FPCG First Physicians Capital Group Inc (CE)

Proposal 1 — Amendment to Certificate of Incorporation to Effect the Reverse Stock Split

You are being asked to vote on an amendment to our Certificate of Incorporation to effect a Reverse Stock Split of our Common Stock. The intended effect of the Reverse Stock Split is to reduce the number of record holders of our Common Stock to fewer than 300, so we will be eligible to terminate the registration of our Common Stock under the Securities Exchange Act of 1934 (the “Exchange Act”). If the Reverse Stock Split is approved by stockholders, we will take action to deregister our Common Stock with the SEC, and our Common Stock will no longer be eligible for trading on the Over-the-Counter Bulletin Board (the “OTCBB”). In such case, we will no longer be required to file periodic reports with the SEC. However, our Common Stock may be quoted on the OTC Pink Marketplace, or the “Pink Sheets.”

We intend for the Reverse Stock Split to treat stockholders holding Common Stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are registered in their names. Nominees will be instructed to effect the Reverse Stock Split for their beneficial holders. However, nominees may have different procedures, and stockholders holding shares in street name should contact their nominees.

As soon as practicable after the Reverse Stock Split, our exchange agent will send each stockholder with the right to receive a certificate for post-split shares and/or cash payment a letter to be used to transmit Common Stock certificates to the exchange agent. After properly completing, executing and returning the transmittal letter and accompanying stock certificates to the exchange agent, these stockholders will receive a certificate for post-split shares and/or a check for their cashed out shares. Nominees (such as a bank or broker) may have required procedures, and stockholders holding Common Stock in street name should contact their nominees to determine how the Reverse Stock Split will affect them. See the information under the caption “Information About the Reverse Stock Split — Exchange of Certificates for Cash Payment or Shares” in this Proxy Statement. In the event we are unable to locate a stockholder or if a stockholder fails properly to complete, execute, and return the transmittal letter and accompanying stock certificates to the exchange agent, any funds payable to that holder pursuant to the Reverse Stock Split will be held in escrow until a proper claim is made, subject to applicable abandoned property laws. Please do not return your stock certificates with your proxy.

The Board recommends that stockholders vote FOR

the Certificate of Amendment to effect the Reverse Stock Split.

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Information about the Meeting and the Reverse Stock Split

The following questions and answers briefly address some commonly asked questions about the Meeting and the Reverse Stock Split that are not addressed in the “Summary Term Sheet.” These questions and answers may not include all the information that is important to you. We urge you to read carefully this entire Proxy Statement, including our financial statements and annexes.

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The Board chose not to retain the services of an independent advisor to evaluate and prepare an opinion regarding the fairness of the Reverse Stock Split because it believes the cost of these services would be excessive given the relative size and cost of the Reverse Stock Split. The total expected payment to be made for fractional shares cashed out in connection with the Reverse Stock Split is approximately $225,000. In comparison, a fairness opinion was expected to cost approximately $100,000.

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Prior to the Reverse Stock Split, SMP and Ciabattoni Trust, two of our significant stockholders, beneficially own approximately 54.1% and 39.0%, respectively, of our Common Stock. After the Reverse Stock Split, SMP and Ciabattoni Trust will beneficially own approximately 54.8% and 39.5%, respectively, of our Common Stock. The shares of Common Stock held by SMP and Ciabattoni Trust represent approximately 30.6% and 18.1% of the Common Stock votes eligible to be cast at the Meeting. The shares of Common Stock held by SMP and Ciabattoni Trust, plus the votes afforded to them as holders of Preferred Stock, represent approximately 20.4% and 13.0%, respectively, of the votes eligible to be cast at the Meeting.

Each of our directors, executive officers, SMP and Ciabattoni Trust intend to vote the Voting Shares that each beneficially owns in favor of the Reverse Stock Split. See the information under the captions “Special Factors — Effects of the Reverse Stock Split,” “Special Factors — Potential Disadvantages of the Reverse Stock Split to Stockholders,” “Special Factors — Financial Effect of the Reverse Stock Split” and “Special Factors — Costs of the Reverse Stock Split” in this Proxy Statement.

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Because the number of shares of Series 7-A to be issued to the 2011 Bridge Lenders is based on the consideration paid for the Exchanged Securities, the Company does not expect the Reverse Stock Split to have an effect on the 2011 Bridge Lenders. The number of shares of Series 7-A that each 2011 Bridge Lender will receive will not be adjusted. However, as with our other series of Preferred Stock, the total number of shares of Common Stock into which each share of Series 7-A is convertible and the number of votes to which each share of Series 7-A is entitled will be adjusted on the Effective Date to reflect the Reverse Stock Split. No shares of Series 7-A are currently outstanding.

Each of William Houlihan, SMP and Ciabattoni Trust is a 2011 Bridge Lender and is eligible to participate in the Series 7-A Exchange. The Company expects to consummate the Series 7-A Exchange within the next year but anticipates that the Series 7-A Exchange will not occur until after the Meeting. Consequently, the Series 7-A Exchange will not affect the beneficial ownership or the voting rights of William Houlihan, SMP or Ciabattoni Trust at the Meeting. If the Reverse Stock Split is approved, the Board intends to adjust the number of shares of Common Stock issuable upon exercise of and the exercise price of any warrants issued in relation to the Series 7-A Exchange to reflect the Reverse Stock Split.

As of the date of this Proxy Statement, William Houlihan, SMP and Ciabattoni Trust beneficially owned 10.6%, 54.1% and 39.0% of the Company’s Common Stock, respectively. Assuming that the Company’s stockholders do not approve the Reverse Stock Split, following the Series 7-A Exchange, they will beneficially own 13.8%, 61.0%, and 46.2% of the Company’s Common Stock, respectively. The table below summarizes the voting rights of William Houlihan, SMP and Ciabattoni Trust before and after the completion of the Series 7-A Exchange assuming the Company’s stockholders do not approve the Reverse Stock Split.

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Special Factors

Reasons for and Purposes of the Reverse Stock Split

The primary purpose of the Reverse Stock Split is to reduce the number of record holders of our Common Stock to fewer than 300 holders, so we can terminate the registration of our Common Stock under the Exchange Act. The Reverse Stock Split is expected to eliminate expenses related to our disclosure and reporting requirements under the Exchange Act and to decrease administrative expenses we incur by servicing record stockholders who own a relatively small number of shares of our Common Stock.

As discussed further in this Proxy Statement under the caption “Special Factors — Background of the Reverse Stock Split,” the Board began informally reviewing a going private transaction in early 2011. The Board began serious consideration of a going private transaction in March 2014 and, as a result, engaged Cabrillo Advisors to assist the Company in evaluating the fair market value of the Common Stock. The Board began more detailed discussions of a going private transaction at the Board meeting held on May 23, 2014, which was the first Board meeting after the Company became current in its SEC reporting obligations. Management expressed concern about the expense of remaining a public company, the Company’s inability in the past to comply with the periodic reporting requirements of the Exchange Act, the significant commitment of management time and resources, and the burden of continuing to be subject to periodic reporting requirements. As a result of these concerns and the factors discussed further in this Proxy Statement under the caption “Special Factors — Background of the Reverse Stock Split,” the Board believes that any material benefit derived from continued registration under the Exchange Act is outweighed by the cost and burdens and that continuing our public company status is not in the best interest of the Company or our stockholders.

Further, we have had difficulty maintaining internal controls over financial reporting. We have reported in our periodic reports for all periods ending after December 31, 2010 that we have material weaknesses in our internal control over financial reporting. Management believes that it would be difficult and expensive for the Company to

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remedy the material weaknesses in its internal controls to conform to the internal control requirements for public companies and such an undertaking would require a commitment of a significant amount of time from management.

In the Board’s view, our status as a public company does not materially benefit our stockholders and places significant financial burden on the Company. To prepare and file our delinquent filings for the periods ending after December 31, 2010, we spent approximately $850,000 in audit, legal, printing, filing and other fees. To continue as a public company, we would need to incur a number of costs associated with compliance with the SEC’s filing and reporting requirements imposed on public companies. To comply with the public company requirements, we estimate we would incur $543,000 annually in related expenses, as follows:

The estimates set forth above are only estimates. These costs would not all be eliminated entirely if the Company terminated its obligations under the Exchange Act. However, these expenses are anticipated to substantially decrease after the Reverse Stock Split and related deregistration. We estimate that the actual annual savings will approximate $370,000 to $410,000, as the Company will continue to incur audit and related fees to prepare its financial statements. The actual savings may be higher or lower than this estimate. The Board believes that it is in our best interests and the best interests of our stockholders to eliminate the administrative, financial, and additional auditing burdens associated with being a public company by going forward with the Reverse Stock Split and related deregistration.

The principal benefits of being an SEC registrant, including access to the public markets for capital raising and liquidity for our stockholders, have largely been unavailable to the Company. The Company has only received financing due to continued investment from our major stockholders. Given the current state of the capital markets and the current economic environment, the Board does not believe that we are in a position to use our status as a public company to raise capital through a public offering of equity or debt securities. Further, the Company does not currently have plans to raise capital in the public market. However, the Company intends to satisfy its future capital requirements using cash flow from operations and may seek bank financing or issue debt securities, if necessary.

Our Common Stock’s low price has impaired our smaller stockholders’ ability to sell their shares, as doing so in the public market is cost prohibitive. In addition, the limited trading volume of our Common Stock and minimal public float could impair our larger stockholders’ ability to sell their shares, which could prevent them from realizing the full benefits of holding publicly traded stock. Our small market capitalization has resulted in limited interest from market makers and financial analysts who might report on our activity to the investment community. Our stock has been thinly traded, and the price of our Common Stock has been low. As a result, entering into a large purchase or sale could significantly impact the market price of our Common Stock. In addition, our Common Stock’s limited trading volume and public float has limited our ability to use our Common Stock as acquisition currency or to attract and retain employees. The Board believes that it is unlikely that our market capitalization and trading liquidity will increase significantly in the foreseeable future.

