F. NOTES PAYABLE	9 Months Ended
Jun. 30, 2018
F. Notes Payable
F. NOTES PAYABLE	The Series MM and Series NN Notes (collectively, the “Notes”) were issued in June and July 2017, as described in Note E. The Notes bear interest at 4% and could be converted into shares of the Company’s common stock at a fixed conversion rate of $1.69 for the Series MM Notes and $2.29 for the Series NN Notes. On October 30, 2017, the Company extended the due dates of the Notes from December 22, 2017 to September 21, 20l8, and issued the note holders 583,057 of Series RR Warrants. The Series RR warrants expire on October 30, 2022 and are exercisable at a price of $1.65 per share, which was the closing price of the Company’s common stock on October 27, 2017. These Series RR warrants are classified as equity warrants and are recorded at approximately $0.7 million, the fair value on the date of issuance. Because the Company was experiencing financial difficulties at the time of the modification and the creditors granted the Company a concession they would not have otherwise considered in the form of a lower effective interest rate, this modification was accounted for under ASC 470-60, “Troubled Debt Restructuring.” The Company calculated the future cash flows of the restructured debt to be greater than the carrying value of the debt and accounted for the change in debt prospectively, using the effective interest rate that equated the carrying amount to the future cash flows. The carrying value of the debt on the date of restructuring was approximately $0.7 million, which was net of a discount of approximately $1.6 million. The discount is being amortized to interest expense over the life of the Notes using the effective interest method. On June 11, 2018, all outstanding Series MM and Series NN notes were converted into common stock in accordance with the original agreements resulting in notes in the principal amount of $1,860,000 being converted into 937,804 shares of common stock. As an inducement to convert, the Company issued the note holders 187,562 Series UU warrants The Series UU warrants are exercisable at a fixed price of $2.80 per share, are exercisable on December 11, 2018 and expire on June 11, 2020. Shares issuable upon the exercise of the warrants are restricted securities unless registered. The Company recognized an expense equal to the fair value of the consideration transferred in the transaction in excess of the fair value of consideration issuable under the original conversion terms. This expense represents the fair value of the Series UU warrants, which was calculated to be approximately $291,000 and is included as interest expense on the statement of operations. During the nine months ended June 30, 2018 and including the inducement, note holders converted notes in the principal amount of $2,294,300, into 1,166,105 shares of common stock. During the three months ended June 30, 2018 and including the inducement, note holders converted notes in the principal amount of $2,110,000, into 1,077,981 shares of common stock. The unamortized debt discounts relating to the converted Notes were charged to interest expense. During the nine and three months ended June 30, 2018, the Company recorded approximately $2.0 and $1.0 million in interest expense, respectively, relating to the amortization of the debt discount. During the nine and three months ended June 30, 2017, the Company recorded approximately $21,000 in interest expense, relating to the amortization of the debt discount. On June 11, 2018, all note holders were given the option to receive the interest accrued on the Notes in cash or in shares converted at $2.80, the fair value of the shares on that date. Accrued interest in the amount of approximately $0.1 million was converted into 28,825 shares of common stock.

F. NOTES PAYABLE

9 Months Ended

Jun. 30, 2018

The Series MM and Series NN Notes (collectively, the “Notes”) were issued in June and July 2017, as described in Note E. The Notes bear interest at 4% and could be converted into shares of the Company’s common stock at a fixed conversion rate of $1.69 for the Series MM Notes and $2.29 for the Series NN Notes. On October 30, 2017, the Company extended the due dates of the Notes from December 22, 2017 to September 21, 20l8, and issued the note holders 583,057 of Series RR Warrants. The Series RR warrants expire on October 30, 2022 and are exercisable at a price of $1.65 per share, which was the closing price of the Company’s common stock on October 27, 2017. These Series RR warrants are classified as equity warrants and are recorded at approximately $0.7 million, the fair value on the date of issuance.

Because the Company was experiencing financial difficulties at the time of the modification and the creditors granted the Company a concession they would not have otherwise considered in the form of a lower effective interest rate, this modification was accounted for under ASC 470-60, “Troubled Debt Restructuring.” The Company calculated the future cash flows of the restructured debt to be greater than the carrying value of the debt and accounted for the change in debt prospectively, using the effective interest rate that equated the carrying amount to the future cash flows. The carrying value of the debt on the date of restructuring was approximately $0.7 million, which was net of a discount of approximately $1.6 million. The discount is being amortized to interest expense over the life of the Notes using the effective interest method.

On June 11, 2018, all outstanding Series MM and Series NN notes were converted into common stock in accordance with the original agreements resulting in notes in the principal amount of $1,860,000 being converted into 937,804 shares of common stock. As an inducement to convert, the Company issued the note holders 187,562 Series UU warrants The Series UU warrants are exercisable at a fixed price of $2.80 per share, are exercisable on December 11, 2018 and expire on June 11, 2020. Shares issuable upon the exercise of the warrants are restricted securities unless registered. The Company recognized an expense equal to the fair value of the consideration transferred in the transaction in excess of the fair value of consideration issuable under the original conversion terms. This expense represents the fair value of the Series UU warrants, which was calculated to be approximately $291,000 and is included as interest expense on the statement of operations.

During the nine months ended June 30, 2018 and including the inducement, note holders converted notes in the principal amount of $2,294,300, into 1,166,105 shares of common stock. During the three months ended June 30, 2018 and including the inducement, note holders converted notes in the principal amount of $2,110,000, into 1,077,981 shares of common stock. The unamortized debt discounts relating to the converted Notes were charged to interest expense.

During the nine and three months ended June 30, 2018, the Company recorded approximately $2.0 and $1.0 million in interest expense, respectively, relating to the amortization of the debt discount. During the nine and three months ended June 30, 2017, the Company recorded approximately $21,000 in interest expense, relating to the amortization of the debt discount.

On June 11, 2018, all note holders were given the option to receive the interest accrued on the Notes in cash or in shares converted at $2.80, the fair value of the shares on that date. Accrued interest in the amount of approximately $0.1 million was converted into 28,825 shares of common stock.