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9. BORROWED DEBT

12 Months Ended

Dec. 31, 2014

All references to common shares and number of warrants reflect the 1 for 15 reverse stock split effected as of March 23,2015.

As of December 31, 2014 and 2013, borrowed debt is as follows:

	December 31,			December 31,
	2014			2013
January Private Placements	$	9,704,901		$	-
February Private Placements		13,239,107			-
6% Convertible Notes		10,906,703			-
4% Convertible Notes and 4% Exchange Convertible Notes		3,275,175			-
12% Exchanged Notes		7,345,428			-
VIP Seller Note		11,000,000			-
Mortgage Note Payable - Building		250,000			-
December 12% Convertible Notes		926,599			-
Demand Loans		1,270,000			-
Convertible Promissory Notes settled in 2014		-			650,000
		57,917,913			650,000
Less current portion		(57,917,913	)		(650,000	)
Total long-term debt	$	-		$	-

January and February Private Placements

Overview. On January 7, 2014, January 14, 2014, January 31, 2014 and February 28, 2014, the Company completed private offerings of $27,375,000 aggregate principal amount of 15% Senior Secured Convertible Promissory Notes, as amended (the “15% Convertible Notes”) and warrants to purchase shares of common stock with accredited investors for total net proceeds to the Company of $25,424,790 after deducting placement agent fees and other expenses.

As of December 31, 2014, the principal balance, unamortized discount, and net carrying amount relating to the 15% Convertible Notes are as follows:

	Principal Balance		Unamortized Discount			Net Carrying Amount
15% Convertible Notes(January)	$	9,704,901	$	-		$	9,704,901
15% Convertible Notes(February)		15,750,000		(2,510,893	)		13,239,107
Totals	$	25,454,901	$	(2,510,893	)	$	22,944,008

Maturity and Interest. The 15% Convertible notes matured on January 7, 2015 and February 28 ,2015, respectively. The notes accrue interest at a rate of 15% on the aggregate unconverted and outstanding principal amount, payable in cash on a quarterly basis. See Note 24 for subsequent events.

Conversion. The 15% Convertible Notes may be converted, in whole or in part, into shares of common stock at the option of the holder at any time. The shares of common stock issuable upon conversion equal: (i) the outstanding principal amount of the convertible note divided by (ii) a conversion price of $75.00, as adjusted from time to time. The conversion price for the 15% Convertible Notes is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, the conversion price of the 15% Convertible Notes will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than the current exercise price, with certain exceptions as further described in the 15% Convertible Notes. The Conversion Price will also adjust on any subsequent issuance of shares of common stock or common stock equivalents based on a formula intended to maintain the fully diluted percentage ownership the shares underlying the 15% Convertible Notes represent. Furthermore, if the Company or any subsidiary thereof sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any of its common stock or any securities which would entitle the holder thereof to acquire at any time its common stock, then the conversion price for the 15% Convertible Notes will be adjusted downward by multiplying it by a fraction, the numerator of which shall be 5,277,600 and the denominator of which shall be the number of fully-diluted shares of our common stock outstanding following such issuance. During 2014, the noteholders exercised the conversion options to reduce principal payments by $1,720,100. As a result of the subsequent issuances of our convertible notes, warrants and shares of our common stock described below, as of December 31, 2014, the conversion price of the 15% Convertible Notes was $0.75 per share.

Prepayments. The 15% Convertible Notes may be prepaid in cash, in whole or in part, at any time for 115% of sum of the outstanding principal and accrued interest.

Collateral. As collateral security for all of the Company’s obligations under the 15% Convertible Notes and related documents executed in connection with the Offerings, the Company granted the purchasers a first priority security interest in all of (i) the Company’s assets and (ii) the equity interests in each subsidiary of the Company, in each case whether owned or existing when the 15% Convertible Notes were issued or subsequently acquired or coming into existence, including any shares of capital stock of any subsidiary.

Warrants. The warrants issued in the offerings are exercisable for an aggregate of 365,000 shares of the Company’s common stock. The warrants are exercisable for a period of five years from their respective issue dates. The exercise price with respect to the warrants is $75.00 per share, as adjusted from time to time. The exercise price and the amount of shares of our common stock issuable upon exercise of the warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, the exercise price of the warrants will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than their current exercise price, with certain limited exceptions as further described in the warrant. Furthermore, if the Company or any subsidiary thereof sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any of its common stock or common stock equivalents, then the exercise price for the warrants will be adjusted downward by multiplying it by a fraction, the numerator of which shall be 5,277,600 and the denominator of which shall be the number of fully-diluted shares of our common stock outstanding following such issuance. As a result of the subsequent issuances of our convertible notes, warrants and shares of our common stock described below, as of December 31, 2014, the exercise price of the warrants was $0.75 per share, and the number of shares issuable upon exercise of the warrants increased to 36,500,000 shares of common stock.

