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Convertible Debt | 9 Months Ended
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Mar. 31, 2013
Convertible Debt [Abstract] |
CONVERTIBLE DEBT | NOTE 5. CONVERTIBLE DEBT Convertible Note Offering On December 21, 2012 the Company issued senior secured convertible notes (the “Convertible Notes”). The term of the Convertible Notes include an eight month maturity period and an annual interest rate of 12% which is accrued until payment or until the Convertible Notes are converted into equity. The Convertible Notes were issued at a price of $200,000 per unit, for total gross proceeds of $2,000,000 with an original issue discount of 0.2%. On March 28, 2013, the Company issued additional Convertible Notes for total gross proceeds of $1,130,000 with an original issue discount of 0.2%. The Convertible Notes are convertible at a per share conversion price of $0.25, which is subject to a one-time reset right (“Conversion Price Reset”) as well as “weighted average” and other customary anti-dilution protections (“Debt Conversion Feature”). The Conversion Price Reset will be available on the earlier of (the “Reset Date”) (i) the date of maturity of the 12% Notes or (ii) the completion of a subsequent financing by the Company of at least $5,000,000, if the closing price of the Company’s stock is less than $0.30 on the Reset Date. For (i) the conversion price after the reset will be equal to 70% of the 5-day VWAP immediately preceding the Reset Date. For (ii) the Conversion Price after the reset will be equal to 70% of 5-day VWAP immediately after the Reset Date. In connection with the issuance of Convertible Notes, 12,520,000 five-year cashless exercise warrants (“Convertible Note Warrants”) were issued with “weighted average” and other customary anti-dilution protections. 6,260,000 Convertible Note Warrants are exercisable at $0.50 and 6,260,000 Convertible Note Warrants are exercisable at $0.25 (see Note 6 for further detail). Debt Discounts Convertible Note Warrants and Debt Conversion Feature The fair value of the Convertible Note Warrants and the Debt Conversion Feature, issued as of December 21, 2012, totaling $1,349,720 is recorded as a debt discount in the accompanying balance sheet and is amortized as interest expense in the accompanying statement of operations over the term of the Convertible Note using the effective interest method (see Note 6 for further detail). The fair value of the Convertible Note Warrants and the Debt Conversion Feature, issued on March 28, 2013, totaling $272,697 is recorded as a debt discounts in the accompanying balance sheet and is amortized as interest expense in the accompanying statement of operations over the term of the Convertible Note using the effective interest method (see Note 6 for further detail). Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The Convertible Notes issued on December 21, 2012 and March 28, 2013 were issued with an original issue discount of 0.2%. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the term of the Convertible Note.
Convertible Note Face Value |  | $ | 3,130,000 |
Debt Discount |  |  |  |
Convertible Note Warrant Derivative |  |  | 908,649 |
Conversion Feature Derivative |  |  | 713,768 |
Original Issue Discount |  |  | 6,260 |
Total Debt Discount |  | $ | 1,628,677 |
Amortization of Debt Discount, as of March 31, 2013 |  |  | (551,502 | )
Debt Discount, Net |  | $ | 1,077,175 |
Convertible Note Carrying Value, at March 31, 2013 |  | $ | 2,052,825 |
Deferred Financing Costs Transaction Fees The Company paid Aegis Capital Corp. (“Aegis”) who acted as the sole placement agent for the first and second closings of the Convertible Notes Offering a commission of 10% of the funds raised in the Convertible Notes offering and a 3% non-accountable reimbursement of its expenses, for a total payment of $406,900, which is recorded as a deferred financing cost in the accompanying balance sheet. The Company incurred additional fees of $96,556 for legal and escrow agent fees, which are recorded as a deferred financing cost in the accompanying balance sheet. Convertible Note Broker Warrants In addition, Aegis received five-year warrants (the “Convertible Note Broker Warrants”) to purchase 2,504,000 shares of the Company’s common stock. The Convertible Note Broker Warrants were issued with “weighted average” and other customary anti-dilution protections. The Convertible Note Broker Warrants are identical to the Convertible Note Warrants in all material respects, except that they are exercisable at $0.25. The fair value of the Convertible Note Broker Warrants of $194,381 is recorded under deferred financing costs in the accompanying balance sheet (see Note 6 for further detail). Third Party Share Sale The Convertible Note holders were sold 6,260,000 free trading shares by non-affiliated, third party shareholders of the Company at par value. Although the Company was not a party to the sale of these shares by third party shareholders, per FASB ASC Topic 718, the fair value of this non-affiliated third party transaction is recognized by the Company as a deferred financing cost of the Convertible Note transaction. Additionally, the Company will provide no reimbursement or compensation to the selling shareholders of the 6,260,000 free trading shares. As such, the Company does not anticipate recognizing any further expenses in relation to this third-party transaction. The fair value of this third party transaction of $1,537,940 is recorded under deferred financing costs in the accompanying balance sheet. Other Transactions On March 29, 2013, the Company paid $15,000 for diligence fees for fees related to a potential future transaction, which is recorded as a deferred financing cost in the accompanying balance sheet.
Placement agent and other fees associated with Convertible Note offering |  | $ | 503,457 |
Convertible Note Broker Warrants |  |  | 194,381 |
Third Party Share Grant |  |  | 1,537,940 |
Total Deferred Financing Costs |  | $ | 2,235,777 |
Amortization of Deferred Financing Costs, as of March 31, 2013 |  |  | 656,623 |
Deferred Financing Costs, Net, as of March 31, 2013 |  | $ | 1,579,154 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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