4. Notes Payable

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Notes Payable

The Company and its subsidiaries are party to a number of loans with affiliates and unrelated parties. At March 31, 2016 and December 31, 2015, notes payable consisted of the following:

Notes Payable – Third Parties

	March 31, 2016
	Face Value		Unamortized			Fair Value of		Net Value
	of Note		Discount			Derivatives		of Note
Loan payable under prepaid forward purchase contract in the amount of $5,000,000, at 20% interest, with no payments of interest or principal through March 30, 2017. All outstanding amounts are due March 30, 2017.	$	5,000,000	$	–		$	–	$	5,000,000
Loan payable to TCA Global Master Fund, LP in the amount of $3,000,000, at 16% interest, with interest only payments monthly through September 11, 2016. Principal and interest payments are due monthly from October 11, 2016 through September 11, 2017.		3,000,000		(305,188	)		130,849		2,825,661
Loan payable to CommerceNet in the amount of $250,000 at 1.06% interest, increasing to 6% after two years. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017.		170,806		–			–		170,806
Loan payable to Jay Tenebaum in the amount of $250,000 at 1.06% interest, increasing to 6% after two years. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017.		170,806		–			–		170,806
	$	8,341,612	$	(305,188	)	$	130,849		8,167,273
Less current portion									(5,269,031	)
Notes payable, net of current portion								$	2,898,242

	December 31, 2015
	Face Value		Unamortized			Fair Value of		Net Value
	of Note		Discount			Derivatives		of Note
Loan payable to former shareholder of Epinex Diagnostics Laboratories, Inc. in the amount of $400,000, at 0% interest, with principal payments of $100,000 due in periodic installments from November 26, 2014 through February 26, 2016. Amount recorded is net of imputed discount of $1,775 at December 31, 2015.	$	100,000	$	(1,775	)	$	–	$	98,225
Loan payable to TCA Global Master Fund, LP in the amount of $3,000,000, at 16% interest, with interest only payments monthly through September 11, 2016. Principal and interest payments are due monthly from October 11, 2016 through September 11, 2017.		3,000,000		(453,025	)		186,117		2,733,092
Loan payable to CommerceNet in the amount of $250,000 at 1.06% interest, increasing to 6% after two years. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017.		170,806		–			–		170,806
Loan payable to Jay Tenebaum in the amount of $250,000 at 1.06% interest, increasing to 6% after two years. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017.		170,806		–			–		170,806
	$	3,441,612	$	(454,800	)	$	186,117		3,172,929
Less current portion									(269,031	)
Notes payable, net of current portion								$	2,903,898

Notes Payable – Related Parties

	March 31, 2016
	Face Value		Unamortized			Fair Value of		Net Value
	of Note		Discount			Derivatives		of Note
Convertible debenture dated December 31, 2014 in the amount of $3,000,000 which bears interest at 10% and is due December 31, 2016. The note provides the lender, D&D Funding II, LLC, the option to convert the note into the Company's common stock at a 25% discount to the average trading price (as defined in the note agreement) for the ten consecutive trading days prior to the conversion date.	$	3,000,000	$	(1,588,495	)	$	2,263,237	$	3,674,742
Loan payable to Alcimede, LLC in the amount of $3,000,000, at 6% interest, with one payment of $3,000,000, plus interest, due on February 2, 2017. (On June 29, 2015, Alcimede exercised options to purchase 1,000,000 shares for $2,500,000, which reduced the loan.)	$	500,000		–			–	$	500,000
Current portion of notes payable, related party	$	3,500,000	$	(1,588,495	)	$	2,263,237	$	4,174,742

	December 31, 2015
	Face Value		Unamortized			Fair Value of		Net Value
	of Note		Discount			Derivatives		of Note
Convertible debenture dated December 31, 2014 in the amount of $3,000,000 which bears interest at 10% and is due December 31, 2016. The note provides the lender, D&D Funding II, LLC, the option to convert the note into the Company's common stock at a 25% discount to the average trading price (as defined in the note agreement) for the ten consecutive trading days prior to the conversion date.	$	3,000,000	$	(2,236,112	)	$	2,270,000	$	3,033,888
Loan payable to Alcimede, LLC in the amount of $3,000,000, at 6% interest, with one payment of $3,000,000, plus interest, due on February 2, 2016. (On June 29, 2015, Alcimede exercised options to purchase 1,000,000 shares for $2,500,000, which reduced the loan.)	$	500,000		–			–	$	500,000
Loan payable to Christopher Diamantis in the amount of $1,600,000. One payment of $1,600,000 due January 7, 2016 plus $100,000 of interest.	$	1,600,000		–			–	$	1,600,000
Current portion of notes payable, related party	$	5,100,000	$	(2,236,112	)	$	2,270,000	$	5,133,888

Convertible Debenture Dated December 31, 2014

On December 31, 2014, the Company borrowed $3,000,000 from D&D Funding II, LLC (“D&D”), Christopher Diamantis, a director of the Company, is the manager and 50% owner of D&D. In January 2016, the Company temporarily repaid $3,000,000 of the amounts due under the D&D note. In addition to the principal amount, the Company paid $300,000 in cash for interest for 2015. In March 2016, the Company re-borrowed 100% of the principal amount repaid in January 2016. This note is convertible into the Company’s Common Stock at a 25% discount to the trailing ten day average closing price at any time prior to the repayment. In the event of conversion, the holder of the note is also entitled to receive a number of warrants to purchase the Company’s Common Stock equal to the number of shares issued upon conversion with exercise prices equal to the trailing ten day average closing price of our Common Stock. These two features are derivative instruments that are re-valued quarterly and are reflected in the table above.

Prepaid Forward Purchase Contract

On March 31, 2016, the Company entered into an agreement to pledge certain of its accounts receivable as collateral against a prepaid forward purchase contract. The receivables had an estimated collectable value of $8,700,000 and have been adjusted down to approximately $4,300,000 in our books and records. The consideration received was $5,000,000. In exchange for the consideration received, the counterparty received the right to: (i) a 20% per annum investment return from the Company on the consideration, with a minimum repayment term of six months and minimum return of $500,000, (ii) all payments recovered from the accounts receivable up to $5,250,000, if paid in full within six months, or $5,500,000, if not paid in full within six months, and (iii) 20% of all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the extent that the counterparty has not been paid $6,000,000, the Company is required to pay the difference. Christopher Diamantis, a director of the Company, guaranteed the Company's payment obligation of up to $6,000,000. For providing the guarantee, and to the extent that the counterparty receives amounts payable under clause (ii) above exceeding $5,000,000, Mr. Diamantis will be paid a fee by the counterparty equal to the amount by which the amount received under clause (ii) above exceeds $5,000,000 ($250,000 or $500,000, depending on the timing of payment).