (18,223) (105,756)
Net cash (used) by investing activities (18,223) (105,756)
Cash flows from financing activities:    
Proceeds from common stock sales 548,400 0
Proceeds from exercising warrants 28,750 0
Proceeds from notes payable, related parties 0 475,000
Proceeds from notes payable, unrelated parties 83,983 25,000
Proceeds from bank line of credit 0 900,000
Proceeds from convertible senior secured debentures 740,000 7,000,000
Repayment of notes payable, related parties 0 (1,498,933)
Repayment of notes payable, unrelated parties 0 (125,000)
Repayment of bank line of credit 0 (900,000)
Cash flows from financing activities 1,401,133 5,876,067
Net increase (decrease) in cash and cash equivalents (411,987) 1,548,443
Cash and cash equivalents, beginning of period 491,988 305,649
Cash and cash equivalents, end of period 80,001 1,854,092
Supplemental cash flow information:    
Interest paid in cash $ 0 $ 86,638
Number of shares issued for interest (in Shares) 6,230,113 0
Loan fees incurred in conjunction with warrants granted to placement agent in convertible debenture offering $ 1,477 $ 185,874
Discount on notes payable 36,767 1,698,766
Amount of debt converted 357,500 0
Discount recognized on debentures payable 220,125 0
Income taxes paid 0 0
Stock Issued for Interest on Debentures [Member]    
Supplemental cash flow information:    
Stock issued $ 697,669 $ 0
Number is shares issued on conversion of debt (in Shares) 4,766,666 0
Stock Issued for Services [Member]    
Supplemental cash flow information:    
Stock issued $ 137,550 $ 483,812
Number of shares issued for services (in Shares) 465,000 1,023,519
Stock Issued for Compensation [Member]    
Supplemental cash flow information:    
Stock issued $ 0 $ 80,625
Number of shares issued for compensation (in Shares) 0 159,375
XML 47 R35.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 2 - Going Concern (Details) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Retained Earnings (Accumulated Deficit) $ (26,749,521) $ (13,511,976)
Working Capital (Deficit) $ (6,425,273)  
XML 48 R22.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 16 - Employment Contracts
 9 Months Ended
Sep. 30, 2015
Contractors [Abstract]  
Long-term Contracts or Programs Disclosure [Text Block]
Note 16 – Employment Contracts

During the year ended December 31, 2012, the Company entered into an amended and restated three-year employment contract with its Chief Operating Officer.  The agreement continues through September 30, 2015.  If the Company meets various goals and criteria during those three years, which have been set forth in the agreement, they will issue a prescribed amount of shares of its common stock to the Chief Operating Officer.  The Company reserved 650,000 shares of its common stock as required by the agreement.  As of December 31, 2014, in accordance with the terms of the agreement, the employee vested 335,000 shares of restricted stock for achieving milestones as set forth in the employment agreement.

Effective January 1, 2015, the Company entered into the second amended and restated employment agreement with its COO.  The COO had the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the COO earned a base salary of $170,000.  This agreement was terminated as of May 1, 2015.

During the year ended December 31, 2012, the Company entered into a three-year contact with its Vice President of Customer Support.  The agreement continued through September 30, 2015.  If the Company meets various goals and criteria during those three years, they will issue a prescribed amount of its common shares to the Vice President of Customer Support.  The Company reserved 288,000 shares of its common stock as required by the agreement.  As of December 31, 2014, in accordance with the terms of the agreement, the employee vested 136,200 shares of restricted stock for achieving milestones as set forth in the employment agreement.  

Effective January 1, 2015, the Company entered into an amended and restated employment agreement with its Vice President of Customer Support.  The Vice President of Customer Support has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the Vice President of Customer Service shall earn an initial base salary of $100,000.

On March 4, 2013, the Company entered into an employment agreement with its CEO/President.  The CEO/President has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.  The Company reserved 750,000 shares of its common stock as required by the agreement.  Per the agreement, the Company issued 150,000 common shares on the last day of every fiscal quarter as compensation through that period.  As of December 31, 2014, all 750,000 common shares had vested.  In addition, the Chief Executive Officer and President shall earn an initial base salary of $250,000, which began on January 1, 2013.   

Effective January 1, 2015, the Company entered into an employment agreement with its CEO/President.  The CEO/President has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the CEO/President shall earn an initial base salary of $250,000.  In April of 2015, the CEO ceased receiving cash compensation, and agreed to accept stock in lieu of cash until (i) the Company becomes profitable (generates a net income from operations) for a quarter of operations, or (ii) July 31, 2016.  As of September 30, 2015, the Company accrued $125,000 of salary, and $9,546 in associated payroll taxes, which will be converted into the common stock at the close of the 2015 fiscal year or in accordance with the above conditions.

On March 4, 2013, the Company amended the agreement with its non-employee interim Chief Financial Officer (CFO).  The CFO has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.  The Company reserved 416,250 shares of its common stock as required by the agreement.  Per the contract, the Company issued a prescribed amount of common shares on the last day of every fiscal quarter, beginning with the second quarter of 2013 and ending on March 31, 2014.   In addition, the Non-Employee Interim Chief Financial Officer will earn a base monthly retainer of $3,000, which began on January 1, 2013 and will continue until the Company completes certain requirements per the agreement.  On May 22, 2014, the Company entered into a second amended agreement with its Non-Employee Interim CFO.  The amendment extended the potential term of the Non-Employee Interim CFO agreement from April 1, 2014 through November 30, 2015.  Further, the amendment provides for compensation to the CFO of up to 935,000 shares of the Company’s common stock, based upon the actual number of months served.  As of December 31, 2014, 515,000 shares have vested, leaving 420,000 shares reserved as of December 31, 2014.  During the first three quarters of 2015, 315,000 shares were authorized under this agreement, and 105,000 remain available under the agreement.  In addition, the Non-Employee Interim CFO will continue to earn a base monthly retainer of $3,000.

On March 11, 2014, the Company entered into an employment agreement with its Lead Engineer.  The Lead Engineer has the ability to earn shares of common stock over the term of the agreement, which runs through March 30, 2016.  The Company reserved 82,287 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue up to 27,429 common shares per year.  As of December 31, 2014, 60,000 common shares have been authorized and 22,287 shares remain reserved.  In addition, the Lead Engineer shall earn an initial base salary of $96,000, which began on March 11, 2013.   

Effective January 1, 2015, the Company entered into an amended and restated employment agreement with its Lead Engineer.  The Lead Engineer has the ability to earn shares of common stock over the term of the agreement, which runs through December 31, 2017.  In addition, the Lead Engineer shall earn an initial base salary of $105,000.

On November 1, 2014, the Company entered into an employment agreement with its Vice President of Finance.  The Vice President of Finance has the ability to earn shares of common stock over the term of the agreement, which runs through October 31, 2017.  The Company reserved 540,000 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue up to 180,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.  As of December 31, 2014, 5,000 common shares have been authorized and 510,000 shares remain reserved.  In addition, the VP Finance shall earn an initial base salary of $170,000 beginning on November 1, 2014.   

On November 1, 2014, the Company entered into an employment agreement with its Vice President of Sales.  The Vice President of Sales has the ability to earn shares of common stock over the term of the agreement, which runs through October 31, 2017.  The Company reserved 420,000 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue up to 140,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.  As of December 31, 2014, 5,000 common shares have been authorized and 396,667 shares remain reserved.  In addition, the VP Sales shall earn an initial base salary of $140,000 beginning on November 1, 2014.

On July 29, 2015, the Company approved a stock incentive plan authorizing the issuance of up to 6,750,000 shares of common stock under the plan and granted restricted stock awards to seven of its employees for a total of 4,022,613 shares. These shares will vest and be issued on January 1, 2016 assuming each of the employees remained employed by the Company through such date.

