Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE DEBT AND EQUITY FINANCINGS (Details Textual)

v2.4.0.6
CONVERTIBLE DEBT AND EQUITY FINANCINGS (Details Textual) (USD $)
 1 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 1 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 4 Months Ended 12 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended 1 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 1 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 12 Months Ended 12 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Nov. 17, 2011
Nov. 29, 2012
Oct. 31, 2011
Dec. 31, 2012
Feb. 29, 2012
Dec. 31, 2011
Mar. 31, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2010
Sep. 30, 2010
Apr. 29, 2012
Jan. 31, 2012
Jan. 25, 2012
Jul. 31, 2011
Jan. 31, 2011
Dec. 31, 2012
Minimum [Member]
Dec. 31, 2011
Minimum [Member]
Dec. 31, 2012
Maximum [Member]
Nov. 30, 2010
October Purchase Agreement [Member]
Nov. 03, 2010
October Purchase Agreement [Member]
Jan. 31, 2011
October 2010 Note [Member]
Dec. 31, 2012
October 2010 Note [Member]
Sep. 30, 2011
October 2010 Note [Member]
Sep. 26, 2010
October 2010 Note [Member]
Dec. 31, 2012
January 2011 Notes [Member]
Apr. 30, 2011
January 2011 Notes [Member]
Sep. 30, 2011
January 2011 Notes [Member]
Nov. 23, 2010
January 2011 Notes [Member]
Dec. 31, 2012
October 2011 Note [Member]
Jan. 31, 2012
October 2011 Note [Member]
Sep. 30, 2011
October 2011 Note [Member]
Feb. 29, 2012
Unsecured Bridge Notes [Member]
Dec. 31, 2012
Unsecured Bridge Notes [Member]
Sep. 30, 2012
August 2012 Bridge Note [Member]
Dec. 31, 2012
August 2012 Bridge Note [Member]
Sep. 30, 2012
August 2012 Bridge Note [Member]
Oct. 31, 2011
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Jun. 03, 2010
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Oct. 31, 2010
John Pappajohn [Member]
October Purchase Agreement [Member]
Oct. 31, 2010
John Pappajohn [Member]
October 2010 Note [Member]
Sep. 30, 2011
John Pappajohn [Member]
October 2011 Note [Member]
Sep. 30, 2011
John Pappajohn [Member]
October 2011 Note [Member]
Minimum [Member]
Sep. 30, 2011
John Pappajohn [Member]
October 2011 Note [Member]
Maximum [Member]
Oct. 31, 2010
John Pappajohn [Member]
October 2010 One [Member]
Nov. 30, 2012
John Pappajohn [Member]
Amended and Restated Bridge Financing Purchase Agreement [Member]
Nov. 28, 2012
John Pappajohn [Member]
Amended and Restated Bridge Financing Purchase Agreement [Member]
Aug. 31, 2010
Sail Venture Partners L P [Member]
Sep. 30, 2010
Sail Venture Partners L P [Member]
Aug. 20, 2010
Sail Venture Partners L P [Member]
Sep. 30, 2010
Sail Venture Partners L P [Member]
Warrants Cancellation [Member]
Nov. 30, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 Note [Member]
Nov. 03, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 Note [Member]
Nov. 30, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 One [Member]
Nov. 03, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 One [Member]
Dec. 31, 2012
Mr. Andy Sassine [Member]
Mar. 31, 2011
Mr. Andy Sassine [Member]
Feb. 23, 2011
Mr. Andy Sassine [Member]
Dec. 31, 2012
Pyxis Long [Member]
Dec. 31, 2012
Monarch Capital Group Llc [Member]
Minimum [Member]
Dec. 31, 2012
Monarch Capital Group Llc [Member]
Maximum [Member]
Dec. 31, 2010
Monarch Capital Group Llc [Member]
October 2010 Note [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
October 2010 Note [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
January 2011 Notes [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
October 2011 Note [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
January 2011 Notes One [Member]
Sep. 30, 2011
Antaeus Capital Inc [Member]
January 2011 Notes [Member]
Sep. 30, 2011
Antaeus Capital Inc [Member]
January 2011 Notes [Member]
Minimum [Member]
Sep. 30, 2011
Antaeus Capital Inc [Member]
January 2011 Notes [Member]
Maximum [Member]
Sep. 30, 2011
Zanett Opportunity Fund, Ltd [Member]
October 2011 Note [Member]
Sep. 30, 2012
Zanett Opportunity Fund, Ltd [Member]
Unsecured Bridge Notes [Member]
Sep. 30, 2012
Alphanorth Offshore Inc [Member]
October 2011 Note [Member]
Sep. 30, 2012
Innerkip Capital Management Inc [Member]
October 2011 Note [Member]
Dec. 31, 2012
Innerkip Capital Management Inc [Member]
October 2011 Note [Member]
Minimum [Member]
Dec. 31, 2012
Innerkip Capital Management Inc [Member]
October 2011 Note [Member]
Maximum [Member]
Dec. 31, 2012
Extuple Limited Partnership [Member]
Dec. 31, 2012
Mark and Jill Oman [Member]
Dec. 31, 2012
Ronald Dozoretz [Member]
Dec. 31, 2012
Mr. Larry Hopfenspirger [Member]
Dec. 31, 2012
Mr. Larry Hopfenspirger [Member]
October 2011 Note [Member]
Dec. 31, 2012
Tierney [Member]
Dec. 31, 2012
Follman [Member]
Nov. 30, 2012
October 2012 Notes [Member]
Dec. 10, 2012
October 2012 Notes [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Sep. 30, 2012
October 2012 Notes [Member]
Dec. 10, 2012
October 2012 Notes [Member]
Minimum [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Minimum [Member]
Dec. 10, 2012
October 2012 Notes [Member]
Maximum [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Maximum [Member]
Dec. 31, 2012
October 2012 Notes [Member]
John Pappajohn [Member]
Sep. 30, 2010
October 2012 Notes [Member]
John Pappajohn [Member]
Sep. 30, 2010
October 2012 Notes [Member]
Monarch Capital Group Llc [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Alphanorth Offshore Inc [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Extuple Limited Partnership [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Mr. Tony Pullen [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Mark and Jill Oman [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Ronald Dozoretz [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Mr. Larry Hopfenspirger [Member]
Nov. 28, 2012
October 2012 Notes [Member]
Carpenter [Member]
Dec. 31, 2012
October 2012 Notes [Member]
Carpenter [Member]
Amended and Restated Bridge Financing Purchase Agreement [Member]
Dec. 31, 2012
Bridge Financing 2012 [Member]
Dec. 31, 2012
Bridge Financing 2012 [Member]
August 2012 Bridge Note [Member]
Dec. 31, 2012
Bridge Financing 2012 [Member]
Amendment and Conversion Agreement [Member]
Sep. 30, 2012
October 2010 Notes and January 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Dec. 31, 2011
Unsecured Convertible Notes Payable [Member]
Sep. 30, 2012
Unsecured Convertible Notes Payable [Member]
Dec. 31, 2012
Unsecured Convertible Notes Payable [Member]
Sep. 30, 2010
Bridge Note One [Member]
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Sep. 30, 2010
Bridge Note Two [Member]
