14. Preferred Stock
|12 Months Ended|
Sep. 30, 2016
|14. Preferred Stock||
14. Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.00001 per share. Pursuant to the Company's Certificate of Incorporation, the Board of Directors has the authority to amend the Company's Certificate of Incorporation, without further stockholder approval, to designate and determine the preferences, limitations and relative rights of the preferred stock before any issuance of the preferred stock and to create one or more series of preferred stock, fix the number of shares of each such series, and determine the preferences, limitations and relative rights of each series of preferred stock, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, and liquidation preferences.
Series D Convertible Preferred Stock
The Board of Directors has designated 1,000,000 shares of preferred stock as Series D Convertible Preferred Stock ("Series D preferred stock"). The Series D preferred stock votes on an as-converted basis. The Series D preferred stock has a dividend rate of 8%, payable quarterly. The Company may redeem the Series D preferred stock at a redemption price equal to 120% of the original purchase price with 15 days' notice. During the fiscal 2016 and 2015, the Company accrued $18,617 and $24,800 of dividends on Series D preferred stock, respectively, and settled $18,617 and $31,051 of accrued dividends, respectively, by issuing 302,517 and 118,068 shares of common stock, respectively. Subsequent to September 30, 2016, the Company entered into agreements with each of the Series D preferred stockholders to stop accruing dividends effective July 1, 2016.
Subsequent to September 30, 2016, the Company entered into letter agreements with the holders of all Series D preferred shares to convert all outstanding shares of Series D preferred shares into shares of common stock contingent upon the completion of the offering (see Note 21).
Series E Convertible Preferred Stock
During fiscal 2013, the Board of Directors designated shares of preferred stock as Series E Convertible Preferred Stock ("Series E preferred stock"), convertible into common stock at $1.00 per share, adjustable if there are distributions of common stock or stock splits by the Company. The Series E preferred stock is non-voting and receives a monthly dividend of 3.322% for 25 to 32 months. In addition, the convertibility and the redemption price of the Series E preferred stock is gradually reduced by dividend payments over 25 to 32 months. After the dividend payment term, the redemption price of Series E preferred stock is $0, the Series E preferred stock has no convertibility to common stock and the holders are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company's gross profits payable quarterly for a two-year period.
During fiscal 2014, $83,473 of debenture loans and accrued interest converted into 8,347 shares of Series E preferred stock. During fiscal 2016 and 2015, the Company accrued dividends of $217,895 and $326,863, respectively, payable to Series E preferred stockholders. As of September 30, 2016 and 2015, the aggregate redemption price for the Series E preferred stock was $477,829. Subsequent to September 30, 2016, the Company entered into a letter agreement with a director, who owns 13,843 of Series E preferred shares, who agreed to convert these Series E preferred shares into shares of common stock, contingent upon the completion of the offering (see Note 21).
Series F Convertible Preferred Stock
During fiscal 2014, the Board of Directors designated 7,803 shares of preferred stock as Series F Convertible Preferred Stock ("Series F preferred stock"). In April 2014, the Company increased the authorized shares of Series F preferred stock to 10,000. Series F preferred stock is non-voting, has a stated value of $1,000 per share and is convertible into common stock at $0.3337 per share (see Note 13). The Series F preferred stock has a dividend rate, payable quarterly, of 8% until April 30, 2015, 16% from May 1, 2015 to July 31, 2015, 20% from August 1, 2015 to October 31, 2015, and 25% thereafter. In February 2016, the Company redeemed all 5,361 outstanding shares and $673,848 of accrued dividends for 10,000,00 shares of common stock, $5,900,000 of notes payable and exchanged warrants for the purchase of 5,534,097 shares of common stock held by Series F preferred stockholders for new warrants with new terms for the purchase of the same number of shares (see Note 16). The Company recorded a deemed dividend of $6,484,236 as a result of the transactions.
During fiscal 2014, the Company issued 5,361858 4,503 shares of Series F preferred stock for net proceeds of $3,580,771, after considering $675,229 of related costs, and the conversion of $574,592 of debt and accrued interest. During fiscal 2016 and 2015, the Company accrued dividends of $495,148 and $643,320, respectively, payable to Series F preferred stockholders. In June 2015, the Company settled $571,840 of accrued dividends and $71,480 of future dividends by issuing 3,372,917 shares of common stock. The agreed upon conversion rate per common share issued was less than the fair value of the common stock as of the conversion date, therefore, the additional fair value of $301,097 was recorded as a deemed dividend.
Upon any liquidation, dissolution or winding up of the Company, before any distribution or payment may be made to the holders of the common stock, the holders of the Series D preferred stock, Series E preferred stock, and Series F preferred stock are entitled to be paid out of the assets an amount equal to $1.00 per share plus all accrued but unpaid dividends. If the assets of the Company are insufficient to make payment in full to all holders of preferred stock, then the assets shall be distributed among the holders of preferred stock ratably in proportion to the full amounts to which they would otherwise be entitled.
The entire disclosure for terms, amounts, nature of changes, rights and privileges, dividends, and other matters related to preferred stock.
No definition available.