10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 000-53570

ACTIVECARE, INC.

(Exact name of registrant as specified in its charter)

Delaware	87-0578125
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

1365 West Business Park Drive, Suite 100

Orem, UT 84058

(Address of principal executive offices)

(877) 219-6050

 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☑

As of January 30, 2018, the registrant had 239,100 shares of common stock outstanding.

ActiveCare, Inc.

Quarterly Report on Form 10-Q

Table of Contents

	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	38
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.  Controls and Procedures	53
PART II – OTHER INFORMATION	53
Item 1.  Legal Proceedings	53
Item 1A.  Risk Factors	53
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.  Defaults Upon Senior Securities	54
Item 4.  Mine Safety Disclosures	54
Item 5.  Other Information	54
Item 6.  Exhibits	54
SIGNATURES	55

2

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

ActiveCare, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

	June 30,		September 30,
	2017		2016
Assets
Current assets:
Cash	$	114,440	$	167,737
Accounts receivable, net		643,857		487,001
Inventory		501,769		204,736
Note receivable		500,000		-
Prepaid expenses and other		56,555		644,857
Total current assets		1,816,621		1,504,331
Property and equipment, net		56,445		86,734
Deposits and other assets		12,970		17,846
Domain name, net		8,759		9,295
Total assets	$	1,894,795	$	1,618,206

See accompanying notes to condensed consolidated financial statements.

3

ActiveCare, Inc.

Condensed Consolidated Balance Sheets (Unaudited) (continued)

	June 30,			September 30,
	2017			2016
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable	$	3,453,795		$	1,700,448
Accounts payable, related party		242,568			291,753
Accrued expenses		7,765,437			2,101,711
Contingent liabilities		750,000			-
Current portion of notes payable		9,501,544			3,722,899
Notes payable, related party		3,869,683			3,898,124
Dividends payable		733,880			606,545
Derivatives liability		4,231,983			2,054,071
Total current liabilities		30,548,890			14,375,551
Notes payable, net of current portion		5,889,170			7,353,856
Total liabilities		36,438,060			21,729,407
Stockholders' deficit:
Preferred stock, $.00001 par value: 10,000,000 shares authorized; 45,000 shares of Series D; 70,070 shares of Series E; and 43,220 and 0 shares of Series G issued and outstanding, respectively		2			1
Common stock, $.00001 par value: 200,000,000 shares authorized; 239,100 and 232,100 shares outstanding, respectively		2			2
Additional paid-in capital, common and preferred		88,786,513			88,067,410
Accumulated deficit		(123,329,782	)		(108,178,614	)
Total stockholders' deficit		(34,543,265	)		(20,111,201	)
Total liabilities and stockholders' deficit	$	1,894,795		$	1,618,206

See accompanying notes to condensed consolidated financial statements.

4

ActiveCare, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Revenues:
Chronic illness monitoring supplies revenues	$	1,037,179		$	1,858,926		$	4,311,955		$	4,972,196
Chronic illness monitoring fee revenues		159,025			317,156			599,339			888,453
Total Chronic illness monitoring revenues		1,196,204			2,176,082			4,911,294			5,860,649
Cost of revenues:
Chronic illness monitoring supplies cost of revenues		733,143			1,269,828			3,054,086			3,878,972
Chronic illness monitoring fee cost of revenues		114,954			112,486			319,184			358,436
Total Chronic illness monitoring cost of revenues		848,097			1,382,314			3,373,270			4,237,408
Gross profit		348,107			793,768			1,538,024			1,623,241
Operating expenses:
Selling, general and administrative (including $1,461,457, $1,004,211, $2,101,037 and $3,257,614, respectively, of stock-based compensation)		3,225,054			2,169,603			6,382,027			6,944,098
Research and development		56,191			57,611			307,137			139,023
Total operating expenses		3,281,245			2,227,214			6,689,164			7,083,121
Loss from operations		(2,933,138	)		(1,433,446	)		(5,151,140	)		(5,459,880	)
Other income (expense):
Interest expense, net		(2,198,631	)		(813,517	)		(6,856,258	)		(1,935,486	)
Loss on settlement		(750,000	)		-			(750,000	)		-
Gain on derivatives liability		64,145			5,603,411			230,163			2,796,542
Loss on extinguishment of debt		-			(15,393	)		(2,499,212	)		(3,058,809	)
Gain on disposal of property and equipment		-			-			-			245
Gain on liability settlements		-			8,859			-			295,099
Loss on induced conversions of debt		-			-			-			(379,132	)
Other income		2,614			-			2,614			-
Total other income (expense)		(2,881,872	)		4,783,360			(9,872,693	)		(2,281,541	)
Net income (loss)		(5,815,010	)		3,349,914			(15,023,833	)		(7,741,421	)
Deemed dividends on redemption of preferred stock		-			-			-			(6,484,236	)
Dividends on preferred stock		(58,978	)		(45,781	)		(127,335	)		(699,250	)
Net loss attributable to common stockholders	$	(5,873,988	)	$	3,304,133		$	(15,151,168	)	$	(14,924,907	)
Net loss per common share - basic	$	(24.77	)	$	15.18		$	(64.81	)	$	(81.57	)
Net loss per common share - diluted	$	(24.77	)	$	(3.78	)	$	(64.81	)	$	(82.78	)
Weighted average common shares outstanding – basic		237,100			217,595			233,767			182,979
Weighted average common shares outstanding – diluted		237,100			260,266			233,767			201,928

   

See accompanying notes to condensed consolidated financial statements.

5

ActiveCare, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	June 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(15,023,833	)	$	(7,741,421	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts		4,081,912			904,115
Loss on extinguishment of debt		2,499,212			3,058,809
Stock-based compensation expense		1,705,975			2,801,432
Loss on settlement		750,000			-
Stock and warrants issued and accrued for services		395,062			456,182
Increase in note payable principal recorded as interest expense to convert accounts payable into notes payable		482,500			-
Stock accrued for interest expense		144,000			-
Depreciation and amortization		33,643			39,353
Gain on derivatives liability		(230,163	)		(2,796,542	)
Gain on disposal of property and equipment		-			(245	)
Loss on induced conversions of debt		-			379,132
Gain on liability settlements		-			(295,099	)
Changes in operating assets and liabilities:
Accounts receivable		(241,844	)		(44,459	)
Inventory		(297,033	)		414,110
Prepaid expenses and other		815,799			(178,053	)
Accounts payable		2,470,310			(732,265	)
Accrued expenses		1,796,360			931,492
Net cash used in operating activities		(618,100	)		(2,803,459	)
Cash flows from investing activities:
Proceeds from sale of property and equipment		-			600
Purchases of property and equipment		(2,818	)		(5,004	)
Investment in contingent note receivable		(500,000	)		-
Net cash used in investing activities		(502,818	)		(4,404	)
Cash flows from financing activities:
Proceeds from issuance of notes payable, net		4,421,489			5,709,287
Proceeds from issuance of related-party notes payable, net		-			250,000
Proceeds from issuance of warrants in connection with notes payable		-			2,967
Principal payments on related-party notes payable		(28,441	)		(7,795	)
Principal payments on notes payable		(3,325,427	)		(3,175,603	)
Net cash provided by financing activities		1,067,621			2,778,856
Net decrease in cash		(53,297	)		(29,007	)
Cash, beginning of the period		167,737			172,436
Cash, end of the period	$	114,440		$	143,429

See accompanying notes to condensed consolidated financial statements.

6

ActiveCare, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)

	Nine Months Ended
	June 30,
	2017		2016
Supplemental Cash Flow Information:
Cash paid for interest	$	379,589	$	191,943
Non-Cash Investing and Financing Activities:
Issuance of warrants to purchase shares of common stock for loan origination fees	$	2,103,341	$	201,058
Accrual of a liability to issue warrants to purchase shares of common stock for loan forbearance fees		148,677		-
Accrual of a liability to issue shares of common stock for loan origination fees		125,000		-
Dividends on preferred stock		127,335		699,250
Accrual of a liability to issue shares of common stock for loan forbearance fees		60,000		-
Deemed dividend on the redemption of preferred stock and accrued dividends for notes payable, common stock and exchange of warrants		-		6,484,236
Conversion of accounts payable and accrued liabilities to notes payable		-		2,555,189
Assignment of related-party notes payable to an unrelated third party		-		263,082
Issuance of shares of common stock for consulting services		-		227,500
Accrual of a liability to issue warrants to purchase shares of common stock for loan origination fees		-		130,246
Cancellation and reissuance of shares of common stock		-		121,250
Conversion of related-party accounts payable and accrued liabilities to related-party notes payable		-		84,404
Issuance of shares of common stock for related-party loan origination fee		-		70,000
Issuance of shares of common stock for loan extension fees		-		31,250
Accrual of a liability to issue shares of common stock for loan amendment fees		-		28,500
Issuance of shares of common stock for dividends		-		12,434
Accrual of a liability to issue shares of common stock for services		-		7,600

See accompanying notes to condensed consolidated financial statements.

7

ActiveCare, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.   Basis of Presentation

The unaudited interim condensed consolidated financial statements of ActiveCare, Inc. (the "Company" or "ActiveCare") have been prepared in accordance with Article 8 of Regulation S-X, promulgated by the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles ("US GAAP") have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, the accompanying interim condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 2017 and September 30, 2016, and the results of its operations for the three and nine months ended June 30, 2017 and 2016 and its cash flows for the nine months ended June 30, 2017 and 2016.  These financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto that are included in the Company's Annual Report on Form 10-K for the year ended September 30, 2016.  The results of operations for the three and nine months ended June 30, 2017 may not be indicative of the results for the full fiscal year ending September 30, 2017.

Going Concern

The Company continues to incur negative cash flows from operating activities and net losses.  The Company had minimal cash, negative working capital and negative total equity as of June 30, 2017 and September 30, 2016.  In addition, the Company is in technical default on certain notes payable although the lenders in each case are working with the Company to resolve the defaults.  These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In order for the Company to eliminate substantial doubt about its ability to continue as a going concern, it must achieve profitability, generate positive cash flows from operating activities and obtain the necessary debt or equity funding to meet its projected capital investment requirements.  Management's plans with respect to this uncertainty consist of raising additional capital by issuing debt or equity securities and increasing the sales of the Company's services and products.  There can be no assurance that the Company will be able to raise sufficient additional capital or that revenues will increase rapidly enough to achieve operating profits.  If the Company is unable to increase revenues or obtain additional financing, it will be unable to continue the development of its products and services and may have to cease operations.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ from these estimates.

Fair Value of Financial Instruments

The Company measures the fair values of its assets and liabilities using the US GAAP hierarchy.  The carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, accounts payable, and accrued liabilities approximate fair values due to the short-term nature of these financial instruments. Derivative financial instruments are recorded at fair value based on current market pricing models. The carrying amounts reported for notes payable approximate fair values because the underlying instruments are at interest rates which approximate current market rates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period's presentation. The reclassifications had no effect on the previously reported net loss.

2.  Net Loss per Common Share

Basic net loss per common share ("Basic EPS") is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted net loss per common share ("Diluted EPS") is computed by dividing net loss available to common stockholders by the sum of the weighted average number of common shares outstanding and the weighted-average dilutive potential common shares outstanding.  The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

8

Potential common shares consist of shares issuable upon the exercise of common stock warrants, shares issuable from restricted stock grants, and shares issuable pursuant to convertible notes and convertible Series D and Series E preferred stock.  The following table reflects the calculation of basic and diluted net loss per common share for the periods indicated:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Numerator:
Net loss attributable to common stockholders	$	(5,873,988	)	$	3,304,133		$	(15,151,168	)	$	(14,924,907	)
Effect of dilutive securities on net loss:
Common stock warrants		-			(2,427,640	)		-			-
Convertible debt		-			(1,860,373	)		-			(1,790,407	)
Total net loss for purpose of calculating diluted net loss per common share	$	(5,873,988	)	$	(983,880	)	$	(15,151,168	)	$	(16,715,314	)
Number of shares used in per common share calculations:
Total shares for purposes of calculating basic net loss per common share		237,100			217,595			233,767			182,979
Weighted-average effect of dilutive securities:
Common stock warrants		-			3,337			-			-
Convertible debt		-			39,334			-			18,949
Total shares for purpose of calculating diluted net loss per common share		237,100			260,266			233,767			201,928
Net loss per common share:
Basic	$	(24.77	)	$	15.18		$	(64.81	)	$	(81.57	)
Diluted	$	(24.77	)	$	(3.78	)	$	(64.81	)	$	(82.78	)

The effect of dilutive securities on the numerator for purposes of calculating diluted loss per common share is related to the convertible debt and related warrants due to the reduction of the gain on derivatives liability for warrants that were in the money.

As of June 30, 2017 and 2016, there were certain outstanding potential common shares that were not included in the computation of Diluted EPS as their effect would be anti-dilutive for the three and nine months then ended.  The potential common shares outstanding consist of the following:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2017		2016		2017		2016
Common stock warrants		109,174		18,346		109,174		42,378
Series D convertible preferred stock		450		450		450		450
Series E convertible preferred stock		961		961		961		961
Convertible debt		158,798		95,799		158,798		95,799
Restricted shares of common stock		15		15		15		15
Liability to issue common stock and warrants		358,097		2,246		358,097		2,246
Total common stock equivalents		627,495		117,817		627,495		141,849

3.  Recent Accounting Pronouncements

In May 2014, August 2015 and May 2016, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, ASU 2017-13 Revenue Recognition, Revenue from Contracts with Customers, Leases, and Leases: Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, and ASU 2017-14 Income Statement—Reporting Comprehensive Income, Revenue Recognition, and Revenue from Contracts with Customers, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

9

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This standard sets forth management's responsibility to evaluate, each reporting period, whether there is substantial doubt about the Company's ability to continue as a going concern, and if so, to provide related disclosures. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its evaluation of going concern.

In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. The purpose of ASU 2015-11 is to more closely align the measurement of inventory in US GAAP with the measurement of inventory in International Financial Reporting Standards. ASU 2015-11 requires entities to measure most inventory at the "lower of cost or net realizable value." Additionally, some of the amendments are designed to more clearly articulate the requirements for the measurement and disclosure of inventory. ASU 2015-11 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU 2016-02, Leases.  The purpose of ASU 2016-02 is to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting.  The purpose of ASU 2016-09 is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equities or liabilities, and classification of amounts in the statement of cash flows.  ASU 2016-09 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In May 2017, the FASB issued ASU 2017-09, Stock Compensation: Scope of Modification Accounting. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

10

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivative and Hedging (Topic 815). The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down-round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity's own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down-round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share ("EPS") in accordance with Topic 260 to recognize the effect of the down-round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down-round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Accounting Standards Codification, to a scope exception. Those amendments do not have an accounting effect. ASU 2017-11 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

4.  Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts.  Specific reserves are estimated by management based on certain assumptions and variables, including the customer's financial condition, age of the customer's receivables and changes in payment histories.  Accounts receivable are written off when management determines the likelihood of collection is remote.  A receivable is considered to be past due if any portion of the receivable balance has not been received by the contractual payment date.  Interest is not charged on accounts receivable that are past due.  The Company recorded an allowance for doubtful accounts of $25,468 and $75,161 as of June 30, 2017 and September 30, 2016, respectively.  During the three months ended June 30, 2017, the Company wrote off approximately $103,000 of accounts receivable that were previously allowed against.

5.  Inventory

Inventory is recorded at the lower of cost or market value, cost being determined using the first-in, first-out ("FIFO") method. Inventory consists of diabetic supplies.  Inventory held by distributors is reported as inventory until the supplies are shipped to the end user by the distributor.  The Company estimates an inventory reserve for obsolescence and excessive quantities.  Due to competitive pressures and technological innovation, it is possible that estimates of net realizable values could change in the near term.  Inventory consists of the following as of:

	June 30, 2017			September 30,  2016
Finished goods	$	503,477		$	206,444
Inventory reserve		(1,708	)		(1,708	)
Net inventory	$	501,769		$	204,736

6.  Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of:

	June 30, 2017		September 30, 2016
Prepaid information technology services	$	38,081	$	57,073
Other		12,249		112,117
Prepaid insurance		6,225		14,602
Prepaid legal and professional fees		-		333,741
Research and development		-		96,346
Line of credit acquisition fees		-		30,978
Total prepaid expenses and other current assets	$	56,555	$	644,857

11

7.  Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization.  Depreciation and amortization are determined using the straight-line method over the estimated useful lives of the assets, which range between 3 and 7 years.  Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the terms of the lease.  Expenditures for maintenance and repairs are expensed as incurred.  Upon the sale or disposal of property and equipment, any gains or losses are included in operations.  Property and equipment consisted of the following as of:

	June 30, 2017			September 30, 2016
Software	$	47,974		$	47,974
Leasehold improvements		98,023			98,023
Furniture		68,758			68,758
Equipment		47,191			49,772
Total property and equipment		261,946			264,527
Accumulated depreciation and amortization		(205,501	)		(177,793	)
Property and equipment, net	$	56,445		$	86,734

Assets to be disposed of are reported at the lower of the carrying amounts or fair values, less the estimated costs to sell or dispose.  During the nine months ended June 30, 2016, the Company recorded a gain on the disposal of property and equipment of $245.  Depreciation expense for the nine months ended June 30, 2017 and 2016, was $33,107 and $38,817, respectively.

8.  Accrued Expenses

Accrued expenses consisted of the following as of:

	June 30, 2017		September 30, 2016
Interest	$	2,694,545	$	1,206,387
Liability to issue warrants for the purchase shares of common stock		2,081,254		-
Liability to issue common stock		2,000,933		240,000
Finance fees		333,000		-
Payroll expense		329,615		207,052
Other		141,394		89,828
Deferred revenue		85,399		111,803
Warranty liability		58,300		134,330
Commissions and fees		40,997		52,311
Severance		-		60,000
Total accrued expenses	$	7,765,437	$	2,101,711

12

9.  Notes Payable

The Company had the following notes payable outstanding as of: 

	June 30,		September 30,
	2017		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.  Some of the notes are currently in technical default. However, as of the time of this report, the lenders have informally agreed to work with the Company until such time as the note can be repaid.  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 to be offered in the proposed offering that is described in the Form S-1 filed on July 19, 2016 (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.  On December 11, 2017, the Company entered into Securities Purchase Agreements that adjusted the conversion rate to exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in a contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the "Private Placement") (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment (see Note 18).  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.  During the three months ended March 31, 2017, 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 Offering, which also removes the maximum share limitation conversion, which have expired (see Note 17).  Subsequent to June 30, 2017, the Company received letters related to the notes wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 (see Note 18).  In December 2017, the Company entered into those certain forbearance and lock up letter agreements with four of the eight debtors, with principal balances in the aggregate amount of $1,134,658, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more.  Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents.  The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.  In addition, two of the five debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity (see Note 18).  On January 12, 2018, the Company received letters from four of the debtors where the debtors forbear against any historical and future events of default and remedies through February 15, 2018. Further, the maturity date was extended through February 15, 2018.  As part of the letters, the Company agreed not to initiate any new financing arrangements without the consent of the debtors. (see Note 18).  On December 11, 2017, the Company borrowed an aggregate additional $300,000 from two of the lenders under new note payable agreements (see Note 18).	$	5,900,000	$	5,900,000

13

Secured borrowings from a third party that purchased $3,257,600 of customer receivables for $2,100,000, with due dates ranging from January 2018 to October 2018, and payable in daily payments ranging from $5,000 to $13,000.  The $1,157,600 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 a former chief executive officer of the Company and are subordinated to other notes payable. On April 17, 2017, the Company entered into a factoring agreement which provides for an advance of $1,794,000, comprised of $1,000,000 in cash and the consolidation of $794,000 from four prior factoring agreements into the amounts owed under the factoring agreement (collectively, the "Funds"). In consideration for the Funds, the Company sold to the lender all future receipts until the total amount of $2,511,601 has been paid. The factoring agreement requires payment of the minimum daily amount of $12,999.99 for 193 days. The $2,511,601 can be reduced if repayment occurs more quickly. Repayment of the amounts owing is with recourse and secured by all accounts, chattel paper, documents, equipment, general intangibles, instruments, and inventory of the Company and subordinated to other notes payable.  In June 2017, the lender verbally agreed to reduce the minimum daily amount to $5,000 and, in November 2017, verbally agreed to further reduce the minimum daily amount to $2,600 through January 7, 2018, after which the daily amount would return to $13,000.  Subsequent to June 30, 2017, the Company entered into similar secured borrowings and related verbal or written reductions in the daily amounts.  On January 5, 2018, the Company further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018 (see Note 18). 1,974,602 689,318

Unsecured note payable with a vendor with interest at 0.65% per annum payable at the end of each calendar year, due January 2018, issued in March 2016 upon the conversion of $2,523,937 in accounts payable to the vendor.  The note requires payments of $50,000 per month in April 2016 through December 2016, $100,000 per month in January 2017 through December 2017 and the remaining balance due in January 2018.  In September 2017, the Company entered into agreements with the vendor which supersedes the unsecured note payable agreement and provides new terms (see Note 18). 1,773,937 2,223,937

