Delaware
|
87-0419387
|
(State
or other jurisdiction
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
Identification
No.)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨ (Do
not check if smaller reporting company)
|
Smaller
reporting company x
|
PART
I
|
3
|
|
ITEM
1.
|
Business
|
4
|
ITEM
1A.
|
Risk
Factors
|
12
|
ITEM
1B.
|
Unresolved
Staff Comments
|
22
|
ITEM
2.
|
Properties
|
23
|
ITEM
3.
|
Legal
Proceedings
|
23
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ITEM
4.
|
(Removed
and Reserved)
|
23
|
PART
II
|
24
|
|
ITEM
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
24
|
ITEM
6.
|
Selected
Financial Data
|
28
|
ITEM
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
28
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ITEM
7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
37
|
ITEM
8.
|
Financial
Statements and Supplementary Data
|
38
|
ITEM
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
62
|
ITEM 9A.
|
Controls
and Procedures
|
63
|
ITEM
9B.
|
Other
Information
|
64
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PART
III
|
65
|
|
ITEM
10.
|
Directors,
Executive Officers and Corporate Governance
|
65
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ITEM
11.
|
Executive
Compensation
|
69
|
ITEM
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
77
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ITEM
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
79
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ITEM
14.
|
Principal
Accounting Fees and Services
|
86
|
PART
IV
|
86
|
|
ITEM
15.
|
Exhibits,
Financial Statement Schedules
|
86
|
·
|
our
inability to raise additional funds to support operations and capital
expenditures;
|
·
|
our
inability to achieve greater and broader market acceptance of our products
and services in existing and new market
segments;
|
·
|
our
inability to successfully compete against existing and future
competitors;
|
·
|
our
inability to manage and maintain the growth of our
business;
|
·
|
our
inability to protect our intellectual property rights;
and
|
·
|
other
factors discussed under the headings “Risk Factors,” “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
and “Business.”
|
ITEM
1.
|
Business
|
|
·
|
More
than $29 billion in spending has been dedicated to the compulsory
utilization of electronic health records and other IT services under the
“HITECH” portion of the American Recovery and Reinvestment Act (ARRA),
with most of that spending to occur between
2011-2013. Currently, less than 20% of healthcare providers
utilize electronic records, yet all providers will be expected to have
adopted such systems by 2015 (or face economic penalties under
Medicare/Medicaid). This extraordinary growth in the use of
medical informatics tools creates a significant and expanding market for
CNS Response.
|
|
·
|
Similarly,
Comparative Effectiveness Research has been made a key feature of the
Obama health plan. The cost to treat Americans under care for depression
and other mental illnesses rose by nearly two-thirds from $35 billion to
$58 billion in the last 10 years, according to a recent report from the
Agency for Healthcare Research and Quality. Finding more
cost-effective treatment modalities in mental disorders will be critical
to successful health care reform;
|
|
·
|
The
Mental Health Parity Act (Parity Act) requires payers, beginning in 2010,
to pay for behavioral medications and treatments using the same standards
for evidence and coverage as they currently use for medical/surgical
treatments;
|
|
·
|
According
to a recent RAND report, 275,000 returning military personnel from the
Iraq and Afghanistan theatres suffer from Major Depression, Post Traumatic
Stress Disorder (PTSD), traumatic brain injury;
and
|
|
·
|
Consumers
have emerged as active decision makers in behavioral treatment, driven by
over $4.8 billion in annual Pharma direct-to-consumer advertising and the
internet. At the same time, media costs for reaching those
consumers are at historic lows.
|
|
·
|
Patients
are directed by an attending physician to a local rEEG® provider, who
performs a standard digital EEG.
|
|
·
|
EEG
data file is uploaded over the web to our central analytical
database.
|
|
·
|
We
analyze the data against the CNS Database for patients with similar brain
patterns.
|
|
·
|
We
provide a report describing the probability of patient success with
different medication options (much like an antibiotic sensitivity report
commonly used in medicine).
|
|
·
|
The
rEEG® Report is sent back to the attending physician, usually by the next
business day.
|
|
·
|
Grow
our focused physician network: We currently have 52 active
practicing physicians utilizing rEEG in their practices, defined as having
paid for testing within the last 12 months. Over the same
period 31 new physicians were trained. Physicians who become
“power users” (which we define as physicians who conduct several tests per
month) report significantly better results than casual users of rEEG
technology, and have certain economies of scale in using the test in their
practices. Similar to the adoption of LASIK technology in
consumer-driven ophthalmology, successful practices using rEEG have
reported that as their word-of-mouth referrals increase, their procedure
billings increase, and their average patient visits decrease (as patients
improve). Accordingly, their patient turnover may increase over
time, requiring additional marketing efforts to grow their practice
volume.
|
|
·
|
Increase
unit pricing: Currently, the wholesale (direct-to-physician)
price for standard rEEG testing is $400 per test, and the retail (payer
and consumer) price is approximately $800. We anticipate
that our pricing will be increased over time with greater acceptance of
the test as a standard of care, rewarding power users for committed volume
and affording improvement in test margins
overall.
|
|
·
|
Utilize
our neurometric information service: In 2008, we purchased the
psychiatric clinic in Denver, co-founded by our Chief Medical Officer,
Daniel Hoffman, MD. The clinic currently serves as a platform
for perfecting rEEG workflow, information systems, product development and
research. We also test local marketing strategies in Denver
which can then be generalized to other rEEG® network
clinics. The Denver clinic may ultimately become a national
Center of Excellence for neuropsychiatry, where insurers may direct
certain treatment-resistant
patients.
|
|
·
|
Scalable
platform for delivery: During 2009 and 2010, significant
development effort was focused on production systems and lab
infrastructure to accommodate potential growth in the production volume of
our rEEG Reports. Our current production application is able to
accommodate up to 100 tests per week without additional
manpower. In addition to providing scalable capacity, the
production system provides for online delivery of tests and delivery of
test data to physicians’ desktops or iPAD. Currently, we are
investing in projects to reduce or eliminate the remaining manual
processes in test production: including the “artifacting” of EEG data and
the Neurologist review of each case. It is estimated that these
processes will, over time, be replaced with validated algorithms,
exception-based reviews and/or post-facto sampling for quality
assurance.
|
|
·
|
Evidence for payers:
We will share well-designed research on rEEG® efficacy, showing the
weight of superior evidence in controlled and real-world clinical trials
and case series.
|
|
·
|
Parity: In
2010, the Mental Health Parity Act (Parity Act) will change all payers’
coverage criteria, requiring equal coverage for behavioral and medical
therapies, using the same coverage criteria and
evidence. Milliman Global Actuarial Services estimates a 1-3%
increase in overall health costs resulting from a significant increase in
behavioral health expenditures driven by the Parity Act. Of
particular interest to us, however, is the specific language in the Parity
Act which requires that coverage of a scope-of-service for one type of
diagnosis (for example: a Neurologist performing a diagnostic EEG for
Epilepsy) be applied equally as the use of an EEG by a Psychiatrist for
medication management.
|
|
·
|
Budget Impact
Model: A Budget Impact Model for rEEG® has been
developed by Analysis Group Economics based on the published research of
Kessler, Russell and others covering the cost of treatment failure in
mental disorders. Modeling the economic impact of rEEG® in a
health plan with five million members, we estimate that full utilization
of rEEG® in treatment-resistant depression, anxiety, bipolar and ADHD
could save $8,500 per treatment resistant member for a savings of $45
million per year.
|
|
·
|
Economic Trials:
Economic Trials are intended to demonstrate the comparative
effectiveness of rEEG versus prevailing Trial & Error medication
management through pilot programs within a payer’s own
population. Although no payer is currently reimbursing
physicians for the use of rEEG technology, we are currently negotiating
pilot programs for reimbursement coverage with several of the nation’s
largest payers, representing over 80 million covered
lives.
|
(3)
|
Full payer
coverage.
|
|
·
|
Patient Advocacy:
We believe that some components of the rEEG test may be billable to
payers under the Mental Health Parity Act. Historically,
patients of our physician network providers, and those in our own clinic
in Colorado, have paid out of pocket for rEEG testing and then sought
reimbursement from their insurance carrier. Although these
providers frequently furnish information to support these claims, the
success of their prosecution by patients is
unclear.
|
|
·
|
Guideline development:
We intend to continue internal and externally-sponsored
clinical research to prove the efficacy of our technology to professional
associations, such as the American Psychiatric Association. We
believe that with strong clinical results, professional associations may
endorse rEEG in their treatment guidelines, which may drive full payer
coverage.
|
|
·
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the National Institutes of Mental
Health, focusing on the cost-effectiveness of rEEG as a more
deployable version of brain imaging to guide
prescribing;
|
|
·
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the Department of Defense and the
Veterans Administration, to address the potential for rEEG in
treating returning soldiers with PTSD and Major Depression;
and
|
|
·
|
the Centers for Medicare and
Medicaid Services (CMS), as a mechanism for improving quality and
cost performance in programs that spend billions on psychotropic
medications.
|
|
·
|
The
study found that rEEG significantly outperformed the modified STAR*D
treatment algorithm from the beginning. The difference, or
separation, between rEEG and the STAR*D control group was 50 and 100
percent for the study’s two primary endpoints. By
contrast, separation between a new treatment and a control group often
averages less than 10 percent in antidepressant
studies. Interestingly, separation was achieved early (in week
2) and was durable, continuing to grow through week
12.
|
|
·
|
The
control group in this case, STAR*D, was a particularly tough comparator,
representing a level of evidence-based depression care that is available
to only 10% of the US population, according to one of the study’s
authors.
|
|
·
|
Statistical
significance (p < .05) was achieved on all primary and most secondary
endpoints.
|
|
·
|
Enrichment:
Selecting patients for clinical trial who not only have the symptoms of
interest, but are shown by rEEG® screening to likely respond to the
developer’s drug. An oft-cited example is the antidepressant
Prozac, which failed several clinical trials before it achieved success in
two separate trials. The ability to design trials in which
exclusion criteria identify and exclude patients who are clearly
resistant, as determined by rEEG, has the potential to sharpen patient
focus and productivity in clinical trials of psychotropic
medications.
