(State or other jurisdiction of incorporation)

(IRS Employer Identification No.)

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☒

 

Page

 

 

PART I – FINANCIAL INFORMATION

3

Item 1.  Financial Statements

3

Condensed Consolidated Balance Sheets (Unaudited)

3

Condensed Consolidated Statements of Operations (Unaudited)

5

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.  Controls and Procedures

39

PART II – OTHER INFORMATION

40

Item 1.  Legal Proceedings

40

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.  Defaults Upon Senior Securities

40

Item 4.  Mine Safety Disclosures

40

Item 5.  Other Information

40

Item 6.  Exhibits

41

SIGNATURES

42

December 31,

2016

September 30,

2016

Current assets:

Cash

$

292,724

$

167,737

Accounts receivable, net

1,023,365

487,001

Inventory

391,383

204,736

Prepaid expenses and other

680,425

644,857

Total current assets

2,387,897

1,504,331

Property and equipment, net

75,599

86,734

Deposits and other assets

17,846

17,846

Domain name, net

9,116

9,295

Total assets

$

2,490,458

$

1,618,206

December 31,

2016

September 30,

2016

Current liabilities:

Accounts payable

$

3,078,550

$

1,700,448

Accounts payable, related party

285,448

291,753

Accrued expenses

4,793,854

2,101,711

Current portion of notes payable

4,562,248

3,722,899

Notes payable, related party

3,882,718

3,898,124

Dividends payable

640,723

606,545

Derivatives liability

2,628,506

2,054,071

Total current liabilities

19,872,047

14,375,551

Notes payable, net of current portion

7,105,873

7,353,856

 

Total liabilities

26,977,920

21,729,407

 

Stockholders' deficit:

Preferred stock, $.00001 par value: 10,000,000 shares authorized; 45,000 shares of Series D; and 70,070 shares of Series E outstanding

1

1

Common stock, $.00001 par value: 200,000,000 shares authorized; 232,100 shares outstanding

2

2

Additional paid-in capital, common and preferred

88,079,363

88,067,410

Accumulated deficit

(112,566,828

)

(108,178,614

)

 

Total stockholders' deficit

(24,487,462

)

(20,111,201

)

 

Total liabilities and stockholders' deficit

$

2,490,458

$

1,618,206

Three Months Ended

December 31,

2016

2015

Revenues:

Chronic illness monitoring supplies revenues

$

1,608,074

$

1,853,417

Chronic illness monitoring fee revenues

253,520

234,253

Total Chronic illness monitoring revenues

1,861,594

2,087,670

 

Cost of revenues:

Chronic illness monitoring supplies cost of revenues

1,199,158

1,464,850

Chronic illness monitoring fee cost of revenues

100,992

128,506

Total Chronic illness monitoring cost of revenues

1,300,150

1,593,356

 

Gross profit

561,444

494,314

 

Operating expenses:

Selling, general and administrative (including $11,953 and $1,179,922, respectively, of stock-based compensation)

1,210,295

2,346,705

Research and development

167,608

22,909

 

Total operating expenses

1,377,903

2,369,614

 

Loss from operations

(816,459

)

(1,875,300

)

 

Other income (expense):

Gain on derivatives liability

22,057

46,311

Gain on disposal of property and equipment

-

600

Interest expense, net

(1,555,416

)

(491,149

)

Loss on extinguishment of debt

(2,004,218

)

-

Total other expense

(3,537,577

)

(444,238

)

Net loss

(4,354,036

)

(2,319,538

)

Dividends on preferred stock

(34,178

)

(403,548

)

Net loss attributable to common stockholders

$

(4,388,214

)

$

(2,723,086

)

Net loss per common share – basic and diluted

$

(18.91

)

$

(17.27

)

Weighted average common shares outstanding – basic and diluted

232,100

157,652

Three Months Ended

December 31,

 

2016

2015

Cash flows from operating activities:

Net loss

$

(4,354,036

)

$

(2,319,538

)

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on extinguishment of debt

2,004,218

-

Amortization of debt discounts

1,047,851

270,731

Stock-based compensation expense

11,953

1,085,294

Depreciation and amortization

11,314

13,745

Gain on derivatives liability

(22,057

)

(46,311

)

Stock and warrants issued for services

-

94,628

Gain on disposal of property and equipment

-

(600

)

Changes in operating assets and liabilities:

Accounts receivable

(543,512

)

(139,126

)

Inventory

(186,647

)

21,507

Prepaid expenses and other

167,863

(28,230

)

Accounts payable

1,249,358

125,354

Accrued expenses

565,710

419,958

Net cash used in operating activities

(47,985

)

(502,588

)

 

Cash flows from investing activities:

Proceeds from sale of property and equipment

-

600

Purchases of property and equipment

-

(2,674

)

 

Net cash used in investing activities

-

(2,074

)

 

Cash flows from financing activities:

Proceeds from issuance of notes payable, net

1,185,000

1,209,200

Principal payments on related-party notes payable

(15,406

)

-

Principal payments on notes payable

(996,622

)

(661,636

)

Net cash provided by financing activities

172,972

547,564

 

Net increase in cash

124,987

42,902

Cash, beginning of the period

167,737

172,436

 

Cash, end of the period

$

292,724

$

215,338

Three Months Ended

December 31,

 

2016

2015

Supplemental Cash Flow Information:

Cash paid for interest

$

142,457

$

8,713

Non-Cash Investing and Financing Activities:

Issuance of warrants for the purchase of common stock for loan origination fees

$

635,990

$

-

Accrual of a liability to issue warrants to purchase shares of common stock for loan forbearance fees

148,677

130,246

Accrual of a liability to issue shares of common stock for loan forbearance fees

60,000

-

Dividends on preferred stock

34,178

403,548

Issuance of common stock for loan origination fees

-

101,058

Issuance of common stock for consulting services

-

22,500

Conversion of related-party accounts payable and accrued liabilities to related-party notes payable

-

31,252

 

2016

2015

Common stock options and warrants

84,074

18,999

Series D convertible preferred stock

450

450

Series E convertible preferred stock

961

961

Series F convertible preferred stock

-

32,131

Convertible debt

137,140

47,200

Restricted shares of common stock

15

15

Liability to issue common stock

154,881

-

Total common stock equivalents

377,521

99,756

December 31,

2016

September 30,

2016

Finished goods

$

393,091

$

206,444

Inventory reserve

(1,708

)

