8. TERM LOAN

On September 30, 2016, the Company and its senior lender modified certain bridge loans entered into from June 2016 through September 2016. The various bridge loans with an outstanding balance of $2.25 million were restructured into one term loan for $2.5 million, with a maturity date of April 30, 2017 and an interest rate of 16% per year. Consideration was then made whether the terms of the restructured debt instrument were substantially different from the original debt instrument. Under ASC 470-50 Modifications and Extinguishment if the present value of the cash flows under the new debt is at least 10% different from the present value of the remaining cash flows under the original debt, they are considered to be substantially different and extinguishment accounting is applied. Based on the calculations performed, there was a greater than 10% difference between the present value of cash flows under the restructured debt compared to the present value of the remaining cash flows under the original debt. Therefore, the restructuring met the conditions for debt extinguishment accounting under ASC 470-50. As of September 30, 2016, the fair value of this debt was determined to be $2,560,700, and is recorded as such in Section 6, Notes Payable. The difference in the face value of the note and the fair value of the note, $60,700 was recorded as a one time extinguishment expense in this period, along with $110,000 of fees paid to the lender and $143,200 to establish the warrant liability, for a total one time extinguishment expense of $313,900. See Footnote 10 “Warrants and Derivative Warrant Liability” for the fair value calculation of the warrant issued in conjunction with this term loan. As of September 30, 2016 there are $473,100 in deferred financing costs associated with the term loan, which will be amortized on a straight line method, which approximates the interest rate method, over a seven month period to interest expense.