Related-party Transactions

9 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Related-party Transactions

Disgorgement Funds Received

During January 2015, the Company received notice from a shareholder of the Company stating that the shareholder was returning realized profits from their trades of the Company’s common stock during the year ended September 30, 2014. The shareholder also indicated that during this time, the shareholder was subject to Section 16 of the Security Exchange Act of 1934, as amended (the “Exchange Act”) because they owned more than 10% of the shares of Company common stock. As such, the shareholder complied with Section 16(b) of the Exchange Act by returning the realized profits to the Company in the amount of $4.7 million. The Company received these funds during January 2015.

During March 2015, the Company received notice from a shareholder stating that it was returning realized profits from trading of the Company’s common stock during fiscal year 2014. During 2014, the shareholder was subject to Section 16 of the Exchange Act because the shareholder owned more than 10% of the shares of the Company's common stock. The shareholder, in compliance with Section 16(b) of the Exchange Act, returned those profits to the Company. The shareholder is also a creditor of the Company. On April 21, 2015, the Company and the shareholder entered into an agreement whereby $215,286, the realized profit recognized by the shareholder, would be deducted from accumulated interest on promissory notes between the shareholder and the Company. During the three months ended June 30, 2015, the Company deducted the amount from accumulated interest due to the shareholder.

Related-Party Loan Agreements

On September 25, 2015, the Company entered into the Loan Agreement described in Note 17 above with Sapinda, a significant shareholder, to provide the Company with a $5.0 million line of credit that accrues interest at a rate of 3% per annum for undrawn funds and 8% per annum for borrowed funds. Pursuant to the terms and conditions of the Loan Agreement, available funds may be drawn down at the Company’s request at any time until the loan agreement matures on September 30, 2017, when all borrowed funds, plus all accrued but unpaid interest will become due and payable. The Company, however, may elect to satisfy any outstanding obligations under the loan agreement prior to the maturity date without penalties or fees. The Company drew $1,399,644 of this line of credit during the nine months ended June 30, 2016.

On February 8, 2016, the Company submitted, under the terms of the Loan Agreement, to Sapinda a second Notice of Borrowing in the amount of $2.0 million, with a funding date of February 26, 2016.  As of June 30, 2016 Sapinda had failed to fund the $2.0 million.  Under the terms of the Loan Agreement Sapinda incurs a penalty of $1,000 per day beginning on the third (3rd) calendar day from the date specified for funding under the Notice of Borrowing.  As of June 30, 2016 Sapinda has incurred penalties of $210,000. The penalty has been treated as a gain contingency and has therefore not been reflected in the financial statements as of June 30, 2016. Subsequent to June 30, 2016, the Company received $2.0 million requested under a Related-Party Loan Agreement from Sapinda Asia Limited on July 14, 2016 (See Notes 17 and 18).

Stock Payable – Related Party

In connection with the acquisitions described under Note 8 above, the Company recognized a liability for stock payable to the former owners of the entities acquired. In conjunction with the respective purchase agreements, shares of the Company’s common stock are payable based on the achievement of certain milestones. Changes in the stock payable liability are shown below:

	June 30,			September 30,
	2016			2015
Beginning balance	$	3,501,410		$	3,000,000
Stock payable resulting from the acquisition of Track Group Analytics		-			1,170,000
Payment of shares for achieving performance milestones		(61,432	)		(668,590	)
Ending balance	$	3,439,978		$	3,501,410

Shares of common stock valued at $3,000,000 that can be earned by the former owner of GPS Global Tracking and Surveillance System, Ltd., now a wholly-owned subsidiary of the Company, subject to achieving certain milestones, were included in the beginning balance shown above. Each of the foregoing related-party transactions was reviewed and approved by disinterested and independent members of the Company's Board of Directors.