NOTE

64% of our outstanding common shares as of September 30, 2016). The three debt agreements consisted of a Bridge Loan Promissory Note, a Secondary Revolving Promissory Note and an Unrestricted Line of Credit (collectively, the “Loan Agreements”). On December 31, 2015, the Bridge Loan Promissory Note and the Secondary Revolving Promissory Note expired leaving the Unrestricted Line of Credit.

, bearing an interest rate of 6% per annum, has since been amended resulting in an increase in the maximum borrowing amount from $2,000,000 to $3,500,000, a reduction in the conversion rate of $0.30 to $0.06 per share, and an extension of the maturity date from December 31, 2015 to January 31, 2018.  The change in the conversion rate took place on December 29, 2015 and resulted in an estimated change in fair value of the conversion price of $310,000. This change in fair value was recorded as a deferred financing cost on December 29, 2016 and was amortized over the then remaining seven-month term of the Unrestricted Line of Credit. The deferred financing cost totaled $0 and $44,000 on September 30, 2016 and June 30, 2016, respectively. During the three months ended September 30, 2016, we recorded $44,000 of deferred financing amortization costs, which is included in other expense in the accompanying condensed consolidated statements of operations.

September 30, 2016, we borrowed an aggregate of $4,670,000 pursuant to these various debt agreements with Esenjay. On September 3, 2015, we entered into a Loan Conversion Agreement with Esenjay, as amended on October 6, 2015 and November 13, 2015, pursuant to which we issued 51,171,025 shares of our common stock (based on $0.04 per share) in exchange for the cancellation of $2,000,000 outstanding under the Loan Agreements, plus $46,841 in accrued interest. In conjunction with our then outstanding private placement (see Note 6) between April 1, 2016 and August 31, 2016, $1,750,000 of the outstanding debt under the Unrestricted Line of Credit was settled via the issuance of 43,750,000 shares of our common stock.

he outstanding principal balance of the Unrestricted Line of Credit was $920,000 resulting in $2,580,000 available for future draws. Borrowings under the Unrestricted Line of Credit are subject to pre-approval by Esenjay which has no obligation to loan additional funds. During the three months ended September 30, 2016 and 2015, the Company recorded approximately $16,000 and $20,000 of interest expense related to the Unrestricted Line of Credit, respectively.  Subsequent to September 30, 2016, we have borrowed an additional $275,000 under the Unrestricted Line of Credit (see Note 12).