| Equity and Debt Financing Agreements | 4. Equity and Debt Financing Agreements Convertible Note Financings Short-term convertible debt as of June
30, 2016 is as follows (In thousands):
Notes Accrued Interest Total
Convertible notes with accrued interest accounted for as stock settled debt $ 494 $ 11 $ 505
Conversion premiums 247 247
741 11 752
Convertible notes with embedded derivatives 6,029 787 6,816
Derivative discounts (3,053 ) (3,053 )
2,976 787 3,763
Original issue discounts and loan fee discounts (453 ) (453 )
$ 3,264 $ 798 $ 4,062 Dominion Convertible Debt Financings On November 25,
2014, the Company closed a financing transaction by entering into a Securities Purchase Agreement dated November 25, 2014 (the
Note I SPA) with Dominion Capital LLC (the Purchaser) for an aggregate subscription amount of $4,000,000
(the Purchase Price). Pursuant to the Note I SPA, the Company issued a series of 4% Original Issue Discount Senior
Secured Convertible Promissory Notes (collectively, the Note I) to the Purchaser. The Purchase Price will be paid
in eight equal monthly payments of $500,000. Each individual Note was issued upon payment and will be amortized beginning six months
after issuance, with amortization payments being 1/24 th On August 14, 2015,
the Company closed a financing transaction by entering into a Securities Purchase Agreement dated August 14, 2015 (the Note
II SPA) with Dominion Capital LLC (the Purchaser) for an aggregate subscription amount of $2,400,000 (the
Purchase Price). Pursuant to the Note II SPA, the Company issued a series of 4% Original Issue Discount Senior Secured
Convertible Promissory Note (collectively, the Note II) to the Purchaser. The Purchase Price was paid in six equal
monthly payments of $400,000. Each individual Note was issued upon payment and is amortized beginning six months after issuance,
with amortization payments being 1/24 th The aggregate principal
amount of both Notes I and II are issued with a 4% original issue discount whereby the aggregate principal amount of Notes I and
II is $6,400,000 but the actual purchase price of Notes I and II is $6,144,000. Each of Notes I and II accrue interest at a rate
equal to 12% per annum and with maturity dates, depending on the date funded, between June 26, 2016 and June 30, 2017. Notes I
and II are convertible any time after the issuance date of the notes. The Purchasers have the right to convert Note I into shares
of the Companys common stock at a conversion price equal to 95% of the daily VWAP on the trading day immediately prior to
the closing of each tranche. The Purchasers have the right to convert Note II into shares of the Companys common stock at
a conversion price equal to $1.40. Additionally, under certain conditions defined in Notes I and II, the notes would be convertible
into common stock at a price equal to 62.5% of the lowest VWAP during the 15 Trading Days immediately prior to the applicable amortization
date. In the event that there is an Event of Default or certain conditions are not met, the conversion price will be adjusted to
equal to 55% of the lowest VWAP during the thirty (30) Trading Days immediately prior to the applicable Conversion Date. Notes
I and II can be prepaid at any time upon five days notice to the Holder by paying an amount in cash equal to the outstanding
principal and interest and a 120% premium. During 2015, the
Company had received all eight tranches under the Note I SPA ($500,000 principal in 2014 and $3,650,000 principal in 2015 which
includes an additional $150,000 added to one of the agreed $500,000 monthly funding as requested by the Company), with maturity
dates, depending on the date funded, between June 26, 2016 and December 29, 2016, pursuant to a convertible note. Under the agreement
the Company received $3,540,600, which was net of the $448,400 Purchasers expenses and legal fees and $166,000 which represents
the 4% original issue discount. As of June 30, 2016, the Company has received, all six tranches under the Note II SPA ($2,281,250
in principal in 2015 and $208,333 in 2016) with maturity dates of February 15, 2017 and June 30, 2017, pursuant to a convertible
note. Under the agreement the Company received $2,143,000, which was net of Purchasers expenses, legal fees of $247,000
and a 4% original issue discount of $99,583. The notes might be accelerated if an event of default occurs under the terms of the
note, including the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company
is delinquent in its SEC filings. In connection with the issuance of Notes I and II, the Company recorded a debt discount of $387,000
in 2014, $5,116,600 in 2015 and $180,000 during the three months ended March 31, 2016, totaling to $5,683,600 of debt discount
recorded, related to the embedded conversion option derivative liability. The amortization expense related to that discount recorded
was approximately $3,331,000 through 2015 and $1,033,000 during the six months ended June 30, 2016. During the quarter ended June
30, 2016, $1,022,605 of the outstanding principal and interest on Notes I and II was converted into 6,622,381 shares of common
stock. As of June 30, 2016, the outstanding principal and interest on Notes I and II were $4,280,528. As the note conversion includes
a lesser of pricing provision, a derivative liability of $8,936,405 was recorded when Notes I and II were entered
into. The derivative liability is re-measured at each balance sheet date and reclassified to equity on a pro-rata basis upon conversion
of the note, the derivative liability balance for Notes I and II at June 30, 2016 was $4,254,398. On December 22,
2015, in order to finance the acquisition of ENG, the Company closed a financing transaction by entering into a Securities Purchase
Agreement dated December 22, 2015 (the Note III SPA) for an aggregate principal amount of $904,042 and subscription
amount of $865,000, net of OID (the Purchase Price). The Company also reimbursed the Purchaser $30,000 for legal
fees and expenses from the proceeds of the Note. Pursuant to the Note III SPA, the Company shall issue a 4% Original Issue Discount
Senior Secured Convertible Promissory Note (the Note III) to Dominion. Note III was issued upon payment and will
be amortized beginning six months after issuance, with amortization payments being 1/24th of the principal and accrued interest,
made in cash or common stock, on a semi-monthly basis, subject to certain conditions contained in the Note III SPA. The amortization
payments will begin to be due starting on the 15th day of the month immediately following the six-month anniversary of the Closing
Date. The Company received funding for Note III on December 24, 2015, net proceeds of $751,500 (net of the $152,542 of legal fees,
expenses and OID). Note III accrues interest at a rate equal to 12% per annum (interest is guaranteed for the first twelve months)
and has a maturity date of June 15, 2017. Note III is convertible any time after its issuance date and Dominion has the right to
convert any or all of Note III into shares of the Companys common stock at a conversion price equal to $1.10, subject to
adjustment as described in Note III. Additionally, under certain conditions defined in Note III, it may also be convertible into
common stock at a price equal to 62.5% of the lowest VWAP during the 15 Trading Days immediately prior to the applicable amortization
date. In the event that there is an Event of Default or certain conditions are not met, the conversion price will be adjusted to
equal to 55% of the lowest VWAP during the thirty (30) Trading Days immediately prior to the applicable Conversion Date. Note III
can be prepaid at any time upon five days notice to the Dominion by paying an amount in cash equal to the outstanding principal
and interest, and a 20% premium. In connection with the issuance of the Note III, the Company recorded a debt discount of $751,500
when Note III was entered into, related to the embedded conversion option derivative liability. The amortization expense related
to that discount recorded was approximately $154,000 for six months ended June 30, 2016. As of June 30, 2016, the outstanding principal
and interest on Note III was $960,216. As the note conversion includes a lesser of pricing provision, a derivative
liability of $1,267,800 was recorded when Note III was entered into. The derivative liability is re-measured at each balance sheet
date, the derivative liability balance for Note III at June 30, 2016 was $1,112,192. On January 28, 2016,
the Company closed a financing transaction by entering into a Securities Purchase Agreement dated January 28, 2016 (the Note
IV SPA) with Dominion Capital LLC (the Purchaser) for an aggregate principal amount of $2,187,500 and subscription
amount of $2,100,000 (the Purchase Price), net of OID. Pursuant to the Note IV SPA, the Company shall issue a series
of 4% Original Issue Discount Senior Secured Convertible Promissory Notes (collectively, the Note IV) to the Purchaser.
