11.

Credit Facility

On May 12, 2016, we entered into a $4 million unsecured credit facility with our largest shareholder, WAVI. Under the related commitment letter, WAVI has agreed to make a series of four $1 million advances on June 1, 2016, September 1, 2016, December 1, 2016 and March 1, 2017. As of December 31, 2016, we received $3 million of advances and the final advance of $1 million was received subsequent to year end on March 1, 2017. The Original Note is unsecured, carries an annual interest rate of 10%, and matures on June 1, 2017. In addition, we have agreed not to permit any liens on our assets, subject to certain exceptions. As partial compensation for WAVI entering into the commitment letter, we issued WAVI a detachable common stock purchase warrant exercisable to purchase up to 550,000 shares of common stock at an exercise price of $1.75 per share. The warrant expires on May 12, 2021.

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.

Amendment of Credit Facility

On January 9, 2017, the Company issued the Note to WAVI. The Note, which amends and restates the Original Note, extends the maturity date of the Note from June 1, 2017 to June 1, 2022, transfers all accrued interest through May 31, 2017 into principal of the note and includes a long-term repayment schedule as follows: beginning September 1, 2017 to June 1, 2018, the Company will make four quarterly cash interest only payments of $106,250 and from September 1, 2018 through June 1, 2022, the Company will make quarterly cash principal payments of $265,625, in addition to ongoing interest payments. All other terms of the Original Note, including the $4 million principal amount of the Note and the 10% per annum interest rate on the Note, remain the same. As a result, we have classified the note payable as a long term liability.

Scheduled principal payments are as follows:

2017	$	––
2018		531,250
2019		1,062,500
2020		1,062,500
2021		1,062,500
Thereafter		531,250
Total	$	4,250,000