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Subsequent Events
6 Months Ended
Jun. 30, 2014
Notes to Financial Statements  
Note 11. Subsequent Events

Note Financing

 

In July 2014, the Company’s Board of Directors approved an exchange of existing promissory notes, in the aggregate principal amount of up to $870,694, into new convertible promissory demand notes maturing February 28, 2015. The Company anticipates that substantially all of the existing note holders will participate in this exchange. The Board also approved the issuance of an additional $500,000 of convertible promissory demand maturing February 28, 2015. As additional consideration for participation in the $500,000 New Note Offering, the purchasers shall be issued 200,000 shares of the Company’s common stock, par value $0.01 per share for every $100,000 invested. As of the date hereof, the Company has issued New Note Notes in the aggregate principal amount of $250,000 and issued or reserved an aggregate total of 500,000 shares of Common Stock in connection with the New Note Offering.

 

Each New Note accrues interest at a rate of 10% per annum, payable in either cash or shares of Common Stock and matures on February 28, 2015. Each New Note is convertible, at the option of the holder thereof, into that number of shares of Common Stock equal to the outstanding principal balance of the New Note, plus accrued but unpaid interest, divided by $0.08 . Additionally, in the event the Company completes an equity or equity-linked financing with gross proceeds to the Company of at least $1.5 million, the Outstanding Balance of all New Notes will, at the discretion of each respective holder, either (i) convert into securities sold in the Qualified Financing, or (ii) automatically convert into Conversion Shares.

  

The Company presently intends to issue additional promissory notes to finance its current working capital needs. However, there can be no assurance that the Company will be able to issue additional promissory notes.

 

As discussed in Note 6, the Company issued 2,367,352 of the 2,601,233 authorized shares of Common Stock to settle the accrued but unpaid interest on outstanding notes payable.  Subsequent to the period, the Company issued the additional 233,881 shares that were classified as Stock to be Issued as of June 30, 2014.

 

Modification of Consulting Agreement

 

As described in Note 10 above, on July 1, 2014, the Company and its financial advisor modified the terms of the consulting agreement originally entered into on May 16, 2011, to provide for one $15,000 payment in August 2014 and deferral of all other remaining cash fees until December 31, 2014 in consideration for the issuance of the 109,917 FPMI Warrants, as described in Note 4 above.