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Notes Payable
6 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Notes Payable
Note 2: Notes Payable

G-Max Trust Note

On June 11, 2012, the Company issued a convertible promissory note in the aggregate principal amount of $500,000 and 500,000 shares of common stock to The G-Max Trust, and received gross proceeds of $500,000, excluding transaction costs and expenses. Interest on the outstanding principal balance of the note accrues at a rate of 10% per annum compounded monthly and is payable monthly commencing July 1, 2012. All unpaid principal and interest on the note is due and payable on April 1, 2013. At any time on or before the maturity date, the investor has the right to convert part or all of the principal and interest owed under the note into common stock at a conversion price equal to $0.55 per share (subject to adjustment for stock dividends, stock splits, reverse stock splits, reclassifications or other similar events affecting the number of outstanding shares of common stock). The market value of the common stock on the date issued was $0.74 per share, for a total value of $370,000. Debt issuance cost of $370,000 was recorded as a result, and is being amortized over the term of the G-Max Note. The stock is restricted for six months from the date issued. Amortization of the debt issuance cost, which is included in interest expense, was $93,261 and $112,521, respectively, for the three and six months ended September 30, 2012.

The conversion feature of the G-Max Note is considered beneficial to the investor due to the conversion price for the convertible note being lower than the market value of the common stock on the date the note was issued. The estimated value of the beneficial conversion feature was $172,727. The beneficial conversion feature is being amortized over the term of the G-Max Note. This resulted in a charge to interest expense of approximately $44,000 and $53,000, respectively, for the three and six months ended September 30, 2012. At September 30, 2012, the net carrying value of the note was $379,881.

The effective annual interest rate of the G-Max Note is 111.50% after considering the debt issuance cost and the beneficial conversion feature

Gemini Master Fund, Ltd. Notes

On April 2, 2012, the Company completed the closing of a private placement financing transaction with Gemini Master Fund, Ltd. pursuant to a securities purchase agreement. The Company issued a 10% Senior Convertible Note (the “Gemini Note”) in the aggregate principal amount of $1.0 million and 1,000,000 shares of our common stock, and received gross proceeds of $1.0 million, excluding transaction costs and expenses. Interest on the Gemini Note is payable at a rate of 10% per annum and is payable on the maturity date of the Gemini Note. Principal and accrued and unpaid interest is due and payable nine months after the date of the Gemini Note. The Gemini Note is convertible into shares of common stock at any time at the discretion of the investor at an initial conversion price per share of $0.25, subject to adjustment for stock splits, stock dividends and other similar transactions and subject to the terms of the Gemini Note. The conversion price is also subject to price anti-dilution adjustments providing that with the exception of certain excluded categories of issuances and transactions, if we issue equity securities or securities convertible into equity securities at an effective price per share less than the conversion price of the Gemini Note, the conversion price of the Gemini Note will be adjusted downward to equal the per share price of the new securities. The Company bifurcated the conversion option derivative from the debt. See Note 3. Our obligations under the Gemini Note and the other transaction agreements are guaranteed by our principal subsidiaries, including Adamis Corporation, Adamis Laboratories, Inc. and Adamis Viral, Inc. The market value of the common stock issued on April 2, 2012 was $0.25 per share, aggregated $250,000. Debt issuance cost of $250,000 was recorded as a result, and is being amortized over the term of the Gemini Note. The stock is restricted for six months from the date issued. Amortization of the debt issuance cost, which is included in interest expense, was $83,636 and $164,545, respectively, for the three and six months ended September 30,2012. At September 30, 2012 the net carrying value of the Gemini Note was $881,594. For further details on the conversion feature see Note 3.

The effective annual interest of the Gemini Note is 46.1% after considering the debt issuance cost and the conversion feature.
 

On June 11, 2012, the Company completed the closing of a private placement financing transaction with Gemini. The Company issued a 10% Senior Convertible Note in the aggregate principal amount of $500,000 (“Gemini Note Two”) and 500,000 shares of common stock, and received gross proceeds of $500,000, excluding transaction costs and expenses. The maturity date is nine months after the date of the note. The other materials terms and conditions are similar to the Gemini Note described above, except that the initial conversion price per share is $0.55. The market value of the common stock on the date issued was $0.74 per share, for a total value of $370,000. Debt issuance cost of $370,000 was recorded as a result, and is being amortized over the term of the Gemini Note Two. The stock is restricted for six months from the date issued. Amortization of the debt issuance cost, which is included in interest expense, was $124,689 and $150,440, respectively, for the three and six months ended September 30,2012. At September 30, 2012, the net carrying value of Gemini Note Two was $385,176. For further details on the conversion feature see Note 3.

The effective annual interest rate of the Gemini Note Two is 22.5% after considering the debt issuance cost and the beneficial conversion feature.

Notes Payable to Related Party

The Company had notes payable to a related party amounting to $81,232 at September 30, 2012, which bear interest at 10%. Accrued interest related to the notes was $68,341 at September 30, 2012.