SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES	3 Months Ended
Mar. 31, 2016
SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES [Abstract]
SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES	NOTE 9 – SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES On February 11, 2014 the Company entered into an agreement with Edward Smith III, a Director and Shareholder of the Company, pursuant to which Mr. Smith agreed to lend the Company $200,000 in a convertible senior secured note. The note matures in two years (February 11, 2016) and bears interest at 12.5% computed based on a 365-day year. Accrued interest is payable either at maturity or quarterly at the option of Mr. Smith in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under the note is $2.25, subject to adjustment as provided in the note. If on the maturity date of the note, the thirty day trailing average closing price of the Company’s common stock (the “Trailing Average Price”) is below $2.25, the Conversion Price on the maturity date will be reduced to the Trailing Average Price, but to not less than $1.25. The Conversion Price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note. On April 25, 2014, the Company entered into an agreement with Edward Smith III, a Director and Shareholder of the Company, pursuant to which Mr. Smith agreed to lend the Company $300,000 in a convertible subordinated secured note. The note matures in two years (April 25, 2016) and bears interest at 14% computed based on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under the note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note. On April 30, 2014, the Company issued a 14% convertible subordinated secured note to each of Morris Garfinkle, Mark Hershhorn, Brian Israel and Edward B. Smith, Directors of the Company, in the principal amount of $19,000, for director fees due and payable to them (the “Director Notes”). Each Director Note matured in two years (April 30, 2016) and bears interest at 14% computed on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the Director Note, the director may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under each Director Note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note. On May 12, 2014, the Company issued 14% convertible subordinated secured notes to both Mo Garfinkle and CKS Warehouse in the principal amount of $75,000 each. Both notes matured in two years (May 12, 2016) and bear interest at 14% computed on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of each note, Mr. Garfinkle and CKS Warehouse may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under each note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note. On July 15, 2014, the Company entered into an agreement with Edward Smith III, pursuant to which Mr. Smith agreed to lend the Company $64,000 in an unsecured note payable. The note matured in 90 days (October 15, 2014) without interest payable on the unpaid principal and subject to the terms of the Company’s agreements with its secured creditors. On August 6, 2014 this note was rolled into the $264,000 convertible subordinated secured note discussed below. On August 6, 2014, the Company issued a 14% convertible subordinated secured note to Edward B. Smith in the principal amount of $264,000. The note matured in two years (August 6, 2016) and bears interest at 14% computed on a 365-day year. Under this note Mr. Smith had provided $200,000 of cash as of August 6, 2014 and the parties agreed to include the unsecured funds in the amount of $64,000 provided by Mr. Smith on July 15, 2014 and include those amounts as part of this subordinated secured transaction. The loan agreement executed by the parties on July 15, 2014 is now null and void. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under this note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore, no beneficial conversion feature was recorded on this note. In connection with the private placement offering that was consummated in January 2015, the members of the Company’s Board of Directors agreed to receive an aggregate of 96,590 Units, (representing one (1) Unit for every $4.00 of debt exchanged), 826,806 Initial Warrants and 351,586 Additional Warrants in exchange for previously issued convertible notes (including principal and accrued and unpaid interest) (the “Notes”) held by the directors or affiliated entities as follows: (i) 71,211 Units, 609,566 Initial Warrants and 259,208 Additional Warrants were issued to Edward B. Smith, III, the Company’s Chief Executive Officer and a director, in exchange for an aggregate of $284,844 of notes, (ii) 10,084 Units, 86,317 Initial Warrants and 36,705 Additional Warrants were issued to Morris Garfinkle in exchange for $40,335 of notes; (iii) 5,211 Units, 44,606 Initial Warrants and 18,968 Additional Warrants were issued to each of Mark Hershhorn and Brian Israel (directors of the Company at the time of the exchange), in exchange for an aggregate of $20,844 of notes, respectively; and (v) 4,873 Units, 41,712 Initial Warrants and 17,737 Additional Warrants were issued to CKS Warehouse, an entity in which Mr. Hershhorn owns a controlling interest, in exchange for an aggregate of $19,491of principal and interest on notes. The fair value of the preferred stock issued with the Units above was calculated using multinomial lattice models that valued the preferred stock based on a probability weighted discounted cash flow model. The assumptions used to determine the fair value included the holder of the preferred stock would convert the preferred stock once the stock price exceeded the exercise price, the historical annual volatility of the Company’s stock price was 119% and the weighted cost of capital for the Company was 16.93%. As a result of the conversion of convertible debt into Units, the Company recorded a loss on debt conversion of $351,314 for the three months ended March 31, 2015. On December 23, 2015, the Company executed an amendment to the $200,000 12.5% convertible subordinated secured note dated February 11, 2014, the $300,000 14% convertible subordinated secured notes dated April 25, 2014, and the note issued to Mr. Garfinkle dated May 12, 2014) whereby the maturity date for each note was extended to July 1, 2016. The outstanding amount of convertible notes payable to related parties was $624,866 at March 31, 2016 and December 31, 2015. The amount of accrued and unpaid interest was $171,746 at March 31, 2016.

