Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE DEBT AND EQUITY FINANCINGS

v2.4.1.9
CONVERTIBLE DEBT AND EQUITY FINANCINGS
 3 Months Ended
Dec. 31, 2014
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
4.
CONVERTIBLE DEBT AND EQUITY FINANCINGS
 
Starting September 22, 2014, through September 29, 2014, the Company entered into a new Note Purchase Agreement (the “Note Purchase Agreement”) in connection with a bridge financing, with seven accredited investors, including lead investor RSJ Private Equity (“RSJ PE”).  Pursuant to the Note Purchase Agreement, the Company issued seven secured convertible promissory notes (each, a “September 2014 Note”) in the aggregate principal amount of $1.65 million. Of this amount, RSJ PE purchased a September 2014 Note for $750,000. The September 2014 Notes were also purchased by the following affiliates of the Company or entities under their control: The Tierney Family Trust, of which the Company’s Chairman of the Board, Thomas Tierney, is a trustee, purchased a September 2014 Note for $200,000; the Company’s Director, John Pappajohn, purchased a September 2014 Note for $200,000; and Oman Ventures, of which Mark Oman, a greater than 5% stockholder of the Company, is the President, purchased a September 2014 Note for $200,000.
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
 
 
Carrying
 
 
 
 
 
Balance
 
Discount
 
Value
 
Note Type and Investor
 
Due Date
 
($)
 
($)
 
($)
 
Senior Secured 5% Notes Convertible at $0.25
 
 
 
 
 
 
 
 
 
 
 
 
(the “September 2014 Notes”)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSJ Private Equity
 
03/21/2016
 
$
750,000
 
$
(56,200)
 
$
693,800
 
4 Accredited Investors
 
03/21/2016
 
 
300,000
 
 
(24,200)
 
 
275,800
 
John Pappajohn
 
03/21/2016
 
 
200,000
 
 
(21,300)
 
 
178,700
 
Tierney Family Trust
 
03/21/2016
 
 
200,000
 
 
(21,300)
 
 
178,700
 
Oman Ventures
 
03/21/2016
 
 
200,000
 
 
(21,300)
 
 
178,700
 
Total Secured Convertible Promissory (September 2014) Notes
 
 
 
$
1,650,000
 
$
(144,300)
 
$
1,505,700
 
 
The Note Purchase Agreement provides for the issuance and sale of September 2014 Notes in the aggregate principal amount of up to $2.5 million, in one or more closings to occur over a six-month period beginning September 22, 2014. The Note Purchase Agreement also provides that the Company and the holders of the September 2014 Notes enter into a registration rights agreement covering the registration of the resale of the shares of the Company’s Common Stock underlying the September 2014 Notes.
 
The September 2014 Notes mature on March 21, 2016, which is eighteen months from the date of first issuance (subject to earlier conversion or prepayment), earn interest at a rate of 5% per annum with interest payable at maturity, are convertible into shares of Common Stock (i) automatically upon the closing of a qualified offering of no less than $5 million at a conversion price equal to the lesser of $0.25 or 70% of the lowest cost of Common Stock offered by the Company, but in no event less than $0.10 per share or (ii) voluntarily within 15 days of maturity at the lesser of a conversion price equal to $0.25 or the lowest cost of Common Stock offered by the Company, but in no event less than $0.10 per share. No September 2014 Note may be prepaid without the prior written consent of the holder of such Note. The September 2014 Notes are secured by a security interest in the Company’s intellectual property, as detailed in a security agreement. Upon a change of control of the Company, the holder of a September 2014 Note will have the option to have the Note repaid with a premium equal to 50% of the outstanding principal.