XML 49 R36.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 3 - Prepaid loan costs (Details) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Jun. 02, 2015
Jun. 02, 2014
May. 27, 2014
Mar. 31, 2014
Sep. 30, 2015
Dec. 31, 2013
Mar. 31, 2015
Mar. 10, 2015
Dec. 31, 2014
Note 3 - Prepaid loan costs (Details) [Line Items]                  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) $ 0.10           $ 0.50 $ 0.50  
Adjustments to Additional Paid in Capital, Other         $ 7,969,780        
Warrants Issued with Notes Payable [Member]                  
Note 3 - Prepaid loan costs (Details) [Line Items]                  
Debt Instrument, Description       issued notes payable that included a three-year warrant for each $1.00 of principal covered in the notes   issued notes payable that include a three-year warrant for each $1.00 of principal covered in the notes      
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) $ 0.10     $ 0.50   $ 0.40      
Adjustments to Additional Paid in Capital, Other       $ 154,881   $ 296,524      
Convertible Debt [Member]                  
Note 3 - Prepaid loan costs (Details) [Line Items]                  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)         $ 0.10        
Convertible Note One [Member] | Convertible Debt [Member]                  
Note 3 - Prepaid loan costs (Details) [Line Items]                  
Debt Issuance Cost     $ 632,786            
Debt Instrument, Convertible, Remaining Discount Amortization Period     18 months            
Deferred Finance Costs, Gross         $ 65,910       $ 382,305
Convertible Note Two [Member] | Convertible Debt [Member]                  
Note 3 - Prepaid loan costs (Details) [Line Items]                  
Debt Issuance Cost   $ 177,153              
Debt Instrument, Convertible, Remaining Discount Amortization Period   18 months              
Deferred Finance Costs, Gross         16,631       $ 104,966
Convertible Note Three [Member] | Convertible Debt [Member]                  
Note 3 - Prepaid loan costs (Details) [Line Items]                  
Debt Issuance Cost $ 77,654                
Debt Instrument, Convertible, Remaining Discount Amortization Period 14 months                
Deferred Finance Costs, Gross         $ 55,470        
XML 50 R24.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 18 - Interest Expense
 9 Months Ended
Sep. 30, 2015
Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract]  
Other Liabilities Disclosure [Text Block]
Note 18 – Interest Expense

The company’s interest expense for the nine months ended September 30, 2015 consisted of the following:

Description
 
Amount
 
Amortization of loan fees
   
426,914
 
Notes payable
   
1,050
 
Convertible senior secured debentures
   
2,078,306
 
Total
   
2,506,270
 

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Note 1 - Company Organization and Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2015
Accounting Policies [Abstract]  
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]
Note 1 – Company Organization and Summary of Significant Accounting Policies

Organization

Guardian 8 Corporation (“Guardian 8”) was incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation.  In August of 2009, the Company changed its name to Guardian 8 Corporation.  The Company’s principle offices are located in Scottsdale, Arizona.

Effective November 30, 2010, we merged with Global Risk Management & Investigative Solutions (“Global Risk”), a public company with its common stock registered with the United States Securities and Exchange Commission.  The Company merged into a newly formed wholly owned subsidiary of Global Risk, with the Company being the surviving corporation.  Post-merger, Global Risk changed its name to Guardian 8 Holdings.

Basis of presentation

These interim financial statements are condensed and should be read in conjunction with the Company’s December 31, 2014 annual statements included in the Form 10-K filed on March 31, 2015.

Principles of consolidation

For the three and nine months ended September 30, 2015 and 2014, and for the year ended December 31, 2014, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.

Cash and cash equivalents

Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.  At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.  As of September 30, 2015 and December 31, 2014, there were cash equivalents of $80,001 and $491,988 respectively. 

Inventory

During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its Pro V2 from its contract manufacturer.  These deliveries were part of the Company’s initial purchase orders totaling 11,800 units.  The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States.  The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection.  The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred.  As of September 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders and has reserved $59,510 to offset any units scrapped during inspection of units not yet performed as of this date.  No additional purchase orders are pending.  As of September 30, 2015 there are approximately 10,400 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months. Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or market.  Inventories include the cost of inbound shipping, duty and receiving inspection.  Inventory obsolescence is examined on a regular basis.  Currently there is no inventory considered obsolete.

Accounts receivable

Accounts receivable are customers outstanding balances carried on a gross basis less allowance for doubtful accounts.  Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of our customers, and the amount and age of past due accounts.  Receivables are considered past due if full payment is not received by the contractual due date.  Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.  We review these policies on a quarterly basis and based on these reviews, we believe we maintain adequate reserves.  At September 30, 2015 and December 31, 2014, the allowance for doubtful accounts was $478 and $4,978, respectively. Interest is not accrued on overdue accounts receivable.

Revenue recognition

Revenues are recognized in accordance with ASC subtopic 605-10, “Revenue Recognition”.  The company recognizes revenue from sales of product upon delivery to its customers where the fee is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.  Revenues for the nine months ended September 30, 2015 and 2014 were $157,262 and $39,346, respectively.

Warranty

The Company offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device.  These fees are intended to cover the handling and repair costs and include a profit.  One year extended warranties that provide additional coverage beyond the limited warranty are offered for specified fees. Revenue derived from the sale of extended warranties are deferred and amortized over the duration of the warranty period.  As of September 30, 2015 and December 31, 2014, the Company recorded $14,544 and $4,513 as deferred revenue, respectively.  Extended warranty expense for the nine months ended September 30, 2015 and 2014 was $6,579 and $955, respectively.

Research and development costs

The Company expenses all costs of research and development as incurred. Research and development expenses included in general and administrative expenses totaling $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014 respectively. 

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.  All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01.  Adjustments include appropriate estimates for arrangements normally determined or settled at year-end.  All adjustments are of a normal and recurring nature.

Property and equipment

Property and equipment are stated at cost.  Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.

The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: 

Equipment
2-5 years
Tooling
10 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, debentures payable and related accrued interest, and derivative liability.  Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.  See Note 14 for further details.

Impairment of long-lived assets

ASC 360, “Accounting for the Impairment of Long-Lived Assets to be Disposed Of”, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future new cash flows expected to result from the asset, including eventual disposition.  If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.  The Company did not have impaired assets during the nine months ended September 30, 2015 and 2014. 

Net loss per share

Net Loss per share is provided in accordance with ASC 260-10, “Earnings Per Share” that requires the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with ASC 260-10, any anti-dilutive effects on net income (loss) per share are excluded.  For the nine months ended September 30, 2015 and 2014, the denominator in the diluted earnings per share computation is the same as the denominator for basic earnings per share due to the anti-dilutive effect of the warrants on the Company’s net loss.  Diluted earnings (loss) per share is not presented since the effect of the assumed conversion of warrants would have an anti-dilutive effect. Potential common shares as of September 30, 2015 that have been excluded from the computation of diluted net loss per share amounted to 23,709,523 from warrants and debt totaling $7,207,500 that is convertible into 96,100,000 common shares.

Income taxes

The Company follows ASC subtopic 740-10, “Accounting for Income Taxes”, for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.  See Note 15 for further details.

 Recent pronouncements

The Company has evaluated all new accounting pronouncements as of the issue date of these financial statements and has determined that none have or will have a material impact on the financial statements or disclosures.

XML 53 R3.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Allowance for doubtful accounts (in Dollars) $ 478 $ 4,978
Fixed assets, accumulated depreciation (in Dollars) 176,856 116,863
Accumulated amortization (in Dollars) $ 6,198 $ 4,698
Preferred stock, par value (in Dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares outstanding 0 0
Preferred stock, shares issued 0 0
Common stock, par value (in Dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 60,515,071 41,416,113
Common stock, shares outstanding 60,515,071 41,416,113
Common stock owed but not issued 917,681 1,127,859
Convertible Debt [Member]    
Convertible debt, discount (in Dollars) $ 2,113,383 $ 1,120,509
Convertible Notes Payable [Member]    
Convertible debt, discount (in Dollars) $ 36,767  
XML 54 R17.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 11 - Options and warrants
 9 Months Ended
Sep. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 11 – Options and warrants

Options

As of September 30, 2015 and December 31, 2014 there were no outstanding options.

Warrants

On January 1, 2014, there were 13,376,623 warrants outstanding.

During the year ended December 31, 2014, there were 500,000 warrants issued with notes payable, 7,000,000 warrants issued with debentures, 175,000 warrants issued for debenture conversions, and 560,000 warrants issued for broker fees.  There were no warrants exercised.

As of December 31, 2014, there were 21,611,623 warrants outstanding.

   
Number of Options
   
Weighted Average
Exercise Price of Options
   
Number of Warrants
   
Weighted Average
Exercise Price of Warrants
 
Outstanding 1/01/2014
   
-
   
$
-
     
13,376,623
   
$
0.61
 
    Granted
   
-
     
-
     
8,235,000
     
0.59
 
    Cancelled
   
-
     
-
     
-
     
-
 
    Exercised
   
-
     
-
     
-
     
-
 
Outstanding 12/31/2014
   
-
   
$
-
     
21,611,623
   
$
0.60
 

During the first quarter of 2015, 115,000 warrants were exercised at $0.25 per share.

