As of December 31, 2016, $417,000 of convertible notes and $23,000 if accrued interest was due to note holders. During the year ended December 31, 2017, the Company issued convertible promissory notes in the aggregate of $1,616,000 for cash proceeds of $1,469,000 and a discount of $147,000. The notes do not bear any interest; however, the implied interest rate used was 10% since the notes were issued 10% less than its face value, are unsecured, mature in twelve months from issuance and convertible at $0.05 per share. In addition, the Company also granted these note holders warrants to purchase 16,160,770 shares of the Company’ common stock. The warrants are fully vested, exercisable at $0.05 per share and expire one year from the date of issuance. As a result, the Company recorded a note discount of $1,616,000 to account for the relative fair value of the warrants, the notes’ beneficial conversion factor (“BCF”) and original issue discount (“OID”). The note discounts are amortized over the life of the notes or were amortized in full upon the conversion of the corresponding notes to common stock. During 2017, a total of $1,528,000 of notes payable were converted into 29,986,732 shares of common stock and amortized note discount of $1,661,000 was recorded as interest expense. As of December 31, 2017, total outstanding notes payable amounted to $509,000 which are due through June 2018 and unamortized note discount of $47,000. During the year ended December 31, 2017, the Company accrued interest of $48,000. As of December 31, 2017, total accrued interest amounted to $71,000 which was reported as part of convertible debentures in the accompanying consolidated balance sheet. As of December 31, 2017, $381,000 of these notes were past due.

During the year ended December 31, 2018, the Company issued convertible promissory notes in the aggregate of $1,955,000 for cash proceeds of $1,778,000 and a discount of $178,000. The notes do not bear any interest; however, the implied interest rate used was 10% since the notes were issued 10% less than its face value, are unsecured, mature in twelve months from issuance and convertible at $0.05 to $0.08 per share. In addition, the Company also granted these note holders warrants to purchase 18,238,688 shares of the Company’ common stock. The warrants are fully vested, exercisable at $0.05 to $0.08 per share and expire one year from the date of issuance. As a result, the Company recorded a note discount of $1,778,000 to account for the relative fair value of the warrants, the notes’ BCF and OID. The note discounts are amortized over the life of the notes or were amortized in full upon the conversion of the corresponding notes to common stock. During 2018, a total of $579,000 of notes payable were converted into 9,299,125 shares of common stock and amortized note discount of $902,000 was recorded as interest expense. As of December 31, 2018, total outstanding notes payable amounted to $1,886,000 which are due through December 2019 and unamortized note discount of $1,100,000.

During the year ended December 31, 2018, the Company accrued interest of $52,000. As of December 31, 2018, total accrued interest amounted to $123,000 which was reported as part of convertible debentures in the accompanying consolidated balance sheet. As of December 31, 2018, $454,000 of the outstanding notes are past due and the Company is currently in negotiations with the noteholders to settle the matured notes payable.