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5. CONVERTIBLE NOTES PAYABLE | 3 Months Ended
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Jun. 30, 2013
Convertible Notes Payable [Abstract] |
CONVERTIBLE NOTES PAYABLE | Convertible notes payable consist of the following at June 30, 2013:
|  | Principal |  |  | Unamortized Discount |  |  | Net Amount |  |  | Accrued Interest |
Amended and Restated Series A 12% Convertible Notes, past due |  | $ | 885,000 |  |  | $ | – |  |  | $ | 885,000 |  |  | $ | 442,500 |
December 2006 10% Convertible Notes, past due |  |  | 17,000 |  |  |  | – |  |  |  | 17,000 |  |  |  | 16,525 |
2008 10% Convertible Notes, past due |  |  | 25,000 |  |  |  | – |  |  |  | 25,000 |  |  |  | 16,354 |
October & November 2009 10% Convertible Notes, past due |  |  | 50,000 |  |  |  | – |  |  |  | 50,000 |  |  |  | 21,722 |
April 2010 10% Convertible Note |  |  | 75,000 |  |  |  | (2,251 | ) |  |  | 72,749 |  |  |  | 25,823 |
September 2010 10% Convertible Notes, past due |  |  | 308,100 |  |  |  | – |  |  |  | 308,100 |  |  |  | 63,946 |
April 2011 10% Convertible Notes, past due |  |  | 400,400 |  |  |  | – |  |  |  | 400,400 |  |  |  | 115,115 |
July and August 2011 10% Convertible Notes, $257,656 past due |  |  | 357,655 |  |  |  | – |  |  |  | 357,655 |  |  |  | 80,867 |
September 2011 Convertible Notes, past due |  |  | 22,260 |  |  |  | – |  |  |  | 22,260 |  |  |  | – |
Law Firm Note Number 1 |  |  | 75,000 |  |  |  | – |  |  |  | 75,000 |  |  |  | 4,792 |
Law Firm Note Number 2 |  |  | 47,000 |  |  |  | – |  |  |  | 47,000 |  |  |  | 170 |
Total – Convertible Notes |  | $ | 2,262,415 |  |  | $ | (2,251 | ) |  | $ | 2,260,164 |  |  | $ | 787,814 |
All of the convertible notes payable in the above table are presently past due or will be due within one year of the June 30, 2013 balance sheet date. As a result, we expect to amortize all of the remaining discounts during the fiscal year ending March 31, 2014. During the three months ended June 30, 2013, we recorded interest expense of $89,260 related to the contractual interest rates of our convertible notes and interest expense of $2,033 related to the amortization of debt discounts on the convertible notes for a total of $91,293. Convertible notes payable consisted of the following at March 31, 2013:
|  | Principal |  |  | Unamortized Discount |  |  | Net Amount |  |  | Accrued Interest |
Amended and Restated Series A 12% Convertible Notes, past due |  | $ | 885,000 |  |  | $ | – |  |  | $ | 885,000 |  |  | $ | 398,250 |
2008 10% Convertible Notes, past due |  |  | 25,000 |  |  |  | – |  |  |  | 25,000 |  |  |  | 15,417 |
December 2006 10% Convertible Notes, past due |  |  | 17,000 |  |  |  | – |  |  |  | 17,000 |  |  |  | 15,888 |
October & November 2009 10% Convertible Notes |  |  | 50,000 |  |  |  | (389 | ) |  |  | 49,611 |  |  |  | 20,000 |
April 2010 10% Convertible Note |  |  | 75,000 |  |  |  | (3,895 | ) |  |  | 71,105 |  |  |  | 23,938 |
September 2010 10% Convertible Notes, past due |  |  | 308,100 |  |  |  | – |  |  |  | 308,100 |  |  |  | 52,393 |
April 2011 10% Convertible Notes, past due |  |  | 400,400 |  |  |  | – |  |  |  | 400,400 |  |  |  | 100,100 |
July and August 2011 10% Convertible Notes, $257,656 past due |  |  | 357,655 |  |  |  | – |  |  |  | 357,655 |  |  |  | 68,704 |
September 2011 Convertible Notes, past due |  |  | 178,760 |  |  |  | – |  |  |  | 178,760 |  |  |  | – |
Law Firm Note |  |  | 75,000 |  |  |  | – |  |  |  | 75,000 |  |  |  | 3,854 |
Total – Convertible Notes |  | $ | 2,371,915 |  |  | $ | (4,284 | ) |  | $ | 2,367,631 |  |  | $ | 698,544 |
AMENDED AND RESTATED SERIES A 12% CONVERTIBLE NOTES In June 2010, we entered into Amended and Restated 12% Series A Convertible Promissory Notes (the "Amended and Restated Notes") with the holders of certain promissory notes previously issued by the Company (“Amended Series A 10% Convertible Notes” or the "Prior Notes"), and all amendments to the Prior Notes. The Amended and Restated Notes, in the principal amount of $900,000 matured on December 31, 2010. In connection with the restructuring we paid $54,001 of accrued and default interest through the date of the restructuring, liquidated damages of $205,000 and $54,003 of prepaid interest through the expiration date in the aggregate amount of $313,004 through the issuance of units ("Units") at a fixed rate of $0.20 per Unit, each Unit consisting of one share of our common stock and one common stock purchase warrant to purchase one share of our common stock at a fixed exercise price of $0.20 per share as prescribed in the Amended and Restated Note Agreement. The noteholders have antidilution price protection on the Amended and Restated Notes. In addition to the extension of the expiration date of the Amended and Restated Notes to December 31, 2010, we agreed to increase the annual interest rate from ten percent to twelve percent. We also agreed to change the exercise prices on all of the warrants held by the noteholders to $0.20 per share, to change certain formerly contingent warrants to non-contingent warrants and to extend the expiration date of their warrants to February 2016. As of December 31, 2010, the Amended and Restated Notes matured and as of March 31, 2013 remain in default. We are accruing interest at the revised default rate of 20% following the expiration date of December 31, 2010. During the fiscal year ended March 31, 2013, the holders of $15,000 of the Amended and Restated Notes converted their principal and related accrued interest into common stock per the conversion formula. We have begun discussions with the noteholders regarding an extension to the notes but there can be no assurance that we will be able to do so on terms that we deem acceptable or at all. We are recording interest at the default rate of 20%. DECEMBER 2006 10% CONVERTIBLE NOTES At June 30, 2013, one note representing $17,000 of the December 2006 10% Notes remained outstanding and in default. This note is convertible into our common stock at $0.17 per share. We are recording interest at the default rate of 15%. 