In conjunction with the sale of 1,096,800 shares of common stock for $548,400 in the first quarter 2015, the Company issued 1,096,800 warrants to purchase common shares at $0.50 for a period of five years.  These shares and warrants were purchased by and issued to executives and members of the Board of Directors of the Company.

In connection with the duly exercised Amendment to Securities Purchase Agreement dated June 2, 2015 the Company reduced the exercise price of all of its Class C Warrants from $0.50 per share to $0.10 per share. The Company valued its Class C warrants on the date of change using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $535,100. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, and a trading price $0.14 per share and exercise price $0.10.  The discount will be amortized over the remaining ten months to maturity on July 31, 2016.  In addition, 18,600 warrants valued at $1,477 were issued to placement agents.

In March 2015, the Company changed its exercise price of its Class A and B warrants from prices ranging from $0.55 to $0.75 per share to $0.50 per share.  The Company valued these warrants at $220,125 on the date of change using the Black-Scholes option pricing model and treated the change in value as additional compensation which is being expensed over the remaining lives of the various warrants. The assumptions used in the pricing model were:  terms ranging from approximately 5 months to four years and three months, risk free interest rate. ranging from 1.10% to 1.62%, volatility ranging from 112.04% to 125.00%, and a trading price $0.45 per share and exercise price $0.50.  The discount will be amortized over the remaining ten months to maturity on July 31, 2016.

Also in connection with the duly exercised Amendment to Securities Purchase Agreement dated June 2, 2015 the Company reduced the exercise price of all of its remaining outstanding warrants from $0.50 per share to $0.10 per share. The Company valued the change in the fair value of these warrants at June 2, 2015 at $512,713, which is being amortized into operations over the remaining terms of the various warrants. The Company valued these warrants on the date of change using the Black-Scholes option pricing model. The assumptions used in the pricing model were:  term ranging from 2 months to 8.5 years, risk free interest rates ranging from 0.28%%, to 2.07%, volatility ranging from 117.73%, to 189.34%, trading price $0.14 per share and exercise price $0.10.  

Amortization charged to operations on the increase in the above warrant values due to the reduction in the exercise prices during the nine months ended September 30, 2015 was $1,649,695.

In June 2015, 267,500 warrants were issued in conjunction with debenture conversions.

In June 2015, 625,000 warrants were issued in conjunction with the sale of additional debentures.

In July 2015, 50,000 warrants were issued in conjunction with the sale of additional debentures.

In August 2015, 40,000 warrants were issued in conjunction with debenture conversions.

In August 2015, 50,000 warrants were issued in conjunction with the sale of additional debentures.

In September 2015, 50,000 warrants were issued in conjunction with debenture conversions.

In September 2015, 15,000 warrants were issued in conjunction with the sales of additional debentures.

As a result of the $0.50 unit offering in February 2015, the Company was required to adjust the exercise price on all of its Class A, B and C warrants (18,532,500 warrants in the aggregate) down to $0.50.  In June 2015 the exercise price of the Class A, B and C warrants were further adjusted down to $0.10 per share.  See Note 10 for the explanation of the revaluation of the Class A, B and C warrants.

During the quarter ended September 30, 2015 392,500 warrants expired and were cancelled.

A summary of warrants as of September 30, 2015 is as follows:

   
Number of Options
   
Weighted Average
Exercise Price of Options
   
Number of Warrants
   
Weighted Average
Exercise Price of Warrants
 
Outstanding 1/01/2015
   
-
   
$
-
     
21,611,623
   
$
0.15
 
    Granted
   
-
     
-
     
2,212,900
     
0.10
 
    Cancelled
   
-
     
-
     
(392,500)
     
0.55
 
    Exercised
   
-
     
-
     
(115,000
)
   
0.25
 
Outstanding 9/30/2015
   
-
   
$
-
     
23,317,023
   
$
0.14
 

XML 55 R1.htm IDEA: XBRL DOCUMENT v3.3.0.814
Document And Entity Information - shares
 9 Months Ended
Sep. 30, 2015
Nov. 10, 2015
Document and Entity Information [Abstract]    
Entity Registrant Name Guardian 8 Holdings  
Document Type 10-Q  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   61,315,071
Amendment Flag false  
Entity Central Index Key 0001429592  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Filer Category Smaller Reporting Company  
Entity Well-known Seasoned Issuer No  
Document Period End Date Sep. 30, 2015  
Document Fiscal Year Focus 2015  
Document Fiscal Period Focus Q3  
XML 56 R18.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 12 - Lease commitments and related party transactions
 9 Months Ended
Sep. 30, 2015
Lease Commitments And Related Party Transactions [Abstract]  
Lease Commitments And Related Party Transactions [Text Block]
Note 12 – Lease commitments and related party transactions

In December of 2011, the Company leased space in Scottsdale, Arizona for its main headquarters. The lease ran from January 2012 to March 2014 at a rate of $1,907 per month. The lease expired on June 30, 2014.  The Company subsequently entered into a new lease on July 1, 2014 (See Note 18).

On July 1, 2014, the Company entered into a forty-month office lease agreement ending on October 31, 2017.  The lease requires monthly payments of $5,988.

Rent expense was $50,746 and $12,520 for the nine months ended September 30, 2015 and 2014, respectively.

During the nine months ended September 30, 2014, as part of a new convertible debenture, the Company issued notes payable totaling $295,000 to related parties.  During the nine months ended September 30, 2015, as part of a new convertible debenture, the Company issued notes payable totaling $275,000.  The maturity date for these notes is July 31, 2016.  See Note 8 for further details.

See Note 15 for details on stock issued to employees and related party consultants per their employment or consulting contracts with the Company.

XML 57 R4.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Statement of Operations (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Revenues $ 61,954 $ 20,334 $ 157,262 $ 39,346
Cost of sales 32,533 13,397 86,767 27,501
Gross profit 29,421 6,937 70,495 11,845
Depreciation and amortization 23,100 24,858 67,500 68,001
General and administrative expenses 526,377 1,184,489 2,422,227 2,973,393
549,477 1,209,347 2,489,727 3,041,394
Loss from operations (520,056) (1,202,410) (2,419,232) (3,029,549)
Other income (expense):        
Interest income 0 1,262 0 1,999
Interest expense (1,041,025) (572,155) (2,506,270) (1,213,532)
Loss in extinguishment of debt 0 0 (6,118,145) 0
Change in fair value of derivative liability 838,603 0 (2,193,898) 0
Total other income (expense) (202,422) (570,893) (10,818,313) (1,211,533)
Loss before income tax (722,478) (1,773,303) (13,237,545) (4,241,082)
Provision for income tax expense 0 0 0 0
Net loss $ (722,478) $ (1,773,303) $ (13,237,545) $ (4,241,082)
Net loss per share - basic (in Dollars per share) $ (0.01) $ (0.04) $ (0.27) $ (0.10)
Weighted average shares outstanding – basic (in Shares) 58,650,456 41,172,560 49,867,454 40,806,423
XML 58 R12.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 6 - Bank line of credit
 9 Months Ended
Sep. 30, 2015
Disclosure Text Block [Abstract]  
Short-term Debt [Text Block]
Note 6 – Bank line of credit

On January 17, 2014, the Company entered into a revolving line of credit agreement with Cornerstone Bank, N.A.  The agreement provided for an aggregate of up to $700,000, which was increased to $900,000 on April 28, 2014, at any time outstanding pursuant to a revolving line of credit and matured on January 16, 2015.  The agreement was secured by inventory, work in process, accounts receivable, a letter of credit, and was personally guaranteed by the Company’s Chief Executive Officer/President.  Interest was at 6% per annum, with monthly interest payments to be paid by the Company.

As part of the agreement, the Company entered into a Letter of Credit Rights Control Agreement with F&M Bank & Trust Company.  Per this agreement, if the Company were to default on the line of credit, F&M Bank & Trust Company would then be held liable to Cornerstone Bank, N.A. for the payment of the line of credit.  In addition, the Company would then owe the amount disbursed to F&M Bank & Trust Company.  As of September 30, 2014, the bank line of credit was fully paid and the pledged letter of credit terminated.

