Quarterly report pursuant to Section 13 or 15(d)

3. Condensed Consolidated Balance Sheets

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3. Condensed Consolidated Balance Sheets
 9 Months Ended
Dec. 31, 2013
Balance Sheet Related Disclosures [Abstract]  
3. Condensed Consolidated Balance Sheets

Inventories

 

Inventories consisted of the following:

 

    December 31,     March 31,  
    2013     2013  
Raw materials   $ 702,000     $ 835,000  
Finished goods     353,000       327,000  
      1,055,000       1,162,000  
Less: inventory allowances     (85,000 )     (170,000 )
    $ 970,000     $ 992,000  

 

Notes Payable

 

On May 1, 2010, the Company entered into a loan and security agreement and a supplement to the loan and security agreement with Venture Lending & Leasing V, Inc., to borrow up to an aggregate of $3,000,000 (together, the “VLL5 Loan Agreements”). In connection with those agreements, the Company issued two warrants to Venture Lending & Leasing V, LLC, a Delaware limited liability company (“LLC5”), which, in the aggregate, had a total put option cash value of $750,000 (the “VLL5 Warrants”).

 

On June 29, 2011, the Company entered into a loan and security agreement and a supplement to the loan and security agreement with Venture Lending & Leasing VI, Inc., to borrow up to an aggregate of up to $2,500,000 (together, the “VLL6 Loan Agreements”). In connection with those agreements, the Company issued three warrants to Venture Lending & Leasing VI, LLC, a Delaware limited liability company (“LLC6”), which, in the aggregate, had a total put option cash value of $1,250,000 (the “VLL6 Warrants”).

 

On October 30, 2012, the Company entered into a stock purchase agreement with LLC5 and LLC6 for the issuance to LLC5 and LLC6 of shares of common stock having an aggregate fair market value equal to $3,500,000 (the “Shares”), in exchange for LLC5’s agreement to surrender the VLL5 Warrants and LLC6’s agreement to surrender the VLL6 Warrants. On November 1, 2012, the Company issued an aggregate of 617,284 shares of its common stock with an aggregate grant date fair market value of $3,500,000, or approximately $5.67 per share. 

 

As of December 16, 2013, the Shares were sold for an average price of $5.35 per share, resulting in gross proceeds of $3,304,000 and net proceeds of $3,291,000 after deducting certain transaction costs. Pursuant to the stock purchase agreement, the net proceeds from the sale of the Shares were applied as follows:

 

  (a) $2,000,000 of the proceeds received were retained by LLC5 and LLC6 as consideration for surrendering the VLL5 Warrants and VLL6 Warrants and the underlying put warrant liabilities.

 

  (b) After the put warrant liabilities were satisfied, the remaining proceeds were applied to the reduction of the Company’s remaining loans outstanding under the VLL5 Loan Agreements and the VLL6 Loan Agreements. As there was no outstanding loans under the VLL5 Loan Agreements, the Company used the amount to prepay the outstanding loans under the VLL6 Loan Agreements. $1,131,000 of the proceeds received was applied as a prepayment of the then outstanding debt under the VLL6 Loan Agreements and $94,000 of the proceeds received was applied as a prepayment of all future interest owed in connection with the VLL6 Loan Agreements.

 

  (c) After the loans were prepaid in full, approximately $66,000 remained in excess of all outstanding obligations owed by the Company. Pursuant to the terms of the stock purchase agreement, such amount was allocated 50/50, and $33,000 was paid to the Company.

 

In connection with the VLL5 Loan Agreements and the VLL6 Loan Agreements, during the three months ended December 31, 2013 and 2012, the Company made interest payments of $48,000 and $116,000, respectively, and principal payments of $375,000 and $503,000, respectively. During the nine months ended December 31, 2013 and 2012, the Company made interest payments of $188,000 and $375,000, respectively, and principal payments of $1,379,000 and $1,335,000, respectively.