LEGAL PROCEEDINGS

3 Months Ended

Dec. 31, 2014

Legal Matters and Contingencies [Abstract]

Legal Matters and Contingencies [Text Block]

NOTE 9          LEGAL PROCEEDINGS

From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. As of December 31, 2014, there were no such actions or proceedings, either individually or in the aggregate, other than as described below, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.

On July 15, 2014, Terence Bernard Wise, a director of the Company, filed a derivative complaint in Supreme Court of the State of New York, New York County, against then-directors (now former directors) Frank LaGrange Johnson, Robert Garrett, John F. Chiste, Timothy Gordon and Owen P.J. King, also naming the Company as a nominal defendant, alleging breaches of fiduciary duty and seeking declaratory and injunctive relief (both preliminary and final), including a temporary restraining order ("TRO"), preventing the Board of the Company from pursuing any extraordinary action without shareholder approval that would alter the Company's capital structure. The court rejected Mr. Wise's request for a TRO and Mr. Wise then withdrew his request for preliminary injunctive relief. Mr. Wise subsequently amended his complaint to add additional allegations of breach of fiduciary duties and allegations of breach of director duties under various provisions of New York’s Business Corporation Law.

On December 4, 2014, Mr. Wise brought a new application to the court, seeking a TRO and a preliminary injunction to enjoin the Company's Board from causing the Company to issue any Series B Senior Convertible Preferred Stock (the "Preferred Stock"), or take any antecedent or preparatory steps to effectuate such issuance prior to the Company's 2014 Annual Meeting. The court granted the TRO in part by prohibiting the Company from issuing (but not from taking antecedent or preparatory steps to issue) such Preferred Stock prior to December 8, 2014. At a hearing on December 8, 2014, the court granted Mr. Wise's motion for a preliminary injunction, enjoining the Company's issuance of the Preferred Stock prior to the Company's 2014 Annual Meeting. On December 8, 2014, the Company filed a notice of appeal of the court's order to the Appellate Division of the Supreme Court of the State of New York, First Department (the "First Department"). On December 9, 2014, the Company moved before the First Department to vacate the lower court's injunction. On January 7, 2015, the Company's counsel, together with counsel representing Mr. Wise, sent a letter to the First Department advising the court that the December 9, 2014 motion to vacate the preliminary injunction had been rendered moot due to the election of a new Board at the Annual Meeting, which did not intend to proceed with the issuance of Preferred Stock. On January 20, 2015, the First Department issued an order deeming the motion withdrawn as moot. The case otherwise remains pending.

On July 22, 2014, the Company filed a lawsuit in U.S. District Court for the Southern District of New York against Mr. Wise and shareholder Jenny P. Yu, alleging certain violations of the federal securities laws relating to the Schedules 13D filed by each of Mr. Wise and Ms. Yu, and the preliminary proxy solicitation materials filed by Mr. Wise (the "Federal Action") in support of the candidates that he proposed for election to the Company's Board at the 2014 Annual Meeting. Specifically, the Company alleged that these filings were misleading because Mr. Wise and Ms. Yu had formed an undisclosed "group" under Section 13(d) of the Securities Exchange Act. The Company's lawsuit sought expedited injunctive and declaratory relief requiring Mr. Wise and Ms. Yu to comply with the federal securities laws by submitting revised disclosures in advance of any vote by the Company's shareholders, and also sought to have Mr. Wise's Board nominations invalidated and for a declaration that Mr. Wise and Ms. Yu were subject to certain provisions of the New York's Business Corporation Law as a result of their purported "group" under Section 13(d). In an August 19, 2014 order, the Court rejected the Company's request for a preliminary injunction. On September 20, 2014, the Court dismissed all of the Company's claims against Mr. Wise and Ms. Yu with prejudice, after which the Company filed an appeal to the United States Court of Appeals for the Second Circuit. On February 11 and 12, 2015, all parties to the Federal Action stipulated to withdraw the Company's appeal with prejudice.

On August 26, 2014, James McKenna, the Company's former Chief Financial Officer, filed a lawsuit in the U.S. District Court for the Southern District of New York against the Company and its then-directors (now former directors) Frank LaGrange Johnson, Robert Garrett John F. Chiste, Timothy Gordon and Owen P.J. King, asserting retaliation and whistleblowing claims under the Dodd-Frank Act, claims for breach of contract and breach of the covenant of good faith and fair dealing against the Company, and a single claim for tortious interference with contract against the individual defendants. The complaint seeks an unspecified amount of monetary consequential damages and punitive damages. The case currently remains pending while the parties discuss the terms of a potential settlement. No assurance can be given that these discussions will be successful or that a settlement will be reached.

On November 13, 2014, the Company filed a lawsuit in the Supreme Court of the State of New York, Kings County, against Mr. Wise and the six individuals Mr. Wise had nominated to stand for election to the Company's Board at the 2014 Annual Meeting: Howard Morgan, Michael Luetkemeyer, Eric Freitag, Sangita Shah, N. Scott Fine, and Darryl Keyes. The Company's complaint sought a judicial declaration that Mr. Wise's nominations were invalid, as they were purportedly not noticed within the timeframe that the Company argued was provided by the Company's Bylaws. The complaint also sought an injunction preventing Mr. Wise from soliciting proxies for the election of his nominees. At a hearing on December 1, 2014, the Court denied the Company's request for preliminary injunctive relief. On December 2, 2014, the Company requested an injunction from the Appellate Division of the Supreme Court of the State of New York, Second Department, which was denied on December 12, 2014. On December 3, 2014, Mr. Wise filed a motion to dismiss the lawsuit in its entirety, with prejudice. On February 11, 2015, the parties stipulated to discontinue the case.