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Sep. 30, 2011
October 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Sep. 30, 2011
October 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Minimum [Member]
Sep. 30, 2011
October 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Maximum [Member]
Jun. 30, 2012
Bridge 2011 Financing [Member]
October 2011 Note [Member]
Sep. 30, 2012
Bridge 2011 Financing [Member]
October 2011 Note [Member]
Sep. 30, 2011
Bridge 2011 Financing [Member]
Amendment and Conversion Agreement [Member]
Dec. 31, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Nov. 30, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Dec. 31, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Dec. 27, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Nov. 10, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Sep. 30, 2012
Bridge Notes 2011 [Member]
Zanett Opportunity Fund, Ltd [Member]
Sep. 30, 2010
Deerwood Note [Member]
Aug. 20, 2010
Deerwood Note [Member]
Aug. 20, 2010
Deerwood Note [Member]
Minimum [Member]
Sep. 30, 2010
Deerwood Note [Member]
Deerwood Holdings Llc and Deerwood Partners Llc [Member]
Sep. 30, 2010
Deerwood Note One [Member]
Deerwood Holdings Llc and Deerwood Partners Llc [Member]
Sep. 30, 2010
Deerwood Note Two [Member]
Deerwood Holdings Llc and Deerwood Partners Llc [Member]
Sep. 30, 2011
January 2011 Note [Member]
Amendment and Conversion Agreement [Member]
Dec. 31, 2012
Secured Convertible Senior Notes Payable [Member]
Sep. 30, 2012
Secured Convertible Senior Notes Payable [Member]
Dec. 31, 2012
Secured Convertible Senior Notes Payable [Member]
John Pappajohn [Member]
Dec. 31, 2012
Secured Convertible Senior Notes Payable [Member]
Sail Venture Partners L P [Member]
Secured Debt, Current                 $ 500,000                               $ 3,000,000                                                                                                                                                                                                                        
Debt Instrument, Face Amount       9,612,000                                 762,200 3,023,900   3,000,000     2,500,000 5,000,000     2,000,000       400,000   400,000   500,000 761,700 250,000 2,000,000     511,700   500,000           250,000   512,200               100,000 550,000 160,000 200,000 100,000     250,000 90,000 500,000 650,000         100,000   90,000     1,600,000     1,998,100         500,000   60,000 100,000           50,000 50,000   2,000,000         90,000 250,000 250,000       1,860,000 2,000,000   500,000   500,000 250,000 250,000 40,000       500,000 250,000 250,000   3,023,900 [1],[2],[3]   761,700 [1],[2],[3],[4] 250,000 [1],[2],[3],[5]
Warrants To Purchase Common Stock 83,334       30,000 5,000   166,667 5,334 8,334 3,334           166,668 85,282 83,334 92,895   520,666         446,675       687,174   30,000         83,334   126,949 41,667       85,282     3,334 34,152   3,334 41,667   51,228               16,668   183,334 5,334 6,667 5,000     83,334 30,000 166,667 15,167             30,000                         127,172 211,954   423,908                   126,949 30,000     8,334             83,334 83,334 166,668     13,334 5,000         2,500          
Convertible Subordinated Debt, Current       90,000       2,000,000 250,000           5,000,000                           5,000,000     2,000,000 90,000         250,000                                                                                                                                                                                              
Exercise Price Of Warrants       $ 3.00 $ 3     $ 3 $ 3   $ 16.8 $ 3       $ 9               $ 9                 $ 3                                 $ 16.80                       $ 3   $ 3 $ 3 $ 3 $ 3           $ 3                                       $ 0.04718 $ 0.04718   $ 0.04718                           $ 15 $ 3       $ 3                         $ 16.80          
Long-term Debt, Gross 250,000   2,000,000         500,000 250,000       650,000 500,000                                               2,000,000                                                                                                                                                           2,000,000                                  
Debt Conversion, Converted Instrument, Amount               1,900                                                                           200,000                                                   500,000                           1,900               100,000         60,000   50,000                                                                
Debt Conversion, Converted Instrument, Shares Issued               40,000                                                         40,000                                                                                                 40,000                                                                                              
Debt Instrument, Interest Rate, Stated Percentage       9.00%             9.00%                         9.00%                                                                                                                         9.00%                                                 9.00%         9.00%                 9.00%                  
Net proceeds from bridge notes       1,368,300   1,040,400         250,000                                                     250,000     250,000         300,000           250,000                                     90,000                                         250,000                         3,000,000                 3,000,000     250,000 250,000 500,000     40,000         250,000 250,000 10,000,000        
Percentage Of Shares Issuable Upon Conversion Of Warrants                                               50.00%       50.00%                           50.00% 50.00% 100.00%                                     10.00% 110.00%     10.00%           7.00%                                           5.00%                   100.00%                 50.00% 100.00%                                    
Beneficial Ownership Percentage             5.00% 5.00%                                                                                               5.00% 5.00%   5.00%                                 5.00% 5.00% 5.00% 5.00%   5.00% 5.00%                       4.999%                                                                              