(1,708

)

 

Net inventory

$

391,383

$

204,736

 

December 31,

2016

September 30,

2016

Prepaid legal and professional fees

$

454,451

$

333,741

Line of credit acquisition fees

104,824

30,978

Other

78,624

112,117

Prepaid information technology services

27,486

57,073

Prepaid insurance

15,040

14,602

Research and development

-

96,346

 

Total prepaid expenses and other current assets

$

680,425

$

644,857

December 31,

2016

September 30,

2016

Software

$

47,974

$

47,974

Leasehold improvements

98,023

98,023

Furniture

68,758

68,758

Equipment

49,772

49,772

 

Total property and equipment

264,527

264,527

 

Accumulated depreciation and amortization

(188,928

)

(177,793

)

 

Property and equipment, net

$

75,599

$

86,734

 

December 31,

2016

September 30,

2016

 Liability to issue warrants for the purchase shares

   of common stock

$

2,141,254

$

-

 Interest

1,556,675

1,206,387

 Payroll expense

266,550

207,052

 Liability to issue common stock

240,000

240,000

 Warranty liability

184,875

134,330

 Other

130,734

89,828

 Commissions and fees

112,739

52,311

 Deferred revenue

101,027

111,803

 Severance

60,000

60,000

 

Total accrued expenses

$

4,793,854

$

2,101,711

December 31,

September 30,

2016

2016

Unsecured notes payable with interest at 10% per annum, due November 2018.  The notes may go into default in the event other notes payable go into default subsequent to the effective date of the note.  In February 2016, the Company redeemed all 5,361 shares of its Series F Convertible Preferred Stock ("Series F preferred") plus accrued dividends of $673,948 for 20,005 shares of common stock with a fair value of $1,600,000 containing certain temporary restrictions, and $5,900,000 of notes payable. Payments on the notes are partially or fully convertible at the Company's option at the lesser of (i) 80% of the per share price of the common stock of the offering, (ii) $25 per share, (iii) 80% of the unit price in the offering (if applicable), or (iv) the exercise price of any warrants issued in the offering to a maximum of 39,334 shares of common stock.  The conversion rate is adjustable to any lower rates granted through equity sales or other conversion rates provided by issuances of other debt, warrants, options or other instruments, with the exception of certain other raises.  A note may only be converted if the holder owns less than 4.99% of the Company's common stock after conversion.  The Company recorded a derivative liability of $2,461,899 related to the conversion feature of the notes.  In connection with the redemption of the Series F preferred stock, the Company issued new warrants in exchange for warrants held by the Series F preferred stockholders for the purchase of 11,070 shares of common stock at an exercise price of the lesser of (i) 80% of the per share price of the common stock of the offering, (ii) $25 per share, (iii) 80% of the unit price in the offering (if applicable), or (iv) the exercise price of any warrants issued in the offering, adjustable to any lower rates granted through equity sales or other conversion rates provided by issuances of other debt, warrants, options or other instruments, with the exception of certain other raises.  The Company is also required to issue additional warrants for the purchase of up to 16,000 shares of common stock exercisable at $0.50 per share, also adjustable, that vest upon certain events of default.  The fair value of $1,344,608 related to the new warrants was recorded as a derivative (see Notes 12 and 15).  The fair value of the stock, conversion feature, warrants and $25,000 of fees, in excess of the carrying value of the Series F preferred stock were recorded as a deemed dividend of $6,484,236.  Subsequent to December 31, 2016, the Company entered into letter agreements related to the note to convert the outstanding principal and interest into shares of common stock contingent upon the Company's contemplated public offering of securities (the "Offering"), which also removes the maximum share limitation conversion (see Note 18).

$

5,900,000

$

5,900,000

Unsecured note payable with a vendor with interest at 0.65% per annum, due January 2018, issued in March 2016 upon the conversion of $2,523,937 in accounts payable to the vendor.

2,073,937

2,223,937

Secured note payable to a third party with interest at 12.75% per annum, due February 2019.  The note is secured by the assets of the Company and may go into default in the event other notes payable go into default subsequent to the effective date of the note.  The Company entered into the note payable agreement in conjunction with a line of credit.  The Company initially borrowed $1,500,000 and may borrow additional amounts under the note payable agreement up to a total balance of $3,000,000 as the Company meets certain milestones.  The interest rate may also reduce to 11.25% per annum as the Company meets certain milestones.  In conjunction with the note and related line of credit, the Company issued warrants to the lender to purchase 24,032 shares of common stock at $32.50 per share with a fair market value of $3,732,100 (see Notes 12 and 15), which resulted in a loss on derivative of $2,309,461.  The Company has recorded discounts of $1,500,000, which are being amortized to interest expense over the term of the note.  In April 2016, the Company borrowed an additional $500,000 on the note and incurred additional fees of $25,000, which are being amortized to interest expense over the remaining term of the note.  In September 2016, the Company entered into a forbearance agreement where the lender will forbear from exercising remedies with regard to certain breaches through October 31, 2016 and consented to the Company entering into a purchase agreement with another party and issue the note and the warrant thereunder. Effective November 1, 2016, the Company and the lender entered into a forbearance and consent under loan and security agreement. Pursuant to the terms of the forbearance agreement, the lender will forbear from exercising remedies with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous forbearance agreement.  Additionally, the lender has provided the Company with the consent required under the existing agreements and previous forbearance agreement to make certain payments to other debt holders from the proceeds of the offering. The lender also consented to the issuance of the Company's proposed Series G Preferred Stock to certain affiliates of the Company (see Note 18).  In consideration for the new forbearance, the Company has agreed to issue the lender warrants to purchase 130,000 shares of common stock at an exercise price equal to the per share price of the common stock in the offering, which shall be subject to a 6-month lock-up agreement. The forbearance was in effect through December 31, 2016.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses. The Company recorded a loss on extinguishment of debt of $2,043,715 on the note and its related line of credit in relation to the forbearance agreement. Effective December 31, 2016, the Company and the lender entered into a third forbearance and consent under loan and security agreement. Pursuant to the terms of the third forbearance, the lender will forbear from exercising remedies with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous two forbearances.  Additionally, pursuant to the third forbearance, the lender has provided the Company with the consent required under the existing agreements and prior two forbearances to make certain payments from the proceeds of the offering. In consideration for the third forbearance, the Company has agreed to issue the lender warrants to purchase 10,000 shares of common stock at an exercise price equal to the per share price of the common stock in the offering and $50,000 of common stock at 80% of the at the same issue price in of the offering, which shall be subject to a lock-up agreement. The forbearance set forth in the December Forbearance will be in effect through February 15, 2017.  The Company has included the $148,677 estimated fair value of the warrants and $60,000 fair value related to the shares of common stock in accrued expenses. $104,824 of the fair value of the warrants and common stock associated with the note is recorded as a discount and is being amortized to interest expense over the remaining life of the note. Subsequent to December 31, 2016, the lender extended the December Forbearance period through March 31, 2017.

