6.	Convertible Debt

The following table provides the details of the Convertible Notes outstanding at September 30, 2016:

Note	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
2016 Convertible Notes	9/27/2016	9/27/2017	$	3.50		6.00	%	$	1,880,000
Series B Note	3/15/2011	6/30/2018	$	2.74		1.00	%		550,000
Total principal amount								$	2,430,000

On September 27, 2016, the Company issued and sold convertible promissory notes (“2016 Convertible Notes”) in an aggregate principal amount of $1,880,000. The 2016 Convertible Notes were issued to an investor and certain other parties in connection with the settlement of a litigation matter (see Note 9). The 2016 Convertible Notes have a term of one year and bear interest at a rate of 6.0% per annum with the principal and accrued interest due upon the earlier of the maturity date or conversion date. At any time prior to the maturity date, the holders may elect to convert, in whole or in part, the 2016 Convertible Notes (including any accrued but unpaid interest) into shares of the Company’s common stock, par value $0.001 per share, at a conversion price of $3.50 per share. In the event of a Change of Control (as defined in the 2016 Convertible Notes), the holders of the 2016 Convertible Notes may declare the aggregate outstanding amount of the 2016 Convertible Notes to be immediately due and payable or may elect to convert the 2016 Convertible Notes and any accrued but unpaid interest as if such conversion took place on the maturity date.

The Company accounted for the issuance of the convertible promissory notes in accordance with ASC 470-10-25 and, at the time of issuance, recorded a litigation settlement expense of $2,500,000 which represents the difference between the estimated fair value of the 2016 Convertible Notes issued and the cash received from the noteholders.

From December 2009 through December 2015, Diffusion LLC issued unsecured convertible promissory notes (the “Convertible Notes”) for gross proceeds of $22,384,320. The Convertible Notes bear interest at either 1% or 1.5% per annum. The Convertible Notes accrue interest beginning on the date of issuance, with the principal and accrued interest due upon the earlier of the maturity date or conversion date. At any time prior to the maturity date, the holders may elect to convert, in whole or in part, the Convertible Notes and any related accrued but unpaid interest into common stock of the Company at a price per share equal to the conversion price.

In the event of a Change of Control or a Qualified Financing (each as defined below), the holders of the Convertible Notes may declare the aggregate outstanding amount of the Convertible Notes to be immediately due and payable or may elect to convert the Convertible Notes and any accrued but unpaid interest as if such conversion took place on the maturity date. A Change of Control is defined as: (i) a merger or consolidation in which the members immediately prior to the transaction do not own, directly or indirectly, more than 50% of the membership interest of the surviving company; (ii) the acquisition of more than 50% of the Company’s outstanding membership interest by a single person, entity or group or persons or entities acting in concert or (iii) the sale or transfer of all or substantially all of the assets of the Company. A Qualified Financing is defined as a sale of units or other transaction that results in gross proceeds to the Company of at least $15,000,000, including the conversion of the Convertible Notes. Through the date the financial statements were available to be issued, there have been no Change of Control or Qualified Financing events.

The Company may prepay the Convertible Notes, in full or in part, at any time on a pari passu basis. Upon receipt of notice that the Company intends to prepay the Convertible Notes, holders will have the option to convert their notes in lieu of payment.

At the effective time of the Merger, $1,125,000 in aggregate principal amount of Convertible Notes were outstanding and

the rights of the holders of each such outstanding Convertible Note convertible into Diffusion Units were converted into the right to convert such securities into a number of shares of the Company’s common stock equal to the number of Diffusion Units such Convertible Note would be convertible into pursuant to its terms multiplied by the Exchange Ratio.

During the nine months ended September 30, 2016, the following Convertible Notes and the related accrued interest were converted into 217,122

shares of common stock:

Convertible Note Series	Principal		Accrued Interest		Total Principal and Accrued Interest
B	$	20,000	$	962	$	20,962
C		425,000		14,538		439,538
E		50,000		770		50,770
F		200,000		225		200,225
Total	$	695,000	$	16,495	$	711,495

During the three and nine months ended September 30, 2015, $54,500 and $1,361 of Series C principal and accrued interest, respectively, were converted into equity.