Note 5 - Related Party Debt Agreements |
9 Months Ended |
|---|---|
Mar. 31, 2017 | |
| Notes to Financial Statements | |
| Related Party Debt Agreement Disclosure [Text Block] |
NOTE 5 - RELATED PARTY DEBT AGREEMENTSBetween October 2011 and September 2012, the Company entered into three debt agreement with Esenjay Investments, LLC (“Esenjay”). Esenjay is deemed to be a related party as Mr. Michael Johnson, the beneficial owner and director of Esenjay is a current member of our board of directors and a major shareholder of the Company (owning approximately 64% of our outstanding common shares as of March 31, 2017). The three debt agreements consisted of a Bridge Loan Promissory Note, a Secondary Revolving Promissory Note and an Unrestricted Line of Credit (collectively, the “Loan Agreements”). On December 31, 2015, the Bridge Loan Promissory Note and the Secondary Revolving Promissory Note expired leaving the Unrestricted Line of Credit.The Unrestricted Line of Credit, bearing an interest rate of 6% per annum, has since been amended resulting in an increase in the maximum borrowing amount from $2,000,000 to $3,500,000, a reduction in the conversion rate of $0.30 to $0.06 per share, and an extension of the maturity date from December 31, 2015 to January 31, 2018. The change in the conversion rate took place on
December 29, 2015 and resulted in an estimated change in fair value of the conversion price of $310,000. This change in fair value was recorded as a deferred financing cost on December 29, 2015 and was amortized over the then remaining seven -month term of the Unrestricted Line of Credit. The deferred financing cost was fully amortized as of July 31, 2016. During the nine months ended March 31, 2017, we recorded $44,000 of deferred financing amortization costs, which is included in interest expense in the accompanying condensed consolidated statements of operations. Between July 1, 2014 and March 31, 2017, we borrowed an aggregate of $7,075,000 pursuant to these various debt agreements with Esenjay. On September 3, 2015, we entered into a Loan Conversion Agreement with Esenjay, as amended on October 6, 2015 and November 13, 2015, pursuant to which we issued 51,171,025 shares of our common stock (based on $0.04 per share) in exchange for the cancellation of $2,000,000 outstanding under the Loan Agreements, plus $46,841 in accrued interest. In conjunction with our then outstanding private placement (see Note 7) between April 1, 2016 and August 31, 2016, $1,750,000 of the outstanding debt under the Unrestricted Line of Credit was settled via the issuance of 43,750,000 shares of our common stock.As of March 31, 2017, the outstanding principal balance of the Unrestricted Line of Credit was $3,325,000. Borrowings under the Unrestricted Line of Credit are subject to pre-approval by Esenjay which has no obligation to loan additional funds. During the three and nine months ended March 31, 2017, the Company recorded approximately $42,000 and $80,000 of interest expense related to the Unrestricted Line of Credit, respectively. During the three and nine months ended March 31, 2016, the Company recorded approximately $30,000 and $80,000 of interest expense related to the Unrestricted Line of Credit, respectively. On April 11, 2017, the Unrestricted Line of Credit was amended for a fifth time resulting in an increase in the maximum borrowing amount from $3,500,000 to $5,000,000 and an increase in the interest rate, effective April 1, 2017, from 6% per annum to 8% per annum on the outstanding balance and future drawdowns. See Note
13. During the
three months ended March 31, 2017
, we received cash advances totaling
$500,000 (the “Advances”) from a shareholder (“Shareholder”). The Advances were received pursuant to an oral agreement, whereby we agreed to accrue interest on the Advances at 12% per annum. During the three ended March 31, 2017, the Company recorded approximately $7,000 of interest expense related to the Advances. See Note
13.
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