Notes Payable	3 Months Ended
Mar. 31, 2014
Notes to Financial Statements
Note 6. Notes Payable	Convertible Notes Payable. In May 2012, in consideration for the extension of certain promissory notes due and payable on March 31, 2012 (the “2012 Notes”) to June 30, 2012, the Company assigned to the holders of the 2012 Notes FPMI Warrants to to purchase a total of 113,127 shares of FPMI common stock for $0.50 per share (the “$0.50 FPMI Warrants”). In August 2012, in consideration for the extension of the maturity date of the 2012 Notes to November 15, 2012, the Company agreed to assign a total of 155,877 $0.50 FPMI Warrants to the holders of the 2012 Notes. As a result, a total of 260,508 $0.50 FPMI Warrants have been assigned to holders of 2012 Notes. Between August 2012 and July, 2013, the Company issued promissory notes in the aggregate principal amount of $114,000 (the “2013 Notes”). As additional consideration for the 2013 Notes, the Company issued an aggregate total of 200,000 of its common stock, 8,496 $0.50 FPMI Warrants and 64,000 FPMI Warrants exercisable for $1.00 per share. The 2012 and 2013 Notes accrue interest at the rate of 6% annually prior to maturity, and 12% annually thereafter. All of the Notes have matured and are currently due and payable on demand. The Notes are convertible at the option of each respective holder into shares of common stock at a conversion price equal to $0.10 per share. In addition, the holders may exchange the Notes for common stock in the event the Company consummates a qualified financing (the “Qualified Financing”), which is defined in the Notes as a financing resulting in gross proceeds to the Company of at least $500,000. While the Company intends to pay the Notes using proceeds from a Qualified Financing, such Qualified Financing may not occur prior to the date the holders of the Notes demand repayment. In connection with the issuance of the 2012 and 2013 Notes, the Company has recorded debt discount and expenses of the beneficial conversion feature of $106,261 and $28,998, respectively. The Company will amortize these expenses over the life of the Notes. As of December 31, 2012, the Company recorded interest expense related to the debt discount of $21,905 and $3,777 related to the beneficial conversion feature. In connection with the issuance of the 2013 Notes, the Company has recorded debt discount and expenses in the amount of $27,753 related to the value of the exchange of 64,000 FPMI warrants to the holders of the Notes. The Company will amortize the costs over the remaining life of these Notes. As of March 31, 2014, the Company recorded other financing costs of $47,919 related to the debt discount on these Notes. On October 29, 2013, the holder of certain outstanding 2012 and 2013 Notes totaling approximately $217,000 in principal and accrued interest agreed to cancel such notes in exchange for a new promissory note with a face amount of $217,000 maturing on March 31, 2014 and 100,000 FPMI Warrants. Separately, our financial advisor agreed to exchange $216,000 of fees accrued from May 15, 2012 to October 15, 2013 that are payable in cash on December 31, 2013 for a note with a face amount of $250,000 maturing on March 31, 2014 and 100,000 FPMI Warrants. This notes accrued interest at a rate of 8% annually prior to maturity, and, following maturity of the note on March 31, 2014, now accrues interest at rate of 12% annually. During the three months ended March 31, 2014, the Company issued two 2014 Notes to two investors in the principal amounts of $100,000, and $36,000. As additional consideration for the purchase of the 2014 Notes, the Company issued an aggregate total of 272,000 shares of common stock. The Company recorded debt discount of $18,769 related to the 2014 Notes and will amortize the expense over the life of the 2014 Notes. During the three months ended March 31, 2014, the Company recorded $1,292 of interest expense related to the debt discount on the 2014 Notes. Long-Term Notes Payable. The Company received a $44,000 loan from the Portland Development Commission in 2007. The loan matures in 20 years and was interest free through February 2010. The terms of the note stipulate monthly interest only payments from April 2010 through December 2014, at a 5% annual rate. The Company recorded interest expense on this loan of $540 for the three months ended March 31, 2014.

