SHORT-TERM NOTES PAYABLE

9 Months Ended

Sep. 30, 2013

Short-Term Notes Payable

Short-Term Notes Payable

During the nine months ended September 30, 2013, the Company entered into separate note purchase agreements with investors for the sale and issuance of promissory notes in the aggregate principal amount of $330,000 (the “Notes”).

The Notes bear interest at the rate of 10% per annum, and mature six months from the date of issuance.  The Notes contain customary default provisions and provide that 110% of the principal amount of the Notes shall be exchanged by the investor into securities offered in a subsequent financing consummated by the Company prior to the maturity date of the Notes.  As of September 30, 2013, $275,000 of the outstanding Notes were exchanged for 378,125 shares of Series B Preferred Stock and 503,284 warrants (see Note 3).

As of September 30, 2013, the Company has accrued $6,024 in interest on the Notes and incurred approximately $15,000 in costs related to issuing the Notes.  These costs are included in interest and other expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2013.