|
|
·
|
Repositioning: rEEG®
may suggest new applications/indications of existing
medications. For example, Selective Serotonin Reuptake
Inhibitors Antidepressants (SSRI’s) are now commonly given by primary care
physicians for depression and other complaints, but often produce unwanted
side effects or inadequate results. The ability to define
individual neurometrics for patients, who respond better to tricyclics
(TCA’s), or combinations of TCA’s and stimulants, offers the potential for
new indications for existing
compounds.
|
|
·
|
Salvage:
Resuscitation of medications that failed phase II or III
studies. One example of this opportunity is
Sanofi-Aventis’ unsuccessful PMA filing for Rimonabant, a
promising anti-obesity/cardio-metabolic compound which was denied
approval in the U.S. due to central nervous system side-effects in their
clinical trial populations. Being able to screen out trial
participants with resistance to a certain medication is an application for
rEEG, and could create “theranostic” products (where an indication for use
is combined with rEEG) for compounds which have failed to receive
broader approval.
|
|
·
|
New Combinations:
Unwanted adverse effects occur with medications in fields from
cancer to hepatitis. The ability to improve these medications, in
combination with psychotropics, may improve safety, compliance, and
sometimes, patient outcomes.
|
|
·
|
Decision Support:
Improved understanding supports improved decision making at all
levels of pharmaceutical
development.
|
|
·
|
GENOMIC
HEALTH, Inc. is a life science company focused on the development and
commercialization of genomic-based clinical laboratory services for cancer
that allow physicians and patients to make individualized treatment
decisions.
|
|
·
|
ASPECT
MEDICAL SYSTEMS, INC. (now part of Covidien) is developing a specific EEG
measurement system that indicates a patient's likely response to some
antidepressant medications.
|
|
·
|
BRAIN
RESOURCE COMPANY, is an Australian Clinical Research Organization (CRO)
and neurosciences company focused on personalized medicine solutions for
patients, clinicians, pharmaceutical trials and discovery
research.
|
ITEM 1A.
|
Risk
Factors
|
|
·
|
the
use of and demand for rEEG Reports and other products and/or services that
we may offer in the future that are based on our patented
methodology;
|
|
·
|
the
effectiveness of new marketing and sales
programs;
|
|
·
|
turnover
among our employees;
|
|
·
|
changes
in management;
|
|
·
|
the
introduction of products or services that are viewed in the marketplace as
substitutes for the services we
provide;
|
|
·
|
communications
published by industry organizations or other professional entities in the
psychiatric and physician community that are unfavorable to our
business;
|
|
·
|
the
introduction of regulations which impose additional costs on or impede our
business; and
|
|
·
|
the
timing and amount of our expenses, particularly expenses associated with
the marketing and promotion of our services, the training of physicians
and psychiatrists in the use of our rEEG Reports, and research and
development.
|
|
·
|
delays
or the inability to obtain required approvals from institutional review
boards or other governing entities at clinical sites selected for
participation in our clinical
trials;
|
|
·
|
delays
in enrolling patients and volunteers into clinical
trials;
|
|
·
|
lower
than anticipated retention rates of patients and volunteers in clinical
trials;
|
|
·
|
negative
results from clinical trials for any of our potential products;
and
|
|
·
|
failure
of our clinical trials to demonstrate the efficacy or clinical utility of
our potential products.
|
|
·
|
quarterly
variations in our revenues and operating
expenses;
|
|
·
|
developments
in the financial markets and worldwide or regional
economies;
|
|
·
|
announcements
of innovations or new products or services by us or our
competitors;
|
|
·
|
announcements
by the government relating to regulations that govern our
industry;
|
|
·
|
significant
sales of our Common Stock or other securities in the open
market;
|
|
·
|
variations
in interest rates;
|
|
·
|
changes
in the market valuations of other comparable companies;
and
|
|
·
|
changes
in accounting principles.
|
High
|
Low
|
|||||||
Year
Ended September 30, 2009
|
||||||||
First
Quarter
|
$
|
1.01
|
$
|
0.10
|
||||
Second
Quarter
|
$
|
0.90
|
$
|
0.05
|
||||
Third
Quarter
|
$
|
0.69
|
$
|
0.15
|
||||
Fourth
Quarter
|
$
|
0.72
|
$
|
0.20
|
||||
Year
Ended September 30, 2010
|
||||||||
First
Quarter
|
$
|
1.20
|
$
|
0.50
|
||||
Second
Quarter
|
$
|
1.20
|
$
|
0.52
|
||||
Third
Quarter
|
$
|
1.15
|
$
|
0.40
|
||||
Fourth
Quarter
|
$
|
0.95
|
$
|
0.05
|
ITEM 6.
|
Selected Financial
Data.
|
ITEM 7.
|
Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.
|
Year ended September 30,
|
||||||||
2010
|
2009
|
|||||||
Revenues
|
100
|
%
|
100
|
%
|
||||
Cost
of revenues
|
21
|
19
|
||||||
Gross
profit
|
79
|
81
|
||||||
Research
and development
|
176
|
305
|
||||||
Sales
and marketing
|
136
|
131
|
||||||
General
and administrative expenses
|
785
|
555
|
||||||
Goodwill
impairment
|
0
|
46
|
||||||
Operating
loss
|
(1,018
|
)
|
(956
|
)
|
||||
Other
income (expense), net
|
(262
|
)
|
(261
|
)
|
||||
Net
income (loss)
|
(1,280
|
)%
|
(1217
|
)%
|
Year
ended September 30,
|
Percent
|
|||||||||
2010
|
2009
|
Change
|
||||||||
Neurometric
Service Revenues
|
$ | 136,100 | $ | 120,400 | 13 | % | ||||
Clinical
Service Revenues
|
502,400 | 579,700 | (13 | )% | ||||||
Total
Revenues
|
$ | 638,500 | $ | 700,100 | (9 | )% |
Year ended September 30,
|
Percent
|
|||||||||||
2009
|
2008
|
Change
|
||||||||||
Cost
of Neurometric Information Services revenues
|
$ | 135,100 | $ | 131,600 | 3 | % |
Year ended September 30,
|
Percent
|
|||||||||||
2010
|
2009
|
Change
|
||||||||||
Neurometric
Information Services research and development
|
$ | 1,120,500 | $ | 1,924,100 | (42 | )% |
Year ended September 30,
|
Percent
|
|||||||||
2010
|
2009
|
Change
|
||||||||
Sales
and Marketing
|
||||||||||
Neurometric
Information Services
|
$ | 853,100 | $ | 908,500 | (6 | )% | ||||
Clinical
Services
|
17,800 | 7,300 | 144 | % | ||||||
Total
Sales and Marketing
|
$ | 870,900 | $ | 915,800 | (5 | )% |
Year ended September 30,
|
Percent
|
|||||||||||
2010
|
2009
|
Change
|
||||||||||
General
and administrative
|
||||||||||||
Neurometric
Information Services
|
$ | 4,262,900 | $ | 3,430,900 | 24 | % | ||||||
Clinical
Services
|
754,100 | 669,600 | 13 | % | ||||||||
Total
General and administrative
|
$ | 5,017,000 | $ | 4,100,500 | 22 | % |
Year ended September 30,
|
Percent
|
|||||||||||
2010
|
2009
|
Change
|
||||||||||
Neurometric Information
Services (Expense), net
|
$ | (1,668,100 | ) | $ | (1,822,700 | ) | (8 | )% | ||||
Clinical
Services (Expense)
|
(100 | ) | (200 | ) | 50 | % | ||||||
Total
interest income (expense)
|
$ | (1,668,200 | ) | $ | (1,822,900 | ) | (8 | )% | ||||
* not meaningful |
Year ended September 30,
|
Percent
|
|||||||||||
2010
|
2009
|
Change
|
||||||||||
Neurometric
Information Services net loss
|
$ | (7,904,400 | ) | $ | (8,451,300 | ) | (6 | )% | ||||
Clinical
Services net loss
|
(269,600 | ) | (70,900 | ) | 280 | % | ||||||
Total
Net Loss
|
$ | (8,174,000 | ) | $ | (8,522,200 | ) | (4 | )% |
Payments due by period
|
||||||||||||||||||||
Contractual
Obligations
|
Total
|
Less than 1
year
|
1 to 3 years
|
3-5 years
|
More than 5 years
|
|||||||||||||||
Long-Term
Debt Obligations
|
24,700 | 24,799 | - | - | - | |||||||||||||||
Capital
Lease Obligations
|
5,600 | 2,200 | 3,400 | - | - | |||||||||||||||
Operating
Lease Obligations
|
274,500 | 104,700 | 169,800 | - | - | |||||||||||||||
Total
|
304,800 | 131,600 | 173,200 | - | - |
|
1.
|
$0.9
million, which represents the fair value liability associated with the
warrants issued in conjunction with the October
Notes.
|
|
2.
|
$1.2
million, which represent the fair value liability associated with the
conversion option of the October
Notes.
|
|
(Please
see “Item 5. Market For Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity
Securities”.)
|
|
·
|
the
amount and timing of costs we incur in connection with our research and
product development activities, including enhancements to our CNS Database
and costs we incur to further validate the efficacy of our rEEG
technology;
|
|
·
|
the
amount and timing of costs we incur in connection with the expansion of
our commercial operations, including our selling and marketing
efforts;
|
|
·
|
whether
we incur additional consulting and legal fees in our efforts to obtain
510(k) clearance from the FDA.
|
|
·
|
if
we expand our business by acquiring or investing in complimentary
businesses.
