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Debt
3 Months Ended
Mar. 31, 2015
Debt [Abstract]  
Debt

Note 6.  Debt.


Convertible Notes Payable


On August 2, 2013, the Company entered into a Convertible Promissory Note Agreement (the” Convertible Note Agreement”) to be funded in a series of loans up to a maximum principal amount of $997,000 (“Convertible Notes”). As of December 31, 2013, the Company had received $997,000 in proceeds under the Convertible Notes. The Convertible Notes accrued interest at a rate of 2.5% per year.  Principal repayments were to commence on April 30, 2014 equal to 1/24th of the then outstanding balance, with the entire principal amount due and payable on April 30, 2016. The lender opted not to collect principal payments, which were to commence on April 30, 2014, in anticipation of converting the convertible note.


The Convertible Note Agreement provided that if, prior to April 30, 2014, the Company entered into any financing transaction with the lender or an affiliate thereof, upon the closing of such transaction, the outstanding principal balance of the Convertible Notes would automatically convert on a dollar-for-dollar basis into the securities being issued and sold at a conversion price equal to the purchase price per share implied by a pre-investment valuation of the Company equal to $20,000,000 (“Conversion Price”).  The Convertible Note Agreement further provided that if the Company entered into an agreement with a third party, other than the lender or affiliate thereof, into any debt or equity financing, exclusive license of any portion of the IP Rights, a sale of substantially all of the assets of the Company, or subsidiary thereof, or any transaction or series of transactions resulting in the current stockholders holding less than a majority of the voting interests, then, at the lender's option, effective immediately prior to closing of the third party transaction, the outstanding principal balance of the Convertible Notes would have been converted on a dollar-for-dollar basis into shares of Company common stock. The Convertible Note Agreement provided that in the case of conversion of principal under either scenario, the Company would have no further obligations or liabilities under the Convertible Notes.


In January 2014, the lender increased the aggregate principal amount of the Convertible Notes from $997,000 to $1,126,000 and advanced funds to the Company to that effect, such that the total amount funded to the Company was equal to the increased principal amount of the Convertible Notes.


On August 28, 2014, the lender converted the Convertible Notes in the aggregate principal amount of $1,126,000 plus accrued interest of $26,242, into 3,624,400 shares of the Company common stock. Simultaneous with the issuance of the 3,624,400 shares to the lender, the two principal stockholders of the Company, as capital contributions, surrendered to the Company for cancellation an aggregate of 3,624,400 shares of Company common stock. The net effect of such issuance and cancellations resulted in no change in the total number of shares of Company common stock issued (71,400,000) and outstanding (68,000,000) at such time.


For the three months ended March 31, 2015 and 2014, the Company recorded interest expense on the Convertible Note amounting to $-0- and $6,833, respectively.


On July 11, 2014, the Company received $1,100,000 in proceeds from the issuance of a convertible promissory note (the “Bridge Note”) from an affiliate of GEM Global Yield Fund, LLC SCS (“GEM”). The Bridge Note bears interest at a rate of 10% per year, maturing fifteen months from the date of issue and was secured by all assets of the Company. The Bridge Note was mandatorily convertible into Company common stock upon the closing of the PPO. The Company issued in the name of the purchaser of the Bridge Note but placed into escrow 3,400,000 shares of Company Common Stock.  These shares were not deemed outstanding, but would either be delivered to the Bridge Note purchaser or returned to the Company for cancellation pursuant to the terms of a Termination Shares Escrow Agreement, dated as of July 11, 2014, among the Company, the purchaser of the Bridge Note and the escrow agent.


On November 24, 2014, the purchaser of the Bridge Note loaned the Company an additional $250,000. In connection with the funding of such loan, the Bridge Note was amended and restated to reflect a principal amount of $1,350,000.


On January 15, 2015, the purchaser of the Bridge Note loaned the Company a further $960,000.  In connection with the funding of such further loan, the Bridge Note was amended and restated to reflect a principal amount of $2,310,000. On March 5, 2015, the Bridge Note was further amended and restated to the effect that the mandatory conversion feature was amended to a set fixed conversion amount such that, upon mandatory conversion, the Bridge Note purchaser would receive one share of Company common stock for each $1.00 of principal of the Bridge Note outstanding as of the date of the mandatory conversion. The Company evaluated the modification to the conversion rate as an inducement to convert the Bridge Note and concluded that it provided the purchaser of the Bridge Note an incremental value of $3,465,000, which is included as interest expense on the consolidated statement of operations for the period ended March 31, 2015.


The Company recorded interest expense of $38,301 and $-0- during the three months ended March 31, 2015 and 2014, respectively, on the Bridge Note. The outstanding principal and accrued interest balance at March 31, 2015 and December 31, 2014 was $-0- and $1,406,174, respectively.