The Purchase Price is scheduled to be paid in six equal monthly tranches of $350,000, subject to the discretion of the Purchaser.
Each individual Note will be issued upon payment and will be amortized beginning six months after issuance, with amortization payments
being 1/24th of the principal and accrued interest, made in cash or common stock at the option of the Company, on a semi-monthly
basis, subject to certain conditions and limitations contained in the Note IV SPA. The amortization payments will begin on the
15th day of the month immediately following the six-month anniversary of the Closing Date. The Company also reimbursed the Purchaser
$20,000 for expenses from the proceeds of the first tranche and the Purchasers counsel $10,000 from the first tranche. As
of six months ended June 30, 2016, the Company has received a total of $437,178 net proceeds under Note IV (net of the $83,655
of legal fees, expenses and OID). Note IV accrues interest at a rate equal to 12% per annum (interest is guaranteed for the first
twelve months) and has a maturity dates between July 15, 2017 and December 21, 2017. Note IV is convertible any time after its
issuance date and Dominion has the right to convert any or all of Note IV into shares of the Companys common stock at a
conversion price equal to $1.10 subject to adjustment as described in Note IV. Additionally, under certain conditions defined in
Note IV, it may also be convertible into common stock at a price equal to 62.5% of the lowest VWAP during the 15 Trading Days immediately
prior to the applicable amortization date. In the event that there is an Event of Default or certain conditions are not met, the
conversion price will be adjusted to equal to 55% of the lowest VWAP during the thirty (30) Trading Days immediately prior to the
applicable Conversion Date. Note IV can be prepaid at any time upon five days notice to the Dominion by paying an amount
in cash equal to the outstanding principal and interest, and a 20% premium. Subsequent to the funding of the first tranche the
Purchaser and the Company agreed to delay further tranches, until such time as the Purchaser and Company mutually agree, both as
to timing and amount. In connection with the issuances of Note IV, the Company recorded a debt discount of $437,178 when the notes
were entered into, related to the embedded conversion option derivative liability. The amortization expense related to that discount
recorded was approximately $94,000 for the six months ended June 30, 2016. As of June 30, 2016, the outstanding principal and interest
on Note IV was $541,142. As the note conversion includes a lesser of pricing provision, a derivative liability of
$507,252 was recorded when Note IV was entered into. The derivative liability is re-measured at each balance sheet date, the derivative
liability balance for Note IV at June 30, 2016 was $654,055. Pursuant to the
Companys obligations under Notes I, II, III and IV, the Company entered into a Security Agreement with the Purchaser, pursuant
to which the Company granted a lien on all assets of the Company, subject to existing security interests, (the Collateral)
for the benefit of the Purchaser, to secure the Companys obligations under the Note. In the event of a default as defined
in Notes I, II, III and IV, the Purchaser may, among other things, collect or take possession of the Collateral, proceed with the
foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral. Other Convertible Debt Financing On June 18, 2014,
the Company closed a financing agreement whereby the Company borrowed an aggregate principal amount of $247,500 with a 10% original
note discount. The note has an interest rate of 10%, and is convertible at the option of the lender into shares of the Companys
common stock at the lesser of (i) a 40% discount to the lowest closing bid price in the 20 trading days prior to conversion or
(ii) $3.75. The note might be accelerated if an event of default occurs under the terms of the note, including the Companys
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. The
first tranche was funded on June 18, 2014 with a principal amount of $55,000 and net proceeds of $50,000, with a maturity date
of June 17, 2016, pursuant to the convertible note. In connection with the issuance of the note, the Company recorded a debt discount
of $50,000 related to the derivative liability which was fully amortized as of June 30, 2015. As of June 30, 2015, the outstanding
principal and interest of the note was fully converted into 488,518 shares of common stock. As the note conversion includes a lesser
of pricing provision, a derivative liability of $59,623 was recorded when the note was entered into. The derivative liability
was re-measured at each balance sheet date and was reclassified to equity upon conversion of the note. The second tranche was funded
on September 19, 2014, with a principal amount of $55,000 and net proceeds of $50,000, with a maturity date of September 19, 2015,
pursuant to a convertible note. In connection with the issuance of the notes, the Company recorded a debt discount of $50,000 related
to the derivative liability which was fully amortized as of June 30, 2015. As of June 30, 2015, the outstanding principal and interest
on the notes was fully converted into 139,619 shares of common stock. As the note conversion includes a lesser of
pricing provision, a derivative liability of $59,623 was recorded when the note was entered into. The derivative liability was
re-measured at each balance sheet date and was reclassified to equity upon conversion of the note. The third tranche was funded
on December 22, 2014, with a principal amount of $55,000 and net proceeds of $50,000, with a maturity date of December 22, 2015,