XML 59 R11.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 5 - Deposit on Inventory
 9 Months Ended
Sep. 30, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]
Note 5 – Deposit on Inventory

As of September 30, 2015 the Company had no outstanding deposits on inventory or prepaid inventory in transit.  On December 31, 2014 the Company had prepaid inventory of $22,674 which was in transit from the manufacturer and received in January 2015.

XML 60 R23.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 17 - Public & Investor Relations Agreements
 9 Months Ended
Sep. 30, 2015
Disclosure Text Block Supplement [Abstract]  
Commitments Disclosure [Text Block]
Note 17 – Public and Investor Relations Agreements

On March 1, 2013, the Company entered into a one-year agreement with a public relations firm to assist with public relations as the Company moves into scaled production and distribution.  The contract will be executed on a project-by-project basis, beginning with media assistance provided at an industry conference in April 2013.  All monies paid under this contract were classified in sales, general and administrative expenses as a marketing expenditure. This agreement terminated on February 28, 2014.

On August 30, 2013, the Company entered an agreement with an investor relations firm for a period of 12 months, ending May 26, 2014, with the right to cancel services at the end of each subsequent three-month period.  The terms of the agreement called for the issuance of 142,000 common shares to be issued for the first three-months of service ending November 26, 2013, and then the equivalent number of shares required to compensate for the $50,000 per period thereafter.  This agreement was terminated on May 26, 2014.

On October 29, 2013, the Company entered an agreement with a digital marketing services firm for a period of twelve months and ended October 31, 2014.  The terms of the agreement called for a payment of $70,200 for the twelve months of service.  The agreement was terminated on October 31, 2014.

On September 8, 2014, the Company entered an agreement with a social media firm for a period of six months that ended March 8, 2015.  The agreement provided the right to cancel services upon 30 days-notice. The terms of the agreement called for payment of $4,750 per month.  This agreement was terminated on November 30, 2014.

On September 8, 2014, the Company entered an agreement with digital sales and marketing firm for a period of three months that ended December 8, 2014.  The terms of the agreement called for payment of $32,000 per month paid 50% cash and 50% common stock.

On September 30, 2014, the Company entered into a sales referral agreement with commissions of 5%.

On October 1, 2014, the Company entered an agreement with a national distributor for a period of three years which ends September 30, 2017.  The agreement provided the right to cancel services upon 30 days-notice.  The terms of the agreement call for commission of 15%.

On October 14, 2014, the Company entered an agreement with a Federal agency marketing firm for a period of three months that ended January 13, 2015.  The terms of the agreement called for a payment of $57,000 for the three months of service.  This agreement was extended to July 15, 2015.

On November 5, 2014, the Company entered an agreement with a digital marketing and public relations firm for a period of six months ending May 5, 2015. The terms of the agreement called for payments of $36,000 per quarter.  On April 12, 2015 this agreement was cancelled.

On December 5, 2014, the Company entered into an international sales referral agreement with commissions between 6% and 8%.

On January 1, 2015, the Company entered into agreements with Merriman Capital, Inc. to provide Banking and Advisory services. The monthly retainer for these services is $10,000.

 On January 1, 2015, the Company entered into agreements with Top Sales and Marketing, Inc. to provide Consulting services.  The monthly fee for these services is $5,000 and the original one month contract was extended through March 2015.

On March 1, 2015, the Company extended an agreement with a Federal agency marketing firm for a period from January 15, 2015 through July 15, 2015.  The terms of the agreement require monthly payments of $12,500 for the term of the agreement and 150,000 shares of the Company’s restricted common stock.  

XML 61 R19.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 13 - Derivative Liability
 9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Note 13 – Derivative Liability

At June 30, 2015, the Company recognized a derivative liability and a correlating charge to operations in the amount of $3,032,501 pursuant to ASC Topic 815-25-19 “Contracts in Entity's Own Equity” as the total number of Company’s committed common shares and the number of actual common shares outstanding at June 30, 2015 exceeded the number of common shares the Company currently is authorized to issue. The liability was computed based upon the fair value of the committed and outstanding shares. The committed shares consisted of $7,182,500 of debt convertible into 46,803,566 shares of common stock and 23,485,923 common stock warrants. In the valuation, the Company used the trading price of its common stock at June 30, 2015 of $0.11 per share.

At September 30, 2015 the fair value of the derivative liability was $2,193,898. The liability was computed based upon the fair value of the committed and outstanding shares. The committed shares consisted of $7,207,500 of debt convertible into 96,100,000 shares of common stock and 23,317,023 common stock warrants. In the valuation, the Company used the trading price of its common stock at September 30, 2015 of $0.03 per share.

XML 62 R15.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 9 - Patents
 9 Months Ended
Sep. 30, 2015
Disclosure Text Block [Abstract]  
Intangible Assets Disclosure [Text Block]
Note 9 – Patents

In June of 2009, concurrent with the Company’s incorporation, one of its officers and directors, agreed to transfer all rights, title and interest in the patent he held for a personal security device. The cost of the patent is being amortized over the 20-year life of the patent.

The Company hired a patent attorney specializing in products for the security industry to assist in filing additional utility and technology patents for its new enhanced non-lethal products.  As of September 30, 2015, the costs paid to this attorney for the filings, drawings, and research totaled $23,735.  These costs have been capitalized and are being amortized over a 15-year life.

XML 63 R13.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 7 - Notes payable
 9 Months Ended
Sep. 30, 2015
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
Note 7 – Notes payable

On September 1, 2013, the Company had a total of $615,000 of the original $650,000 in notes payable outstanding to its CEO and directors, with an additional $33,933 owed in accrued interest.  This debt, previously due on September 1, 2013 through November 30, 2013, was exchanged for three new unsecured notes payable totaling $648,933.  Each of these notes were to mature on April 30, 2014, bearing interest at 12% per annum, and included a three-year warrant for every $1.00 of principal amount of each note.  The warrants were exercisable at $0.40 per share.  The notes were subsequently extended with a due date of July 15, 2014 however, the notes payable and related accrued interest were paid off as of June 30, 2014.

Issue Date
 
Interest Rate
   
Current Due Date
 
Amount
 
September 1, 2013
   
12.0
%
 
July 15, 2014
 
$
543,300
 
September 1, 2013
   
12.0
%
 
July 15, 2014
   
52,983
 
September 1, 2013
   
12.0
%
 
July 15, 2014
   
52,650
 
Total
           
$
648,933
 

On September 1, 2013 the Company issued a note payable in the amount of $45,000 from a related party in exchange for outstanding invoices owed for engineering services provided in the first nine months of the year.  The note is unsecured, bears interest at 12% per annum, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note was subsequently extended with a due date of July 15, 2014.

On September 18, 2013, the Company issued a note payable to the CEO and president of the Company in the amount of $50,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note was subsequently extended with a due date of July 15, 2014.

On September 19, 2013, the Company issued a note payable to a related party in the amount of $30,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note was subsequently extended with a due date of July 15, 2014.

On September 19, 2013, the Company issued a note payable to a related party in the amount of $250,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share. The note was subsequently extended with a due date of July 15, 2014.

On September 30, 2013, the Company issued a note payable in the amount of $100,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.   The warrants are exercisable at $0.40 per share. The note was subsequently extended with a due date of July 15, 2014.

As of December 31, 2013, the Company had notes payable of $1,123,933 and accrued interest of $42,158.  All amounts were due within twelve months.  The Company also recognized $296,524 of loan fees associated with the notes payable issued during the year ended December 31, 2013.  The loan fees were amortized over the term of the notes payable.

Issue Date
 
Interest Rate
   
Current Due Date
 
Amount
 
September 1, 2013
   
12.0
%
 
April 30, 2014
 
$
543,300
 
September 1, 2013
   
12.0
%
 
April 30, 2014
   
52,983
 
September 1, 2013
   
12.0
%
 
April 30, 2014
   
52,650
 
September 1, 2013
   
12.0
%
 
April 30, 2014
   
45,000
 
September 18, 2013
   
12.0
%
 
April 30, 2014
   
50,000
 
September 19, 2013
   
12.0
%
 
April 30, 2014
   
30,000
 
September 19, 2013
   
12.0
%
 
April 30, 2014
   
250,000
 
September 30, 2013
   
12.0
%
 
April 30, 2014
   
100,000
 
Total
             
$
1,123,933
 

These notes payable were paid with proceeds from the sale of debentures in June, 2014.