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
39 | |
Consolidated
Balance Sheets as of September 30, 2010 and 2009
|
40
|
|
Consolidated
Statements of Operations for the Years Ended September 30, 2010 and
2009
|
41
|
|
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit) for the Years
Ended September 30, 2010 and 2009
|
42
|
|
Consolidated
Statements of Cash Flows for the Years Ended September 30, 2010 and
2009
|
43
|
|
Notes
to Consolidated Financial Statements for the Years
Ended September 30, 2010 and 2009
|
44
|
As
at September 30,
|
||||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$ | 62,000 | $ | 988,100 | ||||
Accounts
receivable (net of allowance for doubtful accounts of $10,400 and $11,700
in 2010 and 2009 respectively)
|
48,900 | 61,700 | ||||||
Prepaids
and other
|
84,900 | 89,500 | ||||||
Total
current assets
|
195,800 | 1,139,300 | ||||||
Furniture
& equipment
|
23,000 | 17,500 | ||||||
Other
assets
|
18,700 | 4,100 | ||||||
TOTAL
ASSETS
|
$ | 237,500 | $ | 1,160,900 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable (including $60,800 and $7,000 to related parties in 2010 and 2009
respectively)
|
$ | 1,383,700 | $ | 1,285,600 | ||||
Accrued
liabilities
|
380,700 | 261,400 | ||||||
Other
payable – related party
|
100,000 | - | ||||||
Deferred
compensation (including $81,200 and $81,200 to related parties in
2010 and 2009 respectively)
|
263,600 | 220,100 | ||||||
Accrued
patient costs
|
135,000 | 305,500 | ||||||
Accrued
consulting fees (including $27,000 and $18,000 to related parties in 2010
and 2009, respectively)
|
86,600 | 72,100 | ||||||
Derivative
liability
|
2,061,900 | - | ||||||
Secured
convertible promissory notes-related party (net of discounts $1,023,900 in
2010 and $0 in 2009)
|
- | - | ||||||
Current
portion of long-term debt
|
26,900 | 95,900 | ||||||
Total
current liabilities
|
4,438,400 | 2,240,600 | ||||||
LONG-TERM
LIABILITIES
|
||||||||
Note
payable to officer
|
- | 24,800 | ||||||
Capital
lease
|
3,400 | 5,600 | ||||||
Total
long-term liabilities
|
3,400 | 30,400 | ||||||
TOTAL
LIABILITIES
|
4,441,800 | 2,271,000 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
- | - | ||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Common
stock, $0.001 par value; authorized 750,000,000 shares; 56,023,921
and 41,781,129 shares outstanding as of September 30, 2010 and
2009
|
56,000 | 41,800 | ||||||
Additional
paid-in capital
|
29,109,600 | 24,044,000 | ||||||
Accumulated
deficit
|
(33,369,900 | ) | (25,195,900 | ) | ||||
Total
stockholders' equity
|
(4,204,300 | ) | (1,110,100 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 237,500 | $ | 1,160,900 |
YEARS ENDED
SEPTEMBER 30,
|
||||||||
2010
|
2009
|
|||||||
REVENUES
|
||||||||
Neurometric
Information Services
|
$ | 136,100 | $ | 120,400 | ||||
Clinical
Services
|
502,400 | 579,700 | ||||||
638,500 | 700,100 | |||||||
OPERATING
EXPENSES:
|
||||||||
Cost
of Neurometric Service revenues
|
135,100 | 131,600 | ||||||
Research
and development
|
1,120,500 | 1,924,100 | ||||||
Sales
and marketing
|
870,900 | 915,800 | ||||||
General
and administrative
|
5,017,000 | 4,100,500 | ||||||
Goodwill
impairment charges
|
- | 320,200 | ||||||
Total
operating expenses
|
7,143,500 | 7,392,200 | ||||||
OPERATING
LOSS
|
(6,505,000 | ) | (6,692,100 | ) | ||||
OTHER
INCOME (EXPENSE):
|
||||||||
Interest
income (expense), net
|
(360,500 | ) | (1,732,900 | ) | ||||
Loss
on extinguishment of debt
|
(1,094,300 | ) | - | |||||
Financing
fees
|
(213,400 | ) | (90,000 | ) | ||||
Total
other income (expense)
|
(1,668,200 | ) | (1,822,900 | ) | ||||
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
(8,173,200 | ) | (8,515,000 | ) | ||||
PROVISION
FOR INCOME TAXES
|
800 | 7,200 | ||||||
NET
LOSS
|
$ | (8,174,000 | ) | $ | (8,522,200 | ) | ||
BASIC
NET LOSS PER SHARE
|
$ | (0.16 | ) | $ | (0.31 | ) | ||
DILUTED
NET LOSS PER SHARE
|
$ | (0.16 | ) | $ | (0.31 | ) | ||
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
||||||||
Basic
|
52,277,119 | 27,778,171 | ||||||
Diluted
|
52,277,119 | 27,778,171 |
Additional
|
||||||||||||||||||||
Common Stock
|
Paid-in
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||
Balance
at October 1, 2008
|
25,299,547
|
$
|
25,300
|
$
|
17,701,300
|
$
|
(16,673,700
|
)
|
$
|
1,052,900
|
||||||||||
Stock-
based compensation
|
-
|
-
|
850,500
|
-
|
850,500
|
|||||||||||||||
Issuance
of 3,433,333 bridge warrants
|
-
|
-
|
1,058,000
|
-
|
1,058,000
|
|||||||||||||||
Exercise
of 1,498,986 $0.01 warrants
|
1,498,986
|
1,500
|
13,500
|
-
|
15,000
|
|||||||||||||||
Exercise
of 2,124,740 $0.132 options
|
2,124,740
|
2,100
|
278,400
|
-
|
280,500
|
|||||||||||||||
Issuance
of stock in connection with the Maxim PIPE net of offering costs of
$250,700
|
6,810,002
|
6,800
|
1,785,500
|
-
|
1,792,300
|
|||||||||||||||
Value
of beneficial conversion feature of bridge notes
|
-
|
-
|
642,000
|
-
|
642,000
|
|||||||||||||||
Issuance
of stock on conversion $1,720,900 of bridge notes and accrued
interest
|
6,047,854
|
6,100
|
1,714,800
|
-
|
1,720,900
|
|||||||||||||||
Warrants
issued in association with the Maxim PIPE
|
-
|
-
|
1,607,000
|
-
|
1,607,000
|
|||||||||||||||
Offering
cost pertaining to the Maxim PIPE
|
-
|
-
|
(1,607,000
|
)
|
-
|
(1,607,000
|
)
|
|||||||||||||
Net
loss for the year ended September 30, 2009
|
-
|
-
|
(8,522,200
|
)
|
(8,522,200
|
)
|
||||||||||||||
Balance
at September 30, 2009
|
41,781,129
|
$
|
41,800
|
$
|
24,044,000
|
$
|
(25,195,900
|
)
|
$
|
(1,110,100
|
)
|
|||||||||
Stock-
based compensation
|
-
|
-
|
1,302,100
|
-
|
1,302,100
|
|||||||||||||||
Issuance
of stock in connection with the Maxim PIPE net of offering costs of
$540,600
|
11,786,666
|
11,800
|
2,983,600
|
-
|
2,995,400
|
|||||||||||||||
Warrants
issued in association with the Maxim PIPE
|
-
|
-
|
7,615,100
|
-
|
7,615,100
|
|||||||||||||||
Offering
cost pertaining to the Maxim PIPE
|
-
|
-
|
(7,615,100
|
)
|
-
|
(7,615,100
|
)
|
|||||||||||||
Value
of warrants surrendered for cashless exercise
|
-
|
-
|
(415,800
|
)
|
-
|
(415,800
|
)
|
|||||||||||||
Stock
issued for cashless exercise
|
2,456,126
|
2,400
|
413,400
|
-
|
415,800
|
|||||||||||||||
Warrants
issued for consulting services
|
-
|
-
|
199,000
|
-
|
199,000
|
|||||||||||||||
Value
of beneficial conversion feature of bridge notes
|
-
|
-
|
430,700
|
-
|
430,700
|
|||||||||||||||
Issuance
of bridge warrants
|
152,600
|
152,600
|
||||||||||||||||||
Net
loss for the year ended September 30, 2010
|
-
|
-
|
-
|
(8,174,000
|
)
|
(8,174,000
|
)
|
|||||||||||||
Balance
at September 30, 2010
|
56,023,921
|
$
|
56,000
|
$
|
29,109,600
|
$
|
(33,369,900
|
)
|
$
|
(4,204,300
|
)
|
YEAR ENDED SEPTEMBER 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (8,174,000 | ) | $ | (8,522,200 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
& amortization
|
9,400 | 9,100 | ||||||
Amortization
of discount on bridge notes issued
|
335,900 | 1,058,000 | ||||||
Value
of beneficial conversion feature of bridge notes
|
- | 642,000 | ||||||
Stock
based compensation
|
1,302,100 | 850,500 | ||||||
Extinguishment
of debt
|
1,094,300 | - | ||||||
Issuance
of warrants for consulting services
|
199,000 | - | ||||||
Issuance
of warrants for financing services
|
193,400 | - | ||||||
Non-cash
interest expense
|
21,600 | 20,900 | ||||||
Goodwill
impairment
|
- | 320,200 | ||||||
Write-off
of doubtful accounts
|
12,950 | 22,700 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(150 | ) | 13,800 | |||||
Prepaids
and other
|
4,600 | 99,900 | ||||||
Accounts
payable and accrued liabilities
|
231,900 | 1,003,800 | ||||||
Deferred
compensation and others
|
43,500 | (40,300 | ) | |||||
Accrued
patient costs
|
(170,500 | ) | (92,000 | ) | ||||
Security
Deposit on new lease
|
(14,600 | ) | - | |||||
Net
cash used in operating activities
|
(4,910,600 | ) | (4,613,600 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Acquisition
of Furniture & Equipment
|
(14,900 | ) | (2,000 | ) | ||||
Net
cash used in investing activities
|
(14,900 | ) | (2,000 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Repayment
of convertible debt with accrued interest
|
- | (92,600 | ) | |||||
Repayment
of debt
|
(94,100 | ) | (86,700 | ) | ||||
Repayment
of lease payable
|
(1,900 | ) | (1,800 | ) | ||||
Proceeds
from the sale of common stock, net of offering costs
|
2,995,400 | 1,792,300 | ||||||
Proceeds
from bridge notes
|
1,000,000 | 1,700,000 | ||||||
Proceeds
from related party loan
|
100,000 | - | ||||||
Proceeds
from exercise of warrants and options
|
- | 295,500 | ||||||
Net
cash provided by financing activities
|
3,999,400 | 3,606,700 | ||||||
NET
DECREASE IN CASH
|
(926,100 | ) | (1,008,900 | ) | ||||
CASH-
BEGINNING OF YEAR
|
988,100 | 1,997,000 | ||||||
CASH-
END OF YEAR
|
$ | 62,000 | $ | 988,100 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid
during the period for:
|
||||||||
Interest
|
$ | 7,900 | $ | 64,100 | ||||
Income
taxes
|
$ | 800 | $ | 7,200 | ||||
Fair
value of note payable to officer issued for acquisition
|
$ | 24,700 | $ | 118,600 | ||||
Fair
value of equipment acquired through lease
|
$ | 6,600 | $ | 7,600 | ||||
Conversion
of bridge notes and related accrued interest into common
stock
|
$ | - | $ | 1,720,900 |
NATURE OF
OPERATIONS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
|
·
|
Level 1 inputs
to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active
markets.