1,486,111

1,652,778

Secured borrowings from a third party that purchased $1,555,750 of customer receivables for $1,125,000, with due dates ranging from April 2017 to June 2017, and payable in daily payments ranging from $1,500 to $4,000.  The $430,750 difference between the customer receivables and cash received is being amortized to interest expense over the term of the respective notes.  The secured borrowings are guaranteed by two officers of the Company and are subordinated to other notes payable.

1,072,984

689,318

Unsecured note payable with a third party with no interest, was due the earlier of November 2016 or the third business day after the closing of a proposed offering on Form S-1 filed on July 19, 2016. Pursuant to the note, the Company may borrow up to $1,500,000 upon meeting certain milestones.  The note required a payment of common stock on the 5th trading day after the pricing of the proposed offering, but no later than December 15, 2016.  The number of common shares will equal $200,000 divided by the lowest of (i) the lowest daily closing price of the common stock during the ten days prior to delivery of the common shares or during the ten days prior to the date of the Purchase Agreement, (ii) 80% of the common stock offering price of the offering, (iii) 80% of the unit price offering price of the offering, or (iv) the exercise price of any warrants issued in the offering.  The estimated fair value of $240,000 of the stock is included in accrued liabilities and is being amortized to interest expense over the life of the note.  In connection with the issuance of the note, the Company also issued 20,000 warrants to purchase shares of common stock at an exercise price per share equal to the lesser of (i) 80% of the per share price of the common stock in the offering, (ii) $25 per share, (iii) 80% of the unit price in the offering, or (iv) the exercise price of any warrants issued in the offering and the number of shares will reset upon the closing of the offering.  The warrants may only be exercised to the extent the holder would own a maximum of 9.99% of the Company's common stock after exercise.  The fair value of $493,590 related to the replacement warrants was recorded as a derivative (see Notes 12 and 15).  Of this fair value amount, $220,000 was recorded as a debt discount and is being amortized over the life of the note and the remaining $273,590 was recorded as a loss on derivative liability.  In the event of borrowing in excess of an initial $500,000, the Company will be required to issue additional warrants with an aggregate exercise amount equal to 100% of the additional amount borrowed with similar terms to the initial warrants issued.  In November 2016, the Company borrowed an addition $250,000 on the note and issued an additional warrant for the purchase of 10,000 shares of common stock with similar terms to the original warrants.  The fair value of $286,171 related to the November 2016 warrants was recorded as a derivative (see Notes 12 and 15).  The fair value was recorded as a debt discount and is being amortized over the remaining life of the note.  In November 2016, the Company amended the note to extend the maturity date to the earlier of March 31, 2017 or the third business day after the closing of the offering.  In addition, the amendment adjusted the origination shares to equal 20% of the note divided by the lowest of (i) the lowest daily closing price of the common stock during the ten days prior to delivery of the shares or during the ten days prior to the date of the agreement, (ii) 80% of the common stock offering price of the offering, (iii) 80% of the unit price offering price (if applicable), or (iv) 80% of the exercise price of any warrants issued in the offering.  In December 2016. the Company borrowed an addition $250,000 on the note and issued an additional warrant for the purchase of 10,000 shares of common stock with similar terms to the original warrants.  The fair value of $349,819 related to the December 2016 warrants was recorded as a derivative (see Notes 12 and 15).  The fair value was recorded as a debt discount and is being amortized over the remaining life of the note.  Subsequent to December 31, 2016, the Company borrowed the remaining $500,000 on the note and extended the maturity date (see Note 18).

1,000,000

500,000

Secured line of credit with a third party with interest at 12.25% per annum, due February 2018.  The note is secured by the assets of the Company and may go into default in the event other notes payable go into default subsequent to the effective date of the note.  The Company entered into the line of credit agreement in conjunction with a note payable.  The Company may draw up to the lesser of 80% of certain accounts receivable or $1,500,000 and increase the maximum it may borrow under the agreement up to a total balance of $3,000,000 at $500,000 per increase as the Company meets certain milestones.  The interest rate may also reduce to 10.75% per annum as the Company meets certain milestones.  In conjunction with the line of credit and related note, the Company issued warrants to purchase 24,032 shares of common stock at $32.50 per share with a fair market value of $3,732,100 (see Notes 12 and 15), which resulted in a loss on derivative of $2,309,461.  The Company has recorded prepaid expenses of $44,665, which are being amortized to interest expense over the term of the line of credit.  In September 2016, the Company entered into a forbearance agreement where the lender will forbear from exercising remedies with regard to certain breaches through October 31, 2016 and consented to the Company entering into a purchase agreement with another party and issuance of the note and the warrant thereunder. Effective November 1, 2016, the Company and the lender entered into a forbearance and consent under loan and security agreement. Pursuant to the terms of the forbearance agreement, the lender will forbear from exercising remedies with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous forbearance agreement.  Additionally, the lender has provided the Company with the consent required under the existing agreements and previous forbearance agreement to make certain payments to other debt holders from the proceeds of the offering. The lender also consented to the issuance of the Company's proposed Series G Preferred Stock to certain affiliates of the Company (see Note 18).  In consideration for the new forbearance, the Company has agreed to issue the lender warrants to purchase 130,000 shares of common stock at an exercise price equal to the per share price of the common stock in the offering, which shall be subject to a 6-month lock-up agreement. The forbearance was in effect through December 31, 2016.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses. The Company recorded a loss on extinguishment of debt of $2,043,715 on the line of credit and its related secured note payable in relation to the forbearance agreement. Effective December 31, 2016, the Company and the lender entered into a third forbearance and consent under loan and security agreement. Pursuant to the terms of the third forbearance, the lender will forbear from exercising remedies with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous two forbearances.  Additionally, pursuant to the third forbearance, the lender has provided the Company with the consent required under the existing agreements and prior two forbearances to make certain payments from the proceeds of the offering. In consideration for the third forbearance, the Company has agreed to issue the lender warrants to purchase 10,000 shares of common stock at an exercise price equal to the per share price of the common stock in the offering and $50,000 of common stock at 80% of the at the same issue price in of the offering, which shall be subject to a lock-up agreement. The forbearance set forth in the December Forbearance will be in effect through February 15, 2017.  The Company has included the $148,677 estimated fair value of the warrants and $60,000 fair value related to the shares of common stock in accrued expenses. $104,824 of the fair value of the warrants and common stock associated with the line of credit is recorded in prepaid expenses and other assets and is being amortized to interest expense over the remaining life of the line of credit.  Subsequent to December 31, 2016, the lender extended the December Forbearance period through March 31, 2017.