On February 12, 2014, the Company issued a note payable in the amount of $50,000 to a related party.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On February 24, 2014, the Company issued a note payable in the amount of $25,000 to a related party.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and includes a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On February 24, 2014, the Company issued a note payable in the amount of $400,000 to a related party.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On February 24, 2014, the Company issued a note payable in the amount of $25,000 to an unaffiliated Company.  The note was unsecured, bears interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants are exercisable at $0.50 per share.  The note and related accrued interest were paid off in June 2014.

On April 18, 2014, the Company issued a note payable in the amount of $90,000 to a related party.  The note was unsecured, bearing interest at 12% and was payable on July 15, 2014.  The note and related accrued interest were paid off in June 2014.

On May 9, 2014, the Company issued a note payable in the amount of $25,000 to a related party.  The note was unsecured, bearing interest at 12% and was payable on July 15, 2014.  The note and related accrued interest were paid off in June 2014.

These notes payable were paid June 2, 2014 from proceeds of the sale of debentures.  Notes payable balances were $0 as of June 30, 2015 and December 31, 2014.  Total interest expense on notes payable was $0 and $63,677 for the nine months ended September 30, 2015 and 2014, respectively.

On August 13, 2015 we completed the sale of a Convertible Promissory Note in the principal amount of $120,750 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between a New York corporation, and us.  The note matures on August 17, 2016. The VVG Note may be prepaid in whole or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the issue date, beginning at 110% of the outstanding principal and accrued interest increasing by 5% for every 30-day period thereafter until the 180th day following the Closing Date. After the expiration of the 180 days following the Closing Date, we may not prepay the Note for any reason.  At any time after 180 days after the date the note is issued it is convertible into our common stock, at buyer’s option, at a 25% discount to the market price, which is defined as 75% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading days prior to the conversion date.  The conversion price is subject to proportional adjustment in the event of stock splits, stock dividends, and similar corporate events.

XML 64 R14.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 8 - Convertible Senior Secured Debentures
 9 Months Ended
Sep. 30, 2015
Disclosure Text Block [Abstract]  
Long-term Debt [Text Block]
Note 8 – Convertible Senior Secured Debentures

Through September 30, 2015, the Company has issued the following convertible Senior Secured Debentures:

The first closing was on May 27, 2014 for $5,250,000 with 8% interest and an amended maturity date of July 31, 2016.

The second closing was on June 2, 2014 for $1,750,000 with 8% interest and an amended maturity date of July 31, 2016.

The third closing was on June 2, 2015 for $625,000 with 8% interest and a maturity date of July 31, 2016.

The fourth closing was on July 31, 2015 for $50,000 with 8% interest and a maturity date of July 31, 2016.  The loan was from the Company’s President/CEO.

The fifth closing was on August 26, 2015 for $50,000 with 8% interest and a maturity date of July 31, 2016.  The loan was from the Company’s President/CEO.

The sixth closing was on September 14, 2015 for $15,000 with 8% interest and a maturity date of July 31, 2016.  The loan was from the Company’s President/CEO.

The maturity date for the first two closings was extended from November 30, 2015 to July 31, 2016 in accordance with the duly exercised First Amendment to Securities Purchase Agreement effective June 2, 2015.  The exercise price was reduced to $0.50 as of March 10, 2015, due to the sale of shares, in accordance with the requirements of the debenture agreements.  The exercise price was again reduced to $0.10 on June 2, 2015 due to the issuance of additional debentures.

Conversion Rights - The debentures may be converted by each buyer at any time through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.075 per share.

The Company may force conversion of the debentures into shares of common stock at $0.075 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $0.20 per share.

In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.20, then on the maturity date, the buyers must convert all remaining principal due under the debentures.

Upon conversion of any debentures, an additional Class C Warrant will be issued under the same terms and same amount as the warrants issued in the debenture sale.

Security of Debentures - The debentures are guaranteed, pursuant to “Secured Guaranty” and “Pledge and Security Agreement by Guardian 8 Corporation and a secured interest in all of the assets of the company and Guardian 8 Corporation.

Registration Rights - The Company agreed to file a “resale” registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144.  The Registrant agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company was obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty-day period up to a maximum of six percent, (i) that the registration statement had not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements.  On October 29, 2014 the Company’s registration statement was declared effective. The registration statement is currently not effective; however, debenture holders are able to utilize Rule 144 for the resale of common stock underlying the debentures.

Valuation of Warrants - The Company valued its Class C warrants based upon the change in terms under the June 2, 2015 amendment. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amounts of $535,100. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14, and exercise price $0.10.  The discount will be amortized over the remaining thirteen months to maturity on July 31, 2016.  Based upon the change in terms of the June 2, 2015 amendment, the Company accounted for the change in terms as an extinguishment of debt pursuant to ASC Topic 470-50 and recorded a loss on the extinguishment of $6,118,145.  Substantially all of the loss was based upon the change in the fair value of conversion feature of the subject debt from $0.50 per share to $0.10 per share.

In connection with the issuance of $625,000 of convertible debt on June 2, 2015, the Company granted 625,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $220,125. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14 per share, and exercise price $0.10.  The discount of $130,861 as of September 30, 2015 will be amortized over the remaining ten months to maturity on July 31, 2016.

In connection with the issuance of $115,000 of convertible debt during the third quarter 2015, the Company granted 115,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $5,247. The assumptions used in the pricing model were:  term 10 to 12 months, risk free interest rate .25%, volatility 198%, trading price of $0.03 to $0.07 per share, and exercise price $0.10. 

Related Parties - $570,000 of the debentures were to related parties.

XML 65 R16.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 10 - Stockholders' equity
 9 Months Ended
Sep. 30, 2015
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
Note 10 – Stockholders’ equity

On January 1, 2014, there were 37,274,292 common shares issued and outstanding, 2,855,979 common shares owed but not issued, and no preferred shares issued.  As of June 30, 2015, all of the shares owed but not issued have been issued to their respective parties.

On February 3, 2014, the Company authorized and recognized the expense for 325,000 shares of common stock, valued at $130,000 to an outside consultant pursuant to an agreement with the consultant.  These shares were owed but not issued as of September 30, 2015.

On February 3, 2014, the Company authorized and recognized the expense for 98,039 shares of common stock, valued at $50,000 to an outside consultant pursuant to an agreement with the consultant.  These shares were issued in May 2014.

On March 31, 2014, the Company authorized and recognized the expense for the issuance of 104,000 shares of common stock, valued at $53,040 to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were issued in May 2014.

On March 31, 2014, the Company authorized and recognized the expense for the issuance of 150,000 shares of common stock, valued at $76,500 to its CEO pursuant to the terms of his employment agreement.  These shares were issued in May 2014.

On May 20, 2014, the Company authorized, issued and recognized the expense for 60,000 shares of common stock, valued at $30,600 to a board member.

On June 18, 2014, the Company authorized 200,000 shares of common stock to its interim CFO per the terms of her new employment contract (See Note 15).  The associated expense recognized during the second quarter of 2014 was $96,020.  These shares were issued in the second quarter of 2014.

On June 30, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its interim CFO per her new employment contract (See Note 15).  These shares were issued in the third quarter of 2014.

On August 1, 2014 the Company authorized and recognized the expense for the issuance of 9,375 shares of common stock, valued at $4,125 to an employee.  These shares were issued in the fourth quarter of 2014.

On September 8, 2014 the Company authorized and recognized the expense for the issuance of 26,230 shares of common stock, valued at $16,000 to a consultant.  These shares were issued in the fourth quarter of 2014.

On September 30, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $58,800 to its interim CFO per her new employment contract (See Note 15).  These shares were issued in the fourth quarter of 2014.

On October 8, 2014 the Company authorized and recognized the expense for the issuance of 26,667 shares of common stock, valued at $16,000 to a consultant.  These shares were issued in the fourth quarter of 2014.

On November 8, 2014 the Company authorized and recognized the expense for the issuance of 36,774 shares of common stock, valued at $16,000 to a consultant.  These shares were issued in the fourth quarter of 2014.

On November 13, 2014 the Company authorized and recognized the expense for the issuance of 12,000 shares of common stock, valued at $5,100 to an employee.  These shares were issued in the fourth quarter of 2014.