These warrants are considered liabilities and will be recorded at fair value each reporting period with adjustments recorded in the consolidated statements of operations and comprehensive loss.

Warrants and Embedded Derivatives

The proceeds for the 15% Convertible Notes were allocated at issuance based upon the fair value of the warrants and the embedded derivatives as follows:

	January			February			Total
Proceeds	$	11,325,000		$	16,050,000		$	27,375,000
Fair value of warrants		(8,871,000	)		(22,116,900	)		(30,987,900	)
Fair value of conversion and other features		(6,342,600	)		(19,260,000	)		(25,602,600	)
Fair value of amounts in excess of proceeds	$	(3,888,600	)	$	(25,326,900	)	$	(29,215,500	)

At the time of issuance the fair value was determined to be reasonable and because the fair value exceeded the proceeds, greater value was given by us than received in the associated transactions. From a purely financial perspective, the theoretical value of a security does not take into account the speed of execution that is necessary to accomplish the goal of financing a specific acquisition. When we identify specific strategic targets where the identification of the target and the consummation of the transaction encompass a very compressed timeline the mechanics of an “orderly market” are not always present. We accept reduced consideration in certain financings due to the need to execute quickly and the accompanying need to be more aggressive in accepting terms. It is our view that the strategic advantage of acquiring our identified targets in this quickly developing market outweighed the discount on the proceeds.

6% Convertible Notes

Overview. On April 22, 2014, the Company completed a private offering of $24,175,824 principal amount (the "First Tranche") of 6% Original Issue Discount Senior Secured Convertible Promissory Notes, as amended (the "6% Convertible Notes") with accredited investors for total net proceeds to the Company of $20,511,200 after deducting placement agent fees and other expenses. On June 3, 2014, the Company issued additional 6% Convertible Notes in the principal amount of $4,395,604 (the "Second Tranche") for total net proceeds to the Company of $3,950,000. The third tranche of additional 6% Convertible Notes in the principal amount of $3,596,704 (the "Third Tranche") was purchased on August 20, 2014 for total net proceeds to the Company of $2,975,000. On October 15, 2014, the Company and the holder of the 6% Convertible Notes amended the 6% Convertible Notes, and the Company agreed to issue an additional $5,500,000 principal amount of 6% Convertible Notes for total net proceeds of $4,648,200 (the "Fourth Tranche"). The Company used a portion of the proceeds from the Fourth Tranche to fully repay and terminate the credit facility of its subsidiary, FIN Branding Group. The remaining proceeds were used by the Company to purchase inventory for its subsidiaries FIN Branding Group, LLC and Hardwire Acquisition Company and for other general corporate purposes, other than the repayment of any other indebtedness.

The holder of the 6% Convertible Notes have the right at any time and from time to time until August 15, 2015 to purchase additional 6% Convertible Notes in an aggregate principal amount of up to $12,087,913 for an aggregate purchase price of up to $11,000,000. The conversion price of these additional 6% Convertible Notes would be the lower of (i) 115% of the volume-weighted average price of the Company's common stock on the trading day immediately preceding the date of any purchase of such notes and (ii) the lowest conversion price of any of the outstanding 6% Convertible Notes.

As of December 31, 2014, the principal balance, unamortized discount, and net carrying amount relating to the 6% Convertible Notes are as follows:

	Principal Balance		Unamortized Discount		Net Carrying Amount
First Tranche	$	7,870,824	$	-	$	7,870,824
Second Tranche		10,000		-		10,000
Third Tranche		10,000		-		10,000
Fourth Tranche		3,015,879		-		3,015,879
Totals	$	10,906,703	$	-	$	10,906,703

Maturity and Interest. The 6% Convertible Notes are due December 15, 2016, and accrue interest at a rate of 6% on the aggregate unconverted and outstanding principal amount payable in cash on the last trading day of each month. The Company has also agreed pay to the holders of the 6% Convertible Notes on each such trading day a fixed payment amount in cash in the amount of $128,571.

