Note 4 - Convertible Notes

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

4.   Convertible Notes

On September 4, 2013, the Company issued Convertible Notes for total aggregate proceeds of $4.3 million. All of the Convertible Notes were purchased by existing preferred stockholders. The Convertible Notes accrued interest at 8% per annum and matured on or after March 31, 2014 upon written notice from a majority of the outstanding Convertible Note holders.

 In connection with the issuance of the Convertible Notes, the Company incurred $36,000 of financing costs which were recorded in other current assets. The Company also reimbursed the lenders $10,000 for financing costs which were recorded as a discount on the Convertible Notes. The Convertible Notes included various embedded conversion and redemption features. The Company recorded approximately $1.4 million as the fair value of the combined embedded derivative liability on September 4, 2013, with a corresponding amount recorded as debt discount. The debt discount has been amortized to interest expense over the life of the Convertible Notes.  Amounts recorded for issuance costs and embedded features were amortized to interest expense over the life of the Convertible Notes, approximately seven months. Changes in the estimated fair value of the embedded features were recorded in earnings in the period in which they occurred.  As of December 31, 2013, the fair value of the combined embedded derivative liability was $1.4 million.

 On May 13, 2014, the Convertible Notes, including accrued interest, were converted into 10,344,201 shares of Series D Preferred Stock at a conversion price of $0.4414 per share. In connection with the conversion, the compound embedded derivative liability, which had a fair value of $1.5 million upon conversion, was written-off.  There was no gain or loss recognized upon conversion of the Convertible Notes.