Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' DEFICIT

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STOCKHOLDERS' DEFICIT
 6 Months Ended
Mar. 31, 2015
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
6.
STOCKHOLDERS’ DEFICIT
 
Common and Preferred Stock
   
As of March 31, 2015, 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 (“Common Stock”); 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 March 31, 2015, 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 vested pro-rata over 12 months starting from the date of grant. The four managers 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 years 2012 and 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.
 
On January 8, 2015, the Board granted an option to purchase 250,000 shares of its Common Stock pursuant to the 2012 Plan, at an exercise price of $0.25 per share to a consultant. The option vesting is contingent upon the achievement of agreed upon goals.
 
As of March 31, 2015, 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 12,165,575 shares of Common Stock have been issued under the 2012 Plan, none of which have been exercised, leaving 2,834,425 options available for issuance.
  
Stock-based compensation expenses are generally 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 six months ended March 31, 2015 and 2014 is as follows:
   
 
 
For the three months ended
March 31,
 
 
 
2015
 
2014
 
Cost of Neurometric Services revenues
 
$
-
 
$
2,200
 
Research
 
 
10,400
 
 
21,200
 
Product Development
 
 
15,500
 
 
67,000
 
Sales and marketing
 
 
53,400
 
 
24,700
 
General and administrative
 
 
20,500
 
 
187,900
 
Total
 
$
99,800
 
$
303,000
 
 
 
 
For the six months ended
March 31,
 
 
 
2015
 
2014
 
Cost of Neurometric Services revenues
 
$
-
 
$
5,100
 
Research
 
 
20,800
 
 
46,900
 
Product Development
 
 
34,000
 
 
138,100
 
Sales and marketing
 
 
63,300
 
 
51,000
 
General and administrative
 
 
44,100
 
 
425,800
 
Total
 
$
162,200
 
$
666,900
 
 
Total unrecognized compensation as of March 31, 2015 amounted to $241,765.
 
A summary of stock option activity is as follows: 
 
 
 
Number of
Shares
 
Weighted Average
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
 
Granted
 
250,000
 
 
0.25
 
Exercised
 
-
 
 
-
 
Forfeited
 
-
 
 
-
 
Outstanding at March 31, 2015
 
12,667,499
 
$
0.83
 
 
Following is a summary of the status of options outstanding at March 31, 2015:
 
Exercise
Price
 
Number
of Shares
 
Expiration
Date
 
Weighted Average
Exercise Price
 
 
 
 
 
 
 
 
 
 
 
$
0.04718
 
8,920,300
 
12/2022 – 01/2023
 
$
0.04718
 
$
0.25
 
2,777,605
 
03/2023 – 01/2025
 
 
0.25
 
$
0.26
 
425,000
 
07/2024
 
 
0.26
 
$
3.00
 
42,670
 
03/2022
 
 
3.00
 
$
3.60
 
28,648
 
08/2016
 
 
3.60
 
$
3.96
 
32,928
 
08/2016
 
 
3.96
 
$
9.00
 
4,525
 
11/2016
 
 
9.00
 
$
12.00
 
28,535
 
03/2019 – 07/2020
 
 
12.00
 
$
14.10
 
10,000
 
03/2021
 
 
14.10
 
$
15.30
 
1,373
 
09/2018
 
 
15.30
 
$
16.50
 
262,441
 
03/2020
 
 
16.50
 
$
17.70
 
953
 
08/2016
 
 
17.70
 
$
24.00
 
4,667
 
12/2017
 
 
24.00
 
$
26.70
 
32,297
 
09/2017
 
 
26.70
 
$
28.80
 
11,767
 
04/2018
 
 
28.80
 
$
32.70
 
83,790
 
08/2017
 
 
32.70
 
 
Total
 
12,667,499
 
 
 
$
0.83
 
 
Warrants to Purchase Common Stock
 
 The warrant activity for the period starting October 1, 2013, through March 31, 2015, is described as follows:
 
 
 
Number of
Shares
 
Weighted Average
Exercise Price
 
Outstanding at September 30, 2014
 
814,744
 
$
3.07
 
Granted
 
200,000
 
 
0.25
 
Exercised
 
-
 
 
-
 
Forfeited
 
(226,020)
 
 
9.14
 
Outstanding at December 31,2014
 
788,724
 
 
0.61
 
Granted
 
-
 
 
-
 
Exercised
 
-
 
 
-
 
Forfeited
 
(7,200)
 
 
9.15
 
Outstanding at March 31, 2015
 
781,524
 
$
0.53
 
 
Following is a summary of the status of warrants outstanding at March 31, 2015:
 
Exercise
Price
 
Number
of Shares
 
Expiration
Date
 
Weighted Average
Exercise Price
 
 
 
 
 
 
 
 
 
 
 
$
0.04718
 
38,152
 
03/2018
 
$
0.04718
 
 
0.25
 
332,200
 
04/2016 – 07/2017
 
 
0.25
 
 
0.275
 
324,000
 
06/2018 – 03/2019
 
 
0.275
 
 
1.00
 
67,170
 
10/2015 – 01/2017
 
 
1.00
 
 
7.50
 
3,334
 
05/2016
 
 
7.50
 
$
9.00
 
16,668
 
07/2017
 
 
9.00
 
 
Total
 
781,524
 
 
 
$
0.53
 
 
On March 22, 2014, a warrant to purchase120,000 shares of Common Stock at an exercise price of $0.275 per share were issued to Monarch Capital who acted as placement agents in raising $300,000 from 11 accredited investors who purchased restricted common stock in private placement agreements dated October 2, 2013 and January 8, 2014.
 
Also on March 22, 2014, a warrant to purchase 32,200 shares of Common Stock at an exercise price of $0.25 per share were issued to D&D Securities, Inc. who acted as placement agents in raising $115,000 from three accredited investors who purchased restricted common stock in private placement agreements dated January 8, 2014.
 
On August 1, 2014, a warrant to purchase 200,000 shares of Common Stock at an exercise price of $0.25 per share were issued to Red Chip Companies, Inc. pursuant to an investor relations services agreement.
 
At March 31, 2015, there were warrants outstanding to purchase 781,524 shares of the Company’s common stock. The exercise price of the outstanding warrants range from $0.04718 to $9.00 with a weighted average exercise price of $0.53. The warrants expire at various times starting 2015 through 2019.