Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE DEBT AND EQUITY FINANCINGS (Details Textual)

v2.4.0.8
CONVERTIBLE DEBT AND EQUITY FINANCINGS (Details Textual) (USD $)
 3 Months Ended 9 Months Ended 1 Months Ended 1 Months Ended 9 Months Ended 4 Months Ended 12 Months Ended 3 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 3 Months Ended 12 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 9 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 9 Months Ended 6 Months Ended 9 Months Ended 9 Months Ended 1 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 9 Months Ended
Dec. 31, 2012
Jun. 30, 2013
Jun. 30, 2012
Nov. 30, 2010
October Purchase Agreement [Member]
Nov. 03, 2010
October Purchase Agreement [Member]
Nov. 30, 2010
October 2010 Note [Member]
Jun. 30, 2013
October 2010 Note [Member]
Sep. 26, 2010
October 2010 Note [Member]
Apr. 30, 2011
January 2011 Notes [Member]
Sep. 30, 2011
January 2011 Notes [Member]
Jun. 30, 2013
January 2011 Notes [Member]
Nov. 23, 2010
January 2011 Notes [Member]
Jan. 31, 2012
October 2011 Note [Member]
Jun. 30, 2013
October 2011 Note [Member]
Sep. 30, 2011
October 2011 Note [Member]
Feb. 29, 2012
Unsecured Bridge Notes [Member]
Jun. 30, 2013
Unsecured Bridge Notes [Member]
Jun. 30, 2013
August 2012 Bridge Note [Member]
Jun. 30, 2013
October 2012 Bridge Notes [Member]
Oct. 31, 2011
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Dec. 31, 2010
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Jun. 03, 2010
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Oct. 31, 2010
John Pappajohn [Member]
October Purchase Agreement [Member]
Oct. 31, 2010
John Pappajohn [Member]
October 2010 Note [Member]
Nov. 17, 2011
John Pappajohn [Member]
October 2011 Note [Member]
Oct. 31, 2011
John Pappajohn [Member]
October 2011 Note [Member]
Oct. 18, 2011
John Pappajohn [Member]
October 2011 Note [Member]
Oct. 31, 2010
John Pappajohn [Member]
October 2010 One [Member]
Nov. 30, 2012
John Pappajohn [Member]
Amended and Restated Bridge Financing Purchase Agreement [Member]
Nov. 28, 2012
John Pappajohn [Member]
Amended and Restated Bridge Financing Purchase Agreement [Member]
Aug. 31, 2010
Sail Venture Partners L P [Member]
Jun. 30, 2013
Sail Venture Partners L P [Member]
Sep. 30, 2010
Sail Venture Partners L P [Member]
Aug. 20, 2010
Sail Venture Partners L P [Member]
Jun. 30, 2013
Sail Venture Partners L P [Member]
October 2010 Note [Member]
Sep. 30, 2010
Sail Venture Partners L P [Member]
Warrants Cancellation [Member]
Jun. 30, 2013
Sail Venture Partners L P [Member]
January 2011 Notes [Member]
Nov. 30, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 Note [Member]
Nov. 30, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 One [Member]
Nov. 03, 2010
Bgn Acquisition Ltd Lp [Member]
October 2010 One [Member]
Jun. 30, 2013
Mr. Andy Sassine [Member]
November 2012 Notes [Member]
Jun. 30, 2013
Monarch Capital Group Llc [Member]
Dec. 31, 2010
Monarch Capital Group Llc [Member]
Minimum [Member]
Dec. 31, 2010
Monarch Capital Group Llc [Member]
Maximum [Member]
Dec. 31, 2010
Monarch Capital Group Llc [Member]
October 2010 Note [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
October 2010 Note [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
January 2011 Notes [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
October 2011 Note [Member]
Sep. 30, 2010
Monarch Capital Group Llc [Member]
January 2011 Notes One [Member]
Jun. 30, 2013
Antaeus Capital Inc [Member]
Minimum [Member]
Jun. 30, 2013
Antaeus Capital Inc [Member]
Maximum [Member]
Sep. 30, 2011
Antaeus Capital Inc [Member]
January 2011 Notes [Member]
Jun. 30, 2013
Zanett Opportunity Fund, Ltd [Member]
October 2011 Note [Member]
Sep. 30, 2012
Zanett Opportunity Fund, Ltd [Member]
Unsecured Bridge Notes [Member]
Sep. 30, 2012
Alphanorth Offshore Inc [Member]
October 2011 Note [Member]
Jun. 30, 2013
Innerkip Capital Management Inc [Member]
October 2011 Note [Member]
Jun. 30, 2013
Innerkip Capital Management Inc [Member]
October 2011 Note [Member]
Minimum [Member]
Jun. 30, 2013
Innerkip Capital Management Inc [Member]
October 2011 Note [Member]
Maximum [Member]
Jun. 30, 2013
Mark and Jill Oman [Member]
Jun. 30, 2013
Mr. Larry Hopfenspirger [Member]
October 2011 Note [Member]
Jun. 30, 2013
Tierney Family Trust [Member]
Jun. 30, 2013
The Follman Trust [Member]
Nov. 30, 2012
October 2012 Notes [Member]
Mar. 26, 2013
October 2012 Notes [Member]
Dec. 10, 2012
October 2012 Notes [Member]
Jan. 14, 2013
October 2012 Notes [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Oct. 26, 2012
October 2012 Notes [Member]
Sep. 30, 2012
October 2012 Notes [Member]
Mar. 26, 2013
October 2012 Notes [Member]
Minimum [Member]
Dec. 10, 2012
October 2012 Notes [Member]
Minimum [Member]
Jan. 14, 2013
October 2012 Notes [Member]
Minimum [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Minimum [Member]
Mar. 26, 2013
October 2012 Notes [Member]
Maximum [Member]
Dec. 10, 2012
October 2012 Notes [Member]
Maximum [Member]
Jan. 14, 2013
October 2012 Notes [Member]
Maximum [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Maximum [Member]
Jun. 30, 2013
October 2012 Notes [Member]
John Pappajohn [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Sail Venture Partners L P [Member]
Sep. 30, 2010
October 2012 Notes [Member]
Monarch Capital Group Llc [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Alphanorth Offshore Inc [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Innerkip Capital Management Inc [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Extuple Limited Partnership [Member]
Oct. 25, 2012
October 2012 Notes [Member]
Extuple Limited Partnership [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Mr. Tony Pullen [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Mark and Jill Oman [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Ronald Dozoretz [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Mr. Larry Hopfenspirger [Member]
Nov. 28, 2012
October 2012 Notes [Member]
Mr. Larry Hopfenspirger [Member]
Mar. 31, 2013
October 2012 Notes [Member]
Carpenter [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Carpenter [Member]
Nov. 28, 2012
October 2012 Notes [Member]
Carpenter [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Carpenter [Member]
Amended and Restated Bridge Financing Purchase Agreement [Member]
Jun. 30, 2013
October 2012 Notes [Member]
John Pappajohn One [Member]
Jun. 30, 2013
October 2012 Notes [Member]
John Pappajohn Two [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Tierney Family Trust [Member]
Jun. 30, 2013
October 2012 Notes [Member]
Alphanorth Off shore, Inc1 [Member]
Jun. 30, 2013
October 2012 Notes [Member]
The Follman Trust [Member]
Jun. 30, 2012
Bridge Financing 2012 [Member]
October 2011 Note [Member]
Sep. 30, 2012
Bridge Financing 2012 [Member]
October 2011 Note [Member]
Jun. 30, 2013
Bridge Financing 2012 [Member]
Amendment and Conversion Agreement [Member]
Sep. 30, 2012
Bridge Financing 2012 [Member]
Amendment and Conversion Agreement [Member]
Jun. 30, 2012
Bridge Financing 2012 [Member]
Amendment and Conversion Agreement [Member]
Sep. 30, 2012
October 2010 Notes and January 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Jun. 30, 2013
Unsecured Convertible Notes Payable [Member]
Sep. 30, 2012
Unsecured Convertible Notes Payable [Member]
Feb. 23, 2011
Unsecured Convertible Notes Payable [Member]
Mr. Andy Sassine [Member]
Nov. 30, 2012
Bridge Loan [Member]
Sep. 30, 2010
Bridge Note One [Member]
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Sep. 30, 2010
Bridge Note Two [Member]
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Jun. 30, 2013
October 2011 Notes [Member]
Sep. 30, 2011
October 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Minimum [Member]
Sep. 30, 2011
October 2011 Notes [Member]
Amendment and Conversion Agreement [Member]
Maximum [Member]
Sep. 30, 2011
October 2011 Notes [Member]
John Pappajohn [Member]
Sep. 30, 2011
October 2011 Notes [Member]
John Pappajohn [Member]
Minimum [Member]
Sep. 30, 2011
October 2011 Notes [Member]
John Pappajohn [Member]
Maximum [Member]
Jun. 30, 2012
Bridge 2011 Financing [Member]
Jun. 30, 2012
Bridge 2011 Financing [Member]
October 2011 Note [Member]
Sep. 30, 2012
Bridge 2011 Financing [Member]
October 2011 Note [Member]
Jun. 30, 2013
Bridge 2011 Financing [Member]
Amendment and Conversion Agreement [Member]
Dec. 31, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Nov. 30, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Dec. 31, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Dec. 27, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Nov. 10, 2011
Bridge 2011 Financing [Member]
John Pappajohn [Member]