Percentage Of Cash Fee           10.00%     10.00%                                                                                                           10.00%       10.00%           7.00%                                                                                                                        
Cash Expense Allowance Percentage           2.00%                                                                                                                 2.00%                                                                                                                                            
Amount Of Cash Fee       6,000   16,000     15,000                                                                                                         60,000   55,000 16,000 20,000 15,000           45,500                                       6,000                                                                                
Cash Expense Allowance Amount       1,200   3,200     5,000                                                                                                         10,000   11,000 3,200 4,000                                                     1,200                                                                                
Percentage Of Cash Fee On Gross Proceeds Of Notes                         7.00%                                                                                                                                                                                                                                                
Debt Instrument Face Amount Description     Principal amount of up to $3,000,000 plus an amount corresponding to accrued and unpaid interest on any exchanged notes.                                                                                                                                                                                                                                                                    
Percentage Warrants To Purchase Common Stock                               50.00%                                                                                                                                                                                                                                          
Gains (Losses) on Extinguishment of Debt       466,300                                                                                                                                                                                                                                                                  
Beneficial Conversion Discount       0       1,600,000                                                     2,000,000 100,000 400,000                                                                                           2,000,000                                                                                                    
Amortization of discount on bridge notes issued       423,800   1,379,100                                 0     0       0       0   270,200                                                                                                                                                                                                  
Convertible Notes Payable       2,000,000       2,000,000                     398,100                                                                                                                                                                                                                                    
Debt Instrument, Unamortized Discount       (270,200)                                     0     0       277,100       15,000   100,000                                                                                                                                                                                           0 [1],[2],[3]   0 [1],[2],[3],[4] 0 [1],[2],[3],[5]
Debt Instrument, Convertible, Conversion Price                                               $ 9                                                                       $ 1 $ 3             $ 1 $ 3         $ 1 $ 3                 $ 0.04718 $ 0.04718                         $ 9.00       $ 1   $ 1             $ 3 $ 3 $ 9   $ 3                 $ 15 $ 9                
Debt Conversion, Original Debt, Amount                                                                         1,900                                                                                                                                     1,350,000                                                          
Notes Issued For Cash Value       300,000                                                                                                                                                                             300,000                                                                                    
Percentage Of Beneficial Ownership       5.00%                                                                                                                                                                                     5.00%   5.00% 5.00%                                                                      
Payment Of Finders Fee                                                                                                                                                                                           7,000   14,000                                                                          
Increase (Decrease) in Notes Payable, Current                                             23,900                                                                                                                                                                                                                            
Proceeds from Loans       3,000,000                                                                                                                                                                                                                                                                  
Debt Instrument No Mandatory Concersion Requirement Public Offering Value       3,000,000                                                                                                                                                                                                                           3,000,000                                      