Conversion. The 6% Convertible Notes may be converted in whole or in part into shares of common stock at the option of the holders of the 6% Convertible Notes at any time and from time to time into a number of shares of our common stock equal to (x) the "conversion amount" of such notes divided by (y) the conversion price. The conversion amount of any 6% Convertible Note to be converted is equal to the sum of (i) the principal amount of such note, (ii) any accrued and unpaid interest with respect to such principal, (iii) any accrued and unpaid late charges with respect to such principal and interest and (iv) the Make-Whole Amount. The conversion price of the 6% Convertible Notes is $0.86, as adjusted from time to time. The conversion prices for the 6% Convertible Notes are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, should the Company issue any common stock at, or should the exercise or conversion price of any previously issued option, warrant or convertible security be adjusted to, a purchase price that is less than the current exercise price of the 6% Convertible Notes, the conversion price of the 6% Convertible Notes will be adjusted to 115% of such lower purchase price with certain limited exceptions. Furthermore, should the Company complete an underwritten public offering of a minimum of $25 million, the conversion price would reset to the price that is equal to 115% of the volume weighted average price ("VWAP") of our common stock of the Company's shares of common stock on the trading day immediately following the pricing of such public offering should that price be lower than the conversion price then in effect. During 2014, the noteholders exercised the conversion options to reduce principal payments by $830,000. The conversion price at December 31, 2014 was $0.8625.

“Make-Whole Amount” means an amount in cash equal to all of the interest that would have accrued with respect to the applicable principal amount of 6% Convertible Notes being converted or redeemed for the period commencing on the applicable redemption date or conversion date and ending on December 15, 2016.

Prepayments and Redemptions. The 6% Convertible Notes include a prepayment clause with certain limitations. Commencing on January 1, 2015, the Purchaser has the right to require the Company to redeem up to $2,000,000 of principal amount of the 6% Convertible Notes, plus any accrued and unpaid interest thereon and the Make-Whole Amount, per calendar month. The holders have the right, in the event of a change of control, to require the Company to redeem all or portions of the 6% Convertible Notes, in exchange for cash equal to 107.5% of the principal amount redeemed plus all accrued and unpaid interest and late charges.

Collateral. As security for all of the Company's obligations under the 6% Convertible Notes and related documents executed in connection with the Offering: (i) VIP granted a guarantee in favor of the holders of the 6% Convertible Notes supported by a first priority security interest in all of VIP's assets and (ii) the Company granted such holders a first priority security interest in all of the shares owned by the Company in VIP following the acquisition of VIP. Additionally, the Company is required to maintain a $3 million cash balance that is restricted as to withdrawal, which may be used for redemptions upon instruction from the holders. Additionally, on October 15, 2014, the Company and its subsidiaries VCIG LLC, FIN Branding Group, LLC and Hardwire Acquisition Company entered into a pledge and security agreement pursuant to which the Company pledged the equity interests of such subsidiaries to the holders of the 6% Convertible Notes and each of such subsidiaries granted a security interest in all of its assets to the holders of the 6% Convertible Notes to secure all obligations of the Company under the 6% Convertible Notes. In addition, each of such subsidiaries guaranteed the Company's obligations under the 6% Convertible Notes. Approximately $2.6 million of the gross proceeds from the Fourth Tranche was deposited into a lockbox account over which the holders of the 6% Convertible Notes have a first priority security interest. The Company may withdraw funds from such account to purchase inventory for FIN Branding Group, LLC and Hardwire Acquisition Company with the prior consent of the holders of the 6% Convertible Notes.

Certain Covenants. The Company has agreed, subject to certain limited exceptions, not to, and to cause each of VCIG LLC, Must Have Limited, FIN Branding Group, LLC and Hardwire Acquisition Company (collectively, the “Subsidiaries”) not to, (i) pay any dividend on or repurchase any of its capital stock or rights to purchase capital stock or repay or purchase any subordinated debt, (ii) repay any principal under any indebtedness other than with net proceeds from the sale of equity securities of the Company or (iii) pledge any of its assets. The Company also agreed, subject to certain limited exceptions, (i) not to cause or permit any of the Subsidiaries to incur any debt or guarantee any indebtedness or to transfer any of its assets or issue or sell any equity interests and (ii) not to take any action, or fail to take any action, that could materially diminish the business of any of the Subsidiaries or divert the business of any of the Subsidiaries to any other person. The Company has also agreed to cause its subsidiary VIP to maintain a minimum EBITDA of $900,000 each month.

