Notes Payable	12 Months Ended
Dec. 31, 2015
Notes to Financial Statements
6. Notes Payable	The Company is a party to a Loan and Security Agreement (the “Loan Agreement”) with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed an aggregate of $1,000,000 from the Lender (the “Loan”), including $250,000 and $150,000 during the years ended December 31, 2015 and 2014, respectively. The Loan is evidenced by a promissory note (the “Senior Note”) in the face amount of $1,000,000 (as amended). The balance on the Senior Note was $891,089 and $750,000 as of December 31, 2015 and 2014, respectively. The Senior Note bears interest on the unpaid principal balance of the Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (7.75% as of December 31, 2015). Under the terms of the Loan Agreement, the Company has agreed to make monthly payments of accrued interest. The principal amount and all unpaid accrued interest on the Note is payable on May 31, 2016 (as amended), or earlier in the event of default or a sale or liquidation of the Company. The Loan may be prepaid in whole or in part at any time by the Company without penalty. The Senior Note contains financial covenants which require the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation (“EBITDAS”). The Company granted the Lender a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to repay the Loan, including a Deposit Account Control Agreement, which grants the Lender a security interest in certain bank accounts. See Note 13. On August 27, 2015, a vendor of the Company was granted an order of garnishment against the Company’s funds held in a bank account in the amount of $83,766 for an unpaid debt, accordingly, such amount was classified as restricted cash. On September 16, 2015, the Company’s Lender filed a motion with the court to intercede in the garnishment action on the grounds that it has a superior lien on the funds which was granted at a hearing on October 6, 2015. In addition, as a result of the garnishment action, the Lender notified the Company that an event of default has occurred on the Senior Note and the Loan is in default and immediately payable. On November 30, 2015, the court issued an order that the Company’s Lender was the priority lienholder with regard to the funds being held in the bank account. Subsequent to receiving the court’s order, the funds were released by the bank to the Company’s Lender and the funds were applied against the Loan balance. The funds applied against the loan balance have been advanced back to the Company subsequent to December 31, 2015. On December 9, 2015, the Lender waived the events of default related to the garnishment. In connection with the Loan Agreement, the Company granted the Lender five-year warrants to purchase an aggregate of 1,875,000 shares of Common Stock at an exercise price ranging from $0.10 to $0.35 per share, of which 750,000 and 225,000 warrants were issued during the years ended December 31, 2015 and 2014, respectively. The warrants contain customary anti-dilution provisions. The warrants had an aggregate grant date relative fair value of $472,100, of which $69,600 and $36,000 were recorded as debt discounts during the years ended December 31, 2015 and 2014, respectively, and were amortized using the effective interest method over the term of the Senior Note. In addition, the Company agreed to modify the exercise price on 375,000 previously issued warrants from $0.35 to $0.12 effective November 11, 2015 which resulted in an additional debt discount of $1,800. The Company amortized $114,434 and $229,231 of the debt discount as interest expense during the years ended December 31, 2015 and 2014, respectively. As of December 31, 2014, the remaining unamoritized debt discount was $43,034 and the debt discounts were fully amortized as of December 31, 2015. Including the value of warrants issued in connection with Senior Note and subsequent amendments, the Senior Note had an effective interest rate of 37% per annum. The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Lender’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. Upon the occurrence of an event of default, the Lender has the right to impose interest at a rate equal to five percent (5.0%) per annum above the otherwise applicable interest rate (the “Default Rate”). The repayment of the Loan may be accelerated prior to the maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties. On March 13, 2013, the Company converted an advance from a related party of $40,000 to a notes payable with a maturity date of December 31, 2013. The principal balance of the note is due at maturity, with no interest. The Company made principal payments of $31,000 and $5,000 during the years ended December 31, 2015 and 2014, respectively, and the note has been repaid in full as of December 31, 2015. Imputed interest expense on this note was de minimis. On August 15, 2013, a related party advanced $56,000 to the Company. Subsequently, $7,000 of that advance was repaid to the related party and the Company issued a promissory note for the principal balance of $49,000 (the “Original Note”). The Original Note bears interest at a rate of 10% per annum. The Original Note had a maturity date of November 7, 2013. Through November 21, 2013, the Company repaid $6,905 of the principal of the Original Note and a replacement note was issued for the remaining principal balance of $42,095 (the “Replacement Note”). The Replacement Note waived any existing default under the Original Note and had a maturity date of May 31, 2014. All other terms of the Replacement Note and Original Note are the same. Effective July 23, 2015, the Company reached a settlement agreement with the related party whereby the Company has agreed to pay twelve monthly payments of $4,099 on the first of each month starting on August 1, 2015 to fully satisfy its obligations under the note payable. During the year ended December 31, 2015, the Company made principal payments of $18,206. Interest expense on this note was $2,868 and $3,252 during the years ended December 31, 2015 and 2014, respectively. On October 30, 2013, the Company issued a note payable with a principal amount of $100,000 to a lender. The note bears interest on the unpaid principal balance until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (7.75% as of December 31, 2015). Under the terms of the note, the Company has agreed to make monthly payments of accrued interest. The principal amount and all unpaid accrued interest is payable on October 31, 2016 (as amended) but the Company’s obligations are unsecured and are subordinate to its obligations pursuant to the Senior Note described above. The Loan may be prepaid in whole or in part at any time by the Company without penalty. In consideration of the note payable, the Company issued to the lender a five-year warrant to purchase 150,000 shares of Common Stock at an exercise price of $0.35 per share. The warrant contains customary anti-dilution provisions. The warrant had a relative fair value of $36,800 that the Company has recorded as a debt discount which was amortized using the effective interest method over the term of the note. The Company amortized $15,333 and $18,400 of the debt discount as interest expense during the years ended December 31, 2015 and 2014, respectively. As of December 31, 2015, the debt discount was fully amortized. Including the value of the warrant, the note had an effective interest rate of 26% per annum. See Note 13.

