6. Notes Payable

12% Convertible Notes

In December 2012, January 2013 and February 2013, the Company issued five (5) separate 12% Secured Convertible Notes totaling $950,000 (the “Original 12% Secured Convertible Notes”) pursuant to a note purchase agreement dated December 7, 2012 (the “Original Note Purchase Agreement”). All of the Original 12% Secured Convertible Notes accrued interest at 12% per annum. The Original 12% Secured Convertible Notes were contingently convertible into shares of the Company’s common stock at a conversion price of 75% of the price per share issued by the Company in a Qualified Financing (defined as an equity financing of not less than $7,000,000). The difference between the effective conversion price of the Original 12% Secured Convertible Notes into shares of the Company’s common stock, and the fair value of the Company’s common stock on the date of issuance of the Original 12% Secured Convertible Notes, resulted in a beneficial conversion feature in the amount of $287,500. In accordance with ASC 470-20, because the Original 12% Secured Convertible Notes were convertible upon the occurrence of a contingent future event (the Qualified Financing), the contingent beneficial conversion feature has been measured at the issuance date, but is not reflected in the consolidated financial statements until the occurrence of the contingent event.

In May 2013, the holders of the Original 12% Secured Convertible Notes transferred, in separate transactions, all of their respective rights, title and interests in the Original 12% Secured Convertible Notes to a third party (the “Current Holder”) pursuant to various note purchase agreements by and between each original holder and the Current Holder. Also in May 2013, immediately following the Current Holder’s acquisition of the Original 12% Secured Convertible Notes, the Company and the Current Holder entered into an Amended and Restated Note Purchase Agreement to amend and restate Original Note Purchase Agreement. Pursuant to the Amended and Restated Note Purchase Agreement, all of the Original 12% Secured Convertible Notes were automatically deemed null and void. In addition, the Company issued to the Current Holder a new convertible promissory note (the “New 12% Convertible Note”) in the original principal amount of $1,002,800, which amount reflected the outstanding principal amount and unpaid accrued interest due under the Original 12% Secured Convertible Notes as of the date of the Amended and Restated Note Purchase Agreement. The New 12% Convertible Note was unsecured and accrued interest at the rate of 12% per annum and was scheduled to mature on June 2, 2014.

On April 4, 2014, the Company entered into a Note Conversion Agreement with the Current Holder of the New 12% Convertible Note pursuant to which the Current Holder agreed to convert $1,223,795 in principal and interest due thereunder, as calculated through June 2, 2014, into 6,526,908 shares of common stock at the conversion price set forth in the New 12% Convertible Note.

As to the Original 12% Secured Convertible Notes, because no transaction or occurrence of a contingent future event (the Qualified Financing) was consummated pursuant to the terms of the Original Note Purchase Agreement, the warrants issued to the original holders in connection with the Original 12% Secured Convertible Notes were reduced by one-half, to purchase an aggregate 475,000 shares of the Company’s common stock.

Promissory Notes

In November 2012, the Company issued two (2) separate promissory notes totaling $450,000 (the “November Notes”). The November Notes were unsecured and accrued interest at 10% per annum. One of the November Notes in the principal amount of $250,000 was paid in full prior to maturity in December 2012. The other November Note in the principal amount of $200,000 was amended and restated and was paid in full prior to its revised maturity in December 2013.

In February 2013, the Company issued four (4) promissory notes totaling $400,000 (the “February Notes”). The February Notes are unsecured, accrue interest at a rate of 10% per annum and mature on the earlier of March 1, 2014 or the closing of a single transaction (whether debt, equity or a combination of both) that results in aggregate gross proceeds to the Company of $10,000,000. On May 6, 2014, the Company entered into amendments to the February Notes. Pursuant to these amendments, the maturity date of each promissory note was extended until the earlier of (i) June 30, 2014, (ii) the closing of a single transaction (whether debt, equity or a combination of both) that results in aggregate gross proceeds to the Company of $1,500,000, or (iii) the acceleration of the maturity of the promissory note upon the occurrence of an Event of Default (as defined in each of the promissory notes). The amendments became effective as of April 30, 2014.

