Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' DEFICIT

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STOCKHOLDERS' DEFICIT
 3 Months Ended
Dec. 31, 2014
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
6.
STOCKHOLDERS’ DEFICIT
 
Common and Preferred Stock
 
As of December 31, 2014, the Company is authorized to issue 195,000,000 shares of stock of which 180,000,000 are Common Stock at par value of $0.001 per share; the remaining 15,000,000 shares, with a par value of $0.001 per shares are blank-check preferred stock which the Board is expressly authorized to provide, for one or more series of preferred stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.
 
As of December 31, 2014, 101,667,409 shares of Common Stock were issued and outstanding. No shares of preferred stock were issued or outstanding.
 
From October 4, 2013, through February 14, 2014, 29 accredited investors purchased an aggregate of 5,900,000 shares of Common Stock, at a price of $0.25 per share pursuant to private placements. The Company received gross aggregate cash proceeds of $1,475,000. (Refer to Note 8. Related Party Transactions)
 
Between November 11, 2013, and December 20, 2013, the Company issued an aggregate of 1,446,380 shares of its Common Stock valued at $361,500, as full and complete settlement of trade payables totaling an aggregate $1,466,800 owed to two creditors who are also accredited investors. As a result of this transaction the Company recorded a gain on extinguishment of debt of $1,105,200.
   
On March 21, 2014, the Board resolved to amend the Company’s Charter in order to further increase the number of shares of Common Stock authorized for issuance under the Charter from 150,000,000 to 180,000,000. This amendment to the Charter was approved by more than 65% of the stockholders eligible to vote at the annual meeting of stockholders held on May 13, 2014.
 
From July 8, 2014 through July 23, 2014, 8 accredited investors purchased an aggregate of 1,040,000 shares of Common Stock, at a price of $0.25 per share pursuant to private placements. The Company received gross aggregate cash proceeds of $260,000. (Refer to Note 8. Related Party Transactions)
 
On January 29, 2014 and June 20, 2014, placement agent warrants to purchase in aggregate 608,309 shares of Common Stock with a price of $0.04718 per share were exercised on a net basis resulting in the issuance of 564,467 shares of Common Stock.
   
Stock-Option Plans
 
On August 3, 2006, CNS California adopted the CNS California 2006 Stock Incentive Plan (the “2006 Plan”). The 2006 Plan provides for the issuance of awards in the form of restricted shares, stock options (which may constitute incentive stock options (ISO) or non-statutory stock options (NSO), stock appreciation rights and stock unit grants to eligible employees, Directors and consultants and is administered by the Board. A total of 667,667 shares of stock were ultimately reserved for issuance under the 2006 Plan. As of September 30, 2014, 70,825 options were exercised and there were 501,924 options and 6,132 restricted shares outstanding under the amended 2006 Plan leaving 87,786 shares which will not be issued as the 2006 Plan has been frozen. The outstanding options have exercise prices to purchase shares of Common Stock ranging from $3.60 to $32.70.
  
On March 22, 2012, our Board approved the CNS Response, Inc. 2012 Omnibus Incentive Compensation Plan (the “2012 Plan”), reserved 333,334 shares of stock for issuance and on December 10, 2012, the Board approved the amendment of the 2012 Plan to increase the shares authorized for issuance from 333,334 shares to 5,500,000 shares. On March 26, 2013, the Board further approved the amendment of the 2012 Plan to increase the shares authorized for issuance from 5,500,000 shares to 15,000,000 shares. The 2012 Plan, as amended, was approved by our stockholders at the 2013 annual meeting held on May 23, 2013.
 
On October 8, 2013, the Board granted to the Company’s two executive officers and two senior managers (collectively, the “Managers”) options to purchase shares of its Common Stock pursuant to the 2012 Omnibus Incentive Compensation Plan, as amended (the “2012 Plan”), at an exercise price of $0.25 per share as follows: George Carpenter 435,000 shares, Paul Buck 470,000 shares, Stewart Navarre 385,000 shares and Brian MacDonald 310,000. These options vest pro-rata over 12 months starting from the date of grant. The four managers have agreed to forego a portion of their salaries in fiscal year 2014 as follows: George Carpenter $98,000, Paul Buck $106,500, Stewart Navarre $83,600 and Brian MacDonald $66,700. These executive officers and managers will be paid out of the salaries which were earned and accrued during fiscal year 2012 and fiscal year 2013. The accruals to be paid out are equivalent to the fiscal year 2014 salaries that each of the executive officers and managers agreed to forego in lieu of receiving options.
 
On November 8, 2013, the Board granted 700,000 options to purchase shares of its Common Stock pursuant to the 2012 Plan, at an exercise price of $0.25 per share to select consultants and staff, excluding the managers. The staff options vest evenly over 48 months starting on the date of grant; consultant options vest evenly over 36 months starting on the date of grant.
 
On July 31, 2014, the Board granted 425,000 options to purchase shares of its Common Stock pursuant to the 2012 Plan, at an exercise price of $0.26 per share to select consultants. These options vest evenly over 36 months starting on the date of grant.
 
As of December 31, 2014, 70,825 options had been exercised and 501,924 options and 6,132 restricted shares were outstanding under the amended 2006 Plan leaving 87,786 shares which will never be issued as the 2006 Plan is frozen. Options to purchase 11,915,575 shares of Common Stock have been issued under the 2012 Plan, none of which have been exercised, leaving 3,084,425 options available for issuance.
 