Debt Instrument Mandatory Concersion Requirement Public Offering Value       5,000,000                                                                                                                                                                                                                           5,000,000                                      
Proceeds from Issuance of Debt   1,600,000                                                                                                                                                                                                                                                                      
Notes Payable, Related Parties       9,341,800                                     3,023,900     2,500,000       2,000,000       90,000   1,998,100                                           200,000                                                   2,000,000 2,000,000           250,000                               4,083,300 4,500,000                                           3,023,900 3,023,900 761,700 [1],[2],[3],[4] 250,000 [1],[2],[3],[5]
Common Stock Value Untraded   $ 13,800                                                                                                                                                                   $ 15,000 $ 13,800                                                                                                
Common Stock Value Price Per Share   $ 0.83                                                                                                                                                                         $ 0.76 $ 0.76 $ 0.83 $ 0.83                                                                                      
Debt Instrument, Covenant Description                                                           Among the restrictive covenants imposed on the Company pursuant to the Bridge Financing Purchase Agreement is a covenant not to borrow, guaranty or otherwise incur indebtedness that is senior or pari passu with the October 2012 Bridge Notes in excess of $250,000, and a covenant not to effect a merger, reorganization, or sell, exclusively license or lease, or otherwise dispose of any assets of the Company with a value in excess of $20,000, other than in the ordinary course of business.                                                                                                                                                                                                              
[1] The 2012 Bridge Notes: On August 17, 2012, the Company entered into a new Note Purchase Agreement (the "2012 Bridge Financing Purchase Agreement") in connection with a bridge financing (the "2012 Bridge Financing"), with SAIL Holdings LLC. The 2012 Bridge Financing Purchase Agreement initially provided for the issuance and sale of August 2012 Bridge Notes in the aggregate principal amount of up to $2,000,000, in one or multiple closings to occur no later than October 15, 2012. The consummation of the 2012 Bridge Financing and issuance of the August 2012 Bridge Notes, and corresponding security interest, had to be approved by the Majority Holders of each tranche of our October 2010 Notes, January 2011 Notes, October 2011 Notes and the Unsecured Note. If the Company did not obtain such consent, the holders could declare a default under such notes and seek all remedies available under such notes. On October 19, 2012 the original 2012 Bridge Financing Purchase Agreement in connection with the 2012 Bridge Financing was amended and restated (the "Amended and Restated Bridge Financing Purchase Agreement") thereby extending the period for closing the sale of August 2012 Bridge Notes from October 15, 2012 to November 30, 2012. Additionally, the revised notes ("October 2012 Notes") eliminated the mandatory conversion provision (upon a subsequent equity financing) included in the August 2012 Bridge Notes at the request of a prospective investor. Otherwise the October 2012 Bridge Notes have substantially the same terms as the August 2012 Notes. The Amended and Restated Bridge Financing Purchase Agreement provided for the issuance and sale of Bridge Notes in the aggregate principal amount of up to $2,000,000, in one or multiple closings to occur no later than November 30, 2012. Additionally this amended and restated agreement also provided for the reissuance and replacement of five August 2012 Notes with the revised October 2012 Notes. The Amended and Restated Bridge Financing Purchase Agreement also provides that the Company and the holders of the Bridge Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the August 2012 Bridge Notes. The October 2012 Notes mature on the later of October 1, 2013 or one year from the date of issuance (subject to earlier conversion or prepayment), earn interest at a rate of 9% per year with interest payable at maturity, are convertible into shares of common stock of the Company at a conversion price of $0.04718 and are secured by a first position security interest in the Company's assets, with the security interest of all previously outstanding convertible promissory notes subordinated. The conversion price is subject to adjustment upon (1) the subdivision or combination of, or stock dividends paid on, the common stock; (2) the issuance of cash dividends and distributions on the common stock; and (3) the distribution of other capital stock, indebtedness or other non-cash assets. The October 2012 Notes are convertible at any time at the option of their holders and can be declared due and payable upon an event of default, defined in the October 2012 Notes to occur, among other things, if the Company fails to pay principal and interest when due, in the case of voluntary or involuntary bankruptcy or if the Company fails to perform any covenant or agreement as required by the October 2012 Notes or materially breaches any representation or warranty in the October 2012 Notes or the Bridge Financing Purchase Agreement. Among the restrictive covenants imposed on the Company pursuant to the Bridge Financing Purchase Agreement is a covenant not to borrow, guaranty or otherwise incur indebtedness that is senior or pari passu with the October 2012 Bridge Notes in excess of $250,000, and a covenant not to effect a merger, reorganization, or sell, exclusively license or lease, or otherwise dispose of any assets of the Company with a value in excess of $20,000, other than in the ordinary course of business. The Company issued October 2012 Notes in the aggregate principal amount of $2.0 million. Furthermore, the consents to the 2012 Bridge Financing obtained from holders of previously outstanding