Events of Default. The 6% Convertible Notes include the following events of default, among others: (i) a default in the payment of interest or principal when due, which default, in the case of an interest payment, is not cured within three trading days; (ii) failure to comply with any other covenant or agreement contained in the notes after an applicable cure period; (iii) the occurrence of any default under, redemption of, or acceleration prior to the maturity of any indebtedness (but excluding any indebtedness arising out of the 6% Convertible Notes) (after giving effect to any applicable cure period) of the Company or its subsidiaries; (iv) failure to pay any other obligation of the Company that exceeds $50,000 and causes such obligation to become due and payable earlier that would otherwise become due; (v) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a bankruptcy or liquidation event; (vi) a judgment for payment of money exceeding $100,000 in the case of VIP and exceeding $1,000,000 in the case of the Company and any of its subsidiaries (other than VIP) remains unvacated, unbonded or unstayed for a period of 30 calendar days; (vii) our common stock is not be eligible for listing on a national exchange or the OTC Bulletin Board; or (viii) failure to have any registration statement declared effective, or the lapsing of such registration statement, by certain deadlines pursuant to the registration rights agreement entered into between the note holders of the 6% Convertible Notes and the Company.

4% Convertible Notes

Overview. On May 30, 2014, the Company completed a private offering for total net proceeds to the Company of $2,000,000 after deducting placement agent fees and other expenses, which proceeds the Company used for general working capital. Pursuant to a securities purchase agreement with the purchaser, the Company issued to the purchaser $2,105,263 principal amount of 4% original issue discount convertible promissory notes (the "4% Convertible Notes"). Additionally, on May 30, 2014, the Company exchanged $3,625,000 principal amount of FIN Promissory Notes plus $375,000 of accrued interest with a holder of a portion of our FIN Promissory Notes, for $4,210,526 principal amount of another series of 4% original issue discount convertible promissory notes (the "Exchange Convertible Notes"). The 4% Convertible Notes are unsecured.

As of December 31, 2014, the principal balance, unamortized discount, and net carrying amount relating to the 4% convertible and exchanged notes are as follows:

	Principal Balance		Unamortized Discount			Net Carrying Amount
May convertible note	$	1,281,376	$	(243,568	)	$	1,037,808
May exchanged note		2,794,736		(557,369	)		2,237,367
Totals	$	4,076,112	$	(800,937	)	$	3,275,175

Maturity and Interest. The 4% Convertible Notes and the Exchange Convertible Notes are due on November 30, 2015 less any amounts converted prior to the maturity date and accrue interest at a rate of 4% on the aggregate unconverted and outstanding principal amount payable in cash on a monthly basis. Beginning November 30, 2014, and continuing on each of the following twelve successive months thereafter, the Company are obligated to pay 1/13th of the face amount of the 4% Convertible Notes and accrued interest. Beginning August 30, 2014, and continuing on each of the following fifteen successive months thereafter, the Company are obligated to pay 1/16th of the face amount of the Exchange Convertible Note and accrued interest. In each case such payments shall, at the holder's option, be made in cash or, subject to the Company complying with certain conditions, be made in common stock. For a position of the notes, each share of common stock is ascribed a value that is equal to 75% of the lowest VWAP for the 20 consecutive trading days immediately prior to such payment date. For a portion of the notes each share of common stock is ascribed a value that is equal to 70% of the lowest VWAP for the 20 consecutive trading days immediately prior to such payment date. Such amortization payments in shares of common stock may be requested by the holders up to 12 trading days prior to the amortization payment due date.

Subsequent to year end, the discount to the VWAP was increased from 25% to 30%. In addition, the prepayment rate was increased by 5% of the sum of the outstanding principal and any remaining interest through maturity.

Conversion. The 4% Convertible Notes and the 4% Exchange Convertible Notes may be converted, in whole or in part, into shares of common stock at the option of the holder at any time and from time to time. The shares of common stock issuable upon conversion of the 4% Convertible Notes or the 4% Exchange Convertible Notes shall equal: (i) the principal amount of the note to be converted (plus accrued interest and unpaid late charges, if any) divided by (ii) a conversion price of $90.00, as adjusted from time to time. The conversion price is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, subject to certain limited exceptions, if the Company issues any common stock or warrants or convertible debt entitling any person to acquire common stock at a per share purchase price that is less than the conversion price for the notes, such conversion price will be adjusted to that lower purchase price. As a result of the subsequent issuances of our convertible notes, warrants and shares of our common stock, as of December 31, 2014, the conversion price of the 4% Convertible Notes and the 4% Exchange Convertible Notes was $0.75 per share. During 2014, the noteholders exercised the conversion options to reduce principal payments by $1,976,518.

Prepayments. The notes may be prepaid in whole or in part at any time upon ten days’ notice for 125% of the sum of the outstanding principal and any remaining interest through maturity.