pursuant to a convertible note. The Company recorded a debt discount of $50,000 related to the derivative liability which was fully
amortized as of September 30, 2015. As of September 30, 2015, the outstanding principal and interest of the note was fully converted
into 117,147 shares of common stock. As the note conversion includes a lesser of pricing provision, a derivative
liability of $62,118 was recorded when the note was entered into. The derivative liability was re-measured at each balance sheet
date and was reclassified to equity upon conversion of the note. The fourth tranche was funded on January 13, 2016, with a principal
amount of $82,500 and net proceeds of $75,000, with a maturity date of January 13, 2018, pursuant to a convertible note. In connection
with the issuance of the note, the Company recorded a debt discount of $75,000, related to the embedded conversion option derivative
liability. The amortization expense related to that discount recorded was approximately $17,000 for the six months ended June 30,
2016. As of June 30, 2016, the outstanding principal and interest on the note was $86,320. As the note conversion includes a lesser
of pricing provision, a derivative liability of $122,263 was recorded when the note was entered into. The derivative liability
is re-measured at each balance sheet date and reclassified to equity on a pro-rata basis upon conversion of the note, the derivative
liability balance for note at June 30, 2016 was $111,450. On October 27, 2014,
the Company borrowed $161,000 with a maturity date of October 27, 2015, pursuant to a financing agreement. Under the agreement
the Company received $150,000, which was net of an original issue discount of $11,000. The note bears interest at 8% per annum
and is convertible at the option of the lender into shares of the Companys common stock at a 40% discount to the price of
common shares in the 10 days prior to conversion. The note might be accelerated if an event of default occurs under the terms of
the note, including the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company
is delinquent in its SEC filings. In conjunction with the Note, the Company granted the lender a warrant for 20,000 common shares
at a strike price of $4.0. The warrant has a life of three years and its relative fair value of $33,404 has been recorded as a
debt discount and additional paid in capital as of June 30, 2015. In connection with the issuance of the note, the Company computed
a premium of $107,333 as the note is considered stock settled debt under ASC 480. On April 6, 2015, Dominion Capital LLC entered
into a purchase and assignment of the note (see paragraph below), and the Company and Dominion amended the note, with the total
amount of $166,681, with terms and conditions identical to Purchasers notes pursuant to the $4 Million Financing Agreement.
Pursuant to the amendment the maturity date was extended to October 24, 2015. Additionally, on April 6, 2015, the Company and Purchaser
entered into an $88,319 Senior Convertible, Redeemable Debenture of the Company, which was issued without proceeds as consideration
for the Purchasers expenses in conjunction with the purchase and assignment with the Lender, including legal and transaction
fees. This amount was recorded as a loss on debt extinguishment. As of June 30, 2015, the Company no longer has any outstanding
debt owed to the Lender. The total recorded premium was accreted and charged to interest expense upon the assignment of the convertible
note. On April 6, 2015,
the Company issued a new note for $166,681 convertible at the lesser of a 37.5% discount to the common stock price on the date
of the note (which was $0.77) or a 37.5% discount to the price of our common stock price at the time of conversion. In conjunction
with the purchase and assignment, the Company and Purchaser entered into a new note with a principal value of $88,319 as compensation
for Purchasers costs related to the purchase and assignment. This $88,319 was expensed as a loss on debt extinguishment.
In connection with the issuance of the notes, the Company recorded a debt discount of $255,000 related to the embedded conversion
option derivative liability which has been fully amortized as of December 31, 2015. As of the quarter ended June 30, 2016, the
outstanding principal and interest of the note was fully converted into 636,490 shares of common stock. As of June 30, 2016, the
note has no outstanding balance. As the note conversions includes a lesser of pricing provision, a derivative liability
of $305,904 was recorded when these notes were entered into. The derivative liability is re-measured at each balance sheet date
and reclassified to equity on a pro-rata basis upon conversion of the notes. The recorded derivative liability balance was reclassified
to equity upon conversion of the note and has zero balance as of June 30, 2016. On March 9, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of two Convertible
Redeemable Notes in the aggregate principal amount of $270,400 (the Notes), with the first note being in the amount
of $135,200 (Note I) and the second note being in the amount of $135,200 (Note II) with a maturity
date of March 9, 2017. Pursuant to Note I, the Company received $125,000 of proceeds, net of original issue discount of $5,200
and legal fees of $5,000. Note II was initially paid for by the issuance of an offsetting $130,000 secured note issued by the Lender
to the Company (Secured Note). The Notes bear an interest rate of 12%; and may be at any time after 180 days of the
date of closing converted into shares of Company common stock convertible at the lesser of a 37.5% discount to the common stock
price on the date of the note (which was $1.40) or a 37.5% discount to the price of our common stock price at the time of conversion.