NOTE 9 – SHORT-TERM CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES

On February 11, 2014 the Company entered into an agreement with Edward Smith III, a Director and Shareholder of the Company, pursuant to which Mr. Smith agreed to lend the Company $200,000 in a convertible senior secured note. The note matures in two years (February 11, 2016) and bears interest at 12.5% computed based on a 365-day year. Accrued interest is payable either at maturity or quarterly at the option of Mr. Smith in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under the note is $2.25, subject to adjustment as provided in the note. If on the maturity date of the note, the thirty day trailing average closing price of the Company’s common stock (the “Trailing Average Price”) is below $2.25, the Conversion Price on the maturity date will be reduced to the Trailing Average Price, but to not less than $1.25. The Conversion Price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note.

On April 25, 2014, the Company entered into an agreement with Edward Smith III, a Director and Shareholder of the Company, pursuant to which Mr. Smith agreed to lend the Company $300,000 in a convertible subordinated secured note. The note matures in two years (April 25, 2016) and bears interest at 14% computed based on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under the note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note.

On April 30, 2014, the Company issued a 14% convertible subordinated secured note to each of Morris Garfinkle, Mark Hershhorn, Brian Israel and Edward B. Smith, Directors of the Company, in the principal amount of $19,000, for director fees due and payable to them (the “Director Notes”). Each Director Note matured in two years (April 30, 2016) and bears interest at 14% computed on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the Director Note, the director may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under each Director Note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note.

On May 12, 2014, the Company issued 14% convertible subordinated secured notes to both Mo Garfinkle and CKS Warehouse in the principal amount of $75,000 each. Both notes matured in two years (May 12, 2016) and bear interest at 14% computed on a 365-day year. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of each note, Mr. Garfinkle and CKS Warehouse may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under each note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore no beneficial conversion feature was recorded on this note.

On July 15, 2014, the Company entered into an agreement with Edward Smith III, pursuant to which Mr. Smith agreed to lend the Company $64,000 in an unsecured note payable. The note matured in 90 days (October 15, 2014) without interest payable on the unpaid principal and subject to the terms of the Company’s agreements with its secured creditors. On August 6, 2014 this note was rolled into the $264,000 convertible subordinated secured note discussed below.

On August 6, 2014, the Company issued a 14% convertible subordinated secured note to Edward B. Smith in the principal amount of $264,000. The note matured in two years (August 6, 2016) and bears interest at 14% computed on a 365-day year. Under this note Mr. Smith had provided $200,000 of cash as of August 6, 2014 and the parties agreed to include the unsecured funds in the amount of $64,000 provided by Mr. Smith on July 15, 2014 and include those amounts as part of this subordinated secured transaction. The loan agreement executed by the parties on July 15, 2014 is now null and void. Accrued interest is payable at maturity in shares of the Company’s common stock. At any time on or after the date that is 90 days after the date of issuance of the note, Mr. Smith may elect to convert the aggregate principal balance and accrued interest into shares of common stock of the Company. The conversion price under this note is $1.00. The conversion price was greater than the closing stock price on the agreement date; therefore, no beneficial conversion feature was recorded on this note.

In connection with the private placement offering that was consummated in January 2015, the members of the Company’s Board of Directors agreed to receive an aggregate of 96,590 Units, (representing one (1) Unit for every $4.00 of debt exchanged), 826,806 Initial Warrants and 351,586 Additional Warrants in exchange for previously issued convertible notes (including principal and accrued and unpaid interest) (the “Notes”) held by the directors or affiliated entities as follows: (i) 71,211 Units, 609,566 Initial Warrants and 259,208 Additional Warrants were issued to Edward B. Smith, III, the Company’s Chief Executive Officer and a director, in exchange for an aggregate of $284,844 of notes, (ii) 10,084 Units, 86,317 Initial Warrants and 36,705 Additional Warrants were issued to Morris Garfinkle in exchange for $40,335 of notes; (iii) 5,211 Units, 44,606 Initial Warrants and 18,968 Additional Warrants were issued to each of Mark Hershhorn and Brian Israel (directors of the Company at the time of the exchange), in exchange for an aggregate of $20,844 of notes, respectively; and (v) 4,873 Units, 41,712 Initial Warrants and 17,737 Additional Warrants were issued to CKS Warehouse, an entity in which Mr. Hershhorn owns a controlling interest, in exchange for an aggregate of $19,491of principal and interest on notes.

The fair value of the preferred stock issued with the Units above was calculated using multinomial lattice models that valued the preferred stock based on a probability weighted discounted cash flow model. The assumptions used to determine the fair value included the holder of the preferred stock would convert the preferred stock once the stock price exceeded the exercise price, the historical annual volatility of the Company’s stock price was 119% and the weighted cost of capital for the Company was 16.93%. As a result of the conversion of convertible debt into Units, the Company recorded a loss on debt conversion of $351,314 for the three months ended March 31, 2015.

On December 23, 2015, the Company executed an amendment to the $200,000 12.5% convertible subordinated secured note dated February 11, 2014, the $300,000 14% convertible subordinated secured notes dated April 25, 2014, and the note issued to Mr. Garfinkle dated May 12, 2014) whereby the maturity date for each note was extended to July 1, 2016.

The outstanding amount of convertible notes payable to related parties was $624,866 at March 31, 2016 and December 31, 2015. The amount of accrued and unpaid interest was $171,746 at March 31, 2016.