929,518

929,518

Note payable previously secured by CareServices customer contracts.  In January 2015, the note was amended to reduce the outstanding principal to $375,000, interest at 9% per annum, and payable in 15 monthly installments beginning in February 2015.  The amendment released the collateralized customer contracts and the note payable is guaranteed by both a former Executive Chairman of the Board of Directors and a member of the Board of Directors.  A gain on the extinguishment of the old note of $769,449 was recorded in other income.  In December 2015, the note was amended to extend maturity to January 2018 payable in monthly installments beginning in July 2016, convert $31,252 from accrued interest into principal, interest at 10% per annum, and provide that the note is convertible into common stock at its fair value per share.  The Company recorded a derivative in connection with the convertible feature of the note (see Note 12) and is amortizing the initial $302,690 fair value of the derivative liability over the life of the note.  In February 2016, the note was amended to subordinate to other notes payable also issued during February 2016.  In July 2016, the note was amended to extend the maturity date to the earlier of an equity raise in excess of $10,000,000 or November 2016 and included additional default penalties and payment terms.  In October 2016, the note was amended to extend the maturity date to the earlier of an equity raise in excess of $10,000,000 or December 31, 2016 and included additional default penalties and payment terms.  In December 2016 and February 2017, the note was further amended to extend the maturity date to the earlier of an equity raise in excess of $10,000,000 or February 15, 2017 and March 31, 2017, respectively.

334,464

334,464

Unsecured note payable with interest at 12% per annum, due February 2016, convertible into common stock at $150 per share.  In connection with the issuance of the note, the Company repriced previously issued warrants to purchase shares of common stock.  The $22,397 increase in relative fair value of the warrants was included as a loss on the extinguishment of the old note in other expense in fiscal 2015.  The note also required a payment of 6,000 shares of common stock.  The fair value of $780,000 was included as a loss on the extinguishment of the old note in other expense in fiscal 2015.  The maturity date was subsequently extended on two occasions for a total of 500 shares of common stock and the note was due May 2016.  The $31,250 fair value of these shares was being amortized over the extension period.  In February 2016, the note was amended to subordinate to other notes payable also issued during February 2016, and the conversion price was reduced to $30 per share, which was below the fair value of the Company's common stock on the date of the amendment.  The note may only be converted if the holder owns less than 9.99% of the Company's common stock after conversion.  The Company recorded the value of the beneficial conversion feature of $381,299 to loss on termination of debt as a result of the modification.  In May 2016, the note was amended to extend the maturity date to the earlier of an equity raise of $10,000,000 or October 2016 which required a payment of 600 shares of common stock.  The $28,500 fair value of these shares has been included in accrued liabilities and was amortized over the extension period.  In October 2016, the Company extended the maturity date of the note month-by-month through no later than April 30, 2017 for a fee of $5,000 per month extended.

300,000

300,000

Unsecured note payable with interest at 12% per annum, due September 2016, subordinated to other notes payable.  In connection with the issuance of the note, the Company issued 2,000 shares of common stock.  The $100,000 fair value of the stock was amortized to interest expense over the term of the note.  Subsequent to December 31, 2016, the Company entered into a letter agreement related to the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering (see Note 18).

250,000

250,000

Secured note payable to a third party with interest at 18% per annum, due June 2017.  The note is secured by shares of the Company's common stock held by, and other assets of an entity controlled by, a former Executive Chairman of the Board of Directors.  The note is guaranteed by a former Executive Chairman of the Board of Directors and his related entity and may go into default in the event other notes payable go into default subsequent to the effective date of the note.  Payments on the note are convertible at the holder's option into common stock at 75% of its fair value if not paid by its respective due date, which is subject to a 20 trading day true-up and is adjustable to any lower rates granted through equity sales or other conversion rates provided by issuances of other debt, warrants, options or other instruments, with the exception of other certain raises.  The note may only be converted if the holder owns less than 4.99% of the Company's common stock after conversion.  The Company recognized a derivative liability related to the conversion feature with a fair value of $181,670, which was recognized as a loss on termination of debt.  In June 2016, $13,713 of principal and $11,287 of accrued interest converted into 953 shares of common stock, pursuant to the terms of the note.  In August 2016, $64,654 of principal and $10,346 of accrued interest converted into 9,203 shares of common stock, pursuant to the terms of the note.  This note was terminated subsequent to December 31, 2016 (see Note 18).

109,488

162,539

Unsecured notes with interest at 18% per annum, due April 2013, in default.  The Company issued 20,000 shares of Series D preferred stock as loan origination fees.  The $195,000 fair value of the preferred stock was amortized over the original term of the note.   Principal of $50,000 and accrued interest of $13,333 were converted to common stock in December 2013.  Subsequent to December 31, 2016, the Company entered into a letter agreement related to the remainder of the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering (see Note 18).