Notes Payable

3 Months Ended

Mar. 31, 2014

Convertible Notes Payable. In May 2012, in consideration for the extension of certain promissory notes due and payable on March 31, 2012 (the “2012 Notes”) to June 30, 2012, the Company assigned to the holders of the 2012 Notes FPMI Warrants to to purchase a total of 113,127 shares of FPMI common stock for $0.50 per share (the “$0.50 FPMI Warrants”). In August 2012, in consideration for the extension of the maturity date of the 2012 Notes to November 15, 2012, the Company agreed to assign a total of 155,877 $0.50 FPMI Warrants to the holders of the 2012 Notes. As a result, a total of 260,508 $0.50 FPMI Warrants have been assigned to holders of 2012 Notes.

Between August 2012 and July, 2013, the Company issued promissory notes in the aggregate principal amount of $114,000 (the “2013 Notes”). As additional consideration for the 2013 Notes, the Company issued an aggregate total of 200,000 of its common stock, 8,496 $0.50 FPMI Warrants and 64,000 FPMI Warrants exercisable for $1.00 per share.

The 2012 and 2013 Notes accrue interest at the rate of 6% annually prior to maturity, and 12% annually thereafter. All of the Notes have matured and are currently due and payable on demand. The Notes are convertible at the option of each respective holder into shares of common stock at a conversion price equal to $0.10 per share. In addition, the holders may exchange the Notes for common stock in the event the Company consummates a qualified financing (the “Qualified Financing”), which is defined in the Notes as a financing resulting in gross proceeds to the Company of at least $500,000. While the Company intends to pay the Notes using proceeds from a Qualified Financing, such Qualified Financing may not occur prior to the date the holders of the Notes demand repayment.

In connection with the issuance of the 2012 and 2013 Notes, the Company has recorded debt discount and expenses of the beneficial conversion feature of $106,261 and $28,998, respectively. The Company will amortize these expenses over the life of the Notes. As of December 31, 2012, the Company recorded interest expense related to the debt discount of $21,905 and $3,777 related to the beneficial conversion feature.

In connection with the issuance of the 2013 Notes, the Company has recorded debt discount and expenses in the amount of $27,753 related to the value of the exchange of 64,000 FPMI warrants to the holders of the Notes. The Company will amortize the costs over the remaining life of these Notes. As of March 31, 2014, the Company recorded other financing costs of $47,919 related to the debt discount on these Notes.

On October 29, 2013, the holder of certain outstanding 2012 and 2013 Notes totaling approximately $217,000 in principal and accrued interest agreed to cancel such notes in exchange for a new promissory note with a face amount of $217,000 maturing on March 31, 2014 and 100,000 FPMI Warrants. Separately, our financial advisor agreed to exchange $216,000 of fees accrued from May 15, 2012 to October 15, 2013 that are payable in cash on December 31, 2013 for a note with a face amount of $250,000 maturing on March 31, 2014 and 100,000 FPMI Warrants. This notes accrued interest at a rate of 8% annually prior to maturity, and, following maturity of the note on March 31, 2014, now accrues interest at rate of 12% annually.

During the three months ended March 31, 2014, the Company issued two 2014 Notes to two investors in the principal amounts of $100,000, and $36,000. As additional consideration for the purchase of the 2014 Notes, the Company issued an aggregate total of 272,000 shares of common stock. The Company recorded debt discount of $18,769 related to the 2014 Notes and will amortize the expense over the life of the 2014 Notes. During the three months ended March 31, 2014, the Company recorded $1,292 of interest expense related to the debt discount on the 2014 Notes.

Long-Term Notes Payable. The Company received a $44,000 loan from the Portland Development Commission in 2007. The loan matures in 20 years and was interest free through February 2010. The terms of the note stipulate monthly interest only payments from April 2010 through December 2014, at a 5% annual rate. The Company recorded interest expense on this loan of $540 for the three months ended March 31, 2014.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details