Annual report pursuant to section 13 and 15(d)

Note 7: Stockholders' Equity

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Note 7: Stockholders' Equity
 12 Months Ended
Sep. 30, 2012
Equity [Abstract]  
Note 7: Stockholders' Equity

Issuances of Common Stock

 

November 2010 Equity Issuance Agreement

 

On November 29, 2010, the Company and Joint Corporation FeelTech Investment Unit 1 (the “Purchaser”) entered into a Stock Purchase Agreement (the “Agreement”) for the purchase of $200,000 worth of the Company’s common stock, $0.001 par value per share (“Common Stock”), over a three month period.

 

Under the terms of the Agreement, the Company agreed to sell, and the Purchaser is obligated to purchase, unregistered shares of common stock in multiple investment tranches (each, a “Tranche”) for an aggregate purchase price of $200,000. The per share price in each Tranche was determined by adding (i) $0.50 and (ii) the average closing price for the Common Stock as reported by the NASDAQ Capital Market for the 90-day period immediately preceding (but not including) the closing date of the applicable Tranche. The Agreement was satisfied by the Purchaser as follows:

 

  · $50,000 was wired to the Company on December 3, 2010 in exchange for the Company’s issuance of 8,421 shares of Common Stock (determined by using the $5.94 per share purchase price applicable to the first Tranche).

 

  · $50,000 was wired to the Company’s designated account on December 22, 2010 in exchange for the issuance of 7,383 shares (determined by using the $6.77 per share purchase price applicable to the second Tranche).

 

  · $50,000 was wired to the Company’s designated account on January 22, 2011 in exchange for the issuance of 7,057 shares (determined by using the $7.09 per share purchase price applicable to the third Tranche).

 

  · $50,000 was wired to the Company’s designated account on February 25, 2011 in exchange for the issuance of 7,620 shares (determined by using the $6.56 per share purchase price applicable to the fourth Tranche).

 

The Company issued and sold the shares of Common Stock to the Purchaser in reliance on the exemption provided under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated by the Securities and Exchange Commission (the “SEC”).

 

March 2011 Equity Issuance Agreement

 

On March 22, 2011, the Company and six new investors (the “March Purchasers”) entered into a Stock Purchase Agreement (the “March Agreement”), pursuant to which the March Purchasers committed to purchase an aggregate of $150,000 worth of the Company’s common stock, $0.001 par value per share, over a three month period.

 

Under the terms of the March Agreement, the Company agreed to sell, and each March Purchaser is obligated to purchase by a specified date, Common Stock for an aggregate purchase price of $25,000. The per share price is to be determined by adding (i) $0.50 and (ii) the average closing price for the Common Stock as reported by the NASDAQ Capital Market for the 90-day period immediately preceding (but not including) the closing date of the applicable purchase.

 

  · $50,000 was wired to the Company’s designated account on March 28, 2011 in exchange for the issuance of 9,061 shares (determined by using the $5.52 per share purchase price applicable).

 

  · $50,000 was wired to the Company’s designated account on April 26, 2011 in exchange for the issuance of 10,656 shares (determined by using the $4.69 per share purchase price applicable).

 

  · An additional $50,000 was due to be wired to the Company’s designated account on or before May 25, 2011, but such amount was never paid by the applicable March Purchasers. On or about July 7, 2011, the Company provided written notice to the applicable March Purchasers that it considered them to be in material breach of their agreements with the Company. As of September 30, 2012 the March Purchasers have not responded to the Company’s notice of breach. As the Company did not issue shares related to this scheduled payment, the Company has deemed this to be a cancelled order.

 

December 2011 Equity Issuance

On December 12, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of Isaac Capital Group LLC (“ICG”), John Kocmur (“Kocmur”), Kingston Diversified Holdings LLC (“Kingston”), Augustus Gardini, L.P. (“Augustus”) and Lausanne LLC (“Lausanne” and collectively with ICG, Kocmur, Kingston and Augustus, the “Purchasers”) pursuant to which the Company’s issued and sold an aggregate of 1,612,899 shares (the “Shares”) of the Company’s common stock for an aggregate purchase price equal to $2.0 million. Each of ICG, Kocmur and Kingston (the “Lead Purchasers”) invested $500,000 and were issued 403,225 shares of the Company’s Common Stock, and each of Augustus and Lausanne invested $250,000 and were issued 201,612 shares of the Company’s Common Stock.

Pursuant to the Purchase Agreement:

  · The per share purchase price was $1.24, which was the closing bid price of the Company’s common stock, as reported by the NASDAQ Capital Market, on December 12, 2011, the date of the closing of the purchase and sale.

 

  · Each Lead Purchaser was given the right, until the date that purchaser beneficially owns less than five percent (5%) of the Company’s issued and outstanding common stock, to nominate one director for election by the Company’s stockholders at each meeting of the stockholders at which directors are to be elected, and to designate a replacement director to fill any vacancy if the director previously designated or nominated by that purchaser ceases for any reason to be a director.

 

March 2012 Equity Issuance

 

In March 2012, the Company issued 45,180 shares of its common stock in exchange for the received payment of $150,000.

 

June 2012 Equity Issuance

 

In June 2012, the Company issued 36,364 shares of its common stock in exchange for the received payment of $200,000.

 

Increase in Shares Under Amended and Restated 2003 Stock Plan

 

At the 2012 annual meeting of the Company’s Stockholders, the stockholders approved a proposal to increase the number of shares of the Company’s common stock available for issuance under the Company’s Amended and Restated 2003 Stock Plan from 140,000 to 340,000.

 

Series E Convertible Preferred Stock

 

During the year ended September 30, 2002, pursuant to an existing tender offer, holders of 13,184 shares of the Company’s common stock exchanged said shares for 131,840 shares of Series E Convertible Preferred Stock, at the then $0.85 market value of the common stock. The shares carry a $0.30 per share liquidation preference and accrue dividends at the rate of 5% per annum on the liquidation preference per share, payable quarterly from legally available funds. If such funds are not available, dividends shall continue to accumulate until they can be paid from legally available funds. Holders of the preferred shares are entitled, after two years from issuance, to convert them into common shares on a hundred-to-one basis together with payment of $0.45 per converted share.

 

Treasury Stock

 

The Company’s treasury stock consists of shares repurchased on the open market or shares received through various agreements with third parties. The value of such shares is determined based on cash paid or quoted market prices.

 

On May 25, 2007, the Company’s Board of Directors terminated its pre-existing stock repurchase plan and replaced it with a new plan authorizing repurchases of up to $1,000,000 of common stock from time to time on the open market or in privately negotiated transactions. The repurchase plan was increased by another $500,000 on October 23, 2008. During the years ended September 30, 2012 and 2011, there were no stock repurchases.

 

Dividends

 

During each of the years ended September 30, 2012 and 2011, the Company accrued dividends of $1,918, payable to holders of Series E preferred stock. No dividends were paid in 2012 or 2011.