The Notes also contain certain representations, warranties, covenants and events of default, and increases in the amount of the
principal and interest rates under the Notes in the event of such defaults. In connection with the issuance of Note I, the Company
recorded a debt discount of $125,000, related to the embedded conversion option derivative liability. The amortization expense
related to that discount recorded was approximately $37,000 for the six months ended June 30, 2016. As of June 30, 2016, the outstanding
principal and interest on Note I was $140,223. As the note conversion includes a lesser of pricing provision, a derivative
liability of $178,453 was recorded when Note I was entered into. The derivative liability is re-measured at each balance sheet
date and reclassified to equity on a pro-rata basis upon conversion of the note, the derivative liability balance for Note I at
June 30, 2016 was $148,233. On March 16, 2016,
the Company borrowed $53,000 with a maturity date of on December 18, 2016, pursuant to a financing agreement. Under the agreement
the Company received $50,000 of proceeds, net of $3,000 legal fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Companys common stock at a 35% discount to the price of common shares in
the ten days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including
the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in
its SEC filings. In connection with the issuance of the note, the Company recorded a premium of $28,538 as the note is considered
stock settled debt under ASC 480, which was fully accreted as of quarter ended June 30, 2016. As of June 30, 2016, the outstanding
principal and interest on the note was $54,174. On April 1, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of two Convertible
Redeemable Notes in the aggregate principal amount of $270,400 (the Notes), with the first note being in the amount
of $135,200 (Note I) and the second note being in the amount of $135,200 (Note II).Note I was funded
on April 1, 2016, with a maturity date of April 1, 2017, pursuant to Note I, the Company received $125,000 of net proceeds, net
of original issue discount of $5,200 and legal fees of $5,000. Note II was initially paid for by the issuance of an offsetting
$130,000 secured note issued by the Lender to the Company (Secured Note). The Notes bear an interest rate of 12%;
and may be at any time after 180 days of the date of closing converted into shares of Company common stock convertible at the lesser
of a 37.5% discount to the common stock price on the date of the note (which was $1.40) or a 37.5% discount to the price of our
common stock price at the time of conversion. In connection with the issuance of Note I, the Company recorded a debt discount of
$125,000, related to the embedded conversion option derivative liability. The amortization expense related to that discount recorded
was approximately $31,000 for the quarter ended June 30, 2016. As of June 30, 2016, the outstanding principal and interest on Note
I was $139,200. As the note conversion includes a lesser of pricing provision, a derivative liability of $174,903
was recorded when Note I was entered into. The derivative liability is re-measured at each balance sheet date and reclassified
to equity on a pro-rata basis upon conversion of the note, the derivative liability balance for Note I at June 30, 2016 was $150,554. On April 12, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of a Convertible
Redeemable Note in the aggregate principal amount of $58,000, with a maturity date of April 7, 2017, pursuant to note, the Company
will receive $50,000 of net proceeds, net of original issue discount and legal fees. The note bears an interest rate of 5%; and
is convertible at variable conversion price at a 37% discount to the common shares price on the date of the note or at a 47% discount
if the lowest trading price equal to or is lower than $0.25, as described in the note. The note also contains certain representations,
warranties, covenants and events of default, and increases in the amount of the principal and interest rates under the Note in
the event of such defaults. In connection with the issuance of note, the Company recorded a debt discount of $50,000, related to
the embedded conversion option derivative liability. The amortization expense related to that discount recorded was approximately
$11,000 for the quarter ended June 30, 2016. As of June 30, 2016, the outstanding principal and interest on note was $58,628. As
the note conversion includes a lesser of pricing provision, a derivative liability of $73,505 was recorded when the
note was entered into. The derivative liability is re-measured at each balance sheet date and reclassified to equity on a pro-rata
basis upon conversion of the note, the derivative liability balance for Note I at June 30, 2016 was $63,417. On April 18, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of two Convertible
Redeemable Notes in the aggregate principal amount of $143,000 (the Notes), with the first note being in the amount
of $71,500 (Note I) and the second note being in the amount of $71,500 (Note II).Note I was funded
on April 18, 2016, with a maturity date of April 18, 2017, pursuant to Note I, the Company received $55,000 of net proceeds, net
of original issue discount of $6,500 and legal fees of $10,000. Note II was initially paid for by the issuance of an offsetting
$65,000 secured note issued by the Lender to the Company (Secured Note). The Notes bear an interest rate of 10%;
and maybe converted into shares of Company common stock, convertible at variable conversion price at a 38% discount of the average
of the three lowest closing bid price of the common stock for the 20 trading days prior to conversion. The Notes also contain certain
representations, warranties, covenants and events of default, and increases in the amount of the principal and interest rates under
the Notes in the event of such defaults. In connection with the issuance of the note, the Company recorded a premium of $42,900
as the note is considered stock settled debt under ASC 480, which was fully accreted as of quarter ended June 30, 2016. As of June
30, 2016, the outstanding principal and interest on the note was $73,288. On April 18, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of two Convertible
Redeemable Notes in the aggregate principal amount of $126,000 (the Notes), with the first note being in the amount
of $63,000 (Note I) and the second note being in the amount of $63,000 (Note II).Note I was funded
on April 20, 2016, with a maturity date of April 19, 2017, pursuant to Note I, the Company received $57,000 of net proceeds, net
of original issue discount of $3,000 and legal fees of $3,000. Note II was initially paid for by the issuance of an offsetting
$60,000 secured note issued by the Lender to the Company (Secured Note). The Notes bear an interest rate of 10%;
and maybe converted into shares of Company common stock, convertible at variable conversion price at a 35% discount of the lowest
closing bid price of the common stock for the 15 trading days prior to conversion. The Notes also contain certain representations,
warranties, covenants and events of default, and increases in the amount of the principal and interest rates under the Notes in
the event of such defaults. In connection with the issuance of the note, the Company recorded a premium of $33,923 as the note
is considered stock settled debt under ASC 480, which was fully accreted as of quarter ended June 30, 2016. As of June 30, 2016,
the outstanding principal and interest on the note was $64,575. On April 28, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of two Convertible
Redeemable Notes in the aggregate principal amount of $437,500 (the Notes), with the first note being in the amount
of $218,750 (Note I) and the second note being in the amount of $218,750 (Note II).Note I was funded
on April 28, 2016, with a maturity date of April 27, 2017, pursuant to Note I, the Company received $190,000 of net proceeds, net
of original issue discount of $8,750 and legal fees of $20,000. Note II was initially paid for by the issuance of an offsetting
$210,000 secured note issued by the Lender to the Company (Secured Note). The Notes bear an interest rate of 12%;
and may be at any time after 180 days of the date of closing converted into shares of Company common stock convertible at the lesser
of a 37.5% discount to the common stock price on the date of the note (which was $1.40) or a 37.5% discount to the price of our
common stock price at the time of conversion. In connection with the issuance of Note I, the Company recorded a debt discount of
$190,000, related to the embedded conversion option derivative liability. The amortization expense related to that discount recorded
was approximately $33,000 for the quarter ended June 30, 2016. As of June 30, 2016, the outstanding principal and interest on Note
I was $223,281. As the note conversion includes a lesser of pricing provision, a derivative liability of $276,783
was recorded when Note I was entered into. The derivative liability is re-measured at each balance sheet date and reclassified
to equity on a pro-rata basis upon conversion of the note, the derivative liability balance for Note I at June 30, 2016 was $247,455. On May 4, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of two Convertible
Redeemable Notes in the aggregate principal amount of $126,000 (the Notes), with the first note being in the amount
of $63,000 (Note I) and the second note being in the amount of $63,000 (Note II).Note I was funded
on May 4, 2016, with a maturity date of May 4, 2017, pursuant to Note I, the Company received $57,000 of net proceeds, net of original
issue discount of $3,000 and legal fees of $3,000. Note II was initially paid for by the issuance of an offsetting $60,000 secured
note issued by the Lender to the Company (Secured Note). The Notes bear an interest rate of 10%; and maybe converted
into shares of Company common stock, convertible at variable conversion price at a 37.5% discount of the lowest closing bid price
of the common stock for the 15 trading days prior to conversion. The Notes also contain certain representations, warranties, covenants
and events of default, and increases in the amount of the principal and interest rates under the Notes in the event of such defaults.
