In November 2015, the Company issued a 12% note in the amount of $25,000. The note is secured by the assets of the Company, matured in October 2016, and accrued interest is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of this note, 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. The Company also incurred debt issuance costs of $94,400, which are presented as a discount against the note and amortized into interest expense over the term of the note.

25,000

In December 2015, the Company issued 12% notes totaling $850,000. The notes are secured by the assets of the Company and matured in December 2016. Any unpaid accrued interest on the note is convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these 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. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities. See Note 8. The Company also incurred debt issuance costs of $165,300 which are presented as a discount against the notes and amortized into interest expense over the term of the notes.

850,000

In January 2016, the Company issued 12% notes totaling of $100,000. These notes are secured by the assets of the Company, matured in January 2017, and accrued interest is convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 208,332 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities. See Note 8.

100,000

—

In December 2016, the Company issued promissory notes with an aggregate face value of $1,275,000 which are payable one year from the date of issuance and bear interest of 10% per annum for the initial six months of the term of the Notes and 15% per annum for the remaining six months of the term of the Notes. The note holders also received 1,912,500 shares of common stock, with a fair value of $191,250. The Company allocated the proceeds to the notes and common stock based on their relative fair values, resulting in a discount against the notes for the common stock of $166,304, which will be amortized into expense over the one-year term of the notes. In connection with the issuance of the notes and common stock, the Company also incurred debt issuance costs of $212,427 of which $184,719 was recorded as debt issuance cost against the notes to be amortized over the term of the notes.

1,275,000

—

Total Principal Outstanding

$

3,497,819

$

2,196,669

Less Current Maturities

(109,819

)

(634,069

)

3,388,000

1,562,600

Unamortized Deferred Discounts

(159,375

)

(1,193,947

)

Unamortized Debt Issuance Costs

(177,022

)

(368,653

)

Notes Payable, Net

$

3,051,603

$

—