2008 10% CONVERTIBLE NOTES One 2008 10% Convertible Note in the amount of $25,000 which matured in January 2010 remained outstanding at June 30, 2013. This note is convertible into our common stock at $0.50 per share. We are recording interest at the default rate of 15%. OCTOBER & NOVEMBER 2009 10% CONVERTIBLE NOTES In October and November 2009, we raised $430,000 from the sale to accredited investors of 10% convertible notes ("October & November 2009 10% Convertible Notes"). The October & November 2009 10% Convertible Notes matured at various dates between April 2011 and May 2011 and are convertible into our common stock at a fixed conversion price of $0.25 per share prior to maturity. The investors also received matching three year warrants to purchase unregistered shares of our common stock at a price of $0.25 per share. We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a 100% discount against the principal of the notes. We are amortizing this discount using the effective interest method over the term of the notes. Deferred financing costs of $20,250 incurred in connection with this financing were issued in the form of a convertible note with warrants on the same terms as those received by the investors. We capitalized the $20,250 of deferred financing costs and amortized them over the term of the notes using the effective interest method. Prior to March 31, 2012, $355,000 of the October and November 2009 financing had been converted to common stock. On March 31, 2012, we agreed to extend the expiration date and to change the exercise price of certain warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October & November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. We recorded a charge of $77,265 relating to this modification. In July 2012, we issued 461,409 shares of common stock to the holder of the $25,000 note in exchange for the value of the principal and related accrued interest of $8,000 under the same terms that we used to sell units consisting of one share of common stock and one-half of a stock purchase warrant on June 29, 2012 (see Note 6). The 461,409 share issuance was priced based on 80% of the trailing five day average before issuance to be consistent with the equity unit structure. As part of that structure, the noteholder also received seven year warrants to purchase 230,705 share of common stock at a price of $0.107 per share. The $16,149 value of the warrant was calculated using the binomial lattice valuation methodology. We recorded a loss on conversion of $45,796 on the conversions in the quarter ended September 30, 2012. We are recording interest at the default rate of 15%. APRIL 2010 10% CONVERTIBLE NOTE In April 2010, we raised $75,000 from the sale to an accredited investor of a 10% convertible note. The convertible note matured in October 2011 and is convertible into our common stock at a fixed conversion price of $0.25 per share prior to maturity. The investor also received three year warrants to purchase 300,000 unregistered shares of our common stock at a price of $0.25 per share. We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a 100% discount against the principal of the notes. We amortized this discount using the effective interest method over the term of the note. On March 31, 2012, we agreed to extend the expiration date and to change the exercise price of certain warrants of the note holder by two years in exchange for his extension of $50,000 of the October & November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note by that same two year period. We recorded a charge of $77,265 relating to this modification in the quarter ended March 31, 2012. SEPTEMBER 2010 10% CONVERTIBLE NOTES On September 3, 2010, we entered into a Subscription Agreement with three accredited investors (the “Purchasers”) providing for the issuance and sale of convertible promissory notes and corresponding warrants in the aggregate principal amount of $1,430,000. The initial closing under the Subscription Agreement resulted in the issuance and sale of (i) convertible promissory notes in the aggregate principal amount of $743,600, (ii) five-year warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.31125 per share, and (iii) five-year warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.43575 per share. The convertible promissory notes bear interest compounded monthly at the annual rate of ten percent (10%) and matured on September 3, 2011. The aggregate gross cash proceeds were $650,000, the balance of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten (10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion price may not be more than $0.30 nor less than $0.20. There are no registration requirements with respect to the shares of common stock underlying the notes or the warrants. There were no conversions on the September 2010 10% Convertible Notes during the three months ended June 30, 2013. We are recording interest at the default rate of 15%. APRIL 2011 10% CONVERTIBLE NOTES In April 2011, we entered into a Subscription Agreement with two accredited investors (the “Purchasers”) providing for the issuance and sale of convertible promissory notes and corresponding warrants in the aggregate principal amount of $385,000. The closing under the Subscription Agreement resulted in the issuance and sale by us of (i) convertible promissory notes in the aggregate principal amount of $385,000, (ii) five-year warrants to