State of Texas Funding	3 Months Ended
Sep. 30, 2013
State Of Texas Funding
State of Texas Funding	(10) State of Texas Funding In March 2010, the Texas Emerging Technology Fund awarded 1^stDetect $1.8 million for the development and marketing of the Miniature Chemical Detector, a portable mass spectrometer designed to serve the security, healthcare and industrial markets. In exchange for the award, 1^stDetect granted a common stock purchase right and a note payable to the State of Texas. As of September 30, 2013, 1^stDetect has received $1.8 million in disbursements. The proceeds from the award can only be used to fund development of the Miniature Chemical Detector at 1^st Detect, not for repaying existing debt or for use in other Company subsidiaries. The common stock purchase right is exercisable at the first Qualifying Financing Event (“QFE”), which is essentially a change in control or third party equity investment in 1^st Detect. The number of shares available to the State of Texas, at the price of par value, is calculated as the total disbursements (numerator) divided by the stock price established in the QFE (denominator). If the first QFE did not occur within 18 months of the agreement’s effective date, which has been extended to June 30, 2014 as a result of extensions granted by the State of Texas, the number of shares available for purchase would equal the total disbursements (numerator) divided by $100 (denominator). As of September 30, 2013 no QFE has occurred. The note equals the disbursements to 1^st Detect to date, accrues interest at 8% per year and cancels automatically at the earlier of (1) selling substantially all of the assets of 1^st Detect, (2) selling more than 50% of common stock of 1^st Detect or (3) March 2020. No payments of interest or principal are due on the note unless there is a default, which would occur if 1^st Detect moves its operations or headquarters outside of Texas at any time before March 2020. 1^st Detect has the option to pay back the principal plus accrued interest by June 30, 2014, but repayment does not cancel the State of Texas’ common stock purchase right. Management considers the likelihood of voluntarily repaying the note or of a default event as remote due to the fact that the covenants that would necessitate repayment are within the control of the Company. As such, the $1.8 million, which was received in two installments of $0.9 million and $0.9 million prior to the period ended September 30, 2013, was accounted for as a contribution to equity. As of September 30, 2013, no default events have occurred.

State of Texas Funding

3 Months Ended

Sep. 30, 2013

(10) State of Texas Funding

In March 2010, the Texas Emerging Technology Fund awarded 1^stDetect $1.8 million for the development and marketing of the Miniature Chemical Detector, a portable mass spectrometer designed to serve the security, healthcare and industrial markets. In exchange for the award, 1^stDetect granted a common stock purchase right and a note payable to the State of Texas. As of September 30, 2013, 1^stDetect has received $1.8 million in disbursements. The proceeds from the award can only be used to fund development of the Miniature Chemical Detector at 1^st Detect, not for repaying existing debt or for use in other Company subsidiaries.

The common stock purchase right is exercisable at the first Qualifying Financing Event (“QFE”), which is essentially a change in control or third party equity investment in 1^st Detect. The number of shares available to the State of Texas, at the price of par value, is calculated as the total disbursements (numerator) divided by the stock price established in the QFE (denominator). If the first QFE did not occur within 18 months of the agreement’s effective date, which has been extended to June 30, 2014 as a result of extensions granted by the State of Texas, the number of shares available for purchase would equal the total disbursements (numerator) divided by $100 (denominator). As of September 30, 2013 no QFE has occurred.

The note equals the disbursements to 1^st Detect to date, accrues interest at 8% per year and cancels automatically at the earlier of (1) selling substantially all of the assets of 1^st Detect, (2) selling more than 50% of common stock of 1^st Detect or (3) March 2020. No payments of interest or principal are due on the note unless there is a default, which would occur if 1^st Detect moves its operations or headquarters outside of Texas at any time before March 2020. 1^st Detect has the option to pay back the principal plus accrued interest by June 30, 2014, but repayment does not cancel the State of Texas’ common stock purchase right.

Management considers the likelihood of voluntarily repaying the note or of a default event as remote due to the fact that the covenants that would necessitate repayment are within the control of the Company. As such, the $1.8 million, which was received in two installments of $0.9 million and $0.9 million prior to the period ended September 30, 2013, was accounted for as a contribution to equity. As of September 30, 2013, no default events have occurred.