PROMISSORY NOTES PAYABLE AND ADVANCES

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

PROMISSORY NOTES PAYABLE AND ADVANCES

NOTE 6 – PROMISSORY NOTES PAYABLE AND ADVANCES

On September 25, 2015, we entered into a Securities Purchase Agreement and issued a 15% Promissory Note with the principal face value of $500,000 (the “15% Note”) to an accredited investor. Under the terms of the 15% Note, all principal and related accrued interest outstanding are due and payable to the noteholder upon the earlier of: (i) September 25, 2016; or (ii) within ten business days after the consummation of an equity or convertible debt financing with aggregate gross proceeds of at least $1,000,000.

Borrowings made pursuant to the 15% Note bear interest at the annual rate of 15% (or $75,000), irrespective of whether paid at or prior to September 25, 2016.  If any amount payable pursuant to the note payable is not paid when due (without regard to any applicable grace periods as set forth in the Note), whether at stated maturity, by acceleration or otherwise, such overdue amount shall bear interest at the rate of 15% from the date of such non-payment until such amount is paid in full. We recognized $ 43,521 in interest expense during the three months ended March 31, 2016 based on an estimated repayment date of April 4, 2016 (see subsequent events footnote below).

During November 2015, we issued a one year 10% promissory notes payable (the “10% Note”) to a purchaser for cash proceeds totaling $50,000. In the event that we secure any future financing with aggregate gross proceeds of at least $1 million while the 10% Note is outstanding, the 10% Note and all accrued interest therefrom will be immediately due and payable within ten business days of the closing of such financing. The holder may also convert any unpaid principal under the 10% Note into any funding instrument entered into by our Company for a period of 180 days after the date of the 10% Note. The full interest of 10% of the borrowings under the 10% Note ($5,000) is due irrespective of whether paid at maturity or when required to be prepaid. We have recognized $2,420 in interest expense during the three months ended March 31, 2016 based on an estimated repayment date of May 15, 2016.

On November 30, 2015 and on four subsequent dates during December 2015, four individuals (the “Lenders”) advanced a total of $410,000 to the Company. The borrowings (“Advances”) were not accompanied by documentation of the nature of the Advances. However, there were general discussions as to the repayment terms, the interest expected to be paid to the Lenders and additional equity of the Company to be issued to the Lenders in connection with the Advances. Accordingly, we have accounted for the Advances based on estimates of their still undocumented final terms.

On March 30, 2016, a corporation advanced our Company $244,975. The advance was undocumented but our Company subsequently entered into an agreement with the corporation on terms documented in the subsequent events footnote that follows. The amounts advanced were accounted for at the value of the cash received as of March 31, 2016.

In connection with the expected value of the warrants, we recorded an equity contribution of $138,333 in December 2015 ($82,351 and $15,259 of which was amortized and charged to interest expense during the three months ended March 31, 2016 and December 31, 2015, respectively). We calculated an original issue discount of $51,111 on the borrowings ($30,467 of which was charged to interest expense during the three months ended March 31, 2016) and we have recognized $11,496 of interest during the three months ended March 31, 2016 for the expected interest to be paid on the non-discounted face value of the borrowings.

Borrowings under notes payable and advances as of March 31, 2016 and December 31, 2015 are summarized as follows:

	Company  Proceeds		Carrying  Value at  March 31,  2016		Carrying  Value at  December  31, 2015		Accrued  Interest at  March 31,  2016		Accrued  Interest at  December  31, 2015		Principal  Value at  Maturity
15% Note	$	500,000	$	500,000	$	500,000	$	75,000	$	31,479	$	500,000
10% Note		50,000		50,000		50,000		3,803		1,383		50,000
Advances - 2015		410,000		405,322		292,504		13,687		2,190		461,111
Advances - 2016		244,975		244,975		-		-		-		275,000
	$	1,204,975	$	1,200,297	$	842,504	$	92,490	$	35,052	$	1,286,111