Stock-based compensation expense is recognized over the employees’ or service provider’s requisite service period, generally the vesting period of the award. Stock-based compensation expense included in the accompanying statements of operations for the three months and three months ended December 31, 2014 and 2013 is as follows:
 
 
 
For the three months ended
 
 
 
December 31,
 
 
 
2014
 
2013
 
Cost of Neurometric Services revenues
 
$
-
 
$
2,900
 
Research
 
 
10,400
 
 
25,700
 
Product Development
 
 
18,500
 
 
71,200
 
Sales and marketing
 
 
9,900
 
 
26,300
 
General and administrative
 
 
23,700
 
 
237,900
 
Total
 
$
62,500
 
$
364,000
 
 
Total unrecognized compensation as of December 31, 2014 amounted to $297,803.
 
A summary of stock option activity is as follows: 
 
 
 
Number of
 
Weighted Average
 
 
 
Shares
 
Exercise Price
 
Outstanding at September 30, 2014
 
 
12,417,499
 
$
0.84
 
Granted
 
 
-
 
 
-
 
Exercised
 
 
-
 
 
-
 
Forfeited
 
 
-
 
 
-
 
Outstanding at December 31, 2014
 
 
12,417,499
 
$
0.84
 
 
Following is a summary of the status of options outstanding at December 31, 2014:
 
 
 
 
 
 
Weighted
 
Weighted
 
 
 
 
 
 
Average
 
Average
 
Exercise
 
Number
 
Contractual
 
Exercise
 
Price
 
of Shares
 
Life
 
Price
 
 
 
 
 
 
 
 
 
 
 
$
0.04718
 
 
8,920,300
 
 
10 years
 
$
0.04718
 
$
0.25
 
 
2,527,605
 
 
10 years
 
 
0.25
 
$
0.26
 
 
425,000
 
 
10 years
 
 
0.26
 
$
3.00
 
 
42,670
 
 
10 years
 
 
3.00
 
$
3.60
 
 
28,648
 
 
10 years
 
 
3.60
 
$
3.96
 
 
32,928
 
 
10 years
 
 
3.96
 
$
9.00
 
 
4,525
 
 
10 years
 
 
9.00
 
$
12.00
 
 
28,535
 
 
10 years
 
 
12.00
 
$
14.10
 
 
10,000
 
 
10 years
 
 
14.10
 
$
15.30
 
 
1,373
 
 
10 years
 
 
15.30
 
$
16.50
 
 
262,441
 
 
10 years
 
 
16.50
 
$
17.70
 
 
953
 
 
10 years
 
 
17.70
 
$
24.00
 
 
4,667
 
 
10 years
 
 
24.00
 
$
26.70
 
 
32,297
 
 
10 years
 
 
26.70
 
$
28.80
 
 
11,767
 
 
10 years
 
 
28.80
 
$
32.70
 
 
83,790
 
 
10 years
 
 
32.70
 
 
Total
 
 
12,417,499
 
 
 
 
$
0.84
 
 
We have entered into agreements on June 3, 2011 with the majority of our 2006 Plan option holders pursuant to which holders of options to purchase an aggregate of 439,689 shares of our common stock, at exercise prices ranging from $3.60 per share to $32.70 per share, have agreed to amend their options to permit exercise only in cash and to limit the period during which the options may be exercised post-termination to 90 days (for employees) and twelve months (for consultants).
  
We have agreed to freeze any further grants or exercises of securities under the 2006 Plan and adopt the 2012 Stock Incentive Plan, which was approved at the 2013 Annual Meeting of Stockholders held on May 23, 2013.
 
Warrants to Purchase Common Stock
 
 The warrant activity for the period starting October 1, 2013, through December 31, 2014, is described as follows:
 
Warrants
 
Exercise
Price
 
Issued, Surrendered or Expired in Connection With:
 
 
1,497,556
 
$
 
 
Warrants outstanding at October 1, 2013
 
 
120,000
 
 
0.275
 
Warrants issued to Monarch Capital who acted as placement agents in raising $300,000 from 11 accredited investors who purchased restricted common stock, par value $0.001 per share, in a private placement agreements dated October 2, 2013 and January 8, 2014.
 
 
32,200
 
 
0.25
 
Warrants issued to D&D Securities Inc. who acted as placement agents in raising $115,000 from three accredited investors who purchased restricted common stock, par value $0.001 per share, in a private placement agreement dated January 8, 2014.
 
 
(519,288)
 
 
0.04718
 
Warrants exercised as of January 29, 2013.
 
 
(89,021)
 
 
0.04718
 
Warrants exercised as of June 20, 2014.
 
 
(226,703)
 
 
$9.00 to $9.90
 
Warrants expired
 
 
814,744
 
$
3.07
 
Warrants outstanding at September 30, 2014
 
 
200,000
 
 
0.25
 
Warrants issued to RedChip Companies Inc. which is providing investor relations services
 
 
(226,020)
 
 
$9.00 to $9.90
 
Warrants expired
 
 
788,724
 
 
0.61
 
Warrants outstanding at December 31, 2014
 
 
 
At December 31, 2014, there were warrants outstanding to purchase 788,724 shares of the Company’s common stock. The exercise price of the outstanding warrants range from $0.04718 to $9.90 with a weighted average exercise price of $0.61.  The warrants expire at various times starting 2015 through 2019.