Sep. 30, 2012
Bridge Notes 2011 [Member]
Zanett Opportunity Fund, Ltd [Member]
Aug. 20, 2010
Deerwood Note [Member]
Aug. 20, 2010
Deerwood Note [Member]
Minimum [Member]
Aug. 20, 2010
Deerwood Note [Member]
Maximum [Member]
Sep. 30, 2010
Deerwood Note [Member]
Deerwood Holdings Llc and Deerwood Partners Llc [Member]
Sep. 30, 2010
Deerwood Note One [Member]
Deerwood Holdings Llc and Deerwood Partners Llc [Member]
Sep. 30, 2010
Deerwood Note Two [Member]
Deerwood Holdings Llc and Deerwood Partners Llc [Member]
Jun. 30, 2013
January 2011 Note [Member]
Sep. 30, 2012
August 2012 Bridge Notes [Member]
Sep. 30, 2012
August 2012 Bridge Notes [Member]
Jun. 30, 2013
Secured Convertible Senior Notes Payable [Member]
Meyer Proler [Member]
Jun. 30, 2013
Six January 2011 Notes [Member]
Sep. 30, 2010
Bridge Note [Member]
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Minimum [Member]
Sep. 30, 2010
Bridge Note [Member]
John Pappajohn [Member]
Bridge Note and Warrant Purchase Agreement [Member]
Maximum [Member]
Secured Debt, Current               $ 3,000,000                                                                                                                                                                                                                                                                      
Debt Instrument, Face Amount   6,523,900     762,200 3,023,900     2,500,000 5,000,000     2,000,000         400,000       500,000 761,700 250,000       511,700   500,000                   512,200           100,000 550,000 160,000 200,000       250,000 90,000 500,000 650,000       90,000     1,600,000       2,000,000   1,998,100                 500,000   60,000 100,000 350,000 200,000 200,000   250,000 100,000 60,000 150,000     50,000       200,000     1,860,000 2,000,000 2,000,000       3,500,000 [1],[2]     2,000,000 250,000 250,000       2,000,000         2,000,000         250,000 250,000 40,000       500,000 250,000 250,000   400,000 400,000        
Warrants To Purchase Common Stock   67,170   92,895   520,666     446,675       687,174     30,000       83,334 8,334   126,949 41,667       85,282     3,334   34,152     3,334   41,667 51,228     152,000     16,668   18,334 5,334 6,667     5,000 83,334 30,000 166,667 15,167       30,000                                       127,173 148,368 519,288     296,735                                                 8,334                     83,334 83,334 166,668     13,334           2,500              
Convertible Subordinated Debt, Current                       5,000,000     2,000,000 90,000       250,000                                                                 250,000                                                                                                                                                                            
Exercise Price Of Warrants                               $ 3.00                                   $ 16.80                     $ 3.00   $ 3.00 $ 3.00 $ 3.00     $ 3.00       $ 3.00                                               $ 0.04718 $ 0.04718 $ 0.04718     $ 0.04718                             $ 3.00                   $ 15.00               $ 9.00 $ 3.00                         $ 16.80              
Long-term Debt, Gross                                       2,000,000   500,000                                                                                                                                                         2,000,000                                                                                
Debt Conversion, Converted Instrument, Amount                                                         200,000                                                   500,000                                                       50,000                   50,000           50,000                                                                                
Debt Conversion, Converted Instrument, Shares Issued   41,873,745                                                           5,631,699                 550,021                                                   40,403,929                       303,313   858,415   1,121,237     5,500,212 2,223,929 1,287,303   1,091,299 1,091,299     4,300,551 6,538,258 4,403,349 1,352,181 4,491,310                                                                         40,000 1,121,238 1,469,816    
Debt Instrument, Interest Rate, Stated Percentage                                                                                                                                                                                                       9.00%                   9.00%               9.00%   9.00%             9.00%                        
Proceeds From Notes Payable   1,368,300 2,195,300                                 250,000       250,000   250,000     300,000                 250,000                               90,000                                                                                         3,000,000 10,000,000 250,000     3,000,000                           3,000,000 10,000,000   250,000 250,000 500,000     40,000         250,000 250,000              
Percentage Of Shares Issuable Upon Conversion Of Warrants                   50.00%                             100.00%                                         10.00% 110.00%         10.00%       7.00%                                                                                     50.00% 100.00%       100.00%                   50.00% 50.00% 100.00% 50.00%                                            
Beneficial Ownership Percentage                                                                                                                     5.00%   5.00% 5.00%                                     4.999%   5.00%                                                                                                                
Percentage Of Cash Fee                                                                                           10.00%           10.00%       7.00%                                                                                                                                                                      
Cash Expense Allowance Percentage                                                                                           2.00%                                                                                                                                                                                          
Amount Of Cash Fee                                                                                         60,000   55,000 16,000 20,000     15,000       45,500                                               6,000   24,500                                                                                                                  
Cash Expense Allowance Amount                                                                                         10,000   11,000 3,200 4,000                                                             1,200                                                                                                                      
Gains (Losses) on Extinguishment of Debt 556,300 [3],[4],[5],[6] 556,300                                                                                                                                                                                                                                                                                  
Beneficial Conversion Discount                                                                                                                             2,000,000                                                                                                                                             2,000,000          
Amortization of discount on bridge notes issued   661,000 2,991,900                     277,100     15,000 661,000 368,900                                                                                                                                                                                                                                                
Debt Instrument, Unamortized Discount   1,300         0       0     0     0   1,300                                                                                                                                                                           0 [1],[2]                                                                    
