Message: 7. PROMISSORY NOTES:"paid the remaining balance of $300,000 in March 2009."
7. PROMISSORY NOTES
7.5% Convertible Subordinated Term Note
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March 31,
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2009
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2008
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||||||
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$
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$
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|||||||
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7.5% Convertible Subordinated Term Note
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387,234 | 780,065 | ||||||
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Less unamortized debt discount
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(6,141 | ) | (31,983 | ) | ||||
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Less long-term portion – net of related unamortized debt discount
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— | (381,093 | ) | |||||
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Short term portion of Convertible Subordinated Term Note
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381,093 | 366,989 |
On December 12, 2006 the Company became obligated on a 7.5% Convertible Subordinated Term Note (“Term Note”) in the original principal amount of $970,752 that was issued in exchange for two short-term unsecured promissory notes. The Term Note provided for monthly principal and interest installments of $6,000 starting December 2006, increased to $15,000 in February 2007, increased to $30,000 in December 2007 and to $50,000 in December 2008 with maturity November 30, 2009. Commencing with the February 2007 installment payment, the Company had the option, subject to certain limitations, to elect to make such installment payments either in cash or in shares of common stock (“Monthly Installment Shares”). Monthly Installment Shares are valued at the arithmetic average of the closing prices for the last five trading days of the applicable month without discount. Installment note payments must be paid in cash if the computed average price is less than $0.10 per share. Subject to certain notice periods and other limitations, the balance of the note is convertible by the holder at $0.30 per common share and the Company may elect to call the note for mandatory conversion if the closing sale price of the Company’s common stock is at least $0.40 per share for ten consecutive trading days. The Company may also prepay the note in full or in minimum payments of $50,000 on ten-day notice. The note may be subordinate to certain future senior indebtedness.
For the year ended March 31, 2009 the Company made two monthly payments totaling $60,000 in cash and ten monthly payments aggregating $380,000 by issuing 3,018,331 shares of common stock. For the year ended March 31, 2008 the Company made all monthly note payments aggregating $240,000 by issuing 1,623,808 shares of common stock.
18% Secured Promissory Note
In March 2007 the Company obtained $750,000 in short-term purchase order financing from a commercial lender pursuant to an 18% Secured Promissory Note with interest payable monthly for any full or partial month the principal was outstanding subject to a security agreement providing a security interest in substantially all of the Company’s assets. The Company paid an initial origination finance charge of $15,000 by issuing 73,385 restricted shares of common stock. In connection with two renewals during fiscal 2008 the Company paid aggregate finance charges of $15,500 by issuing 104,196 restricted shares of common stock. The Company made principal reductions of $300,000 during fiscal 2008 and the principal balance at March 31, 2008 was $450,000.
In connection with two renewals during fiscal 2009 the Company paid aggregate finance charges of $7,000 by issuing 68,921 restricted shares of common stock. The Company made additional principal reductions of $150,000 during the year and paid the remaining balance of $300,000 in March 2009. The note financing fees were recorded as a debt discount and amortized over the respective amended term of the note using the interest method.
F-17
e.Digital Corporation
Notes to Consolidated Financial Statements
March 31, 2009
12% Promissory Note
In April 2008 the Company borrowed $40,000 pursuant to an unsecured promissory note with principal and interest due April 3, 2009. In April 2008 the Company issued 40,000 shares of common stock as payment of a $4,800 originating finance fee. The note financing fee was recorded as a debt discount and amortized over the amended term of the note using the interest method. This note was repaid in March 2009.
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