10. Commitments and Contingencies
|12 Months Ended|
Sep. 30, 2012
|Commitments And Contingencies|
|10. Commitments and Contingencies||
Bank and Other Cash Equivalent Deposits in Excess of FDIC Insurance Limits
The Company maintains cash and cash equivalent accounts with Federal Deposit Insurance Corporation (FDIC) insured financial institutions. Under provisions of the Dodd Frank Wall Street Reform and Consumer Protection Act, unlimited FDIC insurance is provided for all funds in non-interest bearing transaction accounts through December 31, 2012. In addition, certain of the Companys interest bearing collateral money market accounts are each insured up to $250,000 by the FDIC. The Companys exposure for amounts in excess of FDIC insured limits at September 30, 2012 was approximately $5.5 million. The Company has not experienced any losses in such accounts.
Commencing May 1, 2012 the Company leased approximately 6,800 square feet of improved office, laboratory, assembly and warehouse space in Poway, California for a period of 39 months terminating July 2015. The gross monthly base rent is approximately $7,200 increasing 3.5% per annum subject to other certain future adjustments. The agreement provided for concessions including a $17,000 tenant improvement allowance and three free months rent during the lease term.
Commencing June 1, 2011 the Company leased 3,498 square feet of space now used for warehousing in Poway, California for a period of 25 months terminating June 30, 2013. The gross monthly base rent is $3,603 per month for the remaining term of the lease, subject to certain future adjustments. The Companys President, Mr. Norris, executed a personal guarantee of the lease without compensation.
The Company has no other operating leases and the remaining future annual minimum lease payment obligation under the foregoing facility leases are $117,521, $84,246 and $83,171 for the years ending September 30, 2013, 2014 and 2015, respectively.
In April 2012 the Company entered into a five-year employment agreement with Kenneth F. Potashner as Executive Chairman. Under the terms of the employment agreement, the Company may be obligated to pay to Mr. Potashner severance equal to one year of his annual base salary plus targeted bonus if his employment is terminated without cause. The Company also granted him an option to purchase up to 175,000 shares of common stock exercisable at $4.50 per share until April 3, 2017 vesting upon achievement of performance targets established by the Board of Directors. In connection with this employment option grant, the vesting of a December 2011 consultancy option to purchase 410,000 shares at an exercise price of $3.25 per share was modified such that 195,000 shares were vested as of April 3, 2012, 195,000 shares will vest equally over eight calendar quarters that commenced March 31, 2012 and 20,000 shares will vest upon achievement of performance targets established by the Board of Directors. A total of 20,000 performance shares vested during the year ended September 30, 2012. In April 2012 the Company paid Mr. Potashner $125,000 for consulting services from December 2011 through his April 2012 employment.
On May 1, 2012 the Company adopted a cash bonus plan for the period April 1, 2012 to December 31, 2012, pursuant to which each of the Companys executive officers and certain other officers, consultants and employees designated by the Board of Directors are eligible to receive a target bonus equal to a percentage of the executive officers or other individuals annualized base compensation if applicable performance objectives are met. The performance objectives are based 25% upon the Company achieving certain revenue performance targets, 25% upon the Company achieving certain licensing targets, 25% based upon the Company achieving certain technology development targets and 25% upon the Company or its licensees or partners achieving certain new HSS technology product launch targets. The performance objectives include both objective determinations and subjective determinations to be made by the Board of Directors. The maximum bonus percentage for each participant is 50% of his or her annual base compensation, except for the Companys Executive Chairman whose maximum bonus percentage is 60% of his annual base compensation. All computations are adjusted to 75% to reflect the nine-month bonus period for the period April 1, 2012 to December 31, 2012 and payments of earned bonuses are deferred if certain cash generation targets are not met. At September 30, 2012 the Company had accrued an aggregate of $35,298 for bonuses under the plan.
Guarantees and Indemnifications
Our officers and directors are indemnified as to personal liability as provided by the Nevada Revised Statutes, the Companys articles of incorporation and bylaws and by indemnification agreements with the Company. The Company may also undertake indemnification obligations in the ordinary course of business related to its products and the issuance of securities with customers, investors, vendors and business parties. The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such indemnification obligations now or in the future. Because of the uncertainty surrounding these circumstances, the Companys current or future indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business. The Company has no liabilities recorded for such indemnities.
The entire disclosure for commitments and contingencies.
Reference 1: http://www.xbrl.org/2003/role/presentationRef