14

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. The note is currently in technical default. However, as of the time of this report, the lender has provided bridge capital since going in default and has informally agreed to work with the Company until such time as the note can be repaid.  Pursuant to the note, the Company may borrow up to $1,500,000 upon meeting certain milestones and may be converted into shares of common stock upon default.  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 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.  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.  On January 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants.  The fair value of $567,753 related to the January 3, 2017 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. On January 30, 2017, the Company amended the note to extend the maturity date to the earlier of March 15, 2017 or the third business day after the closing of the Offering. Also on January 30, 2017. the Company borrowed the remaining $300,000 on the note and issued an additional warrant for the purchase of 12,000 shares of common stock with similar terms to the original warrants.  The fair value of $899,598 related to the January 30, 2017 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.  On March 3, 2017, the Company amended the note to increase the maximum sum from $1,500,000 to $2,000,000. Also on March 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants.  The fair value of $407,947 related to the March 3, 2017 warrants was recorded as a derivative (see Notes 12 and 15).  The Company recorded a loss on extinguishment of debt of $501,969 related to the March 3, 2017 amendment and additional borrowing. Effective March 27, 2017, the Company amended the note to extend the maturity date to the earlier of April 15, 2017 or the third business day after the closing of the Offering. Additionally, the lender agreed to enter into a lock up prohibiting the sale or other transfer of all securities of the Company owned by them for a period of 6 months. In consideration for entering into the lock-up agreement the Company has agreed to pay a $340,000 fee, payable in shares of common stock at a rate of the lowest of (i) 80% of the common stock Offering price of the Offering, (ii) 80% of the unit price Offering price of the Offering (if applicable), or (iii) 80% of the exercise price of any warrants issued in the Offering.  The lock-up agreement was signed during April 2017, which has expired. Effective April 19, 2017, the Company amended the note to extend the maturity date to the earlier of May 20, 2017 or the third business day after the closing of the Offering. On December 11, 2017, the Company borrowed an additional $250,000 from the lender under a new note payable agreement (see Note 18). 1,700,000 500,000

15

Secured note payable to a third party with interest at 12.75% per annum, due February 2019, in default.  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 a lender entered into a forbearance and consent under a 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 previous forbearance agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous 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, (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 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 12-month lock-up agreement.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016.  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 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 previous two forbearances.  Additionally, pursuant to the December 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 December 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 $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017.  $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. The forbearance set forth in the December Forbearance was in effect through February 15, 2017.  On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017.  On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017.  In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $15,470 on the note payable. 1,152,778 1,652,778

16

Secured line of credit with a third party with interest at 12.25% per annum, due February 2018, in default.  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 a lender entered into a forbearance and consent under a 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 previous forbearance agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous 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, (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 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 12-month lock-up agreement.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016.  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 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 previous two forbearances.  Additionally, pursuant to the December 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 December 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 $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017.  $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. The forbearance set forth in the December Forbearance was in effect through February 15, 2017.  On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017.  On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017.  In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $16,997 on the note payable. 1,259,007 929,518

17

Unsecured note payable with interest at 18% per annum, with no maturity date.  The note payable is from a verbal agreement with the lender which converted $617,500 of advances into $1,100,000 of principal on the note payable.  The additional $482,500 of principal plus agreed upon fees of $95,226 have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).	1,100,000	-
Unsecured note payable with interest at 2.8% of total revenue per annum, with no maturity date.  The note payable is from a verbal agreement with the lender which converted a $350,000 advance into the note payable.  Agreed upon fees of $143,987 and a future payoff fee of 20%, or $70,000, have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to where the Company is required to pay any outstanding interest at the end of the first month following a quarter end, the lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).	350,000	-
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 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, February 2017 and March 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, March 31, 2017, and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 (see Note 18).	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.  During September 2017, the Board of Directors granted 200 shares of Series H Preferred Stock for extension fees. 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.  In October 2017, the Company entered into a settlement agreement related to the note where the Company borrowed an additional $200,000 and modified the terms of the note payable to become secured by inventory owned by the Company, requires issuance of 3,000 shares of Series H Preferred Stock, which were authorized for grant by the Board of Directors on September 5, 2017 and are required to be able to convert the lender's shares into 300,000 shares of the Company's common stock, and requires payments of $8,600 for 72 consecutive weeks.  If any payment is late, the Company is required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default.  The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor.  The fair value of the shares will be amortized over the life of the amended note.  The note terms are adjustable for any terms subsequently provided to other investors (see Note 18).	300,000	300,000

18

Secured note payable with interest at 12.25% per annum, due May 2017, in default. 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 agreement in conjunction with a modification to another note payable and line of credit. The note requires payment of a $3,000 modification fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding.  The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $4,050 on the note payable..	300,000	-
Unsecured note payable with interest at 12.75% per annum, due June 2017, in default, subordinated to other notes payable. The note requires payment of a $3,000 closing fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding.  The $3,000 closing fee is being amortized to interest expense over the remaining term of the note and the $50,000 fees are being accrued as incurred.  On January 12, 2018, the lender forbore against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18).	300,000	-
Unsecured note payable with interest at 12% per annum, due September 2016, in default, 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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). On January 12, 2018, the lender forbore against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18).	250,000	250,000
Unsecured cash advance with fees at $1,000 per day for the first 15 days and $1,500 per day thereafter, with no maturity date.  The terms of the advance are verbal. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).	100,000	-
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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17).	64,261	64,261
Secured note payable to a third party with interest at 18% per annum, due June 2017.  The note was 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 was 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 were 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 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 by paying the remaining principal and accrued interest in cash with no additional consideration.	-	162,539

19

Total notes payable before discount		16,859,049			13,006,815
Less discount		(1,468,335	)		(1,930,060	)
Total notes payable		15,390,714			11,076,755
Less current portion		(9,501,544	)		(3,722,899	)
Notes payable, net of current portion	$	5,889,170		$	7,353,856

10.  Related-Party Notes Payable

The Company had the following related-party notes payable outstanding as of:

	June 30,		September 30,
	2017		2016
Secured borrowings from entities controlled by an officer who purchased a $2,813,175 customer receivable for $1,710,500.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (see Note 18).	$	1,721,100	$	1,721,100

20

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 note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (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. The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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

21

Unsecured note payable to an entity controlled by an officer with interest at 18% per annum, due on demand.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  In January 2017 and February 2017, the note was amended to extend the maturity date to February 15, 2017 and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.		1,260			17,227
Unsecured note payable to a former officer with interest at 12% per annum, due on demand.		-			12,474
Total notes payable, related-party		3,869,683			3,898,124
Less current portion		(3,869,683	)		(3,898,124	)
Notes payable, related-party, net of current portion	$	-		$	-

11.  Fair Value Measurements

The Company measures the fair values of its assets and liabilities using the US GAAP hierarchy levels as follows:
                        

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.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Items measured at fair value on a recurring basis include embedded derivatives related to the Company's warrants and notes payable. During the nine months ended June 30, 2017, the Company has not changed the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The following fair value hierarchy table presents information about the Company's financial liabilities measured at fair value on a recurring basis:

	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2017
Derivatives liability	$	-	$	269,427	$	3,962,556	$	4,231,983
September 30, 2016
Derivatives liability		-		281,613		1,772,458		2,054,071

22

The following is a reconciliation of the opening and closing balances for the derivatives liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended June 30, 2017:

	Derivatives Liability
Balance, September 30, 2016	$	1,772,458
Issuance of warrants recorded as derivatives		2,511,288
Gain on termination of debt resulting from payments on notes payable		(103,213	)
Loss on derivatives liability resulting from changes in fair value		(217,977	)
Balance, June 30, 2017	$	3,962,556

The Company's embedded derivative liabilities are re-measured to fair value as of each reporting date.  See Note 12 for more information about the valuation methods of derivatives and the inputs used for calculating fair value.

12.  Derivatives Liability

The derivatives liability as of June 30, 2017 and September 30, 2016, was $4,231,983 and $2,054,071, respectively. The derivatives liability as of June 30, 2017 and September 30, 2016 is related to a variable conversion price adjustment on outstanding notes payable and warrants.  All of the derivatives outstanding as of September 30, 2015, were eliminated during February 2016, due to the conversion of notes payable into shares of common stock.

During the nine months ended June 30, 2017, the Company estimated the fair value of some of the embedded derivatives upon issuance at the end of each reporting period using a binomial option-pricing model with the following assumptions, according to the instrument: exercise price of $8 to $15 per share; risk free interest rate of 0.85% to 1.14%; expected life of 0.53 to 1.03 years; expected dividends of 0%; volatility factor of 260.57% to 282.07%; and stock price of $8 to $15.  During the nine months ended June 30, 2017, the Company estimated the fair value of the remaining embedded derivatives upon issuance and at the end of each reporting period using a Monte Carlo valuation model with the following assumptions: exercise prices ranging from $2.50 to $25.00 per share; risk free interest rates ranging from 0.44% to 1.99%; expected lives ranging from 0.09 to 4.93 years; expected dividends of 0%; volatility factors of 128% - 194%; and stock prices ranging from $2.50 to $25.00.

During fiscal year 2016, the Company estimated the fair value of some of the embedded derivatives upon issuance, at the end of each reporting period and prior to their conversion and elimination using a binomial option-pricing model with the following assumptions, according to the instrument: exercise prices ranging from $14.50 to $46.75 per share; risk free interest rates ranging from 0.16% to 1.06%; expected lives ranging from 0.05 to 2.09 years; expected dividends of 0%; volatility factors ranging from 125.33% to 510.03%; and stock prices ranging from $15 to $70. During fiscal 2016, the Company estimated the fair value of the remaining embedded derivatives upon issuance and at the end of each reporting period using a Monte Carlo valuation model with the following assumptions: exercise prices ranging from $20 to $125 per share; risk free interest rates ranging from 0.18% to 1.44%; expected lives ranging from 0.04 to 6.40 years; expected dividends of 0%; volatility factors of 129% to 140%; and stock prices ranging from $20 to $475 per share.  The expected lives of the instruments were equal to the average term of the conversion option or expected exercise period of the warrants.  The expected volatility is based on the historical price volatility of the Company's common stock.  The risk-free interest rate represents the US Treasury constant maturities rate for the expected life of the related conversion option. The dividend yield represents anticipated cash dividends to be paid over the expected life of the conversion option.  The Company recognized a gain on derivatives liability for the three months ended June 30, 2017 of $64,145 and a gain on derivatives liability for the three months ended June 30, 2016 of $5,603,411.  The Company recognized a gain on derivatives liability for the nine months ended June 30, 2017 of $230,163 and a gain on derivatives liability for the nine months ended June 30, 2016 of $2,796,542.

13.  Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.00001 per share.  Pursuant to the Company's Certificate of Incorporation, the Board of Directors has the authority to amend the Company's Certificate of Incorporation, without further stockholder approval, to designate and determine the preferences, limitations and relative rights of the preferred stock before any issuance of the preferred stock and to create one or more series of preferred stock, fix the number of shares of each such series, and determine the preferences, limitations and relative rights of each series of preferred stock, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, and liquidation preferences.

23

Series D Convertible Preferred Stock

The Board of Directors has designated 1,000,000 shares of preferred stock as Series D Convertible Preferred Stock ("Series D Preferred ").  The Series D Preferred votes on an as-converted basis.  The Series D Preferred has a dividend rate of 8%, payable quarterly.  The Company may redeem the Series D Preferred at a redemption price equal to 120% of the original purchase price with 15 days' notice. During the nine months ended June 30, 2017 and 2016, the Company accrued $24,800 and $18,617 of dividends on Series D preferred stock, respectively, and settled $0 and $12,434 of accrued dividends, respectively, by issuing 0 and 455 shares of common stock, respectively.

Series E Convertible Preferred Stock

During fiscal year 2013, the Board of Directors designated shares of preferred stock as Series E Convertible Preferred Stock ("Series E Preferred"), convertible into common stock at $500 per share, adjustable if there are distributions of common stock or stock splits by the Company.  The Series E Preferred is non-voting and receives a monthly dividend of 3.322% for 25 to 32 months.  In addition, the convertibility and the redemption price of the Series E Preferred is gradually reduced by dividend payments over 25 to 32 months.  After the dividend payment term, the redemption price of Series E Preferred is $0, the Series E Preferred has no convertibility to common stock and the holders are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company's gross profits payable quarterly for a two-year period.

During the three months ended June 30, 2017 and 2016, the Company accrued dividends of $34,178 and $39,598, respectively, payable to Series E Preferred.  During the nine months ended June 30, 2017 and 2016, the Company accrued dividends of $102,535 and $185,485, respectively, payable to Series E Preferred.  As of June 30, 2017 and September 30, 2016, the aggregate redemption price for the Series E Preferred was $477,829.

24

Series F Convertible Preferred Stock

During fiscal year 2014, the Board of Directors designated 7,803 shares of preferred stock as Series F Convertible Preferred Stock ("Series F Preferred").  In April 2014, the Company increased the authorized shares of Series F Preferred to 10,000.  Series F Preferred is non-voting, has a stated value of $1,000 per share and is convertible into common stock at $166.85 per share (see Note 12).  Series F Preferred has a dividend rate, payable quarterly, of 8% until April 30, 2015, 16% from May 1, 2015 to July 31, 2015, 20% from August 1, 2015 to October 31, 2015, and 25% thereafter.  In February 2016, the Company redeemed all 5,361 outstanding shares and $673,848 of accrued dividends for 20,005 shares of common stock, $5,900,000 of notes payable and exchanged warrants for the purchase of 11,070 shares of common stock held by Series F Preferred stockholders for new warrants with new terms for the purchase of the same number of shares (see Note 15).  The Company recorded a deemed dividend of $6,484,236 as a result of the transactions.

During the three and nine months ended June 30, 2016, the Company accrued dividends of $0 and $495,148, respectively, payable to Series F Preferred stockholders.

Series G Convertible Preferred Stock

During January 2017, the Board of Directors designated 43,220 shares of preferred stock as Series G Convertible Preferred Stock ("Series F Preferred").  Series G Preferred votes on an as-converted basis, has a stated value of $500 per share. The Series G Preferred will automatically convert the stated value of such shares into fully paid and non-assessable shares of common stock (Series G Conversion Shares") of the Company upon (i) the Company's receipt of $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 $25,000,000 or more, or (iii) the closing of an underwritten offering by the Company pursuant to which the Company receives aggregate gross proceeds of at least $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 shall equal the stated value 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.

On January 31, 2017, the Company issued 32,415 shares of Series G Preferred to an entity affiliated with one of the Company's former Chief Executive Officers and 10,805 shares of Series G Preferred to a different former Chief Executive Officer and consultant to the Company. The consideration for such issuance relates to services rendered to the Company. Each of the two recipients of the Series G Preferred stock have entered into lock-up agreements, as amended, prohibiting the sale or other transfer of the Common Shares issued pursuant to the conversion of the Series G Preferred securities of the Company owned by each of them for the longer of (i) 18 months or (ii) the date the Company first has annual gross revenues in an amount of at least $20,000,000.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.  As of June 30, 2017, the agreements have expired.  On September 5, 2017, the Board of Directors of the Company agreed to modify the terms of the Series G Convertible Preferred stock to remove the 18-month lock-up period, however, no such amendment to the Series G Preferred has not been filed with the State of Delaware as of the date of this filing.

Liquidation Preference

Upon any liquidation, dissolution or winding up of the Company, before any distribution or payment may be made to the holders of the common stock, the holders of the Series D Preferred, Series E Preferred, and Series F Preferred are entitled to be paid out of the assets an amount equal to $1.00 per share plus all accrued but unpaid dividends.  If the assets of the Company are insufficient to make payment in full to all holders of preferred stock, then the assets shall be distributed among the holders of preferred stock ratably in proportion to the full amounts to which they would otherwise be entitled.

14.  Common Stock

In April 2014, the Company amended its Certificate of Incorporation increasing the total number of authorized shares of common stock from 50,000,000 shares to 200,000,000 shares.

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.

During the nine months ended June 30, 2017, the Company issued 7,000 shares of common stock (post reverse stock split)for services provided by an independent consultant; the value on the date of grant was $70,000.

25

15.  Common Stock Options and Warrants

The fair value of each stock option or warrant is estimated on the date of grant using a binomial option-pricing model or the Monte Carlo valuation model.  The expected life of stock options or warrants represents the period of time that the stock options or warrants are expected to be outstanding, based on the simplified method.  Expected volatilities are based on historical volatility of the Company's common stock, among other factors.  The Company uses the simplified method within the binomial option-pricing valuation model due to the Company's short trading history.  The risk-free rate related to the expected term of the stock options or warrants is based on the US Treasury yield curve in effect at the time of grant.  The dividend yield is zero.

During fiscal 2016, the Company granted warrants to purchase 24,032 common shares with an exercise price of $32.50 per share in connection with the acquisition of a note payable and line of credit; warrants for the purchase of 14,786 shares vested immediately, 3,696 vested upon the disbursement of the second tranche of the related note payable, and 5,550 vest evenly in the event of three available increases on the related line of credit (see Note 9). The warrants expire in February 2023, may be exercised via cashless exercise and are puttable upon expiration or liquidation for the greater of $500,000 or up to 6.5% of the equity value of the Company, depending on the number of warrants vested. The fair value of the warrants upon grant of $3,731,969 was recorded as a derivative and the Company received cash of $2,967 upon issuance of the warrants. The Company recognized $1,419,541 as debt discount for the portion allocated to the note payable and the debt discount is being amortized over the life of the note payable to interest expense. During September 2016, the Company entered into a conditionally effective warrant cancellation agreement with the warrant holders, which has expired (see Note 17).

During February 2016, the Company exchanged warrants held by the holders of its Series F Preferred for the purchase of 11,070 shares of common stock in connection with the redemption of Series F Preferred for new warrants for the purchase of the same number of shares on different terms. The new warrants were initially exercisable for $150 per share, 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. During September 2016, the Company issued warrants for the purchase of common stock that adjusted the warrants to have 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. On December 11, 2017, the Company entered into Securities Purchase Agreements that adjusted the conversion rate to exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in a contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the "Private Placement") (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment (see Note 18). The new warrants expire in February 2021, and may be exercised via cashless exercise. Additional warrants for the purchase of 16,000 shares of common stock may be issued in the event of default on the related notes payable, exercisable at $0.50 per share, with 25% issuable upon the first event of default, 37.5% upon the second event, and 37.5% upon the third event. The warrants issuable upon default expire in February 2026 (if issued), may be exercised via cashless exercise, and are puttable upon expiration or liquidation with the primary warrants. The new warrants may only be exercised to the extent the respective holder would own a maximum of 4.99% of the Company's common stock after exercise, but the holders may elect to increase the maximum to 9.99%. The Company recognized a deemed dividend of $6,484,236 as a result of the exchange and related redemption of Series F Preferred.

During September 2016, the Company granted warrants to purchase 20,000 shares in connection with the acquisition of a note payable 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. Upon the closing of the Offering, the number of shares issuable under the warrant will reset to an amount of shares equal to the aggregate exercise amount of the warrants (as defined therein) divided by the exercise price then in effect. The warrants expire in September 2021, and may be exercised via cashless exercise. 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 Company recognized $220,000 of the $493,590 fair value of the warrants as a debt discount, which is being amortized over the life of the borrowing, and recognized the remaining $273,590 as a loss on derivatives liability. In the event the Company borrows additional amounts above the initial $500,000 under the note payable, 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 warrants issued as part of the initial borrowing. During the nine months ended June 30, 2017, the Company borrowed an additional $1,000,000 on the note and issued warrants for the purchase of 40,000 shares of common stock with the same terms as the initial warrants. The Company recognized the $2,103,341 fair value of the warrants as debt discounts, which are being amortized over the remaining life of the borrowing. Effective March 3, 2017, the note was amended to increase the maximum principal sum from $1,500,000 to $2,000,000 under which the Company borrowed an additional $200,000 in consideration and issued the lender a warrant to purchase up to 8,000 shares of common stock with the same terms as the warrants previously issued under the previous terms of the note.  The Company recognized the $407,947 fair value of the warrants as part of the total on extinguishment of debt of $501,969.

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During the nine months ended June 30, 2017, the Company measured the fair value of warrants classified as liabilities on the date of issuance and on each re-measurement date using the Monte Carlo valuation model. For this liability, the Company and specialist developed their own assumptions that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company's common stock, stock price volatility, the contractual term of the warrants, risk–free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants uses Level 3 measurements. The following assumptions were used:

Exercise price	$	2.50 - $25.00
Expected term (years)		0.21 - 4.93
Volatility		128% - 194	%
Risk-free rate		0.49% - 1.99	%
Dividend rate		0	%
Common stock price	$	2.50 - $25.00

The following table summarizes information about stock options and warrants outstanding as of June 30, 2017:

Options and Warrants	Number of Options and Warrants			Weighted- Average Exercise Price
Outstanding as of October 1, 2016		65,045		$	35.06
Granted		48,000			25.00
Forfeited		(3,871	)		357.84
Outstanding as of June 30, 2017		109,174			37.12
Exercisable as of June 30, 2017		102,225			34.46

As of June 30, 2017, the outstanding warrants have an aggregate intrinsic value of $0 and the weighted average remaining term of the warrants was 4.52 years. The total compensation cost related to unvested awards not yet recognized (warrants and shares) was $38,468.

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16.  Related-Party Transactions Not Otherwise Disclosed

In February 2016, the Company amended a consulting agreement dated September 2015, with an entity controlled by a former Executive Chairman of the Board of Directors, effective January 2016.  The amendment extended the agreement through December 2016, which automatically renews on a monthly basis until otherwise cancelled in accordance with the terms therein, changing the monthly compensation of $6,000 to an hourly rate of $250 per hour, and eliminated the previously included bonus structure.  During May 2017, the Company granted 1,719 shares of common stock, with a value of $17,207 on the date of grant, to the consultant as a bonus for services performed.  As of June 30, 2017, the shares have not been issued and the value has been included in accrued expenses.  On September 5, 2017, the Company granted 1,500 shares of the Company's Series H Preferred stock to an entity controlled by a former Executive Chairman of the Board of Directors for past services rendered in addition to amounts earned under an existing consulting agreement.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  On November 13, 2017, the former Executive Chairman of the Board of Directors terminated the consulting agreement.