Notes Payable

12 Months Ended

Dec. 31, 2015

The Company is a party to a Loan and Security Agreement (the “Loan Agreement”) with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed an aggregate of $1,000,000 from the Lender (the “Loan”), including $250,000 and $150,000 during the years ended December 31, 2015 and 2014, respectively. The Loan is evidenced by a promissory note (the “Senior Note”) in the face amount of $1,000,000 (as amended). The balance on the Senior Note was $891,089 and $750,000 as of December 31, 2015 and 2014, respectively. The Senior Note bears interest on the unpaid principal balance of the Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (7.75% as of December 31, 2015). Under the terms of the Loan Agreement, the Company has agreed to make monthly payments of accrued interest. The principal amount and all unpaid accrued interest on the Note is payable on May 31, 2016 (as amended), or earlier in the event of default or a sale or liquidation of the Company. The Loan may be prepaid in whole or in part at any time by the Company without penalty. The Senior Note contains financial covenants which require the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation (“EBITDAS”). The Company granted the Lender a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to repay the Loan, including a Deposit Account Control Agreement, which grants the Lender a security interest in certain bank accounts. See Note 13.

On August 27, 2015, a vendor of the Company was granted an order of garnishment against the Company’s funds held in a bank account in the amount of $83,766 for an unpaid debt, accordingly, such amount was classified as restricted cash. On September 16, 2015, the Company’s Lender filed a motion with the court to intercede in the garnishment action on the grounds that it has a superior lien on the funds which was granted at a hearing on October 6, 2015. In addition, as a result of the garnishment action, the Lender notified the Company that an event of default has occurred on the Senior Note and the Loan is in default and immediately payable. On November 30, 2015, the court issued an order that the Company’s Lender was the priority lienholder with regard to the funds being held in the bank account. Subsequent to receiving the court’s order, the funds were released by the bank to the Company’s Lender and the funds were applied against the Loan balance. The funds applied against the loan balance have been advanced back to the Company subsequent to December 31, 2015. On December 9, 2015, the Lender waived the events of default related to the garnishment.