convertible promissory notes have taken effect, since the Company raised more than $1.35 million in the 2012 Bridge Financing. Such consents had been given pursuant to the terms of the Amended and Restated Consent, Note Amendment and Warrant Forfeiture Agreement, dated as of October 24, 2012 (the "Consent Agreement"), between the Company and the holders of at least a majority in aggregate principal amount outstanding ("Majority Holders") of each tranche of the Company's secured convertible promissory notes issued in October and November 2010 (the "October 2010 Notes"), secured convertible promissory notes issued between January and April 2011 (the "January 2011 Notes"), secured convertible promissory notes issued between October 2011 and January 2012 (the "October 2011 Notes") and an unsecured convertible promissory note issued in February 2012 (the "February 2012 Note"). As a result, all of such notes were amended to (a) extend the maturity date of October 1, 2013, (b) set the conversion price at $1.00, subject to adjustment as provided in the notes and (c) remove full-ratchet anti-dilution protection. In addition, the holders forfeited the warrants they received in connection with the issuance of the notes, and consented to the 2012 Bridge Financing, the issuance of the October 2012 Notes and to the subordination of their notes to these October 2012 Notes. The October 2012 Bridge Notes are secured by a first position security interest in the Company's assets, with the security interest of all previously outstanding convertible promissory notes subordinated. Holders of the October 2010 Notes would hold a second position security interest and holders of the January 2011 and October 2011 Notes would hold a third position security interest, in the assets of the Company. The security interests relating to all such notes will be governed by the second amended and restated security agreement, dated as of August 16, 2012, between the Company and David Jones, as administrative agent for the secured parties (the "Second Amended and Restated Security Agreement"), which replaces the security agreement entered into in September 2011. Until his resignation from the Board on November 30, 2012, David Jones was the Chairman of our Board of Directors and a limited partner and former managing partner of SAIL Venture Partners LP. The Second Amended and Restated Security Agreement and the corresponding security interest terminate upon the earlier of (a) repayment of the notes and (b)(1) with respect to the August 2012 Bridge Notes, if and when the Majority Holders of August 2012 Bridge Notes have converted their notes into shares of common stock, (2) with respect to the October 2010 Notes, if and when the Majority Holders of October 2010 Notes have converted their notes into shares of common stock and (3) with respect to the January 2011 and October 2011 Notes, if and when holders of the Majority Holders of January 2011 and October 2011 Notes (on a combined basis) have converted their notes. The agreement also provides that the Company and the holders of the August 2012 Bridge Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the August 2012 Bridge Notes. The Company recorded a beneficial conversion feature for the August 2012 Bridge Notes, in accordance with FASB ASC 470-20. The Company measures the embedded beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the embedded beneficial conversion feature to additional paid-in capital. Intrinsic value is calculated as the difference between the effective conversion price and the fair value of the common stock into which the debt is convertible, multiplied by the number of shares into which the debt is convertible. A beneficial conversion feature totaling $400,000 was recorded as loan discount for fiscal year 2012. The loan discount is amortized over the life of the convertible note. For the three months ended December 31, 2012 $100,000 of amortization of loan discount was recorded as interest expense. The Company did not record a beneficial conversion feature for the October 2012 Bridge Notes as a very low volume of shares traded on the open market during the period from October 1, 2012 through November 30, 2012, the date of the closing of the 2012 Bridge Financing. Management judged that the Company's stock was not actively traded as only $13,800 worth of stock was traded on 9 of 42 trading days during this period at prices ranging from $0.76 to $0.83. The contemporaneous bridge financing of $2 million of Senior Secured Convertible Notes ("October 2012 Notes") with a conversion price of $0.04718 involving accredited third party investors was considered a better determinant of fair value. Consequently, management's judgment was that the pricing of the October 2012 Notes at $0.04718 represented a better determinant of fair value of the convertible notes and therefore there was no beneficial conversion feature associated with the October 2012 Notes. As of December 31, 2012 outstanding senior subordinated convertible promissory notes (October 2010 Notes) were $3,023,900 (including $23,900 corresponding to accrued and unpaid interest on the exchanged notes) and debt discount was $0. During the three months ended December 31, 2012 the Company amortized $0 of the debt discount. As of December 31, 2012 outstanding subordinated secured convertible promissory notes (January 2011 Notes) were $2,500,000 and debt discount was $0. During the three months ended December 31, 2012 the Company amortized $0 of the debt discount. As of December 31, 2012 outstanding subordinated secured convertible promissory notes (October 2011 Notes) were $2,000,000 and debt discount was $0. During the three months ended, December 31, 2012 the Company amortized $277,100 of the debt discount. As of December 31, 2012 outstanding unsecured convertible promissory notes (Unsecured Bridge Notes) were $90,000 and debt discount was $0. During the three months ended December 31, 2012 the Company amortized $15,000 of the debt discount. As of December 31, 2012 outstanding senior convertible promissory notes (August 2012 Bridge Notes) were $1,998,100 and debt discount was $270,200. During the three months ended December 31, 2012 the Company amortized $100,000 of the debt discount. The combined outstanding senior secured, senior subordinated secured, subordinated secured and unsecured convertible promissory notes as of December 31, 2012 were $9,612,000 and debt discounts were $270,200. During the three months ended December 31, 2012 the Company amortized $392,100 of the debt discount.