Debt Instrument, Convertible, Conversion Price                                                                     $ 1.00   $ 1.00       $ 0.04718   $ 1.00 $ 3.00           $ 1.00 $ 3.00           $ 1.00 $ 3.00                 $ 0.04718                       $ 0.04718   $ 0.04718   $ 0.04718     $ 0.04718 $ 0.04718 $ 0.04718   $ 0.04718 $ 0.04718     $ 0.04718 $ 0.04718 $ 0.04718 $ 0.04718 $ 0.04718   $ 3.00 $ 0.04718   $ 1.00                 $ 3.00 $ 9.00         $ 9.00                   $ 9.00 $ 15.00             $ 0.04718 $ 1.00 $ 9.00 $ 15.00
Debt Conversion, Original Debt, Amount   3,088,100                                                           1,440,000     250,000   1,000,000       25,000                                                   1,838,100                       190,000   39,100   50,000     250,000 100,000 60,000   50,000 50,000     200,000 300,000 200,000 60,900 200,000     1,350,000 1,350,000                                                                 1,900 50,000 1,000,000    
Payment Of Finders Fee                                                                                                                                                                 7,000       14,000                                                                                                            
Increase (Decrease) in Notes Payable, Current             23,900                                                                                                                                                                                                                                                                        
Debt Instrument No Mandatory Conversion Requirement Public Offering Value                                                                                                                                                                                                     3,000,000                                                                                
Debt Instrument Mandatory Conversion Requirement Public Offering Value                                                                                                                                                                                                     5,000,000                                                                                
Proceeds from Issuance of Debt                                                                                                                                                                                                         20,000                                                                            
Notes Payable, Related Parties   6,522,600         2,773,900       150,000           90,000   160,000       250,000       250,000                                                                           2,000,000   2,000,000 90,000                                                                         3,500,000 4,083,300 200,000       2,000,000                                           1,500,000            
Common Stock Value Untraded                                                                                                                               $ 283,400 $ 15,000 $ 36,700 $ 13,800                                                                                                                                                
Common Stock Value Price Per Share                                                                                                                                           $ 0.46 $ 0.76 $ 0.49 $ 0.76 $ 0.83 $ 0.83 $ 2.50 $ 0.83                                                                                                                            
Debt Instrument, Convertible, Latest Date                                                               Jan. 31, 2013                                                                                                 Mar. 28, 2013   Jun. 14, 2013     Apr. 30, 2013   Jan. 18, 2013     Mar. 27, 2013     Jan. 25, 2013 Mar. 21, 2013   May 16, 2013 Jun. 14, 2013                                                                                  
Warrants Expiration Period                                                                                             5 years 5 years                                                               5 years                                                                                                                      
[1] The October 2011 Bridge Notes: The 2011 Bridge Financing Purchase Agreement provides for the issuance and sale of October 2011 Notes (including the notes issued in October 2011) in the aggregate principal amount of up to $2,000,000, and warrants to purchase a number of shares corresponding to 100% of the number of shares issuable on conversion of the Bridge Notes, in one or multiple closings to occur no later than April 1, 2012. The 2011 Bridge Financing Purchase Agreement also provides that the Company and the holders of the October 2011 Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the October 2011 Notes and the related warrants.Initially, the October 2011 Notes were to mature one year from the date of issuance (subject to earlier conversion or prepayment), earn interest equal to 9% per year with interest payable at maturity, be convertible into shares of common stock of the Company at a conversion price of $3.00, be secured by a second position security interest in the Company’s assets that is pari passu with the interest recently granted to the holders of the January 2011 Notes, be subordinated in all respects to the Company’s obligations under its October 2010 Notes and the related guaranties issued to certain investors by SAIL Venture Partners, L.P. be are pari passu to the obligations under the January 2011 Notes. The second position security interest is governed by the Amended and Restated Security Agreement.The conversion price of the October 2011 Notes was subject to adjustment upon (1) the subdivision or combination of, or stock dividends paid on, the common stock; (2) the issuance of cash dividends and distributions on the common stock; (3) the distribution of other capital stock, indebtedness or other non-cash assets; and (4) the completion of a financing at a price below the conversion price then in effect. At the closing of a public offering by the Company of shares of its common stock and/or other securities with gross proceeds to the Company of at least $10 million (the “Qualified Offering”), each 2011 Bridge Note would be either redeemed or converted (in whole or in part) at a conversion price equal to the lesser of the public offering price or the conversion price then in effect, with the choice between redemption and conversion being at the sole option of the holder. The October 2011 Notes can be declared due and payable upon an event of default, defined in the October 2011 Notes to occur, among other things, if the Company fails to pay principal and interest when due, in the case of voluntary or involuntary bankruptcy or if the Company fails to perform any covenant or agreement as required by the 2011 Bridge Note or materially breaches any representation or warranty in the 2011 Bridge Note or the 2011 Bridge Financing Purchase Agreement.The warrants related to the October 2011 Notes were to expire five years from the date of issuance and were exercisable for shares of common stock of the Company at an exercise price of $3.00. Exercise price and number of shares issuable upon exercise were subject to adjustment (1) upon the subdivision or combination of, or stock dividends paid on, the common stock; (2) in case of any reclassification, capital reorganization or change in capital stock and (3) upon the completion of a financing at a price below the exercise price then in effect (including the Qualified Offering), except that subsequent to the Qualified Offering, the exercise price would not be adjusted for any further financings. The warrants contained a cashless exercise provision.With the exception of each holder’s option to redeem or convert their 2011 Bridge Note at the closing of the Qualified Offering, any provision of the October 2011 Notes or related warrants can be amended, waived or modified upon the written consent of the Company and holders of a majority of the aggregate principal amount of such notes outstanding. Any such majority consent will affect all October 2011 Notes or warrants, as the case may be, and will be binding on the Company and all holders of the October 2011 Notes or warrants. Each holder’s option to redeem or convert the 2011 Bridge Note at the closing of the Qualified Offering cannot be amended, waived or modified without