During the fourth quarter of 2014, by request from debenture owners that their debentures be converted, the Company issued 350,000 shares pursuant to the terms of the debenture agreements.  The shares valued at $175,000 were issued as of December 31, 2014.  In addition, 7,507 shares valued at $3,754 were issued for accrued interest through the date of conversion.

On December 31, 2014, the Company authorized 335,000 shares of its common stock to six non-employee directors for director fees.  The services were valued at $157,192.  These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.

On December 31, 2014, the Company authorized 200,000 shares of its common stock to its CEO as a bonus for services performed for the Corporation.  These shares were valued at $94,000.  These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.

On December 31, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were owed but not issued as of December 31, 2014 and were subsequently issued in February 2015.

Effective December 31, 2014, 162,859 shares of common stock became issuable to members of the Company’s executive and sales teams for their efforts during the fiscal year. The expense associated with these grants totaled $76,544.  These shares were owed but not issued as of December, 31, 2014 and were subsequently issued in February 2015.

During the year ended December 31, 2014, the Company corrected an error in a warrant exercise by decreasing 5,000 shares that were unissued.

As of December 31, 2014, there were 41,416,113 common shares issued and outstanding, 1,127,859 common shares owed but not issued, and no preferred shares issued.

During the first quarter of 2015, the Company issued 802,859 shares which were previously owed but not issued.

During the first three quarters of 2015, the Company authorized 465,000 shares, valued at $137,550 for services.  315,000 shares were authorized in accordance with the interim CFO agreement and 150,000 were authorized for a consultant.  105,000 shares were issued to the interim CFO in April 2015 and as of September 30, 2015, the consultant shares and the remaining 210,000 CFO shares have not been issued.

The Company authorized 115,000 shares upon the exercise of warrants and received $28,750 cash.  90,000 shares were issued in January 2015 and the remaining 25,000 shares are owed as of September 30, 2015.

On March 10, 2015, the Company authorized and subsequently issued 1,096,800 shares for $548,400 cash.  These shares were purchased by and issued to executives and members of the Board of Directors of the Company.  As a result of the cash sale of 1,096,800 shares at $.50 per share and a warrant with an exercise price of $.50, we are required to ratchet down all Class A, B and C warrants.  In addition, on June 2, 2015 the Company revised the share price of this cash investment from $.50 per share to $.075 per share.  As a result, an additional 6,215,201 shares were issued to these investors in June 2015.

In addition, during the first quarter of 2015, the Company authorized 251,182 shares and issued 220,826 shares in payment of interest on debentures due March 1, 2015.  5,041 shares were issued in June 2015 and the remaining 25,315 shares were issued in September, 2015.  The 251,182 shares were valued at $125,591.

On June 1, 2015, the Company authorized 3,125,499 additional shares for payment of interest to debenture holders for interest through June 1, 2015.  2,858,481 shares were issued on June 1, 2015.  59,337 shares were issued on September 1, 2015 and 207,681 shares are owed as of September 30, 2015.  The 3,125,499 shares were valued at $426,006.

During June 2015, by request from debenture owners that their debentures be converted, the Company issued 3,566,667 shares pursuant to the terms of the debenture agreements in addition to 4,379 shares for accrued interest.  The conversion shares valued at $267,500 were issued in June 2015.  4,379 interest shares valued at $645 were issued for accrued interest through the date of conversion.

The Company valued its Class C warrants based upon the change in terms under the June 2, 2015 amendment. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $535,100. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%%, volatility 119.05%, trading price $0.14, and exercise price $0.10.  The discount will be amortized over the remaining thirteen months to maturity on July 31, 2016. Based upon the change in terms of the June 2, 2015 amendment, the Company accounted for the change in terms as an extinguishment of debt pursuant to ASC Topic 470-50 and recorded a loss on the extinguishment of $6,118,145.  Substantially all of the loss was based upon the change in the fair value of conversion feature of the subject debt from $0.50 per share to $0.10 per share.  The loss in addition to the change in discount of $1,851,635 resulted in $7,969,780 additional paid in capital.

In connection with the issuance of $625,000 of convertible debt on June 2, 2015, the Company granted 625,000 warrants. The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $220,125. The assumptions used in the pricing model were:  term 1.17 years, risk free interest rate .26%, volatility 119.05%, trading price $0.14 per share, and exercise price $0.10.  The discount of $130,861 as of September 30, 2015 will be amortized over the remaining ten months to maturity on July 31, 2016.

On August 12, 2015, a debenture holder converted $40,000 in principal amount of its debenture to 533,333 shares common stock, we authorized the issuance of 6,168 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 40,000 warrants.

On September 18, 2015, a debenture holder converted $50,000 in principal amount of its debenture to 666,666 shares common stock, we authorized the issuance of 36,529 restricted shares of common stock for interest associated with the principal amount of the debenture being converted.  As a result of the conversion, the holders currently issued warrants automatically increased by an additional 50,000 warrants.

On September 1, 2015, the Company authorized 2,806,356 shares for payment of interest to debenture holders for interest through September 1, 2015.  2,806,356 shares were issued on September 1, 2015.  The 2,806,356 shares were valued at $144,247.

As of September 30, 2015, there were 60,515,071 common shares issued and outstanding, 917,681 common shares owed but not issued, and no preferred shares issued.

XML 66 R34.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 1 - Company Organization and Summary of Significant Accounting Policies (Details) - Property, Plant and Equipment, Useful Lives
 9 Months Ended
Sep. 30, 2015
Tooling [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful life 10 years
Leasehold Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Leasehold improvements Life of lease
Furniture and Fixtures [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful life 5 years
Minimum [Member] | Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful life 2 years
Maximum [Member] | Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful life 5 years
XML 67 R51.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 16 - Employment Contracts (Details)
 3 Months Ended 9 Months Ended 12 Months Ended
Jul. 29, 2015
shares
Jan. 01, 2015
USD ($)
Dec. 31, 2014
shares
Nov. 01, 2014
USD ($)
shares
Mar. 31, 2014
shares
Mar. 11, 2014
USD ($)
shares
Mar. 04, 2013
USD ($)
shares
Mar. 31, 2015
shares
Sep. 30, 2015
USD ($)
shares
Dec. 31, 2014
shares
Dec. 31, 2012
shares
May. 22, 2014
USD ($)
shares
Note 16 - Employment Contracts (Details) [Line Items]                        
Stock Authorized to be Issued, Shares               1,096,800        
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized 6,750,000                      
Number of Employees 7                      
Stock Issued During Period, Shares, Restricted Stock Award, Gross 4,022,613                      
Vice President of Customer Support [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Expiration Date   Dec. 31, 2017                 Sep. 30, 2015  
Deferred Compensation Arrangement with Individual, Maximum Contractual Term                     3 years  
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance                     288,000  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period                   136,200    
Other Commitment (in Dollars) | $   $ 100,000                    
Chief Operating Officer [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Maximum Contractual Term                     3 years  
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance                     650,000  
Chief Operating Officer [Member] | Restricted Stock [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period                   335,000    
Chief Executive Officer [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Stock Authorized to be Issued, Shares     200,000   150,000              
Chief Executive Officer [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Expiration Date   Dec. 31, 2017         Mar. 31, 2014          
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance             750,000          
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period                   750,000    
Deferred Compensation Arrangement with Individual, Description             Per the agreement, the Company issued 150,000 common shares on the last day of every fiscal quarter as compensation through that period.          
Accrued Salaries (in Dollars) | $                 $ 125,000      
Accrued Payroll Taxes (in Dollars) | $                 $ 9,546      
Chief Executive Officer [Member] | Employee Contract, Second Amendment [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance     420,000             420,000    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period                   515,000    
Chief Executive Officer [Member] | Yearly Salary [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Other Commitment (in Dollars) | $   $ 250,000         $ 250,000          
Non-Employee Interim Chief Financial Officer [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Expiration Date             Mar. 31, 2014          
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance             416,250   105,000      
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period                 315,000      
Deferred Compensation Arrangement with Individual, Description             Per the contract, the Company issued a prescribed amount of common shares on the last day of every fiscal quarter, beginning with the second quarter of 2013 and ending on March 31, 2014.          
Non-Employee Interim Chief Financial Officer [Member] | Monthly Retainer [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Other Commitment (in Dollars) | $             $ 3,000         $ 3,000
Lead Engineer [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Expiration Date   Dec. 31, 2017       Mar. 30, 2016            
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance     22,287     82,287       22,287    
Deferred Compensation Arrangement with Individual, Description           Per the agreement, the Company will issue up to 27,429 common shares per year.            
Stock Authorized to be Issued, Shares                   60,000    
Lead Engineer [Member] | Yearly Salary [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Other Commitment (in Dollars) | $   $ 105,000       $ 96,000            
VP Finance [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance     510,000 540,000           510,000    
Deferred Compensation Arrangement with Individual, Description       Per the agreement, the Company will issue up to 180,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.                
Stock Authorized to be Issued, Shares                   5,000    
VP Finance [Member] | Yearly Salary [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Other Commitment (in Dollars) | $       $ 170,000                
VP Sales [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance     396,667 420,000           396,667    
Deferred Compensation Arrangement with Individual, Description       Per the agreement, the Company will issue up to 140,000 common shares per year based upon the completion of performance related milestones as approved by the Board of Directors.                
Stock Authorized to be Issued, Shares                   5,000    
VP Sales [Member] | Yearly Salary [Member] | Employee Contract [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Other Commitment (in Dollars) | $       $ 140,000                
Maximum [Member] | Chief Executive Officer [Member] | Employee Contract, Second Amendment [Member]                        
Note 16 - Employment Contracts (Details) [Line Items]                        
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance                       935,000
XML 68 R21.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 15 - Income Taxes
 9 Months Ended
Sep. 30, 2015
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 15 – Income Taxes

