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Note 3. Condensed Consolidated Balance Sheets
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Dec. 31, 2011
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| Supplemental Balance Sheet Disclosures [Text Block] |
Note
3. Condensed Consolidated Balance Sheets
Inventories
Inventories
consisted of the following (in thousands):
Notes
Payable
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 $2,500,000 (collectively, the “VLL6
Agreements”). The VLL6 Agreements provided
for a first tranche of $1,500,000 and, upon meeting certain
milestones, the Company became eligible to borrow an
additional $1,000,000. The loan is secured by all assets
of the Company. On June 29, 2011, the Company borrowed
$1,500,000 on the first tranche. On November 10, 2011,
the Company borrowed $1,000,000 on the second tranche. The
cash interest or “streaming” rate on the loan is
10%. In connection with the first tranche, for the first
nine months, the Company will make monthly interest-only
payments set at $12,500 through March 1,
2012. Thereafter, the Company will make principal and
interest payments of $56,250 per month for thirty
months. Additionally, the Company will make a final
balloon payment of $116,505 on September 1, 2014. In
connection with the second tranche, for the first nine
months, the Company will make monthly interest-only payments
set at $8,333 through August 1, 2012. Thereafter, the Company
will make principal and interest payments of $37,500 per
month for thirty months. Additionally, the Company
will make a final balloon payment of $77,670 on February 1,
2015, resulting in an effective interest rate of 13%. During
the three and nine months ended December 31, 2011, the
Company made interest payments of $53,000 and $92,000,
respectively.
In
connection with the VLL6 Agreements, the Company issued a
warrant to Venture Lending & Leasing VI, LLC for the
purchase of 226,325 shares of the Company’s common
stock at a purchase price per share equal to $1.657. Once the
Company became eligible to draw the second tranche of the
loan, it was required to issue a second warrant to Venture
Lending & Leasing VI, LLC with coverage equal to $62,500
for the purchase of additional shares of the Company’s
common stock at a strike price equal to the 10-day
volume-weighted average price (“VWAP”) ending on
the trading day prior to the date the Company satisfied the
second tranche milestones. On September 30, 2011, the
Company met the second tranche milestones and it issued the
second warrant for the purchase of 39,100 shares of the
Company’s common stock at a purchase price per share
equal to $1.5985. On November 10, 2011, the Company borrowed
the second tranche and therefore the Company became obligated
to issue a third warrant to Venture Lending & Leasing VI,
LLC with coverage equal to $62,500 for the purchase of
additional shares of the Company’s common stock at a
strike price equal to the 10-day VWAP ending on the trading
day prior to the borrowing date of the second tranche. In
connection with borrowing the second tranche, the Company
issued the third warrant for the purchase of 41,187 shares of
the Company’s common stock at a purchase price per
share equal to $1.5175. The three warrants issued to Venture
Lending & Leasing VI, LLC are hereinafter collectively
referred to as the “Warrants”. The Warrants have
a cashless exercise feature. The Warrants expire on
November 30, 2018. Additionally, the Warrants include a
put option. The warrant related to the first tranche may be
put back to the Company for $937,500 cash. On September 30,
2011, when the Company became eligible to draw the second
tranche and issued the second warrant, the second warrant
included a put option in an amount equal to $156,250, which
increased the total cash payment to $1,093,750. On November
10, 2011, when the Company borrowed the additional $1,000,000
on the second tranche and issued the third and final warrant,
the third warrant included a put option in an amount equal to
$156,250, which increased the total cash payment under the
Warrants to $1,250,000. The put feature is available to
the holder of the Warrants for 60 days after the first of the
following to occur: (i) a change in control of the Company,
(ii) the closing of at least $20,000,000 of a round of
additional equity financing, or (iii) July 31, 2015.
The
Company recorded the $1,250,000 cash value of the Warrants as
a put warrant liability and a corresponding amount of
$1,250,000 was recorded as a discount on the note payable.
The discount will be accreted to non-cash interest expense
over the term of the loan using the effective interest
method. For the three and nine months ended December 31,
2011, the Company recorded $68,000 and $127,000 of non-cash
interest related to the note. The remaining balance of the
discount on note payable amounted to $1,123,000 at December
31, 2011, of which $408,000 is included in the current
portion of long-term debt, net, in the accompanying condensed
consolidated balance sheet. The remaining balance
of the note amounted to $2,500,000 at December 31, 2011, of
which $375,000 is included in the current portion of
long-term debt in the accompanying condensed consolidated
balance sheet.
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