| 5. Convertible Notes Payable | Convertible Notes Payable consisted
of the following at June 30, 2015:
Principal Unamortized
Discount Net
Amount Accrued
Interest
Convertible Notes Payable Current Portion:
November 2014 10% Convertible Notes $ 527,780 $ (279,413 ) $ 248,367 $ 34,453
Total Convertible
Notes Payable Current Portion 527,780 (279,413 ) 248,367 34,453
Convertible Notes Payable Non-Current
Portion
Total Convertible
Notes Payable $ 527,780 $ (279,413 ) $ 248,367 $ 34,453 During the three months ended June
30, 2015, we recorded interest expense of $13,195 related to the contractual interest rates of our convertible notes, interest
expense of $93,138 related to the amortization of debt discount and interest expense of $19,302 related to the amortization of
deferred financing costs for a total interest expense of $125,635 related to our convertible notes in the three months ended June
30, 2015. Convertible Notes Payable consisted
of the following at March 31, 2015:
Principal Unamortized
Discount Net
Amount Accrued
Interest
Convertible Notes Payable Non-Current
Portion:
November 2014 10% Convertible Notes $ 527,780 $ (372,551 ) $ 155,229 $ 21,258
Total Convertible
Notes Payable Non-Current Portion 527,780 (372,551 ) 155,229 21,258
Total Convertible Notes Payable $ 527,780 $ (372,551 ) $ 155,229 $ 21,258 During the fiscal year ended March
31, 2015, we recorded interest expense of $24,625 related to the contractual interest rates of our convertible notes, interest
expense of $155,230 related to the amortization of debt discounts on the convertible notes and interest expense of $118,147 related
to the amortization of deferred financing costs for a total of $298,002. NOVEMBER 2014 10% CONVERTIBLE NOTES In November 2014, we entered into
a subscription agreement with two accredited investors providing for the issuance and sale of (i) convertible promissory notes
in the aggregate principal amount of $527,780 and (ii) five year warrants to purchase up to 47,123 shares of common stock at a
fixed exercise price of $8.40 per share. These notes bear interest at the annual rate of 10% and mature on April 1, 2016. The aggregate gross cash proceeds
to us were $415,000 after subtracting legal fees of $35,000; the balance of the principal amount of the notes represents a $27,780
due diligence fee and an original issuance discount. We recorded deferred financing costs of $112,780 to reflect the legal fees,
due diligence fee and original issuance discount and will amortize those costs over the life of the notes using the effective
interest method. The estimated relative fair value
of warrants issued in connection with the November 2014 10% Convertible Notes was recorded as a debt discount and is amortized
as additional interest expense over the term of the underlying debt. We recorded debt discount of $240,133 based on the relative
fair value of these warrants. In addition, as the effective conversion price of the debt was less than market price of the underlying
common stock on the date of issuance, we recorded an additional debt discount of $287,647 related to the beneficial conversion
feature. As of March 31, 2014, the $527,780 principal amount outstanding under this agreement is presented net of unamortized
debt discount of $372,551. These notes are convertible at the
option of the holders into shares of our common stock at a fixed price of $5.60 per share, for up to an aggregate of 94,246 shares
of common stock. There are no registration requirements with respect to the shares of common stock underlying the notes or the
warrants. The pricing on both the conversion
price and on the warrant exercise price reflected a negotiation that began in September 2014 and continued through funding in
November 2014. During that period of time the price of our common stock rose significantly, which complicated the pricing negotiations.
We ended up with pricing the notes and warrants at levels consistent with our prior equity unit issuances in October 2014. AMENDED AND RESTATED SERIES A 12%
CONVERTIBLE NOTES In June 2010, we entered into Amended
and Restated Series A 12% Convertible Promissory Notes (the "Amended and Restated Notes") with the holders of certain
promissory notes previously issued by us, extending the due date to December 31, 2010 on the aggregate principal balance of $900,000.
During the fiscal year ended March 31, 2013, the holders of $15,000 of the Notes converted their principal and related accrued
interest into common stock. During the fiscal year ended March 31, 2015, the holders of the remaining $885,000 of the Notes converted
their principal and related accrued interest into common stock. There was no balance remaining at March 31, 2015. The following transactions related
to the Amended and Restated Notes impacted our condensed consolidated statements of operations and statements of cash flows in
the three month period ended June 30, 2014. Weiner Note Conversion On June 24, 2014, we entered into
an agreement with the Ellen R. Weiner Family Revocable Trust (the Trust), a holder of a Series A 12% Convertible
Note (the Note), which previously was classified as being in default. As per the agreement, the Trust converted
past due principal of $660,000 and accrued interest balance of $343,200 into restricted common stock, representing all amounts
outstanding to the Trust. Additionally, the Trust agreed to
waive anti-dilution price protection underlying warrants previously issued to the Trust. On June 26, 2014, three other parties
who held similar warrants also agreed to waive their anti-dilution price protection. Under its agreement, the Trust converted
the entire $1,003,200 past due principal and interest balance on the Note, which previously was in default, into an aggregate
of 466,365 restricted shares of our common stock and five-year warrants to acquire up to 136,190 shares of our common stock at
an exercise price of $2.10 per share (which exercise price was the result of certain contractual price adjustments previously
made during 2011) and up to 7,944 shares of our common stock at an exercise price of $5.40 per share (collectively, the Conversion
Securities). Based on the fair value of the warrants and shares issued to the Trust for the accrued interest, we recorded
a loss on settlement of notes of $1,791,421 during the June 2014 period. In exchange for the Trusts
conversion in full of the Note and accrued interest and for the waivers of anti-dilution price protection in the previously issued
warrants, in addition to the Conversion Securities, we issued to the Trust 1,500 restricted shares of common stock as a service
fee, changed the exercise price of all of the previously issued warrants to $2.10 per share and extended the expiration date of
all of the previously issued warrants to July 1, 2018. We valued the 1,500 share service fee at $12,000 based on our closing price
on the date of the agreement and recorded that value as interest expense during the June 2014 period. Bird Estate Extension On July 8, 2014, we executed a written
restructuring agreement (the Agreement) with the Estate of Allan Bird (the Estate), a holder of a
Series A 12% Convertible Note (the Note), which previously was classified as being in default. Since the negotiations
for the Agreement were completed in the month of June, we recorded the impact of the Agreement as of June 30, 2014. In the Agreement,
the Estate agreed to extend the expiration date of the Note to April 1, 2016, to convert approximately $116,970 of accrued interest
to equity, and to waive anti-dilution price protection underlying the Note and warrants previously issued to the Estate. Under the Agreement, the Estate converted
the entire $116,970 past due interest balance on the Note, which previously was in default, into an aggregate of 51,837 restricted
shares of our common stock. The Estate received five-year warrants to acquire up to 46,429 shares of our common stock at an exercise
price of $2.10 per share (which exercise price was the result of certain contractual price adjustments previously made during
2011). Based on our common stock prices during a period of negotiation with the Estate including during calendar year 2013, the
Estate also received five-year warrants to acquire up to 2,708 shares of our common stock at an exercise price of $5.40 (collectively
known as the Conversion Securities). Based on the fair value of the warrants and shares issued to the Estate for
the accrued interest, we recorded a loss on settlement of notes of $663,209 during the June 2014 period. In exchange for the Estates
extension of the Note, conversion of accrued interest and for the waivers of anti-dilution price protection in the previously
issued warrants, in addition to the Conversion Securities, we also issued to the Estate 500 restricted shares of common stock
as an extension fee and extended the expiration date of all of the previously issued warrants to July 1, 2018. We valued the 500
share extension fee at $4,500 based on our closing price and recorded that value as a deferred financing cost, which we will amortize
over the extended two year life of the note. As a result of the waiver of anti-dilution
protection by the Trust and the Estate, as of June 30, 2014, we no longer had any derivative liabilities as all of the holders
of the financial instruments that had price antidilution protection waived such price antidilution protection. As a result of
those waivers, we reclassified into equity our derivative liability balance of $10,679,067 as of June 30, 2014. |