As a result of going private, we believe management will have more time to further our business objectives and the interests of our stockholders. If the Company does not go private, the time and resources required of management for compliance with SEC reporting requirements may require us to hire additional personnel. Further, remaining public may make it difficult for us to attract and retain additional executives and independent directors without increasing director compensation and obtaining additional directors’ and officers’ liability insurance.

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The Board determined to proceed with the Reverse Stock Split at this time because it recently filed its delinquent SEC reports and because of the burden of continued compliance with SEC reporting obligations. The benefits of remaining a public company are far outweighed by the direct and indirect costs associated with remaining a public company. See also information under the caption “Special Factors — Strategic Alternatives Considered” in this Proxy Statement for an additional description of the reasons why our Board approved the Reverse Stock Split instead of another alternative transaction structure.

The Reverse Stock Split will terminate the equity interests of approximately 287 record holders of Common Stock. The Reverse Stock Split will treat stockholders holding Common Stock in street name through a nominee (such as a bank or broker) in the same manner as record holders. Nominees will be instructed to effect the Reverse Stock Split for their beneficial holders. Nominees may have different procedures, and stockholders holding shares in street name should contact their nominees.

We presently have approximately 354 record holders and 3,759 beneficial holders of our Common Stock, of which we believe approximately 287 record holders and 3,567 beneficial holders own less than 2,000 shares. We estimate that the shares held by these small holders of less than 2,000 shares comprise less than 1.5% of our outstanding shares of Common Stock before the Reverse Stock Split. Further, 242 of the record holders that will be cashed out in the Reverse Stock split own less than 100 shares of Common Stock. The Reverse Stock Split will provide small stockholders a mechanism to liquidate their equity interest without having to pay brokerage commissions. The Reverse Stock Split will eliminate much of the administrative burden and cost of maintaining records for numerous small accounts and the associated cost of preparing, printing, and mailing information to them.

When the Reverse Stock Split is consummated, stockholders owning fewer than 2,000 shares of Common Stock will no longer have any equity interest in the Company and will not participate in our future earnings, any increased value of our assets or operations or any benefit derived from our net operating loss carry-forwards. Only continuing stockholders will benefit from any future increase in our earnings. The stockholders who continue to hold an equity interest in the Company after the Reverse Stock Split will own a security with limited liquidity. See also information under the captions “Recommendation of the Board” and “Fairness of the Reverse Stock Split” in this Proxy Statement.

Strategic Alternatives Considered

The Board considered alternatives to effect deregistration of the Common Stock when evaluating the Reverse Stock Split. After evaluating the risks and benefits of each alternative, the Board determined that the Reverse Stock Split would be the simplest and most cost-effective means to achieve the purposes described above. The alternatives considered were:

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The Board also considered pursuing a sale of the Company. The Board concluded that they did not believe that a sale was in the best interests of the Company or its stockholders given the small scale of its operations and the concentration of its customer base. Further, the Board did not believe that a majority of the stockholders would support a sale.

In selecting the method by which to take the Company private, the Board did not consider the existence or lack of appraisal rights. Section 262 of Delaware General Corporation Law provides for appraisal rights in transactions structured as, among other things, mergers, consolidations and sales involving all or substantially all of a corporation’s assets. Other than pursuing a sale of the Company, none of the strategic alternatives considered would have provided the Company’s stockholders with appraisal rights under Delaware law.

Background of the Reverse Stock Split

During the fiscal year ended September 30, 2010, we shifted our strategy from majority ownership in healthcare delivery companies to a focus on providing management, financial, and ancillary healthcare and information technology services to rural and community hospitals. We expect to maintain and/or acquire minority ownership in selected healthcare delivery companies that complement our management services and financing activities. We may also invest in, acquire, or partner with other companies that provide similar services in our markets.

In pursuit of this reorganization, we undertook to divest underperforming facilities and reduce or outsource administrative functions to better manage costs. As a result of the initiative, during the fiscal year ended September 30, 2011, we successfully divested our majority owned hospitals and obtained contracts to provide healthcare management services to two hospital clients. We currently have four operating subsidiaries:

Solutions provides an array of management services, including hospital operations management, revenue cycle management, IT, finance and human resources. Services provides ancillary service oversight and management solutions for lab, pharmacy, and emergency departments in rural hospital settings. Resources provides medical and back office staffing solutions to our hospital clientele. Realty Group is our real estate subsidiary that owns healthcare-related properties and leases them to clients. We currently have contracts to provide financial and administrative services to two hospital clients. As of September 30, 2013 and 2012, 100% of our accounts receivable were derived from our management services contract with one customer.

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During the reorganization, the Company experienced significant management turnover. It was difficult to recruit talent with the necessary public company experience to manage our operations and public reporting process. Further, the Company did not use the public markets to raise the capital that it needed during this time period and had successfully obtained funding from its existing stockholders, including SMP and Ciabattoni Trust.

In early 2011, David Hirschhorn, the Company’s then current Chief Executive Officer, recommended that the Board consider a going private transaction. As a result, the Board began informally reviewing the costs and benefits to the Company of remaining a public company or, alternatively, taking the Company private. The Board did not engage any third-party advisors at this time. Mr. Hirschhorn also discussed the idea of a going private transaction with Brian Potiker of SMP and Anthony Ciabattoni of Ciabattoni Trust. Mr. Potiker and Mr. Ciabattoni agreed that it would be appropriate to consider a going private transaction and that they would consider any proposal approved by the Board.

Prior to the reorganization, the Company had experienced sustained losses and had an accumulated deficit of approximately $95.5 million as of September 30, 2010. The Company funded its losses through the issuance of Preferred Stock, the issuance of promissory notes, and cash from operations. During and since the reorganization, the Company has not utilized the public markets to raise capital to fund operations and management does not anticipate that it will need to do so in the near future. Further, the Company was not eligible to utilize the public markets for capital raising during this period because the Company was not current in filing its periodic reports with the SEC.

Following the reorganization, the Company had net income from continuing operations of $5.6 million and $5.8 million in the fiscal years ended September 30, 2012 and 2013, respectively. While the Company had returned to profitability, management expressed concerns that the Company’s size and anticipated capital needs did not justify the costs of remaining a public company.

In 2011, the Company ceased filing periodic reports with the SEC as a result of time and resource constraints on management and significant management turnover. From time to time since 2011, management, members of the Board, Mr. Potiker and Mr. Ciabattoni had informal discussions regarding the advisability of and the reasons for undertaking a going private transaction. The Board members understood that the Company would be unable to pursue a going private transaction until the Company was current in its public reporting obligations with the SEC. As a result, the Board members determined that they would defer consideration of undertaking a going private transaction until the Company had stabilized management and provided current public disclosure.

On August 5, 2013, the Company received a letter from the SEC requesting that the Company file all required reports to avoid SEC administrative proceedings to revoke our Exchange Act registration. Prior to April 4, 2014, the last periodic report of the Company filed with the SEC was the Form 10-Q for the fiscal quarter ended December 31, 2010, which was filed on February 22, 2011. In order to become current with all required quarterly and annual reports under the Exchange Act, the Company filed Form 10-Ks for the fiscal years ended September 30, 2011, 2012, and 2013 concurrently with Form 10-Qs for the fiscal quarters ended March 31, 2011, June 30, 2011, December 31, 2011, March 31, 2012, June 30, 2012, December 31, 2012, March 31, 2013, June 30, 2013, and December 31, 2013 (collectively, the “Reports”).

Mr. Potiker and Mr. Ciabattoni were invited to participate as observers in Board meetings on behalf of SMP and Ciabattoni Trust following the closing in November 2013 of the 2013 bridge financing in which SMP and Ciabattoni Trust participated. SMP and Ciabattoni Trust were already significant stockholders at the time. As Board observers, Messrs. Potiker and Ciabattoni receive all notices and agendas for Board meetings and have the right to attend Board meetings.

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While preparing the Reports in January 2014, Mr. Kirrane had informal discussions with Board members, recommending that the Board consider a going private transaction following the Company becoming current with its SEC reporting obligations. At the request of the Board, management engaged outside legal counsel to consider the process and costs of taking the Company private. The Board members and management determined that it was the appropriate time to analyze the advisability of terminating the Company’s SEC reporting obligations following the filing of the Reports. Management has continued to consult with counsel periodically regarding these matters. In late January 2014, Mr. Kirrane informed Mr. Potiker and Mr. Ciabattoni that the Board had started to consider a going private transaction. Each of Mr. Potiker and Mr. Ciabattoni informed Mr. Kirrane that they intended to support a going private transaction, assuming the Board approved terms they considered fair to stockholders.

While preparing the Reports, Mr. Kirrane, the Company’s current President and Chief Executive Officer, concluded that the Company did not maintain effective internal control over financial reporting. Specifically, the Company has material weaknesses in its internal controls related to the effectiveness of management’s controls over the closing process for financial reporting. These controls specifically related to adequate oversight by management, adequate segregation of duties, adequate review and approval of journal entries and adequate review and approval of consolidating financial statements. Management informed the Board that it believes that it would be difficult and expensive for the Company to remedy the material weaknesses in its internal controls to conform to the internal control requirements for public companies and such an undertaking would require a commitment of a significant amount of time from management.

In January 2014, the Board had informal discussions regarding engaging an independent financial advisor to give an opinion regarding the fairness of the Reverse Stock Split and to assist in the evaluation of strategic alternatives available to the Company. The Board asked management to review the anticipated cost of an independent financial advisor. Management informed the Board that the cost to retain an independent financial advisor to provide a fairness opinion was expected to exceed $100,000 and they did not believe it would provide a benefit commensurate with the anticipated cost. Given the current financial condition of the Company, management believed that retaining an independent financial advisor to provide an opinion regarding fairness would not be a prudent use of the Company’s limited financial resources. However, in March 2014, the Board began serious consideration of a going private transaction and, as a result, engaged Cabrillo Advisors, an independent advisor, to assist the Company in evaluating the fair market value of our Common Stock. The Board selected Cabrillo Advisors following discussions with several valuation firms. Following those discussions and the receipt of cost estimates from several firms, the Board selected Cabrillo Advisors based on their valuation experience, understanding of the Company’s industry and reasonable cost estimate. The Board did not obtain or request an opinion from Cabrillo Advisors regarding the fairness of the Reverse Stock Split. This valuation cost approximately $26,500 plus expenses. The payment to Cabrillo Advisors was not contingent on any result. The Board also believed that a third party valuation was necessary because the trading price was not a reliable indicator of fair market value because of the lack of consistent trading in the Company’s Common Stock prior to the filing of the Reports and significant fluctuation in the price of our Common Stock following the filing of the Reports.

