Note 5. Line of Credit - Related Party

3 Months Ended

Jun. 30, 2012

Related Party Transactions Disclosure [Text Block]

Note 5.   Line of Credit – Related Party

In the second quarter of fiscal 2012, we entered into an amended and restated revolving loan agreement with our Chairman, Lewis C. Pell (the “Lender”) providing for an additional $5.0 million in available loans to us, in addition to $5.0 million previously borrowed under an original revolving loan agreement (collectively, the “Loan Agreement”), for an aggregate loan of up to $10.0 million (the “Loan Amount”).  Amounts drawn against the Loan Agreement 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 Loan Amount calculated based on the difference between the average annual principal amount of the outstanding balance under the Loan Agreement and the maximum amount of $10.0 million.

At June 30, 2012, we had $10.0 million in outstanding borrowings under the Loan Agreement, which is reflected as line of credit – related party on our condensed 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.

In connection with the Loan Agreement, the Lender received warrants to purchase an aggregate of 1,880,620 shares of our common stock at a weighted average exercise price of $1.86 per share. All of the warrants are vested and expire on the later of September 30, 2016 or one year after the termination of the Loan Agreement and repayment of all amounts due and payable under the Loan Agreement.

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. We recorded the transaction as a deferred debt cost and amortize to expense over the term of the loan. The following table summarizes amounts drawn against the Loan Agreement and warrant issuances as of June 30, 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	$	2,000		--	$	-			--		--			--		--
December 2011		2,000		--		-			--		--			--		--
September 2011		1,000		1,229,105		1,611	(1)	$	2.034		0.96	%		5.00		86	%
December 2010		500		37,879		30		$	1.650		1.56	%		3.90		91	%
June 2010		2,000		151,515		87		$	1.650		1.58	%		4.37		93	%
March 2010		2,500		189,394		106		$	1.650		2.36	%		4.62		91	%
November 2009		-		272,727		221		$	1.375		2.31	%		5.00		89	%
Total	$	10,000		1,880,620	$	2,055

(1) Includes the incremental fair value of $73 thousand arising from the extension of the maturity date of the original (previously issued) warrants.

Debt cost expense and interest expense related to the stock warrants and availability fee and accrued interest on outstanding borrowings, respectively, for the three months ended June 30, 2012 and 2011 was recorded in our condensed consolidated statement of operations as follows:

	Three Months Ended June 30,
	2012		2011
Debt cost expense	$	144	$	41
Interest expense		190		95

At June 30, 2012, unrecognized debt cost expense related to the stock warrants was approximately $1.4 million, which is expected to be recognized over a weighted average period of approximately 2.4 years. 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 at June 30, 2012.

In July 2012 and August 2012, we entered into additional agreements with the Lender (see Note 10. Subsequent Events).