Right to Participate in Future Financings. From May 30, 2014 until May 30, 2015, if the Company or any of its subsidiaries issue any securities subsequent to the issuance of the 4% Convertible Notes, other than any issuance through a public underwritten offering or to an investor or a group of investors that already own common stock or any securities that entitle the holder thereof to acquire at any time our common stock, the holders of the 4% Convertible Notes shall have the right to participate in such subsequent financing in an amount up to 100% of the holder’s subscription amount in the 4% Convertible Notes on the same terms, conditions and price provided for in such subsequent financing.

Events of Default. The 4% Convertible Notes and the 4% Exchange Convertible Notes include the following events of default, among others: (i) a default in the payment of interest or principal when due, which default, in the case of an interest payment, is not cured within three trading days; (ii) failure to comply with any other covenant or agreement contained in the notes after an applicable cure period; (iii) a default or event of default under any other material agreement not covered by clause (iv) below to which the Company is obligated (subject to any grace or cure period provided in the applicable agreement); (iv) failure to pay any other obligation of the Company that exceeds $50,000 and causes such obligation to become due and payable earlier that would otherwise become due; (v) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a bankruptcy or liquidation event; (vi) a judgment for payment of money exceeding $50,000 remains unvacated, unbonded or unstayed for a period of 45 calendar days; (vii) our common stock is not be eligible for listing on a national exchange or the OTC Bulletin Board; (viii) a Change of Control or Fundamental Transaction (as such terms are defined below) occurs, or the Company agrees to sell over 33% of its assets; or (ix) failure to file with the SEC any required reports under Section 13 or 15(d) of the Exchange Act.

If any event of default occurs, the outstanding principal amount of the notes, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder’s election, immediately due and payable in cash in the sum of (a) 130% of the outstanding principal amount of the notes and accrued and unpaid interest thereon, (b) all other amounts, costs, expenses and liquidated damages due in respect of the notes and (c) an amount in cash equal to all of the interest that, but for the default payment, would have accrued with respect to the applicable principal amount being so redeemed for the period commencing on the default payment date and ending on November 30, 2015. After the occurrence of any event of default that results in the acceleration of the notes, the interest rate on shall accrue at an interest rate equal to the lesser of 24% per annum, or the maximum rate permitted under applicable law. In addition, at any time after the occurrence of any event of default the holder may require the Company to, at such holder’s option, convert all or any part of the 4% Convertible Notes and the 4% Exchange Convertible Notes into common stock at 60% of the lowest VWAP during the 30 trading day-period immediately prior to such conversion date.

“Change of Control Transaction” means the occurrence of any of (a) an acquisition by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control of in excess of 33% of the voting securities of the Company, (b) the Company merges into or consolidates with any other entity, or any entity merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another entity and the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Company’s Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the issue date of such notes, as applicable (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

“Fundamental Transaction” means the occurrence of any of the following events: (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another entity, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any direct or indirect purchase offer, tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding common stock, (iv) the Company, directly or indirectly, in one or more related transactions, effects any reclassification, reorganization or recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property or (v) the Company, directly or indirectly, in one or more related transactions, consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another entity whereby such other entity acquires more than 50% of the outstanding shares of common stock of the Company.

12% Exchanged Notes

Overview. On February 28, 2014, the Company and its wholly owned subsidiary, VCIG LLC, issued $15,000,000 principal amount of promissory notes (the “FIN Promissory Notes”) in connection with our acquisition of FIN. On May 30, 2014, the Company issued 4% Exchange Convertible Notes in exchange for $3,625,000 of principal of the FIN Promissory Notes plus accrued interest. On July 17, 2014, the Company paid back $875,000 of principal of the FIN Promissory Notes plus accrued interest and issued 12% Convertible Notes in exchange for the remaining $10,500,000 of principal of the FIN Promissory Notes. As a result of this exchange, the FIN Promissory Notes were paid in full. The 12% original issue discount convertible promissory notes have an aggregate principal amount of $11,052,632 (the “12% Exchanged Notes”). The Company recognized a loss of $2,161,215 equal to the difference between the carrying value of the old promissory note and the fair value of the new promissory notes and warrants.

