(7) CAPITAL STOCK
(a) Common stock
On January 4, 2009, the Company received a notice of claims (the Default Notice) from certain investors (the Investors) with respect to a private placement transaction dated June 4, 2007 (the Financing Transaction), pursuant to which the Company issued 50,000 shares of common stock and 50,000common stock warrants to the Investors. The Default Notice was made by the Investors due to the Companys failure to fulfill its registration statement obligation under the Financing Transaction. The Default Notice demanded the issuance of 50,000 shares of the Companys common stock as liquidated damages under the agreement. After due consideration and reasonable deliberation, the Company agreed to issue to each of the Investors 5,000 shares of the Companys common stock, which represented a total of 50,000 shares. The shares of common stock were issued to the Investors in March and April 2009. In connection with its audited financial statements for the fiscal year ended September 30, 2009, the Company decided to restate its financial statements for the 2008 fiscal year end period and each quarter in 2009 fiscal year to reflect the issuance of these shares as liquidated damages.
On February 1, 2009, the Company cancelled 1,000 shares returned from Her Village Limited pursuant to an Asset Transfer Agreement.
In March and April 2009, the Company issued a total of 50,000 shares to certain investors as liquidated damages for its failure to meet its registration obligation under a financing transaction occurring in 2007.
In May 2009, the Company issued 44,219 common shares of common stock and 7,782 warrants as consideration of the acquisition of GlobStream. At the same time, the Company cancelled the 12,000 common stock then held by GlobStream on acquisition.
On July 9, 2009, the Company entered into an agreement with Redrock Capital Venture Limited which cancelled outstanding loans in the amount of $223,529 in favor of Redrock for the issuance of 92,683 shares of its common stock.
On September 8, 2009, pursuant to the transaction with Beijing Hua Hui on August 1, 2009, the Company issued 832,318 shares of its common stock to Wise Gold Investment Ltd., a British Virgin Island company acting on behalf of Hua Hui. In addition, on that same date, it issued 1,942,074 shares of common stock to Blossom Grow Holdings Limited, a British Virgin Island company, as escrow agent under an escrow agreement by and among the Company, the escrow agent, and Hua Hui.
On November 14, 2009, the Board of Directors resolved to return and retired the 500 treasury stock held by the Company.
Effective on November 16, 2009, we effected a 20 for 1 reverse split of our issued and outstanding common stock. This reverse stock split already gave retroactive effect in the computation of basis and diluted EPS for all period presented accordingly.
As of September 30, 2012 and 2011, the Company had 3,272,311 and 3,272,311 shares issued and outstanding respectively.
On July 22, 2007, 60,000 common stock warrants were issued to Investors. Under the Warrant, the investors have the right, for a period of three years from the date of such warrant, to purchase a total of 60,000 shares of the Companys common stock. The per share exercise price of the Warrant is $33. The warrants were expired on July 21, 2010.
On July 4, 2008, pursuant to the Stock Purchase Agreement made and entered into by the Company and Her Village Limited, we issued warrants to the investor for the option to purchase 50,000 shares of Common Stock with an exercise price of $20 per share and an expiration date of 18 months from the date of issuance. Such warrants were expired on January 3, 2010.
On June 28, 2009, pursuant to the Acquisition Agreement made and entered into by the Company and GlobStream, the
company issued warrants to Mr. Luo Wenjun for the option to purchase7,782 shares of common stock with an exercise price of $3 per share and an expiration after March 23, 2019.
These Warrants may be exercised, in whole or in part, by the Holder during the Exercise Period by (i) the presentation and surrender of this Warrant to the Company along with a duly executed Notice of Exercise specifying the number of Warrant Shares to be purchased, and (ii) delivery of payment to the Company of the Exercise Price for the number of Warrant Shares specified in the Notice of Exercise.
As of September 30, 2012, the Company had 7,782 common stock warrants outstanding.
(c) 2001 stock plan
In 2001, the Board of Directors adopted a Stock Plan (Plan). Under the terms and conditions of the Plan, the Board of Directors is empowered to grant stock options to employees, consultants, officers and directors of the Company. Additionally, the Board will determine at the time of granting the vesting provision and whether the options will be qualified as Incentive Stock Options under Section 422 of the Internal Revenue Code (Section 422 provides certain tax advantages to the employee recipients). The Plan was approved by the shareholders of the Company on September 15, 2001. The total number of shares of common stock available under the Plan may not exceed100. As of September 30, 2012, no options were granted under the Plan.
(d) Development fund
In 2004, certain shareholders, directors, and officers entered into an agreement to establish a fund wherein 32,500 shares of common stock would be returned by the shareholders to the Company for cancellation and reissuance as incentives to compensate new officers, directors and other management team members based on the management effort and performance decided by the three shareholders.
On July 28, 2005, one of the shareholders returned 500 shares to the Company, which is treated as treasury stock at the face value and the premium as additional paid-in capital. The shares have been valued at a predecessor cost value of $0.02 per share and were held by the Company. On November 14, 2009, the Board of Directors resolved to return and retire these 500 shares.