The Company follows ASC subtopic 740-10 for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.  Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company’s operations for the nine months ended September 30, 2015 and 2014 resulted in losses, thus no income taxes have been reflected in the accompanying statements of operations.

As of December 31, 2014, the Company had net operating loss carry-forwards that may be used to reduce future income taxes payable.  A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to this deferred asset. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.

For financial reporting purposes, the Company has incurred a loss since inception to September 30, 2015.  Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2015. Further, management does not believe it has taken the position in the deductibility of its expenses that creates a more likely than not potential for future liability under the guidance of FIN 48.

XML 69 R26.htm IDEA: XBRL DOCUMENT v3.3.0.814
Accounting Policies, by Policy (Policies)
 9 Months Ended
Sep. 30, 2015
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]
Basis of presentation

These interim financial statements are condensed and should be read in conjunction with the Company’s December 31, 2014 annual statements included in the Form 10-K filed on March 31, 2015.
Consolidation, Policy [Policy Text Block]
Principles of consolidation

For the three and nine months ended September 30, 2015 and 2014, and for the year ended December 31, 2014, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.
Cash and Cash Equivalents, Policy [Policy Text Block]
Cash and cash equivalents

Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.  At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.  As of September 30, 2015 and December 31, 2014, there were cash equivalents of $80,001 and $491,988 respectively.
Inventory, Policy [Policy Text Block]
Inventory

During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its Pro V2 from its contract manufacturer.  These deliveries were part of the Company’s initial purchase orders totaling 11,800 units.  The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States.  The supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection.  The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred.  As of September 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders and has reserved $59,510 to offset any units scrapped during inspection of units not yet performed as of this date.  No additional purchase orders are pending.  As of September 30, 2015 there are approximately 10,400 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months. Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or market.  Inventories include the cost of inbound shipping, duty and receiving inspection.  Inventory obsolescence is examined on a regular basis.  Currently there is no inventory considered obsolete.
Receivables, Policy [Policy Text Block]
Accounts receivable

Accounts receivable are customers outstanding balances carried on a gross basis less allowance for doubtful accounts.  Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of our customers, and the amount and age of past due accounts.  Receivables are considered past due if full payment is not received by the contractual due date.  Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.  We review these policies on a quarterly basis and based on these reviews, we believe we maintain adequate reserves.  At September 30, 2015 and December 31, 2014, the allowance for doubtful accounts was $478 and $4,978, respectively. Interest is not accrued on overdue accounts receivable.
Revenue Recognition, Policy [Policy Text Block]
Revenue recognition

Revenues are recognized in accordance with ASC subtopic 605-10, “Revenue Recognition”.  The company recognizes revenue from sales of product upon delivery to its customers where the fee is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.  Revenues for the nine months ended September 30, 2015 and 2014 were $157,262 and $39,346, respectively.
Standard Product Warranty, Policy [Policy Text Block]
Warranty

The Company offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device.  These fees are intended to cover the handling and repair costs and include a profit.  One year extended warranties that provide additional coverage beyond the limited warranty are offered for specified fees. Revenue derived from the sale of extended warranties are deferred and amortized over the duration of the warranty period.  As of September 30, 2015 and December 31, 2014, the Company recorded $14,544 and $4,513 as deferred revenue, respectively.  Extended warranty expense for the nine months ended September 30, 2015 and 2014 was $6,579 and $955, respectively.
Research and Development Expense, Policy [Policy Text Block]
Research and development costs

The Company expenses all costs of research and development as incurred. Research and development expenses included in general and administrative expenses totaling $123,422 and $244,794 for the nine months ended September 30, 2015 and 2014 respectively.
Use of Estimates, Policy [Policy Text Block]
Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.  All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01.  Adjustments include appropriate estimates for arrangements normally determined or settled at year-end.  All adjustments are of a normal and recurring nature.
Property, Plant and Equipment, Policy [Policy Text Block]
Property and equipment

Property and equipment are stated at cost.  Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.

The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: 

Equipment
2-5 years
Tooling
10 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years
Fair Value of Financial Instruments, Policy [Policy Text Block]
Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, debentures payable and related accrued interest, and derivative liability.  Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.  See Note 14 for further details.
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
Impairment of long-lived assets

ASC 360, “Accounting for the Impairment of Long-Lived Assets to be Disposed Of”, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future new cash flows expected to result from the asset, including eventual disposition.  If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.  The Company did not have impaired assets during the nine months ended September 30, 2015 and 2014.
Earnings Per Share, Policy [Policy Text Block]
Net loss per share

Net Loss per share is provided in accordance with ASC 260-10, “Earnings Per Share” that requires the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with ASC 260-10, any anti-dilutive effects on net income (loss) per share are excluded.  For the nine months ended September 30, 2015 and 2014, the denominator in the diluted earnings per share computation is the same as the denominator for basic earnings per share due to the anti-dilutive effect of the warrants on the Company’s net loss.  Diluted earnings (loss) per share is not presented since the effect of the assumed conversion of warrants would have an anti-dilutive effect. Potential common shares as of September 30, 2015 that have been excluded from the computation of diluted net loss per share amounted to 23,709,523 from warrants and debt totaling $7,207,500 that is convertible into 96,100,000 common shares.
Income Tax, Policy [Policy Text Block]
Income taxes

The Company follows ASC subtopic 740-10, “Accounting for Income Taxes”, for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.  See Note 15 for further details.
New Accounting Pronouncements, Policy [Policy Text Block]
Recent pronouncements

