Senior Notes Payable

6 Months Ended

Jun. 30, 2015

Senior Notes Payable

Senior Notes Payable

Note 9

Senior Notes Payable:

In the following table is a summary of the Company’s notes payable:

	June 30, 2015
	(unaudited)
Senior-secured notes payable, net of unamortized debt discount of $2,816	$	7,184

Senior Notes Payable

On June 22, 2015, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) and related financing documents with entities affiliated with existing institutional investors in the Company providing for the issuance of $42,500 aggregate principal amount (the “Financing”) of senior secured notes (the “Notes”), senior secured convertible debentures, except for $500of Debentures, (the “June 2015 Debentures”) and warrants (the “June 2015 Warrants”) to purchase 3,000,000 shares of common stock at an exercise price of $0.75 per share. The Company sold $10,000 aggregate principal amount of Notes bearing interest at 9% per year with a maturity date of the earlier of 30 days after the Company obtains stockholder approval of stock issuances under the Debentures and the Warrants or November 30, 2015. The June 2015 Debentures are discussed further in Note 9, Convertible Debentures, below. The proceeds of the Financing were used to pay the purchase price of the assets acquired under the Asset Purchase Agreement.

Under the terms of the Warrants, the issuances of shares of the common stock upon exercise of the Warrants are subject to stockholder approval of such issuances and an amendment to the Company’s certificate of incorporation to increase the Company’s authorized shares of common stock. Upon receipt of stockholder approval, the Company has also agreed to reprice outstanding warrants held by certain investors to reduce the exercise price to $0.75 per share.

The Warrants issued in connection with the 9% Notes contain anti-dilution provisions that allow for downward exercise price adjustments in certain situations. The warrants were treated as a derivative liability and a discount to the Notes and the discount is being amortized under the effective interest method over the repayment term of 5 months. As of June 30, 2015, the remaining unamortized warrant balance was $2,816.

The Company computed the value of the warrants using the binomial method. The key assumptions used to value the warrants are as follows:

	June 22, 2015			June 30, 2015
Number of shares underlying warrants		3,000,000			3,000,000
Exercise price	$	0.75		$	0.75
Share price	$	1.38		$	1.15
Fair value of warrants	$	2,959		$	2,390
Probability of stockholder approval		80.0	%		80.0	%
Volatility		90.0	%		90.0	%
Risk-free interest rate		1.62	%		1.62	%
Expected dividend yield		0	%		0	%
Expected warrant life		5 years			4.98 years