64,261

64,261

Total notes payable before discount

13,520,763

13,006,815

Less discount

(1,852,642

)

(1,930,060

)

Total notes payable

11,668,121

11,076,755

Less current portion

(4,562,248

)

(3,722,899

)

Notes payable, net of current portion

$

7,105,873

$

7,353,856

December 31,

September 30,

2016

2016

Secured borrowings from entities controlled by an officer who purchased a $2,813,175 customer receivable for $1,710,500.  The Company repurchased the receivable for $1,950,000 less cash received by the entities through March 2015.  The $239,500 difference between the buyback and cash received plus $253,500 of loan origination fees was amortized to interest expense through March 2015.  In September 2015, the note was modified to extend the maturity date to January 2017, with interest at 18% per annum.  The Company added $81,600 of extension fees and issued 6,000 shares of common stock to a lender as part of the modification.  The note is convertible into common stock at $150 per share.  The $540,000 fair value of the common stock was recognized as a loss on extinguishment of debt in fiscal 2015.  In February 2016, the note was amended to subordinate to other notes payable also issued during February 2016, and the conversion price was reduced to $30 per share, which was below the fair value of the Company's stock on the date of the amendment.  The conversion of the note is now limited to a maximum of 40,000 common shares in combination with other convertible notes payable held by the lenders.  The note has a default penalty of 8,407 shares of common stock, in combination with other convertible notes held by the lenders, if not paid by maturity.  The Company recorded the value of the combined beneficial conversion features of $1,400,000 to loss on termination of debt as a result of the amendment. Subsequent to December 31, 2016, the Company entered into a letter agreement related to the secured borrowings to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering (see Note 18).

$

1,721,100

$

1,721,100

Unsecured note payable to an entity controlled by an officer with interest at 18% per annum, due January 2017, convertible into common stock at $150 per share.  The Company issued 6,000 shares of common stock to a lender as loan origination fees.  The $540,000 fair value of the common stock was recognized as a loss on extinguishment of debt in fiscal 2015.  In February 2016, the note was amended to subordinate to other notes payable also issued during February 2016, and reduced the conversion price to $30 per share, which was below the fair value of the Company's stock on the date of the amendment.  The conversion of the note is now limited to a maximum of 40,000 common shares in combination with other convertible notes payable held by the lender.  The note has a default penalty of 8,407 shares of common stock, in combination with other convertible notes held by the lender, if not paid by maturity.  The Company recorded the value of the combined beneficial conversion features of $1,400,000 to loss on termination of debt as a result of the amendment. Subsequent to December 31, 2016, the Company entered into a letter agreement related to the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering (see Note 18).

1,303,135

1,303,135

Unsecured note payable to an entity controlled by a former Executive Chairman of the Board of Directors with interest at 18% per annum, due January 2017.  In February 2016, notes payable to the same entity, with outstanding balances of $511,005 plus accrued interest of $30,999 combined into this note.   The note is subordinated to notes payable to unrelated parties and is convertible into shares of common stock at $30 per share, which was below the fair value of the Company's stock on the date of the agreement.  The conversion of the note is limited to a maximum of 18,500 common shares.  The Company recorded the value of the beneficial conversion feature of $632,339 to loss on termination of debt.  The note has a default penalty of 1,469 shares of common stock if not paid by maturity. The note may only be converted if the holder owns less than 4.99% of the Company's common stock after conversion.  Subsequent to December 31, 2016, the Company entered into a letter agreement related to the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering (see Note 18).

542,004

542,004

Unsecured note payable to an entity controlled by an officer with interest at 12% per annum, due September 2016, subordinated to other third party notes payable.  In connection with the issuance of the note, the Company issued 2,000 shares of common stock.  The $70,000 fair value of the stock is being amortized to interest expense over the term of the note. Subsequent to December 31, 2016, the Company entered into a letter agreement related to the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering (see Note 18).

250,000

250,000

Unsecured note payable to a former officer with interest at 12% per annum, due September 2013.  This note is in default and is convertible into common stock at $375 per share.

26,721

26,721

Unsecured note payable to an entity controlled by an officer with interest at 18% per annum, due on demand.  In February 2016, the note was amended to subordinate the note to other notes payable also issued during February 2016.  The note is convertible into shares of common stock at $30 per share, which was below the fair value of the Company's stock on the date of the amendment.  The conversion of the note is now limited to a maximum of 40,000 common shares in combination with other convertible notes payable held by the entity.  The note has a default penalty of 8,407 shares of common stock, in combination with other convertible notes held by the entity, if not paid by maturity.  The Company recorded the value of the combined beneficial conversion features of $1,400,000 to loss on termination of debt as a result of the amendment.  Subsequent to December 31, 2016, the Company amended the note to extend the maturity date to March 31, 2017 (see Note 18).

25,463

25,463

Unsecured note payable to a former officer with interest at 15% per annum, due June 2012, in default.  The note included a $3,000 loan origination fee added to the principal and is convertible into common stock at $250 per share.

11,863

17,227

Unsecured note payable to a former officer with interest at 12% per annum, due on demand.

2,432

12,474

Total notes payable, related-party

3,882,718

3,898,124

Less current portion

(3,882,718

)

(3,898,124

)

Notes payable, related-party, net of current portion

-

-

Level 1

The Company does not have any Level 1 inputs available to measure its assets.

Level 2

Certain of the Company's embedded derivative liabilities are measured on a recurring basis using Level 2 inputs.

Level 3

Certain of the Company's embedded derivative liabilities are measured on a recurring basis using Level 3 inputs.