In July 2016, the Company entered into a Consulting Agreement with a former Executive Chairman and Chief Executive Officer of the Company.  This Consulting Agreement is for an initial period of one year, and shall automatically renew for consecutive one month periods unless terminated by the Company or the former Executive Chairman and Chief Executive Officer. As consideration for the services to be performed thereunder, the Company shall pay the former Executive Chairman and Chief Executive Officer at the rate of $250 per hour, but such compensation may not exceed $20,000 during any calendar month.  During May 2017, the Company granted 10,324 shares of common stock, with a value of $103,343 on the date of grant, to the consultant as a bonus for services performed.  As of June 30, 2017, the shares have not been issued and the value has been included in accrued expenses.  On September 5, 2017, the agreement was replaced with a new agreement for an initial period of one year, and shall automatically renew for consecutive one month periods unless terminated by the Company or the former Executive Chairman and Chief Executive Officer.  As consideration for the services, the Company shall pay the former Executive Chairman and Chief Executive Officer at the rate of $250 per hour, but such compensation may not exceed $20,000 during any calendar month, plus 1,500 shares of the Company's Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.

In August 2016, the Company received a cash advance for $135,000 from a former Executive Chairman and Chief Executive Officer of the Company.  During the nine months ended June 30, 2017, the Company repaid the advance.

During May 2017, the Company granted 96,275 shares of common stock, with a value of $963,713 on the date of grant, to a former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, as a bonus for services performed.  As of June 30, 2017, the shares have not been issued and the value has been included in accrued expenses.  On September 5, 2017, the Board of Directors of the Company granted 963 shares of Series H Preferred stock to the former Executive Chairman and Chief Executive Officer of the Company in lieu of the 96,275 shares of previously granted common stock.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  The Series H Preferred shares have not yet been issued.

In September 2017, the Company entered into an employment agreement with the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, for a period of two years for services as the Executive Chairman and Chief Executive Officer of the Company.  The initial term of the agreement is for two years and shall automatically renew on a year to year basis, unless terminated sooner.  The base compensation is $360,000 per year plus 1,500 shares of the Company's Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  An additional cash or stock bonus may be awarded, subject to the attainment of such individual of certain objectives as the Board of Directors of the Company shall establish from time to time.  Upon certain termination conditions contained in the agreement, the Company may be required to pay severance of twice the base compensation at its highest point during the five-year period prior to termination.  Effective October 12, 2017, the former Executive Chairman and Chief Executive Officer has waived any constructive termination in relation to changes in title, working conditions or duties such that his powers are diminished, reduced or otherwise changed to include powers, duties, or working conditions which are note materially consistent with title, continuing after written notice and 10 days to cure.

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17.  Commitments and Contingencies

During the nine months ended June 30, 2017, the Company leased office space under a non-cancelable operating lease.  In February 2015, the Company entered into a sublease agreement for part of the office space under the non-cancelable operating lease through the end of the original lease period.  Payments under the sublease were made by the sublessee directly to the Company's landlord.  The non-cancelable operating lease was terminated during June 2015.

During June 2015, the Company entered into a new non-cancelable operating lease for its existing office space, excluding the previously subleased space, with payments beginning in July 2015.  Future minimum rental payments under the non-cancelable operating lease as of June 30, 2017, were as follows:

Years Ending September 30,
2017	$	32,908
2018		111,340
	$	144,248

The Company's rent expense under the new non-cancelable operating lease for nine months ended June 30, 2017 and 2016, was approximately $97,000 and $94,000, respectively.

During February 2016, the Company entered into an agreement with one if its vendors to purchase a minimum of $200,000 of inventory per quarter through January 2018.  The agreement was cancelled subsequent to June 30, 2017.

During February 2016, the Company redeemed all of its Series F preferred stock in exchange for 20,005 shares of common stock and $5,900,000 of notes payable (see Note 9).  As part of the redemption, the Company exchanged warrants held by the Series F Preferred stockholders for the purchase of 11,070 shares of common stock for new warrants to purchase the same number of shares with different terms.  As part of the redemption, the Company may be required to issue additional warrants for the purchase of up to 16,000 shares of common stock upon three events of default on the notes payable (see Note 15).

During February 2016, the Company converted notes payable and accrued interest payable to an entity controlled by a former Executive Chairman of the Board of Directors into a convertible note payable (see Note 10).  The Company may be required to issue 1,469 shares of common stock if the note is not paid by maturity.

During February 2016, the Company amended notes payable to an entity controlled by an officer of the Company to subordinate to notes payable also issued during February 2016, reduced the conversion price per share to $30 per share and limited the shares into which it is convertible (see Note 10).  The Company may be required to issue 8,407 shares of common stock if the note is not paid by maturity.

During September 2016, the Company issued a note payable to a third party for up to $1,500,000.  The Company initially borrowed $500,000 under the note and may borrow up to $1,500,000 upon meeting certain milestones.  The Company subsequently drew an additional $1,000,000 under the note and issued additional warrants for the purchase of 40,000 shares of common stock at similar terms to warrants issued as part of the initial borrowing.  During March 2017, the note was amended to increase the maximum principal sum from $1,500,000 to $2,000,000 under which the Company borrowed an additional $200,000 in consideration and issued the lender a warrant to purchase up to 8,000 shares of common stock with the same terms as the warrants previously issued under the previous terms of the note.  In the event the Company borrows any part of the remaining $300,000 available, 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 warrants issued as part of the initial borrowing.

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During September 2016, the Company entered into a conditionally effective warrant cancellation agreement (the "Warrant Cancellation Agreement") with certain warrant holders who were issued the warrants in connection with a secured note payable and line of credit. Pursuant to the terms of the Warrant Cancellation Agreement, upon the Company's consummation of an equity financing of at least $15,000,000, the warrant holders agree to terminate and cancel the warrants they currently hold. As an inducement to enter into the Warrant Cancellation Agreement, the warrant holders will receive upon termination and cancelation of the warrants an aggregate of 10,800 shares of the Company's common stock, which will be subject to a 6-month lock-up agreement. Additionally, if the warrant holders terminate and cancel the warrants, the Company will issue the related note holder a new unsecured promissory note with an initial principal amount of $180,000, no cash interest, and a three-year term. In lieu of cash interest, the principal of the note will increase in the amount $3,333 each month not to exceed a maximum of $300,000.

Effective November 1, 2016, the Board approved the 2016 Incentive Stock Option plan providing for the issuance of options to purchase up to 377,250 shares.  No shares have been approved under the Plan as of June 30, 2017.

On April 17, 2017 the Company entered into a Joint Venture Agreement, effective March 31, 2017 (the "JV Agreement") with Colorado Choice Health Plans ("CCHP"), a customer. Under the JV Agreement: (i) CCHP is providing various services to the Company to improve the Company's diabetes programs, (ii) the Company loaned CCHP $500,000 under a debenture note (recorded as a note receivable in the accompanying consolidated condensed balance sheets), and (iii) the JV Agreement will terminate upon the later of (a) repayment of the debenture note or (b) the one year anniversary of the JV Agreement. The debenture note: (i) bears interest at the rate of five percent per annum, (ii) is subordinated to the rights of CCHP policyholders, claimants and beneficiary claims and all other classes of CCHP creditors other than subordinated debenture holders, (iii) does not become a liability of CCHP until and unless the Commissioner of the Colorado Department of Regulatory Agencies, Division of Insurance ("Division of Insurance") authorizes repayment of the debenture agreement, and shall be treated by CCHP as surplus until the time of such approval, (iv) is only repayable from available funds in excess of CCHP's minimum net surplus required to be maintained by the Division of Insurance, and (v) is otherwise repayable on March 31, 2018, assuming approval by the Division of Insurance.

On May 28, 2015, an investor of the Company filed a lawsuit claiming damages of $1,000,000 exclusive of interest and costs against the Company, a former Executive Chairman, an entity controlled by another former Executive Chairman, and 4G Biometrics, a wholly owned subsidiary of the Company, for breach of contract. The Company has engaged legal counsel regarding the matter.  The Company has assessed a high probability of settling the matter for $750,000 in cash, equity, or a combination thereof.  The Company has accrued a contingent liability of $750,000 and loss on settlement as of June 30, 2017.

On November 4, 2015, the Company received a demand for payment of $275,000 from a former employee of the Company and former principal of 4G Biometrics whose employment was terminated for cause.  On December 4, 2015, the Company filed a complaint against the former owners of 4G Biometrics, including this former employee, seeking damages in excess of $300,000 related to alleged misrepresentations made to induce the Company to acquire 4G Biometrics.  Between February 4, 2016 and February 8, 2016, the Company settled the complaint with each of the former owners of 4G Biometrics and all parties released each other from all outstanding claims, including any current monetary obligations to each party, excluding one former owner of 4G Biometrics who continues to be employed by the Company.  A Stipulation for Order of Dismissal with Prejudice of all Claims and Counterclaims has been filed and is in the process of being approved.  The settlement resulted in the termination of $39,863 of related-party accounts payable.

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18.  Subsequent Events

Subsequent to June 30, 2017, the Company entered into the following agreements and transactions:

(1)	On August 2, 2017, the Company received a cash advance from a third party in the amount of $100,000, which incurs fees of $1,500 per day until repaid.  During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date.
(2)	On August 7, 2017, the Company received a cash advance from a third party in the amount of $50,000, which incurs fees of $750 per day until repaid. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date.
(3)	During August 2017, the Company received letters related to unsecured notes payable with third parties with principal balances totaling $5,900,000 as of June 30, 2017 where the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.
(4)	During August 2017, the Company received a letter related to an unsecured note payable with a third party with a principal balance of $334,464 as of June 30, 2017 wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018.
(5)	During August 2017, the Company received a letter related to secured and unsecured notes payable with entities controlled by the Company's former chief executive officer and Executive Chairman of the Board of Directors, who was in office at the time, with principal balances of $1,721,100, $1,303,135, $250,000 and $25,463 as of June 30, 2017, wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through January 12, 2018 and extended maturity date was extended through January 12, 2018.
(6)	During August 2017, the Company received a letter related to an unsecured note payable with a former Executive Chairman of the Board of Directors with a principal balance of $542,004 as of June 30, 2017 wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through January 12, 2018 and extended maturity date was extended through January 12, 2018.
(7)	During July 2017, the Company granted 1,562 shares of common stock, with a value of $12,496 on the date of grant, to the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, as a bonus for services performed during the three months ended June 30, 2017.  The value of the shares has been included in accrued expenses as of June 30, 2017.
(8)	On August 16, 2017, the Company sold $248,500 of future customer receipts to a third party for $175,000 in cash.  The $73,500 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 and is guaranteed by the Company's former Executive Chairman and Chief Executive Officer, who was in office at the time.

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(9)	During July 2017, the Company granted 50,000 shares of common stock, with a value of $400,000 on the date of grant, to a third party as part of a one-year consulting agreement.  The value of the shares will be amortized to selling, general and administrative expenses evenly over the service period.  On September 5, 2017, the Board of Directors granted the issuance of 500 shares of Series H Preferred stock in lieu of the 50,000 shares of common stock, to which the third party has verbally agreed.  The Series H Preferred shares have not yet been issued.
(10)	During July 2017, the Company granted 3,937 shares of common stock to employees for bonuses.  The $31,500 fair value of the shares has been included in accrued expenses as of June 30, 2017.
(11)	On August 28, 2017, the Company sold $224,850 of future customer receipts to a third party for $150,000 in cash.  The $74,850 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 and is guaranteed by the Company's former Executive Chairman and Chief Executive Officer, who was in office at the time.
(12)	On August 31, 2017, the Company sold $119,920 of future customer receipts to a third party for $80,000 in cash.  The $39,920 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 and is guaranteed by the Company's former Executive Chairman and Chief Executive Officer, who was in office at the time.
(13)	On September 5, 2017, the Board of Directors of the Company modified the terms of the Series G Convertible Preferred stock to remove the 18-month lock-up period.  The amendment has not been filed with the State of Delaware as of the date of this filing.
(14)	On September 5, 2017, the Board of Directors of the Company ratified a change to the Series H Preferred stock, previously contemplated and approved by the Board of Directors, to where each share of the Series H Preferred stock is convertible into 100 shares of the Company's common stock, is limited to a total ownership of 4.99% of the outstanding common stock at the time of conversion, is to be non-voting stock, does not bear interest or dividends, and is transferable with the same terms.  The Certificate of Designation for the Series H Preferred stock has not been filed with the State of Delaware as of the time of this filing and no shares had been issued prior to September 5, 2017.
(15)	On September 5, 2017, the Company entered into a consulting agreement with a former Executive Chairman and Chief Executive Officer of the Company, which replaced and existing consulting agreement, for certain consulting services to the Company including, but not limited to (i) developing business plans, (ii) making introductions to potential customers and/or suppliers, (iii) identifying qualified employees and other service providers, (iv) sales, marketing, manufacturing and other operating activities, and (v) meeting with the Company's and its affiliates' respective managers, officers, employees, agents, and other service providers regarding the business, prospects and affairs of the Company and its affiliates. The former officer may not engage in and shall not be entitled to any fees or consideration for (i) negotiating the purchase and/or sale of Company securities, (ii) making recommendations regarding transactions involving Company securities, (iii) or any other matters involving transactions of Company securities.  The agreement is for one year and includes compensation of $250.00 per hour, but such compensation may not exceed $20,000 during any calendar month, plus 1,500 shares of the Company's Series H Preferred stock.  The shares of Series H Preferred stock have not been issued at the time of this filing.
(16)	On September 5, 2017, the Company renewed an existing license and royalty agreement with an entity controlled by a former Executive Chairman and Chief Executive Officer of the Company (the "licensee").  Under the agreement, the licensee receives the right to make, sell and use products related to the Company's intellectual property regarding diabetics, cellular, GPS and CareCenter arena and generally characterized as the CareCenter Technology in a certain region.  The Company shall receive a royalty of 15% of the licensee's gross sales price for the product.  The initial term is for three years whereby the licensee must achieve a minimum royalty of $10,000 per month to maintain the agreement, whereby the agreement will be extended for one addition year unless terminated.  If the minimum monthly royalty is not maintained, the licensee may pay a sum to bring the total payment up to $360,000 within 60 days of the end of the three-year term to extend the agreement for one additional year.  The Company may terminate the agreement if the licensee does not commence to manufacture, distribute and sell product within a 6-month period after the execution of the agreement.
(17)	On September 5, 2017, the Company granted 1,500 shares of the Company's Series H Preferred stock to an entity controlled by a former Executive Chairman of the Board of Directors for past services rendered in addition to amounts earned under an existing consulting agreement.  The shares of Series H Preferred stock have not been issued at the time of this filing.

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(18)	On September 5, 2017, the Company entered into an employment agreement with the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, for a period of two years for services as the Executive Chairman and Chief Executive Officer of the Company.  The initial term of the agreement is for two years and shall automatically renew on a year to year basis, unless terminated sooner.  The base compensation is $360,000 per year plus 1,500 shares of the Company's Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  An additional cash or stock bonus may be awarded, subject to the attainment of such individual and ActiveCare objectives as the Board of Directors of the Company shall establish from time to time as determined by the Board of Directors of the Company.  Upon certain termination conditions upon termination of the agreement, the Company may be required to pay severance of twice the base compensation of the former Executive Chairman and Chief Executive Officer at its highest point during the five-year period prior to termination. In addition, the Board of Directors approved compensation at a level of $360,000 per year retroactive from July 2017, when the former Executive Chairman and Chief Executive Officer was appointed, until the employment agreement was signed. Effective October 12, 2017, the agreement was amended to waive any constructive termination in relation to changes in title, working conditions or duties such that his powers are diminished, reduced or otherwise changed to include powers, duties, or working conditions which are note materially consistent with title, continuing after written notice and 10 days to cure.
(19)	On September 5, 2017, the Board of Directors granted 963 shares of Series H Preferred stock to the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, in lieu of 96,275 shares of previously granted common stock as a bonus for services performed.  The Series H Preferred shares have not yet been issued.
(20)	On September 5, 2017, the Board of Directors granted 200 shares of Series H Preferred stock to the holder of an unsecured note payable with a balance of $300,000 as of June 30, 2017 for the extension of the note payable.  The Series H Preferred shares have not yet been issued.
(21)	From September 21, 2017 through December 1, 2017, the Company received cash advances totaling $230,000 from an entity controlled by the Company's former Executive Chairman and Chief Executive Officer, who was in office at the time, and repaid $10,000 plus the reimbursement of bank fees of $200.
(22)	On September 25, 2017, the Company entered into agreements with its primary product vendor that supersedes all prior agreements with the vendor.  Under the agreements, the vendor will provide all products and services to the Company's service members as they are assigned to the vendor.  In return, the vendor will pay the Company a fee for services rendered to the vendor and to the members for monitoring and reporting.  The Company also earns commissions on all members assigned under the agreement to be paid upon completion of certain milestones met with each individual member.  The agreements also modify the terms of an existing note payable to the vendor.  The note accrues interest at 0.65% per annum, is reduced by the amount of commissions earned by the Company under the agreements and matures on September 25, 2019.  The agreements also add interest fees on existing accounts payable at 0.65% per annum and the accounts payable are reduced by the amount of commissions earned by the Company under the agreements for a minimum of 24 months.

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(23)	On September 27, 2017, the Company received a cash advance from a third party in the amount of $40,000, which incurs fees of $600 per day until repaid.
(24)	In October 2017, the Company entered into a settlement agreement related to an unsecured note payable with a principal balance of $300,000 as of June 30, 2017.  As part of the agreement, the lender lent the Company an additional $200,000 which has been added to the principal balance of the note payable.  The agreement modified the terms of the note payable to become secured by inventory owned by the Company, requires issuance of 3,000 shares of Series H Preferred Stock, which were granted by the Board of Directors on September 5, 2017 and are required to be able to convert the lender's shares into 300,000 shares of the Company's common stock, and requires payments of $8,600 for 72 consecutive weeks.  If any payment is late, the Company is required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default.  The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor.  The fair value of the shares will be amortized over the life of the amended note.  The note terms are adjustable for any terms subsequently provided to other investors.
(25)	On November 7, 2017, the Company entered into individual agreements related to secured borrowings from four different parties that each previously purchased customer receivables that require daily payments.  The agreements modified each agreement to reduce the amount of the respective daily payment to approximately half of the amount previously drawn through January 7, 2018, whereafter the amount of the payment returns to the payment required under the respective agreement plus an additional amount equal to the amount shorted during the period of lower payments divided by the number of remaining payments remaining on the original term of the respective note payable.  Three of the four agreements are verbal.  On January 5, 2018, the Company further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018.  Three of the four agreements are verbal.
(26)	On November 13, 2017, an entity controlled by a former Executive Chairman of the Board of Directors, with whom we contracted for consulting, terminated the existing consulting arrangement.
(27)	On November 13, 2017, the Company entered into a sales broker agreement with an entity controlled by a former Executive Chairman of the Board (the "Sales Broker").  Under the Sales Broker agreement, the Company will provide services to certain customers referred to the Company and the Sales Broker will receive administration fees in the amount of 15% of gross revenues, as defined by the Sales Broker agreement, as long as the Company services the respective customer even in the event the Sales Broker agreement is terminated.  The Sales Broker will promote the Company, its services and products, and introduce potential customers to the Company as a sales representative.  The initial term of the Sales Broker agreement is one year, which automatically renews for additional one-year periods until cancelled by either party.
(28)	On November 30, 2017, the Company signed a letter of understanding with a former consultant where the Company agreed to convert $100,000 of past consulting fees owed into an equivalent value of equity in the Company upon a qualifying capital raise.
(29)	On November 10, 2017, the Company signed a formal agreement replacing a former verbal agreement with an unsecured note holder, with principal due of $350,000 as of June 30, 2017.  The new agreement memorialized previously agreed upon terms whereby the lender converted a $350,000 advance into an unsecured note payable, with interest at 2.8% of revenues, for $143,987 in fees and a future payoff fee of 20% of the principal, or $70,000, which are included in accrued liabilities and interest expense as of June 30, 2017.  The written agreement adjusted the verbal agreement to where the Company is required to pay any outstanding interest at the end of the first month following a quarter end. The lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and the written agreement includes a most favored nations clause in relation to conversion features.