[2] The October 2010 Notes: The October Purchase Agreement provides for the issuance and sale of October 2010 Notes, for cash or in exchange for outstanding convertible notes, in the aggregate principal amount of up to $3,000,000 plus an amount corresponding to accrued and unpaid interest on any exchanged notes, and warrants to purchase a number of shares corresponding to 50% of the number of shares issuable on conversion of the October 2010 Notes. The agreement provides for multiple closings, but mandates that no closings may occur after January 31, 2011. The October Purchase Agreement also provides that the Company and the holders of the October 2010 Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the October 2010 Notes and the related warrants. Initially, the October 2010 Notes were to mature one year from the date of issuance (subject to earlier conversion or prepayment), earn interest equal to 9% per year with interest payable at maturity, and be convertible into shares of common stock of the Company at a conversion price of $9.00. The conversion price was subject to adjustment upon (i) the subdivision or combination of, or stock dividends paid on, the common stock; (ii) the issuance of cash dividends and distributions on the common stock; (iii) the distribution of other capital stock, indebtedness or other non-cash assets; and (iv) the completion of a financing at a price below the conversion price then in effect. The October 2010 Notes were furthermore convertible, at the option of the holder, into securities to be issued in subsequent financings at the lower of the then-applicable conversion price or price per share payable by purchasers of such securities. The October 2010 Notes can be declared due and payable upon an event of default, defined in the October 2010 Notes to occur, among other things, if the Company fails to pay principal and interest when due, in the case of voluntary or involuntary bankruptcy or if the Company fails to perform any covenant or agreement as required by the October Note. Our obligations under the terms of the October 2010 Notes are secured by a security interest in the tangible and intangible assets of the Company, pursuant to a Security Agreement, dated as of October 1, 2010, by and between the Company and John Pappajohn, as administrative agent for the holders of the October 2010 Notes. This agreement was subsequently amended. The warrants related to the October 2010 Notes were to expire seven years from the date of issuance and were exercisable for shares of common stock of the Company at an exercise price of $9.00. Exercise price and number of shares issuable upon exercise were subject to adjustment (1) upon the subdivision or combination of, or stock dividends paid on, the common stock; (2) in case of any reclassification, capital reorganization or change in capital stock and (3) upon the completion of a financing at a price below the exercise price then in effect. Any provision of the October 2010 Notes or related warrants could be amended, waived or modified upon the written consent of the Company and holders of a majority of the aggregate principal amount of such notes outstanding. Any such consent would affect all October 2010 Notes or warrants, as the case may be, and will be binding on all holders thereof. The October 2010 Notes were subsequently amended as detailed in (23) below.