|
|
·
|
Level 2 inputs
to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the
assets or liability, either directly or indirectly, for substantially the
full term of the financial
instruments.
|
|
·
|
Level 3 inputs
to the valuation methodology are unobservable and significant to the fair
value.
|
September 30, 2010
|
||||
Annual
dividend yield
|
-
|
|||
Expected
life (years)
|
1.0-3.5
|
|||
Risk-free
interest rate
|
1.12%-1.27
|
%
|
||
Expected
volatility
|
142%-274
|
%
|
Fair
Value
|
Fair
Value Measurements at
|
|||||||||||||||
As
of
|
September
30, 2010
|
|||||||||||||||
September
30,
|
Using Fair Value Hierarchy
|
|||||||||||||||
2010
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Liabilities
|
||||||||||||||||
Warrant
liability
|
$ | 889,100 | $ | - | $ | 889,100 | $ | - | ||||||||
Secured
convertible promissory note
|
1,023,900 | 1,023,900 | ||||||||||||||
Conversion
option liability
|
1,172,800 | - | 1,172,800 | - | ||||||||||||
Total
accrued derivative liabilities
|
$ | 3,085,800 | $ | - | $ | 3,085,800 | $ | - |
3.
|
CONVERTIBLE DEBT AND EQUITY
FINANCINGS
|
(a)
|
the
March 30, 2009 SAIL/Brandt Notes
|
(b)
|
the
May 14, 2009 SAIL Note
|
(c)
|
the
June 12, 2009 Pappajohn Note
|
(a)
|
Conversion
of the March 30, 2009 SAIL/Brandt
Notes
|
(b)
|
Conversion
of the May 14, 2009 SAIL Note
|
(c)
|
Conversion of
the June 12, 2009 Pappajohn Note
|
4.
|
STOCKHOLDERS’
EQUITY
|
Options
granted in:
|
Dividend
Yield
|
Risk-free
interest
rate
|
Expected
volatility
|
Expected life
|
|||||||||
Fiscal
2006
|
0
|
%
|
5.46
|
%
|
100
|
%
|
5
years
|
||||||
November
2006
|
0
|
%
|
5.00
|
%
|
100
|
%
|
10
years
|
||||||
August
2007
|
0
|
%
|
4.72
|
%
|
91
|
%
|
5
years
|
||||||
October
2007
|
0
|
%
|
4.60
|
%
|
105
|
%
|
5
years
|
||||||
December
2007
|
0
|
%
|
4.00
|
%
|
113
|
%
|
5
years
|
||||||
April
2008
|
0
|
%
|
3.78
|
%
|
172
|
%
|
5
years
|
||||||
September
2008
|
0
|
%
|
3.41
|
%
|
211
|
%
|
5
years
|
||||||
October
2008
|
0
|
%
|
3.77
|
%
|
211
|
%
|
5
years
|
||||||
March
2009
|
0
|
%
|
3.00
|
%
|
385
|
%
|
5
years
|
||||||
March
2010
|
0
|
%
|
3.62
|
%
|
215
|
%
|
5
years
|
||||||
July
2010
|
0
|
%
|
1.81
|
%
|
536
|
%
|
5
years
|
For the fiscal year ended September 30,
|
||||||||
2010
|
2009
|
|||||||
Operations
|
$
|
18,000
|
$
|
16,100
|
||||
Research
and development
|
341,600
|
260,800
|
||||||
Sales
and marketing
|
197,200
|
137,500
|
||||||
General
and administrative
|
745,300
|
436,100
|
||||||
Total
|
$
|
1,302,100
|
$
|
850,500
|
Number of
Shares
|
Weighted Average
Exercise Price
|
|||||||
Outstanding
at October 1, 2008
|
8,964,567
|
$
|
0.60
|
|||||
Granted
|
80,000
|
$
|
0.43
|
|||||
Exercised
|
(2,124,740
|
)
|
$
|
0.132
|
||||
Forfeited
|
(257,813
|
)
|
$
|
0.51
|
||||
Outstanding
at September 30, 2009
|
6,662,014
|
$
|
0.76
|
|||||
Granted
|
9,450,000
|
$
|
0.54
|
|||||
Exercised
|
-
|
$
|
||||||
Forfeited
|
(441,041
|
)
|
$
|
0.81
|
||||
Outstanding
at September 30, 2010
|
15,670,973
|
$
|
0.62
|
|||||
Weighted
average fair value of options granted during:
|
||||||||
Year
ended September 30, 2009
|
$
|
0.43
|
||||||
Year
ended September 30, 2010
|
$
|
0.54
|
Exercise
Price
|
Number
of Shares
|
Weighted
Average
Contractual
Life
|
Weighted
Average
Exercise
Price
|
||||||
$0.12
|
859,270
|
10
years
|
$
|
0.12
|
|||||
$0.132
|
987,805
|
7
years
|
$
|
0.132
|
|||||
$0.30
|
135,700
|
10
years
|
$
|
0.30
|
|||||
$0.59
|
28,588
|
10
years
|
$
|
0.59
|
|||||
$0.80
|
140,000
|
10
years
|
$
|
0.80
|
|||||
$0.89
|
968,875
|
10
years
|
$
|
0.89
|
|||||
$0.96
|
496,746
|
10
years
|
$
|
0.96
|
|||||
$1.09
|
2,513,549
|
10
years
|
$
|
1.09
|
|||||
$1.20
|
243,253
|
5
years
|
$
|
1.20
|
|||||
$0.51
|
41,187
|
10
years
|
$
|
0.51
|
|||||
$0.40
|
856,000
|
10
years
|
$
|
0.40
|
|||||
$0.55
|
8,400,000
|
10
years
|
$
|
0.55
|
|||||
Total
|
15,670,973
|
$
|
0.62
|
Warrants
to Purchase
|
Exercise
Price
|
Issued
in Connection With:
|
||||
100,000
shares
|
$
|
0.25
|
A
$200,000 bridge note with SAIL on May 14, 2009 as described in Note
3
|
|||
3,333,333
shares
|
$
|
0.30
|
A
$1,000,000 bridge note with Pappajohn on June 12, 2009 as described
in Note 3
|
|||
3,404,991
shares
|
$
|
0.30
|
Associated
with the August 26, 2009 private placement transaction of 6,810,002 shares
at $0.30 with 50% warrant coverage as described in Note
3
|
|||
3,023,927
shares
|
$
|
0.30
|
Associated
with the automatic conversion of $1,700,000 of convertible promissory
notes and $20,900 accrued interest upon completion an equity financing in
excess of $1,500,000 as described in Note 3
|
|||
274,867
shares
|
$
|
0.33
|
The
placement agent for private placement as described in Note
3
|
Warrants to Purchase
|
Exercise
Price
|
Issued in Connection With:
|
|||
5,893,334
shares
|
$ | 0.30 |
Associated
with the second, third and fourth closing of the private placement
transaction of 11,786,667 shares at $0.30 with 50% warrant coverage as
described in Note 3
|
||
1,200,267
shares
|
$ | 0.33 |
Associated
with warrants for the lead and secondary placement agents for private
placement as described in Note 3
|
||
(3,333,333)
shares
|
$ | 0.30 |
These
warrants were surrendered in a net issue exercise and 2,456,126 shares
were issued in lieu of cash.
|
||
500,000
shares
|
$ | 0.30 |
These
warrants were granted to individual staff members of Equity Dynamics, Inc.
a Company owned by Mr. Pappajohn, for their efforts in providing
consulting services associated with the Company’s financing
activities.
|
||
852,812
shares
|
$ | 0.30 |
These
warrants were issued to Mr. John Pappajohn, a Director of the Company,
pursuant to the October 1, 2010 Note and Warrant Purchase agreement
described in note 3; whereby two outstanding convertible notes of $250,000
each, issued on June 3 and July 25, 2010 respectively, and 250,000
outstanding warrants issued on July 25, 2010, with an exercise price of
$0.50 were cancelled and exchanged on October 1, 2010 for two
new notes of $250,000 each plus unpaid interest and warrants to purchase
852,812 shares of common stock.
|
||
256,125
shares
|
$ | 0.30 |
These
warrants were issued to Deerwood Partners, LLC which is controlled by Dr.
George Kallins, a Director of the Company, pursuant to the October 1, 2010
Note and Warrant Purchase agreement described in note 3; whereby two
outstanding convertible notes of $125,000 each, issued on July 5 and
August 20, 2010 respectively, and 75,000 outstanding warrants issued on
August 20, 2010, with an exercise price of $0.56 were cancelled and
exchanged on November 3, 2010 for two new notes of $125,000 each plus
unpaid interest and warrants to purchase 256,125 shares of common
stock.
|
||
256,125
shares
|
$ | 0.30 |
These
warrants were issued to Deerwood Holdings, LLC which is controlled by Dr.