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(30)	On November 27, 2017, the Company signed a formal agreement memorializing previous agreements with the holder of an unsecured note and cash advance, with aggregate principal due of $1,200,000 as of June 30, 2017, as well as additional advances with aggregate principal of $190,000 that were received subsequent to June 30, 2017.  The new agreement memorialized the terms of the note payable whereby the lender converted $617,500 in advances into a $1,100,000 unsecured note payable, with interest at 18% per annum for $95,226 in fees, which have been included in accrued liabilities and interest expense as of June 30, 2017.  In addition, the new agreement allows for advances to incur fees at 1.5% of the advance principal per calendar day until paid in full.  The written agreement adjusted the verbal agreements to where the note payable and advance balances and fees may be called by the lender at any time and are due by May 30, 2018, and the new agreement includes a most favored nations clause in relation to conversion features on the note payable and advances.  The new agreement also assigned $2,000,000 of note payable principal held by an entity controlled by an officer of the Company to the lender.  All interest accrued on the assigned balance is payable to the officer.
(31)	On December 6, 2017 the Company entered into those certain forbearance and lock up letter agreements with three (3) debtors which held convertible debentures in the aggregate principal amount of $1,109,345 at the time of the agreements, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more.  Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents.  The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.  In addition, two (2) of the debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity.
(32)	Effective December 11, 2017, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with four accredited investors, including the Company's new Chief Executive Officer in connection with the closing of a bridge financing (the "Bridge Financing") in the gross amount of $600,000. The three remaining accredited investors hold notes payable with an aggregate principal balance of $3,865,865 as of June 30, 2017. Pursuant to the Purchase Agreements, the Investors purchased from the Company (i) Promissory Notes in the aggregate principal amount of $631,578.06 (the "Notes") due and payable six months from the Effective Date and (ii) Common Stock Purchase Warrants (the "Warrant"), exercisable for five years from the date of issuance, to purchase up that certain amount of shares with an aggregate exercise amount equal to $600,000 at an exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in the companies contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the "Private Placement") (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment hereunder (the "Exercise Price"). The Notes were issued in favor of the Investors with an original issue discount equal to five percent (5%). Additionally, pursuant to the Purchase Agreement, the Company will issue the investors common stock (the "Origination Shares") worth 30% of the purchase price paid by each investor (the "Origination Dollar Amount") on the 5th trading day after the pricing of the Private Placement, but in no event later than six months from the Effective Date. The Origination Dollar amount will divided by the lowest of (i) $3.00 (subject to adjustment for stock splits), (ii) 80% of the common stock offering price in the Private Placement, (iii) 80% of the offering price of the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement.  At the closing of the Private Placement the Note shall automatically convert into a subscription into the Private Placement in an amount equal to 125% of the Note balance, subject to certain conditions as outlined therein. If the Company fails to repay the balance due under the Note on its Maturity the Investors have the right, at any time, at their election, to convert all or part of the outstanding and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company pursuant to the following conversion formula: number of shares receivable upon conversion equals the dollar amount being converted divided by the Conversion Price. The Conversion Price is the lesser of $3.00 (subject to adjustment for stock splits) or 60% of the lowest trade price in the 25 trading days. Further, in the event of any default, the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof through the date of acceleration (the "Note Balance"), shall become, at the Investor's election, immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the investor's choice of (this choice may be made at any time without presentment, demand, or notice of any kind): (i) the Note Balance divided by the Conversion Price on the date of the default multiplied by the closing price on the date of the default; or (ii) the Note Balance divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a lower Conversion Price, multiplied by the closing price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a higher closing price; or (iii) 150% of the Note Balance. If, at any time the Note is outstanding, the Company issues a Variable Security (as defined therein), then in such event the Investors shall have the right to convert all or any portion of the outstanding balance of the Notes into shares of Common Stock on the same terms as granted in any applicable Variable Security issued by the Company.

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(33)	On November 17, 2017, the Company received cash advances from third parties totaling $60,000.  On January 5, 2018, the advances converted into agreements with the same terms as the Bridge Financing entered into on December 11, 2017.
(34)	On December 11, 2017, Eric Robinson voluntarily resigned as Chief Financial Officer, Secretary and In-House Counsel, and all other positions with the Company to which he has been assigned regardless of whether he served in such capacity, effective immediately. On the same date, Jeffrey S. Peterson voluntarily resigned as Chairman of the Board of Directors, while acknowledging that he will continue to serve the Company as a Director and Executive Vice President.  On the same date, Robert J. Welgos and Bradley Robinson voluntarily resigned as members of the Board of Directors and all other positions with the Company to which they may have been assigned, regardless of whether they served in such capacity, effective immediately.  These resignations were not as a result of any disagreements with the Company.
(35)	On December 11, 2017, Isaac Onn was appointed as a member of the Company's board of Directors and Mark J. Rosenblum was appointed as the Company's Chairman of the Board of Directors and Chief Executive Officer in connection with the Bridge Financing.  In connection with Mr. Rosenblum's appointment as the Company's Chief Executive Officer, on December 11, 2017, the Company and Mr. Rosenblum finalized the terms of his employment and entered into an employment agreement (the "Rosenblum Employment Agreement"). Mr. Rosenblum shall have such duties, responsibilities and authority which shall include, but not be limited to the responsibility for the overall management, direction and strategy of the Company. The Company shall pay Mr. Rosenblum a salary at a rate of Three Hundred Thousand and 00/100 Dollars ($300,000) per year (the "Initial Base Salary"). The Initial Base Salary shall increase to an annual rate of Three Hundred and Sixty Thousand Dollars ($360,000) (the "Base Salary") upon the Company closing a financing of at least Five Million Dollars ($5,000,000). Mr. Rosenblum shall be eligible for an annual performance-based cash bonus of up to 100% of the Base Salary (as further defined in the Rosenblum Employment Agreement"). The Rosenblum Employment Agreement is for a term of three (3) years and will be automatically renewed for one year periods, unless otherwise terminated by the Company or Mr. Rosenblum. Upon execution of the Rosenblum Employment Agreement the Company agreed to issue restricted shares equal to $300,000 valued at the offering price of the next equity offering of the Company ("RSU") and an option to purchase an aggregate $600,000 valued at the offering price of the next equity offering of the Company at an exercise price equal to the market price for the next equity offering of the Company (the "Options"). One-third of these Options shall vest immediately, another third on the first anniversary of the Rosenblum Employment Agreement, and the final third on the second anniversary of the Rosenblum Employment Agreement. The RSUs shall vest 50% immediately upon issuance and 25% on each of the first and second anniversaries of the Rosenblum Employment Agreement. If the Company terminates Mr. Rosenblum's employment without just cause or if Mr. Rosenblum's employment is terminated due to Disability (as defined therein), Mr. Rosenblum shall be entitled to receive, in addition to any accrued and unpaid Base Salary, plus any accrued but unused vacation time and unpaid expenses that have been earned as of the date of such termination, the following severance payments (the "Severance Payments"): (i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following such termination and continuing until the later of (A) the expiration of the Term or (B) the expiration of (i) six (6) months following the effective termination date; provided, however, that if the Company terminates the Agreement without Just Cause (as defined in the Rosenblum Employment Agreement) within six (6) months of the effective date, then Mr. Rosenblum will only be entitled to three (3) months of severance instead of six (6) months; and (ii) during the Severance Period (as defined in the Rosenblum Employment Agreement), health and life insurance benefits substantially similar to those which Mr. Rosenblum was receiving or entitled to receive immediately prior to termination; provided, however, such insurance benefits shall be reduced to the extent comparable benefits during such period following Mr. Rosenblum's termination, and any benefits actually received shall be reported by Mr. Rosenblum to the Company.  The Company will reimburse Mr. Rosenblum for any reasonably travel and relocation expenses.
(36)	During December 2017, the Company entered into those certain forbearance and lock up letter agreements with a debtor which holds convertible debentures in the principal amount of $25,312 as of December 5, 2017, whereby the debtor agreed that, without prior written consent of the Company, the debtor will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more. Additionally, the debtor agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the convertible debentures. The forbearance and lock up letter agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.

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(37)	On January 12, 2018, the Company received letters from four (4) debtors which hold convertible debentures with principal balances totaling $3,162,955 as of June 30, 2017 where the debtors forbear against any historical and future events of default and remedies through February 15, 2018. Further, the maturity date was extended through February 15, 2018.  As part of the letters, the Company agreed not to initiate any new financing arrangements without the consent of the debtors.
(38)	On January 12, 2018, the Company received a letter from a lender who holds two unsecured notes payable with principal balances totaling $550,000 as of June 30, 2017 where the lender forbears against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock.
(39)	On December 22, 2017, the Company entered into a Services Agreement (the "Cleveland Clinic Agreement") with the Cleveland Clinic Foundation d.b.a. Cleveland Clinic, an Ohio nonprofit corporation ("Cleveland Clinic"). Pursuant to the Cleveland Clinic Agreement, the Company will be providing services to Cleveland Clinic as agreed to by the parties in any mutually agreed form pursuant to a "Statement of Work". Pursuant to the Statement of Work included in the Cleveland Clinic Agreement, the Company will provide monitoring services to Cleveland Clinic's expected beneficiary diabetic population within the Cleveland Clinic Medicare ACO. The initial term of the Cleveland Clinic Agreement is for three years and shall automatically renew after the term for a successive twelve (12) month period from year to year unless sooner terminated by either party in accordance with the terms of the Cleveland Clinic Agreement. As consideration for the Company's Services, the Company is to receive a fixed monthly fee per Covered Diabetic Patient (as defined in the Cleveland Clinic Agreement). In addition, at such time the Cleveland Clinic Accountable Care Organization ("CCACO") shall receive a shared savings payment from the Centers for Medicare and Medicaid Services, CCACO shall share such savings with the Company based on a formula defined in the Cleveland Clinic Agreement. Cleveland Clinic may, by written notice to the Company, terminate the Agreement, any purchase order or any portion of a purchase order if the Company (i) is in material breach of any of the terms and conditions of the Cleveland Clinic Agreement or any Purchase Order, which breach in not cured within thirty (30) days after notification of such breach, (ii) terminates or suspends its business, becomes insolvent, or becomes subject to any bankruptcy or insolvency proceeding under Federal or State law. Cleveland Clinic further may terminate the Cleveland Clinic Agreement, any Purchase Order or any portion of any Purchase Order for convenience upon ninety (90) days' prior written notice to Company ("Termination for Convenience"). In connection with any Termination for Convenience, Cleveland Clinic will reimburse Company for the actual cost reasonably incurred for work in process up to the time of cancellation, as well as any non-cancellable contract of Company, or non-cancellable purchase order to a third party, entered into for the benefit of Cleveland Clinic. The Cleveland Clinic Agreement is nonexclusive, and Cleveland Clinic may contract with others to perform similar services. Accordingly, the Company may also perform similar services for others.

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

This quarterly report on Form 10-Q and other reports filed by ActiveCare, Inc. (the "Company") from time to time with the SEC (collectively, the "Filings") contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company's management as well as estimates and assumptions made by Company's management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words "anticipate," "believe," "estimate," "expect," "future," "intend," "plan," or the negative of these terms and similar expressions as they relate to the Company or the Company's management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company's business, industry, and the Company's operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by US GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to assist in better understanding our operations and our present business environment.  This MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements for the fiscal years ended September 30, 2016 and 2015, and the accompanying notes thereto, contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

Overview

ActiveCare, Inc. is a Delaware corporation, formed March 5, 1998. Our fiscal year ends on September 30. Our focus is on the monitoring of individuals with diabetes. Diabetes is a pandemic that, as of 2014, affected approximately 9% of the U.S. population or 29 million Americans. Studies have shown that the annual cost of treating an individual with diabetes and the comorbidities associated with the disease is approximately $13,700 per year. This combination costs the U.S. health system up to $245 billion annually. A major driver of diabetic-related claims is the lack of adherence to regular glucose monitoring. It is estimated that less than 20% of diabetics monitor their blood glucose levels on a regular basis, despite physician recommendations. ActiveCare offers what it believes to be a unique approach to caring for chronic illnesses such as diabetes by adding a "human touch" and monitoring component to traditional disease management. To that end, ActiveCare has created a "CareCenter" where its highly trained staff reaches out to assist its members in real-time. Historically, disease management, such as diabetes has been reserved for only the extreme high risk and high claim members. However, the ActiveCare solution brings clarity and light to the diabetic population, identifying who needs help today. Knowing who to worry about allows for the necessary action to be taken today to avoid major and costly events in the future.

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Going Concern

We have financed operations primarily through the sale of equity securities, long-term debt and short-term debt. Until revenues are sufficient to meet our needs, we will continue to attempt to secure financing through equity or debt securities. We continue to incur negative cash flows from operating activities and net losses. We had minimal cash, negative working capital, and negative total equity as of June 30, 2017 and September 30, 2016. In addition, the Company is in technical default on certain notes payable although the lenders in each case are working with the Company to resolve the defaults. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

In order for us to eliminate substantial doubt about our ability to continue as a going concern, we must achieve profitability, generate positive cash flows from operating activities and obtain the necessary debt or equity funding to meet our projected capital investment requirements. Our management's plans with respect to this uncertainty consist of raising additional capital by issuing debt or equity securities and increasing the sales of our products and services. If we are successful in completing the Offering, we believe the net proceeds of the Offering together with anticipated growth of the business will be sufficient to eliminate substantial doubt about our ability to continue as a going concern. There can be no assurance, however, that we will be able to complete the Offering, raise sufficient additional capital or that revenues will increase rapidly enough to offset operating losses. If we are unable to increase revenues or obtain additional financing, we will be unable to continue the development of our products and services and may have to cease operations.

Research and Development Program

During the three and nine months ended June 30, 2017, we spent approximately $56,000 and $307,000, respectively, compared to $58,000 and $139,000 during the same periods in 2016, on research and development related to chronic illness monitoring. The research and development program focuses on ongoing improvements to methods and systems along with new technologies for the capture and analysis of data, as well as scalable architectures to migrate to production applications and deployments.

Critical Accounting Policies

Our condensed consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (or US GAAP).

This Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our condensed consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these condensed consolidated financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses for the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ (perhaps significantly) from these estimates under different assumptions or conditions. The following summary includes accounting policies that we deem to be most critical to our business. Management considers an accounting estimate to be critical if:

• 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.

Our significant accounting policies are described in Note 2 to our audited consolidated financial statements appearing in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and are hereby incorporated by reference.

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Liability Related to Options and Warrants

The fair value of each stock option or warrant is estimated on the date of grant using a binomial option-pricing model or the Monte Carlo valuation model. The expected life of stock options or warrants represents the period of time that the stock options or warrants are expected to be outstanding, based on the simplified method. Expected volatilities are based on historical volatility of the Company's common stock, among other factors. The Company uses the simplified method within the binomial option-pricing valuation model due to the Company's short trading history and limited history of exercises of stock options or warrants. The risk-free rate related to the expected term of the stock options or warrants is based on the US Treasury yield curve in effect at the time of grant. The dividend yield is zero.

During the three and nine months ended June 30, 2017, the Company measured the fair value of warrants classified as liabilities on the date of issuance and on each re-measurement date using the Monte Carlo valuation model. For this liability, the Company and valuation specialists developed their own assumptions that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company's common stock, stock price volatility, the contractual term of the warrants, risk–free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants uses Level 3 measurements.

Fair Value of Financial Instruments

We measure the fair values of our assets and liabilities using the US GAAP hierarchy. The carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, accounts payable, and accrued liabilities approximate fair values due to the short-term nature and liquidity of these financial instruments. Derivative financial instruments are recorded at fair value based on current market pricing models. The carrying amounts reported for notes payable approximate fair value because the underlying instruments are at interest rates which approximate current market rates.

Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. Specific reserves are estimated by management based on certain assumptions and variables, including the customer's financial condition, age of the customer's receivables and changes in payment histories. Accounts receivable are written off when management determines the likelihood of collection is remote. A receivable is considered to be past due if any portion of the receivable balance has not been received by the contractual payment date.

Inventory

Inventory consists of glucometers and diabetic supplies and is recorded at the lower of cost or market, cost being determined using the first-in, first-out ("FIFO") method. Inventory held by distributors is reported as inventory until the supplies are shipped to the end user by the distributor. We estimate an inventory reserve for obsolescence and excessive quantities. Due to competitive pressures and technological innovation, it is possible that estimates of net realizable values could change in the near term.

Goodwill

Goodwill is reviewed for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. Our annual testing date is September 30. The estimates of fair value are based on the best information available as of the date of the assessment, which primarily incorporates management assumptions about expected future cash flows and the Company's overall market capitalization. Future cash flows can be affected by changes in industry or market conditions. Goodwill was impaired by $826,000 as of September 30, 2015, due, in part, to a potentially long-term reduction in the market capitalization of the Company subsequent to September 30, 2015.  As a result, the Company no longer presents goodwill as an asset in its balance sheets.

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Impairment of Long-Lived Assets

Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from two to twenty years. Long-lived assets, including intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. No long-lived assets were considered to be impaired as of June 30, 2017.

Extinguishment of Debt

We compare the cash flows of a modified note payable on the date of modification to the original terms of the note payable. The original note is derecognized and a gain or loss on the extinguishment is recognized if the present value of the cash outflows of the original note payable is 10% or more than the modified note payable.

Revenue Recognition

During the three and nine months ended June 30, 2017 and the comparable periods from 2016, revenues came from Chronic Illness Monitoring products and services. Information regarding revenue recognition policies relating to Chronic Illness Monitoring is contained in the following paragraphs.

Chronic Illness Monitoring

Chronic Illness Monitoring revenues are recognized when persuasive evidence of an arrangement exists, delivery of the product or service to the end user has occurred, prices are fixed or determinable, and collection is reasonably assured.

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We enter into agreements with insurance companies, disease management companies, third-party administrators, and self-insured companies (collectively, the customers) to lower medical expenses by distributing diabetic testing products and supplies to employees (end users) covered by their health plans or the health plans they manage. Cash is due from the customer or the end user's health plan as the products and supplies are deployed to the end user. We also monitor the end user's test results in real-time with our 24x7 CareCenter. Customers who are billed separately for monitoring are obligated to pay as the service is performed and revenue is recognized ratably over the period of the contract. The term of these contracts is generally one year and, unless terminated by either party, will automatically renew annually until terminated. Collection terms are net 30 days after claims are submitted. There is no contingent revenue in these contracts.

We also enter into agreements with distributors who take title to products and distribute those products to the end user. Delivery is considered to occur when the supplies are delivered by the distributor to the end user. Cash is due from the distributor, the customer or the end user's health plan as initial products are deployed to the end user. Subsequent sales (resupplies) are shipped directly from us to the end user and cash is due from the customer or the end user's health plan.

Shipping and handling fees are typically not charged to end users. The related freight costs and supplies directly associated with shipping products to end users are included as a component of cost of revenues.

Multiple-Element Arrangements

Sales of Chronic Illness Monitoring products and services contain multiple elements.  We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. In order to account for elements in a multiple-element arrangement as separate units of accounting, the deliverables must have stand-alone value upon delivery. In determining whether monitoring services have stand-alone value, the nature of our monitoring services, whether we sell supplies to new customers without monitoring services, and availability of monitoring services from the other vendors are factors that are considered.

When multiple elements included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on the relative selling prices. Multiple-element arrangements accounting guidance provides a hierarchy to use when determining the relative selling price for each unit of accounting. Vendor-specific objective evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a stand-alone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence (TPE) of selling price is used to establish the selling price if it exists. If VSOE of selling price and TPE of selling price are not available, then the best estimate of selling price is to be used. Total consideration under our multiple-element contracts is allocated to supplies and monitoring through application of the relative fair value method or selling price.

Stock-Based Compensation

We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized in the statement of operations over the period during which the employee is required to provide service in exchange for the award — the requisite service period. The grant-date fair values of the equity instruments are estimated using option-pricing models adjusted for the unique characteristics of those instruments.

Results of Operations

Three Months Ended June 30, 2017 and 2016

Revenues

Revenues for the three months ended June 30, 2017 were $1,196,000 compared to $2,176,000 for the same period in 2016, a decrease of $980,000.  The decrease is primarily due to the loss of significant customers during the nine months ended June 30, 2017.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2017 was $848,000, compared to $1,382,000 for the same period in 2016, a decrease of $534,000.  The decrease in cost of revenues is primarily due to the loss of significant customers during the nine months ended June 30, 2017 and a decrease in the cost of supplies from our vendors.

Gross Profit

Gross profit for the three months ended June 30, 2017 was $348,000, compared to $794,000 for the same period in 2016, a decrease of $446,000 as a result of the decrease in revenues and cost of revenues. 

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Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2017 were $3,225,000, compared to $2,170,000 for the same period in 2016, an increase of $1,055,000.  Included in selling, general and administrative expenses is $1,461,000 and $1,004,000 of stock-based compensation incurred during the three months ended June 30, 2017 and 2016, respectively.  The increase in expenses incurred is due primarily to a write off of prepaid legal and professional fees related to an equity financing during the three months ended June 30, 2017 and increases in stock-based compensation expense and payroll and payroll tax expenses, offset, in part, by a decrease in other legal and professional fees.

Research and Development Expenses

Research and development expenses for the three months ended June 30, 2017 were $56,000, compared to $57,000 for the same period in 2016, a decrease of $1,000. We expect to continue invest into innovating new products as funds become available.

Gain on Derivatives Liability

Gain on derivatives liability for the three months ended June 30, 2017 was $64,000, compared to $5,603,000 for the same period in 2016.  The derivative liability recorded as of June 30, 2017 and 2016 relate to variable conversion price adjustments and put options on outstanding notes payable and warrants.

Interest Expense

Interest expense for the three months ended June 30, 2017 was $2,199,000, compared to $814,000 for the same period in 2016, an increase of $1,385,000.  The increase was primarily due to amortization of note payable discounts related to warrants, shares and other costs accrued, issued or paid in connection with notes payable agreements entered into and/or amended during the fiscal years 2017 and 2016 as well as fees and interest related to cash advances made during the fiscal years 2017 and 2016.

Loss on Settlement

During the three months ended June 30, 2017, we assessed the potential outcome of a lawsuit and recorded a contingent liability of $750,000 for a potential settlement.

Net Income (Loss)

Net loss for the three months ended June 30, 2017, was $5,815,000 compared to net income of $3,350,000 for the same period in 2016, for the reasons described above.

Dividends on Preferred Stock

Dividends on preferred stock for the three months ended June 30, 2017, were $59,000, compared to $46,000 for the same period in 2016.  The decrease was primarily due to the accretion of dividends payable for July 1, 2016 through March 31, 2017 related to the expiration of letter agreements that ceased dividends beginning July 1, 2016.

Nine Months Ended June 30, 2017 and 2016

Revenues

Revenues for the nine months ended June 30, 2017 were $4,911,000 compared to $5,861,000 for the same period in 2016, a decrease of $950,000.  The decrease is primarily due to the loss of significant customers during the nine months ended June 30, 2017.

Cost of Revenues

Cost of revenues for the nine months ended June 30, 2017 was $3,373,000, compared to $4,237,000 for the same period in 2016, a decrease of $864,000.  The decrease in cost of revenues is primarily due to the loss of significant customers during the nine months ended June 30, 2017 and a decrease in the cost of supplies from our vendors.

Gross Profit

Gross profit for the nine months ended June 30, 2017 was $1,538,000, compared to $1,623,000 for the same period in 2016, a decrease of $85,000 as a result of an increase in revenues and a reduction in the cost of revenues. 