Quoted Prices in Active Markets for Identical Items (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Total

December 31, 2016

Derivatives liability

$

-

$

301,181

$

2,327,325

$

2,628,506

 

September 30, 2016

Derivatives liability

-

281,613

1,772,458

2,054,071

Derivatives

Liability

Balance, September 30, 2016

$

1,772,458

Issuance of warrants recorded as derivatives

635,990

Gain on termination of debt resulting from

  payments on notes payable

(39,497

)

Gain on derivatives liability resulting

  from changes in fair value

(41,626

)

Balance, December 31, 2016

$

2,327,325

Exercise price

$

5 - $25

Expected term (years)

4.03 - 4.88

Volatility

151

%

Risk-free rate

1.22% - 1.99

%

Dividend rate

0

%

Common stock price

$

5 - $25

Number of Options and Warrants

Weighted-

Average

Exercise

Price

Outstanding as of October 1, 2016

65,045

$

35.06

Granted

20,000

25.00

Forfeited

(971

)

679.92

Outstanding as of December 31, 2016

84,074

48.50

Exercisable as of December 31, 2016

75,365

41.23

2017

$

98,086

2018

111,340

$

209,426

(1)

On January 27, 2017, the Company effected a 1-for-500 reverse stock split of its outstanding common stock, which caused the then outstanding common stock to decrease from 115,112,802 to 232,100 while keeping the authorized capitalization unchanged.

(2)

On January 12, 2017, the Company entered into letter agreements (together the "Note Holder Letter Agreements") with eight (8) investors (each a "Note Holder" and together the "Note Holders") holding convertible notes payable whereby the Note Holders agreed to convert all monies due them under the Notes into restricted shares of common stock (the "Note Conversion Shares") and warrants to purchase common stock (the "Note Conversion Warrants" and together with the Note Conversion Shares, the "Note Conversion Securities"), all contingent upon the completion of the Company's contemplated public offering of securities. As incentive to enter into the Note Holder Letter Agreements, the Company agreed to add approximately $1,687,811 to the outstanding principal and interest as of October 31, 2016, effectively making the total obligation due to Note Holders an aggregate of $8,000,000 (the "Total Note Obligation"). Pursuant to the Note Holder Letter Agreements, the Total Note Obligation will automatically convert upon consummation of the offering into the Note Conversion Securities at the combined price per share and warrant paid by investors in the offering (the "Conversion Price"). The terms of the Note Conversion Warrants will be substantially similar to the Warrants being included in the offering, except such Note Conversion Warrants will be a restricted security and will not publicly trade on NASDAQ. In addition, the Note Holders currently hold warrants to purchase an aggregate of 11,070 shares that will be terminated upon the consummation of the offering. In consideration of such termination, the Note Holders will be issued new warrants to purchase an identical number of shares of Common Stock at an exercise price equal to the Conversion Price, as defined in the agreements. Each person entering into the Note Holder Letter Agreements have entered into lock-up agreements prohibiting the sale or other transfer of any securities of the Company owned by such persons for a period of 6 months. If such offering is not completed by February 15, 2017, the Note Holder Letter Agreements and lock-up agreements will terminate.  During February 2017, prior to the expiration of the existing agreements, the Note Holders signed amendments to their respective Note Holder Letter Agreements and lock-up agreements to extend the expiration dates to March 31, 2017.

(3)

(4)

(5)

On January 12, 2017, the Company entered into a letter agreement with a third-party vendor, whereby such vendor agreed to convert all monies due from the Company pursuant to certain accounts payable into common stock of the Company, contingent upon the completion of the offering. As of September 30, 2016, the aggregate amount of $73,667 was owed to the vendor. Pursuant to the letter agreement, the aggregate amount owed will automatically convert upon consummation of the Offering of securities into such number of restricted shares of the Company's common stock calculated by dividing the aggregate amount owed by the per share price of the common stock in the offering. The vendor has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by it for a period of 6 months. If such offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 13, 2017, the Company signed an amendment to the letter agreement and signed a new lock-up agreement to extend the expiration dates to March 31, 2017.

(6)

On January 12, 2017, the Company entered into a letter agreement with a director of the Company whereby the director agreed to convert all monies due him from the Company from unpaid board service fees into common stock of the Company, contingent upon the completion of the Offering. As of October 31, 2016, the aggregate amount of $42,500 was owed to the director. Pursuant to the letter agreement, the unpaid fees will automatically convert upon consummation of the offering into such number of restricted shares of the Company's common stock calculated by dividing the unpaid fees by $17.50 or 2,426 shares. The director has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by him for a period of 12 months. If such offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 10, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017.

(7)

On January 12, 2017, the Company entered into a second letter agreement with the director, whereby the director agreed to convert 13,843 shares of Series E Preferred of the Company owned into common stock of the Company, contingent upon the completion of the Offering. As of September 30, 2016, the aggregate amount of $181,297 consisting of accrued dividends, royalty and interest was owed to the director with respect to his Series E Preferred. Pursuant to the second letter agreement, the aggregate amount will automatically convert upon consummation of the Offering into such number of restricted shares of the Company's common stock calculated by dividing the aggregate amount by $17.72 or 10,223 shares. The director has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned for a period of 12 months. If such offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 10, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017.

(8)

On January 12, 2017, the Company entered into a letter agreement with entities controlled by the Chief Executive Officer, whereby each of such parties agreed to convert all monies due pursuant to three separate promissory notes into common stock of the Company, contingent upon the completion of the offering. As of September 30, 2016, the aggregate amount of $3,876,737 was owed to the holders pursuant to the notes payable. Pursuant to the letter agreement, the aggregate amount owed, together with interest accruing subsequent to September 30, 2016, will automatically convert upon consummation of the offering into such number of restricted shares of the Company's common stock calculated by dividing the aggregate amount owed by $22.50, or 172,300 shares, exclusive of interest accruing subsequent to September 30, 2016. Each of the parties subject to the letter agreement have entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by such parties for a period of 12 months. The letter agreement extends the due date of the notes to the earlier of the offering or February 15, 2017.  On February 10, 2017, the Company signed an amendment to the letter agreement and signed a new lock-up agreement to extend the expiration dates to March 31, 2017.

(9)

On January 12, 2017, the Company entered into a letter agreement with an entity controlled by a former Executive Chairman and a current consultant to the Company, whereby the entity agreed to convert all monies due it under a promissory note into common stock of the Company, contingent upon the completion of the Offering. As of September 30, 2016, the aggregate amount of $602,145 was owed to the entity pursuant to the promissory note. Pursuant to the letter agreement, the aggregate amount owed, together with interest accruing subsequent to September 30, 2016, will automatically convert upon consummation of the Offering into such number of restricted shares of the Company's common stock calculated by dividing the redemption value by 80% of the per share price of the common stock in the Offering, exclusive of interest accruing subsequent to September 30, 2016.  The entity has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by it for a period of 6 months. If the Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 13, 2017, the Company signed an amendment to the letter agreement and signed a new lock-up agreement to extend the expiration dates to March 31, 2017.