the written consent of the Company and such holder and such amendment, waiver or modification will be binding only on the Company and such holder.The Amended and Restated Security Agreement and the corresponding security interest terminate (1) with respect to the October 2010 Notes, if and when holders of a majority of the aggregate principal amount of October 2010 Notes issued have converted their notes into shares of common stock and (2) with respect to the January 2011 Notes and 2011 Bridge Notes, if and when holders of a majority of the aggregate principal amount of January 2011 Notes and October 2011 Notes (on a combined basis) have converted their notes.On June 1, 2012, the Company, having received on or prior to such date the consent of holders of October 2011 Notes in the aggregate principal amount of $1,860,000 (out of a total outstanding aggregate principal amount of $2,000,000), amended such notes to add a mandatory conversion provision to the terms of such notes. Under that provision, the October 2011 Notes would be automatically converted upon the closing of a public offering by the Company of shares of its securities with gross proceeds to the Company of at least $3 million (except for October 2011 Notes in the aggregate amount of $50,000 which were not subject to the mandatory conversion requirement upon a $3 million public offering, but rather a $5 million public offering). If the public offering price were less than the conversion price then in effect, the conversion price would be adjusted to match the public offering price. Pursuant to the agreements amending the October 2011 Notes, the exercise price of the warrants that were issued in connection with the notes would be adjusted to match such public offering price, if such price were lower than the exercise price then in effect. The warrants were also amended to remove the full-ratchet provision from the warrants for securities offerings occurring after any such public offering. The Company agreed to issue to each holder of the October 2011 Notes who executed the agreements, as consideration for the above, warrants to purchase a number of shares of common stock corresponding to 50% of the number of shares issuable upon conversion of the principal amount and accrued and unpaid interest of his or her notes. These warrants would be issued on or within 10 business days after any public offering.
[2] The 2012 Bridge Notes: On August 17, 2012, the Company entered into a new Note Purchase Agreement (the “2012 Bridge Financing Purchase Agreement”) in connection with a bridge financing (the “2012 Bridge Financing”), with SAIL Holdings LLC. The 2012 Bridge Financing Purchase Agreement initially provided for the issuance and sale of August 2012 Bridge Notes in the aggregate principal amount of up to $2,000,000, in one or multiple closings to occur no later than October 15, 2012. The consummation of the 2012 Bridge Financing and issuance of the August 2012 Bridge Notes, and corresponding security interest, had to be approved by the Majority Holders of each tranche of our October 2010 Notes, January 2011 Notes, October 2011 Notes and the Unsecured Note. If the Company did not obtain such consent, the holders could declare a default under such notes and seek all remedies available under such notes.On October 19, 2012 the original 2012 Bridge Financing Purchase Agreement in connection with the 2012 Bridge Financing was amended and restated (the “Amended and Restated Bridge Financing Purchase Agreement”) thereby extending the period for closing the sale of August 2012 Bridge Notes from October 15, 2012 to November 30, 2012. Additionally, the revised notes (“October 2012 Notes”) eliminated the mandatory conversion provision (upon a subsequent equity financing) included in the August 2012 Bridge Notes at the request of a prospective investor. Otherwise the October 2012 Bridge Notes have substantially the same terms as the August 2012 Notes.The Amended and Restated Bridge Financing Purchase Agreement provided for the issuance and sale of Bridge Notes in the aggregate principal amount of up to $2,000,000, in one or multiple closings to occur no later than November 30, 2012. Additionally this amended and restated agreement also provided for the reissuance and replacement of five August 2012 Notes with the revised October 2012 Notes. The Amended and Restated Bridge Financing Purchase Agreement also provides that the Company and the holders of the Bridge Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the August 2012 Bridge Notes.The October 2012 Notes mature on the later of October 1, 2013 or one year from the date of issuance (subject to earlier conversion or prepayment), earn interest at a rate of 9% per year with interest payable at maturity, are convertible into shares of common stock of the Company at a conversion price of $0.04718 and are secured by a first position security interest in the Company’s assets, with the security interest of all previously outstanding convertible promissory notes subordinated. The conversion price is subject to adjustment upon (1) the subdivision or combination of, or stock dividends paid on, the common stock; (2) the issuance of cash dividends and distributions on the common stock; and (3) the distribution of other capital stock, indebtedness or other non-cash assets. The October 2012 Notes are convertible at any time at the option of their holders and can be declared due and payable upon an event of default, defined in the October 2012 Notes to occur, among other things, if the Company fails to pay principal and interest when due, in the case of voluntary or involuntary bankruptcy or if the Company fails to perform any covenant or agreement as required by the October 2012 Notes or materially breaches any representation or warranty in the October 2012 Notes or the Bridge Financing Purchase Agreement. Among the restrictive covenants imposed on the Company pursuant to the Bridge Financing Purchase Agreement is a covenant not to borrow, guaranty or otherwise incur indebtedness that is senior or pari passu with the October 2012 Bridge Notes in excess of $250,000, and a covenant not to effect a merger, reorganization, or sell, exclusively license or lease, or otherwise dispose of any assets of the Company with a value in excess of $20,000, other than in the ordinary course of business.The Company issued October 2012 Notes in the aggregate principal amount of $2.0 million. Furthermore, the consents to the 2012 Bridge Financing obtained from holders of previously outstanding convertible promissory notes have taken effect, since the Company raised more than $1.35 million in the 2012 Bridge Financing. Such consents had been given pursuant to the terms of the Amended and Restated Consent, Note Amendment and Warrant Forfeiture Agreement, dated as of October 24, 2012 (the “Consent Agreement”), between the Company and the holders of at least a majority in aggregate principal amount outstanding (“Majority Holders”) of each tranche of the Company’s secured convertible promissory notes issued in October and November 2010 (the “October 2010 Notes”), secured convertible promissory notes issued between January and April 2011 (the “January 2011 Notes”), secured convertible promissory notes issued between October 2011 and January 2012 (the “October 2011 Notes”) and an unsecured convertible promissory note issued in February 2012 (the “February 2012 Note”). As a result, all of such notes were amended to (a) extend the maturity date of October 1, 2013, (b) set the conversion price at $1.00, subject to adjustment as provided in the notes and (c) remove full-ratchet anti-dilution protection. In addition, the holders forfeited the warrants they received in connection with the issuance of the notes, and consented to the 2012 Bridge Financing, the issuance of the October 2012 Notes and to the subordination of their notes to these October 2012 Notes.The October 2012 Bridge Notes are secured by a first position security interest in the Company’s assets, with the security interest of all previously outstanding convertible promissory notes subordinated. Holders of the October 2010 Notes would hold a second position security interest and holders of the January 2011 and October 2011 Notes would hold a third position security interest, in the assets of the Company. The security interests relating to all such notes will be governed by the second amended and restated security agreement, dated as of August 16, 2012, between the Company and David Jones, as administrative agent for the secured parties (the “Second Amended and Restated Security Agreement”), which replaces the