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Equity
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9 Months Ended |
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Jun. 30, 2014
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| Equity [Abstract] | |
| Equity |
8. Equity
In January 2014, the Company issued 100,000 shares of common stock to American Capital Ventures in consideration for services rendered through June 2014. The shares were valued at $20,000 which was expensed to general and administrative expense.
On March 31, 2014, the Company entered into a Securities Purchase Agreement (the “SPA”) with Aracle SPF I, LLC (“Aracle”) pursuant to which Aracle and or other subscribed investors had the right to acquire up to 12 units (the “Units”), for $50,000 per Unit, with each Unit consisting of 250,000 shares of common stock (the “Shares”) of the Company and 125,000 common stock purchase warrants (the “Warrants”). The Warrants are exercisable 6 months after issuance, have a term of 4 years, and have an exercise price of $0.25 per warrant share. The SPA contains standard representations, warranties, and covenants. In addition, the SPA contains a price adjustment mechanism that requires the Company, with certain exceptions, to issue additional shares of common stock to the investor in the event the Company, within 12 months of the initial closing under the SPA, issues certain equity securities at a price per share less than $0.20, provided, however, as long as the Company is listed on the NYSE MKT the total number of shares issuable under the foregoing adjustment provision may not exceed 19.9% of the Company’s outstanding shares of common stock on March 30, 2014. Further, in the event the Company is delisted from NYSE MKT while Aracle owns at least 51% of the Shares issued to it under the SPA, the Company shall issue an additional 3,000,000 Shares to Aracle, and the 12 month price adjustment period shall be extended to 36 months. The Company agreed to appoint two new members to the Company’s Board of Directors within 60 days of the initial closing, which new members are subject to the prior approval of Aracle. The Company granted Aracle piggyback registration rights with respect to the Shares and the shares of common stock underlying the Warrants. The Company appointed Mr. Jack Zwick to the Board of Directors and Chairman of the Audit Committee on May 20, 2014, which appointment was approved by Aracle. The second member has not yet been appointed.
Concurrently with entering into the SPA, the Company and Aracle conducted an initial closing thereunder, in which Aracle purchased 9.5 Units for $475,000. The Company incurred certain expenses related to the SPA of approximately $88,000, which were paid from the proceeds.
On April 16, 2014, the Company, Aracle and a second institutional investor (both companies referred to as “Investors”), entered into certain Securities Purchase Agreements (“SPA”) pursuant to which the Investors purchased 2.5 Units for $125,000. The Company incurred certain expenses related to the SPA of approximately $7,250, which were paid from the proceeds of this closing.
Stock Options
On January 28, 2014, the Board of Directors of the Company approved the issuance of 1,395,500 stock options, of which 895,500 are exercisable at $0.25 per share, valued at approximately $151,000 and will vest over a period of three years; 300,000 stock options are exercisable at $0.20 per share, valued at $52,000 and will vest over a period of three years and; the remaining 200,000 stock options are exercisable at $0.20 per share, valued at $34,000 and will vest over a period of two years. Of the options issued, 50,500 vested immediately, 200,000 options will vest over a period of two years and the remaining 1,145,000 will vest over three years.
On March 5, 2014, the Board of Directors of the Company approved the issuance of 1,000,000 stock options exercisable at $0.35 per share, valued at approximately $272,000 and they will vest over a three year period.
The Company has recognized compensation expense in the amount of $44,000 and $90,000 during the quarter and nine months ended June 30, 2014, respectively, related to the issuance of the stock options. The Black-Scholes option pricing model was used to value the options based upon an expected stock price volatility of 97%, a 10 year expected life of the option and an a risk free interest rate of 2.75% and 2.71%, respectively. There is approximately $444,000 of unvested stock compensation that will be recorded over the remaining life of vesting of approximately 2.65 years.
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