In connection with the issuance of the note, the Company recorded a premium of $37,800 as the note is considered stock settled
debt under ASC 480 which was fully accreted as of quarter ended June 30, 2016. As of June 30, 2016, the outstanding principal and
interest on the note was $64,050. On May 17, 2016,
the Company closed a Securities Purchase Agreement (SPA) with a lender, providing for the purchase of a Convertible
Redeemable Notes with the principal amount of $55,000 (the Note). The Note was funded on May 19, 2016, with a maturity
date of May 17, 2017, pursuant to Note, the Company received $49,500 of net proceeds, net of $5,500 legal fees. The Note bear an
interest rate of 10%; and maybe converted into shares of Company common stock, convertible at variable conversion price at a 35%
discou | 8. Equity and Debt Financing Agreements Ironridge Series F Preferred Stock
Financings Beginning in July
2011, the Company entered into a series of financings with Ironridge involving the Companys Series F convertible preferred
stock. Between July 2011 and December 31, 2014, a total of 3,150 Series F shares have been issued and fully converted into a total
of 60,104,701 shares of common stocks, as of the year ended December 31, 2014. No Series F shares have been redeemed. As of December
31, 2015 and 2014, there are no shares of Series F outstanding. At December 31,
2013, there were 600 Series F shares outstanding. During the year ended December 31, 2014, these 600 shares of Series F were converted
into 22,992,056 shares of common stock. The Company had the
option to buy back any shares of Series F at the liquidation value plus accrued dividends, without any premium. The Company also
agreed to file a Registration Statement covering the common shares underlying the Series F within 30 days of closing and to use
its best efforts to get the Registration Statement effective. As the Registration Statement was not effective within 90 days of
closing on January 10, 2014, the Company issued 150 shares of Series F to Ironridge as liquidated damages, for which an expense
in the amount of $150,000 has been recorded during the year ended December 31, 2014. On February 25, 2014, these 150 shares of
Series F were converted into 3,398,389 shares of common stock. On February 27,
2014, the Company entered into a Stock Purchase Agreement with Ironridge. Pursuant to the agreement, the Company agreed to issue
150 shares of Series F to Ironridge in exchange for $100,000. Additionally, the Company issued 50 shares of Series F as commitment
and documentation fees which were recorded at face value of $50,000, and in March 2014 issued an additional 100 shares of Series
F as liquidated damages, for which an expense in the amount of $100,000 was recorded, in fulfillment of its obligations under the
agreement. During the year ended December 31, 2014, all of the 300 Series F shares were converted into 17,607,041 shares of common
stock. In connection with
the Series F conversions, the Company recorded beneficial conversion dividends totaling nil and $0.9 million during years ended
December 31, 2015 and 2014 which represents the excess of fair value of the Companys common stock at the date of issuance
of the converted Series F Preferred Stock over the effective conversion rate, multiplied by the common shares issued upon conversion.
These charges are non-cash charges. Certificate of Designations for Series
F Preferred Stock On July 27, 2011,
the Company filed a Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary
of State of the State of Delaware. On December 19, 2013, the Certificate of Designations was amended. A summary of the Certificate
of Designations, as amended, is set forth below: Dividends and
Other Distributions. Redemption In addition, if the
Company determines to liquidate, dissolve or wind-up its business, or engage in any deemed liquidation event, it must redeem the
Series F Preferred Stock at the applicable early redemption price set forth above. Conversion. If the Company or
Ironridge elects to convert the Series F Preferred Stock into common stock and the closing bid price of the Companys common
stock exceeds 150% of the Series F Conversion Price for any 20 consecutive trading days, the Company will issue that number of
shares of its common stock equal to the early redemption price set forth above multiplied by the number of shares subject to conversion,
divided by the Series F Conversion Price. If the Company elects to convert the Series F Preferred Stock into common stock and the
closing bid price of the Companys common stock is less than 150% of the Series F Conversion Price, the Company will issue
an initial number of shares of its common stock equal to 130% of the early redemption price set forth above multiplied by the number
of shares subject to conversion, divided by the lower of (i) the Series F Conversion Price and (ii) 100% of the closing bid price
of a share of the Companys common stock on the trading day immediately before the date of the conversion notice. After 20 trading
days, the Ironridge Entity shall return, or the Company shall issue, a number of conversion shares (the Series F Reconciling
Conversion Shares), so that the total number of conversion shares under the conversion notice equals the early redemption
price set forth above multiplied by the number of shares of subject to conversion, divided by the lower of (i) the Series F Conversion
Price and (ii) 85% of the average of the daily volume-weighted average prices of the Companys common stock for the lowest
three is the twenty trading days following the Ironridge Entitys receipt of the conversion notice. However, if the trading
price of the Companys common stock during any one or more of the 20 trading days following the Ironridge Entitys
receipt of the conversion notice falls below 70% of the closing bid price on the day prior to the date the Company gives notice
of its intent to convert, the Ironridge Entity will return the Series F Reconciling Conversion Shares to the Company and the pro
rata amount of the conversion notice will be deemed canceled. The Company cannot
issue any shares of common stock upon conversion of the Series F Preferred Stock if it would result in an Ironridge Entity being