As of December 31, 2014, the principal balance, unamortized discount, and net carrying amount relating to the 12% Exchanged Notes are as follows:

	Principal Balance		Unamortized Discount		Net Carrying Amount
12 % Exchanged Notes	$	7,345,428	$	-	$	7,345,428

Maturity and Interest. The 12% Exchanged Notes are due on January 17, 2016, less any amounts converted or repaid prior to the maturity date, and accrue interest at a rate of 12% on the aggregate unconverted and outstanding principal amount payable, at the holder’s option, in cash or common stock on a monthly basis. On November 17, 2014, the Company are obligated to pay 1/8^th of the face amount of the 12% Exchanged Notes and accrued interest, and continuing on each of the following 14 successive months thereafter, the Company are obligated to pay 1/16th of the face amount of the 12% Exchanged Notes and accrued interest. At the holder’s option, the holder can request that our monthly payments be for 5/16th of the face amount of the 12% Exchanged Notes. In each case such payments shall, at the holder’s option, be made in cash or, subject to the Company complying with certain conditions, be made in common stock with each share of common stock being ascribed a value that is equal to 75% of the lowest VWAP for the 20 consecutive trading days immediately prior to such payment date. Such amortization payments in shares of common stock may be requested by the holders up to 12 trading days prior to the amortization payment due date.

Conversion. The 12% Exchanged Notes may be converted, in whole or in part, into shares of common stock at the option of the holder at any time and from time to time. The shares of common stock issuable upon conversion of the 12% Exchanged Notes shall equal: (i) the principal amount of the Note to be converted (plus accrued interest and unpaid late charges, if any) divided by (ii) a conversion price of $97.50, as adjusted from time to time. The conversion price is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, subject to certain limited exceptions, if the Company issues any common stock or warrants or convertible debt entitling any person to acquire common stock at a per share purchase price that is less than the conversion price for the notes, such conversion price will be adjusted to that lower purchase price. Also, the conversion price of the notes will be adjusted if the closing bid price for the Company’s common stock on January 13, 2015 is below the conversion price, in which case the original conversion price will automatically adjust to 70% of the lowest VWAP in the 15 trading days prior to such date. As a result of the subsequent issuances of our convertible notes, warrants and shares of our common stock, as of December 31, 2014, the conversion price of the 12% Exchanged Notes was $0.75 per share. During 2014, the noteholders exercised the conversion options to reduce principal payments by $3,049,309.

Prepayments and Redemptions. The 12% Exchanged Notes may be prepaid in whole or in part at any time upon ten days’ notice for 105% of the sum of the outstanding principal and accrued interest, subject to the Company complying with certain conditions. On or at any time within 30 days after the date our common stock is listed on either the New York Stock Exchange or a Nasdaq exchange, the holders can require the Company to redeem all or any part of the 12% Exchange Notes for an amount equal to the outstanding principal amount and interest multiplied by 105%.

Events of Default. The 12% Exchanged Notes include the following events of default, among others: (i) a default in the payment of interest or principal when due, which default, in the case of an interest payment, is not cured within three trading days; (ii) failure to comply with any other covenant or agreement contained in the notes after an applicable cure period; (iii) a default or event of default under any other material agreement not covered by clause (iv) below to which the Company is obligated (subject to any grace or cure period provided in the applicable agreement); (iv) failure to pay any other obligation of the Company that exceeds $50,000 and causes such obligation to become due and payable earlier that would otherwise become due; (v) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a bankruptcy or liquidation event; (vi) a judgment for payment of money exceeding $50,000 remains unvacated, unbonded or unstayed for a period of 45 calendar days; (vii) our common stock is not be eligible for listing on a national exchange or the OTC Bulletin Board; (viii) a Change of Control or Fundamental Transaction (as such terms are defined below) occurs, or the Company agrees to sell over 33% of its assets; or (ix) failure to file with the SEC any required reports under Section 13 or 15(d) of the Exchange Act.

If any event of default occurs, the outstanding principal amount of the notes, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder’s election, immediately due and payable in cash in the sum of (a) 125% of the outstanding principal amount of the notes and accrued and unpaid interest thereon, (b) all other amounts, costs, expenses and liquidated damages due in respect of the notes and (c) an amount in cash equal to all of the interest that, but for the default payment, would have accrued with respect to the applicable principal amount being so redeemed for the period commencing on the default payment date and ending on January 17, 2016. After the occurrence of any event of default that results in the acceleration of the notes, the interest rate on shall accrue at an interest rate equal to the lesser of 24% per annum, or the maximum rate permitted under applicable law. In addition, at any time after the occurrence of any event of default the holder may require the Company to, at such holder’s option, convert all or any part of the FIN July 2014 Convertible Exchange Notes into common stock at 55% of the lowest VWAP during the 30 trading day-period immediately prior to such conversion date.