In January 2014, counsel suggested that the Board consider whether a special committee should be formed to consider the Company’s strategic alternatives and the terms of any going private transaction. Establishing a special committee would have created another protection of procedural fairness for any going private transaction. However, the Board determined that, in view of the small size of the Board, the independence of all the Board members and the cost of retaining separate independent counsel for a special committee, a special committee was not necessary.

In February 2014, following informal discussion of the various alternatives for taking the Company private, the Board members generally agreed that the Reverse Stock Split would be the most desirable alternative to pursue, given the relative certainty of the outcome and cost of completion, provided that it was effected at a price and on terms fair to all of our stockholders. The Board instructed management to make a recommendation

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regarding the terms of the Reverse Stock Split, including the specific ratio for the reverse stock split and the pre-split share price to be paid for fractional shares. Management was also directed to engage counsel and prepare the necessary documents to comply with the reporting and disclosure requirements of the Exchange Act. Concurrently, management prepared an analysis of the potential reverse stock split ratios.

Following the Board’s discussion, Mr. Kirrane informed Mr. Potiker that the Board had asked management to prepare an analysis of a potential reverse stock split and expected to formally begin to consider a going private transaction in the near future. Mr. Potiker and Mr. Ciabattoni determined that they would not exercise their observation rights with respect to Board meetings at which the Board considered a going private transaction and related alternatives in order to allow the Board members, each of which is independent, to consider the transaction without any input or influence from Mr. Potiker or Mr. Ciabattoni.

In determining the appropriate ratios, management reviewed the list of record owners provided by the transfer agent and ran calculations to determine the minimum ratio necessary to achieve the Company’s primary objective of reducing the number of stockholders to below 300. In preparing the analysis, management used a range of split ratios that would allow the Company to achieve a number of record holders below 300 after the anticipated conversion of a portion of beneficial owners holding shares of the Company’s Common Stock through nominees or brokers to record ownership.

On April 8, 2014, management provided Cabrillo Advisors with historical financial statements and cash flow information. Further, during early April, management and Cabrillo Advisors’ representatives had discussions regarding the prospects for the Company’s operations. Using that information, Cabrillo Advisors developed projected financial statements and worked with management to refine the calculations and assumptions used in the forecast. On May 29, 2014, the Board reviewed and approved the financial forecast.

On May 21, 2014, management called a Board meeting to be held on May 23, 2014 and informed the Board, legal counsel, Mr. Potiker and Mr. Ciabattoni. The agenda for the meeting included, among other matters, a discussion of the valuation process, the preliminary proxy statement and potential Board nominees for the Meeting.

On May 23, 2014, the Board held a meeting with representatives from Cabrillo Advisors, management and legal counsel to discuss the valuation process undertaken by Cabrillo Advisors and begin more detailed discussions regarding the process and timeline for a going private transaction. Mr. Potiker and Mr. Ciabattoni did not attend the meeting. Mr. Houlihan requested that management send the valuation presentation to the Board when it was ready and that they subsequently schedule a meeting to review the presentation.

On May 28, 2014, management called a Board meeting to be held on May 29, 2014 and sent the draft of the valuation presentation, the stock split ratio analysis and the public company cost estimates to the Board, legal counsel, representatives of Cabrillo Advisors, Mr. Potiker and Mr. Ciabattoni for their review. The agenda for the meeting included a review of the terms of the proposed going private transaction and the preparation of the preliminary proxy statement.

On May 29, 2014, the Board held a meeting with representatives from Cabrillo Advisors, management and legal counsel to review the materials sent to the Board. Mr. Potiker and Mr. Ciabattoni did not attend the meeting. At the meeting, representatives of Cabrillo Advisors reviewed a draft of the valuation presentation and the range of the fair market value of the Common Stock with the Board. Mr. Houlihan asked questions regarding the comparability of the companies and transactions used in the analysis, and representatives from Cabrillo reviewed the comparability factors. The Board discussed and asked questions regarding the analysis, including the assumptions used in the valuation. In particular, the Board discussed the number of shares of Common Stock used in the valuation analysis, which was adjusted for 4.25 million shares of Common Stock acquired by the Company that were being cancelled and the changes to the Company’s Common Stock, Series 5-A and Series 6-A as a result of the Series 7-A Exchange that the Company expects to consummate within the next year. Mr. Sells asked about the treatment of the Company’s outstanding options and warrants in the analysis. Representatives from Cabrillo Advisors confirmed that their analysis assumed the conversion of all outstanding options and warrants.

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Management also reviewed its stock split analysis with the Board. The stock split analysis set forth stock split ratios between 1-for-1,000 and 1-for-100,000. Management and the Board members discussed the composition of the Company’s stockholder base and the estimated impact of each ratio on the number of record holders, the number of fractional shares to be purchased and the cost to purchase the fractional shares. They further discussed the need to reduce the number of record stockholders below 300 stockholders to make sure that beneficial owners that convert from street name positions to record positions do not cause the Company to have more than 300 record holders.

The Board members then discussed the alternatives to a going private transaction, including pursuing a sale of the Company and maintaining the status quo. The Board concluded that they did not think that a sale was in the best interests of the Company or its stockholders given the small scale of its operations and the concentration of its customer base. Further, the Board did not believe that a majority of the stockholders would support a sale. The Board members and management agreed that the Company was still in the process of stabilizing operations and personnel and developing a more stable operating history. Further, management believed that a sale process would be disruptive and would distract management from operating the business. Mr. Kirrane confirmed that this reasoning was consistent with his previous informal discussions with Mr. Potiker and Mr. Ciabattoni. The Board also concluded that remaining public was undesirable because the benefits of remaining a public company are outweighed by the costs associated with remaining a public company and the commitment of management time and resources necessary to comply with public reporting requirement. Following the discussion, the Board members determined that they should reconvene the following week to consider the fair market value of the Company’s Common Stock.

On June 2, 2014, management called a Board meeting to be held on June 3, 2014 and informed the Board, legal counsel, Mr. Potiker and Mr. Ciabattoni. The agenda included, among other matters, a review of the terms of the going private transaction.

At a meeting of the Board on June 3, 2014, the Board members, management and legal counsel further discussed the potential going private transaction and reviewed the various alternatives for going private, including a self-tender offer, an odd lot tender offer, purchases of shares in the open market and a reverse stock split. Mr. Potiker and Mr. Ciabattoni did not attend the meeting. The Board members continued to believe that the Reverse Stock Split was the appropriate going private method for the Company due the relative cost and greater certainty of completion. The Board members also discussed the size of the Reverse Stock Split and the price per pre-split share . They emphasized the need to select a stock split ratio that was large enough to meet their goal of going private with an appropriate margin for stockholders that may convert their holdings to be held of record. In evaluating the price per pre-split share to be paid to stockholders, they discussed the range for the fair market value of the Common Stock indicated by the draft of the valuation presentation by Cabrillo Advisors, the recent trading prices and related volumes, the Company’s cash position and the need to maintain a cash cushion for purposes of their operations. The Board did not give significant weight to the Company’s projected financial results because results from operation had remained fairly consistent recently.

The Board considered the Company’s reliance on one customer for a majority of its revenue. Based on these considerations, the Board focused its discussion on stock split ratios from 1-for-1,000 to 1-for-2,500. The Board members determined that they would reconvene after further analysis of the potential terms of the going private transaction.

Subsequent to the June 3, 2014 Board meeting, Mr. Kirrane discussed the status of the Board’s evaluation of the going private transaction with Mr. Potiker. Mr. Kirrane told Mr. Potiker to expect a preliminary draft of a proxy statement to be distributed shortly thereafter. Mr. Potiker agreed to review the draft proxy statement when received and to discuss with Mr. Ciabattoni of the status of the transaction.

On June 16, 2014, at the request of management, legal counsel distributed drafts of the preliminary proxy statement, the Rule 13E-3 Transaction Statement and the final valuation report, including the final valuation presentation, to the Board, representatives of Cabrillo Advisors, Mr. Potiker and Mr. Ciabattoni for their review.

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On June 17, 2014, management called a Board meeting to be held on June 18, 2014 and informed the Board, legal counsel, representatives of Cabrillo Advisors, Mr. Potiker and Mr. Ciabattoni. The primary agenda item was the consideration of the filing of the preliminary proxy statement.

Following the distribution of the draft preliminary proxy statement to Mr. Potiker and Mr. Ciabattoni neither indicated that they had any substantive comments to the draft proxy statement.

On June 18, 2014, the Board held a meeting to further discuss going private and the filing of the preliminary proxy statement. Management and legal counsel also attended. Mr. Potiker and Mr. Ciabattoni did not attend the meeting. The final valuation presentation presented to the Board reflected an adjustment to the conversion rate for the Series 1-A and Series 2-A, which increased the shares of Common Stock issuable upon conversion of the series by 787,496 shares. This increase resulted in a higher number of total diluted shares being used as the denominator in determining the per share value of the Common Stock from the total equity value. The increase in total diluted shares resulted in a $0.01 decrease in the top end of the range of fair market value from $0.65 to $0.64 per share. There were no other changes from the draft to the final valuation presentation.

The Board discussed the draft of the preliminary proxy statement, which incorporated the information from the final valuation report. The Board reviewed management’s analysis of the costs and benefits of proceeding with a going-private transaction. Mr. Houlihan noted management’s assessment that a large percentage of the Company’s shares of Common Stock are held by a relatively small number of stockholders and that the Reverse Stock Split would cash out a significant number of small stockholders that held few shares of Common Stock while only eliminating a small percentage of the outstanding shares of Common Stock. The Board members then discussed that the stockholders with relatively small accounts had very little or no liquidity as a practical matter since the fees associated with trading their shares would significantly reduce or exceed the proceeds from the sale of their stock. They then reviewed the costs to the Company of maintaining its public company status, including the costs associated with the audit and internal control compliance. The Board believed that these costs were excessive given the Company’s resources and operations.

