Annual report pursuant to Section 13 and 15(d)

10. Related-party Notes Payable: Schedule of related party notes payable (Tables)

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10. Related-party Notes Payable: Schedule of related party notes payable (Tables)
12 Months Ended
Sep. 30, 2016
Tables/Schedules  
Schedule of related party notes payable

 

 

2016

 

 

2015

 

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 3,000,000 shares of common stock to a lender as part of the modification.  The note is convertible into common stock at $0.30 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 $0.06 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 20,000,000 common shares in combination with other convertible notes payable held by the lenders.  The note has a default penalty of 4,203,389 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 September 30, 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 21).

$

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 $0.30 per share.  The Company issued 3,000,000 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 $0.06 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 20,000,000 common shares in combination with other convertible notes payable held by the lender.  The note has a default penalty of 4,203,389 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 September 30, 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 21).

 

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 $0.06 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 9,250,000 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 734,489 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 September 30, 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 21).

$

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 1,000,000 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 September 30, 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 21).

 

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 $0.75 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 $0.06 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 20,000,000 common shares in combination with other convertible notes payable held by the entity.  The note has a default penalty of 4,203,389 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.

 

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 $0.50 per share. 

 

17,227

 

 

 

30,000

 

 

 

 

 

 

 

 

 

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

 

12,474

 

 

 

13,644

 

 

 

 

 

 

 

 

 

Unsecured note payable to an entity controlled by a former Executive Chairman of the Board of Directors with no interest (18% per annum in the event of default), due on demand. The holder demanded payment by May 15, 2015.  In February 2016, the note with an outstanding balance of $396,667 plus accrued interest of $53,403 was bifurcated into two notes payable of $243,082 and $206,988. The $243,082 bifurcated note plus $20,000 of the second bifurcated note was assigned to a third party and converted into a convertible note payable.  The remaining $186,989 portion of the second bifurcated note, plus $3,521 of accrued interest, in combination with another note payable held by the entity in the amount of $324,016 plus $27,478 of related accrued interest, were converted into a convertible note payable of $542,004.

$

-

 

 

$

396,667

 

 

 

 

 

 

 

 

 

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, the note with an outstanding balance of $324,016 plus accrued interest of $27,478, in combination with another note payable held by the entity of $186,989 plus $3,521 of accrued interest, were converted into a convertible note payable of $542,004.

 

-

 

 

 

324,016

 

 

 

 

 

 

 

 

 

Total notes payable, related-party

 

3,898,124

 

 

 

3,840,746

 

 

 

 

 

 

 

 

 

Less current portion

 

(3,898,124

)

 

 

(492,495

 

 

 

 

 

 

 

 

 

Notes payable, related-party, net of current portion

$

-

 

 

$

3,348,251