Note 6 - Long-Term Debt

9 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

Note 6 – Long-Term Debt

In September 2010, the Company entered into an agreement with BCA Mezzanine Fund LLP (“BCA”) to loan the Company $2,500,000 in the form of a Promissory Note (the “Note”).  The Note contains a number of affirmative and negative covenants which restrict our operations.  For the quarter ended December 31, 2013, the Company was not in compliance with four covenants related to maintaining agreed upon financial ratios for fixed charges, leverage and debt service as well as a requirement for earnings before interest, taxes, depreciation and amortization (EBITDA). On February 13, 2014 the Company received a waiver from BCA on each of the above mentioned covenants.  In consideration for this waiver for non-compliance of the financial covenants, the Company incurred an incremental fee of $10,000.

In consideration for the waiver for non-compliance of the financial covenants at September 30, 2013, on November 12, 2013, the Company incurred an incremental fee of $10,000.

In consideration for the waiver for non-compliance of the financial covenants at June 30, 2013, on August 12, 2013, BCA received warrants to purchase 20,000 shares of the Company’s common stock. The common stock underlying the warrants is exercisable at a price of $3.69 per share and the warrants expire on September 10, 2019. Determining the warrant value to be recorded requires us to develop estimates to be used in calculating the fair value of the warrant.  The fair value of the warrant is calculated using the Black-Scholes valuation model. The value of the warrant will be recorded as a debt discount of $21,587, and will be amortized over the remaining life of the loan.

In consideration for the waiver for non-compliance of the financial covenants at March 31, 2013, on July 12, 2013, BCA received warrants to purchase 20,000 shares of the Company’s common stock. The common stock underlying the warrants is exercisable at a price of $3.33 per share and the warrants expire on September 10, 2019. Determining the warrant value to be recorded requires us to develop estimates to be used in calculating the fair value of the warrant.  The fair value of the warrant is calculated using the Black-Scholes valuation model. The value of the warrant will be recorded as a debt discount of $19,523, and will be amortized over the remaining life of the loan.

On July 26, 2012, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a private investor (the “Private Investor”).  Pursuant to the terms of the Purchase Agreement, the Company issued (i) a senior secured promissory note (the “2012 Note”) in favor of the Private Investor in the aggregate principal amount of $600,000, approximately $489,000 net of expenses, accruing interest at a rate of 14% per annum and (ii) a common stock purchase warrant to purchase 50,000 shares of the Company’s common stock, par value $0.10 per share. The 2012 Note, together with all unpaid interest and principal was due on March 31, 2013.  The common stock underlying the warrant is exercisable at a price of $3.35 per share and the warrant expires on September 10, 2019. In conjunction with the Purchase Agreement the Company entered into an (i) Investor Rights Agreement, (ii) Securities Agreement, (iii) Intercreditor Agreement and (iv) Subordination Agreement. The Company reported the foregoing on its Current Report on Form 8-K filed with the SEC on August 3, 2012.

Effective May 31, 2013, the Private Investor converted the outstanding principal of $600,000, penalty of $25,000 and accrued interest for the month of May 2013 in the amount of $12,400 for a total of $637,400 into 200,000 shares of the Company’s common stock at a price of $3.187 per share. The fair value of these shares at the date of conversion was $3.32 per share. As such, the Company recorded a loss on the extinguishment of debt in the amount of $26,600 and this amount is included in the accompanying statement of operations for the nine months ended December 31, 2013. As further consideration to the Private Investor, the Company agreed that each time the Company issues any new shares of its common stock in the next two years (excluding the exercise of existing stock options and warrants currently outstanding), at a price lower than a purchase price of $3.187 per share, the Company will issue additional shares to the Private Investor, for no additional consideration, based on the differential between the $3.187 price and the price paid for the newly issued shares of common stock.