10. Credit Facility

On May 12, 2016 we entered into a $4 million credit facility agreement with our largest shareholder WAVI Holding AG (“WAVI”). The agreement calls for WAVI to provide four $1 million tranches at specified times throughout the 12 months from the commencement of the facility agreement. The promissory note carries an annual interest rate of 10%, matures on June 1, 2017, and is unsecured, but senior to any existing debt. In conjunction with the credit facility, we issued 550,000 detachable vested warrants at a $1.75 exercise price, expiring May 12, 2021. On June 1, 2016, we received the first $1 million tranche and on September 1, 2016, we received the second $1 million tranche related to the credit facility agreement. The Company recorded a debt discount related to the value of the warrants in the amount of $374,390. The debt discount amount recorded related to the warrants was determined based on the relative fair value of the note payable and the warrants. The debt discount will amortize monthly at a rate of $31,199 per month until June 1, 2017. The fair value of the warrants was determined using the Black-Scholes model.