Annual report pursuant to Section 13 and 15(d)

21. Subsequent Events

v3.6.0.2
21. Subsequent Events
12 Months Ended
Sep. 30, 2016
Notes  
21. Subsequent Events

21.                Subsequent Events

Subsequent to September 30, 2016, the Company entered into the following agreements and transactions:

(1)     On November 1, 2016, the Company filed a Certificate of Amendment (the “Amendment”) to its Certificate of Incorporation to effectuate a 1-for-500 reverse stock split (the "Reverse Split"). On January 12, 2017, the Company filed a Certificate of Correction to the Amendment in order to clarify that such Reverse Split will not become effected until such time as it is processed and announced by the Financial Industry Regulatory Authority (“FINRA”).  As of January 13, 2017, the Reverse Split has not yet been processed and announced by FINRA. No warrant, option, share and per share information in this report gives effect to this Reverse Split.

(2)     Effective November 1, 2016, the Board approved the 2016 Incentive Stock Option plan providing for the issuance of options to purchase up to 188,625,000 shares.

(3)     On September 9, 2016, the Company and a senior secured lender entered into a Forbearance Loan and Security Agreement (the “September Forbearance Agreement”). Pursuant to the terms of the September Forbearance Agreement, the lender will forbear from exercising remedies (the “Forbearance”) with regard to certain breaches of agreements between the Company 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 (the “November Forbearance Agreement”). Pursuant to the terms of the November Forbearance Agreement, the lender will forbear from exercising remedies (the “November Forbearance”) with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the September Forbearance Agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the Existing Agreements and September Forbearance Agreement to make certain payments from the proceeds of the offering. These payments include, but are not limited to (i) payments to holders of the Company’s Series E Preferred Stock, (ii) third party note and receivable payments and (iii) repayment of an unsecured note payable issued in September 2016. The lender also consented to the issuance of the Company’s Series G Preferred Stock to certain affiliates of the Company.  In consideration for the November Forbearance, the Company has agreed to issue the lender warrants to purchase 65,000,000 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 12-month lock-up agreement. The Forbearance set forth in the November Forbearance Agreement will be in effect through December 31, 2016.  Effective December 31, 2016, the Company and the lender entered into a forbearance and consent under loan and security agreement (the “December Forbearance”). Pursuant to the terms of the December 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 September Forbearance and November Forbearance.  Additionally, pursuant to the December Forbearance, the lender has provided the Company with the consent required under the Existing Agreements, September Forbearance and November Forbearance to make certain payments from the proceeds of the offering. In consideration for the December Forbearance, the Company has agreed to issue the lender warrants to purchase 5,000,000 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.

(4)     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 offering. 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 5,534,097 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 the offering is not completed by February 15, 2017, the Note Holder Letter Agreements and lock-up agreements will terminate.

(5)     On January 12, 2017, the Company entered into a letter agreement with a third-party lender, whereby the lender agreed to convert all monies due under that certain subordinated promissory note into common stock of the Company, contingent upon the completion of the offering. As of September 30, 2016, the aggregate amount of $101,814 was owed pursuant to the 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 aggregate amount owed by 80% of the per share price of the common stock in the offering. The lender has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned 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.

(6)     On January 12, 2017, the Company entered into a letter agreement with a third-party lender, whereby the lender agreed to convert all monies due him under that certain subordinated promissory note into common stock of the Company, contingent upon the completion of the offering.  As of September 30, 2016 the aggregate amount of $265,616 was owed pursuant to the 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 aggregate amount owed by 80% of the per share price of the common stock in the offering. The lender 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 6 months. The letter agreement extends the due date of the note to the earlier of the offering or February 15, 2017.

(7)     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 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 the offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate.

(8)     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 $0.035 or 1,214,286 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 the offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate.

(9)     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 Stock 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 Stock. 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 $0.035 or 5,116,421 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 the offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate.

(10) 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 $0.045, or 86,149,712 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.

(11) 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 aggregate amount owed by $0.045 or 13,381,004 shares, 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 12 months. If the offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate.

(12) 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 Stock 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 Stock 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.

(13) On January 12, 2017, the Company entered into a letter agreement with an entity affiliated with the Chief Executive Officer, whereby the entity agreed to convert 25,000 shares of Series D Preferred Stock 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 Stock was $300,000. 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 $0.045 or 6,666,666 shares and all dividends cease accruing beginning July 1, 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 12 months. If the offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate.

(14) On November 3, 2016, the Company drew an additional $250,000 on a note payable where it may borrow up to $1,500,000.  The Company issued warrants to purchase 5,000,000 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) $0.05 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.  In connection with the draw of additional funds, the lender provided new conditions on October 31, 2016 for the Company to be able to draw funds.

(15) On November 17, 2016, the Company amended a note payable where it may borrow up to $1,500,000 to extend the maturity date to the earlier of January 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.

(16) On December 28, 2016, the Company drew an additional $250,000 on a note payable where it may borrow up to $1,500,000.  The Company issued warrants to purchase 5,000,000 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) $0.05 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.

(17) 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 4,000,000 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) $0.05 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.

(18) 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 $100,000 of this amount was repaid subsequent to year end.

(19) On October 3, 2016, the Company sold $210,000 of future customer receipts to a third party for $150,000 in cash.  The $60,000 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.

(20) On December 6, 2016, the Company sold $560,000 of future customer receipts to a third party for $400,000 in cash.  The $160,000 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.

(21) From October through December 2016, the Company received cash advances from third parties in the amount of $717,500 and repaid $124,000, inclusive of fees.

(22) On October 31, 2016, the Company amended a convertible note payable to a third party to extend the maturity date month-by-month through no later than April 30, 2017 for a fee of $5,000 per month.

(23) On October 31, 2016, the Company amended a note payable with principal balance of $334,464 to extend the maturity date to the earlier of the offering or December 31, 2016.  On December 8, 2016, the Company further amended the note to extend the maturity date to the earlier of the offering or February 15, 2017.

(24) On December 16, 2016, the Company sold $225,750 of future customer receipts to a third party for $175,000 in cash.  The $50,750 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.

(25) 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.