Warrants. The warrants issued in the exchange are exercisable for a period of eighteen months from their issue dates. The exercise price with respect to the warrants is $150.00 per share. The exercise price for the warrants is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances, but do not contain any down-round ratchet provisions. The warrants issued in the offerings are exercisable for an aggregate of 53,846 shares of the Company’s common stock. The warrants are exercisable for a period of 18 months from their respective issue dates.

These warrants are considered liabilities and will be recorded at fair value each reporting period with adjustments recorded in the consolidated statements of operations and comprehensive loss.

December 12% Convertible Notes

Overview. From December 23, 2014, through December 29, 2014, the Company, completed a private offering of $1,052,632 principal amount 5% Original Issue Discount Convertible Promissory Notes (the “December 12% Convertible Notes”) with accredited investors for total net proceeds to the Company of $917,500. The investors also agreed to purchase up to an additional $2,000,000 of December 2014 Convertible Notes, if certain conditions and milestones were met. See Note 24 for subsequent events.

As of December 31, 2014, the principal balance, unamortized discount, and net carrying amount relating to the December 12% Convertible Notes are as follows:

	Principal Balance		Unamortized Discount			Net Carrying Amount
December 12% Convertible Notes	$	1,052,632	$	(126,033	)	$	926,599

Maturity and Interest. The December 12% Convertible Notes are due one year from the date of issuance, less any amounts converted or redeemed prior to the maturity date, and accrues interest at an annual rate of 12% on the aggregate unconverted and outstanding principal amount, payable in cash or, should the Company’s common stock be listed on a national exchange, in common stock, on the first day of each calendar month. Beginning on the third month after the original issue date and continuing on each of the following nine successive months thereafter, the Company are obligated to pay 1/10th of the face amount of the December 12% Convertible Notes and accrued interest, which, at the Company’s option, may be paid in cash or, subject to the Company complying with certain conditions, in common stock with each share of common stock being ascribed a value that is equal to 75% of the lowest VWAP for the 20 consecutive trading days immediately prior to such payment date.

Conversion. The December 12% Convertible Notes may be converted, in whole or in part, into shares of common stock at the option of the holder at any time and from time to time. The shares of common stock issuable upon conversion of the December 12% Convertible Notes shall equal: (i) the principal amount of the note to be converted divided by (ii) a conversion price of $2.10, as adjusted from time to time. The conversion price is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. If, on the day that is the six month anniversary from the original issue date, the closing bid price for the common stock is below conversion price, the conversion price will automatically adjust to 70% of the lowest VWAP in the 15 trading days prior to the six month anniversary. Additionally, should the Company issue any equity at, or should the exercise or conversion price of any previously issued option, warrant convertible security be adjusted to a purchase price that is less than the current Conversion Price, the Conversion Price will be adjusted to such lower purchase price, with certain limited exceptions. As a result of the subsequent issuances of our warrants, as of December 31, 2014, the conversion price of the December 12% Convertible Notes was $0.75 per share.

Prepayments and Redemptions. The December 12% Convertible Notes may be prepaid in whole or in part at any time upon ten (10) days written notice to the holders for 120% of outstanding principal and accrued interest. At any time, within thirty (30) days of the Company's common stock being listed on a national exchange, the holders of the December 12% Convertible Notes may "put" to the Company all or any part of the December 12% Convertible Notes, which the Company must purchase within ten (10) days of such notice for 105% the then outstanding principal amount and interest.

Right to Participate in Future Financings. For twelve (12) months from the execution of the securities purchase agreement, if the Company or any of its subsidiaries issue any securities subsequent to the issuance of the December 12% Convertible Notes, other than any issuance through a public underwritten offering or to an investor or a group of investors that already own common stock or any securities that entitle the holder thereof to acquire at any time our common stock, the holders shall have the right to participate in such subsequent financing in an amount up to 100% of the holder's subscription amount in the December 12% Convertible Notes on the same terms, conditions and price provided for in such subsequent financing.

VIP Seller Note

Overview. On April 22, 2014, the Company issued $11,000,000 principal amount of promissory notes (the “VIP Promissory Notes”) to the MHL Shareholders in connection with our acquisition of VIP. The VIP Promissory Notes become due at the earlier of (1) December 13, 2014, (2) the day the Company first trades it shares of a common stock on certain listed exchanges (including the NYSE Market, the Nasdaq Capital Market, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange) or (3) the Company completes an underwritten public offering of a minimum of $40 million (the “Maturity Date”). Beginning on August 21, 2014, the VIP Promissory Notes will accrue interest at a rate of 10% per annum. The Company may prepay the VIP Promissory Notes at any time without penalty.

