CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC	9 Months Ended
Sep. 30, 2014
Notes to Financial Statements
NOTE 5. CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC	On August 31, 2012, the Company and Platinum Montaur Life Sciences, LLC (“Montaur”) entered into a Loan Agreement (the “Loan Agreement”) pursuant to which Montaur made a non-revolving draw credit facility (the “Credit Facility”) of up to $20,000,000 available to the Company, a substantial portion of which was subject to the successful achievement of certain clinical and regulatory milestones set forth in the Loan Agreement, with an initial available principal amount of $5,000,000. The principal balance of each draw bore interest from the applicable draw date until repayment at a rate of 10% per annum, compounded monthly. The Company issued to Montaur a Promissory Note dated August 31, 2012, with a maturity date of five years from the date of closing. The Company used the proceeds from the Credit Facility to fund operations. As a result of the Company’s 2013 financing transactions, this Credit Facility was currently only available at Montaur’s discretion. In addition, for each $1,000,000 of funds borrowed pursuant to the Credit Facility, the Company agreed to issue Montaur a warrant to purchase 100,000 shares of Common Stock, with a term of five years and an exercise price equal to 150% of the market price of the Common Stock at the time of the draw, but in no event less than $20.00 or more than $40.00 per share (together with the Commitment Warrant, the “Warrants”). All of the Warrants were immediately exercisable and have a term of five years from the issue date. The exercise price of the Warrants is subject to adjustment for stock splits, combinations or similar events. An exercise under the Warrants could not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time; provided, however, that a Holder may waive the 4.99% ownership limitation upon sixty-one (61) days advance written notice to the Company. On September 14, 2012, the Company submitted a draw request to Montaur in the amount of $3,000,000 in the form required by the Loan Agreement (the “September Request”). The Company ultimately received the $3,000,000 across three draws in 2012. These draws were recorded on the Consolidated Balance Sheet under Note Payable, net of the initial $3,000,000 in discounts recorded related to the warrants issued and described below. In accordance with the Loan Agreement and as a result of funding received from Montaur, the Company issued to Montaur separate warrants concurrent with the three draws in 2012 to purchase an aggregate of 300,000 shares of Common Stock, with a term of five years, and having exercise prices ranging from $21.10 to $22.70 per share. The fair value of these warrants issued was determined to be approximately $3,455,000, of which $3,000,000 was treated as a debt discount and was to be accreted to interest expense over the term of the note, and the balance of approximately $455,000 was charged to interest expense in 2012. On March 1, 2013, the Company elected to prepay all outstanding draws under the Credit Facility totaling $3,113,366, which includes interest accrued and unpaid to that date of $113,366. After such date, no principal amount was outstanding under the Credit Facility. Concurrent with this prepayment, the Company recorded non-cash interest expense of approximately $2,879,166 in March 2013 relating to the unamortized debt discount on the outstanding draws paid off. Section 3.1 (Prepayment and Prepayment Notice) of the Loan Agreement states that “The Borrower shall have the option at all times to permanently prepay any Draw, in whole or in part, by providing to Lender two (2) Business Days prior written notice of the effective date and amount of such cancellation or prepayment; provided, however, that any such prepayments shall be applied to accrued and unpaid interest before being applied to principal (such principal payments to be applied to the Draw or Draws as designated by the Borrower in the Borrower’s discretion). The Borrower shall have the right, upon two (2) Business Days prior written notice to the Lender, to irrevocably cancel and terminate the Term Loan Facility upon payment of all amounts due and owing hereunder to Lender; provided, that, it is understood and agreed that the provisions of Article 9 hereof shall survive any such termination.” As a result of the Company’s contractual ability to obtain funds through this Loan Agreement only at Montaur’s discretion, the expiration of the Loan Agreement on to December 31, 2014, and the Company’s inability to motivate Montaur to allow the Company to draw against the Credit Facility to fund operations, the Compnay elected to terminate the Loan Agreement. Accordingly, on October 28, 2014, the Company notified Montaur that it was irrevocably canceling and terminating the Loan Agreement effective as of October 30, 2014. Pursuant to the Loan Agreement, the Company issued Montaur a warrant to purchase 400,000 shares of its Common Stock, with a term of five years and an exercise price of $20.00 per share (the “Commitment Warrant”). The fair value of the Commitment Warrant was determined to be approximately $4,840,000, recorded as a deferred financing cost and the Company had been amortizing the interest expense over the term of the note. With the Company’s inability to utilize the Credit Facility on September 30, 2014, and the termination of the Loan Agreement effective October 30, 2014, the Company fully amortized the remaining $2,823,325 in Deferred Financing Cost as of September 30, 2014. Therefore, amortization of the deferred financing cost for the three and nine months ended September 30, 2014 was $3,065,325 and $3,549,325, respectively, and is recorded as interest expense. Amortization of the deferred financing cost for the three and nine months ended September 30, 2013 was $242,000 and $726,000, respectively.

CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC

9 Months Ended

Sep. 30, 2014

NOTE 5. CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC

On August 31, 2012, the Company and Platinum Montaur Life Sciences, LLC (“Montaur”) entered into a Loan Agreement (the “Loan Agreement”) pursuant to which Montaur made a non-revolving draw credit facility (the “Credit Facility”) of up to $20,000,000 available to the Company, a substantial portion of which was subject to the successful achievement of certain clinical and regulatory milestones set forth in the Loan Agreement, with an initial available principal amount of $5,000,000. The principal balance of each draw bore interest from the applicable draw date until repayment at a rate of 10% per annum, compounded monthly. The Company issued to Montaur a Promissory Note dated August 31, 2012, with a maturity date of five years from the date of closing. The Company used the proceeds from the Credit Facility to fund operations. As a result of the Company’s 2013 financing transactions, this Credit Facility was currently only available at Montaur’s discretion. In addition, for each $1,000,000 of funds borrowed pursuant to the Credit Facility, the Company agreed to issue Montaur a warrant to purchase 100,000 shares of Common Stock, with a term of five years and an exercise price equal to 150% of the market price of the Common Stock at the time of the draw, but in no event less than $20.00 or more than $40.00 per share (together with the Commitment Warrant, the “Warrants”). All of the Warrants were immediately exercisable and have a term of five years from the issue date. The exercise price of the Warrants is subject to adjustment for stock splits, combinations or similar events. An exercise under the Warrants could not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time; provided, however, that a Holder may waive the 4.99% ownership limitation upon sixty-one (61) days advance written notice to the Company.

On September 14, 2012, the Company submitted a draw request to Montaur in the amount of $3,000,000 in the form required by the Loan Agreement (the “September Request”). The Company ultimately received the $3,000,000 across three draws in 2012. These draws were recorded on the Consolidated Balance Sheet under Note Payable, net of the initial $3,000,000 in discounts recorded related to the warrants issued and described below. In accordance with the Loan Agreement and as a result of funding received from Montaur, the Company issued to Montaur separate warrants concurrent with the three draws in 2012 to purchase an aggregate of 300,000 shares of Common Stock, with a term of five years, and having exercise prices ranging from $21.10 to $22.70 per share. The fair value of these warrants issued was determined to be approximately $3,455,000, of which $3,000,000 was treated as a debt discount and was to be accreted to interest expense over the term of the note, and the balance of approximately $455,000 was charged to interest expense in 2012.

On March 1, 2013, the Company elected to prepay all outstanding draws under the Credit Facility totaling $3,113,366, which includes interest accrued and unpaid to that date of $113,366. After such date, no principal amount was outstanding under the Credit Facility. Concurrent with this prepayment, the Company recorded non-cash interest expense of approximately $2,879,166 in March 2013 relating to the unamortized debt discount on the outstanding draws paid off.

Section 3.1 (Prepayment and Prepayment Notice) of the Loan Agreement states that “The Borrower shall have the option at all times to permanently prepay any Draw, in whole or in part, by providing to Lender two (2) Business Days prior written notice of the effective date and amount of such cancellation or prepayment; provided, however, that any such prepayments shall be applied to accrued and unpaid interest before being applied to principal (such principal payments to be applied to the Draw or Draws as designated by the Borrower in the Borrower’s discretion). The Borrower shall have the right, upon two (2) Business Days prior written notice to the Lender, to irrevocably cancel and terminate the Term Loan Facility upon payment of all amounts due and owing hereunder to Lender; provided, that, it is understood and agreed that the provisions of Article 9 hereof shall survive any such termination.” As a result of the Company’s contractual ability to obtain funds through this Loan Agreement only at Montaur’s discretion, the expiration of the Loan Agreement on to December 31, 2014, and the Company’s inability to motivate Montaur to allow the Company to draw against the Credit Facility to fund operations, the Compnay elected to terminate the Loan Agreement. Accordingly, on October 28, 2014, the Company notified Montaur that it was irrevocably canceling and terminating the Loan Agreement effective as of October 30, 2014.

Pursuant to the Loan Agreement, the Company issued Montaur a warrant to purchase 400,000 shares of its Common Stock, with a term of five years and an exercise price of $20.00 per share (the “Commitment Warrant”). The fair value of the Commitment Warrant was determined to be approximately $4,840,000, recorded as a deferred financing cost and the Company had been amortizing the interest expense over the term of the note. With the Company’s inability to utilize the Credit Facility on September 30, 2014, and the termination of the Loan Agreement effective October 30, 2014, the Company fully amortized the remaining $2,823,325 in Deferred Financing Cost as of September 30, 2014. Therefore, amortization of the deferred financing cost for the three and nine months ended September 30, 2014 was $3,065,325 and $3,549,325, respectively, and is recorded as interest expense. Amortization of the deferred financing cost for the three and nine months ended September 30, 2013 was $242,000 and $726,000, respectively.