deemed to beneficially own, within the meaning of Section 13(d) of the Securities Exchange Act, more than 9.99% of the total shares
of common stock then outstanding. Furthermore, until stockholder approval is obtained or the holder obtains an opinion of counsel
reasonably satisfactory to the Company and its counsel that such approval is not required, both the holder and the Company are
prohibited from delivering a conversion notice if, as a result of such exercise, the aggregate number of shares of common stock
to be issued, when aggregated with any common stock issued to holder or any affiliate of holder under any other agreements or arrangements
between the Company and the holder or any applicable affiliate of the holder, such aggregate number would, under NASDAQ Marketplace
rules (or the rules of any other exchange where the common stock is listed), exceed the Cap Amount (meaning 19.99% of the common
stock outstanding on the date of the Series F Agreement). If delivery of a conversion notice is prohibited by the preceding sentence
because the Cap Amount would be exceeded, the Company must, upon the written request of the holder, hold a meeting of its stockholders
within sixty (60) days following such request, and use its best efforts to obtain the approval of its stockholders for the transactions
described herein. Due to the above
variations in the conversion price, the beneficial conversion feature is considered contingent and not measurable or recorded until
the actual conversion dates. The beneficial conversion feature is recorded as a constructive dividend and was nil and $0.9 million,
respectively, during 2015 and 2014. Convertible Note Financings Short-term convertible debt for the
years ended December 31, 2015 and 2014 are as follows (In thousands):
2015 2014
Notes Accrued Interest Total Notes Accrued Interest Total
Convertible notes with accrued interest accounted for as stock settled debt $ 200 $ $ 200 $ 534 $ 47 $ 581
Conversion premiums 237 237
200 200 771 47 818
Convertible notes with embedded derivatives 5,984 650 6,634 1,900 68 1,968
Derivative discounts (4,054 ) (4,054 ) (1,038 ) (1,038 )
1,930 650 2,580 862 68 930
Original issue discounts and loan fee discounts (652 ) (652 ) (221 ) (221 )
$ 1,478 $ 650 $ 2,128 $ 1,412 $ 115 $ 1,527 On June 4,
2013, the Company borrowed $50,000 pursuant to a convertible note, in connection with which it issued the lender immediately exercisable
warrants to purchase 104,167 shares of common stock at an initial exercise price of $0.24 per share. The debt was recorded at a
discount in the amount of $23,684, representing the relative fair value of the warrants. The debt shall accrete in value over its
one year term to its face value of approximately $50,000. Additionally, a liability of $23,223 was recorded as the fair value of
the warrant as a result of a down round adjustment to the exercise price of the warrants. In connection with the issuance of the
$50,000 note there is a beneficial conversion feature of approximately $12,500, which will be amortized over the one year term
of the note. In 2013, $47,850 principal balance of the convertible note was converted into 2,600,000 shares of common stock. In
the year ended December 31, 2014, the remaining balance of the note principal and interest was fully converted into 725,734 shares
of common stock. All related debt discount and beneficial conversion feature were fully amortized in conjunction with the conversion
of the note. In the year ended December 31, 2014, the warrants were converted, on a cashless basis, into 1,508,848 shares of common
stock. On July 3, 2013,
the Company entered into a Securities Purchase Agreement for a new convertible promissory note (the Purchase Agreement).
Pursuant to the terms of the Purchase Agreement the investor committed to purchase an 8% Convertible Promissory Note (the Convertible
Promissory Note) in the principal amount of $78,500, with a maturity date of April 8, 2014, convertible into shares of common
stock, $0.01 par value per share, of the Company, upon the terms and subject to the limitations and conditions set forth in such
Convertible Promissory Note. Interest shall commence accruing on the date that the Note is issued and shall be computed on the
basis of a 365-day year and the actual number of days elapsed. The holder may convert the Convertible Promissory Note into common
shares of stock at a 42% discount to the price of common shares in the ten days prior to conversion. In connection with the issuance
of the Convertible Promissory Note, the Company recorded a premium of $56,845 which was amortized over the life of the Note. In
the year ended December 31, 2014, the outstanding principal and interest on the Convertible Promissory Note was converted, into
5,790,072 shares of common stock. On December 13, 2013,
the Company entered into a Securities Purchase Agreement for a new convertible promissory note (the December Purchase Agreement).
Pursuant to the terms of the December Purchase Agreement the investor committed to purchase an 8% Convertible Promissory Note (the
December Convertible Promissory Note) in the principal amount of $103,500, with a maturity date of September 17,
2014, convertible into shares of common stock, $0.01 par value per share, of the Company (the Common Stock), upon
the terms and subject to the limitations and conditions set forth in such December Convertible Promissory Note. Interest shall
commence accruing on the date that such note is issued and shall be computed on the basis of a 365-day year and the actual number
of days elapsed. The holder may convert the December Convertible Promissory Note into common shares of stock at a 39% discount
to the price of common shares in the ten days prior to conversion. In connection with the issuance of the December Convertible
Promissory Note, the Company computed a premium of $66,172 all of which was amortized and the outstanding principal and interest
on the December Convertible Promissory Note was converted, into 3,294,466 shares of common stock in the year ended December 31,
2014. On January 24, 2014,
the Company entered into a Securities Purchase Agreement for a convertible promissory note (the January Purchase Agreement).