The Board members agreed that a reverse stock split continued to be the appropriate approach . Management emphasized its belief that the cost and commitment of management’s time required to remain public was likely not justified since the Company did not anticipate using the public markets to raise capital and the market for the Company’s Common Stock was not providing significant liquidity to stockholders.

Management then revisited the stock split analysis and the composition of the Company’s stockholder base with the Board. After further discussion, the Board determined that a ratio of 1-for-2,000 was appropriate to achieve the Company’s primary objective of reducing the number of record holders to fewer than 300 holders so that the Company can terminate the registration of the Company’s Common Stock under the Exchange Act while also maintaining an adequate cash position and allowing for a portion of the Company’s stockholders to convert from street name positions to record positions.

The Board then considered the fairness of cashing out pre-split shares at various prices. The Board considered the price of the Common Stock as traded on the OTCBB, including the one-month, three-month, six-month and twelve-month average closing prices of $0.54, $0.30, $0.15 and $0.08, respectively, and the 52-week range of $0.01 — $0.60 per share as one factor in determining the price to be paid for fractional post-split shares. In determining the proposed price per pre-split share, the Board considered the increase in the Company’s trading price following the filing of the Reports by reviewing the one-month and three-month average closing prices, which periods followed the filing of the Reports. The Board did not consider the increase in the Company’s trading price in determining whether to pursue a going private transaction at this time. The Board decided to give more weight to the range of fair market value of $0.54 — $0.64 per per-split share in the Cabrillo Advisors’ final valuation presentation because of the lack of consistent trading in the Company’s Common Stock prior to the filing of the Reports and the significant fluctuation in the price of the Company’s Common Stock following the filing of the Reports. In determining the pre-split price per share within the range of fair market value determined by Cabrillo Advisors, the Board considered that the Cabrillo Advisors’ range of fair market value did not fully reflect the lack of

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liquidity in the trading market for the Company’s Common Stock, the impact of the brokerage fees and commissions associated with selling a small number of shares or certain risk factors such as customer concentration and collections rates. As a result, the Board believed that it was appropriate and fair to all stockholders to pay a pre-split price per share at the lower end of the range. In the subjective judgment of the directors, $0.55 per pre-split share represented fair consideration, in light of the historical market prices, while also being within the valuation range provided by Cabrillo Advisors.

On the basis of management’s recommendations, the Board’s independent analysis, the subjective judgment of the Board members and the factors described elsewhere in this Proxy Statement in the sections entitled “Special Factors — Reasons for and Purposes of the Reverse Stock Split,” “Special Factors — Strategic Alternatives Considered,” “Special Factors — Third Party Valuation” and “Special Factors — Fairness of the Reverse Stock Split,” on June 18, 2014, the Board approved a 1-for-2,000 Reverse Stock Split, with a purchase price of $0.55 per pre-split share to be paid to persons that would otherwise be entitled to receive a fractional post-split share of Common Stock. Our directors unanimously approved the Reverse Stock Split. No director dissented or abstained from voting on the Reverse Stock Split. The Board further resolved that the Reverse Stock Split was substantively and procedurally fair to all unaffiliated stockholders, including those whose shares would be cashed out pursuant to the Reverse Stock Split and those who would retain an equity interest in the Company subsequent to the consummation of the Reverse Stock Split. The Board approved the amendment to the Certificate of Incorporation and authorized management to file the necessary documentation with the SEC.

Subsequent to the June 18, 2014 Board meeting, Mr. Kirrane relayed the Board’s decision regarding the terms of the Reverse Stock Split with Mr. Potiker and Mr. Ciabattoni.

On June 19, 2014, Mr. Potiker and Mr. Ciabattoni confirmed to Mr. Kirrane that they intended to vote the shares of Common Stock and Preferred Stock held by SMP and Ciabattoni Trust, respectively, in favor of the Reverse Stock Split. Their intent to vote their shares in favor of the Reverse Stock Split is also disclosed in their respective Schedule 13D filings.

Third Party Valuation

On March 14, 2014, the Board retained Cabrillo Advisors, a third-party independent advisor with extensive experience in performing valuations of businesses and stock, to determine a range of fair market value of the Company’s Common Stock. On May 30, 2014, the Board held a meeting with Cabrillo Advisors and reviewed the draft of the valuation presentation dated as of May 27, 2014. On June 20, 2014, the Board reviewed the final valuation report, including the final valuation presentation dated as of May 27, 2014, which reflected updates to the conversion rates of the Series 1-A and Series 2-A as a result of changes in the Company’s capital structure. The valuation was considered by the Board in connection with its decision regarding the price per pre-split share of Common Stock to be paid to our stockholders in the Reverse Stock Split and the fairness of that price to the Company’s stockholders.

The Board did not limit Cabrillo Advisors in any manner concerning the scope or methodology to be employed in conducting the valuation. The Company paid Cabrillo Advisors a fee of $26,500 plus expenses for the valuation, which payment was not contingent on Cabrillo Advisors’ conclusions or the consummation of any transaction. The Company has agreed to indemnify and hold harmless Cabrillo Advisors and its affiliates and their respective directors, officers, agents and employees against and from all liabilities arising out of or in connection with the advice or services to be rendered by them in connection with this engagement. No person or entity employed by or associated with Cabrillo Advisors owns the stock of, or trades the securities of, or has any financial interest in, the Company or any related entities. Other than with respect to the current engagement, during the past two years no material relationship has existed, nor is one mutually understood to be contemplated, and no compensation was received or is to be received as a result of any relationship between Cabrillo Advisors, its affiliates, and/or unaffiliated representatives and the Company or its affiliates. Cabrillo Advisors may in the future seek to provide services to the Company for which Cabrillo Advisors would expect to receive customary compensation.

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The full text of Cabrillo Advisors’ final valuation report, which includes the final valuation presentation dated as of May 27, 2014 attached as an exhibit thereto, is attached as Annex D to this Proxy Statement and should be read carefully in its entirety. Cabrillo Advisors’ valuation report has been provided in this Proxy Statement with the express written permission of Cabrillo Advisors. The valuation report is directed to the Board, relates only to the fair market value of the shares of the Common Stock and does not address any other aspect of the Reverse Stock Split or any related transaction and does not constitute a recommendation to the Board or any stockholder with respect to the Reverse Stock Split or any other matter being voted upon by the stockholders. The valuation report and its analyses must be considered as a whole. Selecting portions of the valuation report and Cabrillo Advisors’ analyses and factors considered by it, without considering all of its analyses and factors, or attempting to ascribe relative weights to some or all its analyses and factors, could create an incomplete view of the evaluation process underlying the valuation.

In the course of preparing the valuation report, representatives of Cabrillo Advisors made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things, Cabrillo Advisors:

Cabrillo Advisors’ valuation is based on a number of key considerations, including the following:

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None of the information provided by the Company was verified by Cabrillo Advisors as part of its engagement. The valuation report and related analysis reflect Cabrillo Advisors’ best judgment in light of the information available at the time.

Based on its experience and professional judgment after considering the result of its analyses taken as a whole, Cabrillo Advisors estimates that the fair market value of the pre-split shares of Common Stock to be purchased in connection with the Reverse Stock Split is in the range of $0.54 to $0.64 per pre-split share.

Set forth below is a summary of the valuation presentation included in the valuation report. The summary set forth below does not purport to be a complete description of the analyses performed or the presentation made by Cabrillo Advisors to the Board and is qualified by reference to the valuation presentation included in Annex D to this Proxy Statement.

General. Cabrillo Advisors was engaged to provide a calculation of a range of fair market value per share of the Company’s Common Stock. For purposes of its report “fair market value” means the price, expressed in terms of cash equivalents, at which such property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms’ length in an open and unrestricted market, when neither is under compulsion to buy or to sell, and when both have reasonable knowledge of relevant facts.” The best evidence of fair market value would be the market price in an active market . However, over the past several years, trading in the Company’s Common Stock has been sporadic and at relatively low volumes primarily as a result of the lack of current information about the Company. Even after filing the Reports, trading volumes have remained low and the stock price has been volatile. As a result, Cabrillo Advisors has calculated the fair market value of the Company through taking into consideration the best information available, using generally accepted valuation techniques.

Valuation Methods. Cabrillo Advisors considered three valuation methods in preparing the valuation presentation:

Cabrillo Advisors chose these public companies based on their general similarity of industry and operating model to the Company. Cabrillo Advisors noted that many of these companies are significantly larger than the Company. As of the date of the valuation presentation, the last twelve month (“LTM”) revenue, enterprise value and number of facilities of all but one of the 10 comparable companies was greater than that of the Company. Cabrillo Advisors also took into consideration factors such as the Company’s current and projected operating margins, growth rate, customer concentration risk, and payor mix, among other relevant factors.

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Due to the inherent differences between the business, operations and prospects of the Company and the business, operations and prospects of each of the companies included in the analysis, Cabrillo Advisors believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the guideline public company analysis. Accordingly, Cabrillo Advisors also made qualitative judgments concerning differences between the financial and operating characteristics and prospects of the Company and the companies included in the guideline public company analysis that would affect the public trading values of each. Cabrillo Advisors reviewed multiples of enterprise value to earnings before interest, taxes, depreciation and amortization adjusted for certain non-recurring items (“Adjusted EBITDA”) and enterprise value to revenue. The following table shows the share price, equity market value, enterprise value, enterprise value to Adjusted EBITDA multiple and enterprise value to revenue multiple for each guideline public company.

NA refers to not available; NMF refers to not meaningful figure.

FYE refers to the most recently complete fiscal year end (FYE), latest twelve months (LTM) or next fiscal year (NFY) for which financial information has been made public.