[3] Amendment of the October 2010 Notes and the January 2011 Notes: On October 11, 2011, the Company, with the consent of holders of a majority in aggregate principal amount outstanding (the "Majority Holders") of our outstanding January 2011 Notes, amended all of the January 2011 Notes to extend the maturity of such notes until October 1, 2012 by means of an "Amendment and Conversion Agreement." Pursuant to the terms of the amendment, which was effective as of September 30, 2011, the January 2011 Notes would receive a second position security interest in the assets of the Company (including its intellectual property). The Majority Holders of the January 2011 Notes also consented to the terms of a new $2 million bridge financing (the "2011 Bridge Financing") and to granting the investors in such financing a second position security interest in the assets of the Company (including its intellectual property) that is pari passu with the second position security interest received by the holders of the January 2011 Notes. The amendment was also intended to add a mandatory conversion provision to the terms of the January 2011 Notes. Under that provision, the January 2011 Notes would be automatically converted upon the closing of a public offering by the Company of shares of its common stock and/or other securities with gross proceeds to the Company of at least $10 million (the "Qualified Offering"). If the public offering price were less than the conversion price then in effect, the conversion price would be adjusted to match the public offering price (the "Qualified Offering Price"). On October 12, 2011, the Company, with the consent of the Majority Holders of its October 2010 Notes, amended all of the October 2010 Notes to extend the maturity of such notes until October 1, 2012 by means of an Amendment and Conversion Agreement. The Majority Holders of the October 2010 Notes also consented to the terms of the Bridge Financing and to granting the investors in such financing as well as the holders of the Company's January 2011 Notes a second position security interest in the assets of the Company (including its intellectual property). The guaranties that had been issued in 2010 to certain October Note investors by SAIL were extended accordingly. The amendment, which was effective as of September 30, 2011, was also intended to add the same mandatory conversion and conversion price adjustment provisions to the terms of the October 2010 Notes as were added to the terms of the January 2011 Notes. As a result of the issuance of October 2011 Notes (mentioned below) at a conversion price of $3.00 and the associated warrants to purchase common stock at an exercise price of $3.00, the ratchet provision in the October 2010 Notes and January 2011 Notes was triggered, with the result that the conversion price of such notes was lowered from $9.00 to $3.00, the exercise price of the associated warrants was lowered from $9.00 to $3.00 per share, and the number of shares underlying such notes and warrants was proportionately increased. The Amended and Restated Security Agreement, dated as of September 30, 2011, between the Company and Paul Buck, as administrative agent for the secured parties (the "Amended and Restated Security Agreement"), which replaced the existing security agreement from 2010, and the corresponding security interest terminate (1) with respect to the October 2010 Notes, if and when holders of a majority of the aggregate principal amount of October 2010 Notes issued have converted their notes into shares of common stock and, (2) with respect to the January 2011 Notes and the October 2011 Notes (defined below), if and when holders of a majority of the aggregate principal amount of January 2011 Notes and October 2011 Notes (on a combined basis) have converted their notes. On June 1, 2012, the Company, having received on or prior to such date the consent of the Majority Holders of the October 2010 and January 2011 Notes, amended all of the October 2010 Notes and the January 2011 Notes to add a mandatory conversion provision to the terms of such notes. Under that provision, the October 2010 Notes and January 2011 Notes would be automatically converted upon the closing of a public offering by the Company of shares of its securities with gross proceeds to the Company of at least $3 million. If the public offering price were less than the conversion price then in effect, the conversion price would be adjusted to match the public offering price. Pursuant to the agreements amending the October 2010 Notes and January 2011 Notes, which superseded the Amendment and Conversion Agreements, the exercise price of the warrants that were issued in connection with the notes would be adjusted to match such public offering price, if such price were lower than the exercise price then in effect. The warrants were also amended to remove the full-ratchet provision from the warrants for securities offerings occurring after any such public offering. The Company agreed to issue to each holder of the October 2010 and January 2011 Notes, as consideration for the above and, warrants to purchase a number of shares of common stock corresponding to 100% of the number of shares issuable upon conversion of the principal amount and accrued and unpaid interest of his or her notes. These warrants would be issued on or within 10 business days after any public offering. The Company evaluated the agreements amending the October 2010 Notes and January 2011 Notes (which superseded the Amendment and Conversion Agreements) as of September 30, 2012, under ASC 470. The Company noted the change in terms did not constitute a substantial modification under ASC470. The consents to the 2012 Bridge Financing obtained from holders of previously outstanding convertible promissory notes have taken effect, since the Company has raised more than $1.35 million in the 2012 Bridge Financing. Such consents had been given pursuant to the terms of the Amended and Restated Consent, Note Amendment and Warrant Forfeiture Agreement, dated as of October 24, 2012 (the "Consent Agreement"), between the Company and the holders of at least a majority in aggregate principal amount outstanding ("Majority Holders") of each tranche of the Company's secured convertible promissory notes issued in October and November 2010 (the "October 2010 Notes"), secured convertible promissory notes issued between January and April 2011 (the "January 2011 Notes"), secured convertible promissory notes issued between October 2011 and January 2012 (the "October 2011 Notes") and an unsecured convertible promissory note issued in February 2012 (the "February 2012 Note"). As a result, all of such notes were amended to (a) extend the maturity date of October 1, 2013, (b) set the conversion price at $1.00, subject to adjustment as provided in the notes and (c) remove full-ratchet anti-dilution protection. In addition, the holders forfeited the warrants they received in connection with the issuance of the notes, and consented to the 2012 Bridge Financing, the issuance of the October 2012 Notes and to the subordination of their notes to these October 2012 Notes. The Company evaluated the Consent Agreement, effective November 28, 2012 under ASC 470-50-40 "Extinguishments of Debt" ("ASC 470"). ASC 470 requires modifications to debt instruments to be evaluated to assess whether the modifications are considered "substantial modifications". A substantial modification of terms shall be accounted for like an extinguishment. For extinguished debt, a difference between the re-acquisition price and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains. The Company noted the change in terms per the Consent Agreement, met the criteria for substantial modification under ASC 470, and accordingly treated the modification as extinguishment of the original convertible notes, replaced by the new convertible notes under the modified terms. The Company recorded a gain on extinguishment of debt of $466,300 for the period ended December 31, 2012.
