Note 7. Line of Credit - Related Party

12 Months Ended

Mar. 31, 2012

Related Party Transactions Disclosure [Text Block]

Note 7. Line of Credit – Related Party

On September 30, 2011 (the “Effective Date”), we entered into the Loan Agreement with our Chairman, Lewis C. Pell (the “Lender”) providing for an additional $5.0 million in available loans (the “New Loan”) to us, in addition to $5.0 million previously borrowed under the Original Agreement (as defined below), for an aggregate loan of up to $10.0 million.

This Agreement amends and restates the original Revolving Loan Agreement between the Lender and us dated November 9, 2009 (the “Original Agreement”) pursuant to which we borrowed $5 million (the “Original Loan Amount”). Under the Loan Agreement, we may draw up to the New Loan Amount until November 9, 2014 or such earlier time as the agreement is terminated in accordance with its terms. The Loan Agreement extends the Original Loan Amount repayment date to be consistent with the New Loan Amount and extends the expiration date of the stock warrants issued under the Original Agreement to be consistent with the terms of the New Warrant (as defined below).

Subject to the terms of the Loan Agreement, we will be required to prepay all amounts outstanding under the Loan Agreement upon a change in control or event of default. In addition, unless the Lender agrees to a waiver, we will be required to repay all of the New Loan and a portion of the Original Loan Amount, if we secure other financing from an external party or consummate a sale or license of assets.

Any amounts drawn against the New Loan (an “Advance”) accrue interest at an annual rate of 7.5%. The Lender will receive an availability fee equal to an annual rate of 0.5% on the unused portion of the New Loan calculated based on the difference between the average annual principal amount of the outstanding Advances under the Loan Agreement and the maximum amount of aggregate Advances of $10.0 million.

In connection with the Loan Agreement, the Lender received a warrant to purchase an aggregate of 1,229,105 shares of our common stock at an exercise price of $2.034 per share (the “New Warrant”).  The New Warrant vested immediately upon issuance and expires on the later of the fifth anniversary of the Effective Date or one year after the termination of the Loan Agreement (the “Expiration Date”) and repayment of all amounts due and payable under the Loan Agreement. As part of the Original Agreement, the Lender received warrants to purchase up to 272,727 shares of our common stock at an exercise price of $1.375 per share and up to 378,788 shares of our common stock at an exercise price of $1.65 per share.

We have accounted for the fair value of the New Warrant and incremental fair value arising from the extension of the maturity date of the old warrants as an increase to the deferred debt cost. Such deferred debt costs are amortized to expense over the term of the Loan Agreement to its Expiration Date.

We estimated the fair value of all of the stock warrants issued on the date of vesting using a Black-Scholes valuation model that used the weighted average assumptions for the risk-free interest rate, expected life (in years), and expected volatility. The following table summarizes Advances taken and warrant issuances as of March 31, 2012:

Month	Amount of Advance	Number of Warrant Shares Vested		Fair Value of Warrant Shares on Date Vested		Exercise Price		Risk-Free Interest Rate			Expected Life (In Years)		Expected Volatility
March 2012	$2.0 million		--		--		--		--			--		--
December 2011	$2.0 million		--		--		--		--			--		--
September 2011	$1.0 million		1,229,105	$1.5 million		$	2.034		0.96	%		5.00		86	%
December 2010	$0.5 million		37,879	$30 thousand		$	1.650		1.56	%		3.90		91	%
June 2010	$2.0 million		151,515	$87 thousand		$	1.650		1.58	%		4.37		93	%
March 2010	$2.5 million		189,394	$106 thousand		$	1.650		2.36	%		4.62		91	%
November 2009	n/a		272,727	$221 thousand		$	1.375		2.31	%		5.00		89	%
Total	$10.0 million		1,880,620	$2.0 million

At March 31, 2012, we had $10.0 million in outstanding borrowings under the Loan, which is reflected as line of credit – related party on our consolidated balance sheet. The $10.0 million revolving loan expires in November 2014, at which time we must repay all outstanding borrowings and interest and fees under the Loan Agreement.

Debt cost expense and interest expense related to the stock warrants and availability fee and accrued interest on outstanding borrowings, respectively, for fiscal years 2012 and 2011 was recorded in our consolidated statement of operations as follows:

	Fiscal Year Ended
	March 31,
	2012		2011
Debt cost expense	$	372	$	141
Interest expense		470		320

At March 31, 2012, we had $0.2 million in accrued interest related to the Loan Agreement, which is included in accrued expenses on our condensed consolidated balance sheet.