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Note 4. Notes Payable
3 Months Ended
Nov. 30, 2011
Debt Disclosure [Text Block]
Note 4.  Notes Payable

Note Payable - In May 2011, we received $300,000 cash and issued a note payable due in September 2011, bearing interest at 6.25% payable at maturity, together with 300,000 shares of our common stock.  The maturity date could be extended for one month, and if extended, the note bears interest at 8.25% and we agreed to issue the note holder 100,000 shares of our common stock.  The note bears interest at 24% beyond the extended maturity date, is due on demand and remains outstanding as of November 30, 2011.  In January 2012, we agreed to issue the lender 550,000 shares of our common stock and the lender agreed to forbear from issuing a written default notice extend the loan until February 15, 2012.  During the three months ended November 30, 2011, we recorded expense of $94,000 relating to extensions of the notes of and 300,000 shares of common stock issuable, based on closing market prices of our stock on extension dates occurring during the period.

Convertible Notes - During the year ended August 31, 2011, we received $450,000 cash from investors and issued convertible notes payable (together, the “Convertible Notes” and individually, a “Convertible Note”) in such amounts together with warrants to purchase 550,000 shares of our common stock at a per share price of $0.80 that expire in February 2016.  Convertible Notes bear interest at 15% payable at maturity.  Convertible Notes are convertible into shares of our common stock at a conversion price of $0.80 per share if (i) we are acquired or (ii) we elect to prepay all or a portion of the outstanding principal.   The fair value of warrants issued recorded as debt discount was $169,000 and is being amortized to interest expense over the debt terms.  Discount amortization of $29,000 was recognized as interest expense during the three months ended November 30, 2011, and the remaining $24,000 will recognized during the fiscal year ending August 31, 2012.   Convertible Notes of $250,000 are due in February 2012 and $50,000 are due in May 2012.  As of November 30, 2011, Convertible Notes of $150,000 are beyond their maturity dates.

Advances on Notes Payable - On August 31, 2011 and through November 30, 2011, we received $330,000, which is reported as advances on notes payable in the accompanying condensed consolidated balance sheet at November 30, 2011.  Terms of notes payable have not yet been finalized.  Interest has been accrued on advances at a rate of 15% per annum.