security agreement entered into in September 2011. Until his resignation from the Board on November 30, 2012, David Jones was the Chairman of our Board of Directors and a limited partner and former managing partner of SAIL Venture Partners LP.The Second Amended and Restated Security Agreement and the corresponding security interest terminate upon the earlier of (a) repayment of the notes and (b)(1) with respect to the August 2012 Bridge Notes, if and when the Majority Holders of August 2012 Bridge Notes have converted their notes into shares of common stock, (2) with respect to the October 2010 Notes, if and when the Majority Holders of October 2010 Notes have converted their notes into shares of common stock and (3) with respect to the January 2011 and October 2011 Notes, if and when holders of the Majority Holders of January 2011 and October 2011 Notes (on a combined basis) have converted their notes.The agreement also provides that the Company and the holders of the August 2012 Bridge Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the August 2012 Bridge Notes.As of June 30, 2013 the majority of the October 2012 Notes had converted their notes to shares of common stock, consequently pursuant to section 7.13 of the Second Amended and Restated Security Agreement dated August 16, 2012, the security interest for the October 2012 Notes is terminated.The Company recorded a beneficial conversion feature for the August 2012 Bridge Notes, in accordance with FASB ASC 470-20. The Company measures the embedded beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the embedded beneficial conversion feature to additional paid-in capital. Intrinsic value is calculated as the difference between the effective conversion price and the fair value of the common stock into which the debt is convertible, multiplied by the number of shares into which the debt is convertible. A beneficial conversion feature totaling $400,000 was recorded as loan discount for fiscal year 2012. The loan discount is amortized over the life of the convertible note. For the nine months ended June 30, 2013, $661,000 of amortization of loan discount was recorded as interest expense.The Company did not record a beneficial conversion feature for the October 2012 Bridge Notes as a very low volume of shares traded on the open market during the period from October 1, 2012 through November 30, 2012, the date of the closing of the 2012 Bridge Financing. Management judged that the Company’s stock was not actively traded as only $13,800 worth of stock was traded on 9 of 42 trading days during this period at prices ranging from $0.76 to $0.83. The contemporaneous bridge financing of $2 million of Senior Secured Convertible Notes (“October 2012 Notes”) with a conversion price of $0.04718 involving accredited third party investors was considered a better determinant of fair value. Consequently, management’s judgment was that the pricing of the October 2012 Notes at $0.04718 represented a better determinant of fair value of the convertible notes and therefore there was no beneficial conversion feature associated with the October 2012 Notes.From January 18, 2013 through June 30, 2013 October 2012 Notes in the aggregate amount of $1,838,100 plus interest thereon converted to 40,403,929 shares of common stock at a conversion price of $0.04718 per share. Additionally an October 2010 Note of $250,000 plus interest thereon and six January 2011 Notes in aggregate $1,000,000 plus interest thereon converted to 1,469,816 shares of common stock at a conversion price $1.00 per share. For the nine months ended June 30, 2013 $661,000 of amortization of loan discount was recorded as interest expense.As of June 30, 2013 outstanding senior subordinated convertible promissory notes (October 2010 Notes) were $2,773,900 (including $23,900 corresponding to accrued and unpaid interest on the exchanged notes) and debt discount was $0. During the nine months ended June 30, 2013 the Company amortized no debt discount.As of June 30, 2013 outstanding subordinated secured convertible promissory notes (January 2011 Notes) were $1,500,000 and debt discount was $0. During the nine months ended June 30, 2013 the Company amortized no debt discount.As of June 30, 2013 outstanding subordinated secured convertible promissory notes (October 2011 Notes) were $2,000,000 and debt discount was $0. During the nine months ended, June 30, 2013 the Company amortized $277,100 of the debt discount.As June 30, 2013 outstanding unsecured convertible promissory notes (Unsecured Bridge Notes) were $90,000 and debt discount was $0. During the nine months ended June 30, 2013 the Company amortized $15,000 of the debt discount.As of June 30, 2013 outstanding Unsecured convertible promissory note (October 2012) promissory notes (October 2012 Bridge Notes) were $160,000 and debt discount was $1,300. During the nine months ended June 30, 2013 the Company amortized $368,900 of the debt discount.The combined outstanding senior secured, subordinated secured and unsecured (including October 2012 Notes whose security has terminated) convertible promissory notes as of June 30, 2013 were $6,523,900 and debt discounts were $1,300. During the nine months ended June 30, 2013 the Company amortized $661,000 of the debt discount.
[3] The October 2010 Notes: The October Purchase Agreement provides for the issuance and sale of October 2010 Notes, for cash or in exchange for outstanding convertible notes, in the aggregate principal amount of up to $3,000,000 plus an amount corresponding to accrued and unpaid interest on any exchanged notes, and warrants to purchase a number of shares corresponding to 50% of the number of shares issuable on conversion of the October 2010 Notes. The agreement provides for multiple closings, but mandates that no closings may occur after January 31, 2011. The October Purchase Agreement also provides that the Company and the holders of the October 2010 Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the October 2010 Notes and the related warrants.Initially, the October 2010 Notes were to mature one year from the date of issuance (subject to earlier conversion or prepayment), earn interest equal to 9% per year with interest payable at maturity, and be convertible into shares of common stock of the Company at a conversion price of $9.00. The conversion price was subject to adjustment upon (i) the subdivision or combination of, or stock dividends paid on, the common stock; (ii) the issuance of cash dividends and distributions on the common stock; (iii) the distribution of other capital stock, indebtedness or other non-cash assets; and (iv) the completion of a financing at a price below the conversion price then in effect. The October 2010 Notes were furthermore convertible, at the option of the holder, into securities to be issued in subsequent financings at the lower of the then-applicable conversion price or price per share payable by purchasers of such securities. The October 2010 Notes can be declared due and payable upon an event of default, defined in the October 2010 Notes to occur, among other things, if the Company fails to pay principal and interest when due, in the case of voluntary or involuntary bankruptcy or if the Company fails to perform any covenant or agreement as required by the October Note.Our obligations under the terms of the October 2010 Notes are secured by a security interest in the tangible and intangible assets of the Company, pursuant to a Security Agreement, dated as of October 1, 2010, by and between the Company and John Pappajohn, as administrative agent for the holders of the October 2010 Notes. This agreement was subsequently amended.The warrants related to the October 2010 Notes were to expire seven years from the date of issuance and were exercisable for shares of common stock of the Company at an exercise price of $9.00. Exercise price and number of shares issuable upon exercise were subject to adjustment (1) upon the subdivision or combination of, or stock dividends paid on, the common stock; (2) in case of any reclassification, capital reorganization or change in capital stock and (3) upon the completion of a financing at a price below the exercise price then in effect. Any provision of the October 2010 Notes or related warrants could be amended, waived or modified upon the written consent of the Company and holders of a majority of the aggregate principal amount of such notes outstanding. Any such consent would affect all October 2010 Notes or warrants, as the case may be, and will be binding on all holders thereof.The October 2010 Notes were subsequently amended as detailed in (23) below.
