PROMISSORY NOTES PAYABLE

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

PROMISSORY NOTES PAYABLE

NOTE 8 - PROMISSORY NOTES PAYABLE

Note Payable - MultiPay

In connection with the MultiPay Acquisition (Note 6), the Company assumed three promissory notes amounting to approximately $273,000. During the period from the Closing Date to December 31, 2015, the Company paid in full one of the three promissory notes amounting to approximately $85,000. At December 31, 2015, the remaining outstanding note carried an outstanding balance of $96,669. Payments of $6,300 including principal and interest are due monthly. The Interest at December 31, 2015 is 15.47% per annum. Total outstanding principal and interest is due on September 16, 2017 (the “Maturity Date”).

Notes Payable

The following is a summary of the notes payable, excluding MultiPay note payable described above, outstanding as of December 31, 2015:

12% note payable issued in August 2015	(a)	$	27,000
12% notes payable issued in September 2015	(b), (c)		973,000
12% notes payable issued in October 2015	(d)		225,000
12% note payable issued in November 2015	(e)		25,000
12% notes payable issued in December 2015	(f)		850,000
Unamortized debt discounts			(1,193,947	)
Unamortized debt issuance costs			(368,653	)
		$	537,400

(a) In August 2015, the Company entered into an agreement with an accredited investor, whereby the Company issued a 12% note for $27,000 in a private offering and is secured by the assets of the Company. The notes have the following principal terms:

· The principal amount of the notes shall be repaid within 12 months of the issuance date at a 12% interest rate;

· The note holder may convert the accrued interest of his note into shares of the Company’s common stock at a conversion price of $0.10 per share;

· In connection with the issuance of these notes, the Company also issued warrants for the purchase of 180,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.

(b) In September 2015, the Company entered into an agreement with seven accredited investors, whereby the Company issued separate 12% notes for $973,000 in a private offering and is secured by the assets of the Company. The notes have the following principal terms: 

· The principal amount of the notes shall be repaid within 12 months of the issuance date at a 12% interest rate;

· The note holder may convert the accrued interest of his note into shares of the Company’s common stock at a conversion price of $0.10 per share;

· In connection with the issuance of the notes, the Company also issued warrants for the purchase of 6,486,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.

(c) On September 4, 2015, the Company entered into a Securities Purchase Agreement with a director of the Company, pursuant to which the director invested $100,000 into the Company in consideration of a Secured Promissory Note (the "Director Note") and a common stock purchase warrant to acquire an aggregate of 250,000 shares of common stock exercisable for a period of five years at an exercise price of $0.40. The Director Note bears interest of 10%, is payable on the earlier of the Company closing a financing in excess of $1,000,000 or on September 19, 2016. The Director Note contains standard default terms and is secured by all assets of the Company. In the event the Company defaults under the Director Note, the Company is required to issue the director an additional common stock purchase warrant to acquire 666,667 shares of common stock at $0.15 per share.

(d) In October 2015, the Company entered into an agreement with four accredited investors, whereby the Company issued separate 12% notes for $225,000 in a private offering and is secured by the assets of the Company. The notes have the following principal terms: 

· The principal amount of the notes shall be repaid within 12 months of the issuance date at a 12% interest rate;

· The note holder may convert the accrued interest of his note into shares of the Company’s common stock at a conversion price of $0.10 per share;

· In connection with the issuance of the notes, the Company also issued warrants for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.

(e) In November 2015, the Company entered into an agreement with an accredited investor, whereby the Company issued a 12% note for $25,000 in a private offering and is secured by the assets of the Company. The notes have the following principal terms: 

· The principal amount of the notes shall be repaid within 12 months of the issuance date at a 12% interest rate;

· The note holder may convert the accrued interest of his note into shares of the Company’s common stock at a conversion price of $0.10 per share;

In connection with the issuance of these notes, the Company also issued warrants for the purchase of 166,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.

(f) In December 2015, the Company entered into an agreement with three accredited investors, whereby the Company issued separate 12% notes for $850,000 in a private offering and is secured by the assets of the Company. The notes have the following principal terms:

· The principal amount of the notes shall be repaid within 12 months of the issuance date at a 12% interest rate;

· The note holder may convert the accrued interest of his note into shares of the Company’s common stock at a conversion price of $0.48 per share; however, if certain conditions are met, such as the issuance of new securities at a lower price, the conversion price per share will be adjusted downward to 120% of the price of the newly issued securities;

· In connection with the issuance of the notes, the Company also issued warrants for the purchase of 1,770,834 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years; however, if certain conditions are met, such as the issuance of new securities at a lower price, the conversion price per share will be adjusted downward to 120% of the price of the newly issued securities.

Maturities of notes payable at December 31, 2015 are as follows:

Year Ending December 31,
2016	$	2,155,200
2017		41,469
	$	2,196,669

Certain of the warrants qualified for equity accounting and were recorded based on their relative fair value with that of the related debt. However, certain of the warrants did not qualify for equity accounting because their exercise price is reduced if common stock or instruments which are convertible/exercisable into common stock are later issued at a price less than the exercise prices of the warrants discussed in this Note 8 (“down round features”). Accordingly, those warrants have been recorded as derivative liabilities (see Note 10).

The assumptions used in calculating the fair value of warrants accounted for as equity has been estimated using the Black-Scholes option pricing model for warrants granted during the year ended December 31, 2015 are as follows:

Expected Volatility	80%
Expected Term	5.0 Years
Risk Free Rate	1.37% to 1.65%
Dividend Rate	0.00%

The fair value of the warrants accounted for as derivative liabilities have been estimated based on the Monte Carlo Simulation Model because it considers the effect of the down round feature (probability of a triggering capital raise) along with the other assumptions associated with the Black-Scholes option pricing model. The underlying assumptions used in the valuation of the derivative liabilities are included in Note 10.

A summary of the proceeds of the notes payable and a reconciliation of those proceeds to the note balances at December 31, 2015 is as follows:

Balance as of January 1, 2015	$	-
Proceeds from issuances of notes payable		2,200,000
Less debt discount:
Equity warrants		(932,884	)
Derivative liability warrants		(556,892	)
Debt issuance costs		(454,100	)
Amortization of debt discount:
Equity warrants		282,097
Derivative liability warrants		13,732
Amortization of debt issuance costs		85,447
Payments on notes payable		(100,000	)
Balance as of December 31, 2015	$	537,400