Note 7. Long-Term Debt - Related Party

12 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 7. Long-Term Debt – Related Party

On September 19, 2012 (the “Effective Date”), we entered into a new $20.0 million revolving convertible promissory note (the “Replacement Note”) with our chairman, Lewis C. Pell (the “Lender”). The Replacement Note consolidated and restructured the $15.0 million in aggregate borrowings collectively outstanding under the Original Agreement (as defined below) and the Supplemental Note (as defined below) and provided for an additional $5.0 million available to us (of which $2.0 million has been drawn as of March 31, 2013). As we draw upon the remaining $3.0 million, a beneficial conversion feature will be recorded if the market price of our common stock increases after the Effective Date. We also terminated the letter agreement dated August 14, 2012, pursuant to which Mr. Pell had agreed to provide financial assistance to us in the amount of up to $3.0 million.

The Replacement Note accrues annual interest, payable annually, at the rate of 0.84%. The Replacement Note must be repaid in full on or before its fifth anniversary (the “Maturity Date”), but may be prepaid by us at any time without penalty. We will be required to repay all amounts outstanding under the Replacement Note upon an event of default, as defined in the Replacement Note.

The outstanding principal amount of the Replacement Note is convertible at any time prior to the Maturity Date, at Mr. Pell’s option, into shares of our common stock at a conversion price of $1.20 per share, which was the closing price of our common stock on the Effective Date.

The Replacement Note replaces the original loan agreement between us and Mr. Pell dated September 30, 2011 (the “Original Agreement”) pursuant to which we borrowed $10.0 million, and the promissory note of $5.0 million dated July 25, 2012 (the “Supplemental Note”) pursuant to which we borrowed $5.0 million. The amounts borrowed against the Original Agreement and Supplemental Note accrued interest at an annual rate of 7.5%. Mr. Pell also had received an availability fee equal to an annual rate of 0.5% on the difference between the average annual principal amount of the outstanding balance under the Original Agreement and the maximum amount of $10.0 million.

In connection with the Original Agreement, Mr. Pell 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 outstanding as of March 31, 2013 and expire on September 30, 2016.

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, which is amortized to expense over the term of the loan. The following table summarizes amounts drawn against the Original Agreement and warrant issuances:

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.

In connection with the termination of the Original Agreement, we determined that the transaction should be classified as an extinguishment of debt. Accordingly, we wrote-off the remaining deferred debt cost balance of $1.2 million at September 19, 2012.

Debt cost expense and interest expense related to the stock warrants and availability fee and accrued interest on outstanding borrowings, respectively, for fiscal years 2013 and 2012 were recorded in our consolidated statement of operations as follows:

	Fiscal Year Ended March 31,
	2013		2012
Debt cost expense (1)	$	272	$	372
Interest expense		488		470

(1) Expense through September 19, 2012.

At March 31, 2013, we had $17.0 million in outstanding borrowings under the Replacement Note, which is reflected as convertible debt – related party on our consolidated balance sheet. We had $70 thousand in accrued interest related to the Replacement Note, which is included in accrued expenses on our consolidated balance sheet at March 31, 2013.