Collateral. As security for all of the Company’s obligations under the VIP Promissory Notes and related documents executed in connection with the acquisition: (i) the Company granted a guarantee in favor of the holders of the VIP Promissory Notes supported by a second priority security interest in all of VIP’s assets and (ii) the Company granted such holders a second priority security interest in all of the shares owned by the Company in VIP following the acquisition of VIP.

Mortgage Note

In September 2014, the Company purchased for $530,000 land and a building to house the Company’s operations and executive office. As a result of this purchase, the Company financed $430,572 of the purchase price (“Original Mortgage Note”). The 8.5% Original Mortgage Note was due on December 31, 2014. The Original Mortgage Note was retired and replaced with a new $250,000 Mortgage Note as of December 31, 2014 with a maturity of December 31, 2019. The new $250,000 Mortgage Note has a variable interest rate of the prime rate plus 2.5% with the initial rate being 5.75%.

Demand Loans

During November and December 2014, the Company borrowed $1,270,000 from certain note holders. These notes were exchanged for convertible promissory notes in February 2015.

Cross Default

As of December 31, 2014, the Company was in default on the following instruments: 15% Convertible Notes; the 6% Convertible Notes; the 4% Convertible Notes: the VIP Seller Note and the 12% Exchanged Notes. The primary trigger for these defaults was cross default provisions in each note stemming from the inability of the Company to make interest payments on the 15% Convertible Notes at the end of November 2014. Given these cross default provisions, management has been active in seeking a resolution to cure the violations. These actions include refinancing of certain debt instruments and providing or negotiating viable options for the debt holders to convert on revised terms or sell to third parties. The existence of defaults does not affect the classification on the December 31, 2014 consolidated balance sheet of these obligations since they generally contain terms, such as no restrictions on voluntary rights held by the investor lenders to convert the obligations at their discretion at any time. As such, all borrowed debt as of December 31, 2014 is classified as current liabilities.

Warrants and Embedded Derivatives

Certain debt notes issued during 2014 included embedded compound derivatives and detachable common stock purchase warrants. The derivatives and warrants were bifurcated from the host, and are accounted for at fair value. As of December 31, 2014, private placement debt transactions are as follows:

	Face		Carrying		Fair Value of		Fair Value of
	Amount		Amount		Derivatives		Warrants
15% Notes(JAN)	$	9,704,901	$	9,704,901	$	8,042,708	$	16,480,140
15% Notes(FEB)		15,750,000		13,239,107		12,955,844		23,433,000
6% Convertible Notes		10,906,703		10,906,703		6,912,271		n/a
4% Convertible Notes		4,076,112		3,275,175		3,626,840		n/a
12% Exchange Notes		7,345,428		7,345,428		7,147,985		10,960
December 12% Convertible Notes		1,052,632		926,599		1,084,211		n/a
Total	$	48,835,776	$	45,397,913	$	39,769,859	$	39,924,100

The compounded embedded derivatives reported as debt discounts and common stock warrant discounts are amortized to interest expense using the effective interest method over the remaining terms of the convertible notes. When holders of the convertible notes exercise their rights to convert to common stock, the rate of amortization is accelerated by expensing any unamortized discount associated with the converted debt. Amortization of the convertible debt discount for 2014 is summarized as follows:

Balance at beginning of year	$	-

Original face value discount through issuance of convertible notes		4,639,157
Original convertible debt discount through issuance of common stock warrants		15,311,892
Original convertible debt discount through compound embedded derivative		18,340,894
Total convertible note discounts originated during the year		38,291,943

Less discount amortization on convertible debt		(26,074,154	)
Less accelerated discount amortization on convertible debt		(3,136,191	)
Less extinguishment of debt		(5,643,735	)

Balance at end of year	$	3,437,863

February 2014 Convertible Notes Discount, May 2014 Convertible Note Discount and December 12% Convertible Note Discount will be fully amortized in February 2015, November 2015 and December 2015, respectively.

Interest Expense

Interest expense for the years ended December 31, 2014, 2013, and 2012 is as follows:

	Years Ended December 31,
	2014		2013		2012
Accretion of and interest on convertible notes	$	38,128,544	$	-	$	-
FIN July 2014 Convertible Exchange Notes		757,136		-		-
FIN Penalty Shares		3,224,813		-		-
Other		2,025,502		1,804,710		30,140
	$	44,135,995	$	1,804,710	$	30,140

The payment of 800,000 penalty shares during 2014 is consideration exchanged due to late repayment of the FIN Promissory Notes.