Pursuant to the terms of the January Purchase Agreement the investor committed to purchase an 8% Convertible Promissory Note (the
January Convertible Promissory Note) in the principal amount of $78,500 with a maturity date of October 28, 2014,
convertible into shares Common Stock, upon the terms and subject to the limitations and conditions set forth in such Convertible
Promissory Note. Interest shall commence accruing on the date that such note is issued and shall be computed on the basis of a
365-day year and the actual number of days elapsed. The holder may convert the January Convertible Promissory Note into common
shares of stock at a 39% discount to the price of common shares in the ten days prior to conversion. In connection with the issuance
of the January Convertible Promissory Note, the Company recorded a computed of $50,189 as the note is considered stock settled
debt under ASC 480, all of which was amortized and the outstanding principal and interest on the January Convertible Promissory
Note was converted, into 3,132,485 shares of common stock in the year ended December 31,2014. On February 20, 2014,
the Company borrowed $82,500 pursuant to a convertible note with an OID of $7,500 resulting in cash received of $75,000. The debt
matures twenty four months from the date funded, has a one-time 10% interest charge if not paid within 90 days, and is convertible
at the option of the lender into shares of the Companys common stock at the lesser of $0.042 per share or 60% of the average
of the two lowest closing bid prices in the 25 trading days prior to conversion. The note might be accelerated if an event of default
occurs under the terms of the note, including the Companys failure to pay principal and interest when due, certain bankruptcy
events or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a
debt discount of $75,000 which has been fully amortized and the outstanding principal and interest of the Note was converted, into
4,756,739 shares of common stock in the year ended December 31, 2014. As the note conversion includes a lesser of
pricing provision, a derivative liability of $91,061 was recorded when the note was entered into. The derivative liability was
remeasured at each balance sheet date and was reclassified to equity on a pro-rata basis upon conversion of the note. On February 21, 2014,
the Company entered into a financing arrangement pursuant to which it borrowed $100,000 in unsecured debt, convertible at the discretion
of the lender. The debt was issued at a 10% discount, matures on August 21, 2014, has an interest rate of 10%, and is convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion. In connection with the issuance of the note, the Company computed a premium of $66,667
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. In the year ended December 31, 2014, the outstanding principal and interest on the Convertible Promissory
Note was converted, into 4,149,378 shares of common stock. On March 13, 2014,
the Company borrowed two notes of $75,000, each from a separate lender with maturity dates of March 4, 2015. Under each agreement
the Company received $65,750, which was net of legal and due diligence fees. The notes bear interest at 8% per annum and are convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion. The notes might be accelerated if an event of default occurs under the terms of the note,
including the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent
in its SEC filings. In conjunction with each note the Company also issued an additional note, of identical terms, each for $75,000.
The additional note was paid for by the issuance of a note payable from the lenders to the Company. In the event that the original
note is not repaid prior to six months from its issuance, the lender has the option of converting the additional note into shares
of the Companys common stock at a 40% discount to lowest closing bid price in the 20 trading days prior to conversion, subject
to the notes payable to the Company having been paid in full. The additional note payable has been netted with the related note
receivable. In connection with the issuance of the notes, the Company computed a premium of $100,000 as the debt is considered
a stock settled debt under ASC 480, all of which was amortized during the year ended December 31, 2014. As of December 31, 2014
the outstanding principal and interest was converted, into 16,386,485 shares of common stock. On May 5, 2014 one of the $75,000
notes receivable due to the company was paid, for which the Company received $65,750, net of fees. The Company computed a premium
of $50,000 as the debt is considered a stock settled debt under ASC 480, all of which was amortized during the year ended December
31, 2014. As of December 31, 2014 the outstanding principal and interest was converted, into 4,117,795 shares of common stock.
Concurrent with the repayment the Company and the lender entered into two new convertible notes, for $75,000 each, on identical
terms to the March 4, 2014 convertible notes. Each of these two notes was paid for by the issuance of notes payable from the lenders
to the Company, each for $75,000, on identical terms to the March 4, 2014 notes. These two new notes have been netted for presentation
purposes. In connection with the payment of the note receivable to the Company, the Company recorded a premium of $50,000 related
to one of the additional notes that had been entered into on March 4, 2014, all of which was amortized and the outstanding principal
and interest was converted, into 4,166,386 shares of common stock in the year ended December 31, 2014. On March 24, 2014,
the Company borrowed $52,500 with a maturity date of March 19, 2015, pursuant to a financing agreement. Under the agreement the
Company received $46,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note,
including the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent
in its SEC filings. In connection with the issuance of the notes, the Company recorded a premium of $35,000 as the note is considered
stock settled debt under ASC 480, all of which was accreted and charged to interest expense and the outstanding principal and interest
on the note was converted, into 3,043,515 shares of common stock in the year ended December 31, 2014. On April 7, 2014,
the Company borrowed $50,000 with a maturity date of April 4, 2015, pursuant to a financing agreement. Under the agreement the
Company received $44,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the price of common shares in
the twenty days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including
the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in
its SEC filings. In connection with the issuance of the note, the Company computed a premium of $33,333 as the note is considered
stock settled debt under ASC 480, all of which was accreted and charged to interest expense and the outstanding principal and interest
on the note was converted, into 2,888,888 shares of common stock in the year ended December 31, 2014. On April 14, 2014,
the Company borrowed $63,000 with a maturity date of January 2, 2015, pursuant to a financing agreement. Under the agreement the
Company received $60,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option
of the lender into shares of the Companys common stock at a 39% discount to the price of common shares in the ten days prior
to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the Companys
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company computed a premium of $40,279 as the note is considered stock settled debt
under ASC 480, all of which was accreted and charged to interest expense and the outstanding principal and interest on the note
was converted, into 3,102,713 shares of common stock in the year ended December 31, 2014. On April 16, 2014,
the Company borrowed $110,000 pursuant to a convertible note with an OID of $10,000 resulting in cash received of $100,000. The
debt matures twenty four months from the date funded, has a one-time 10% interest charge if not paid within 90 days, and is convertible
at the option of the lender into shares of the Companys common stock at the lesser of $0.042 per share or 60% of the average
of the two lowest closing bid prices in the 25 trading days prior to conversion. The note might be accelerated if an event of default
occurs under the terms of the note, including the Companys failure to pay principal and interest when due, certain bankruptcy
events or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a
debt discount of $139,997, which has been fully amortized and the outstanding principal and interest of the Note was converted,
into 6,910,704 shares of common stock in the year ended December 31, 2014. As the note conversion includes a lesser of
pricing provision, a derivative liability of $139,997 was recorded when the note was entered into. The derivative liability was
remeasured at each balance sheet date and was reclassified to equity on a pro-rata basis upon conversion of the note. On April 25, 2014,
