Stockholders' Equity | Note 12 Stockholders Equity Reverse Stock Split On May 27, 2015, the Company effected a 1-for-10 reverse stock split (the Reverse Stock Split). No fractional shares were issued, and no cash or other consideration was paid in connection with the Reverse Stock Split. Instead, the Company issued one whole share of the post-Reverse Stock Split common stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. The Company was authorized to issue 900,000,000 shares of common stock prior to the Reverse Stock Split. As a result of the Reverse Stock Split, the Companys authorized shares decreased ratably to 90,000,000 shares of common stock. The Reverse Stock Split did not have any effect on the stated par value of the common stock, or the Companys authorized preferred stock. Unless otherwise stated, all share and per share information in this Annual Report on Form 10-K has been retroactively adjusted to reflect the Reverse Stock Split. Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 6,000,000 have been designated as Series A Convertible Preferred Stock (Series A Preferred). As of September 30, 2015, there are 4,351,442 shares of Series A Preferred issued and outstanding. The Board of Directors is authorized to determine any number of series into which shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. Effective as of April 4, 2014, the designations, rights and preferences of the preferred shares changed to blank check preferred. On April 9, 2014, the Company entered into Securities Purchase Agreements with accredited investors pursuant to which the Company issued an aggregates of 6,000,000 shares of Series A Preferred in exchange for $6,000,000, which consisted of cash paid by investors and the cancellation of indebtedness of the Company under advances previously made to the Company by such investors. Shares of Series A Preferred were initially convertible into common stock based on a conversion formula equal to the price per share ($1.00) divided by a conversion price equal to the lesser of (A) $0.02 and (B) seventy percent (70%) of the average of the three (3) lowest daily volume weighted average prices (VWAPs) occurring during the twenty (20) consecutive trading days immediately preceding the applicable conversion date on which the Holder elects to convert any shares of Series A Preferred. On March 13, 2015, following the approval of our Board of Directors and the written consent of the holders of our Series A Preferred, the conversion price of the Series A Preferred was amended to remove the VWAP conversion feature from it, so that the Series A Preferred was convertible into common stock at a fixed price of $0.02 per share. As a result of the Reverse Stock Split, the conversion price of the Series A Preferred is currently $0.20 per share. The conversion price is adjustable in the event of stock splits and other adjustments in the Companys capitalization, and in the event of certain negative actions undertaken by the Company. At the current conversion price, the 4,351,442 shares of Series A Preferred outstanding at September 30, 2015 are convertible into 21,757,210 shares of the common stock of the Company. No holder is permitted to convert its shares of Series A Preferred if such conversion would cause the holder to beneficially own more than 4.99% of the issued and outstanding common stock of the Company immediately after such conversion, unless waived by such holder by providing at least sixty-five days notice. Additional terms of the Series A Preferred include the following: ● The shares of Series A Preferred are entitled to dividends when, as and if declared by the Board as to the shares of the common stock of the Company into which such Series A Preferred may then be converted, subject to the 4.99% beneficial ownership limitation described above. ● Upon the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, the shares of Series A Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the purchase price per share of Series A Preferred plus all accrued but unpaid dividends. ● The Series A Preferred plus all declared but unpaid dividends thereon automatically will be converted into common stock, at the then applicable conversion rate, upon the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred. ● Each share of Series A Preferred will carry a number of votes equal to the number of shares of common stock into which such Series A Preferred may then be converted, subject to the 4.99% beneficial ownership limitation described above. The Series A Preferred generally will vote together with the common stock and not as a separate class, except as provided below. ● Consent of the holders of the outstanding Series A Preferred is required in order for the Company to: (i) amend or change the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred; (ii) authorize, create or issue shares of any class of stock having rights, preferences, privileges or powers superior to the Series A Preferred; (iii) reclassify any outstanding shares into shares having rights, preferences, privileges or powers superior to the Series A Preferred; or (iv) amend the Companys Articles of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred. ● Pursuant to the Securities Purchase Agreements, holders of Series A Preferred are entitled to unlimited piggyback registration rights on registrations by the Company, subject to pro rata cutback at any underwriters discretion. Preferred Stock Conversions for the Year Ended September 30, 2015 For the year ended September 30, 2015, a total of 1,498,558 shares of Series A Preferred were converted into 7,721,685 shares of common stock. The stock was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. Preferred Stock Conversions for the Year Ended September 30, 2014 For the year ended September 30, 2014, a total of 150,000 shares of Series A Preferred were converted into 750,000 shares of common stock. The stock was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. Common Stock Common stock consists of $0.001 par value, 90,000,000 shares authorized, of which 13,762,705 shares were issued and outstanding as of September 30, 2015. Additional Common Stock Issuances for the Year Ended September 30, 2015 On August 10, 2015, the Company issued 25,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $5,887 based on the closing price of the Companys common stock on the date of grant. During the quarter ended March 31, 2015, the Company issued 40,000 shares of common stock and cancelled 75,000 shares of common stock associated with transactions fully recorded in a previous period. During the same period, the Company issued 12,500 shares of common stock and recognized compensation expense associated with the issuance and vesting of these shares in the amount of $23,063. During the quarter ended December 31, 2014, the Company cancelled 1,219,589 non-plan options and issued 1,110,000 plan options and 500,000 warrants with exercise prices ranging from $0.30 to $0.85 per share, vesting immediately. The Company recorded the replacement of the stock options award as a modification of the terms of the cancelled awards, with the total compensation cost measured at the date of cancellation and replacement as being the sum of the portion of the grant-date fair value of the original award for which the requisite compensation expense had already been recognized at that date plus the incremental cost resulting from the cancellation and replacement. The Company recorded a net total of $845,540 stock option compensation expense related to these issuances and cancellations. During the quarter ended December 31, 2014, the Company issued 2,881 shares associated with the exercise of options with an exercise price of $3.30 per share and received $9,506 in cash. During the same period, the Company approved the issuance of 160,000 shares of the Companys common stock and recognized $114,083 of compensation expense associated with the issuance and vesting of these shares, and additional compensation expense of $68,333 for the vesting of prior period awards. Common Stock Issuances for the Year Ended September 30, 2014 From July 1, 2011 to September 30, 2014, the Company issued 20,965 shares of its common stock for services received by an unrelated party. On May 14, 2014, the Company completed a private placement offering to certain accredited investors pursuant to which the Company sold an aggregate of 4,420,000 shares of the Companys common stock resulting in gross proceeds of $2,210,000 to the Company. For the year ended September 30, 2014, the Company approved the issuance of 1,500,000 shares of the Companys common stock. The Company recorded a stock compensation expense of $67,500 associated with these issuances for the vesting portion and $25,000 as issuance to the service providers. During the quarter ended June 30, 2014, the Company issued 1,000 shares associated with the exercise of 1,000 options at $3.30 and received $3,300 cash. During the year ended September 30, 2014, the Company approved the issuance of 105,500 shares of the Companys common stock. The Company recorded a stock compensation expense of $92,788 associated with these issuances for the vesting portion plus a compensation expense of $101,188 for the vesting of prior period awards. |