In connection with the Loan Agreement, the Company granted the Lender five-year warrants to purchase an aggregate of 1,875,000 shares of Common Stock at an exercise price ranging from $0.10 to $0.35 per share, of which 750,000 and 225,000 warrants were issued during the years ended December 31, 2015 and 2014, respectively. The warrants contain customary anti-dilution provisions. The warrants had an aggregate grant date relative fair value of $472,100, of which $69,600 and $36,000 were recorded as debt discounts during the years ended December 31, 2015 and 2014, respectively, and were amortized using the effective interest method over the term of the Senior Note. In addition, the Company agreed to modify the exercise price on 375,000 previously issued warrants from $0.35 to $0.12 effective November 11, 2015 which resulted in an additional debt discount of $1,800. The Company amortized $114,434 and $229,231 of the debt discount as interest expense during the years ended December 31, 2015 and 2014, respectively. As of December 31, 2014, the remaining unamoritized debt discount was $43,034 and the debt discounts were fully amortized as of December 31, 2015. Including the value of warrants issued in connection with Senior Note and subsequent amendments, the Senior Note had an effective interest rate of 37% per annum.

The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Lender’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. Upon the occurrence of an event of default, the Lender has the right to impose interest at a rate equal to five percent (5.0%) per annum above the otherwise applicable interest rate (the “Default Rate”). The repayment of the Loan may be accelerated prior to the maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties.

On March 13, 2013, the Company converted an advance from a related party of $40,000 to a notes payable with a maturity date of December 31, 2013. The principal balance of the note is due at maturity, with no interest. The Company made principal payments of $31,000 and $5,000 during the years ended December 31, 2015 and 2014, respectively, and the note has been repaid in full as of December 31, 2015. Imputed interest expense on this note was de minimis.

On August 15, 2013, a related party advanced $56,000 to the Company. Subsequently, $7,000 of that advance was repaid to the related party and the Company issued a promissory note for the principal balance of $49,000 (the “Original Note”). The Original Note bears interest at a rate of 10% per annum. The Original Note had a maturity date of November 7, 2013. Through November 21, 2013, the Company repaid $6,905 of the principal of the Original Note and a replacement note was issued for the remaining principal balance of $42,095 (the “Replacement Note”). The Replacement Note waived any existing default under the Original Note and had a maturity date of May 31, 2014. All other terms of the Replacement Note and Original Note are the same. Effective July 23, 2015, the Company reached a settlement agreement with the related party whereby the Company has agreed to pay twelve monthly payments of $4,099 on the first of each month starting on August 1, 2015 to fully satisfy its obligations under the note payable. During the year ended December 31, 2015, the Company made principal payments of $18,206. Interest expense on this note was $2,868 and $3,252 during the years ended December 31, 2015 and 2014, respectively.

On October 30, 2013, the Company issued a note payable with a principal amount of $100,000 to a lender. The note bears interest on the unpaid principal balance until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (7.75% as of December 31, 2015). Under the terms of the note, the Company has agreed to make monthly payments of accrued interest. The principal amount and all unpaid accrued interest is payable on October 31, 2016 (as amended) but the Company’s obligations are unsecured and are subordinate to its obligations pursuant to the Senior Note described above. The Loan may be prepaid in whole or in part at any time by the Company without penalty. In consideration of the note payable, the Company issued to the lender a five-year warrant to purchase 150,000 shares of Common Stock at an exercise price of $0.35 per share. The warrant contains customary anti-dilution provisions. The warrant had a relative fair value of $36,800 that the Company has recorded as a debt discount which was amortized using the effective interest method over the term of the note. The Company amortized $15,333 and $18,400 of the debt discount as interest expense during the years ended December 31, 2015 and 2014, respectively. As of December 31, 2015, the debt discount was fully amortized. Including the value of the warrant, the note had an effective interest rate of 26% per annum. See Note 13.