Senior Secured 10% Convertible Notes (Senior Secured 10% Convertible Notes [Member])

9 Months Ended

Sep. 30, 2014

Senior Secured 10% Convertible Notes [Member]

Debt Instrument [Line Items]

Debt

Note 7 - Senior Secured 10% Convertible Notes
 

As of September 30, 2014 and December 31, 2013, the Senior Secured 10% Convertible Notes outstanding were $ 0 and $450,000, respectively.
 

During 2012, we issued Senior Secured 10% Convertible Notes with an aggregate principal value of $374,200. During 2013, we issued additional Senior Secured 10% Convertible Notes with an aggregate principal value of $200,000. Pursuant to the Merger, funds sufficient to retire four of the 2012 notes (aggregate principal value of $124,200) were disbursed prior to December 31, 2013, leaving $250,000 in outstanding principal value from the 2012 notes. 

All of the outstanding Senior Secured 10% Convertible Notes provided for warrants exercisable for a period of five years to be issued in the then future public company, Kogeto, Inc., a Nevada Corporation. Upon conversion of the Senior Secured 10% Convertible Notes, the noteholders receive warrants exercisable into common stock of the future public company at $0.31 per share. The number of warrants to be issued equals 50% of the actual shares issued in the note conversion up to a maximum of 500,000 warrants. If the total number of warrants to be issued exceeds 500,000, then we will issue additional shares of our common stock in proportion to the foregone value of the warrants.

The original conversion terms for noteholders of the Senior Secured 10% Convertible Notes issued during 2012 ($250,000 of principal outstanding at December 31, 2013) allowed conversion at the option of the noteholder, either into shares of Kogeto Tech newly-designated Series B preferred stock (if issued and available) or, alternatively, into Kogeto Tech Series A preferred stock at the Series A preferred stock issue price of $0.60 per share. As part of the Merger, the outstanding notes (including accrued interest and the value of the foregone warrants) were converted into 1,156,789 shares of our common stock at a per share price of $0.28. In addition, this group of noteholders received warrants to purchase 297,903 shares of our common stock at an exercise price of $0.31 per share exercisable for a period of five years, valued at $0.18 per share or $53,623 using the Black-Scholes model and were included in interest expense during the three months ended March 31, 2014.

The Senior Secured 10% Convertible Notes (principal value $200,000 outstanding at December 31, 2013) issued during 2013 contain a mandatory clause (excluding one $25,000 note) that converts outstanding principal and interest into common stock of a newly-formed public company. As part of the Merger, $175,000 (principal value) of the notes (including accrued interest and foregone warrants) were converted into 784,764 shares of our common stock at a per share price of $0.28. In addition, this group of noteholders received warrants to purchase 202,097 shares of our common stock at an exercise price of $0.31 per share exercisable for a period of five years valued at $0.18 per share or $36,377 using the Black-Scholes model and were included in interest expense during the three months ended March 31, 2014. The other $25,000 (principal value) of these notes (plus accrued interest) was repaid at the time of the Merger and was therefore not converted.