purchase an aggregate of 4,004,000 shares of our common stock at an exercise price of $0.125 per share, and (iii) five-year warrants to purchase an aggregate of 4,004,000 shares of our common stock at an exercise price of $0.175 per share. The convertible promissory notes bear interest compounded monthly at the annual rate of ten percent (10%) and matured on April 1, 2012. The aggregate gross cash proceeds to us were $350,000, the balance of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten (10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion price may not be more than $0.20 nor less than $0.10. There are no registration requirements with respect to the shares of common stock underlying the notes or the warrants. In addition, we issued (i) five-year warrants to purchase an aggregate of 812,500 shares of our common stock at an exercise price of $0.125 per share, and (ii) five-year warrants to purchase an aggregate of 812,500 shares of our common stock at an exercise price of $0.175 per share to the Purchasers. These warrants were issued as an antidilution adjustment under certain common stock purchase warrants held by the Purchasers that were acquired from us in September 2010. We are recording interest at the default rate of 15%. JULY & AUGUST 2011 10% CONVERTIBLE NOTES During the three months ended September 30, 2011, we raised $357,656 in 10% convertible notes. Those notes had a fixed conversion price of $0.09 per share and carried an interest rate of 10%. The convertible notes matured in July and August 2012. We also issued those investors five year warrants to purchase 3,973,957 shares of common stock at $0.125 per share. We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a $257,926 discount against the principal of the notes. We amortized this discount using the effective interest method over the term of the note. Effective July 14, 2012, holders of three notes totaling $100,000 agreed to extend the expiration date of their notes to July 13, 2013. Subsequent to June 30, 2013, the holders of the three notes agreed to extend their notes to July 16, 2014. At June 30, 2013, the outstanding principal balance was $357,655, of which $257,655 was in default. Following the expiration of the maturity dates on the $257,655 of notes that are now in default, we began to accrue interest at the default interest rate of 15%. SEPTEMBER 2011 CONVERTIBLE NOTES On September 23, 2011, we entered into a Subscription Agreement with two accredited investors (the “Purchasers”) providing for the issuance and sale of convertible promissory notes and corresponding warrants in the aggregate principal amount of $253,760. The warrants carried a five-year term to purchase an aggregate of 3,625,143 shares of our common stock at an exercise price of $0.10 per share. The convertible promissory notes do not bear an interest rate and mature on September 23, 2012. The aggregate net cash proceeds to us were $175,000, the balance of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares of our common stock at a price per share equal to $0.07. Subject to adjustments as described in the notes, the conversion price may not be more than $0.07. There are no registration requirements with respect to the shares of common stock underlying the notes or the warrants. We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a $168,804 discount against the principal of the notes. We amortized this discount using the effective interest method over the term of the note. The following conversions of the September 2011 Convertible Notes have taken place during the fiscal years ended March 31, 2013 and 2012:
|  | Fiscal Year Ended March 31, 2013 |  |  | Fiscal Year Ended March 31, 2012 |
Principal converted |  | $ | 60,000 |  |  | $ | 15,000 |
During the three months ended June 30, 2013, $156,500 of the September 2011 Convertible Notes were converted into our common stock per the conversion formulae in the notes. At June 30, 2013, the outstanding principal balance was in default and there was no accrued interest as these notes do not bear interest. LAW FIRM NOTE NUMBER 1 On March 22, 2012, we entered into a Promissory Note with our corporate law firm for the amount of $75,000, which represented the majority of the amount we owed to that firm. The Promissory Note originally had a maturity date of December 31, 2012 and bears interest at five percent per annum. The note is convertible at the option of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date prior to conversion with a floor price on such conversions of $0.08 per share. This ability of the holder to convert became exercisable upon the amendment of the Articles of Incorporation increasing the authorized shares of our common stock to a number greater than 250,000,000. As that increase in the authorized number of shares of our common stock was approved by our stockholders at a Special Stockholders Meeting on June 4, 2012, this note was reclassified to a convertible note as of June 30, 2012. During the quarter ended June 30, 2013, the parties agreed to extend the Maturity Date of the Note to October 1, 2013. LAW FIRM NOTE NUMBER 2 On June 4, 2013, we entered into a Promissory Note with our corporate law firm for the amount of $47,000, which represented approximately 50% of the amount we owed to that firm for services in 2012. The Promissory Note has a maturity date of October 1, 2014 and bears interest at five percent per annum. The note is convertible at the option of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date prior to conversion with a floor price on such conversions of $0.07 per share.

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 22 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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