[4] Mr. John Pappajohn is a Director of the Company. On June 3, 2010, we entered into a Bridge Note and Warrant Purchase Agreement with John Pappajohn to purchase two secured promissory notes (each, a "Bridge Note") in the aggregate principal amount of $500,000, with each Bridge Note in the principal amount of $250,000 maturing on December 2, 2010. On June 3, 2010, Mr. Pappajohn loaned the Company $250,000 in exchange for the first Bridge Note (there were no warrants issued in connection with this first note) and on July 25, 2010, Mr. Pappajohn loaned the Company $250,000 in exchange for the second Bridge Note. In connection with his purchase of the second Bridge Note, Mr. Pappajohn received a warrant to purchase up to 8,334 shares of our common stock. The exercise price of the warrant (subject to anti-dilution adjustments, including for issuances of securities at prices below the then-effective exercise price) was $15.00 per share. Pursuant to a separate agreement that we entered into with Mr. Pappajohn on July 25, 2010, we granted him a right to convert his Bridge Notes into shares of our common stock at a conversion price of $15.00. The conversion price was subject to customary anti-dilution adjustments, but would never be less than $9.00. Each Bridge Note accrued interest at a rate of 9% per annum. On October 1, 2010, we entered into a Note and Warrant Purchase Agreement (the "October Purchase Agreement") with Mr. Pappajohn, pursuant to which we issued to Mr. Pappajohn October 2010 Notes in the aggregate principal amount of $761,700 and warrants to purchase up to 126,949 shares of common stock. The Company received $250,000 in gross proceeds from the issuance of October 2010 Notes in the aggregate principal amount of $250,000 and related warrants to purchase up to 41,667 shares. We also issued October 2010 Notes in the aggregate principal amount of $511,700, and related warrants to purchase up to 85,282 shares, to Mr. Pappajohn in exchange for the cancellation of the two Bridge Notes originally issued to him on June 3, 2010 and July 25, 2010 in the aggregate principal amount of $500,000 (and accrued and unpaid interest on those notes) and a warrant to purchase up to 8,334 shares originally issued to him on July 25, 2010. The transaction closed on October 1, 2010.On October 18, 2011, the Company entered into a new note and warrant purchase agreement in connection with a $2 million bridge financing (the "2011 Bridge Financing"), with Mr. Pappajohn. Pursuant to the agreement, the Company issued subordinated secured convertible notes (the "2011 Bridge Notes") in the aggregate principal amount of $250,000 and warrants to purchase 83,334 shares of common stock to Mr. Pappajohn for gross proceeds to the Company of $250,000. The new note and warrant purchase agreement initially provided for the issuance and sale of October 2011 Notes in the aggregate principal amount of up to $2,000,000, and warrants to purchase a number of shares corresponding to 50% of the number of shares issuable on conversion of the 2011 Bridge Notes, in one or multiple closings to occur no later than April 1, 2012. On November 11, 2011, the Company entered into an Amended and Restated Note and Warrant Purchase Agreement (the "2011 Bridge Financing Purchase Agreement") in connection with the Bridge Financing, which amended and restated the October agreement in that it increased the warrant coverage from 50% to 100%. In addition, each holder's option to redeem or convert their 2011 Bridge Note at the closing of the Qualified Offering (defined below) can now only be amended, waived or modified with the consent of the Company and that holder. On each of November 10, 2011, and December 27, 2011, the Company issued a 2011 Bridge Note in the aggregate principal amount of $250,000 and warrants to purchase 83,334 shares of common stock to Mr. Pappajohn for gross proceeds to the Company of $250,000. The combined aggregate amount for these three 2011 Bridge Financings was $500,000 and warrants to purchase 166,668 shares of common stock for gross proceeds to the Company of $500,000. On November 28, 2012, we entered into an Amended and Restated Bridge Financing Purchase Agreement with Mr. Pappajohn pursuant to which we issued to Mr. Pappajohn a October 2012 Note in the aggregate principal amount of $500,000, inclusive of the exchange of $200,000 in aggregate principal amount of demand notes issued on April 26 and May 25, 2012 for an aggregate of $200,000. The gross new cash proceeds to the Company from the November 28 issuance to Mr. Pappajohn were $300,000.
[5] Until his departure from our Board on November 30, 2012, Mr. Dave Jones was the Chairman of the Board of the Company and is a former managing member of the general partner of SAIL, of which SAIL 2010 Co-Investment Partners, L.P. and SAIL Holdings, LLC are affiliates. Mr. Jones remains a limited partner of SAIL. On December 10, 2012, Mr. Walter Schindler joined the Board of the Company. Mr. Schindler holds sole voting and investment power over securities held by SAIL Holdings LLC. As the managing partner of SAIL Capital Partners, which is the general partner of the remaining SAIL entities, Mr. Schindler along with his fellow managing partner, Henry Habicht, holds voting and investment power over securities held by the remaining SAIL entities.