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended June 30, 2017 were $6,382,000, compared to $6,944,000 for the same period in 2016, a decrease of $562,000.  Included in selling, general and administrative expenses is $2,101,000 and $3,258,000 of stock-based compensation incurred during the nine months ended June 30, 2017 and 2016, respectively.  The decrease in expenses incurred is due primarily to decreases in stock-based compensation expense and legal and professional fees, offset, in part, by a write off of prepaid legal and professional fees related to an equity financing during the nine months ended June 30, 2017 and an increase in payroll and payroll tax expenses.

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Research and Development Expenses

Research and development expenses for the nine months ended June 30, 2017 were $307,000, compared to $139,000 for the same period in 2016, an increase of $168,000. The increase was due to more intense investing in research and development as we continue to develop new products and platforms for Chronic Illness Monitoring.  We expect to continue invest into innovating new products as funds become available.

Gain on Derivatives Liability

Gain on derivatives liability for the nine months ended June 30, 2017 was $230,000, compared to $2,797,000 for the same period in 2016.  The derivative liability recorded as of June 30, 2017 and 2016 relate to variable conversion price adjustments and put options on outstanding notes payable and warrants.

Interest Expense

Interest expense for the nine months ended June 30, 2017 was $6,856,000, compared to $1,935,000 for the same period in 2016, an increase of $4,921,000.  The increase was primarily due to amortization of note payable discounts related to warrants, shares and other costs accrued, issued or paid in connection with notes payable agreements entered into and/or amended during the fiscal years 2017 and 2016 as well as fees and interest related to cash advances made during the fiscal years 2017 and 2016.

Loss on Settlement

During the nine months ended June 30, 2017, we assessed the potential outcome of a lawsuit and recorded a contingent liability of $750,000 for a potential settlement.

Loss on Extinguishment of Debt

During the nine months ended June 30, 2017, in addition to the loss on extinguishment described below, we recognized a gain on extinguishment of debt of $40,000 on the partial extinguishment of a derivative on a note payable as payments were made.

During November 2016, we entered into a forbearance agreement related to a secured note payable and related line of credit which requires the issuance of a warrant for the purchase of 130,000 shares of common stock upon the closing of the offering, which resulted in a loss on extinguishment of debt of $2,044,000 related to the extinguishment of debt related to the forbearance agreement on a secured note payable and related line of credit.

During January 2017, we terminated a note payable to a third party for cash and incurred no additional fees.  The note had an associated derivative that resulted in a gain on extinguishment of debt of $64,000.

During March 2017, we modified notes payable to third parties to add additional borrowing capabilities under existing note payable agreements.  These modifications resulted in an aggregate loss on extinguishment of debt of $559,000.

During February 2016, we terminated notes payable to third parties with outstanding principal, net of discounts, of $697,000 and accrued interest of $39,000, for $1,123,000 in cash, and incurred fees of $50,000 to third parties and $75,000 to a related party, which resulted in a loss on extinguishment of debt of $512,000 in connection with these terminations.

During February 2016, we modified notes payable to related parties to subordinate to notes payable also issued during February 2016.  The modifications also reduced the conversion price to $30.00 per common share, which was below the fair value of the stock on the date of the modifications, and limited conversion to a maximum of 58,500 shares of common stock, which was below the fair value of the stock on the date of the modifications.  The modifications resulted in a loss on extinguishment of debt of $2,032,000. Also during February 2016, we modified a note payable to subordinate to notes payable also issued during February 2016, reducing the conversion price to $30.00 per common share, which resulted in a loss on extinguishment of debt of $381,000.

During February 2016, we modified a note payable to related parties to bifurcate the note into two notes payable.  We assigned the majority bifurcated note and part of the smaller bifurcated note to a third party, which then converted the amounts into a convertible note payable.  The fair value of the conversion feature was recorded as a derivative liability and resulted in a loss on extinguishment of debt of $182,000.

During February 2016, notes payable with outstanding principal balances totaling $350,000 plus accrued interest of $16,000 were converted into 18,576 shares of common stock, at $20.00 per common share, which was below the fair value of the stock on the date of conversion.  The conversion resulted in a loss on induced conversion of debt of $148,000 and a gain on extinguishment of debt of $64,000.

During June 2016, $14,000 of principal and $11,000 of accrued interest converted into 953 shares of common stock, pursuant to the terms of a note payable, which resulted in a loss on extinguishment of debt of $15,000.

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Loss on Induced Conversions of Debt

During February 2016, we converted notes payable with outstanding principal balances totaling $233,333 into 11,600 shares of common stock, at $20.00 per common share, which was below the fair value of the Company's stock on the date of conversion, which resulted in a loss on induced conversion of debt of $231,000.

During February 2016, we converted notes payable with outstanding principal balances totaling $350,000 plus accrued interest of $16,000 into 18,576 shares of common stock, at $20.00 per common share, which was below the fair value of the stock on the date of conversion.  The conversion resulted in a loss on induced conversion of debt of $148,000 and a gain on extinguishment of debt of $64,000.

Gain on Liability Settlements

During the nine months ending June 30, 2016, we entered into agreements which settled payables due to third parties, which resulted in gains totaling $295,000.

Net Loss

Net loss for the nine months ended June 30, 2017, was $15,024,000 compared to a net loss of $7,741,000 for the same period in 2016, for the reasons described above.

Deemed Dividend on Preferred Stock

During February 2016, we redeemed all 5,361 outstanding shares of our Series F preferred stock and related accrued dividends in exchange for 20,005 shares of common stock and notes payable of $5,900,000.  We also exchanged warrants held by Series F preferred stockholders for the purchase 11,070 shares of common stock for new warrants for the purchase of the same number of shares with new terms.  We recorded a deemed dividend of $6,484,000 as a result of these transactions.

Dividends on Preferred Stock

Dividends on preferred stock for the nine months ended June 30, 2017, were $127,000, compared to $699,000 for the same period in 2016.  The decrease was primarily due to the conversion of Series F Preferred into convertible notes payable and common stock during February 2016 and the reduction in the Series E Preferred dividend rate.

Liquidity and Capital Resources

Our primary sources of liquidity are the proceeds from the sale of our equity securities and debt.  We have not historically financed operations from cash flows from operating activities.  We anticipate that we will continue to seek funding to supplement revenues from the sale of our products and services through the sale of equity and debt securities until we achieve positive cash flows from operating activities. There is no guarantee that we will be able to raise capital on terms to favorable to the Company or at all.

Our cash balance as of June 30, 2017, was $114,000.  At that time, we had a working capital deficit of $28,732,000, compared to a working capital deficit of $12,871,000 as of September 30, 2016.  The increase in working capital deficit is primarily due to additions to accounts payable, accrued expenses, notes payable, and derivatives liabilities related to the issuance of notes payable and related warrants and reduction of prepaid expenses and other current assets, offset, in part, by additions to inventory and contingent notes receivable.

Operating activities for the nine months ended June 30, 2017, used cash of $618,000, compared to $2,803,000 for the same period in 2016.  The decrease in cash used in operating activities is primarily due to the increase in accounts payable and accrued expenses and decrease in prepaid expenses during the nine months ended June 30, 2017, compared to the same period in 2016, offset, in part, by the increase in net loss after adjustment for non-cash items and increase in accounts receivable and inventory during the nine months ended June 30, 2017, compared to the increase in accounts receivable and inventory for the same period in 2016.

Investing activities for the nine months ended June 30, 2017, used cash of $503,000, compared to $4,000 for the same period in 2016. The decrease in cash used in investing activities is primarily due to the acquisition of a contingent note receivable during the nine months ended June 30, 2017 and decreased purchases of property and equipment during the nine months ended June 30, 2017, compared to the same period in 2016.

Financing activities for the nine months ended June 30, 2017, provided cash of $1,068,000, compared to $2,779,000 for the same period in 2016. The decrease in cash provided by financing activities is primarily due to a net decrease in proceeds from the issuance of notes payable to related and third parties and net increase in principal payments on notes payable during the nine months ended June 30, 2017, compared to the same period in fiscal year 2016.

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We had an accumulated deficit as of June 30, 2017, of $123,330,000, compared to $108,179,000 as of September 30, 2016.  Our total stockholders' deficit as of June 30, 2017, was $34,543,000 compared to $20,111,000 as of September 30, 2016.  These changes were primarily due to our net loss and dividends accrued during the nine months ended June 30, 2017.

During April 2017, the Company received a letter from a significant customer dated April 25, 2017 notifying the Company of the termination its customer agreement effective July 1, 2017. This customer represented approximately 67% and 52% of revenues during the three and nine months ended June 30, 2017, respectively. If the Company is not able to replace the revenues generated by this customer, of which there can be no assurance, it will result in a material reduction in revenues beginning in July 2017. On December 22, 2017, the Company entered into a Services Agreement that is expected to significantly improve revenues during the fiscal year ended September 30, 2018.

As of the date of this report, notes payable due to unrelated parties with total principal amounts in the aggregate of $2,776,046, owing as of June 30, 2017, are past due, in default, and unpaid.In addition, notes payable due to related parties with total principal amounts of $27,980, as of June 30, 2017, are past due, in default and unpaid.  These defaults include principal obligations owed to Partners for Growth, our secured lender, which are in excess of $2,700,000 and which are secured by substantially all assets of the Company.  Other notes are currently in technical default. However, as of the time of this report, the lenders have informally agreed to work with us until such time as the notes can be repaid and some of the lenders have provided bridge capital since going in default.

Recent Accounting Pronouncements

In May 2014, August 2015 and May 2016, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, ASU 2017-13 Revenue Recognition, Revenue from Contracts with Customers, Leases, and Leases: Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, and ASU 2017-14 Income Statement—Reporting Comprehensive Income, Revenue Recognition, and Revenue from Contracts with Customers, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This standard sets forth management's responsibility to evaluate, each reporting period, whether there is substantial doubt about the Company's ability to continue as a going concern, and if so, to provide related disclosures. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its evaluation of going concern.

In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. The purpose of ASU 2015-11 is to more closely align the measurement of inventory in US GAAP with the measurement of inventory in International Financial Reporting Standards. ASU 2015-11 requires entities to measure most inventory at the "lower of cost or net realizable value." Additionally, some of the amendments are designed to more clearly articulate the requirements for the measurement and disclosure of inventory. ASU 2015-11 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU 2016-02, Leases.  The purpose of ASU 2016-02 is to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting.  The purpose of ASU 2016-09 is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equities or liabilities, and classification of amounts in the statement of cash flows.  ASU 2016-09 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

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In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In May 2017, the FASB issued ASU 2017-09, Stock Compensation: Scope of Modification Accounting. The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivative and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down-round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity's own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down-round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share ("EPS") in accordance with Topic 260 to recognize the effect of the down-round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down-round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Accounting Standards Codification, to a scope exception. Those amendments do not have an accounting effect. ASU 2017-11 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

Recent Developments

Subsequent to June 30, 2017, the Company entered into the following agreements and transactions:

(1)	On August 2, 2017, we received a cash advance from a third party in the amount of $100,000, which incurs fees of $1,500 per day until repaid. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date.
(2)	On August 7, 2017, we received a cash advance from a third party in the amount of $50,000, which incurs fees of $750 per day until repaid. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company's common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date.
(3)	During August 2017, we received letters related to unsecured notes payable with third parties with principal balances totaling $5,900,000 as of June 30, 2017 where the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.
(4)	During August 2017, we received a letter related to an unsecured note payable with a third party with a principal balance of $334,464 as of June 30, 2017 wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018.
(5)	During August 2017, we received a letter related to secured and unsecured notes payable with entities controlled by our former chief executive officer and Executive Chairman of the Board of Directors, who was in office at the time, with principal balances of $1,721,100, $1,303,135, $250,000 and $25,463 as of June 30, 2017, wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through January 12, 2018 and extended maturity date was extended through January 12, 2018.
(6)	During August 2017, we received a letter related to an unsecured note payable with a former Executive Chairman of the Board of Directors with a principal balance of $542,004 as of June 30, 2017 wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through January 12, 2018 and extended maturity date was extended through January 12, 2018.
(7)	During July 2017, we granted 1,562 shares of common stock, with a value of $12,496 on the date of grant, to the former Executive Chairman and Chief Executive Officer, who was in office at the time, as a bonus for services performed during the three months ended June 30, 2017.  The value of the shares has been included in accrued expenses as of June 30, 2017.
(8)	On August 16, 2017, we sold $248,500 of future customer receipts to a third party for $175,000 in cash.  The $73,500 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 and is guaranteed by our former Executive Chairman and Chief Executive Officer, who was in office at the time.

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(9)	During July 2017, we granted 50,000 shares of common stock, with a value of $400,000 on the date of grant, to a third party as part of a one-year consulting agreement.  The value of the shares will be amortized to selling, general and administrative expenses evenly over the service period.  On September 5, 2017, our Board of Directors granted the issuance of 500 shares of Series H Preferred stock in lieu of the 50,000 shares of common stock, to which the third party has verbally agreed.  The Series H Preferred shares have not yet been issued.
(10)	During July 2017, we granted 3,937 shares of common stock to employees for bonuses.  The $31,500 fair value of the shares has been included in accrued expenses as of June 30, 2017.
(11)	On August 28, 2017, we sold $224,850 of future customer receipts to a third party for $150,000 in cash.  The $74,850 difference between the future customer receipts and cash received is being amortized to interest expense over the term of the note. The note is subordinated to another note and is guaranteed by our former Executive Chairman and Chief Executive Officer, who was in office at the time.
(12)	On August 31, 2017, we sold $119,920 of future customer receipts to a third party for $80,000 in cash.  The $39,920 difference between the future customer receipts and cash received is being amortized to interest expense over the term of the note. The note is subordinated to another note and is guaranteed by our former Executive Chairman and Chief Executive Officer, who was in office at the time.
(13)	On September 5, 2017, our Board of Directors modified the terms of the Series G Convertible Preferred stock to remove the 18-month lock-up period.  The amendment has not been filed with the State of Delaware as of the date of this filing.
(14)	On September 5, 2017, our Board of Directors ratified a change to the Series H Preferred stock, previously contemplated and approved by the Board of Directors, to where each share of the Series H Preferred stock is convertible into 100 shares of our common stock, is limited to a total ownership of 4.99% of the outstanding common stock at the time of conversion, is to be non-voting stock, does not bear interest or dividends, and is transferable with the same terms.  The Certificate of Designation for the Series H Preferred stock has not been filed with the State of Delaware as of the time of this filing and no shares had been issued prior to September 5, 2017.
(15)	On September 5, 2017, we entered into a consulting agreement with a former Executive Chairman and Chief Executive Officer, which replaced and existing consulting agreement, for certain consulting services to us including, but not limited to (i) developing business plans, (ii) making introductions to potential customers and/or suppliers, (iii) identifying qualified employees and other service providers, (iv) sales, marketing, manufacturing and other operating activities, and (v) meeting with us and our affiliates' respective managers, officers, employees, agents, and other service providers regarding the business, prospects and our affairs and our affiliates. The former officer may not engage in and shall not be entitled to any fees or consideration for (i) negotiating the purchase and/or sale of our securities, (ii) making recommendations regarding transactions involving our securities, (iii) or any other matters involving transactions of our securities.  The agreement is for one year and includes compensation of $250.00 per hour, but such compensation may not exceed $20,000 during any calendar month, plus 1,500 shares of our Series H Preferred stock.  The shares of Series H Preferred stock have not been issued at the time of this filing.
(16)	On September 5, 2017, we renewed an existing license and royalty agreement with an entity controlled by a former Executive Chairman and Chief Executive Officer (the "licensee").  Under the agreement, the licensee receives the right to make, sell and use products related to our intellectual property regarding diabetics, cellular, GPS and CareCenter arena and generally characterized as the CareCenter Technology in a certain region.  We shall receive a royalty of 15% of the licensee's gross sales price for the product.  The initial term is for three years whereby the licensee must achieve a minimum royalty of $10,000 per month to maintain the agreement, whereby the agreement will be extended for one addition year unless terminated.  If the minimum monthly royalty is not maintained, the licensee may pay a sum to bring the total payment up to $360,000 within 60 days of the end of the three-year term to extend the agreement for one additional year.  The Company may terminate the agreement if the licensee does not commence to manufacture, distribute and sell product within a 6-month period after the execution of the agreement.
(17)	On September 5, 2017, we granted 1,500 shares of our Series H Preferred stock to an entity controlled by a former Executive Chairman of the Board of Directors for past services rendered in addition to amounts earned under an existing consulting agreement.  The shares of Series H Preferred stock have not been issued at the time of this filing.

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(18)	On September 5, 2017, we entered into an employment agreement with our former Executive Chairman and Chief Executive Officer, who was in office at the time, for a period of two years for services as our Executive Chairman and Chief Executive Officer.  The initial term of the agreement is for two years and shall automatically renew on a year to year basis, unless terminated sooner.  The base compensation is $360,000 per year plus 1,500 shares of our Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by our Board of Directors, but no Certificate of Designation has been filed with the appropriate authoritative body.  An additional cash or stock bonus may be awarded, subject to the attainment of such individual and ActiveCare objectives as our Board of Directors shall establish from time to time as determined by our Board of Directors.  Upon certain termination conditions upon termination of the agreement, we may be required to pay severance of twice the base compensation of the former Executive Chairman and Chief Executive Officer at its highest point during the five-year period prior to termination. In addition, our Board of Directors approved compensation at a level of $360,000 per year retroactive from July 2017, when the former Executive Chairman and Chief Executive Officer was appointed, until the employment agreement was signed. Effective October 12, 2017, the agreement was amended to waive any constructive termination in relation to changes in title, working conditions or duties such that his powers are diminished, reduced or otherwise changed to include powers, duties, or working conditions which are note materially consistent with title, continuing after written notice and 10 days to cure.
(19)	On September 5, 2017, our Board of Directors granted 963 shares of Series H Preferred stock to our former Executive Chairman and Chief Executive Officer, who was in office at the time, in lieu of 96,275 shares of previously granted common stock as a bonus for services performed.  The Series H Preferred shares have not yet been issued.
(20)	On September 5, 2017, our Board of Directors granted 200 shares of Series H Preferred stock to the holder of an unsecured note payable with a balance of $300,000 as of June 30, 2017 for the extension of the note payable.  The Series H Preferred shares have not yet been issued.
(21)	From September 21, 2017 through December 1, 2017, we received cash advances totaling $230,000 from an entity controlled by our former Executive Chairman and Chief Executive Officer, who was in office at the time, and repaid $10,000 plus the reimbursement of bank fees of $200.
(22)	On September 25, 2017, we entered into agreements with its primary product vendor that supersedes all prior agreements with the vendor.  Under the agreements, the vendor will provide all products and services to our service members as they are assigned to the vendor.  In return, the vendor will pay us a fee for services rendered to the vendor and to the members for monitoring and reporting.  We also earn commissions on all members assigned under the agreement to be paid upon completion of certain milestones met with each individual member.  The agreements also modify the terms of an existing note payable to the vendor.  The note accrues interest at 0.65% per annum, is reduced by the amount of commissions earned by us under the agreements and matures on September 25, 2019. The agreements also add interest fees on existing accounts payable at 0.65% per annum and the accounts payable are reduced by the amount of commissions earned by us under the agreements for a minimum of 24 months.
(23)	On September 27, 2017, we received a cash advance from a third party in the amount of $40,000, which incurs fees of $600 per day until repaid.
(24)	In October 2017, we entered into a settlement agreement related to an unsecured note payable with a principal balance of $300,000 as of June 30, 2017.  As part of the agreement, the lender lent us an additional $200,000 which has been added to the principal balance of the note payable.  The agreement modified the terms of the note payable to become secured by inventory owned by us, requires issuance of 3,000 shares of Series H Preferred Stock, which were granted by our Board of Directors on September 5, 2017 and are required to be able to convert the lender's shares into 300,000 shares of the Company's common stock, and requires payments of $8,600 for 72 consecutive weeks.  If any payment is late, we are required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default.  The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor.  The fair value of the shares will be amortized over the life of the amended note. The note terms are adjustable for any terms subsequently provided to other investors.
(25)	On November 7, 2017, we entered into individual agreements related to secured borrowings from four different parties that each previously purchased customer receivables that require daily payments.  The agreements modified each agreement to reduce the amount of the respective daily payment to approximately half of the amount previously drawn through January 7, 2018, whereafter the amount of the payment returns to the payment required under the respective agreement plus an additional amount equal to the amount shorted during the period of lower payments divided by the number of remaining payments remaining on the original term of the respective note payable.  Three of the four agreements are verbal.  On January 5, 2018, we further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018.  Three of the four agreements are verbal.
(26)	On November 13, 2017, an entity controlled by a former Executive Chairman of the Board of Directors, with whom we contracted for consulting, terminated the existing consulting arrangement.

