7.	Financing Arrangements

Convertible Debt

During February 2011 Holdings issued $550,000 of convertible debt. The notes bear interest at 5% and were due November 31, 2011. The convertible notes were to be convertible upon the later to occur of the acquisition of AMS Inc. or the sale of securities by the Company for net proceeds of at least $1,500,000.

In April 2011, Holdings issued additional convertible debt of $325,000. On May 23, 2011, in accordance with terms of the agreement, the convertible notes in the amount of $875,000 plus interest of $9,300 were converted into 931,847 shares of common stock at the conversion rate of $0.95. The conversion rate resulted in a beneficial conversion in the amount of $46,000, which was recorded as interest expense when the notes were converted on May 23, 2011. The obligations to pay the principal and interest of the note were then cancelled.

Convertible debt

On May 23, 2011, Holdings issued convertible notes for a total of $2 million from the principal stockholders of CMSF Corp. (“Lenders”) that was used to consummate the purchase by the Company of the assets of AMS. The notes are payable on November 19, 2011 unless converted prior to that date. Interest accrued on the notes at rates ranging from 2 % to 6% based on a scale of months from issuance to conversion. The convertible notes converted into a fixed number of preferred stock shares of 1,000,000, which are convertible into 1,287,527 shares of common stock. Holdings agreed to pay for the legal fees incurred by the note holders in connection with the convertible notes. The legal fees were approximately $112,000 and were recorded as a debt discount as they reduced the proceeds from convertible debt. The terms of the debt agreement resulted in a contingent beneficial conversion for the note holders in the amount of $228,000. The beneficial conversion amount was recorded as interest expense when the notes converted on August 10, 2011. In connection with the loans to Holdings Holdings granted a blanket security interest on its assets to the Lenders. The notes were automatically converted into the Company’s. preferred stock at the time of the merger with between the Company and Holdings on August 10, 2011. Upon the conversion of the notes into Company. preferred stock, the security interest terminated. The Company paid approximately $13,000 for accrued interest upon the conversion of the convertible notes.

The Company recorded debt discount related to the legal fees associated with the issuance of the notes of $112,000. Amortization expense related to the discount was $448,618 for the twelve months ended December 31, 2011.

Note Payable

On October 13, 2011, the Company and its subsidiary, AMS entered into a series of agreements with Massachusetts Development Financing Agency “MDFA”) related to financing for up to $2,000,000 loan for the purchase of equipment, including a Loan Agreement, a Note, a Security Agreement, a Guaranty and a Warrant. The actual principal amount will be based on equipment purchased during the first six months or such longer period as the lender permits. The loan bears interest at the rate of 6.25% per annum. The term of the loan is seven years and is repayable as follows: interest only for the first twelve months, and then constant payments of interest and principal during the following six year period in the amount of $29,457 per month. The loan is repayable in whole or part without penalty. The loan is secured by a security interest in substantially all of the assets of AMS, excluding intellectual property. The Company has granted a warrant to MDFA for 59,524 shares of common stock of the Company at an exercise price of $2.10. The fair value of the warrant of $80,357 was recorded as a discount to the debt. The fair value of the warrant was determined using the Black Scholes model with the following assumptions: risk free rate 2.0%, dividend yield 0.0%, expected life of 10 years, and volatility 65%. Additionally, the Company paid the direct financing costs, which was recorded as a deferred financing cost of $34,000. At December 31, 2011 AMS had borrowed $1,396,406. Interest expense of $13,605 was paid for 12 months ended December 31, 2011. The remaining amount of $603,594 is available to be drawn to purchase additional equipment.

The following is a summary of the maturities of long-term debt outstanding on December 31, 2011:

2012	$	22,410
2013		269,264
2014		291,582
2015		312,865
2016		335,338
Thereafter		164,947
	$	1,396,406