In June 2013, the Company issued three (3) demand promissory notes in the aggregate amount of $75,000. Each demand promissory note has an original principal amount of $25,000, bears interest at a rate of ten percent (10%) per annum, is unsecured, and is payable upon demand. These notes were repaid in-full during July 2013.

In January 2014, the Company issued three (3) demand promissory notes in the aggregate amount of $75,000. Each demand promissory note has an original principal amount of $25,000, bears interest at a rate of ten percent (10%) per annum, is unsecured, and is payable upon demand.

Other Indebtedness

In connection with the Asset Contribution Agreement between the Company and Grandparents.com, LLC (“GP”), which became effective on February 23, 2012, the following aggregate indebtedness of $1,078,500 with contingent maturities was incurred by the Company:

Two (2) notes payable, each in the amount of $78,543, to certain officers, directors and beneficial owners of a majority of the capital stock of the Company. The notes bear PIK interest annually at 5% and are due and payable on the earlier of (i) the consummation of a debt or equity financing with gross proceeds to the Company of at least $10,000,000 or (ii) the date subsequent to March 31, 2013 that the Company achieves EBITDA equal to or greater than $2,500,000. The note is subordinate to certain other debt obligations of the Company

One (1) note payable, in the amount of $308,914, to a director and beneficial owner of a majority of the capital stock of the Company. The note bears PIK interest annually at 5% and is due and payable on the earlier of (i) the consummation of a debt or equity financing with gross proceeds to the Company of at least $10,000,000 or (ii) April 1, 2013. However, no payments are required to be paid until the Company achieves EBITDA equal to or greater than $2,500,000.

One (1) promissory note converted from management fees accrued through the transaction date totaling $612,500 and payable to a GP member. The note bears PIK interest annually at 5% and is due and payable on the earlier of (i) the consummation of a debt or equity financing with gross proceeds to the Company of at least $10,000,000 or (ii) the date subsequent to March 31, 2013 that the Company achieves EBITDA equal to or greater than $2,500,000. The note is subordinate to certain other debt obligations of the Company.

Warrants Issued in connection with Notes Payable

In connection with the issuances of the Original 12% Secured Convertible Notes and the February Notes, the Company issued five-year warrants to purchase an aggregate of 1,350,000 shares of the Company’s common stock at an exercise price of $0.50 per share. The Company has accounted for the warrants issued in connection with the Original 12% Secured Convertible Notes and the February Notes in accordance with the provisions of ASC 370-20 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”. The warrants were valued at their fair value of $0.15 to $0.27 per warrant using the Black-Scholes method with the following assumptions: share price = $0.17 to $0.30, volatility = 156%, risk-free rate = 1.82%. The relative fair values of the warrants, based on an allocation of the value of the notes payable and the value of the warrants issued in connection with the notes payable, was recorded as a debt discount (with a corresponding increase to additional paid-in capital) in the amount of $404,515 ($100,230 of which was recorded in 2013), and is being amortized to interest expense over the expected term of the notes payable.

In connection with the issuance of the New 12% Convertible Note, the Company issued five-year warrants to purchase an aggregate of 1,002,800 shares of the Company’s common stock at an exercise price of $0.25 per share. The Company has accounted for the warrants in accordance with the provisions of ASC 370-20 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”. The warrants were valued at their fair value of $0.20 per warrant using the Black-Scholes method with the following assumptions: share price = $0.22 volatility = 155%, risk-free rate = 1.03%. The relative fair values of the warrants, based on an allocation of the value of the New 12% Convertible Note payable and the value of the warrants issued in connection with the New 12% Convertible Note payable, was recorded as a debt discount (with a corresponding increase to additional paid-in capital) in the amount of $201,563, and is being amortized to interest expense over the expected term of the New 12% Convertible Note payable.

The interest expense for the three-months ended March 31, 2014 attributable to the debt discount of warrants was $60,364.

Total interest expense charged to operations amounted to $122,331 and $219,538 for the three-months ended March 31, 2014 and 2013 respectively. The future principal maturities related to all notes payable obligations is estimated as follows at March 31, 2014 (excluding debt discount of $33,989 at March 31, 2014):

For the Years Ending December 31,
2014	$	1,477,800
Contingent		1,078,500
	$	2,556,300