George Kallins, a Director of the Company, pursuant to the October 1, 2010
Note and Warrant Purchase agreement described in note 3; whereby two
outstanding convertible notes of $125,000 each, issued on July 5 and
August 20, 2010 respectively, and 75,000 outstanding warrants issued on
August 20, 2010, with an exercise price of $0.56 were cancelled and
exchanged on November 3, 2010 for two new notes of $125,000 each plus
unpaid interest and warrants to purchase 256,125 shares of common
stock.
|
||
341,498
shares
|
$ | 0.30 |
These
warrants were issued to SAIL, of which Mr. David Jones, a Director of the
Company, is a managing partner. SAIL had undertaken to
guarantee the four abovementioned Deerwood notes which were issued on July
5 and August 20, 2010. For this guarantee SAIL was issued
100,000 warrants on August 20, 2010 with an exercise price of
$0.56. Upon the cancellation and exchange of the Deerwood notes
on November 3, 2010, SAIL undertook to guarantee the four new Deerwood
notes in exchange for the cancellation of the SAIL’s 100,000 outstanding
warrants which were replaced with new
341,498.
|
5.
|
INCOME
TAXES
|
2010
|
2009
|
|||||||
Federal
income tax (benefit) at statutory rates
|
(34
|
)%
|
(34
|
)%
|
||||
Stock-based
compensation
|
0
|
%
|
0
|
%
|
||||
Non
deductible interest expense
|
5
|
%
|
0
|
%
|
||||
Extinguishment
of debt
|
5
|
%
|
0
|
%
|
||||
Change
in valuation allowance
|
30
|
%
|
37
|
%
|
||||
Goodwill
write off
|
0
|
%
|
(3
|
)%
|
||||
State
tax benefit
|
(6
|
)%
|
0
|
%
|
2010
|
2009
|
|||||||
Deferred
income tax assets:
|
||||||||
Net
operating loss carryforward
|
$
|
10,451,700
|
$
|
8,765,900
|
||||
Deferred
interest, consulting and compensation liabilities
|
1,776,800
|
987,500
|
||||||
Amortization
|
(34,400
|
)
|
(24,300
|
)
|
||||
Deferred
income tax assets – other
|
15,000
|
7,800
|
||||||
12,209,100
|
9,736,900
|
|||||||
Deferred
income tax liabilities—other
|
-
|
-
|
||||||
Deferred
income tax asset—net before valuation allowance
|
12,209,100
|
9,736,900
|
||||||
Valuation
allowance
|
(12,209,100
|
)
|
(9,736,900
|
)
|
||||
Deferred
income tax asset—net
|
$
|
-
|
$
|
-
|
6.
|
ACQUISITION OF NEURO THERAPY
CLINIC, PC
|
Fair
value of note payable issued
|
$
|
265,900
|
||
Direct
transaction costs
|
43,700
|
|||
Purchase
price
|
309,600
|
|||
Allocated
to net tangible liabilities, including cash of
$32,100
|
(10,600
|
)
|
||
Allocated
to goodwill
|
$
|
320,200
|
7.
|
LONG-TERM
DEBT
|
8.
|
RELATED
PARTY TRANSACTIONS
|
9.
|
REPORTABLE
SEGMENTS
|
Year ended September 30,
2010
|
||||||||||||||||
Reference
Neurometric
|
Clinic
|
Eliminations
|
Total
|
|||||||||||||
Revenues
|
156,000 | 535,700 | (53,200 | ) | 638,500 | |||||||||||
Operating
expenses:
|
||||||||||||||||
Cost
of revenues
|
135,100 | 19,900 | (19,900 | ) | 135,100 | |||||||||||
Research
and development
|
1,120,500 | - | - | 1,120,500 | ||||||||||||
Sales
and marketing
|
853,100 | 17,800 | - | 870,900 | ||||||||||||
General
and administrative
|
4,296,200 | 754,100 | (33,300 | ) | 5,017,000 | |||||||||||
Goodwill
impairment charges
|
- | - | - | - | ||||||||||||
Total
operating expenses
|
6,404,900 | 791,800 | (53,200 | ) | 7,143,500 | |||||||||||
Loss
from operations
|
$ | (6,248,900 | ) | $ | (256,100 | ) | $ | 0 | $ | (6,505,000 | ) |
Year ended September 30,2009
|
||||||||||||||||
Reference
Neurometric
|
Clinic
|
Eliminations
|
Total
|
|||||||||||||
Revenues
|
138,900
|
628,200
|
(67,000
|
)
|
700,100
|
|||||||||||
Operating
expenses:
|
||||||||||||||||
Cost
of revenues
|
131,600
|
18,500
|
(18,500
|
)
|
131,600
|
|||||||||||
Research
and development
|
1,924,100
|
-
|
-
|
1,924,100
|
||||||||||||
Sales
and marketing
|
908,500
|
7,300
|
-
|
915,800
|
||||||||||||
General
and administrative
|
3,479,400
|
669,600
|
(48,500
|
)
|
4,100,500
|
|||||||||||
Goodwill
impairment charges
|
320,200
|
-
|
-
|
320,200
|
||||||||||||
Total
operating expenses
|
6,763,800
|
695,400
|
(67,000
|
)
|
7,392,200
|
|||||||||||
Loss
from operations
|
$
|
(6,624,900
|
)
|
$
|
(67,200
|
)
|
$
|
0
|
$
|
(6,692,100
|
)
|
Reference
Neurometric
|
Clinic
|
Total
|
||||||||||
Total
assets
|
$
|
203,900
|
$
|
33,600
|
$
|
237,500
|
10.
|
EARNINGS
PER SHARE
|
2010
|
2009
|
|||||||
Net
loss for computation of basic net income (loss) per share
|
$
|
(8,174,000
|
)
|
$
|
(8,522,200
|
)
|
||
Net
income (loss) for computation of dilutive net income (loss) per
share
|
$
|
(8,174,000
|
)
|
$
|
(8,522,200
|
)
|
||
Basic
net income (loss) per share
|
$
|
(0.16
|
)
|
$
|
(0.31
|
)
|
||
Diluted
net income (loss) per share
|
$
|
(0.16
|
)
|
$
|
(0.31
|
)
|
||
Basic
weighted average shares outstanding
|
52,277,119
|
27,778,171
|
||||||
Dilutive
common equivalent shares
|
-
|
-
|
||||||
Diluted
weighted average common shares
|
52,277,119
|
27,778,171
|
||||||
Anti-dilutive
common equivalent shares not included in the computation
of dilutive net loss per share:
|
||||||||
Convertible
debt
|
214,561
|
-
|
||||||
Warrants
|
19,194,806
|
8,318,310
|
||||||
Options
|
11,242,729
|
8,548,206
|
11.
|
COMMITMENTS
AND CONTINGENT
LIABILITIES
|
12.
|
SIGNIFICANT
CUSTOMERS
|
13.
|
SUBSEQUENT
EVENTS
|
ITEM
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
|
·
|
We do not have a comprehensive
and formalized accounting and procedures
manual.
|
Name
|
Age
|
Position
|
||
George
Carpenter
|
52
|
Chairman
of the Board, Chief Executive Officer and Secretary
|
||
Paul
Buck
|
54
|
Chief
Financial Officer
|
||
Daniel
Hoffman, M.D.
|
62
|
President,
Chief Medical Officer
|
||
Michael
Darkoch
|
66
|
Executive
Vice President and Chief Marketing Officer
|
||
John
Pappajohn
|
82
|
Director
|
||
David
B. Jones
|
67
|
Director
|
||
Jerome
Vaccaro, M.D.
|
55
|
Director
|
||
Henry
T. Harbin, M.D
|
64
|
Director
|
||
George
Kallins, M.D.
|
50
|
Director
|
Name of Director
|
Audit Committee
|
Compensation Committee
|
||
John
Pappajohn
|
Member
|
Chair
|
||
David
B. Jones
|
Chair
|
Member
|
||
Jerome
Vaccaro
|
Member
|
|||
Henry
T. Harbin
|
Member
|
|
·
|
the
name and address of the stockholder proposing to make the nomination and
of the person or persons to be
nominated;
|
|
·
|
a
representation that the holder is a stockholder entitled to vote his or
her shares at the annual meeting and intends to vote his or her shares in
person or by proxy for the person or persons nominated in the
notice;
|
|
·
|
a
description of all arrangements or understandings between the
stockholder(s) supporting the nomination and each
nominee;
|
|
·
|
any
other information concerning the proposed nominee(s) that we would be
required to include in the proxy statement if our Board of Directors made
the nomination; and
|
|
·
|
the
consent of the nominee(s) to serve as director if
elected.
|
|
·
|
Alignment
- to align the interests of executives and shareholders through
equity-based compensation awards;
|
|
·
|
Retention
- to attract, retain and motivate highly qualified, high performing
executives to lead our growth and success;
and
|
|
·
|
Performance
- to provide, when appropriate, compensation that is dependent upon the
executive’s achievements and the company’s
performance.
|
|
·
|
Rewards
under incentive plans are based upon our short-term and longer-term
financial results and increasing shareholder
value;
|
|
·
|
Executive
pay is set at sufficiently competitive levels to attract, retain and
motivate highly talented individuals who are necessary for us to strive to
achieve our goals, objectives and overall financial
success;
|
|
·
|
Compensation
of an executive is based on such individual’s role, responsibilities,
performance and experience; and
|
|
·
|
Annual
performance of our company and the executive are taken into account in
determining annual bonuses with the goal of fostering a
pay-for-performance culture.