Based on the analysis of the guideline public companies, Cabrillo Advisors selected multiple ranges of 2.0x — 2.5x LTM revenue for the LTM period ended March 31, 2014, 2.0x — 2.5x NFY 2014 projected revenue, 6.0x — 7.0x LTM Adjusted EBITDA for the LTM period ended March 31, 2014 and 5.5x — 6.5x 2014 NFY projected Adjusted EBITDA to determine an enterprise value range for the Company.

The guideline public company method indicated an enterprise value range for the Company of $43.0 — $52.0 million.

Guideline Transaction Method

Cabrillo Advisors reviewed the purchase prices and multiples paid in the following select mergers and acquisitions involving publicly-traded target companies. The transactions were selected because the target companies in the transactions were outsourced medical service providers and hospital and other medical facility operators, and the transactions occurred between May 2011 and the date of the valuation. Cabrillo Advisors reviewed transactions involving public companies not only because of the Company’s status as a public company but also because of the greater availability and reliability of the financial information, valuation multiples and other data relating to the companies involved and the transaction terms.

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Cabrillo Advisors noted that the comparability of these selected transactions to any potential transaction in which the Company would be involved was limited due to the relative size of the Company as compared to the companies involved in the selected transactions. Additionally, Cabrillo Advisors noted that the relevance of these historical transactions to the current valuation is limited due to the recent and current market conditions. Since late 2011, there were only two transactions involving outsourced medical service providers for which implied EBITDA multiples were available. Additionally, there were only four transactions involving medical facility operators for which EBITDA multiples were available over the same time period. Given the many developments in the Affordable Care Act since the end of 2011, as well as significant movements in the broader stock market, Cabrillo Advisors’ reliance on transactions prior to 2011 was limited.

Based on its analysis of the guideline transactions, Cabrillo Advisors applied a multiple of 6.0x - 7.0x to the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the LTM period ended March 31, 2014, which it adjusted for a 20% minority interest discount and the Company’s interest-bearing debt to determine an implied enterprise value range for the Company. The multiple range was based on the multiples of EBITDA for the LTM period for the selected transactions. The tables below summarizes the transaction value, revenue, EBITDA, transaction value to revenue multiple and transaction value to EBITDA multiple for each guideline transaction.

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NA refers to not available.

Transaction study based on announced and completed, controlling interest acquisitions greater than $1.0 million

No company used in this analysis for comparative purposes is identical to the Company.

The guideline transaction method indicated an enterprise value range for the Company of $39.0 — $45.0 million.

Discounted Cash Flow Method

A discounted cash flow analysis is a valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

Cabrillo Advisors performed a discounted cash flow analysis by adding the present value of projected “free cash flows” for the Company for the fiscal years 2014 through 2020 to the present value of the “terminal value” for the Company’s projected free cash flow for 2021 . “Free cash flow” is defined as cash that is available to either reinvest or to distribute to security holders and “terminal value” refers to the value of all future cash flows from an asset at a particular point in time . The projected free cash flows that Cabrillo Advisors used in its analysis were based on financial projections and estimates prepared based on discussions with the management of the Company.

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Below is a summary of the financial forecast used in the discounted cash flow method, which was prepared by Cabrillo Advisors based on discussions with management.

The financial forecast was developed by Cabrillo Advisors using the Company’s historical financial statements and related cash flow information provided by management. Further, management and Cabrillo Advisors’ representatives had discussions regarding the Company’s operations and prospects. Using that information, Cabrillo Advisors developed projected financial statements and worked with management to refine the calculations and assumptions used in the forecast. The Board then reviewed and approved the financial forecast.

Gross revenue was projected to grow at a rate of 3.0%, with slight improvement in the Company’s bad debt allowance rate each year. Additionally, operating expenses were projected to increase at a rate consistent with gross revenue, and capital expenditures were expected to remain consistent at 1.5% of revenue annually.

Cabrillo Advisors discounted the projected free cash flows and the terminal value of the Company using a discount rate of 16.0%. Cabrillo Advisors calculated a terminal value for the Company by dividing projected 2021 cash flow by 12.0% (which reflects the discount rate of 16.0% less the projected perpetual growth rate of 4.0%).

The discount rate was determined based on Cabrillo Advisors’ estimate of the Company’s weighted average cost of capital. The WACC was calculated by applying the capital asset pricing model to the Company’s estimated cost of debt and equity. The estimated cost of equity was calculated by reviewing inputs such as comparable companies’ equity beta, the current risk free interest rate and market risk and size premiums as provided by Ibbotson & Associates and Duff & Phelps.

Cabrillo Advisors also performed a sensitivity analysis using discount rates ranging from 15.0% to 17.0% and perpetual growth rates from 3.0% to 5.0% to determine an implied enterprise value range as summarized in the table below. Cabrillo Advisors further adjusted the implied enterprise value range to account for a minority interest discount and the Company’s interest-bearing debt.

The discounted cash flow method indicated an enterprise value range for the Company of $32.0 — $41.0 million.

Valuation Summary

Cabrillo Advisors presented a combined analysis of its valuation methods based on the weightings given to the guideline public company method (30.0%,), guideline transaction method (25.0%) and discounted cash flow method (45.0%). Cabrillo Advisors placed a greater degree of weight on the discounted cash flow method

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(45%) given the relative lack of highly comparable companies and transactions in the guideline public company and guideline transaction methods. Cabrillo Advisors weighted the guideline company method at 30% versus the similar transaction method at 25% given the higher relevance of comparable companies in the guideline company method relative to the guideline transaction method. The combined analysis implied an enterprise value range for the Company of $37.1 — $45.3 million. Cabrillo Advisors adjusted the implied enterprise value range for the Company’s net debt, which included the anticipated impact of certain deferred Medicare and Medicaid payments and net operating losses, to determine an implied equity value range of $40.0 — $48.0 million. Based on the equity value range and the capital structure of the Company as adjusted for certain anticipated transactions, Cabrillo Advisors calculated that the range for the fair market value of the Company’s Common Stock was $0.54 — $0.64 per share.

Effects of the Reverse Stock Split

If effected, based on information available to us, the Reverse Stock Split is estimated to reduce the number of record stockholders of our Common Stock from 354 to 67. This reduction in the number of our stockholders will enable us to terminate registration of our Common Stock under the Exchange Act. Additionally, certain provisions of the Exchange Act will no longer apply, such as the short-swing profit recovery provisions of Section 16(b).

For estimated expenditures by the Company of $280,000 in transaction costs (including legal, financial, accounting, printing, mailing and other fees and costs) and estimated costs of $225,000 for fractional post-split shares, we estimate we will realize $370,000 to $410,000 in cost savings on an annual basis by terminating our public company status. We intend to apply for termination of registration of our Common Stock under the Exchange Act as soon as practicable following completion of the Reverse Stock Split.

The effect of the Reverse Stock Split on each stockholder will depend on the number of shares that such stockholder owns. Registered stockholders and stockholders holding shares of Common Stock in street name through a nominee ( e.g ., a broker or a bank) holding fewer than 2,000 shares of Common Stock will have their shares converted into the right to receive a cash amount equal to $0.55 per pre-split share.

Prior to the Reverse Stock Split, SMP and Ciabattoni Trust, two of our significant stockholders, beneficially own approximately 54.1% and 39.0%, respectively, of our Common Stock. After the Reverse Stock Split, SMP and Ciabattoni Trust will beneficially own approximately 54.8% and 39.5%, respectively, of our Common Stock. Further, prior to the Reverse Stock Split, SMP and Ciabattoni Trust beneficially own 13.9% and 6.7%, respectively, of our Series 5-A and 20.5% and 19.1%, respectively, of our Series 6-A. After the Reverse Stock Split, the percentage of Series 5-A and Series 6-A beneficially owned by SMP and Ciabattoni Trust will not change.

As of September 30, 2013, we had net operating loss carry-forwards of approximately $19.9 million, available to offset future taxable income, if any. A change of ownership of more than 50% occurred on June 22, 2001. According to applicable U.S. tax laws, losses that occurred before that date are limited to $0.3 million per year for up to 20 years, totaling approximately $6.5 million of the $19.9 million in net operating loss carry-forwards. The balance of the Company’s net operating loss carry-forwards are not subject to an annual limitation. These net operating loss carry-forwards will expire between 2012 and 2030. To the extent that the Company has future regular, alternative minimum and foreign taxable income, the Company and its stockholders, including its affiliates, may benefit from the use of the Company’s net operating loss carry-forwards. Stockholders owning fewer than 2,000 shares of Common Stock will be cashed out and will not have the opportunity to benefit from the use of the Company’s net operating loss carry-forwards.

The fractional shares acquired in the Reverse Stock Split will be restored to the status of authorized but unissued shares.

Potential Disadvantages of the Reverse Stock Split to Stockholders

Stockholders owning fewer than 2,000 shares of Common Stock immediately prior to the effective time of the Reverse Stock Split will no longer have any equity interest in the Company after the Reverse Stock Split.

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They will not participate in any future potential earnings or growth. Approximately 287 holders of record are currently expected to be fully cashed out in the Reverse Stock Split. It will not be possible for cashed out stockholders to re-acquire an equity interest in the Company unless they purchase an interest from the remaining stockholders.

The Reverse Stock Split will require stockholders who own fewer than 2,000 shares of Common Stock to involuntarily surrender their shares for cash. These stockholders will not have the ability to continue to hold their shares. The ownership interest of these stockholders will terminate as a result of the Reverse Stock Split. The Board believes the Reverse Stock Split will benefit these stockholders because of the liquidity provided by the transaction at a price that is fair to these stockholders and the Company.

The percentage of Common Stock beneficially owned by our officers, directors, and significant stockholders of the Company will not materially increase as a result of the Reverse Stock Split. Based on an assumed cash-out of approximately 407,753 shares, the percentage ownership of each holder remaining after the Reverse Stock Split will not increase materially. For example, if a holder owns 10% of the outstanding Common Stock prior to the Reverse Stock Split, such holder would hold approximately 10.2% after the Reverse Stock Split.

Disadvantages to our stockholders who will remain as stockholders after the Reverse Stock Split include less access to information and decreased liquidity as a result of deregistration of our Common Stock under the Exchange Act. As a result of deregistration, we will not have periodic reporting requirements under the Exchange Act.

