NOTE 7 – SHORT-TERM BORROWINGS TO UNRELATED PARTIES

On July 17, 2015, the Company completed a sale and leaseback transaction with Fordham Capital. In the transaction the Company sold all of its production equipment, furniture and fixtures for $500,000. From the proceeds of the sale, the company repaid outstanding borrowings of $200,000 due to Fordham Capital plus accrued interest of $3,112, franchise taxes of $96,542 and a security deposit of $15,800 related to the equipment lease.

On September 29, 2015, the Company issued a 14% nonconvertible senior unsecured note to an accredited investor in the principal amount of $250,000. The note matures in six months (March 26, 2016) and bears interest at 14% computed based on a 365- day year. Accrued interest is payable at maturity in cash. On December 23, 2015, the company executed an amendment whereby the maturity date was extended to July 1, 2016.

On December 23, 2015, the Company issued a 14% nonconvertible senior unsecured note to an accredited investor in the principal amount of $500,000. The note matures in twelve months (December 23, 2016) and bears interest at 14% computed based on a 365- day year. Accrued interest is payable at maturity in cash.

On March 2, 2016, the Company issued a 14% senior unsecured note to an accredited investor in the principal amount of $100,000. The company recognized and amortized $3,791 of discount as of March 31, 2016. The note matures in one year (March 2, 2017) and bears interest at 14% compounded based on a 365-day year. Accrued interest is payable at maturity in cash. In addition, the Company issued a warrant to acquire 400,000 shares of the Company’s common stock, par value, $0.00005 per share, at an exercise price of $0.64 per share to the accredited investor. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On March 11, 2016, the Company issued a 14% senior unsecured note to an accredited investor in the principal amount of $100,000. The note matures in one year (March 11, 2017) and bears interest at 14% compounded based on a 365-day year. Accrued interest is payable at maturity in cash. In addition, the Company issued a warrant to acquire 400,000 shares of the Company’s common stock, par value, $0.00005 per share, at an exercise price of $0.64 per share to the accredited investor. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. The company recognized and amortized $3,189 of discount as of March 31, 2016.

Below is a summary of the principal and interest activity for the period ended March 31, 2016:

	Principal		Interest
Balance at December 31, 2015	$	750,000	$	10,452
Principal advances and accrued interest		200,000		28,058
Principal payments and interest		-		-

Balance at March 31, 2016	$	950,000	$	38,510