|
Name and
Principal Position
|
Fiscal Year
Ended
September
30,
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||
George
Carpenter (Chief Executive
Officer,
Principal Executive Officer,
|
2010
|
213,700 | (9) | 2,167,300 | (1)(5) | 20,800 | (3) | 2,401,800 | ||||||||||||||
Director)
|
2009
|
180,000 | - | - | 20,500 | (3) | 200,500 | |||||||||||||||
Daniel
Hoffman (President, Chief
|
2010
|
150,000 | - | 270,900 | (1)(6) | 26,000 | (4) | 446,900 | ||||||||||||||
Medical
Officer)
|
2009
|
150,000 | - | - | 33,400 | (4) | 183,400 | |||||||||||||||
Paul
Buck (Chief Financial Officer)
|
2010
|
127,000 | (10) | - | 243,800 | (1)(7) | 94,900 | (11) | 465,700 | |||||||||||||
2009
|
- | - | - | 178,500 | (11) | 178,500 | ||||||||||||||||
Michael
Darkoch (Executive Vice
President
and Chief Marketing
|
2010
|
52,000 | - | 180,000 | (2)(8) | 6,100 | (3) | 363,400 | ||||||||||||||
Officer)
|
2009
|
- | - | - | - | - |
|
(1)
|
On
March 3, 2010, options were granted to Mr. Carpenter in the amount of
4,000,000 shares, Dr. Hoffman in the amount of 500,000 shares,
and Mr. Buck in the amount of 450,000
shares.
|
|
(2)
|
On
July 6, 2010, options were granted to Mr. Darkoch in the amount of 450,000
shares.
|
Name
|
Number of Securities Underlying
Unexercised Options (#)
|
Option Exercise
Price ($)
|
Option Expiration
Date
|
||||||||||
Exercisable
|
Unexercisable
|
||||||||||||
George
Carpenter (1)
|
583,338 | 3,416,662 | 0.55 |
March
2, 2020
|
|||||||||
726,629 | 242,246 | 0.89 |
October
1, 2017
|
||||||||||
Daniel
Hoffman (2)
|
72,919 | 427,081 | 0.55 |
March
2, 2020
|
|||||||||
712,316 | 101,746 | 1.09 |
August
8, 2017
|
||||||||||
119,013 | 0 | 0.12 |
August
11, 2016
|
||||||||||
Paul
Buck(3)
|
65,625 | 384,375 | 0.55 |
March
2, 2020
|
|||||||||
Michael
Darkoch(4)
|
28,125 | 421,875 | 0.44 |
July
6,
2020
|
Name
|
Option
Awards ($)
|
All Other
Compensation ($)
|
Total ($)
|
|||||||||
Jerome
Vaccaro M.D. (3)
|
135,500 | (1) | - | 135,500 | ||||||||
Henry
Harbin M.D. (4)
|
342,200 | (1) | 45,000 | 387,200 | ||||||||
John
Pappajohn (5)
|
135,500 | (1) | - | 135,500 | ||||||||
David
Jones (6)
|
135,500 | (1) | - | 135,500 | ||||||||
Tommy
Thompson (7)
|
81,300 | (1) | - | 81,300 | ||||||||
George
Kallins M.D.(8)
|
100,000 | (2) | - | 100,000 |
(1)
|
These
options were granted on March 3, 2010. The amount reflected in
the table represents the aggregate grant-date fair value of options
computed in accordance with FASB ASC Topic 718 (formerly FAS
123R). The Company estimates the fair value of each option on
the grant date using the Black-Scholes model with the following
assumptions: dividend yield 0%; risk-free interest rate 3.62%;
expected volatility 215% and expected life of the option 5
years.
|
(2)
|
These
options were granted on July 5, 2010. The amount reflected in
the table represents the aggregate grant-date fair value of options
computed in accordance with FASB ASC Topic 718 (formerly FAS
123R). The Company estimates the fair value of each option on
the grant date using the Black-Scholes model with the following
assumptions: dividend yield 0%; risk-free interest rate 1.81%;
expected volatility 536% and expected life of the option 5
years.
|
(3)
|
On
March 3, 2010, Dr. Vaccaro was granted 250,000 options having an exercise
price of $0.55 for his services as a director. The options vest
equally over 36 months starting on the date of grant. The
aggregate number of option awards outstanding for Dr. Vaccaro at September
30, 2010 was 270,000.
|
(4)
|
On
March 3, 2010 Dr Harbin was granted 250,000 options for his services as a
director and 400,000 options for consulting services pursuant to his March
26, 2010 Consulting Agreement described below. These options
have an exercise price of $0.55 and vest equally over 36 months starting
on the date of grant. All other compensation is comprised of
the cash payment of $24,000 paid in January 2010 for Dr. Harbin’s March
17, 2009 Consulting Agreement described below, plus $21,000 which have
been accrued through September 30, 2010 on Dr. Harbin’s March 26, 2010
Consulting Agreement. To date, no cash payment has been made on
the March 26, 2010 agreement.
|
(5)
|
On
March 3, 2010, Mr. Pappajohn was granted 250,000 options having an
exercise price of $0.55 for his services as a director. The
options vest equally over 36 months starting on the date of
grant. The aggregate number of option awards outstanding for
Mr. Pappajohn at September 30, 2010 was
250,000.
|
(6)
|
On
March 3, 2010, Mr. Jones was granted 250,000 options having an exercise
price of $0.55 for his services as a director. The options vest
equally over 36 months starting on the date of grant. The
aggregate number of option awards outstanding for Mr. Jones at September
30, 2010 was 250,500. Mr. Jones has assigned his options to
SAIL Venture Partners, L.P.
|
(7)
|
On
March 3, 2010, Mr. Thompson was granted 250,000 options having an exercise
price of $0.55 for his services as a director. Mr. Thompson
resigned from the Board effective March 12, 2010 thereby forfeiting his
options with no options vested. On March 3, 2010 Mr. Thompson
was also granted 150,000 options for his services as an advisor to the
Company. These options have an exercise price of $0.55 and vest
equally over 36 months starting on the date of grant. The
aggregate number of option awards outstanding for Mr. Thompson at
September 30, 2010 was 150,000.
|
(8)
|
On
July 5, 2010, Dr. Kallins was granted 250,000 options having an exercise
price of $0.40 for his services as a director. The options vest
equally over 36 months starting on the date of grant. The
aggregate number of option awards outstanding for Dr. Kallins at September
30, 2010 was 250,000.
|
Number of Shares Beneficially Owned
|
||||||||
Name of Beneficial Owner
|
Number
|
Percentage of Shares Outstanding
|
||||||
Named Executive Officers and
Directors:
|
||||||||
George
Carpenter
Chief
Executive Officer and Chairman of the Board (1)
|
2,347,377 | 4.0 | % | |||||
Paul
Buck
Chief
Financial Officer (2)
|
382,500 | * | ||||||
Daniel
Hoffman
President
and Chief Medical Officer (3)
|
1,134,699 | 2.0 | % | |||||
Michael
Darkoch
Executive
VP and Chief Marketing Officer (4)
|
75,000 | * | ||||||
David
B. Jones
Director
(5)
|
10,399,021 | 17.3 | % | |||||
Dr.
Jerome Vaccaro
Director
(6)
|
103,344 | * | ||||||
Dr.
Henry Harbin
Director
(7)
|
383,514 | * | ||||||
John
Pappajohn
Director
(8)
|
15,698,383 | 24.8 | % | |||||
George
Kallins
Director(9)
|
3,628,109 | 6.1 | % | |||||
Executive
Officers and Directors as a group (9 persons) (10)
|
34,151,947 | 45.8 | % | |||||
5%
Stockholders:
|
||||||||
SAIL
Venture Partners LP (5)
|
10,399,021 | 17.3 | % | |||||
Leonard
Brandt (11)
|
11,081,982 | 19.0 | % |
(1)
|
Consists
of (a) 360,000 shares of common stock (b) 180,000 shares of common stock
issuable upon the exercise of vested and exercisable warrants to purchase
common stock and (c) 1,807,377 shares of common stock issuable upon the
exercise of vested and exercisable
options.
|
(2)
|
Consists
of (a) 180,000 shares of common stock (b) 90,000 shares issuable upon
exercise of warrants to purchase common stock and (c) 112,500 shares of
common stock issuable upon the exercise of vested and exercisable
options.
|
(3)
|
Consists
of (a) 98,544 shares of common stock (b) 12,501 shares of common stock
issuable upon the exercise of vested and exercisable warrants to purchase
common stock and (c) 1,024,154 shares of common stock issuable upon the
exercise of vested and exercisable
options.
|
(4)
|
Consists
of 75,000 shares of common stock issuable upon the exercise of vested and
exercisable options.
|
(5)
|
Consists
of (a) 6,471,067 shares of common stock held by SAIL Venture Partners,
L.P., (b) 861,458 shares of common stock issuable upon the conversion of
convertible notes held by SAIL Venture Partners, L.P., (c) 2,983,152
shares of Common Stock issuable upon the exercise of vested and
exercisable warrants held by SAIL Venture Partners, L.P., and (d) 83,344
shares of common stock issuable upon the exercise of vested and
exercisable options held by David Jones and assigned to Sail Venture
Partners, L.P. The unanimous vote of the managing members of
SAIL Venture Partners, LLC (who are David B. Jones, Walter Schindler, Alan
Sellers, Henry Habicht and Michael Hammons), is required to vote and make
investment decisions over the shares held by SAIL Venture Partners,
L.P. The address of SAIL Venture Partners, L.P. is 3161
Michelson, Suite 750, Irvine, CA
92612.
|
(6)
|
Consists
of 103,344 shares of common stock issuable upon the exercise of vested and
exercisable options.
|
(7)
|
Consists
of (a) 8,333 shares of common stock, (b) 2,501 shares of common stock
issuable upon the exercise of warrants to purchase common stock and (c)
372,680 shares of common stock issuable upon the exercise of vested and
exercisable options.
|
(8)
|
Consists
of (a) 8,387,578 shares of common stock, (b) 2,624,649 shares of common
stock issuable upon the conversion of convertible notes, (c) 4,602,812
shares of common stock issuable upon the exercise of warrants to purchase
common stock and (d) 83,344 shares of common stock issuable upon the
exercise of vested and exercisable options. The address of John
Pappajohn is 2116 Financial Center, Des Moines, IA
50309.
|
(9)
|
Consists
of (a) 38,000 shares of common stock, (b) 2,605,625 shares of common stock
issuable upon the conversion of the Deerwood Notes, (c) 928,916 shares of
common stock issuable upon the exercise of warrants and (d) 55,568 shares
of common stock issuable upon the exercise of vested and exercisable
options. The Deerwood Notes and warrants are held by Deerwood
Partners LLC and Deerwood Holdings LLC, of which the stockholder is the
co-managing member along with his spouse, and by BGN Acquisition Ltd., LP,
of which the shareholder is the managing partner. The address
of Deerwood Partners LLC and Deerwood Holdings LLC is 16 Deerwood Lane,
Newport Beach, CA 92660. The address of BGN Acquisition Ltd., LP is 15747
Woodruff Avenue, Bellflower, CA
90706.
|
(10)
|
Consists
of (a) 15,543,522 shares of common stock (b) 6,091,732 shares of common
stock issuable upon the conversion of convertible notes, (c) 8,799,880
shares of common stock issuable upon the exercise of vested and
exercisable warrants and (d) 3,717,311 shares of common stock issuable
upon the exercise of vested and exercisable
options.
|
(11)
|
Consists
of (a) 8,890,795 shares of common stock (including 540,000 shares owned by
Mr. Brandt’s children and 956,164 shares held by Brandt Ventures), (b)
1,079,728 shares reserved for issuance upon exercise of warrants to
purchase common stock (including warrants to purchase 478,082 shares of
common stock held by Brandt Ventures) and (c) 1,111,459 shares reserved
for issuance upon exercise of options to purchase common stock held by Mr.
Brandt. The address of Leonard Brandt is 28911 Via Hacienda San
Juan Capistrano CA 92675.
|
Plan Category
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
|
Weighted-average exercise
price of outstanding options,
warrants and rights
(b)
|
Number of securities
remaining available for future
issuance under equity
compensation plans
(c)
|
|||||||||
Equity
compensation plans approved by security holders
|
15,670,973 | $ | 0.62 | 2,020,350 | ||||||||
Equity
compensation plans not approved by security holders
|
0 | $ | 0 | 0 | ||||||||
Total
|
15,670,973 | $ | 0.62 | 2,020,350 |
|
·
|
in
which the amount involved exceeds the lesser of $120,000 or 1% of the
average of our total assets at year-end for the last two completed fiscal
years; and
|
|
·
|
in
which any director, executive officer, or stockholder of more than 5% of
our common stock or any member of their immediate family had or will have
a direct or indirect material
interest.
|
Term
|
Bridge Note/Deerwood Note
|
October Note
|
||
Maturity
|
December
15, 2010
|
One
year from the date of issuance
|
||
Initial
Conversion Price
|
$0.50,
with any adjustment being subject to a $0.30 floor
|
$0.30
|
||
If
Company issues common stock (or securities convertible, exercisable or
exchangeable for common stock), at a consideration (or conversion,
exercise or exchange price) (the “Offering Price”) less than the
Conversion Price, Conversion Price will be adjusted to match the Offering
Price (“Ratchet”)
|
No
|
Yes
|
||
Prepayment
upon financing with aggregate proceeds of not less than
$3million
|
Yes
|
No
|
||
Noteholder
has Security Interest
|
Yes
(Bridge Note); No (Deerwood Note)
|
Yes. Benefits
of security agreement expire on the date that holders of a majority of
aggregate principal amount of notes issued have converted their Notes in
accordance with their terms.
|
||
Events
of Default (Differences only)
|
· General
assignment to creditors
·
Bankruptcy proceeding, which is not dismissed within 60
days
· Entry
of final judgment for the payment of money in excess of $25,000 and
failure to satisfy for 30 days
|
·
Voluntary bankruptcy filing
· Failure
to comply with Use of Proceeds covenant in purchase
agreement
· Court
enters bankruptcy order that is not vacated, set aside or reversed within
60 days
|
||
Option
to convert notes into securities to be issued in subsequent financings at
the lower of conversion price or price per share payable by purchasers of
such securities
|
No
|
Yes
|
||
Amendments,
waivers or modification of the note or related warrants requires written
consent of the holders of a majority of the aggregate principal amount of
the notes outstanding, and such written consent will be binding on all
holders
|
N/A
- single investors
|
Yes
|
||
Warrant
Coverage
|
25%
(in case of Deerwood Notes, 40% of which was issued to guarantor of
Deerwood Notes)
|
50%
(in case of Deerwood entities, 40% of which was issued to guarantor of
notes issued to Deerwood entities)
|
||
Initial
Exercise Price of Warrants
|
$0.50
(Bridge Note); $0.56 (Deerwood Note)
|
$0.30
|
||
Ratchet
as applied to Warrants (see definition above)
|
|
Results
in a decrease in exercise price
|
|
Results
in a decrease in exercise price and corresponding increase in number of
shares
issuable
|
(a) | 1. The information required by this item is included in Item 8 of Part II of this Annual Report. |
2. The information required by this item is included in Item 8 of Part II of this Annual Report. | |
3. Exhibits: See Exhibit Index following the signature pages to this Annual Report, which is incorporated by reference in this Item. The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report. | |
(b)
|
Exhibits.
See Exhibit Index, which is incorporated by reference in this Item. The
Exhibits listed in the accompanying Exhibit Index are filed or
incorporated by reference as part of this Annual
Report.
|
(c)
|
Not
applicable.
|
CNS
RESPONSE, INC.
|
||
By:
|
/s/ George Carpenter | |
George
Carpenter
Chief
Executive Officer
|
||
Date:
December 20, 2010
|
Signature
|
Title
|
Date
|
||
/s/
George Carpenter
|
Chief
Executive Officer, Director
|
December
20, 2010
|
||
George
Carpenter
|
(Principal
Executive Officer)
|
|||
/s/
Paul Buck
|
Chief
Financial Officer (Principal Financial
|
December
20, 2010
|
||
Paul
Buck
|
Officer
and Principal Accounting Officer)
|
|||
/s/
David B. Jones
|
Director
|
December
20, 2010
|
||
David
B. Jones
|
||||
/s/
Jerome Vaccaro
|
Director
|
December
21, 2010
|
||
Jerome
Vaccaro, M.D.
|
||||
/s/
Henry T. Harbin
|
Director
|
December
20, 2010
|
||
Henry
T. Harbin, M. D.
|
||||
/s/
John Pappajohn
|
Director
|
December
21, 2010
|
||
John
Pappajohn
|
||||
/s/
George Kallins
|
|
Director
|
|
December
20, 2010
|
George
Kallins, M.D.
|
Exhibit
Number
|
Exhibit
Title
|
|
2.1
|
Agreement
and Plan of Merger between Strativation, Inc., CNS Merger Corporation and
CNS Response, Inc. dated as of January 16, 2007. Incorporated
by reference to Exhibit No. 10.1 to the Registrant’s Current Report on
Form 8-K (File No. 000-26285) filed with the Commission on January 22,
2007.
|
|
2.2
|
Amendment
No. 1 to Agreement and Plan of Merger by and among Strativation, Inc., CNS
Merger Corporation, and CNS Response, Inc. dated as of February 28,
2007. Incorporated by reference to Exhibit No. 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on March 1, 2007.
|
|
3.1.1
|
Certificate
of Incorporation, dated March 17, 1987. Incorporated by
reference to Exhibit No. 3(i) to the Registrant’s Form 10-SB (File No.
000-26285) filed with the Commission on June 7, 1999.
|
|
3.1.2
|
Certificate
of Amendment of Certificate of Incorporation, dated June 1,
2004. Incorporated by reference to Exhibit 16 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on June 8, 2004.
|
|
3.1.3
|
Certificate
of Amendment of Certificate of Incorporation, dated August 2,
2004. Incorporated by reference to Exhibit 16 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on August 5, 2004.
|
|
3.1.4
|
Certificate
of Amendment of Certificate of Incorporation, dated September 7,
2005. Incorporated by reference to Exhibit 4.4 to the
Registrant’s Registration Statement on Form S-8 (File No. 333-150398)
filed with the Commission on April 23, 2008.
|
|
3.1.5
|
Certificate
of Amendment of Certificate of Incorporation, dated January 8,
2007. Incorporated by reference to Exhibit 3.1.5 to the
Registrant’s Registration Statement on Form S-1/A (File No. 333-164613)
filed with the Commission on July 6, 2010.
|
|
3.1.6
|
Certificate
of Ownership and Merger Merging CNS Response, Inc., a Delaware
corporation, with and into Strativation, Inc., a Delaware corporation,
dated March 7, 2007. Incorporated by reference to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on March 13, 2007.
|
|
3.2.1
|
Bylaws. Incorporated
by reference to Exhibit No. 3(ii) to the Registrant’s Form 10-SB (File No.
000-26285) filed with the Commission on June 7, 1999.
|
|
3.2.2
|
Amendment
No. 1 to Bylaws of CNS Response, Inc. Incorporated by reference
to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No.
000-26285) filed with the Commission on July 2, 2009.
|
|
3.2.3
|
Amendment
No. 2 to Bylaws of CNS Response, Inc. Incorporated by reference
to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K (File No.