Effect of the Reverse Stock Split on Option and Warrant Holders

Regardless of whether an outstanding stock option provides a right to purchase fewer than, equal to or greater than 2,000 shares, the exercise price and the number of shares underlying each such outstanding stock option granted by the Company under its stock option plan will be automatically adjusted to reflect the Reverse Stock Split on the Effective Date.

Similarly, the exercise price and the number of shares underlying our outstanding warrants will be adjusted to reflect the Reverse Stock Split.

Before and after the adjustment to reflect the Reverse Stock Split, the aggregate number of shares of Common Stock underlying the Company’s outstanding stock options and warrants are 6,370,879 and 3,256, respectively. Upon exercise of stock options or warrants, the Company will pay the holder the fair market value (as determined under the applicable stock option or warrant agreement) of any fractional share of Common Stock to which the holder is entitled.

Effect of the Reverse Stock Split on our Preferred Stockholders

The total number of shares of Common Stock into which each of share our outstanding Preferred Stock can be converted will be adjusted on the Effective Date to reflect the Reverse Stock Split. Correspondingly, the number of votes to which each share of Preferred Stock is entitled will also be adjusted to reflect the Reverse Stock Split. Upon conversion of Preferred Stock, the Company will pay the holder the fair market value (as determined under the applicable Certificate of Designation for the Preferred Stock) of any fractional share of Common Stock to which the holder is entitled. For additional information about the adjustment, see “Stockholders Entitled to Vote” in this Proxy Statement.

Effect of the Reverse Stock Split on Participants in Series 7-A Exchange

During the fiscal year ended September 30, 2011, we entered into the 2011 Bridge Notes with the 2011 Bridge Lenders. As part of the consideration for entering into the 2011 Bridge Notes, each of the 2011 Bridge Lenders was granted the option to exchange their current holdings, if any, of Series 5-A, Series 6-A and Common

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Stock (collectively the “Exchanged Securities”) for shares of our Series 7-A. Upon election to exchange, each lender would receive the number of Series 7-A equal to the initial consideration paid for their Exchanged Securities divided by $1,000. In connection with the exchange, each 2011 Bridge Lender would receive warrants to purchase a number of shares of Common Stock of the Company in an amount equal to 1,120 multiplied by the aggregate number of shares of Series 7-A issued at an exercise price of $0.3125 per share. The Company expects each of the 2011 Bridge Lenders to convert their holdings of Exchanged Securities to Series 7-A, which will result in the issuance of an aggregate of 5,998 shares of Series 7-A and warrants to purchase up to 6,717,760 shares of Common Stock.

Because the number of shares of Series 7-A to be issued to the 2011 Bridge Lenders is based on the consideration paid for the Exchanged Securities, the Company does not expect the Reverse Stock Split to have an effect on the 2011 Bridge Lenders. The number of shares of Series 7-A that each 2011 Bridge Lender will receive will not be adjusted. However, as with our other series of Preferred Stock, the total number of shares of Common Stock into which each share of Series 7-A is convertible and the number of votes to which each share of Series 7-A is entitled will be adjusted on the Effective Date to reflect the Reverse Stock Split. No shares of Series 7-A are currently outstanding.

Each of William Houlihan, SMP and Ciabattoni Trust is a 2011 Bridge Lender and is eligible to participate in the Series 7-A Exchange. The Company expects to consummate the Series 7-A Exchange within the next year but anticipates that the Series 7-A Exchange will not occur until after the Meeting. Consequently, the Series 7-A Exchange will not affect the beneficial ownership or the voting rights of William Houlihan, SMP or Ciabattoni Trust at the Meeting. If the Reverse Stock Split is approved, the Board intends to adjust the number of shares of Common Stock issuable upon exercise of and the exercise price of any warrants issued in relation to the Series 7-A Exchange to reflect the Reverse Stock Split.

As of the date of this Proxy Statement, William Houlihan, SMP and Ciabattoni Trust beneficially owned 10.6%, 54.1% and 39.0% of the Company’s Common Stock, respectively. Assuming that the Company’s stockholders do not approve the Reverse Stock Split, following the Series 7-A Exchange, they will beneficially own 13.8%, 61.0%, and 46.2% of the Company’s Common Stock, respectively. The table below summarizes the voting rights of William Houlihan, SMP and Ciabattoni Trust before and after the completion of the Series 7-A Exchange assuming the Company’s stockholders do not approve the Reverse Stock Split.

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Financial Effect of the Reverse Stock Split

We estimate that completion of the Reverse Stock Split will require $505,000, which includes $280,000 for estimated expenses, including legal, financial, accounting, printing, mailing, and other fees and costs. As a result, we will have decreased working capital following the Reverse Stock Split. The payments to holders who receive cash in lieu of a fractional post-split share will be paid from our available cash.

Based upon analysis of the stock ownership among holders of Common Stock, the Board limited the scope of the Reverse Stock Split to 1-for-1,000 to 1-for-2,500 in light of the Company’s continuing working capital needs. See also the information under the caption “Financing the Reverse Stock Split” in this Proxy Statement.

Fairness of the Reverse Stock Split

The Board determined that the Reverse Stock Split, including the proposed cash payment of $0.55 per pre-split share to stockholders whose shares would be cashed out, is substantively and procedurally fair to all of our unaffiliated stockholders, including those whose shares will be cashed out and those who will continue as stockholders of the Company.

The Board considered, among other things, the following factors related to the substantive fairness of the Reverse Stock Split for unaffiliated stockholders:

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The Board considered, among other things, the following factors related to the procedural fairness of the Reverse Stock Split for unaffiliated stockholders:

Based on the factors above, the Board determined that the Reverse Stock Split is procedurally and substantively fair to all unaffiliated stockholders. Because of the wide variety of factors the Board considered in rendering the substantive and procedural fairness of the Reverse Stock Split, the Board did not find it practicable to assign relative weights to factors it considered in deciding that the transaction is fair and in the best interests of unaffiliated stockholders.

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Fairness Determination by Sean Kirrane, Adrian Reeder, SMP, Brian Potiker, Ciabattoni Trust, A. Ciabattoni and J. Ciabattoni

Each of Sean Kirrane, Adrian Reeder, SMP, Brian Potiker, Ciabattoni Trust, A. Ciabattoni and J. Ciabattoni, being those persons and entities deemed a “filing person” for purposes of Schedule 13E-3, has determined that the Reverse Stock Split is procedurally and substantively fair to unaffiliated stockholders, including both unaffiliated stockholders who will be cashed-out in the Reverse Stock Split and those who continue as stockholders following the Reverse Stock Split. In reaching this determination, these persons relied upon the factors considered by, and the analyses of, our Board and adopted such factors and analyses as their own. See “Special Factors — Fairness of the Reverse Stock Split.”

Absence of a Fairness Opinion

Neither the Company, the Board, nor any committee of the Board has solicited or obtained any appraisal, report or opinion by any outside party regarding the fairness of the Reverse Stock Split. The Board chose not to retain the services of an independent advisor to provide advice regarding the fairness of the Reverse Stock Split because it believes the cost of doing so would be excessive relative to the size and cost of the Reverse Stock Split. The total estimated payment to be made for all fractional shares cashed out in connection with the Reverse Stock Split is $225,000. In addition, the total estimated cost of the Reverse Stock Split is approximately $505,000 (including the payment amount of $0.55 per pre-split share). Based on management’s estimates, the cost of a fairness opinion was estimated to be $100,000. In light of the relative costs, the Board did not seek a fairness opinion.

However, the Board engaged Cabrillo Advisors, an independent advisor, to assist the Company in evaluating the fair market value of our Common Stock. The Board did not obtain or request an opinion from Cabrillo Advisors regarding the fairness of the Reverse Stock Split. This valuation cost approximately $26,500 plus expenses.

Termination of Exchange Act Registration

Our Common Stock is currently registered under the Exchange Act and trades on the OTCBB. We are permitted to terminate the Exchange Act registration if there are fewer than 300 record holders of our outstanding shares of Common Stock. As of June 20, 2014, we had 354 record holders of our Common Stock. Upon the effectiveness of the Reverse Stock Split, we expect to have 67 record holders of our Common Stock. We intend to terminate the registration of our Common Stock under the Exchange Act as promptly as possible after the Effective Date. Following deregistration, our Common Stock will no longer be eligible for trading on the OTCBB. Our Common Stock may be quoted on the Pink Sheets.

Terminating our registration under the Exchange Act will substantially reduce the information we will be required to furnish to our stockholders. After we are no longer an SEC reporting company, our stockholders will have access to our corporate books and records to the extent provided by the Delaware law and to any additional disclosures required by our directors’ and officers’ fiduciary duties.

Deregistering will make many of the provisions of the Exchange Act inapplicable to us. These Exchange Act provisions include the short-swing profit provisions of Section 16, the proxy solicitation rules under Section 14 and the stock ownership reporting rules under Section 13. Affiliated stockholders will be permitted to dispose of their Common Stock under Rule 144 promulgated under the Securities Act of 1933. There will no longer be a public market for our Common Stock. Market makers on the OTCBB will not be able to make a market in our Common Stock.

We estimate that termination of registration of our Common Stock under the Exchange Act will save us between $370,000 and $410,000 per year in legal, accounting, printing and other expenses. Deregistration will also enable our management to devote more time to our operations. See also information under the caption “Special Factors — Reasons for and Purposes of the Reverse Stock Split” in this Proxy Statement.

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Quotation of Common Stock

Our Common Stock is currently quoted on the OTCBB. Following the Reverse Stock Split, our shares may be quoted on the Pink Sheets at http://www.otcmarkets.com, an electronic interdealer quotation service. The Pink Sheets are not a stock exchange, and we do not have the ability to list on or control whether our shares are quoted on the Pink Sheets. The price may be more or less than the current price on the OTCBB. In addition, the spread between the bid and ask prices of our Common Stock may be wider than on the OTCBB, and the liquidity of our shares may be lower. There is no assurance, however, that there will be any Pink Sheets quotations after the Reverse Stock Split or that, if such quotations begin, they will continue for any length of time.