[4] Amendment of the October 2010 Notes and the January 2011 Notes: On October 11, 2011, the Company, with the consent of holders of a majority in aggregate principal amount outstanding (the “Majority Holders”) of our outstanding January 2011 Notes, amended all of the January 2011 Notes to extend the maturity of such notes until October 1, 2012 by means of an “Amendment and Conversion Agreement.” Pursuant to the terms of the amendment, which was effective as of September 30, 2011, the January 2011 Notes would receive a second position security interest in the assets of the Company (including its intellectual property). The Majority Holders of the January 2011 Notes also consented to the terms of a new $2 million bridge financing (the “2011 Bridge Financing”) and to granting the investors in such financing a second position security interest in the assets of the Company (including its intellectual property) that is pari passu with the second position security interest received by the holders of the January 2011 Notes. The amendment was also intended to add a mandatory conversion provision to the terms of the January 2011 Notes. Under that provision, the January 2011 Notes would be automatically converted upon the closing of a public offering by the Company of shares of its common stock and/or other securities with gross proceeds to the Company of at least $10 million (the “Qualified Offering”). If the public offering price were less than the conversion price then in effect, the conversion price would be adjusted to match the public offering price (the “Qualified Offering Price”).On October 12, 2011, the Company, with the consent of the Majority Holders of its October 2010 Notes, amended all of the October 2010 Notes to extend the maturity of such notes until October 1, 2012 by means of an Amendment and Conversion Agreement. The Majority Holders of the October 2010 Notes also consented to the terms of the Bridge Financing and to granting the investors in such financing as well as the holders of the Company’s January 2011 Notes a second position security interest in the assets of the Company (including its intellectual property). The guaranties that had been issued in 2010 to certain October Note investors by SAIL were extended accordingly. The amendment, which was effective as of September 30, 2011, was also intended to add the same mandatory conversion and conversion price adjustment provisions to the terms of the October 2010 Notes as were added to the terms of the January 2011 Notes.As a result of the issuance of October 2011 Notes (mentioned below) at a conversion price of $3.00 and the associated warrants to purchase common stock at an exercise price of $3.00, the ratchet provision in the October 2010 Notes and January 2011 Notes was triggered, with the result that the conversion price of such notes was lowered from $9.00 to $3.00, the exercise price of the associated warrants was lowered from $9.00 to $3.00 per share, and the number of shares underlying such notes and warrants was proportionately increased.The Amended and Restated Security Agreement, dated as of September 30, 2011, between the Company and Paul Buck, as administrative agent for the secured parties (the “Amended and Restated Security Agreement”), which replaced the existing security agreement from 2010, and the corresponding security interest terminate (1) with respect to the October 2010 Notes, if and when holders of a majority of the aggregate principal amount of October 2010 Notes issued have converted their notes into shares of common stock and, (2) with respect to the January 2011 Notes and the October 2011 Notes (defined below), if and when holders of a majority of the aggregate principal amount of January 2011 Notes and October 2011 Notes (on a combined basis) have converted their notes.On June 1, 2012, the Company, having received on or prior to such date the consent of the Majority Holders of the October 2010 and January 2011 Notes, amended all of the October 2010 Notes and the January 2011 Notes to add a mandatory conversion provision to the terms of such notes. Under that provision, the October 2010 Notes and January 2011 Notes would be automatically converted upon the closing of a public offering by the Company of shares of its securities with gross proceeds to the Company of at least $3 million. If the public offering price were less than the conversion price then in effect, the conversion price would be adjusted to match the public offering price. Pursuant to the agreements amending the October 2010 Notes and January 2011 Notes, which superseded the Amendment and Conversion Agreements, the exercise price of the warrants that were issued in connection with the notes would be adjusted to match such public offering price, if such price were lower than the exercise price then in effect. The warrants were also amended to remove the full-ratchet provision from the warrants for securities offerings occurring after any such public offering. The Company agreed to issue to each holder of the October 2010 and January 2011 Notes, as consideration for the above and, warrants to purchase a number of shares of common stock corresponding to 100% of the number of shares issuable upon conversion of the principal amount and accrued and unpaid interest of his or her notes. These warrants would be issued on or within 10 business days after any public offering.The Company evaluated the agreements amending the October 2010 Notes and January 2011 Notes (which superseded the Amendment and Conversion Agreements) as of September 30, 2012, under ASC 470. The Company noted the change in terms did not constitute a substantial modification under ASC470.The consents to the 2012 Bridge Financing obtained from holders of previously outstanding convertible promissory notes have taken effect, since the Company has raised more than $1.35 million in the 2012 Bridge Financing. Such consents had been given pursuant to the terms of the Amended and Restated Consent, Note Amendment and Warrant Forfeiture Agreement, dated as of October 24, 2012 (the “Consent Agreement”), between the Company and the holders of at least a majority in aggregate principal amount outstanding (“Majority Holders”) of each tranche of the Company’s secured convertible promissory notes issued in October and November 2010 (the “October 2010 Notes”), secured convertible promissory notes issued between January and April 2011 (the “January 2011 Notes”), secured convertible promissory notes issued between October 2011 and January 2012 (the “October 2011 Notes”) and an unsecured convertible promissory note issued in February 2012 (the “February 2012 Note”). As a result, all of such notes were amended to (a) extend the maturity date of October 1, 2013, (b) set the conversion price at $1.00, subject to adjustment as provided in the notes and (c) remove full-ratchet anti-dilution protection. In addition, the holders forfeited the warrants they received in connection with the issuance of the notes, and consented to the 2012 Bridge Financing, the issuance of the October 2012 Notes and to the subordination of their notes to these October 2012 Notes.The Company evaluated the Consent Agreement, effective November 28, 2012 under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”). ASC 470 requires modifications to debt instruments to be evaluated to assess whether the modifications are considered “substantial modifications”. A substantial modification of terms shall be accounted for like an extinguishment. For extinguished debt, a difference between the re-acquisition price and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains. The Company noted the change in terms per the Consent Agreement, met the criteria for substantial modification under ASC 470, and accordingly treated the modification as extinguishment of the original convertible notes, replaced by the new convertible notes under the modified terms. The Company recorded a gain on extinguishment of debt of $556,300 during the first quarter ended December 31, 2012 of fiscal 2013.