(10)

(11)

(12)

On January 3, 2017, the Company drew an additional $200,000 on a note payable where it may borrow up to $1,500,000.  The Company issued warrants to purchase 8,000 shares of common stock at an exercise price per share equal to the lesser of (i) 80% of the per share price of the common stock of the Offering, (ii) $25 per share, (iii) 80% of the unit price in the offering (if applicable), or (iv) the exercise price of any warrants issued in the Offering.

(13)

On August 19, 2016, the Company received a cash advance from an entity controlled by a former Executive Chairman and consultant in the amount of $135,000 and $80,000 of this amount was repaid subsequent to December 31, 2016

(14)

During January 2017, the Company received cash advances from third parties in the amount of $100,000 and repaid $103,000, inclusive of fees.

(15)

On January 3, 2017, the Company terminated a secured note payable with a principal balance of $162,539 as of September 30, 2016.  No additional consideration was given as part of the termination.

(16)

On January 31, 2017, the Company filed a certificate of designations, preferences and rights (the "Certificate of Designation") with the Secretary of State of the State of Delaware with respect to a newly authorized class of its Series G Preferred Stock (the "Series G Preferred"). The Stated Value of one share of Series G Preferred is $500. The Series G Preferred will automatically convert ("Automatic Conversion") the Stated Value of such shares (the "Conversion Amount") into fully paid and non-assessable shares of common stock of the Company ("Series G Conversion Shares") upon (i) the Company's receipt of Fifty Million Dollars (US$50,000,000) or more in gross revenue in a single fiscal year, (ii) the sale of the Company via asset purchase, stock sale, merger or other business combination in which the Company and/or its stockholders receive aggregate gross proceeds of Twenty-Five Million Dollars (US$25,000,000) or more, or (iii) the closing of an underwritten offering (the "Qualified Offering") by the Company pursuant to which the Company receives aggregate gross proceeds of at least Ten Million Dollars (US$10,000,000) in consideration of the purchase of shares of common stock and/or which results in the listing of the Company's common stock on the Nasdaq National Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE MKT. The number of Series G Conversion Shares issuable upon conversion of the Conversion Amount shall equal the Conversion Amount divided by the Conversion Price then in effect. The "Conversion Price" of the Series G Preferred is $22.50. Upon the trigger of an Automatic Conversion, all of the shares of Series G Preferred owned by such Holders will convert into common stock at the Conversion Price then in effect.

(17)

On January 31, 2017, the Company issued 32,415 shares of Series G Preferred to an entity affiliated with the Chief Executive Officer and 10,805 shares of Series G Preferred to a former Chief Executive Officer and consultant to the Company. The consideration for such issuance relates to services rendered to the Company. As a result of the foregoing, the Series G Preferred held by these parties will convert to an aggregate of 960,445 shares of common stock upon the consummation of the Offering. Each of the holders have entered into lock-up agreements prohibiting the sale or other transfer of all securities of the Company owned by each of them for a period of 12 months. Additionally, each of the holders entered into a second lock-up agreement further restricting the public sale of the their shares of common stock upon the triggering of an Automatic Conversion until the earlier of (i) the Company's receipt of $25,000,000 or more in gross revenue in a single fiscal year (but in no event prior to twelve (12) months from the date of the final prospectus with respect to the offering, if any, even if such gross revenue threshold is attained prior to such date), or (ii) eighteen (18) months from the date thereof.  The lock-up agreements initially expired if the offering was not completed by February 15, 2017, whose expirations were extended to March 31, 2017 with new agreements signed during February 2017.

(18)

On January 27, 2017, the Company sold $280,000 of future customer receipts to a third party for $200,000 in cash.  The $80,000 difference between the future customer receipts and cash received by the Company is being amortized to interest expense over the term of the note. The note is subordinated to another note.

(19)

On February 14, 2017, the Company amended a note payable with principal balance of $334,464 to extend the maturity date to the earlier of the Offering or March 31, 2017.

(20)

During January 2017, the Company amended a note payable to an entity controlled by the Chief Executive Officer with principal balance of $25,463 extend the maturity date to February 15, 2017.  The note was further amended during February 2017 to extend the maturity date to March 31, 2017.

(21)

During February 2017, a lender extended the period covered in a forbearance agreement signed during December 2016 was extended through March 31, 2017.

•

It requires assumptions to be made that were uncertain at the time the estimate was made, and

 

 

•

Changes in the estimate or different estimates that could have been selected could have a material impact on the consolidated results of operations or financial condition.

(1)

On January 27, 2017, we effected a 1-for-500 reverse stock split of our outstanding common stock, which caused our then outstanding common stock to be decreased from 115,112,802 to 232,100 while keeping our authorized capitalization unchanged.

(2)

(3)

(4)

(5)

(6)

(7)

(8)

On January 12, 2017, the Company entered into a letter agreement with entities controlled by the Chief Executive Officer, whereby each of such parties agreed to convert all monies due pursuant to three separate promissory notes into common stock of the Company, contingent upon the completion of the Offering. As of September 30, 2016, the aggregate amount of $3,876,737 was owed to the holders pursuant to the notes payable. Pursuant to the letter agreement, the aggregate amount owed, together with interest accruing subsequent to September 30, 2016, will automatically convert upon consummation of the Offering into such number of restricted shares of the Company's common stock calculated by dividing the aggregate amount owed by $22.50, or 172,300 shares, exclusive of interest accruing subsequent to September 30, 2016. Each of the parties subject to the letter agreement have entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by such parties for a period of 12 months. The letter agreement extends the due date of the notes to the earlier of the offering or February 15, 2017.  On February 10, 2017, the Company signed an amendment to the letter agreement and signed a new lock-up agreement to extend the expiration dates to March 31, 2017.

