Note 15 - Stockholders' Deficit

3 Months Ended

Mar. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

NOTE 15.  STOCKHOLDERS’ DEFICIT

Issuance of shares of common stock and warrants pursuant to a private placement

During the six-month period ended March 31, 2011, the Company generated gross proceeds of $1,585,000 by issuing 3,170,000 shares of its common stock.  The Company paid $169,000 in financing costs in connection with the issuance of shares.  Additionally, the Company recognized derivative liabilities of $530,000 in connection with this transaction, which was offset against the proceeds.  Furthermore, the Company issued 3,170,000 warrants to the investors participating in this private placement and 200,000 warrants to brokers.  The warrants have an exercise price of $0.50 per share.  The warrants expire in December 2016.

Receipt of subscription receivable

During the six-month period ended March 31, 2011, the Company received the remaining proceeds of its Series D Preferred Stock offering which amounted to $1,334,000.

Issuance of shares to satisfy certain liabilities

During the six-month period ended March 31, 2012, the Company issued 1,500,000 shares of its common stock to satisfy certain liabilities.  The aggregate fair value of the shares amounted to $450,000.

Conversion and dividends on Series A Preferred Stock

The holders of the Company’s Series A Preferred Stock that are convertible into the Company’s common stock at $1.25 per share, are entitled to receive dividends on a quarterly basis at a rate of 9% per annum, per share.  Such dividends are cumulative and accumulate whether or not declared by the Company’s Board of Directors, but are payable only when and if declared by the Company’s Board of Directors.

During the six-month period ended March 31, 2012 and 2011, the Company recognized $93,000 and $207,000 of dividends on its Series A Preferred Stock.  The accumulated dividends on the Company’s 46,050 issued and outstanding shares of Series A Preferred Stock was $715,000, at the automatic conversion date, December 21, 2011.  At such date, all accumulated dividends were to be paid, resulting in the issuance of 5,723 shares of Series A Preferred Stock. The Company is in the process of issuing 4,141,826 shares of its common stock to satisfy its obligations pursuant to the conversion of 51,773 shares of Series A Preferred Stock. The conversion of these shares has not yet been completed as of the date of this report.

Reclassification of liability contracts to equity contracts

At March 31, 2011, we reclassified certain the Series C and Series D Preferred Stock and related warrants and certain warrants issued in connection with a private placement from liability contracts to equity contracts.

The reclassification of the Series C and Series D Preferred Stock and aforementioned warrants, previously accounted for as a liability, to equity contracts resulted in the following increases at March 31, 2011:

Series C and Series D Preferred Stock	$	6,156,000
Additional paid-in capital		846,000

Series E Preferred Stock

In March 31, 2012, the Company designated its Series E Preferred Stock, par value $0.01 per share, at a price of $50 per share.  The authorized number of shares of Series E Preferred Stock is 200,000.  None were issued at March 31, 2012.

Each share of the Series E Preferred Stock is convertible in 100 shares of the Company’s common stock.  The conversion rate may be reduced to the lower effective rate of any securities, with certain exceptions, issued by the Company prior to December 30, 2012. Such exceptions include issuance of shares or share equivalent pursuant to stock options, acquisitions, certain financing with a financial institution, and payment in kind to vendors.

The Series E Preferred Stock has a liquidation preference to the holders of common stock in the event of liquidation or dissolution of the Company. The Series E Preferred Stock has voting rights on an as converted basis.  Holders of Series E preferred shares have certain registration rights.