The Company entered into notes payable agreements with vendors in lieu of making payments due on accounts payable to these vendors. Interest accrued on these interest bearing notes payable at an annual rate of 7% with accrued interest and principal due at maturity. In August 2014, the Company entered into a settlement agreement with a vendor for the repayment of $631,000 which included $531,000 in notes payable, $93,000 of accrued interest and $7,000 of accounts payable. Under the terms of the settlement agreement, the Company paid the vendor $90,000 and issued 541,948 shares of common stock and a warrant to purchase 162,539 shares of common stock exercisable at $1.00 per share with a five year term. The Company valued the common stock at $341,000 and estimated the fair value of the warrant to be $55,000 based on a Black-Sholes valuation. The Company estimated the fair value of the common stock to be $0.63 per share based upon the 2014 Private Placement in which the Company sold units consisting of one share of common stock and one warrant for $1.00 each. The Company estimated the fair value of each warrant to be $0.37 based on a Black Scholes valuation model. For the year ended December 31, 2014, the Company recorded a gain on the settlement of $145,006 which was recorded as other income in the statement of operations.

The Company also had a note payable outstanding to another vendor with a balance due of $75,244 at September 30, 2014 which had no stated interest rate. The Company had been accruing interest on this note but reached an agreement with the vendor to pay off this note payable with no interest in four equal monthly principal installments of $25,081 and the note was paid off as of December 31, 2014.

In October 2014, the Company entered into a loan agreement with a financing company for $192,000. The terms of the loan stipulated equal monthly payments of principal and interest payments of $24,293 over an eight month period. Interest accrued on this loan at an annual rate of 3.25%. The loan was fully repaid in June 2015.

In November 2015, the Company entered into a loan agreement with a financing company for $207,750. The terms of the loan stipulate equal monthly payments of principal and interest payments of $23,397 over a nine month period. Interest accrues on this loan at an annual rate of 3.25%.

Interest expense for notes payable for the years ended December 31, 2015 and 2014 totaled $2,440 and $24,021, respectively.

Notes payable consisted of the following: