| Convertible Notes Payable | Convertible Notes Payable consisted
of the following at June 30, 2016:
Principal Unamortized Net Accrued
Convertible Notes Payable Non-Current Portion:
November 2014 10% Convertible Notes $ 692,811 $ (75,994 ) $ 616,817 $ 2,889
Total Convertible Notes
Payable $ 692,811 $ (75,994 ) $ 616,817 $ 2,889 During the three months ended June
30, 2016, we recorded interest expense of $13,882 related to the contractual interest rates of our convertible notes and interest
expense of $27,641 related to the amortization of deferred financing costs for a total interest expense of $41,523 related to
our convertible notes in the three months ended June 30, 2016. Convertible Notes Payable consisted
of the following at March 31, 2016:
Principal Unamortized Net Accrued
Convertible Notes Payable Non-Current Portion:
November 2014 10% Convertible Notes $ 527,780 $ (27,641 ) $ 500,139 $ 74,036
Total Convertible Notes Payable $ 527,780 $ (27,641 ) $ 500,139 $ 74,036 The above table shows the retroactive
application of $27,641 in note discounts representing the deferred financing costs of that same amount on March 31, 2016 due to
the application of related to the application of the new accounting standard ASU 2015-03. 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. 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 47,125 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 originally matured 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. 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 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. Initial Amendment of the November
2014 10% Convertible Note Terms On November 12, 2015, we entered into
an amendment of terms (Amendment of Terms) with the two investors that participated in the November 2014 10% Convertible
Notes. The Amendment of Terms modifies the terms of the subscription agreement, notes and warrants to, among other things, extend
the maturity date of the notes from April 1, 2016 to June 1, 2016, temporarily reduce the number of shares that we must reserve
with respect to conversion of the notes, and temporarily suspend the time period during which one of the investors may exercise
its warrants. In exchange for the investors agreements in the Amendment of Terms, we paid one of the investors a cash fee
of $90,000, which we recorded as deferred financing costs and will amortize over the remaining term of the notes. During the fiscal
year ended March 31, 2016, $62,308 of amortization related to the amendment has been included in interest expense in the accompanying
consolidated statements of operations. Second Amendment and Extension of
the November 2014 10% Convertible Notes On June 27, 2016, we and certain investors
(the Investors) entered into Amendments (the Amendments) to our November 2014 10% Convertible Notes
in the original principal amount of $527,780 (the Notes) and Class A Common Stock Purchase Warrants to purchase
an aggregate of 47,125 shares of common stock (the Existing Warrants) issued and sold by us to the Investors under
a Subscription Agreement dated November 6, 2014. The Amendments provide that the Maturity Date (as defined in the Notes) was extended
from June 1, 2016 to July 1, 2017 and that the Conversion Price (as defined in the Notes) was reduced from $5.60 per share of
common stock to $5.00 per share of common stock. In addition, we reduced the purchase price (as defined in the Existing Warrants)
from $8.40 per share to $5.00 per share. In connection with these modifications, each of the Investors signed a Consent and Waiver
providing its consent under certain restrictive provisions, and waiving certain rights, including a right to participate in certain
offerings made by us, under a Securities Purchase Agreement dated June 23, 2015, (the 2015 SPA) to which we, the
Investors and certain other investors are parties, in order to facilitate an at-the-market equity program (see Note 6). The Amendments also increase the principal
amount of the Notes to $692,811 (in the aggregate) to (i) include accrued and unpaid interest through June 15, 2016, and
(ii) increase the principal amount by $80,000 (in the aggregate) as an extension fee for the extended maturity date of the Notes
set forth above. With respect to each Note, we entered into an Allonge to Convertible Promissory Note (each, an Allonge)
reflecting the changes in the principal amount, Maturity Date and Conversion Price of the Note. We also issued to the Investors new
warrants (the New Warrants) to purchase an aggregate of 30,000 shares of common stock with a Purchase Price (as
defined in the New Warrants) of $5.00 per share of common stock. We issued the New Warrants in substantially the same form as
the Existing Warrants, and the New Warrants will expire on November 6, 2019, the same date on which the Existing Warrants will
expire. The modification of the Notes was
evaluated under FASB Accounting Standards Codification (ASC) Topic No. 470-50-40, Debt Modification and Extinguishments.
Therefore, according to the guidance, the instruments were determined to be substantially different, and the transaction qualified
for extinguishment accounting. As a result, we recorded a loss on debt extinguishment of $536,889 and recognized and an extension
fee expense of $80,000, which are included in other expenses in the accompanying condensed consolidated statements of operations.
The debt extinguishment is comprised from the fair value of warrants issued in connection with the Notes of $287,676, as well
as $325,206 related to beneficial conversion feature and offset by debt discount of $75,993. The beneficial conversion feature
is a result of the effective conversion price of the new Notes being less than the market price of the underlying common stock
on the date of modification. |