The Company has evaluated all new accounting pronouncements as of the issue date of these financial statements and has determined that none have or will have a material impact on the financial statements or disclosures.
XML 70 R49.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 13 - Derivative Liability (Details) - USD ($)
 6 Months Ended 9 Months Ended
Jun. 30, 2015
Sep. 30, 2015
Jun. 02, 2015
Dec. 31, 2014
Dec. 31, 2013
Note 13 - Derivative Liability (Details) [Line Items]          
Derivative Liability, Current   $ 2,193,898   $ 0  
Class of Warrant or Right, Outstanding   23,317,023   21,611,623 13,376,623
Share Price     $ 0.14    
Other Contract [Member]          
Note 13 - Derivative Liability (Details) [Line Items]          
Derivative Liability, Current $ 3,032,501        
Convertible Debt $ 7,182,500        
Debt Conversion, Converted Instrument, Shares Issued 46,803,566        
Class of Warrant or Right, Outstanding 23,485,923        
Share Price $ 0.11        
Embedded Derivative Financial Instruments [Member]          
Note 13 - Derivative Liability (Details) [Line Items]          
Derivative Liability, Current   $ 2,193,898      
Convertible Debt   $ 7,207,500      
Debt Conversion, Converted Instrument, Shares Issued   96,100,000      
Class of Warrant or Right, Outstanding   23,317,023      
Share Price   $ 0.03      
XML 71 R41.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 7 - Notes payable (Details) - Schedule of Debt, Related Party - USD ($)
May. 09, 2014
Apr. 18, 2014
Sep. 01, 2013
Sep. 30, 2015
Dec. 31, 2014
Note 7 - Notes payable (Details) - Schedule of Debt, Related Party [Line Items]          
Notes Payable, Interest Rate 12.00% 12.00%      
Notes Payable, Current Due Date Jul. 15, 2014 Jul. 15, 2014      
Notes Payable, Amount     $ 648,933 $ 402,865 $ 246,548
CEO and Director [Member]          
Note 7 - Notes payable (Details) - Schedule of Debt, Related Party [Line Items]          
Notes Payable, Interest Rate     12.00%    
Notes Payable, Current Due Date     Apr. 30, 2014    
CEO and Director [Member] | Convertible Note One [Member]          
Note 7 - Notes payable (Details) - Schedule of Debt, Related Party [Line Items]          
Notes Payable, Interest Rate     12.00%    
Notes Payable, Current Due Date     Jul. 15, 2014    
Notes Payable, Amount     $ 543,300    
CEO and Director [Member] | Convertible Note Two [Member]          
Note 7 - Notes payable (Details) - Schedule of Debt, Related Party [Line Items]          
Notes Payable, Interest Rate     12.00%    
Notes Payable, Current Due Date     Jul. 15, 2014    
Notes Payable, Amount     $ 52,983    
CEO and Director [Member] | Convertible Note Three [Member]          
Note 7 - Notes payable (Details) - Schedule of Debt, Related Party [Line Items]          
Notes Payable, Interest Rate     12.00%    
Notes Payable, Current Due Date     Jul. 15, 2014    
Notes Payable, Amount     $ 52,650    
XML 72 R5.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($)
Stock Issued for Compensation [Member]
Common Stock [Member]
Stock Issued for Compensation [Member]
Common Stock to be Issued [Member]
Stock Issued for Compensation [Member]
Additional Paid-in Capital [Member]
Stock Issued for Compensation [Member]
Stock Issued for Director Fees [Member]
Common Stock [Member]
Stock Issued for Director Fees [Member]
Common Stock to be Issued [Member]
Stock Issued for Director Fees [Member]
Additional Paid-in Capital [Member]
Stock Issued for Director Fees [Member]
Stock Issued for Conversion of Debentures Payable and Interest [Member]
Common Stock [Member]
Stock Issued for Conversion of Debentures Payable and Interest [Member]
Additional Paid-in Capital [Member]
Stock Issued for Conversion of Debentures Payable and Interest [Member]
Stock Issued for Interest on Debentures [Member]
Common Stock [Member]
Stock Issued for Interest on Debentures [Member]
Common Stock to be Issued [Member]
Stock Issued for Interest on Debentures [Member]
Additional Paid-in Capital [Member]
Stock Issued for Interest on Debentures [Member]
Warrant [Member]
Additional Paid-in Capital [Member]
Warrant [Member]
Common Stock [Member]
Common Stock to be Issued [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance at Dec. 31, 2013                                   $ 37,273 $ 2,856 $ 6,629,143 $ (7,004,557) $ (335,285)
Balance (in Shares) at Dec. 31, 2013                                   37,274,292 2,855,979     37,274,292
Common Stock previously owed                                   $ 2,856 $ (2,856)      
Common Stock previously owed (in Shares)                                   2,855,979 (2,855,979)      
Common stock issued for compensation $ 172 $ 363 $ 255,735 $ 256,270 $ 60 $ 335 $ 187,397 $ 187,792                            
Common stock issued for compensation (in Shares) 171,375 362,859     60,000 335,000                                
Common stock issued for debenture payable and interest                 $ 358 $ 178,396 $ 178,754                      
Common stock issued for debenture payable and interest (in Shares)                 357,507                          
Discounts on notes payable                                       2,027,088   $ 2,027,088
Private placement fees                                       185,875   185,875
Net loss for the year                                         (6,507,419) (6,507,419)
Common stock issued for services                                   $ 697 $ 430 533,427   534,554
Common stock issued for services (in Shares)                                   696,960 430,000      
Balance at Dec. 31, 2014                                   $ 41,416 $ 1,128 9,997,061 (13,511,976) $ (3,472,371)
Balance (in Shares) at Dec. 31, 2014                                   41,416,113 1,127,859     41,416,113
Common Stock previously owed                                   $ 803 $ (803)      
Common Stock previously owed (in Shares)                                   802,859 (802,859)      
Common stock issued for debenture payable and interest                 $ 4,767 $ 352,733 $ 357,500 $ 6,023 $ 207 $ 692,082 $ 698,312              
Common stock issued for debenture payable and interest (in Shares)                 4,766,666     6,022,432 207,681                 6,230,113
Recognition of discount on changes in fair values of warrants                                       535,100   $ 535,100
Reduction of conversion price of debentures                                       7,969,780   7,969,780
Revaluation of Class A and Class B warrants                               $ 35,711 $ 35,711          
Discounts on notes payable                                       220,125   220,125
Net loss for the year                                         (13,237,545) (13,237,545)
Common stock issued for services                                   $ 105 $ 360 137,085   137,550
Common stock issued for services (in Shares)                                   105,000 360,000      
Exercise of warrants                                   $ 90 $ 25 28,635   28,750
Exercise of warrants (in Shares)                                   90,000 25,000      
Common stock sold for cash                                   $ 7,312   541,088   548,400
Common stock sold for cash (in Shares)                                   7,312,001        
Balance at Sep. 30, 2015                                   $ 60,516 $ 917 $ 20,509,400 $ (26,749,521) $ (6,178,688)
Balance (in Shares) at Sep. 30, 2015                                   60,515,071 917,681     60,515,071
XML 73 R10.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 4 - Property and equipment
 9 Months Ended
Sep. 30, 2015
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Disclosure [Text Block]
Note 4 – Property and equipment

Property and equipment consists of the following:

   
September 30,
2015
   
December 31,
2014
 
Equipment
 
$
98,459
   
$
96,379
 
Tooling
   
127,436
     
127,436
 
Computer equipment
   
58,415
     
42,272
 
Warehouse equipment
   
11,649
     
11,649
 
Leasehold Improvements
   
54,452
     
60,459
 
Furniture and fixtures
   
33,928
     
33,928
 
     
384,339
     
372,123
 
Less accumulated depreciation
   
(176,856
)
   
(116,863
) 
   
$
207,483
   
$
255,260
 

XML 74 R27.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 1 - Company Organization and Summary of Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2015
Estimated Useful Life [Member]  
Note 1 - Company Organization and Summary of Significant Accounting Policies (Tables) [Line Items]  
Property, Plant and Equipment [Table Text Block] The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets:

Equipment
2-5 years
Tooling
10 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years
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In ''Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals)'', column(s) 7 are contained in other reports, so were removed by flow through suppression. In ''Condensed Consolidated Statement of Operations (Unaudited)'', column(s) 13 are contained in other reports, so were removed by flow through suppression. In ''Condensed Consolidated Statement of Cash Flows (Unaudited)'', column(s) 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 16, 17 are contained in other reports, so were removed by flow through suppression. grdh-20150930.xml grdh-20150930_cal.xml grdh-20150930_def.xml grdh-20150930_lab.xml grdh-20150930_pre.xml grdh-20150930.xsd true true XML 76 R38.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 5 - Deposit on Inventory (Details)
Dec. 31, 2014
USD ($)
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Inventory, in Transit, Gross $ 22,674
XML 77 R20.htm IDEA: XBRL DOCUMENT v3.3.0.814
Note 14 - Fair Value Measurements
 9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]
Note 14 – Fair Value Measurements

The Company adopted ASC Topic 820-10 to measure the fair value of certain of its financial assets that are required to be measured on a recurring basis.  The adoption of ASC Topic 820-10 did not impact the Company’s financial condition or results of operations.  ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.  A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.  The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

Level 2 – Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 – Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.  The Company had no level three assets or liabilities as of September 30, 2015 or December 31, 2014; therefore, a reconciliation of the changes during the year is not shown. 

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of September 30, 2015:

   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
Notes payable and convertible senior secured debentures
   
-
   
$
5,094,117
     
-
   
$
5,094,117
 

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:

   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
Notes payable and convertible senior secured debentures
   
-
   
$
5,704,491
     
-
   
$
5,704,491