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Note 8 - Preferred Stock
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12 Months Ended |
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Sep. 30, 2011
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| Preferred Stock [Text Block] |
Note
8. Preferred
Stock
Repurchases
and Conversion of Class A Convertible Preferred Stock
– Series 3
The
Company issued 473,377 shares of Class A Convertible
Preferred Stock – Series 3 (the "Series 3 Preferred
Stock") to 11 investors during February 2004 and received
$1,500,602 in proceeds. Each share of Series 3
Preferred Stock
was convertible at any time into one share of the
Company’s common stock. Holders of shares of the
Series 3 Preferred Stock were entitled to cumulative
dividends in preference to any dividend on the
Company’s common stock at
the rate of 10 percent of the original issuance price
($3.17 per share) per annum, payable quarterly at the
Company’s option in cash or shares of the
Company’s common stock. If dividends were paid in
shares of common stock, the dividend rate was
equal to 95 percent of the average of the closing sales
prices of the common stock on the five trading days
preceding the dividend reference date. The dividend
reference date means January 1, April 1, July 1, and
October 1 of each year. In the event of a liquidation or
dissolution of the Company, the Series 3 Preferred Stock
would have had priority over the Company’s common
stock and holders of any other series of preferred stock
of the Company. The Company had the right to redeem any
share of Series 3 Preferred Stock at any time that was
after the second anniversary of the date of issuance of
the share, provided that the redemption could not occur
until the first day on or after the second anniversary of
the date of issuance of such share in which the market
value of the Company’s common stock was at least
150 percent of the original issue price of $3.17 per
share. The liquidation preference on the
Series 3 Preferred Stock was $3.17 per share plus accrued
and unpaid dividends.
In
April 2008, the Company repurchased 150,000 shares of
Series 3 Preferred Stock. The shares were repurchased at
$3.17 per share for a total of approximately
$475,000. In July, 2008, the Company repurchased
an additional 15,773 shares of Series 3 Preferred Stock for
a total of approximately $50,000; the dividend of
approximately $500 of this purchase was paid in October,
2008. All of the shares were purchased at the
same per share price at which they were sold to the
shareholder, $3.17 per share. The repurchased
preferred shares have been retired.
In
February 2009, 31,546 shares of Series 3 Preferred Stock
were converted to 31,546 shares of common
stock. The shares have been retired.
On
July 14, 2009, in accordance with the terms of the Series 3
Preferred Stock, the Company notified all of the holders of
outstanding shares of Series 3 Preferred Stock that it was
exercising its right to redeem all of the outstanding
shares of Series 3 Preferred Stock on August 13,
2009. As of July 14, 2009, a total of 276,058
shares of Series 3 Preferred Stock were outstanding and
subject to the redemption notice. The Company
had the right to redeem the Series 3 Preferred Stock
because as of the close of the market on July 10, 2009, the
Company’s Common Stock had a closing price on the
NASDAQ Capital Market of at least 150% of the $3.17 Face
Amount of the Series 3 Preferred Stock for five consecutive
days. Holders of outstanding shares of Series 3 Preferred
Stock had the right to elect to convert all or part of
their Series 3 Preferred Stock into shares of the
Company’s common stock by providing written notice of
conversion to the Company on or before the redemption
date. As of August 13, 2009, all the
276,058 outstanding shares of Series 3 Preferred Stock were
converted to 276,058 shares of common stock. The
shares have been retired. The final unpaid
dividends of $10,548 were paid on August 20, 2009.
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