the Company borrowed $50,000 with a maturity date of January 25, 2015, pursuant to a financing agreement. Under the agreement the
Company received $45,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the price of common shares in
the ten days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including
the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in
its SEC filings. In connection with the issuance of the note, the Company computed a premium of $33,333 as the note is considered
stock settled debt under ASC 480, all of which was accreted and charged to interest expense and the outstanding principal and interest
on the note was converted, into 2,890,411 shares of common stock in the year ended December 31, 2014. On May 30, 2014,
the Company borrowed $63,000 with a maturity date of February 27, 2015, pursuant to a financing agreement. Under the agreement
the Company received $60,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option
of the lender into shares of the Companys common stock at a 39% discount to the price of common shares in the ten days prior
to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the Companys
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company computed a premium of $40,279 as the note is considered stock settled debt
under ASC 480, all of which was accreted and charged to interest expense and the Company exercised its right to prepay the outstanding
principal and interest for a total redemption amount of $87,536 in the year ended December 31, 2014. On June 18, 2014,
the Company closed a financing agreement whereby the Company borrowed an aggregate principal amount of $247,500 with a 10% original
note discount. The note has an interest rate of 10%, and is convertible at the option of the lender into shares of the Companys
common stock at the lesser of (i) a 40% discount to the lowest closing bid price in the 20 trading days prior to conversion or
(ii) $0.075. The note might be accelerated if an event of default occurs under the terms of the note, including the Companys
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. The
first tranche was funded on June 18, 2014 with a principal amount of $55,000 and net proceeds of $50,000, with a maturity date
of June 17, 2016, pursuant to the convertible note. In connection with the issuance of the note, the Company recorded a debt discount
of $50,000 related to the derivative liability which was fully amortized as of June 30, 2015. As of June 30, 2015, the outstanding
principal and interest of the note was fully converted into 4,425,894 shares of common stock. As the note conversion includes a
lesser of pricing provision, a derivative liability of $59,623 was recorded when the note was entered into. The derivative
liability was re-measured at each balance sheet date and was reclassified to equity upon conversion of the note. The second tranche
was funded on September 19, 2014, with a principal amount of $55,000 and net proceeds of $50,000, with a maturity date of September
19, 2015, pursuant to a convertible note. In connection with the issuance of the notes, the Company recorded a debt discount of
$50,000 related to the derivative liability which was fully amortized as of June 30, 2015. As of June 30, 2015, the outstanding
principal and interest on the notes was fully converted into 6,980,938 shares of common stock. As the note conversion includes
a lesser of pricing provision, a derivative liability of $59,623 was recorded when the note was entered into. The
derivative liability was re-measured at each balance sheet date and was reclassified to equity upon conversion of the note. The
third tranche was funded on December 22, 2014, with a principal amount of $55,000 and net proceeds of $50,000, with a maturity
date of December 22, 2015, pursuant to a convertible note. The Company recorded a debt discount of $50,000 related to the derivative
liability which was fully amortized as of September 30, 2015. As of September 30, 2015, the outstanding principal and interest
of the note was fully converted into 5,857,374 shares of common stock. As the note conversion includes a lesser of
pricing provision, a derivative liability of $62,118 was recorded when the note was entered into. The derivative liability was
re-measured at each balance sheet date and was reclassified to equity upon conversion of the note. The fourth tranche was funded
on January 13, 2016, with a principal amount of $82,500 and net proceeds of $75,000, with a maturity date of January 13, 2018,
pursuant to a convertible note. As the note conversion includes a lesser of pricing provision, a derivative liability
The Company will record a derivative liability and debt discount related to the derivative liability. On June 19, 2014,
the Company borrowed of $25,000, with a maturity date of June 17, 2015, pursuant to a financing agreement. Under the agreement
the Company received $22,000, which was net of legal and due diligence fees. The notes bear interest at 8% per annum and are convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note,
including the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent
in its SEC filings. In connection with the issuance of the note, the Company computed a premium of $16,667 as the note is considered
stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year ended and the Company exercised
its right to prepay the outstanding principal and interest for a total redemption amount of $35,956 in the year ended December
31, 2014. On June 20, 2014,
the Company borrowed $40,000 with a maturity date of June 17, 2015, pursuant to a financing agreement. Under the agreement the
Company received $36,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Companys common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note,
including the Companys failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent
in its SEC filings. In connection with the issuance of the notes, the Company computed a premium of $26,667 as the note is considered
stock settled debt under ASC 480, all of which was accreted and charged to interest expense and the Company exercised its right
to prepay the outstanding principal and interest for a total redemption amount of $57,517 in the year ended December 31, 2014. On July 3, 2014,
the Company borrowed $115,000 with a maturity date of July 3, 2015, pursuant to a convertible note. Under the agreement the Company
received $100,000, which was net of legal and due diligence fees. The Note has an interest rate of 8%, and is convertible at the
option of the lender into shares of the Companys common stock at the lesser of $0.06 per share or a 40% discount of the
lowest closing bid prices in the 15 trading days prior to conversion. The note might be accelerated if an event of default occurs
under the terms of the note, including the Companys failure to pay principal and interest when due, certain bankruptcy events
or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a debt discount
of $58,571 relating to derivative liability which was fully amortized as of March 31, 2015. As of March 31, 2015, the outstanding
principal and interest on the note was fully converted into 8,248,677 shares of common stocks. In conjunction with the Note, the
Company granted the lender a warrant for 1,000,000 common shares at a strike price of $0.08. The warrant has a life of three years
and its relative fair value of $41,429 has been recorded as a debt discount and additional paid in capital as of March 31, 2015.
As the note conversion includes a lesser of pricing provision, a derivative liability of $59,623 was recorded when
the note was entered into. The derivative liability was re-measured at each balance sheet date and was reclassified to equity upon
conversion of the note. On July 7, 2014,
the Company borrowed $53,000 with a maturity date of March 25, 2015, pursuant to a financing agreement. Under the agreement the
Company received $50,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option
of the lender into shares of the Companys common stock at a 39% discount to the price of common shares in the 10 days prior
to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the Companys
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company computed a premium of $33,885 as the note is considered stock settled debt
under ASC 480, all of which was accreted and charged to interest expense in the year ended December 31, 2014. As of June 30, 2015,
the Company exercised its right to prepay the outstanding principal and interest for a total redemption amount of $73,629 and recorded
a loss on extinguishment of approximately $18,550. On July 9, 2014
and August 21, 2014 the Company borrowed from a lender, notes each amounting to $110,000, which matures twelve months from the
date of the respective notes, pursuant the agreement. Each debt was issued at a 10% original issue discount resulting in net total
proceeds of $180,000, net of legal fees. The notes bea |