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(27)	On November 13, 2017, we entered into a sales broker agreement with an entity controlled by a former Executive Chairman of the Board (the "Sales Broker ").  Under the Sales Broker agreement, the Company will provide services to certain customers referred to us and the Sales Broker will receive administration fees in the amount of 15% of gross revenues, as defined by the Sales Broker agreement, as long as the Company services the respective customer even in the event the Sales Broker agreement is terminated.  The Sales Broker will promote the Company, its services and products, and introduce potential customers to us as a sales representative.  The initial term of the Sales Broker agreement is one year, which automatically renews for additional one-year periods until cancelled by either party.
(28)	On November 30, 2017, we signed a letter of understanding with a former consultant where we agreed to convert $100,000 of past consulting fees owed into an equivalent value of our equity upon a qualifying capital raise.
(29)	On November 10, 2017, we signed a formal agreement replacing a former verbal agreement with an unsecured note holder, with principal due of $350,000 as of June 30, 2017.  The new agreement memorialized previously agreed upon terms whereby the lender converted a $350,000 advance into an unsecured note payable, with interest at 2.8% of revenues, for $143,987 in fees and a future payoff fee of 20% of the principal, or $70,000, which are included in accrued liabilities and interest expense as of June 30, 2017.  The written agreement adjusted the verbal agreement to where we are required to pay any outstanding interest at the end of the first month following a quarter end. The lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and the written agreement includes a most favored nations clause in relation to conversion features.
(30)	On November 27, 2017, we signed a formal agreement memorializing previous agreements with the holder of an unsecured note and cash advance, with aggregate principal due of $1,200,000 as of June 30, 2017, as well as additional advances with aggregate principal of $190,000 that were received subsequent to June 30, 2017.  The new agreement memorialized the terms of the note payable whereby the lender converted $617,500 in advances into a $1,100,000 unsecured note payable, with interest at 18% per annum for $95,226 in fees, which have been included in accrued liabilities and interest expense as of June 30, 2017.  In addition, the new agreement allows for advances to incur fees at 1.5% of the advance principal per calendar day until paid in full.  The written agreement adjusted the verbal agreements to where the note payable and advance balances and fees may be called by the lender at any time and are due by May 30, 2018, and the new agreement includes a most favored nations clause in relation to conversion features on the note payable and advances.  The new agreement also assigned $2,000,000 of note payable principal held by an entity controlled by an officer to the lender.  All interest accrued on the assigned balance is payable to the officer.
(31)	On December 6, 2017, we entered into those certain forbearance and lock up letter agreements with three (3) debtors which held convertible debentures in the aggregate principal amount of $1,109,345 at the time of the agreements, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering of $3,000,000 or more.  Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents.  The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.  In addition, two (2) of the debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity.

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(32)	Effective December 11, 2017, we entered into a Securities Purchase Agreement (the "Purchase Agreement") with four accredited investors, including our new Chief Executive Officer in connection with the closing of a bridge financing (the "Bridge Financing") in the gross amount of $600,000. The three remaining accredited investors hold notes payable with an aggregate principal balance of $3,865,865 as of June 30, 2017. Pursuant to the Purchase Agreements, the Investors purchased from us (i) Promissory Notes in the aggregate principal amount of $631,578.06 (the "Notes") due and payable six months from the Effective Date and (ii) Common Stock Purchase Warrants (the "Warrant"), exercisable for five years from the date of issuance, to purchase up that certain amount of shares with an aggregate exercise amount equal to $600,000 at an exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in the companies contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the "Private Placement") (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment hereunder (the "Exercise Price"). The Notes were issued in favor of the Investors with an original issue discount equal to five percent (5%). Additionally, pursuant to the Purchase Agreement, we will issue the investors common stock (the "Origination Shares") worth 30% of the purchase price paid by each investor (the "Origination Dollar Amount") on the 5th trading day after the pricing of the Private Placement, but in no event later than six months from the Effective Date. The Origination Dollar amount will divided by the lowest of (i) $3.00 (subject to adjustment for stock splits), (ii) 80% of the common stock offering price in the Private Placement, (iii) 80% of the offering price of the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement.  At the closing of the Private Placement the Note shall automatically convert into a subscription into the Private Placement in an amount equal to 125% of the Note balance, subject to certain conditions as outlined therein. If we fail to repay the balance due under the Note on its Maturity the Investors have the right, at any time, at their election, to convert all or part of the outstanding and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of our common stock pursuant to the following conversion formula: number of shares receivable upon conversion equals the dollar amount being converted divided by the Conversion Price. The Conversion Price is the lesser of $3.00 (subject to adjustment for stock splits) or 60% of the lowest trade price in the 25 trading days. Further, in the event of any default, the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof through the date of acceleration (the "Note Balance"), shall become, at the Investor's election, immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the investor's choice of (this choice may be made at any time without presentment, demand, or notice of any kind): (i) the Note Balance divided by the Conversion Price on the date of the default multiplied by the closing price on the date of the default; or (ii) the Note Balance divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a lower Conversion Price, multiplied by the closing price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a higher closing price; or (iii) 150% of the Note Balance. If, at any time the Note is outstanding, we issue a Variable Security (as defined therein), then in such event the Investors shall have the right to convert all or any portion of the outstanding balance of the Notes into shares of Common Stock on the same terms as granted in any applicable Variable Security issued by the Company.
(33)	On November 17, 2017, we received cash advances from third parties totaling $60,000.  On January 5, 2018, the advances converted into agreements with the same terms as the Bridge Financing entered into on December 11, 2017.
(34)	On December 11, 2017, Eric Robinson voluntarily resigned as Chief Financial Officer, Secretary and In-House Counsel, and all other positions with the Company to which he has been assigned regardless of whether he served in such capacity, effective immediately. On the same date, Jeffrey S. Peterson voluntarily resigned as Chairman of the Board of Directors, while acknowledging that he will continue to serve the Company as a Director and Executive Vice President.  On the same date, Robert J. Welgos and Bradley Robinson voluntarily resigned as members of the Board of Directors and all other positions with us to which they may have been assigned, regardless of whether they served in such capacity, effective immediately.  These resignations were not as a result of any disagreements with us.
(35)	On December 11, 2017, Isaac Onn was appointed as a member of our board of Directors and Mark J. Rosenblum was appointed as our Chairman of the Board of Directors and Chief Executive Officer in connection with the Bridge Financing.  In connection with Mr. Rosenblum's appointment as our Chief Executive Officer, on December 11, 2017, we and Mr. Rosenblum finalized the terms of his employment and entered into an employment agreement (the "Rosenblum Employment Agreement"). Mr. Rosenblum shall have such duties, responsibilities and authority which shall include, but not be limited to the responsibility for the overall management, direction and strategy of the Company. We shall pay Mr. Rosenblum a salary at a rate of Three Hundred Thousand and 00/100 Dollars ($300,000) per year (the "Initial Base Salary"). The Initial Base Salary shall increase to an annual rate of Three Hundred and Sixty Thousand Dollars ($360,000) (the "Base Salary") upon our closing a financing of at least Five Million Dollars ($5,000,000). Mr. Rosenblum shall be eligible for an annual performance-based cash bonus of up to 100% of the Base Salary (as further defined in the Rosenblum Employment Agreement"). The Rosenblum Employment Agreement is for a term of three (3) years and will be automatically renewed for one year periods, unless otherwise terminated by us or Mr. Rosenblum. Upon execution of the Rosenblum Employment Agreement we agreed to issue restricted shares equal to $300,000 valued at the offering price of the next equity offering of the Company ("RSU") and an option to purchase an aggregate $600,000 valued at the offering price of our next equity offering at an exercise price equal to the market price for our next equity offering (the "Options"). One-third of these Options shall vest immediately, another third on the first anniversary of the Rosenblum Employment Agreement, and the final third on the second anniversary of the Rosenblum Employment Agreement. The RSUs shall vest 50% immediately upon issuance and 25% on each of the first and second anniversaries of the Rosenblum Employment Agreement. If the Company terminates Mr. Rosenblum's employment without just cause or if Mr. Rosenblum's employment is terminated due to Disability (as defined therein), Mr. Rosenblum shall be entitled to receive, in addition to any accrued and unpaid Base Salary, plus any accrued but unused vacation time and unpaid expenses that have been earned as of the date of such termination, the following severance payments (the "Severance Payments"): (i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following such termination and continuing until the later of (A) the expiration of the Term or (B) the expiration of (i) six (6) months following the effective termination date; provided, however, that if we terminate the Agreement without Just Cause (as defined in the Rosenblum Employment Agreement) within six (6) months of the effective date, then Mr. Rosenblum will only be entitled to three (3) months of severance instead of six (6) months; and (ii) during the Severance Period (as defined in the Rosenblum Employment Agreement), health and life insurance benefits substantially similar to those which Mr. Rosenblum was receiving or entitled to receive immediately prior to termination; provided, however, such insurance benefits shall be reduced to the extent comparable benefits during such period following Mr. Rosenblum's termination, and any benefits actually received shall be reported by Mr. Rosenblum to us.  We will reimburse Mr. Rosenblum for any reasonably travel and relocation expenses.

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(36)	During December 2017, we entered into those certain forbearance and lock up letter agreements with a debtor which holds convertible debentures in the principal amount of $25,312 as of December 5, 2017, whereby the debtor agreed that, without our prior written consent, the debtor will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering of $3,000,000 or more. Additionally, the debtor agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the convertible debentures. The forbearance and lock up letter agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.
(37)	On January 12, 2018, we received letters from four (4) debtors which hold convertible debentures with principal balances totaling $3,162,955 as of June 30, 2017 where the debtors forbear against any historical and future events of default and remedies through February 15, 2018 and extended the maturity date through February 15, 2018. As part of the letters, we agreed not to initiate any new financing arrangements without the consent of the debtors.
(38)	On January 12, 2018, we received a letter from a lender who holds two unsecured notes payable with principal balances totaling $550,000 as of June 30, 2017 where the lender forbears against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock.
(39)	On December 22, 2017, we entered into a Services Agreement (the "Cleveland Clinic Agreement") with the Cleveland Clinic Foundation d.b.a. Cleveland Clinic, an Ohio nonprofit corporation ("Cleveland Clinic"). Pursuant to the Cleveland Clinic Agreement, we will be providing services to Cleveland Clinic as agreed to by the parties in any mutually agreed form pursuant to a "Statement of Work". Pursuant to the Statement of Work included in the Cleveland Clinic Agreement, we will provide monitoring services to Cleveland Clinic's expected beneficiary diabetic population within the Cleveland Clinic Medicare ACO. The initial term of the Cleveland Clinic Agreement is for three years and shall automatically renew after the term for a successive twelve (12) month period from year to year unless sooner terminated by either party in accordance with the terms of the Cleveland Clinic Agreement. As consideration for our Services, we are to receive a fixed monthly fee per Covered Diabetic Patient (as defined in the Cleveland Clinic Agreement). In addition, at such time the Cleveland Clinic Accountable Care Organization ("CCACO") shall receive a shared savings payment from the Centers for Medicare and Medicaid Services, CCACO shall share such savings with us based on a formula defined in the Cleveland Clinic Agreement. Cleveland Clinic may, by written notice to us, terminate the Agreement, any purchase order or any portion of a purchase order if we (i) are in material breach of any of the terms and conditions of the Cleveland Clinic Agreement or any Purchase Order, which breach in not cured within thirty (30) days after notification of such breach, (ii) terminate or suspend our business, become insolvent, or become subject to any bankruptcy or insolvency proceeding under Federal or State law. Cleveland Clinic further may terminate the Cleveland Clinic Agreement, any Purchase Order or any portion of any Purchase Order for convenience upon ninety (90) days' prior written notice to us ("Termination for Convenience"). In connection with any Termination for Convenience, Cleveland Clinic will reimburse Company for the actual cost reasonably incurred for work in process up to the time of cancellation, as well as any non-cancellable contract of Company, or non-cancellable purchase order to a third party, entered into for the benefit of Cleveland Clinic. The Cleveland Clinic Agreement is nonexclusive, and Cleveland Clinic may contract with others to perform similar services. Accordingly, the Company may also perform similar services for others.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Information about our exposure to market risk was disclosed in our Annual Report on Form 10-K for the year ended September 30, 2016, which was filed with the Securities and Exchange Commission ("SEC") on January 13, 2017. There have been no material quantitative or qualitative changes in market risk exposure since the date of that filing.

Item 4.  Controls and Procedures

(a)  Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information that is required to be disclosed in our reports under the Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized, and reported within the time periods that are specified in the rules and forms of the SEC and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding any required disclosure.  In designing and evaluating these disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2017, our disclosure controls and procedures were not effective, for the reasons discussed below.  

During the audit process for the year ended September 30, 2016 and the review process for the nine months ended June 30, 2017, management identified ineffective controls over the accounting for 1) debt issuance costs and derivatives, and 2) debt extinguishments as material weaknesses in internal control over financial reporting.

We are in the process of improving our internal control over financial reporting in an effort to eliminate these material weaknesses through improved supervision and training of our staff. Our management, audit committee, and directors will continue to work to ensure that our controls and procedures become adequate and effective.

(b)  Changes in Internal Control over Financial Reporting 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

Except as set forth below, there are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years.

On May 28, 2015, an investor in the Company, filed a lawsuit against the Company, James Dalton, our former CEO and Chairman, ADP Management, an entity controlled by David Derrick, our former Executive Chairman, and 4G Biometrics, a wholly owned subsidiary of the Company in the District Court of Utah-Central Division (Case No. 2:15-CV-00373-BCW). The lawsuit alleges a breach of contract, breach of the implied covenant of good faith and fair dealing, fraud and conspiracy to commit fraud and seeks damages in excess of $1,000,000, exclusive of interest and costs. The Company has engaged legal counsel regarding the matter. The Company has assessed a high probability of settling the matter for $750,000 in cash, equity, or a combination thereof.

Item 1A. Risk Factors.

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on January 13, 2017.

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

During the three months ended June 30, 2017, we issued 7,000 shares of common stock for services provided by an independent consultant, with a value on the date of grant of $70,000 in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.

There were no other unregistered sales of the Company's equity securities during the quarter ended June 30, 2017, that were not otherwise disclosed in a Current Report on Form 8-K.

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Item 3.  Defaults Upon Senior Securities

As of the date of this report, notes payable due to unrelated parties with total principal amounts of $2,776,046, owing as of June 30, 2017, are past due, in default, and unpaid.  In addition, notes payable due to related parties with total principal amounts of $26,721, as of June 30, 2017, are past due, in default and unpaid.  These defaults include obligations owed to Partners for Growth, our secured lender, which are in excess of $2,700,000 and are secured by substantially all assets of the Company.  We intend to make payments on these notes payable as funds are available.  Other notes are currently in technical default. However, as of the time of this report, the lenders have informally agreed to work with us until such time as the notes can be repaid and some of the lenders have provided bridge capital since going in default.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6. Exhibits

Exhibit Number	Description
4.1	Form of Warrant (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
10.1	Form of employment agreement with former chief executive officer.
10.2	Factoring Agreement by and between Complete Business Solutions Group, Inc. and ActiveCare, Inc. (incorporated by reference to Current Report on Form 8-K filed with the SEC on April 20, 2017).
10.3	Joint Venture Agreement by and between Colorado Choice Health Plans and ActiveCare, Inc. (incorporated by reference to Current Report on Form 8-K filed with the SEC on April 20, 2017).
10.4	Amendment # 5 to the Securities Purchase Agreement and the $2,000,000 Promissory Note dated September 19, 2016 (incorporated by reference to Current Report on Form 8-K filed with the SEC on April 20, 2017).
10.5	Form of Forbearance and Lock Up Agreement (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
10.6	Form of Securities Purchase Agreement (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
10.7	Form of Promissory Note (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
10.8	Employment Agreement by and Between Mark J. Rosenblum and ActiveCare, Inc. (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
17.1	Letter of Resignation from Bradley Robinson (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
17.2	Letter of Resignation from Eric Robinson (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
17.3	Letter of Resignation from Jeffrey S. Peterson (incorporated by reference to Current Report on Form 8-K filed with the SEC on December 14, 2017).
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32	Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

* Filed herewith

*  The XBRL related information in Exhibit 101 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ActiveCare, Inc.
Date: January 31, 2018	/s/Mark J. Rosenblum
	Mark J. Rosenblum Chief Executive Officer (Principal Executive Officer)

Date: January 31, 2018	/s/Jeffrey S. Peterson
	Jeffrey S. Peterson Executive Vice President (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of the 5^th day of September, 2017, between Jeffrey Peterson, an individual ("Executive"), and ACTIVECARE, INC., a Delaware corporation ("ActiveCare"). Executive and ActiveCare are sometimes collectively referred to herein as the "parties."

RECITALS

WHEREAS, ActiveCare is a corporation engaged in the business of monitoring individuals with diabetes; and

WHEREAS, Executive desires to obtain from ActiveCare certain benefits as set forth in this Agreement and ActiveCare desires to obtain from Executive a commitment to render services to ActiveCare and to provide various covenants relating to non-competition, intellectual property, non-disclosure and non-solicitation on the terms and conditions set forth in this Agreement, and Executive wishes to be employed by ActiveCare on such terms and conditions.

AGREEMENT

NOW, THEREFORE,in consideration of the mutual promises and covenants contained herein, the parties agree as follows:

1.Employment.  ActiveCare hereby employs Executive in the position of Chief Executive Officer.

2.Term. The term of Executive's employment shall commence on the effective date of this Agreement and continue for an initial term of 2 year, unless sooner terminated as provided herein. Upon expiration of the initial term, the term of Executive's employment shall automatically renew on a year-to-year basis, unless and until terminated as provided herein.

3.Executive's Duties and Responsibilities.

3.1 Services with ActiveCare. During the term of Executive's employment, Executive shall be appointed as Chief Executive Officer and shall perform such duties as are commensurate with his position as Chief Executive Officer. The Executive may be asked to also serve as a director of ActiveCare during all or part of the Term of this Agreement. Executive shall not receive any additional compensation for serving on the Board of Directors (the "Board"). Executive shall abide by the rules, regulations, and practices as adopted or modified from time to time by ActiveCare, in its discretion.  Further, shall Executive's duties, responsibilities, or title change, said agreement shall remain in full force and effect in its entirety, and specifically including Sections 4 and 7 of said agreement herein.

3.2 Performance of Duties. Executive agrees to serve ActiveCare faithfully and to the best of Executive's ability. Executive will spend his full-time effort performing his duties for ActiveCare.  Executive may set his own schedule, and is not required to be present for any set hours per day, week or month.

3.3 No Conflict.  Executive hereby confirms that he is under no contractual commitments inconsistent with Executive's obligations set forth in this Agreement and that during the term of this Agreement, Executive will not render or perform services for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement.  While Executive remains employed by ActiveCare, Executive may participate in outside business activities as described in section 3.5. and in reasonable charitable activities and personal investment activities so long as such activities do not interfere with the performance of Executive's obligations under this Agreement.

3.4 Location. Executive's principal office shall initially be located in Orem, Utah, subject to necessary travel requirements of his position and duties hereunder.  ActiveCare reserves the right to move Executive's principal office to a location within a 50 miles radius of said location.

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4.Compensation.

4.1 Base Salary. During the term of this Agreement, ActiveCare shall pay to Executive an annual Base Salary in the amount of $360,000 in consideration for Executive service to ActiveCare. Executive shall be entitled to annual compensation reviews in which all aspects of his compensation shall be compared with Chief Executive Officer of similarly situated companies with the objective of providing the Executive with appropriate rewards and incentives.  In no event shall Executive's compensation be decreased.  Executive's salary shall be paid in accordance with the Company's regularly established payroll practice.  Executive's Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries.  Effective as of the date of any change to Executive's Base Salary, the Base Salary as so changed shall be considered the new Base Salary for all purposes of this Agreement.

4.2 Bonus Compensation.  Subject to the attainment of such individual and ActiveCare objectives as the Board of Directors of ActiveCare shall establish, the Executive will be awarded a cash and or stock bonus from time to time as determined by the Board of Directors of ActiveCare.

4.3 Long Term Incentive. Executive shall receive 1,500 shares of Series H Preferred Stock of ActiveCare Stock.

4.4 Participation in Benefit Plans. During the Term, the Executive and, to the extent eligible, his dependents, shall be entitled to participate in and receive all benefits under any Executive benefit plans and programs provided by ActiveCare (including without limitation, 401(k), medical, dental, disability, group life (including accidental death and dismemberment) and business travel insurance plans and programs) to full-time senior management personnel of ActiveCare, subject, however, to the terms and conditions of the various plans and programs in effect from time to time.

4.5 Expenses. ActiveCare agrees to pay or to reimburse the Executive during the Term for all reasonable, ordinary and necessary vouchered business or entertainment expenses incurred in the performance of his services hereunder in accordance with the policy of ActiveCare as from time to time in effect.

4.6 Personal Time Off. Executive will be entitled to, and as described in the Executive Handbook, personal days off during each calendar year. The Executive shall accrue paid personal time off days in accordance with the personal time off days policy of ActiveCare applicable generally to Executives of ActiveCare in effect from time to time.

4.7 Benefit Program Changes. Notwithstanding anything contained herein to the contrary, ActiveCare reserves the right to modify, amend or terminate any Executive benefit plan or policy as it deems appropriate in its discretion; provided that unless required by law, ActiveCare shall not amend, modify or terminate any such plan or policy in a manner that treats the Executive differently from other similarly situated Executives.

4.8 Withholdings. All compensation, including without limitation the salary and bonus, paid to the Executive shall be subject to applicable tax withholding requirements as are required by federal, state and local laws, including, but not limited to, federal, state, and local income taxes, FICA and Medicare, and such other sums on which ActiveCare and Executive may agree from time-to-time in writing.

2

5.Confidential Information.  Except as permitted or directed by the Board, during the term of Executive's employment or at any time thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of ActiveCare) any confidential or secret knowledge or information of ActiveCare that Executive has acquired or become acquainted with or will acquire or become acquainted with prior to the termination of the period of Executive's employment by ActiveCare (including employment by ActiveCare prior to the date of this Agreement), whether developed by Executive or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of ActiveCare, any customer or supplier lists of ActiveCare, any confidential or secret development or research work of ActiveCare, or any other confidential information or secret aspects of the business of ActiveCare.  Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of ActiveCare and represents a substantial investment of time and expense by ActiveCare, and that any disclosure or other use of such knowledge or information other than for the exclusive benefit of ActiveCare would be wrongful and would cause irreparable harm to ActiveCare.  Both during and after the term of Executive's employment, Executive will refrain from any acts or omissions that would reduce the value of such knowledge or information to ActiveCare.  The foregoing obligations of confidentiality shall not apply to any knowledge or information that is (a) now made generally available to the public; (b) subsequently becomes generally publicly known in the form in which it was obtained from ActiveCare, other than as a direct or indirect result of the breach of this Agreement by Executive; or (c) was known to or held by Executive prior to disclosure thereof by ActiveCare to Executive, as evidenced by pre-existing written documentation.

