Note 5. Convetible Debt - Related Party

6 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 5. Convertible Debt – Related Party

Convertible Promissory Notes

On September 25, 2013 (the “Effective Date”), we entered into the 2013 Note with Mr. Pell. The 2013 Note accrues annual interest, payable annually, at the rate of 1.66%. The 2013 Note must be repaid in full on or before the fifth anniversary of the Effective Date (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 2013 Note upon an event of default, as defined in the 2013 Note. As we draw upon the 2013 Note, a beneficial conversion feature will be recorded if the market price of our common stock increases after the Effective Date. From the Effective Date to September 30, 2013, the conversion price of the 2013 Note was below the market price of our common stock.

The outstanding principal amount of the 2013 Note is convertible at any time prior to the Maturity Date, at Mr. Pell’s option, into shares of our common stock at a price of $0.89, the closing bid price of our common stock on the Effective Date. At September 30, 2013, we did not have any outstanding principal borrowings under the 2013 Note.

On September 19, 2012 (the “Replacement Note Effective Date”), we entered into a $20.0 million revolving convertible promissory note (the “Replacement Note”) with Mr. Pell. The Replacement Note (i) consolidated and restructured the $15.0 million in aggregate borrowings collectively outstanding under an Amended and Restated Loan Agreement, dated September 30, 2011, between us and Mr. Pell (the “Original Agreement”) and a separate promissory note, dated July 25, 2012, between us and Mr. Pell, and (ii) provided for up to $5.0 million in additional borrowings.

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 the fifth anniversary of the Replacement Note Effective Date (the “Replacement Note 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 Replacement Note 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 bid price of our common stock on the Replacement Note Effective Date. At September 30, 2013, we had $20.0 million in outstanding principal borrowings under the Replacement Note, which is reflected as convertible debt – related party on our condensed consolidated balance sheet.

Pursuant to 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 expire on the later of September 30, 2016 or one year after the termination of the Original Agreement and repayment of all amounts due and payable under the Original Agreement.

In connection with the issuance of the Replacement Note and 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 and six months ended September 30, 2013 and 2012 was recorded in our condensed consolidated statement of operations as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
	2013		2012		2013		2012
Debt cost expense	$	-	$	128	$	-	$	272
Interest expense		42		233		81		422

At September 30, 2013, we had $150 thousand in accrued interest under the Replacement Note, which is included in accrued expenses on our condensed consolidated balance sheet, and no accrued interest under the 2013 Note.

Letter Agreement

Pursuant to the Letter Agreement, 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 in the form of an additional loan, share purchase, or financing transaction, on such terms as we and Mr. Pell may determine. As of September 30, 2013, we had not utilized the financial assistance agreement.