[5] The 2012 Bridge Notes: On August 17, 2012, the Company entered into a new Note Purchase Agreement (the “2012 Bridge Financing Purchase Agreement”) in connection with a bridge financing (the “2012 Bridge Financing”), with SAIL Holdings LLC. The 2012 Bridge Financing Purchase Agreement initially provided for the issuance and sale of August 2012 Bridge Notes in the aggregate principal amount of up to $2,000,000, in one or multiple closings to occur no later than October 15, 2012. The consummation of the 2012 Bridge Financing and issuance of the August 2012 Bridge Notes, and corresponding security interest, had to be approved by the Majority Holders of each tranche of our October 2010 Notes, January 2011 Notes, October 2011 Notes and the Unsecured Note. If the Company did not obtain such consent, the holders could declare a default under such notes and seek all remedies available under such notes.On October 19, 2012 the original 2012 Bridge Financing Purchase Agreement in connection with the 2012 Bridge Financing was amended and restated (the “Amended and Restated Bridge Financing Purchase Agreement”) thereby extending the period for closing the sale of August 2012 Bridge Notes from October 15, 2012 to November 30, 2012. Additionally, the revised notes (“October 2012 Notes”) eliminated the mandatory conversion provision (upon a subsequent equity financing) included in the August 2012 Bridge Notes at the request of a prospective investor. Otherwise the October 2012 Bridge Notes have substantially the same terms as the August 2012 Notes.The Amended and Restated Bridge Financing Purchase Agreement provided for the issuance and sale of Bridge Notes in the aggregate principal amount of up to $2,000,000, in one or multiple closings to occur no later than November 30, 2012. Additionally this amended and restated agreement also provided for the reissuance and replacement of five August 2012 Notes with the revised October 2012 Notes. The Amended and Restated Bridge Financing Purchase Agreement also provides that the Company and the holders of the Bridge Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the August 2012 Bridge Notes.The October 2012 Notes mature on the later of October 1, 2013 or one year from the date of issuance (subject to earlier conversion or prepayment), earn interest at a rate of 9% per year with interest payable at maturity, are convertible into shares of common stock of the Company at a conversion price of $0.04718 and are secured by a first position security interest in the Company’s assets, with the security interest of all previously outstanding convertible promissory notes subordinated. The conversion price is subject to adjustment upon (1) the subdivision or combination of, or stock dividends paid on, the common stock; (2) the issuance of cash dividends and distributions on the common stock; and (3) the distribution of other capital stock, indebtedness or other non-cash assets. The October 2012 Notes are convertible at any time at the option of their holders and can be declared due and payable upon an event of default, defined in the October 2012 Notes to occur, among other things, if the Company fails to pay principal and interest when due, in the case of voluntary or involuntary bankruptcy or if the Company fails to perform any covenant or agreement as required by the October 2012 Notes or materially breaches any representation or warranty in the October 2012 Notes or the Bridge Financing Purchase Agreement. Among the restrictive covenants imposed on the Company pursuant to the Bridge Financing Purchase Agreement is a covenant not to borrow, guaranty or otherwise incur indebtedness that is senior or pari passu with the October 2012 Bridge Notes in excess of $250,000, and a covenant not to effect a merger, reorganization, or sell, exclusively license or lease, or otherwise dispose of any assets of the Company with a value in excess of $20,000, other than in the ordinary course of business.The Company issued October 2012 Notes in the aggregate principal amount of $2.0 million. Furthermore, the consents to the 2012 Bridge Financing obtained from holders of previously outstanding convertible promissory notes have taken effect, since the Company raised more than $1.35 million in the 2012 Bridge Financing. Such consents had been given pursuant to the terms of the Amended and Restated Consent, Note Amendment and Warrant Forfeiture Agreement, dated as of October 24, 2012 (the “Consent Agreement”), between the Company and the holders of at least a majority in aggregate principal amount outstanding (“Majority Holders”) of each tranche of the Company’s secured convertible promissory notes issued in October and November 2010 (the “October 2010 Notes”), secured convertible promissory notes issued between January and April 2011 (the “January 2011 Notes”), secured convertible promissory notes issued between October 2011 and January 2012 (the “October 2011 Notes”) and an unsecured convertible promissory note issued in February 2012 (the “February 2012 Note”). As a result, all of such notes were amended to (a) extend the maturity date of October 1, 2013, (b) set the conversion price at $1.00, subject to adjustment as provided in the notes and (c) remove full-ratchet anti-dilution protection. In addition, the holders forfeited the warrants they received in connection with the issuance of the notes, and consented to the 2012 Bridge Financing, the issuance of the October 2012 Notes and to the subordination of their notes to these October 2012 Notes.The October 2012 Bridge Notes are secured by a first position security interest in the Company’s assets, with the security interest of all previously outstanding convertible promissory notes subordinated. Holders of the October 2010 Notes would hold a second position security interest and holders of the January 2011 and October 2011 Notes would hold a third position security interest, in the assets of the Company. The security interests relating to all such notes will be governed by the second amended and restated security agreement, dated as of August 16, 2012, between the Company and David Jones, as administrative agent for the secured parties (the “Second Amended and Restated Security Agreement”), which replaces the security agreement entered into in September 2011. Until his resignation from the Board on November 30, 2012, David Jones was the Chairman of our Board of Directors and a limited partner and former managing partner of SAIL Venture Partners LP.The Second Amended and Restated Security Agreement and the corresponding security interest terminate upon the earlier of (a) repayment of the notes and (b)(1) with respect to the August 2012 Bridge Notes, if and when the Majority Holders of August 2012 Bridge Notes have converted their notes into shares of common stock, (2) with respect to the October 2010 Notes, if and when the Majority Holders of October 2010 Notes have converted their notes into shares of common stock and (3) with respect to the January 2011 and October 2011 Notes, if and when holders of the Majority Holders of January 2011 and October 2011 Notes (on a combined basis) have converted their notes.The agreement also provides that the Company and the holders of the August 2012 Bridge Notes will enter into a registration rights agreement covering the registration of the resale of the shares underlying the August 2012 Bridge Notes.As of March 31, 2013 the majority of the October 2012 Notes had converted their notes to shares of common stock, consequently pursuant to section 7.13 of the Second Amended and Restated Security Agreement dated August 16, 2012, the security interest for the October 2012 Notes is terminated.The Company recorded a beneficial conversion feature for the August 2012 Bridge Notes, in accordance with FASB ASC 470-20. The Company measures the embedded beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the