NOTE 12 — SUBSEQUENT EVENTS

Asset Purchase Modification Agreement

On April 12, 2016, the Company and IMT entered into the Asset Purchase Modification Agreement which terminated the Payment Notes, cancelling all principal due, or to become due thereunder and, in their stead, obligated the Company to: (i) upon execution of the Asset Purchase Modification Agreement, pay to IMT $500,000 plus any interest accumulated on the Payment Notes prior to their being cancelled; and (ii) prior to December 31, 2016, deliver to IMT Series D Preferred Shares having an aggregate value of cash proceeds of $2,500,000 ("Series D Shares"), plus interest accrued thereon at 9% per annum, with such Series D Shares to be issued in tranches of $250,000. The first Tranche is due within ten business days of the execution of the Asset Purchase Modification Agreement, and subsequent Tranches are due upon notice from IMT that IMT disposed of the Series D Shares acquired by them in connection with the prior Tranche. The Company paid IMT $500,000 plus accrued interest on April 15, 2016. As of May 20, 2016, 250,000 shares of Series D Convertible Preferred Stock have been issued, of which all have been converted into 2,500,000 shares of common stock.

April 2016 Financing

On April 15, 2016, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors pursuant to which we sold a principal amount of $550,000 of 5% Senior Secured Convertible Promissory Notes for an aggregate purchase price of $500,000. In connection with the Securities Purchase Agreement, we also entered into a security agreement, dated April 15, 2016, pursuant to which we granted the investors a security interest in all of our assets.

Warrant Amendments

On April 29, 2016, the Company entered into amendments with certain holders of its Series A Warrant to Purchase Common Stock, dated August 19, 2015, and our Warrant to Purchase Common Stock, dated February 29, 2016. Each of such warrants was amended to reduce the exercise price to $0.07.

May 2016 S-3 Financing

On May 16, 2016, the Company closed an offering of units in which the Company offered 14,000,000 units, at a price of $0.07 per unit, each of which consists of one share of the Company’s common stock, par value $0.00001 per share, and one warrant to purchase one share of the Company’s common stock at an exercise price of $0.1149 per share. The Company received approximately $980,000 in gross proceeds from the offering, before deducting placement agent fees and offering expenses payable by the Company. Roth Capital Partners acted as sole placement agent for the offering.

The Warrants will be exercisable beginning on November 16, 2016 at an exercise price of $0.1149 per share. The Warrants will expire on the fifth (5th) anniversary of the initial date of issuance.

Conversions and Balances of Outstanding Series B Preferred Stock from February 2016 Financing

From April 1, 2016 to May 20, 2016, 1,666,524 of the Series B Convertible Preferred Stock and 322,291 in dividends have been converted into 19,888,153 shares of common stock. As of May 20, 2016, all of the Series B Convertible Preferred Stock has been converted.

Conversions and Balances of Outstanding Series D Preferred Stock from April 2016 Asset Purchase Modification Agreement

From April 1, 2016 to May 20, 2016, 250,000 of the Series D Convertible Preferred Stock have been converted into 2,500,000 shares of common stock.

Conversions of Warrants

From April 1, 2016 to May 20, 2016, 1,556,250 of the Series A warrants issued in connection with the August 2015 financing, have been exercised into 1,556,250 shares of common stock. The Company received $108,938 in gross proceeds from the exercise.

From April 1, 2016 to May 20, 2016, 1,503,330 of the warrants issued in connection with the February 2016 financing, have been exercised into 1,503,330 shares of common stock. The Company received $105,233 in gross proceeds from the exercise.

Other Common Stock Issuances

From April 1, 2016 to May 20, 2016, the Company issued a total of 5,743,648 shares of common stock having a fair value to employees, directors, consultants and general counsel in lieu of paying $565,000 worth of services.