7.	Convertible Notes Payable

Convertible notes payable consist of the following:

	December 31,		March 31,
	2015		2015
9% Senior Subordinated Convertible Notes due February 15, 2016, net of debt discount of $6,052 (December 31, 2015) and $62,182 (March 31, 2015)	$	1,093,948	$	1,037,818
8% Senior Subordinated Convertible Note Payable to NNA due March 28, 2019, net of debt discount of $985,255 (March 31, 2015) – converted in October 2015		-		1,014,745
Conversion feature liability		-		442,358
	$	1,093,948	$	2,494,921
Less: current		(1,093,948)		(1,037,818)
Noncurrent	$	-	$	1,457,103

9% Senior Subordinated Callable Convertible Promissory Notes due February 15, 2016

The 9% Notes, issued January 31, 2013, bear interest at a rate of 9% per annum, payable semi-annually on August 15 and February 15, and mature February 15, 2016, and are subordinated. The principal of the 9% Notes, plus any accrued yet unpaid interest, is convertible, at any time by the holder at a conversion price of $4.00 per share, subject to adjustment for stock splits, stock dividends and reverse stock splits, into shares of the Company’s common stock. On 60 days’ prior notice, the 9% Notes are callable in full or in part by the Company at any time after January 31, 2015. If the Average Daily Value of Trades (“ADVT”) during the prior 90 days as reported by Bloomberg is greater than $100,000, the 9% Notes are callable at a price of 105% of the 9% Notes’ par value, and if the ADVT is less than $100,000, the 9% Notes are callable at a price of 110% of the 9% Notes’ par value.

In connection with the issuance of the 9% Notes, the holders of the 9% Notes received warrants to purchase 66,000 shares of the Company’s common stock at an exercise price of $4.50 per share, subject to adjustment for stock splits, reverse stock splits and stock dividends, which warrants are exercisable at any date prior to January 31, 2018, and were classified in equity. The $186,897 fair value of the 9% Notes warrants was based on the Company’s closing stock price at the transaction date and inputs to the Black-Scholes option pricing model: term of 5.0 years, risk free rate of 0.70%, and volatility of 36.7%.

Subsequent to December 31, 2015, certain holders of the 9% Notes converted an aggregate of approximately $420,000 of outstanding principal and accrued interest into approximately 105,000 shares of the Company’s common stock (see Note 11).

8% Convertible Note Issued to NNA

The NNA 8% Convertible Note commitment provided for the Company to borrow up to $2,000,000. On July 31, 2014, the Company exercised its option to borrow $2,000,000, received $2,000,000 of proceeds and recorded a debt discount of $1,065,775 related to the fair value of a conversion feature liability and a warrant liability discussed below. The conversion price is also subject to adjustment in the event of subsequent down-round equity financings, if any, by the Company. The conversion feature included a non-standard anti-dilution feature that has been bifurcated and recorded as a conversion feature liability at the issuance date of $578,155.

From the proceeds of the transactions with NMM (see Note 9) on October 15, 2015, the Company repaid its outstanding term loan and revolving credit facility with NNA pursuant to the Credit Agreement in the then-outstanding aggregate amount of $7,304,506, consisting of $7,282,500 principal plus $22,006 of accrued interest. Additionally, NNA converted the 8% Convertible Note and exercised all of its related Warrants.

Interest expense associated with the convertible notes payable consisted of the following:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2015		2014		2015		2014
Interest expense	$	36,481	$	66,188	$	168,052	$	144,069
Amortization of loan fees and discount		44,400		67,532		188,619		164,854
	$	80,881	$	133,720	$	356,671	$	308,923