5.1 Good Faith Effort. Notwithstanding the foregoing, in the event that Executive has knowledge of secret, confidential and/or proprietary information to which ActiveCare has a claim, then Executive shall not be liable to ActiveCare pursuant to the provisions of this Agreement for any disclosures of such information, if Executive makes a good faith attempt to maintain the information as secret, confidential and/or proprietary.

5.2 Right to Pursue "Outside Activities".  Notwithstanding anything else contained in this Agreement and unless subsequently agreed by ActiveCare and Executive in writing, Executive shall not be prohibited from engaging in other Outside Activities during the term of this Agreement, or after termination of the Agreement, and ActiveCare shall not be entitled to damages, or other relief, by virtue of the fact that Executive is or continues to engage in University or other Outside Activities.

6.Noncompetition Covenant.

6.1Agreement Not to Compete.  During the term of Executive's employment with ActiveCare Executive agrees to not compete in any manner in which ActiveCare engages in.

6.2Geographic Extent of Covenant.  The obligations of Executive under Section 6.1 shall apply to any geographic area in which ActiveCare (i) has engaged in business during the term of this Agreement through production, promotional, sales or marketing activity, or otherwise, or (ii) has otherwise established its goodwill, business reputation or any customer or supplier relations.

6.3Acknowledgment.  Executive agrees that the restrictions and agreements contained in this Section 6 are reasonable and necessary to protect the legitimate interests of ActiveCare and that any violation of this Section 6 will cause substantial and irreparable harm to ActiveCare that would not be quantifiable and for which no adequate remedy would exist at law and accordingly injunctive relief shall be available for any violation of this Section 6.

6.4Blue Pencil Doctrine.  If the duration or geographical extent of, or business activities covered by, this Section 6 are in excess of what is valid and enforceable under applicable law, then such provision shall be construed to cover only that duration, geographical extent or activities that are valid and enforceable.  Executive acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

3

7.Termination of Employment.

7.1 Termination for Cause. This Agreement may be terminated by ActiveCare immediately and without notice only upon the occurrence of any of the following events (each of which shall constitute "Reasonable Cause" for termination):

a.  Executive commits any act of gross negligence, fraud, dishonesty, or willful violation of any law or material violation of any significant written policy of ActiveCare that causes any harm to ActiveCare;

b. Conviction of Executive of a felony or serious crime involving moral turpitude;

c. Repeated drunkenness or illegal narcotic drug use by Executive;

d. Failure to substantially perform the duties reasonably assigned to Executive, or any intentional refusal without compelling reason by Executive to discharge Executive's job responsibilities and/or respond to ActiveCare's legitimate job-related requests, insofar as such responsibilities and/or requests do not contravene law;

e. Any excessive and unexcused absenteeism by Executive;

f. Failure to cooperate in an investigation conducted and/or undertaken by ActiveCare or a governmental agency which has reasonable and legitimate objectives; and

g. Except as otherwise authorized by the terms of this Agreement, any act of intentional conflict of interest by Executive to ActiveCare which has the potential to cause economic and/or other damage to ActiveCare.

7.2 Voluntary Termination. The Executive may, with three months' notice, terminate this Agreement at any time.

Upon the termination of the employment of the Executive with ActiveCare pursuant to this Section 7.2, the Executive shall be entitled to receive, subject to any offsets, amounts as defined by Section 7.5 (a), (b), (c), and (d). In addition, Executive's unit options shall be governed by Section 7.5 (e).

7.3Death or Disability. In the event the Executive shall be unable to perform his duties hereunder for a period of more than one hundred and twenty (120) days by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever) in substantially the manner and to the extent required hereunder prior to the commencement of such disability (all such causes being herein referred to as "disability"), ActiveCare shall have the right to terminate Executive's employment hereunder as at the end of any calendar month during the continuance of such disability upon at least 60 days' prior written notice to him. This provision shall comply with those rights to which Executive may be entitled under the Americans with Disabilities Act, Family Medical Leave Act, or other federal, state, or local laws.  In the event of the Executive's death, the Date of Termination shall be the date of such death.

4

In the event the Executive's employment terminates pursuant to this Section 7.3, the Executive, or in the case of his death, the Executive's estate, shall be entitled to receive, subject to any offsets, amounts as defined by Section 7.5 (a), (b), (c), (d) and (f). In addition, Executive's unit options, if any, shall be governed by Section 7.5 (e).

Except as provided in this Section 7.3, ActiveCare shall have no further liability to the Executive or the Executive's heirs, beneficiaries or estate for damages, compensation, benefits, severance, indemnities or other amount of whatever nature.

7.4.Constructive Termination. In the event Executive terminates his employment as a result of a Constructive Termination (defined below), Executive shall be entitled to compensation, subject to any offsets, as set forth in Section 7.5 (a), (b), (c), (d), (f) and (i). Executive's unit options shall be governed by the provisions of Section 7.5 (g). In addition, Executive shall be entitled to the severance compensation as set forth in Section 7.5 (h).

A "Constructive Termination" will exist in the event the Executive terminates his employment with ActiveCare after ActiveCare:  (i) materially breaches this Agreement, which breach is not cured within 10 days following written notice from Executive; (ii) changes Executive's title, working conditions or duties such that Executive's powers are diminished, reduced or otherwise changed to include powers, duties, or working conditions which are not materially consistent with title, continuing after written notice and 10 days to cure; (iii) commits acts that would cause Executive to commit fraudulent acts or expose Executive to criminal liability; (iv) involuntarily relocates the Executive's primary place of employment beyond the location as defined in Section 1.2;  (v) merges with or is acquired by another person or entity, or another person or entity, directly or indirectly, acquires sufficient power or control to direct the  activities of ActiveCare, and ActiveCare fails to obtain the assumption in writing of its obligations to perform this Agreement by any within 15 days after the occurrence of the transaction resulting in such. For the purpose of this definition, "control" shall also mean the ability to cause any decision to be taken of or by ActiveCare through ownership of units, voting rights or control of the management; or (vi) ActiveCare decides to abandon or significantly change the direction of its scientific research and/or development, contrary to the direction advocated by Executive.

Except as provided in this Section 7.4, ActiveCare shall have no further liability to the Executive or the Executive's heirs, beneficiaries or estate for damages, compensation, benefits, severance, indemnities or other amount of whatever nature.

7.5.Termination Settlement. The specific consideration due the Executive is controlled by the nature of the termination as defined in the above Sections. In each instance, calculations will be based on Date of Termination.

a.Any earned but unpaid salary compensation;

b.Any earned but unpaid cash bonus;

5

c.Any unused accrued vacation;

d.Any unpaid reimbursable expenses;

e.Subject to such terms and conditions as expressly required by the applicable unit plans, (i) all vested unit options shall remain exercisable for a ninety (90) days (ii) all unvested unit options shall be forfeited, and (iii) all unvested units, shall be forfeited notwithstanding any contrary provisions in the unit grant;

f.A pro rata annual incentive award for the year in which Executive's termination occurs, based on the maximum award opportunity for such year, payable in a single installment;

g.Full vesting of any outstanding long-term incentive awards, unit options and restricted units, granted to Executive under any long-term incentive plan or plans of ActiveCare in which Executive has participated;

h.A lump sum severance payment in an amount equal to twice the Executive's Base Salary.  This amount is to be paid within thirty (30) days of the termination of Executive's employment.

i.Continued medical insurance for eighteen (18) months, paid for entirely by ActiveCare.

j.All personal guarantees made by Executive on and in behalf the of ActiveCare shall be fully satisfied in all aspects, with no remaining personal guarantees by Executive to be remaining after 14 days of termination, by either voluntary or cause.

7.6.Base Salary for Severance Benefit Determinations.  Base salary shall be the highest received cash compensation by Executive over the last five years.

7.7New Employment. Executive shall inform ActiveCare of the identity of any new employer promptly (no more than twenty-four (24) hours) after accepting new employment and shall inform ActiveCare of all changes in employment for one (1) year following the termination, for any reason, of Executive's employment with ActiveCare.  The acceptance of new employment by Executive does not mitigate ActiveCare's obligations under this agreement.  ActiveCare may serve notice on any future employer of Executive that Executive has been exposed to secret, confidential or proprietary information, that Executive is subject to the terms of this Agreement, and that Executive has continuing obligations to ActiveCare under this Agreement.

7.8Resignation and Cooperation. Upon termination of Executive's employment, Executive shall be deemed to have resigned from all offices and directorships then held with the Company.  Following any termination of employment, Executive shall cooperate with the Company in the winding up of pending work on behalf of the Company and the orderly transfer of work to other Executives.  Executive shall also cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Executive's employment by the Company.

7.9 Surrender of Records and Property.  Upon termination of Executive's employment with ActiveCare, Executive shall promptly deliver to ActiveCare all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof that relate in any way to the business, products, practices or techniques of ActiveCare, and all other property, trade secrets and confidential information of ActiveCare, including, but not limited to, all documents that in whole or in part contain any trade secrets or confidential information of ActiveCare, which in any of these cases are in Executive's possession or under Executive's control.

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8.Settlement of Disputes.

8.1 Resolution of Certain Claims—Injunctive Relief.  Executive acknowledges that it would be difficult to fully compensate ActiveCare for damages resulting from any breach by him of the provisions of this Agreement.  Accordingly, Executive agrees that, in addition to, but not to the exclusion of any other available remedy, ActiveCare shall have the right to enforce the provisions of Sections 5, 6, 7, and 8) by applying for and obtaining temporary and permanent restraining orders or injunctions from a court of competent jurisdiction without the necessity of filing a bond therefore, and without the necessity of proving actual damages.

8.2 Venue.  Any action at law, suit in equity or judicial proceeding arising directly, indirectly, or otherwise in connection with, out of, related to or from this Agreement, or any provision hereof, shall be litigated only in the courts of the State of Utah, Utah County.  Executive waives any right Executive may have to transfer or change the venue of any litigation brought against the Executive by ActiveCare.

9.Miscellaneous Provision.

9.1Waiver.  The parties hereby shall not be deemed to have waived any of their respective rights under this Agreement unless such waiver is in writing and signed by such waiving party.

9.2 Notices.  Any notice required or permitted to be given under this Agreement shall be sufficient if given in writing and sent by mail, postage prepaid, return receipt requested, or via hand delivery or overnight courier, to Executive at the last address given for Executive on file with ActiveCare, or to ActiveCare at its principal office.  Such notice shall be deemed complete upon receipt or upon refusal of such delivery as evidenced by the receipt from the postal service or courier.

9.3 Amendment.  No amendment or extension of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.4 Governing Law.  This Agreement shall be governed by the laws of the State of Utah without giving effect to the conflict of law provisions thereof.

9.5 Binding Upon Heirs.  This Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors, heirs, personal representative and permitted assigns.

9.6 Notice. Any notice given to Executive pursuant to this Agreement shall be sufficiently given if sent to Executive by registered or certified mail addressed to the Executive at such address as Executive shall have designated in writing to ActiveCare. Any notice given to ActiveCare pursuant to this Agreement shall be sufficiently given if sent to ActiveCare by registered or certified mail to ActiveCare at such address as ActiveCare shall have designated in writing to Executive.

9.7 Arbitration. Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be finally settled under the Commercial Arbitration Rules of AAA the arbitration shall be conducted before one (1) arbitrator selected by mutual agreement of ActiveCare and Executive; if no agreement is made within ten (10) business days from the date a demand for arbitration was filed with the AAA, ActiveCare and Executive shall request a list of at least seven (7) arbitrators from AAA, and the parties shall alternately strike a name from the list until one name is left. The arbitration shall otherwise be conducted as follows:

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a.The arbitration hearing shall take place no later than ninety (90) days following the AAA's notice of the selection of an arbitrator;

b.Discovery shall be permitted, including depositions, interrogatories, requests for admissions, or production of documents, as determined by the arbitrator;

c.The arbitrator shall give his/her decision in writing, after the conclusion of the proceeding. The arbitrator may request that the parties submit post-hearing briefs.

d.Any arbitration proceeding under this Agreement shall (1) be conducted in such a manner that the proprietary or confidential information of ActiveCare remains protected, and (2) occur in Salt Lake City, Utah; and

e.The decision of the arbitrator is final and binding, but is subject to review pursuant to the laws of the State of Utah.

9.8 Attorney Fees and Costs.  If there is a default hereunder, the defaulting party shall pay the attorney fees, legal expenses and costs of the non-defaulting party incurred in enforcing the terms of this Agreement or obtaining appropriate legal relief for such breach.

9.9 Nonassignability.  This Agreement and the rights and obligations of the parties hereto may not be assigned by any party without obtaining the prior written consent of the other, and the parties expressly agree that any attempt to assign the rights of any party hereunder without such consent shall be null and void.

9.10 Integration; Severability.  This Agreement supersedes any and all other employment agreements, oral or written, between the parties.  If any provision of this Agreement is held by a court and competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect.

9.11 Authority. Each party represents and warrants that such party has the right, power and authority to enter into and execute this Agreement and to perform and discharge all of the obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement and obligation of such party and is enforceable in accordance with its terms.

9.12 Counterparts.  This Agreement may be executed in more than one counterpart, and each executed counterpart shall be considered as the original.

9.13 Further Actions.  Each of the parties agree that it shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intent and purpose of this Agreement and as are consistent with the terms hereof.

8

EXECUTIVE ACKNOWLEDGEMENT

EXECUTIVE ACKNOWLEDGES EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT, THAT EXECUTIVE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT EXECUTIVE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EXECUTIVE HAS ENTERED INTO IT FREELY BASED ON EXECUTIVE'S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above to be effective on the Effective Date.

ACTIVECARE:

By:  ______________________________________

Its:  ______________________________________

EXECUTIVE:

__________________________________________

Jeffrey Peterson

9

Addendum #1

To The Employment Agreement

Between ActiveCare and Jeffrey Peterson

Dated September 5, 2017

Effective this 12^th day of October, 2017 that should Executive's title change and/or duties, specifically referencing section 7.4.ii in relation to constructive termination, are hereby waived by Executive.  The Employment Agreement in its entirety shall remain in full force and effect with the one stated alteration above.

Further, by way of clarification, Executive's compensation was verbally agreed to in the board meeting on July 7, 2016 when he became CEO, which served as the basis of his compensation within the Employment Agreement under section 4.1.

__________________________

Robert Welgos

Board Member

__________________________

Jeffrey Peterson

Executive

10

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Mark J. Rosenblum, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ActiveCare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 31, 2018	/s/ Mark J. Rosenblum
	Mark J. Rosenblum
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey S. Peterson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ActiveCare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 31, 2018	/s/ Jeffrey S. Peterson
	Jeffrey S. Peterson
	Executive Vice President
	(Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32

 CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of ActiveCare, Inc. (the "Company") on Form 10-Q for the quarter ended June 30, 2017 as filed with the U.S. Securities and Exchange Commission on the date hereof.  I, Mark J. Rosenblum, Principal Executive Officer, and Jeffrey S. Peterson, Principal Financial and Accounting Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)Such Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in such Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Mark J. Rosenblum

Mark J. Rosenblum

Chief Executive Officer

(Principal Executive Officer)

/s/Jeffrey S. Peterson

Jeffrey S. Peterson

Executive Vice President

(Principal Financial and Accounting Officer)

Dated: January 31, 2018

This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Jun. 30, 2017	Jan. 30, 2018
Document and Entity Information:
Entity Registrant Name	ACTIVECARE, INC.
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Trading Symbol	acar
Amendment Flag	false
Entity Central Index Key	0001429896
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		239,100
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Current assets:
Cash	$ 114,440	$ 167,737
Accounts receivable, net	643,857	487,001
Inventory	501,769	204,736
Note receivable	500,000
Prepaid expenses and other	56,555	644,857
Total current assets	1,816,621	1,504,331
Property and equipment, net	56,445	86,734
Deposits and other assets	12,970	17,846
Domain name, net	8,759	9,295
Total assets	1,894,795	1,618,206
Current liabilities:
Accounts payable	3,453,795	1,700,448
Accounts payable, related party	242,568	291,753
Accrued expenses	7,765,437	2,101,711
Contingent liabilities	750,000
Current portion of notes payable	9,501,544	3,722,899
Notes payable, related party	3,869,683	3,898,124
Dividends payable	733,880	606,545
Derivatives liability	4,231,983	2,054,071
Total current liabilities	30,548,890	14,375,551
Notes payable, net of current portion	5,889,170	7,353,856
Total liabilities	36,438,060	21,729,407
Stockholders' deficit:
Preferred stock, $.00001 par value: 10,000,000 shares authorized; 45,000 shares of Series D; 70,070 shares of Series E; and 43,220 and 0 shares of Series G issued and outstanding, respectively	2	1
Common stock, $.00001 par value: 200,000,000 shares authorized; 239,100 and 232,100 shares outstanding, respectively	2	2
Additional paid-in capital, common and preferred	88,786,513	88,067,410
Accumulated deficit	(123,329,782)	(108,178,614)
Total stockholders' deficit	(34,543,265)	(20,111,201)
Total liabilities and stockholders' deficit	$ 1,894,795	$ 1,618,206

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Condensed Consolidated Balance Sheets Parenthetical - $ / shares	Jun. 30, 2017	Sep. 30, 2016
Condensed Consolidated Balance Sheets Parenthetical
Preferred stock par value	$ 0.00001	$ 0.00001
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares outstanding	158,290	115,070
Common stock par value	$ 0.00001	$ 0.00001
Common stock shares authorized	200,000,000	200,000,000
Common stock shares outstanding	239,100	232,100

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Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues:
Chronic illness monitoring supplies revenues	$ 1,037,179	$ 1,858,926	$ 4,311,955	$ 4,972,196
Chronic illness monitoring fee revenues	159,025	317,156	599,339	888,453
Total Chronic illness monitoring revenues	1,196,204	2,176,082	4,911,294	5,860,649
Cost of revenues:
Chronic illness monitoring supplies cost of revenues	733,143	1,269,828	3,054,086	3,878,972
Chronic illness monitoring fee cost of revenues	114,954	112,486	319,184	358,436
Total Chronic illness monitoring cost of revenues	848,097	1,382,314	3,373,270	4,237,408
Gross profit	348,107	793,768	1,538,024	1,623,241
Operating expenses:
Selling, general and administrative (including $1,461,457, $1,004,211, $2,101,037 and $3,257,614, respectively, of stock-based compensation)	3,225,054	2,169,603	6,382,027	6,944,098
Research and development	56,191	57,611	307,137	139,023
Total operating expenses	3,281,245	2,227,214	6,689,164	7,083,121
Loss from operations	(2,933,138)	(1,433,446)	(5,151,140)	(5,459,880)
Other income (expense):
Interest expense, net	(2,198,631)	(813,517)	(6,856,258)	(1,935,486)
Loss on settlement	(750,000)		(750,000)
Gain on derivatives liability	64,145	5,603,411	230,163	2,796,542
Loss on extinguishment of debt		(15,393)	(2,499,212)	(3,058,809)
Gain on disposal of property and equipment				245
Gain on liability settlements		8,859		295,099
Loss on induced conversions of debt				(379,132)
Other income	2,614		2,614
Total other income (expense)	(2,881,872)	4,783,360	(9,872,693)	(2,281,541)
Net income (loss)	(5,815,010)	3,349,914	(15,023,833)	(7,741,421)
Deemed dividends on redemption of preferred stock				(6,484,236)
Dividends on preferred stock	(58,978)	(45,781)	(127,335)	(699,250)
Net loss attributable to common stockholders	$ (5,873,988)	$ 3,304,133	$ (15,151,168)	$ (14,924,907)
Net loss per common share - basic	$ (24.77)	$ 15.18	$ (64.81)	$ (81.57)
Net loss per common share - diluted	$ (24.77)	$ (3.78)	$ (64.81)	$ (82.78)
Weighted average common shares outstanding - basic	237,100	217,595	233,767	182,979
Weighted average common shares outstanding - diluted	237,100	260,266	233,767	201,928

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Condensed Consolidated Statements of Operations Parenthetical - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Operations Parenthetical
Compensation expense paid in stock or amortization of stock options and warrants	$ 1,461,457	$ 1,004,211	$ 2,101,037	$ 3,257,614

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Condensed Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net loss	$ (15,023,833)	$ (7,741,421)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts	4,081,912	904,115
Loss on extinguishment of debt	2,499,212	3,058,809
Stock-based compensation expense	1,705,975	2,801,432
Loss on settlement	750,000
Stock and warrants issued and accrued for services	395,062	456,182
Increase in note payable principal recorded as interest expense to convert accounts payable into notes payable	482,500
Stock accrued for interest expense	144,000
Depreciation and amortization	33,643	39,353
Gain on derivatives liability	(230,163)	(2,796,542)
Gain on disposal of property and equipment		(245)
Loss on induced conversions of debt		379,132
Gain on liability settlements		(295,099)
Changes in operating assets and liabilities:
Change in accounts receivable	(241,844)	(44,459)
Change in inventory	(297,033)	414,110
Change in prepaid expenses and other	815,799	(178,053)
Change in accounts payable	2,470,310	(732,265)
Change in accrued liabilities	1,796,360	931,492
Net cash used in operating activities	(618,100)	(2,803,459)
Cash flows from investing activities:
Proceeds from sale of property and equipment		600
Purchases of property and equipment	(2,818)	(5,004)
Investment in contingent note receivable	(500,000)
Net cash used in investing activities	(502,818)	(4,404)
Cash flows from financing activities:
Proceeds from issuance of notes payable, net	4,421,489	5,709,287
Proceeds from issuance of related-party notes payable, net		250,000
Proceeds from issuance of warrants in connection with notes payable		2,967
Principal payments on related-party notes payable	(28,441)	(7,795)
Principal payments on notes payable	(3,325,427)	(3,175,603)
Net cash provided by financing activities	1,067,621	2,778,856
Net decrease in cash	(53,297)	(29,007)
Cash, beginning of the period	167,737	172,436
Cash, end of the period	114,440	143,429
Supplemental Cash Flow Information:
Cash paid for interest	379,589	191,943
Non-Cash Investing and Financing Activities:
Issuance of warrants to purchase shares of common stock for loan origination fees	2,103,341	201,058
Accrual of a liability to issue warrants to purchase shares of common stock for loan forbearance fees	148,677
Accrual of a liability to issue shares of common stock for loan origination fees	125,000
Dividends on preferred stock	127,335	699,250
Accrual of a liability to issue shares of common stock for loan forbearance fees	$ 60,000
Deemed dividend on the redemption of preferred stock and accrued dividends for notes payable, common stock and exchange of warrants		6,484,236
Conversion of accounts payable and accrued liabilities to notes payable		2,555,189
Assignment of related-party notes payable to an unrelated third party		263,082
Issuance of shares of common stock for consulting services		227,500
Accrual of a liability to issue warrants to purchase shares of common stock for loan origination fees		130,246
Cancellation and reissuance of shares of common stock		121,250
Conversion of related-party accounts payable and accrued liabilities to related-party notes payable		84,404
Issuance of shares of common stock for related-party loan origination fee		70,000
Issuance of shares of common stock for loan extension fees		31,250
Accrual of a liability to issue shares of common stock for loan amendment fees		28,500
Issuance of shares of common stock for dividends		12,434
Accrual of a liability to issue shares of common stock for services		$ 7,600

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1. Organization and Nature of Operations

9 Months Ended

Jun. 30, 2017

Notes

1. Organization and Nature of Operations

1.             Basis of Presentation

The unaudited interim condensed consolidated financial statements of ActiveCare, Inc. (the “Company” or “ActiveCare”) have been prepared in accordance with Article 8 of Regulation S-X, promulgated by the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, the accompanying interim condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of June 30, 2017 and September 30, 2016, and the results of its operations for the three and nine months ended June 30, 2017 and 2016 and its cash flows for the nine months ended June 30, 2017 and 2016.  These financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2016.  The results of operations for the three and nine months ended June 30, 2017 may not be indicative of the results for the full fiscal year ending September 30, 2017.

