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Agreements for services, officer and Board of Directors' compensation
3 Months Ended
Dec. 31, 2013
Investment-related Liabilities [Abstract]  
Agreements for services, officer and Board of Directors' compensation

 

In August 2012, the Company entered into one-year consulting agreements with Patrick Kolenik and Cary Sucoff (Messrs. Kolenik and Sucoff are members of the Company’s Board of Directors). The agreements call for the payment to Messrs. Kolenik and Sucoff of $5,000 each per month for their services to our Company. During the year ended September 30, 2013, the Company recognized and paid expenses totaling $55,000, each in connection with these consulting agreements.  During the three months ended December 31, 2013, the Company recognized and paid expenses totaling $0 in connection with these consulting agreements.

 

In Octoer 2012, the Company granted a five-year warrant to purchase up to 133,333 shares of common stock to Chris Leong, a member of our Board of Directors. The warrant vests monthly over a period of twelve months; has an exercise price of $6.90 per share; and includes a cashless exercise option. In November 2012, the Company granted warrants to purchase up to 333,333 shares of common stock to William Hernandez, the Company’s President and a member of the Board of Directors (as of January 2013). The warrants vest over a period of three years; have an exercise price of $7.35 per share; include a cashless exercise option; and expire five years after the date of grant. The fair value of these warrants on the grant date was $1,210,150 of which $527,984 was recognized as a noncash charge to personnel related expense during the year ended September 30, 2013 and $80,995 was recognized as a nocash charge to personnel related expense during the period ended December 31, 2013

 

Pursuant to the terms of the Endorsement Agreement, the Company issued the endorser warrants to purchase up to 133,334 shares of our common stock, as follows: 1) warrants to purchase 66,667 shares of the Company’s common stock vested upon the Effective Date, and 2) warrants to purchase another 66,667 shares of the Company’s common stock shall vest in equal monthly installments during the Term, each exercisable at an exercise price $7.05 per share. The Company also issued the endorser warrants to purchase up to an additional 133,333 shares of common stock (the “Additional Warrant”). The Additional Warrant is exercisable for the number of shares of common stock equal to five times the number of active accounts in effect at the end of the Term, provided there are more than two hundred and fifty thousand active accounts as of the last day of the Term. The Additional Warrant will be exercisable no more rapidly than in equal monthly installments during the six month period immediately following the Term at an exercise price of $7.05 per share. In the event the product of five times the number of active accounts exceeds two million, we will issue the endorser an “End of Term Warrant” for the number of shares in excess of 133,333. The exercise price of the End of Term Warrant shall be the arithmetic mean of the high and low prices of our Company’s common stock on the last trading day before the date of the issuance of the End of Term Warrant. If the Endorsement Agreement is extended, which is at the sole discretion of the endorser, the endorser will receive additional warrants to purchase 133,333 shares of the Company’s common stock for any such Extension Period (each, an “Extension Warrant”). Extension Warrants will vest equally on a monthly basis and will have an exercise price equal to the mean of the high and low prices of the Company’s common stock on the last trading day before the date of issuance of each Extension Warrant. The Company recognized $604,372 in expense related to the warrants issued to the endorser for the year ended September 30, 2013 and $151,700 was recognized during the period ended December 31, 2013

 

Payments made in connection with the Advance, Incentive Compensation and Royalty will be recorded as an expense when incurred. Compensation expense related to the warrants, additional warrants, end of term warrants and extension warrants will be recognized based upon actual and expected vesting, of which an insignificant amount has been expensed for the year ended September 30, 2013 and period ended December 31, 2013.

 

In connection with the Endorsement Agreement (dated November 20, 2012) as of September 30, 2013, the Company made payments to two entities associated with a member of our Board of Directors, Jesse Itzler. Expenses related to these payments totaled $115,000 and $728,405 during the year ended September 30, 2013 and $0 for the three months ended December 31, 2013.

In connection with the Endorsement Agreement (dated November 20, 2012) as of September 30, 2013, the Company made payments to two entities associated with a member of our Board of Directors, Jesse Itzler. Expenses related to these payments totaled $115,000 and $728,405 during the year ended September 30, 2013.

 

During January 2013 (the "Effective Date"), the Company entered into a Promotion/Endorsement Agreement (the “P/E Agreement”) with a term of eighteen (18) months (the “Term”). In connection with the P/E Agreement, the Company agreed to pay a nonrefundable fee of two hundred and fifty thousand dollars payable in four equal installments, on predetermined dates over the Term.

 

In addition to the fee, the Company has agreed to pay monthly incentive compensation per active account (“Incentive Compensation”) and have issued to the endorser additional warrants to purchase our common stock. Should the number of accounts reach a specified level, the endorser will have the opportunity to earn additional warrants equal to five times the number of active accounts at the end of the Term. The Additional Warrant (“Additional Warrant”) is exercisable for the number of shares of the Company’s common stock equal to five times the number of active accounts in effect at the end of the Term, provided there are more than two hundred and fifty thousand active accounts as of the last day of the Term. The Additional Warrant will be exercisable no more rapidly than in equal monthly installments during the six month period immediately following the Term at an exercise price of $5.70 per share. In the event the product of five times the number of active accounts exceeds two million, the Company will issue the endorser an “End of Term Warrant” for the number of shares in excess of 133,333. The exercise price of the End of Term Warrant shall be the arithmetic mean of the high and low prices of our Company’s common stock on the last trading day before the date of the issuance of the End of Term Warrant. Extension Warrants will vest equally on a monthly basis and will have an exercise price equal to the mean of the high and low prices of our Company’s common stock on the last trading day before the date of issuance of each Extension Warrant.