Note 5. Convetible Debt - Related Party

3 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 5.   Convertible debt – Related Party

Convertible Promissory Note:

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 agreement dated September 30, 2011 (the “Original Agreement”) and a note dated July 25, 2012. At June 30, 2013, we had $19 million in outstanding borrowings under the Replacement Note, which is reflected as convertible debt– related party on our condensed consolidated balance sheet. Each quarter, and each time we draw down on any available credit under the Replacement Note, we determine if a beneficial conversion of the convertible debt exists. A beneficial conversion will arise if the $1.20 conversion price of the Replacement Note is below the per share fair value of our common stock. To date, the conversion price of the Replacement Note has not been below the market price of our common stock.

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. At June 30, 2013, we had $107 thousand in accrued interest related to the Replacement Note, which is included in accrued expenses on our condensed consolidated balance sheet.

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.

In connection with the Original 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.

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.

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 amortized to expense over the term of the loan.

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, 2013 and 2012 was recorded in our condensed consolidated statement of operations as follows:

	Three Months Ended June 30,
	2013		2012
Debt cost expense	$	-	$	144
Interest expense	$	41	$	190

At June 30, 2012, unrecognized debt cost expense related to the stock warrants was approximately $1.4 million, which was expected to be recognized over a weighted average period of approximately 2.4 years. In connection with the termination of the Original Agreement in September 2012, we wrote-off the remaining deferred debt cost balance of $1.2M.

Letter Agreement dated June 21, 2013:

Pursuant to a letter agreement dated June 21, 2013, Mr. Pell has agreed to provide financial assistance to us in the amount of up to $5.0 million, if necessary to support our operations, for a period ending on the earlier of (i) July 1, 2014 or (ii) our raising debt or equity capital in the amount of $5.0 million or more.  This financial assistance, if drawn by us, would be on the same terms as our existing convertible debt with Mr. Pell, but may take other forms and or terms that would not necessarily be as beneficial. As of August 14, 2013, we did not utilize the financial assistance agreement.