000-26285) filed with the Commission on July 23, 2009.
|
|
4.1
|
Amended
and Restated 2006 Stock Incentive Plan. Incorporated by
reference to Appendix A to the Registrant’s Definitive Proxy Statement on
Schedule 14A (File No. 000-26285) filed with the Commission on April 1,
2010.*
|
Exhibit
Number
|
Exhibit
Title
|
|
10.1
|
Amended
and Restated Registration Rights Agreement, dated January 16, 2007 by and
among the Registrant and the stockholders signatory
thereto. Incorporated by reference to Exhibit No. 10.2 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on January 16, 2007.
|
|
10.2
|
Form
of Subscription Agreement between the Registrant and certain investors,
dated March 7, 2007. Incorporated by reference to Exhibit 10.4
to the Registrant’s Current Report on Form 8-K (File No. 000-26285) filed
with the Commission on March 13, 2007.
|
|
10.3
|
Form
of Indemnification Agreement by and among the Registrant, CNS Response,
Inc., a California corporation, and certain individuals, dated March 7,
2007. Incorporated by reference to Exhibit 10.5 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on March 13, 2007.
|
|
10.4
|
Form
of Registration Rights Agreement by and among the Registrant and certain
Investors signatory thereto dated March 7, 2007. Incorporated
by reference to Exhibit 10.6 to the Registrant’s Current Report on Form
8-K (File No. 000-26285) filed with the Commission on March 13,
2007.
|
|
10.5
|
Form
of Registration Rights Agreement by and among the Registrant and certain
stockholders of the Company signatory thereto dated March 7,
2007. Incorporated by reference to Exhibit 10.7 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on March 13, 2007.
|
|
10.6
|
Employment
Agreement by and between the Registrant and George Carpenter dated October
1, 2007. Incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on October 3, 2007.*
|
|
10.7
|
Employment
Agreement by and between the Registrant and Daniel Hoffman dated January
11, 2008. Incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on January 17, 2008.*
|
|
10.8
|
Stock
Purchase Agreement by and among Colorado CNS Response, Inc.,
Neuro-Therapy, P.C. and Daniel A. Hoffman, M.D. dated January 11,
2008. Incorporated by reference to the Registrant’s Annual
Report on Form 10-K (File No. 000-26285) filed with the Commission on
January 13, 2009.
|
|
10.9
|
Form
of Warrant issued to Investors in Private
Placement. Incorporated by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K (File No. 000-26285) filed with
the Commission on March 13, 2007.
|
|
10.10
|
Senior
Secured Convertible Promissory Note, dated March 30, 2009, by and between
the Company and Brandt Ventures, GP. Incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.
000-26285) filed with the Commission on April 3, 2009.
|
|
10.11
|
Senior
Secured Convertible Promissory Note, dated March 30, 2009, by and between
the Company and SAIL Venture Partners, LP. Incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
(File No. 000-26285) filed with the Commission on April 3
2009.
|
|
10.12
|
Bridge
Note and Warrant Purchase Agreement, dated May 14, 2009 by and between the
Company and SAIL Venture Partners, LP. Incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
(File Number 000-26285) filed with the Securities and Exchange Commission
on May 20, 2009.
|
Exhibit
Number
|
Exhibit
Title
|
|
10.13
|
Form
of Secured Convertible Promissory Note. Incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
(File Number 000-26285) filed with the Securities and Exchange Commission
on May 20, 2009.
|
|
10.14
|
Form
of Warrant to Purchase Shares. Incorporated by reference to
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on May 20,
2009.
|
|
10.15
|
Bridge
Note and Warrant Purchase Agreement, dated June 12, 2009, by and between
the Company and John Pappajohn. Incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on June 18,
2009.
|
|
10.16
|
Form
of Secured Convertible Promissory Note. Incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
(File Number 000-26285) filed with the Securities and Exchange Commission
on June 18, 2009.
|
|
10.17
|
Form
of Warrant to Purchase Shares. Incorporated by reference to
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on June 18,
2009.
|
|
10.18
|
Form
of Subscription Agreement. Incorporated by reference to Exhibit
10.18 to the Registrant’s Annual Report on Form 10-K (File Number
000-26285) filed with the Securities and Exchange Commission on December
30, 2009.
|
|
10.19
|
Form
of Warrant. Incorporated by reference to Exhibit 10.19 to the
Registrant’s Annual Report on Form 10-K (File Number 000-26285) filed with
the Securities and Exchange Commission on December 30,
2009.
|
|
10.20
|
Registration
Rights Agreement. Incorporated by reference to Exhibit 10.20 to
the Registrant’s Annual Report on Form 10-K (File Number 000-26285) filed
with the Securities and Exchange Commission on December 30,
2009.
|
|
10.21
|
Amendment
No. 1 to Registration Rights Agreement. Incorporated by
reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K
(File Number 000-26285) filed with the Securities and Exchange Commission
on December 30, 2009.
|
|
10.22
|
Form
of Indemnification Agreement. Incorporated by reference to
Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K (File Number
000-26285) filed with the Securities and Exchange Commission on December
30, 2009.
|
|
10.23
|
Employment
Agreement by and between the Registrant and Paul Buck effective as of
February 18, 2010. Incorporated by reference to Exhibit 10.23
to the Registrant’s Registration Statement on Form S-1/A (File No.
333-164613) filed with the Commission on July 6, 2010.*
|
|
10.24
|
Consulting
Agreement by and among CNS Response, Inc. and Henry T. Harbin, effective
January 1, 2010. Incorporated by reference to Exhibit 10.1 to
the Registrant’s Quarterly Report on Form 10-Q (File Number 000-26285)
filed with the Securities and Exchange Commission on May 14,
2010.
|
|
10.25
|
Bridge
Note and Warrant Purchase Agreement, dated as of June 3, 2010, between CNS
Response, Inc. and John Pappajohn. Incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on June 7,
2010.
|
Exhibit
Number
|
Exhibit
Title
|
||
10.26
|
Form
of Note. Incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K (File Number 000-26285) filed with
the Securities and Exchange Commission on June 7, 2010.
|
||
10.27
|
Form
of Warrant. Incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K (File Number 000-26285) filed with
the Securities and Exchange Commission on June 7, 2010.
|
||
10.28
|
Placement
Agent Agreement dated August 3, 2009 between the Registrant and Maxim
Group LLC. Incorporated by reference to Exhibit 10.28 to the
Registrant’s Registration Statement on Form S-1/A (File No. 333-164613)
filed with the Commission on July 6, 2010.
|
||
10.29
|
Form
of Warrant issued to Placement Agent. Incorporated by reference
to Exhibit 10.29 to the Registrant’s Registration Statement on Form S-1/A
(File No. 333-164613) filed with the Commission on July 6,
2010.
|
||
10.30
|
Registration
Rights Agreement dated August 26, 2009 between the Registrant and Maxim
Group, LLC. Incorporated by refrence to Exhibit 10.30 to
the Registrant’s Registration Statement on Form S-1/A (File No.
333-164613) filed with the Commission on November 8,
2010.
|
||
10.31
|
Amendment
No.1 to Placement Agent Agreement dated July 21, 2010 between the
Registrant and Maxim Group LLC. Incorporated by
refrence to Exhibit 10.31 to the Registrant’s Registration Statement on
Form S-1/A (File No. 333-164613) filed with the Commission on November 8,
2010.
|
||
10.32
|
Amendment
No.1 to Form of Warrant issued to Placement Agent dated July 23,
2010. Incorporated by refrence to Exhibit 10.32 to the
Registrant’s Registration Statement on Form S-1/A (File No. 333-164613)
filed with the Commission on November 8, 2010.
|
||
10.33
|
Form
of Unsecured Promissory Note. Incorporated by reference to
Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on July 9,
2010.
|
||
10.34
|
Form
of Guaranty. Incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K (File Number 000-26285) filed with
the Securities and Exchange Commission on July 9, 2010.
|
||
10.35
|
Form
of Deerwood Note. Incorporated by reference to Exhibit 4.1 to
the Registrant’s Current Report on Form 8-K (File Number 000-26285) filed
with the Securities and Exchange Commission on August 24,
2010.
|
||
10.36
|
Form
of Deerwood Warrant. Incorporated by reference to Exhibit 4.2
to the Registrant’s Current Report on Form 8-K (File Number 000-26285)
filed with the Securities and Exchange Commission on August 24,
2010.
|
||
10.37
|
Engagement Agreement, dated
September 30, 2010, between the Registrant and Monarch Capital Group, LLC,
as Placement Agent. Incorporated by reference to Exhibit 10.3
to the Registrant's Current Report on Form 8-K (File Number 000-26285)
filed with the Securities and Exchange Commission on October 13,
2010.
|
||
10.38
|
Form of Note and Warrant Purchase
Agreement, dated October 1, 2010, by and between the Registrant and the
Investors party thereto. Incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on October 7,
2010.
|
||
10.39
|
Security Agreement, dated October
1, 2010, by and between the Registrant and John Pappajohn, as
administrative agent for the secured parties. Incorporated by
reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K
(File Number 000-26285) filed with the Securities and Exchange Commission
on October 7, 2010.
|
||
10.40
|
Form of October
Note. Incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K (File Number 000-26285) filed with
the Securities and Exchange Commission on October 7,
2010.
|
||
10.41
|
Form of October
Warrant. Incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K (File Number 000-26285) filed with
the Securities and Exchange Commission on October 7,
2010.
|
||
10.42
|
Form of Placement Agent Warrant
issued to Monarch Capital Group, LLC. Incorporated by reference
to Exhibit 4.3 to the Registrant's Current Report on Form 8-K (File Number
000-26285) filed with the Securities and Exchange Commission on October
27, 2010.
|
||
10.43*
|
Employment Agreement, dated July
6, 2010, by and between the Registrant and Michael
Darkoch. Incorporated by refrence to Exhibit 10.43
to the Registrant’s Registration Statement on Form S-1/A (File No.
333-164613) filed with the Commission on November 8, 2010.
|
||
10.44
|
Form
of Guaranty, dated as of November 3, 2010, by SAIL Venture Partners, LP in
favor of in favor of [Deerwood Holdings, LLC][Deerwood Partners,
LLC].
|
||
21.1
|
Subsidiaries
of the Registrant. Incorporated by reference to the
Registrant’s Annual Report on Form 10-K (File No. 000-26285) filed with
the Commission on January 13, 2009.
|
||
23.1
|
Consent
of Independent Registered Public Accounting Firm.
|
||
24
|
Power
of Attorney (included in the signature page hereto)
|
||
31.1
|
Certification
by Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of 1934, as amended.
|
||
31.2
|
Certification
by Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of 1934, as
amended.
|
||
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||