(9)

On January 12, 2017, the Company entered into a letter agreement with an entity controlled by a former Executive Chairman and a current consultant to the Company, whereby the entity agreed to convert all monies due it under a promissory note into common stock of the Company, contingent upon the completion of the Offering. As of September 30, 2016, the aggregate amount of $602,145 was owed to the entity pursuant to the promissory note. Pursuant to the letter agreement, the aggregate amount owed, together with interest accruing subsequent to September 30, 2016, will automatically convert upon consummation of the Offering into such number of restricted shares of the Company's common stock calculated by dividing the redemption value by 80% of the per share price of the common stock in the Offering, exclusive of interest accruing subsequent to September 30, 2016.  The entity has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by it for a period of 6 months. If the offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 13, 2017, the Company signed an amendment to the letter agreement and signed a new lock-up agreement to extend the expiration dates to March 31, 2017.

(10)

On January 12, 2017, the Company entered into a letter agreement with a third-party investor, whereby the investor agreed to convert 20,000 shares of Series D Preferred of the Company owned into common stock of the Company based on current redemption value contingent upon the completion of the Offering. As of the date hereof, the current redemption value of such Series D Preferred was $72,000. Pursuant to the letter agreement, the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company's common stock calculated by dividing the redemption value by 80% of the per share price of the common stock in the Offering and all dividends cease accruing beginning July 1, 2016.  The investor has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by him for a period of 12 months. If the Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate.  On February 13, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017.

(11)

(12)

On January 3, 2017, the Company drew an additional $200,000 on a note payable where it may borrow up to $1,500,000.  The Company issued warrants to purchase 8,000 shares of common stock at an exercise price per share equal to the lesser of (i) 80% of the per share price of the common stock of the Offering, (ii) $25 per share, (iii) 80% of the unit price in the Offering (if applicable), or (iv) the exercise price of any warrants issued in the Offering.

(13)

On August 19, 2016, the Company received a cash advance from an entity controlled by a former Executive Chairman and consultant in the amount of $135,000 and $80,000 of this amount was repaid subsequent to December 31, 2016

(14)

During January 2017, the Company received cash advances from third parties in the amount of $100,000 and repaid $103,000, inclusive of fees.

(15)

On January 3, 2017, the Company terminated a secured note payable with a principal balance of $162,539 as of September 30, 2016.  No additional consideration was given as part of the termination.

(16)

On January 31, 2017, the Company filed a certificate of designations, preferences and rights (the "Certificate of Designation") with the Secretary of State of the State of Delaware with respect to a newly authorized class of its Series G Preferred Stock (the "Series G Preferred"). The Stated Value of one share of Series G Preferred is $500. The Series G Preferred will automatically convert ("Automatic Conversion") the Stated Value of such shares (the "Conversion Amount") into fully paid and non-assessable shares of common stock of the Company ("Series G Conversion Shares") upon (i) the Company's receipt of Fifty Million Dollars (US$50,000,000) or more in gross revenue in a single fiscal year, (ii) the sale of the Company via asset purchase, stock sale, merger or other business combination in which the Company and/or its stockholders receive aggregate gross proceeds of Twenty-Five Million Dollars (US$25,000,000) or more, or (iii) the closing of an underwritten offering (the "Qualified Offering") by the Company pursuant to which the Company receives aggregate gross proceeds of at least Ten Million Dollars (US$10,000,000) in consideration of the purchase of shares of common stock and/or which results in the listing of the Company's common stock on the Nasdaq National Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE MKT. The number of Series G Conversion Shares issuable upon conversion of the Conversion Amount shall equal the Conversion Amount divided by the Conversion Price then in effect. The "Conversion Price" of the Series G Preferred is $22.50. Upon the trigger of an Automatic Conversion, all of the shares of Series G Preferred owned by such Holders will convert into common stock at the Conversion Price then in effect.

(17)

On January 31, 2017, the Company issued 32,415 shares of Series G Preferred to an entity affiliated with the Chief Executive Officer and 10,805 shares of Series G Preferred to a former Chief Executive Officer and consultant to the Company. The consideration for such issuance relates to services rendered to the Company. As a result of the foregoing, the Series G Preferred held by these parties will convert to an aggregate of 960,445 shares of common stock upon the consummation of the offering. Each of the holders have entered into lock-up agreements prohibiting the sale or other transfer of all securities of the Company owned by each of them for a period of 12 months. Additionally, each of the holders entered into a second lock-up agreement further restricting the public sale of the their shares of common stock upon the triggering of an Automatic Conversion until the earlier of (i) the Company's receipt of $25,000,000 or more in gross revenue in a single fiscal year (but in no event prior to twelve (12) months from the date of the final prospectus with respect to the offering, if any, even if such gross revenue threshold is attained prior to such date), or (ii) eighteen (18) months from the date thereof.  The lock-up agreements initially expired if the offering was not completed by February 15, 2017, whose expirations were extended to March 31, 2017 with new agreements signed during February 2017.

(18)

On January 27, 2017, the Company sold $280,000 of future customer receipts to a third party for $200,000 in cash.  The $80,000 difference between the future customer receipts and cash received by the Company is being amortized to interest expense over the term of the note. The note is subordinated to another note.

(19)

On February 14, 2017, the Company amended a note payable with principal balance of $334,464 to extend the maturity date to the earlier of the offering or March 31, 2017.

(20)

During January 2017, the Company amended a note payable to an entity controlled by the Chief Executive Officer with principal balance of $25,463 extend the maturity date to February 15, 2017.  The note was further amended during February 2017 to extend the maturity date to March 31, 2017.

(21)

During February 2017, a lender extended the period covered in a forbearance agreement signed during December 2016 was extended through March 31, 2017.

101 INS

XBRL Instance Document*

101 SCH

XBRL Schema Document*

101 CAL

XBRL Calculation Linkbase Document*

101 DEF

XBRL Definition Linkbase Document*

101 LAB

XBRL Labels Linkbase Document*

101 PRE

XBRL Presentation Linkbase Document*

 

 

 

     ActiveCare, Inc.

 

 

 

Date: February 21, 2017 

 

 

Jeffrey S. Peterson

Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

Date: February 21, 2017 

 

 

Eric Robinson

Chief Financial Officer

(Principal Financial and Accounting Officer)