Federal Income Tax Consequences of the Reverse Stock Split

The following is a summary of the material federal income tax consequences of the Reverse Stock Split to holders of Common Stock and to the Company. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), regulations, rulings and judicial decisions currently in effect, all of which are subject to change. This summary does not address all aspects of federal income taxation that may apply to a stockholder because of his particular circumstances. This summary does not discuss any special rules that may be applicable to some investors (for example, estates, trusts, individuals who are not citizens or residents of the United States, foreign corporations, insurance companies, regulated investment companies, tax-exempt organizations and dealers in securities). The discussion assumes that stockholders have held shares of the Company’s Common Stock subject to the Reverse Stock Split as capital assets at all relevant times. This summary does not cover the applicability and effect of any state, local or foreign tax laws. Investors should accordingly consult their own tax advisors for information about the state, local and foreign tax consequences of the transaction.

The following discussion summarizes material federal tax consequences and is based on current law. Stockholders should consult their own tax advisors as to the federal, state, local and foreign tax effects of the Reverse Stock Split in light of their individual circumstances.

The Reverse Stock Split will be a tax-free recapitalization to the Company under the Internal Revenue Code. The Company will not recognize any gain or loss as a result of the Reverse Stock Split. There will not be any other material tax consequences to the Company from the transaction.

Stockholders who receive only Common Stock in exchange for their existing shares, and do not receive payment for any fractional shares, will not recognize gain or loss. Their adjusted tax basis of their new Common Stock will be the same as their adjusted tax basis of their existing Common Stock. The holding period of new Common Stock received as a result of the Reverse Stock Split will be the same as the holding period for the stockholder’s existing Common Stock.

Stockholders who receive cash in lieu of a fractional share of Common Stock and who do not own any of our new Common Stock following the Reverse Stock Split (because they have fewer than 2,000 pre-split shares) will be treated as receiving the cash as payment in exchange for their fractional shares of new Common Stock. They will recognize capital gain or loss equal to the difference between the amount of cash received and the adjusted basis of the pre-split shares surrendered for cash. For these purposes, however, stockholders who do not own any of our new Common Stock following the Reverse Stock Split may be treated as owning some such stock by reason of attribution from family members or entities of which they are owners.

Stockholders who receive a cash payment in lieu of a fractional share but who own some of our new Common Stock (or are treated as owning such stock by attribution rules) following the Reverse Stock Split will either be treated as having sold the fractional shares for the cash or as having received a distribution from the Company in the amount of the cash. Such stockholders are encouraged to consult with their own tax advisors concerning the income tax treatment of the receipt of cash.

If the receipt of cash either is “not essentially equivalent to a dividend” or constitutes a “substantially disproportionate redemption of stock” under rules described below, the stockholder will be treated as having sold

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the fractional shares for the cash, and thus will recognize gain or loss to the extent the cash received is greater or less than the portion of the stockholder’s tax basis in his old Common Stock allocable to the shares for which the cash payment is received.

Not Essentially Equivalent to a Dividend. The receipt of cash is “not essentially equivalent to a dividend” if the reduction in the stockholder’s proportionate interest in the Company resulting from the Reverse Stock Split (taking into account shares attributed to the stockholder) is considered a “meaningful reduction” given your particular facts and circumstances. For a minority stockholder whose relative stock interest is minimal and who exercises no control over the affairs of a corporation, the Internal Revenue Service has ruled that even a very small reduction can satisfy this test.

Substantially Disproportionate Redemption of Stock. The receipt of cash will be a “substantially disproportionate redemption of stock” if (a) the stockholder owns less than 50% of the total combined voting power of all classes of stock entitled to vote, and (b) the percentage of voting stock owned immediately after the Reverse Stock Split is less than 80% of the percentage of shares of voting stock owned immediately before the Reverse Stock Split. For purposes of this test, again a stockholder may be treated as owning stock under attribution rules.

If the receipt of cash in lieu of fractional shares is not treated as a sale of the corresponding stock under either of the tests, it will be treated as a distribution by the Company to the stockholder. Such as distribution will be treated first as ordinary dividend income to the extent of the stockholder’s ratable share of the Company’s current and accumulated earnings and profits, then as a tax-free return of capital to the extent of the stockholder’s aggregate adjusted tax basis in all shares, and any remaining amount will be treated as capital gain.

Capital gain or loss recognized will be long-term if a stockholder’s holding period with respect to the shares surrendered is more than one year. Individuals generally are taxed at a reduced rate on long term capital gains and at the same reduced rate on dividends.

Financing the Reverse Stock Split

Completion of the Reverse Stock Split will require approximately $505,000 in cash, which includes, in addition to the cost to cash out fractional post-split shares of Common Stock, advisory, legal, financial, accounting, printing, mailing and other fees and costs. These costs and related fees and expenses will be paid from the Company’s available cash. You should read the discussion under the caption “Costs of the Reverse Stock Split” below for a description of the fees and expenses we expect to incur in connection with the transaction.

Costs of the Reverse Stock Split

The following estimates the costs incurred or expected to be incurred in connection with the Reverse Stock Split. Final costs of the transaction may be more or less than the estimates shown below. We will be responsible for paying these costs. Please note that the following estimate of costs does not include the cost of cashing out fractional shares of Common Stock pursuant to the Reverse Stock Split.

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Conduct of the Company’s Business After the Reverse Stock Split

We expect our business and operations to continue as usual and, except as disclosed in this Proxy Statement, we do not anticipate the Reverse Stock Split will have any effect upon our business. We expect time and cost savings as a result of no longer being a public company. When the Reverse Stock Split is completed, persons owning fewer than 2,000 shares of Common Stock will no longer have any equity interest in, and will not be stockholders of, the Company. These stockholders will not participate in our future earnings and growth.

When the Reverse Stock Split is effected, we estimate that, based on our stockholder records, 67 record holders will remain as record holders of Common Stock. Stockholders who currently beneficially own approximately 98.9% of our Common Stock will beneficially own 100% of our Common Stock after the Reverse Stock Split. See also information under the caption “Security Ownership” in this Proxy Statement. When the Reverse Stock Split is effected, our directors and executive officers will beneficially own approximately 12.3% of our Common Stock. Further, following the Reverse Stock Split, SMP and Ciabattoni Trust will beneficially own approximately 54.8% and 39.5%, respectively, of our Common Stock.

Following the consummation of the Reverse Stock Split, we will become a privately held company. The registration of our Common Stock under the Exchange Act will be terminated, and our Common Stock will no longer be eligible for trading on the OTCBB. Because our Common Stock will no longer be publicly held, we will no longer need to comply with the proxy rules of Regulation 14A under Section 14 of the Exchange Act. Our officers, directors and stockholders owning more than 10% of our Common Stock will no longer have stock ownership reporting requirements and “short swing” trading restrictions under Section 16 of the Exchange Act. We will no longer be subject to the periodic reporting requirements of the Exchange Act and will cease filing information with the SEC. Among other things, this change will enable us to realize time and cost savings from not having to comply with the requirements of the Exchange Act.

Other than as described in this Proxy Statement, neither we nor our management has any current plans or proposals to (a) effect any extraordinary corporate transaction, such as a merger, reorganization or liquidation; (b) sell or transfer any material amount of our assets; (c) change our Board or management; (d) materially change our indebtedness or capitalization; or (e) otherwise to effect any material change in our corporate structure or business.

Recommendation of the Board

The Board believes that the Reverse Stock Split is fair to our stockholders. The Board believes the transaction is fair to those whose interests are being cashed out pursuant to the Reverse Stock Split and those who will retain an equity interest in the Company subsequent to the Reverse Stock Split. The discussion in this Proxy Statement under the captions “Special Factors — Reasons for and Purposes of the Reverse Stock Split,” “Special Factors — Strategic Alternatives Considered,” “Special Factors — Background of the Reverse Stock Split” and “Special Factors — Effects of the Reverse Stock Split” summarizes the material factors considered by the Board in reaching its fairness determination. For the reasons described above under the caption “Special Factors — Fairness of the Reverse Stock Split,” the Board also believes that the process is fair to all unaffiliated stockholders, including those whose interests are being cashed out pursuant to the Reverse Stock Split and those who will retain an equity interest in the Company subsequent to the Reverse Stock Split.

In consideration of the factors discussed under “Special Factors — Reasons for and Purposes of the Reverse Stock Split,” “Special Factors — Strategic Alternatives Considered,” “Special Factors — Background of the Reverse Stock Split,” “Special Factors — Effects of the Reverse Stock Split,” “Recommendation of the Board” and “Fairness of the Reverse Stock Split” in this Proxy Statement, the Board unanimously approved the Reverse Stock Split and unanimously recommends that stockholders vote FOR the Certificate of Amendment to effect the Reverse Stock Split.

If the Reverse Stock Split is effected, each of the members of our Board and each of our executive officers will continue to be stockholders in the Company. All of the company’s officers and directors intend to vote their shares FOR the Certificate of Amendment to effect the Reverse Stock Split.

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Description of the Reverse Stock Split

Amendment and Restatement of Certificate of Incorporation to Effect the Reverse Stock Split

The Board determined that it is advisable to amend and restate our Certificate of Incorporation to effect a 1-for-2,000 Reverse Stock Split of Common Stock and to provide for the cash payment of $0.55 per pre-split share in lieu of fractional shares of Common Stock that would otherwise be issued following the Reverse Stock Split. As a result, the Board recommends that stockholders vote FOR the proposed Certificate of Amendment.

The proposed Certificate of Amendment is attached as Annex A to this Proxy Statement. The Reverse Stock Split will become effective upon the filing of the proposed Certificate of Amendment with the Office of the Secretary of State of Delaware.

Regulatory Approvals

Except for stockholder approval of the Certificate of Amendment, the amendment is not subject to any regulatory approvals.