embedded beneficial conversion feature to additional paid-in capital. Intrinsic value is calculated as the difference between the effective conversion price and the fair value of the common stock into which the debt is convertible, multiplied by the number of shares into which the debt is convertible. A beneficial conversion feature totaling $400,000 was recorded as loan discount for fiscal year 2012. The loan discount is amortized over the life of the convertible note. For the nine months ended June 30, 2013, $661,000 of amortization of loan discount was recorded as interest expense.The Company did not record a beneficial conversion feature for the October 2012 Bridge Notes as a very low volume of shares traded on the open market during the period from October 1, 2012 through November 30, 2012, the date of the closing of the 2012 Bridge Financing. Management judged that the Company’s stock was not actively traded as only $13,800 worth of stock was traded on 9 of 42 trading days during this period at prices ranging from $0.76 to $0.83. The contemporaneous bridge financing of $2 million of Senior Secured Convertible Notes (“October 2012 Notes”) with a conversion price of $0.04718 involving accredited third party investors was considered a better determinant of fair value. Consequently, management’s judgment was that the pricing of the October 2012 Notes at $0.04718 represented a better determinant of fair value of the convertible notes and therefore there was no beneficial conversion feature associated with the October 2012 Notes.From January 18, 2013 through June 30, 2013 October 2012 Notes in the aggregate amount of $1,838,100 plus interest thereon converted to 40,403,929 shares of common stock at a conversion price of $0.04718 per share. Additionally an October 2010 Note of $250,000 plus interest thereon and six January 2011 Notes in aggregate $1,000,000 plus interest thereon converted to 1,469,816 shares of common stock at a conversion price $1.00 per share. For the nine months ended June 30, 2013 $661,000 of amortization of loan discount was recorded as interest expense.As of June 30, 2013 outstanding senior subordinated convertible promissory notes (October 2010 Notes) were $2,773,900 (including $23,900 corresponding to accrued and unpaid interest on the exchanged notes) and debt discount was $0. During the nine months ended June 30, 2013 the Company amortized no debt discount.As of June 30, 2013 outstanding subordinated secured convertible promissory notes (January 2011 Notes) were $1,500,000 and debt discount was $0. During the nine months ended June 30, 2013 the Company amortized no debt discount.As of June 30, 2013 outstanding subordinated secured convertible promissory notes (October 2011 Notes) were $2,000,000 and debt discount was $0. During the nine months ended, June 30, 2013 the Company amortized $277,100 of the debt discount.As June 30, 2013 outstanding unsecured convertible promissory notes (Unsecured Bridge Notes) were $90,000 and debt discount was $0. During the nine months ended June 30, 2013 the Company amortized $15,000 of the debt discount.As of June 30, 2013 outstanding Unsecured convertible promissory note (October 2012) promissory notes (October 2012 Bridge Notes) were $160,000 and debt discount was $1,300. During the nine months ended June 30, 2013 the Company amortized $368,900 of the debt discount.The combined outstanding senior secured, subordinated secured and unsecured (including October 2012 Notes whose security has terminated) convertible promissory notes as of June 30, 2013 were $6,523,900 and debt discounts were $1,300. During the nine months ended June 30, 2013 the Company amortized $661,000 of the debt discount.
[6] As of September 30, 2012, Dr. George Kallins was a Director of the Company and together with his wife controls Deerwood Partners, LLC and Deerwood Holding, LLC. He is also the General Partner of BGN Acquisitions Ltd. LP.On July 5, 2010 and August 20, 2010, we issued unsecured promissory notes (each, a “Deerwood Note”) in the aggregate principal amount of $500,000 to Deerwood Partners LLC and Deerwood Holdings LLC, with each investor purchasing two notes in the aggregate principal amount of $250,000. The Deerwood Notes were to mature on December 15, 2010. We received $250,000 in gross proceeds from the issuance of the first two notes on July 5, 2010 and another $250,000 in gross proceeds from the issuance of the second two notes on August 20, 2010. In connection with the August 20, 2010 transaction, each of the two investors also received a warrant to purchase up to 2,500 shares of our common stock at an exercise price (subject to anti-dilution adjustments, including for issuances of securities at prices below the then-effective exercise price) of $16.80 per share.SAIL Venture Partners L.P. (“SAIL”) issued unconditional guaranties to each of the Deerwood investors, guaranteeing the prompt and complete payment when due of all principal, interest and other amounts under each Deerwood Note. SAIL’s general partner is SAIL Venture Partners, LLC. At the time of issuance, our director David Jones was a managing member of SAIL Venture Partners, LLC, and he remains a limited partner of SAIL. The obligations under each guaranty were independent of our obligations under the Deerwood Notes and separate actions could be brought against the guarantor. We entered into an oral agreement to indemnify SAIL and grant to SAIL a security interest in our assets in connection with the guaranties. In addition, on August 20, 2010, we granted SAIL warrants to purchase up to an aggregate of 3,334 shares of common stock at an exercise price (subject to anti-dilution adjustments, including for issuances of securities at prices below the then-effective exercise price) of $16.80 per share.Each Deerwood Note accrued interest at a rate of 9% per annum and was convertible into shares of our common stock at a conversion price of $15.00. The conversion price was subject to customary anti-dilution adjustments, but would never be less than $9.00.On November 3, 2010, Deerwood Partners LLC, Deerwood Holdings LLC and BGN Acquisition Ltd. LP, executed the October Purchase Agreement. In connection therewith, we issued October 2010 Notes in the aggregate principal amount of $762,200 and warrants to purchase up to 92,895 shares of common stock, as follows: (a) We received $250,000 in gross proceeds from the issuance to BGN Acquisition Ltd., LP, of October 2010 Notes in the aggregate principal amount of $250,000 and related warrants to purchase up to 41,667 shares. (b) We also issued October 2010 Notes in the aggregate principal amount of $512,200, and related warrants to purchase up to 51,228 shares, to Deerwood Holdings LLC and Deerwood Partners LLC, in exchange for the cancellation of the Deerwood Notes originally issued on July 5, 2010 and August 20, 2010 in the aggregate principal amount of $500,000 (and accrued and unpaid interest on those notes) and warrants to purchase an aggregate of up to 5,000 shares originally issued on August 20, 2010. The related guaranties and oral indemnification and security agreement that had been entered into in connection with the Deerwood Notes were likewise terminated. SAIL, of which our director David Jones is a senior partner, issued unconditional guaranties to each of the Deerwood investors, guaranteeing the prompt and complete payment when due of all principal, interest and other amounts under the October 2010 Notes issued to such investors. The obligations under each guaranty are independent of our obligations under the October 2010 Notes and separate actions may be brought against the guarantor. In connection with its serving as guarantor, we granted SAIL warrants to purchase up to an aggregate of 34,152 shares of common stock. The warrants to purchase 3,334 shares of common stock previously granted to SAIL on August 20, 2010 were canceled.