Annual report pursuant to Section 13 and 15(d)

7. Patents

7. Patents
12 Months Ended
Sep. 30, 2016
7. Patents

7.                   Patents

During fiscal year 2009, the Company licensed the use of certain patents from a third party.  Under the license agreement, the Company was required to pay $300,000 plus a 5% royalty on the net sales of all licensed products. As of September 30, 2009, the Company capitalized the initial license fee as a long-term asset.

During fiscal year 2012, the Company agreed to purchase the related patents and settle amounts owed under the license agreement by issuing 600,000 shares of common stock and 480,000 shares of Series C preferred stock.  The patents were valued at $922,378 based on a valuation performed by an independent third party.  The value of the common stock issued was $240,000, based on the market price of the common stock on the date of issuance. The implied value of the Series C was $682,378, which was based on the difference between the value of the patents and the common stock issued in settlement of the existing liability.  Amortization expense for fiscal years 2016 and 2015 was $0 and $31,718, respectively.  As of September 30, 2016 and 2015, patents totaling $514,046 have been fully amortized.