Holders as of Effective Date; Net Effect After Reverse Stock Split

Stockholders holding fewer than 2,000 pre-split shares of Common Stock will be cashed out at a price of $0.55 per pre-split share. The holdings of all other stockholders will be reduced on a 1-for-2,000 basis. Any stockholders whose shares are cashed out will have no continuing equity interest in the Company.

Nominees and brokers are expected to deliver to the exchange agent the beneficial ownership positions they hold. However, if you are a beneficial owner of Common Stock who is not the record holder of those shares and wish to ensure that your ownership position is accurately delivered to the Company’s exchange agent, you should instruct your broker or nominee to transfer your shares into a record account in your name. Nominees and brokers may have required procedures. Holders should contact their nominees and brokers to determine how to effect the transfer in a timely manner prior to the Reverse Stock Split.

Appraisal Rights

You will not be entitled to appraisal rights under our Certificate of Incorporation or Delaware law since the matter to be voted on does not involve a merger or consolidation. Stockholders holding fewer than 2,000 pre-split shares who want to remain stockholders of the Company may purchase a sufficient number of additional shares on the open market in order to hold at least 2,000 pre-split shares prior to the Effective Date. Those stockholders who do not desire to remain stockholders of the Company may sell a sufficient number of shares so that they hold fewer than 2,000 pre-split shares in order to be cashed out in the Reverse Stock Split. The Company is not aware of any other right or relief that may be available to stockholders in law or in equity.

Exchange of Certificates for Cash Payment or Shares

If the Reverse Stock Split is approved, we will file the Certificate of Amendment with the Secretary of State of Delaware and effect the amendment set forth in Annex A to this Proxy Statement. The Reverse Stock Split will become effective at the time set forth in the Certificate of Amendment. Promptly following the Effective Date, you will be notified by our exchange agent, who will provide instructions to carry out the exchange of certificates for cash.

As soon as practicable after the Effective Date, record holders that are entitled to cash in lieu of fractional shares will be asked to surrender their certificates representing shares of Common Stock to the exchange agent. These record holders will receive in exchange a cash payment in the amount of $0.55 per pre-split share.

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Record holders owning shares after the Reverse Stock Split must exchange their stock certificates for a new stock certificates that will bear a new CUSIP number. The Company’s transfer agent will furnish stockholders with the necessary materials and instructions to effect the surrender promptly following the Reverse Stock Split. The letter of transmittal will direct how old certificates are to be surrendered for new certificates. Stockholders must complete and sign the letter of transmittal and return it with their stock certificates to the transfer agent in accordance with the instructions set forth in the transmittal letter before they can receive their new stock certificates for those shares. The letter of transmittal will also contain instructions in the event that your certificates has been lost, destroyed or mutilated. Do not send your stock certificates to us, and do not send them to the transfer agent until you have received a transmittal letter and have followed the instructions in the letter of transmittal.

If the Reverse Stock Split is effected, any stockholder owning fewer than 2,000 shares of the currently outstanding Common Stock will cease to have any rights with respect to our Common Stock, except to be paid in cash. No interest will be paid or accrued on the cash payable to stockholders after the Reverse Stock Split.

No service charges will be payable by stockholders in connection with the exchange of certificates for cash. All such expenses will be borne by the Company.

Nominees (such as a bank or broker) may have required procedures, and stockholders holding Common Stock in street name should contact their nominees to determine how the Reverse Stock Split will affect them. The exchange agent appointed by us to carry out the exchange has informed us that nominees are expected to provide beneficial ownership positions so that beneficial owners may be treated appropriately in effecting the Reverse Stock Split. However, if you are a beneficial owner of fewer than 2,000 shares of Common Stock, you should instruct your nominee to transfer your shares into a record account in your name in a timely manner to ensure that you will be considered a holder of record prior to the Effective Date, which is anticipated to be promptly following the approval by stockholders of the Certificate of Amendment. A stockholder holding fewer than 2,000 shares of Common Stock in street name who does not transfer shares into a record account in a timely manner may not have his or her shares cashed out in connection with the Reverse Stock Split. For example, such stockholder’s shares may not be cashed out if such stockholder’s nominee is a record holder of an aggregate of 2,000 or more shares of Common Stock, holds shares for multiple stockholders in street name and does not provide such beneficial ownership positions in a timely manner to the exchange agent.

In the event that any certificate representing shares of Common Stock is not presented for cash upon request by us, the cash payment will be administered in accordance with the relevant state abandoned property laws. Until the cash payments have been delivered to the appropriate public official pursuant to the abandoned property laws, such payments will be paid to the holder thereof or to his or her designee, without interest, when the shares of Common Stock are properly presented for exchange.

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Information about the Company and Filing Persons

Name and Address of the Company

The Company’s principal executive office is located at 433 North Camden Drive # 810, Beverly Hills, California 90210, and its telephone number is (310) 860-2501.

Price Range of Common Stock and Dividends

Our Common Stock trades on the OTCBB under the symbol “FPCG.” The following is a schedule of the reported high and low closing bid quotations (rounded to the nearest cent) per share for our Common Stock for the fiscal years ended September 30, 2012, 2013 and 2014. All quotations represent prices between dealers, do not include retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

The source of the foregoing quotations was the Financial Industry Regulatory Composite Feed or other qualified inter dealer quotation medium, as provided by OTC Market Group Inc.

We have not paid any cash dividends in the last two years. Any future declaration and payment of cash dividends will be subject to the discretion of the Board and will depend upon our results of operations, financial condition, cash requirements, future prospects, changes in tax legislation, debt covenant restrictions and other factors deemed relevant by the Board.

On July 29, 2014, our Common Stock’s closing price per share was $0.50. On                     , 2014, the last practicable trading day prior to the date this Proxy Statement was mailed to stockholders, our Common Stock’s closing price was $                    .

Identity and Background of Filing Persons

The Company, William Houlihan (“Houlihan”), Robert N. Schwartz, Ph.D. (“Schwartz”), Richardson E. Sells (“Sells”), Sean Kirrane (“Kirrane”), Adrian Reeder (“Reeder”), SMP, Brian Potiker (“Potiker”), Ciabattoni Trust, Anthony J. Ciabattoni (“A. Ciabattoni”) and Jane G. Ciabattoni (“J. Ciabattoni”) (collectively, the “Filing Persons”) listed below are filing a Schedule 13E-3 concurrently with this Proxy Statement. If the Reverse Stock Split is approved, the Company and other Filing Persons intend to deregister the Company’s Common Stock. The names, addresses, business and background of the Filing Persons (other than the Company) are set forth below.

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Unless otherwise stated, the business address of each director and officer is 433 North Camden Drive # 810, Beverly Hills, California 90210, and the business telephone number for each officer and director is (310) 860-2501.

Houlihan, Schwartz, Sells, Kirrane, Potiker, A. Ciabattoni, and J. Ciabattoni are citizens of the United States. Reeder is a citizen of New Zealand.

None of the Filing Persons has been (a) convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining such person from future violations of, or prohibition activities subject to, federal or state securities laws.

Directors

The directors of the Company are Houlihan, Schwartz, and Sells. For the additional information about the Company’s directors, see “Proposal 2 — Election of Directors” in this Proxy Statement.

Houlihan is a Filing Person and an affiliate of the Company because he is a director of the Company. The business address for Houlihan is 92 Bonnie Way, Allendale, New Jersey 07401 and the business telephone number is (201) 819-5046.

Schwartz is a Filing Person and an affiliate of the Company because he is a director of the Company. The business address for Schwartz is the University of California, Los Angeles, California 90095-1594, and the business telephone number is (310) 317-5672.

Sells is a Filing Person and an affiliate of the Company because he is a director of the Company. The business address for Sells is 18 Audubon Pond Road, Sea Pines, Hilton Head Island, South Carolina 29928, and the business telephone number is (843) 290-9993.

Executive Officers

The executive officers of the Company are Kirrane and Reeder. For additional information about the Company’s executive officers, see “Executive Officers” in this Proxy Statement.

Kirrane is a Filing Person and an affiliate of the Company because he is President and Chief Executive Officer of the Company.

Reeder is a Filing Person and an affiliate of the Company because he is Chief Financial Officer and Executive Vice President of the Company.

Significant Stockholders

SMP, a Michigan limited liability company, is a Filing Person and an affiliate of the Company because it beneficially owns approximately 54.1% of the Common Stock, which represents 30.6% of the Common Stock votes eligible to be cast at the Meeting. The shares of Common Stock held by SMP, plus the votes afforded to it as a holder of the Preferred Stock, represent approximately 20.4% of the Eligible Votes with respect to the Meeting. Potiker is the manager of SMP, has the sole power to vote and dispose of the shares held by SMP and is a Filing Person. For additional information about Potiker, see “Proposal 2 — Election of Directors” in this Proxy Statement. SMP’s primary business is investing in securities for its own account. The business address for SMP and Potiker is 433 N. Camden Drive, Suite 810, Beverly Hills, California 90210, and the business telephone number is (310) 271-4381.

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Ciabattoni Trust, a trust formed under the laws of California, is a Filing Person and an affiliate of the Company because it beneficially owns approximately 39.0% of the Common Stock, which represents 18.1% of the Common Stock votes eligible to be cast at the Meeting. The shares of Common Stock held by SMP, plus the votes afforded to it as a holder of the Preferred Stock, represent approximately 13.0% of the Eligible Votes with respect to the Meeting. A. Ciabattoni is the spouse of J. Ciabattoni and serves as a trustee of the Ciabattoni Trust. A. Ciabattoni has shared power to vote and dispose of the shares held by the Ciabattoni Trust and is a Filing Person. J. Ciabattoni is the spouse of A. Ciabattoni and serves as a trustee of the Ciabattoni Trust. J. Ciabattoni has shared power to vote and dispose of the shares held by the Ciabattoni Trust and is a Filing Person. For the past five years the primary business activity of each of Ciabattoni Trust and A. Ciabattoni is investment in various public and private business ventures. J. Ciabattoni is not presently and for the past five years has not been employed. The business address for A. Ciabattoni, J. Ciabattoni and Ciabattoni Trust is 16 Lagunita Drive, Laguna Beach, California 92561, and the business telephone number is (949) 497-4344.

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