Note 15 - Notes Payable - Related Party

12 Months Ended

Sep. 30, 2011

Related Party Transactions Disclosure [Text Block]

NOTE 15. NOTES PAYABLE – RELATED PARTY

In February 2007, the Company completed a financing transaction under which certain investors purchased 10% promissory notes in the principal amount of $1.0 million, with warrants to purchase an aggregate of 250,000 shares of common stock at an exercise price of $1.40 per share.  The promissory notes initially matured in February 2009, and had a stated interest rate of 10% per annum.  The Company obtained forbearance agreements from the lenders and as a result, re-priced some of the warrants down to an exercise price of $0.75 per share.  The Company recalculated the fair value of the warrants and took an incremental charge of approximately $46,000 recorded as interest expense, in accordance with professional standards.  During 2009 the Company repaid $500,000 of the notes payable and the other $500,000 had been extended to a new maturity of May 2010.  In June 2010, the remaining lender agreed to extend the maturity date to March 31, 2011, in consideration of a warrants grant to purchase an aggregate of 225,000 shares of common stock at an exercise price of $0.50. This note was paid off in March 2011 along with all accrued interest as of that date.

This note was made by Christopher Dewey, one of the Company’s former directors.  The Company incurred interest expense related to this note of approximately $5,700 and $35,000 for the fiscal years ended September 30, 2011 and 2010, respectively.