InterCore, Inc.

The Company used the Binomial Lattice Model to determine the fair value of embedded conversion option. The Company used the Black Scholes Model to determine the fair value of the warrant liability. The warrants have a fixed exercise price and do not have any down round price protection features.

On September 2, 2014, the entered into a note payable with Epec in the amount of $110,000. The note earns 18% annually compounded daily, requires monthly principal payments of $3,000 on the 15th of each month from September through December and matures on December 31, 2014. In connection with the issuance of that note, the Company issued to Epec 8,000 shares of its common stock with a value of $26,000 based upon the closing price of $3.25 per share on that date. The value of those shares was recorded as a debt discount and is being amortized to financing expense ratably over the life of the note.

In accordance with its sequencing policy, the Company could not determine if it had sufficient authorized shares to settle the contract as the outstanding Credit Facility (Note 7) is convertible into a variable amount of shares with no floor. On the date of the issuance of the warrants, the Company reclassified the fair value of the warrants of $161,330 from additional paid-in capital to derivative liability. These warrants are collectively marked-to-market at the end of each reporting period with a related non-cash charge or benefits recorded in the Statement of operations as a change in fair value of derivative liability.

On October 8, 2014, the Company entered into an agreement with its major customer to be compensated for software licenses provided by the Company during the nine months ended September 30, 2014 through the payment of twelve monthly amounts of $125,000 in Canadian dollars. Due to the uncertainty of payment, revenue is being recognized upon the collection of such funds. The Company has recorded revenues of $351,450 in connection with this agreement during the three and nine months ended September 30, 2014.

On October 15 and November 7, 2014, we issued 1,290,491 shares of restricted common stock to Topside in connection with its exercise of warrants to purchase 1,518,130 shares of our common stock. We did not receive any consideration for the exercise of these warrants as they were issued pursuant to the cashless exercise provision contained in those warrants.

On October 29, 2014, the Company entered into a Loan and Security Agreement and Secured Promissory Note (collectively the "Note") with Topside Partners, LP ("Topside") under which the Company borrowed various amounts between that date and November 5, 2014 totaling $1,000,000 and received net proceeds of $895,000. The Note bears interest at 18% per annum, is secured by a lien on all the Company's assets, and matures on May 31, 2015. The Company is obligated to commence repayment of the principal when it becomes cash flow positive and may do so without penalty. Outstanding principal may be converted at the election of Topside at any time into the Company's Series D Preferred Shares at the price of $10.00 per share or into restricted common stock at a price of a 60% discount to market based on the average closing price of the five days preceding such election except that through April 29, 2015, Topside may convert the outstand principal into common stock at a price equal to the lesser of: a) $2.00 per share; or b) a 60% discount to market based upon the average closing price five days preceding such election. Topside has the right to make such a conversion election up to five days after the Company has tendered repayment of the principal. Additionally on that same day and under the terms of the Note, the Company issued a warrant for Topside to purchase up to 2,000,000 shares of the Company's common stock at an exercise price of $1.00 per share for a period of four years. The warrant was 100% vested upon issuance.