Going Concern

The Company continues to incur negative cash flows from operating activities and net losses.  The Company had minimal cash, negative working capital and negative total equity as of June 30, 2017 and September 30, 2016.  In addition, the Company is in technical default on certain notes payable although the lenders in each case are working with the Company to resolve the defaults.  These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In order for the Company to eliminate substantial doubt about its ability to continue as a going concern, it must achieve profitability, generate positive cash flows from operating activities and obtain the necessary debt or equity funding to meet its projected capital investment requirements.  Management's plans with respect to this uncertainty consist of raising additional capital by issuing debt or equity securities and increasing the sales of the Company's services and products.  There can be no assurance that the Company will be able to raise sufficient additional capital or that revenues will increase rapidly enough to achieve operating profits.  If the Company is unable to increase revenues or obtain additional financing, it will be unable to continue the development of its products and services and may have to cease operations.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ from these estimates.

Fair Value of Financial Instruments

The Company measures the fair values of its assets and liabilities using the US GAAP hierarchy.  The carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, accounts payable, and accrued liabilities approximate fair values due to the short-term nature of these financial instruments. Derivative financial instruments are recorded at fair value based on current market pricing models. The carrying amounts reported for notes payable approximate fair values because the underlying instruments are at interest rates which approximate current market rates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period’s presentation. The reclassifications had no effect on the previously reported net loss.

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2. Net Loss per Common Share

9 Months Ended

Jun. 30, 2017

Notes

2. Net Loss per Common Share

 

2.                   Net Loss per Common Share

Basic net loss per common share ("Basic EPS") is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted net loss per common share ("Diluted EPS") is computed by dividing net loss available to common stockholders by the sum of the weighted average number of common shares outstanding and the weighted-average dilutive potential common shares outstanding.  The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Potential common shares consist of shares issuable upon the exercise of common stock warrants and options, shares issuable from restricted stock grants, and shares issuable pursuant to convertible notes and convertible Series D and Series E preferred stock.  The following table reflects the calculation of basic and diluted net loss per common share for the periods indicated:

	Three Months Ended June 30,					Nine Months Ended June 30,
		2017		2016		2017		2016
Numerator:
Net loss attributable to common stockholders	$	(5,873,988)	$	3,304,133	$	(15,151,168)	$	(14,924,907)
Effect of dilutive securities on net loss:
Common stock warrants		-		(2,427,640)		-		-
Convertible debt		-		(1,860,373)		-		(1,790,407)
Total net loss for purpose of   calculating diluted net loss   per common share	$	(5,873,988)	$	(983,880)	$	(15,151,168)	$	(16,715,314)
Number of shares used in per common share   calculations:
Total shares for purposes of calculating basic   net loss per common share		237,100		217,595		233,767		182,979
Weighted-average effect of dilutive securities:
Common stock warrants		-		3,337		-		-
Convertible debt		-		39,334		-		18,949
Total shares for purpose of calculating diluted   net loss per common share		237,100		260,266		233,767		201,928
Net loss per common share:
Basic	$	(24.77)	$	15.18	$	(64.81)	$	(81.57)
Diluted	$	(24.77)	$	(3.78)	$	(64.81)	$	(82.78)

The effect of dilutive securities on the numerator for purposes of calculating diluted loss per common share is related to the convertible debt and related warrants due to the reduction of the gain on derivatives liability for warrants that were in the money.

As of June 30, 2017 and 2016, there were certain outstanding potential common shares that were not included in the computation of Diluted EPS as their effect would be anti-dilutive for the three and nine months then ended.  The potential common shares outstanding consist of the following:

	Three Months Ended June 30,			Nine Months Ended June 30,
		2017	2016	2017	2016
Common stock warrants		109,174	18,346	109,174	42,378
Series D convertible preferred stock		450	450	450	450
Series E convertible preferred stock		961	961	961	961
Convertible debt		158,798	95,799	158,798	95,799
Restricted shares of common stock		15	15	15	15
Liability to issue common stock and warrants		358,097	2,246	358,097	2,246
Total common stock equivalents		627,495	117,817	627,495	141,849

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3. Recent Accounting Pronouncements

9 Months Ended

Jun. 30, 2017

Notes

3. Recent Accounting Pronouncements

3.                   Recent Accounting Pronouncements

In May 2014, August 2015 and May 2016, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, ASU 2017-13 Revenue Recognition, Revenue from Contracts with Customers, Leases, and Leases: Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, and ASU 2017-14 Income Statement—Reporting Comprehensive Income, Revenue Recognition, and Revenue from Contracts with Customers, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This standard sets forth management's responsibility to evaluate, each reporting period, whether there is substantial doubt about the Company's ability to continue as a going concern, and if so, to provide related disclosures. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its evaluation of going concern.

In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. The purpose of ASU 2015-11 is to more closely align the measurement of inventory in US GAAP with the measurement of inventory in International Financial Reporting Standards. ASU 2015-11 requires entities to measure most inventory at the "lower of cost or net realizable value." Additionally, some of the amendments are designed to more clearly articulate the requirements for the measurement and disclosure of inventory. ASU 2015-11 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU 2016-02, Leases.  The purpose of ASU 2016-02 is to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting.  The purpose of ASU 2016-09 is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equities or liabilities, and classification of amounts in the statement of cash flows.  ASU 2016-09 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In May 2017, the FASB issued ASU 2017-09, Stock Compensation: Scope of Modification Accounting. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivative and Hedging (Topic 815). The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down-round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down-round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down-round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down-round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Accounting Standards Codification, to a scope exception. Those amendments do not have an accounting effect. ASU 2017-11 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

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4. Accounts Receivable

9 Months Ended

Jun. 30, 2017

Notes

4. Accounts Receivable

4.                   Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts.  Specific reserves are estimated by management based on certain assumptions and variables, including the customer’s financial condition, age of the customer’s receivables and changes in payment histories.  Accounts receivable are written off when management determines the likelihood of collection is remote.  A receivable is considered to be past due if any portion of the receivable balance has not been received by the contractual payment date.  Interest is not charged on accounts receivable that are past due.  The Company recorded an allowance for doubtful accounts of $25,468 and $75,161 as of June 30, 2017 and September 30, 2016, respectively.  During the three months ended June 30, 2017, the Company wrote off approximately $103,000 of accounts receivable that were previously allowed against.

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5. Inventory

9 Months Ended

Jun. 30, 2017

Notes

5. Inventory

5.                   Inventory

Inventory is recorded at the lower of cost or market value, cost being determined using the first-in, first-out ("FIFO") method. Inventory consists of diabetic supplies.  Inventory held by distributors is reported as inventory until the supplies are shipped to the end user by the distributor.  The Company estimates an inventory reserve for obsolescence and excessive quantities.  Due to competitive pressures and technological innovation, it is possible that estimates of net realizable values could change in the near term.  Inventory consists of the following as of:

		June 30, 2017		September 30, 2016
Finished goods	$	503,477	$	206,444
Inventory reserve		(1,708)		(1,708)
Net inventory	$	501,769	$	204,736

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6. Prepaid Expenses and Other Current Assets

9 Months Ended

Jun. 30, 2017

Notes

6. Prepaid Expenses and Other Current Assets

6.                   Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of:

		June 30, 2017		September 30, 2016
Prepaid information technology services	$	38,081	$	57,073
Other		12,249		112,117
Prepaid insurance		6,225		14,602
Prepaid legal and professional fees		-		333,741
Research and development		-		96,346
Line of credit acquisition fees		-		30,978
Total prepaid expenses and    other current assets	$	56,555	$	644,857

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7. Property and Equipment

9 Months Ended

Jun. 30, 2017

Notes

7. Property and Equipment

7.                   Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization.  Depreciation and amortization are determined using the straight-line method over the estimated useful lives of the assets, which range between 3 and 7 years.  Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the terms of the lease.  Expenditures for maintenance and repairs are expensed as incurred.  Upon the sale or disposal of property and equipment, any gains or losses are included in operations.  Property and equipment consisted of the following as of:

		June 30, 2017		September 30, 2016
Software	$	47,974	$	47,974
Leasehold improvements		98,023		98,023
Furniture		68,758		68,758
Equipment		47,191		49,772
Total property and equipment		261,946		264,527
Accumulated depreciation and amortization		(205,501)		(177,793)
Property and equipment, net	$	56,445	$	86,734

Assets to be disposed of are reported at the lower of the carrying amounts or fair values, less the estimated costs to sell or dispose.  During the nine months ended June 30, 2016, the Company recorded a gain on the disposal of property and equipment of $245.  Depreciation expense for the nine months ended June 30, 2017 and 2016, was $33,107 and $38,817, respectively.

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8. Accrued Expenses

9 Months Ended

Jun. 30, 2017

Notes

8. Accrued Expenses

8.                   Accrued Expenses

Accrued expenses consisted of the following as of:

		June 30, 2017		September 30, 2016
Interest	$	2,694,545	$	1,206,387
Liability to issue warrants for the purchase    shares of common stock		2,081,254		-
Liability to issue common stock		2,000,933		240,000
Finance fees		333,000		-
Payroll expense		329,615		207,052
Other		141,394		89,828
Deferred revenue		85,399		111,803
Warranty liability		58,300		134,330
Commissions and fees		40,997		52,311
Severance		-		60,000
Total accrued expenses	$	7,765,437	$	2,101,711

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9. Notes Payable

9 Months Ended

Jun. 30, 2017

Notes

9. Notes Payable

9.                   Notes Payable

The Company had the following notes payable outstanding as of:    

		June 30,		September 30,
		2017		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.  Some of the notes are currently in technical default. However, as of the time of this report, the lenders have informally agreed to work with the Company until such time as the note can be repaid.    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 to be offered in the proposed offering that is described in the Form S-1 filed on July 19, 2016 (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.  On December 11, 2017, the Company entered into Securities Purchase Agreements that adjusted the conversion rate to exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in a contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the “Private Placement”) (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment (see Note 18).  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.  During the three months ended March 31, 2017, 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 Offering, which also removes the maximum share limitation conversion, which have expired (see Note 17).  Subsequent to June 30, 2017, the Company received letters related to the notes wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 (see Note 18).  In December 2017, the Company entered into those certain forbearance and lock up letter agreements with four of the eight debtors, with principal balances in the aggregate amount of $1,134,658, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more.  Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents.  The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.  In addition, two of the five debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity (see Note 18). On January 12, 2018, the Company received letters from four of the debtors where the debtors forbear against any historical and future events of default and remedies through February 15, 2018. Further, the maturity date was extended through February 15, 2018.  As part of the letters, the Company agreed not to initiate any new financing arrangements without the consent of the debtors. (see Note 18).  On December 11, 2017, the Company borrowed an aggregate additional $300,000 from two of the lenders under new note payable agreements (see Note 18).	$	5,900,000	$	5,900,000
Secured borrowings from a third party that purchased $3,257,600 of customer receivables for $2,100,000, with due dates ranging from January 2018 to October 2018, and payable in daily payments ranging from $5,000 to $13,000.  The $1,157,600 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 a former chief executive officer of the Company and are subordinated to other notes payable. On April 17, 2017, the Company entered into a factoring agreement which provides for an advance of $1,794,000, comprised of $1,000,000 in cash and the consolidation of $794,000 from four prior factoring agreements into the amounts owed under the factoring agreement (collectively, the "Funds"). In consideration for the Funds, the Company sold to the lender all future receipts until the total amount of $2,511,601 has been paid. The factoring agreement requires payment of the minimum daily amount of $12,999.99 for 193 days. The $2,511,601 can be reduced if repayment occurs more quickly. Repayment of the amounts owing is with recourse and secured by all accounts, chattel paper, documents, equipment, general intangibles, instruments, and inventory of the Company and subordinated to other notes payable.  In June 2017, the lender verbally agreed to reduce the minimum daily amount to $5,000 and, in November 2017, verbally agreed to further reduce the minimum daily amount to $2,600 through January 7, 2018, after which the daily amount would return to $13,000.  Subsequent to June 30, 2017, the Company entered into similar secured borrowings and related verbal or written reductions in the daily amounts.  On January 5, 2018, the Company further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018  (see Note 18).		1,974,602		689,318
Unsecured note payable with a vendor with interest at 0.65% per annum payable at the end of each calendar year, due January 2018, issued in March 2016 upon the conversion of $2,523,937 in accounts payable to the vendor.  The note requires payments of $50,000 per month in April 2016 through December 2016, $100,000 per month in January 2017 through December 2017 and the remaining balance due in January 2018.  In September 2017, the Company entered into agreements with the vendor which supersedes the unsecured note payable agreement and provides new terms (see Note 18).		1,773,937		2,223,937
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. The note is currently in technical default. However, as of the time of this report, the lender has provided bridge capital since going in default and has informally agreed to work with the Company until such time as the note can be repaid.  Pursuant to the note, the Company may borrow up to $1,500,000 upon meeting certain milestones and may be converted into shares of common stock upon default.  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 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.  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.  On January 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants.  The fair value of $567,753 related to the January 3, 2017 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. On January 30, 2017, the Company amended the note to extend the maturity date to the earlier of March 15, 2017 or the third business day after the closing of the Offering. Also on January 30, 2017. the Company borrowed the remaining $300,000 on the note and issued an additional warrant for the purchase of 12,000 shares of common stock with similar terms to the original warrants.  The fair value of $899,598 related to the January 30, 2017 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.  On March 3, 2017, the Company amended the note to increase the maximum sum from $1,500,000 to $2,000,000. Also on March 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants.  The fair value of $407,947 related to the March 3, 2017 warrants was recorded as a derivative (see Notes 12 and 15).  The Company recorded a loss on extinguishment of debt of $501,969 related to the March 3, 2017 amendment and additional borrowing. Effective March 27, 2017, the Company amended the note to extend the maturity date to the earlier of April 15, 2017 or the third business day after the closing of the Offering. Additionally, the lender agreed to enter into a lock up prohibiting the sale or other transfer of all securities of the Company owned by them for a period of 6 months. In consideration for entering into the lock-up agreement the Company has agreed to pay a $340,000 fee, payable in shares of common stock at a rate of the lowest of (i) 80% of the common stock Offering price of the Offering, (ii) 80% of the unit price Offering price of the Offering (if applicable), or (iii) 80% of the exercise price of any warrants issued in the Offering.  The lock-up agreement was signed during April 2017, which has expired. Effective April 19, 2017, the Company amended the note to extend the maturity date to the earlier of May 20, 2017 or the third business day after the closing of the Offering. On December 11, 2017, the Company borrowed an additional $250,000 from the lender under a new note payable agreement (see Note 18).		1,700,000		500,000
Secured note payable to a third party with interest at 12.75% per annum, due February 2019, in default.  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 a lender entered into a forbearance and consent under a 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 previous forbearance agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous 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, (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 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 12-month lock-up agreement.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016.  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 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 previous two forbearances.  Additionally, pursuant to the December 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 December 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 $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017.  $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. The forbearance set forth in the December Forbearance was in effect through February 15, 2017.  On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017.  On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017.  In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $15,470 on the note payable.		1,152,778		1,652,778
Secured line of credit with a third party with interest at 12.25% per annum, due February 2018, in default.  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 a lender entered into a forbearance and consent under a 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 previous forbearance agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous 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, (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 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 12-month lock-up agreement.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016.  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 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 previous two forbearances.  Additionally, pursuant to the December 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 December 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 $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017.  $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. The forbearance set forth in the December Forbearance was in effect through February 15, 2017.  On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017.  On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017.  In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $16,997 on the note payable.		1,259,007		929,518
Unsecured note payable with interest at 18% per annum, with no maturity date.  The note payable is from a verbal agreement with the lender which converted $617,500 of advances into $1,100,000 of principal on the note payable.  The additional $482,500 of principal plus agreed upon fees of $95,226 have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).		1,100,000		-
Unsecured note payable with interest at 2.8% of total revenue per annum, with no maturity date.  The note payable is from a verbal agreement with the lender which converted a $350,000 advance into the note payable.  Agreed upon fees of $143,987 and a future payoff fee of 20%, or $70,000, have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to where the Company is required to pay any outstanding interest at the end of the first month following a quarter end, the lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).		350,000		-
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, February 2017 and March 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, March 31, 2017, and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 (see Note 18).		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.  During September 2017, the Board of Directors granted 200 shares of Series H Preferred Stock for extension fees. In October 2017, the Company entered into a settlement agreement related to the note where the Company borrowed an additional $200,000 and modified the terms of the note payable to become secured by inventory owned by the Company, requires issuance of 3,000 shares of Series H Preferred Stock, which were authorized for grant by the Board of Directors on September 5, 2017 and are required to be able to convert the lender’s shares into 300,000 shares of the Company’s common stock, and requires payments of $8,600 for 72 consecutive weeks.  If any payment is late, the Company is required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default.  The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor.  The fair value of the shares will be amortized over the life of the amended note.  The note terms are adjustable for any terms subsequently provided to other investors (see Note 18).		300,000		300,000
Secured note payable with interest at 12.25% per annum, due May 2017, in default. 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 agreement in conjunction with a modification to another note payable and line of credit. The note requires payment of a $3,000 modification fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding.  The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $4,050 on the note payable.		300,000		-
Unsecured note payable with interest at 12.75% per annum, due June 2017, in default, subordinated to other notes payable. The note requires payment of a $3,000 closing fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding.  The $3,000 closing fee is being amortized to interest expense over the remaining term of the note and the $50,000 fees are being accrued as incurred.  On January 12, 2018, the lender forbore against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18).		300,000		-
Unsecured note payable with interest at 12% per annum, due September 2016, in default, 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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). On January 12, 2018, the lender forbore against9/ any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18).		250,000		250,000
Unsecured cash advance with fees at $1,000 per day for the first 15 days and $1,500 per day thereafter, with no maturity date.  The terms of the advance are verbal. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).		100,000		-
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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17).		64,261		64,261
Secured note payable to a third party with interest at 18% per annum, due June 2017.  The note was 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 was 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 were 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 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 by paying the remaining principal and accrued interest in cash with no additional consideration.		-		162,539
Total notes payable before discount		16,859,049		13,006,815
Less discount		(1,468,335)		(1,930,060)
Total notes payable		15,390,714		11,076,755
Less current portion		(9,501,544)		(3,722,899)
Notes payable, net of current portion	$	5,889,170	$	7,353,856

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10. Related Party Notes Payable

9 Months Ended

Jun. 30, 2017

Notes

10. Related Party Notes Payable

10.                Related-Party Notes Payable

The Company had the following related-party notes payable outstanding as of:

		June 30,		September 30,
		2017		2016
Secured borrowings from entities controlled by an officer who purchased a $2,813,175 customer receivable for $1,710,500.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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 note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  In January 2017 and February 2017, the note was amended to extend the maturity date to February 15, 2017 and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.		1,260		17,227
Unsecured note payable to a former officer with interest at 12% per annum, due on demand.		-		12,474
Total notes payable, related-party		3,869,683		3,898,124
Less current portion		(3,869,683)		(3,898,124)
Notes payable, related-party, net of current portion	$	-	$	-

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11. Fair Value Measurements

9 Months Ended

Jun. 30, 2017

Notes

11. Fair Value Measurements

11.                Fair Value Measurements

The Company measures the fair values of its assets and liabilities using the US GAAP hierarchy levels as follows:

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.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Items measured at fair value on a recurring basis include embedded derivatives related to the Company’s warrants and notes payable. During the nine months ended June 30, 2017, the Company has not changed the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The following fair value hierarchy table presents information about the Company's financial liabilities measured at fair value on a recurring basis:

		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2017
Derivatives liability	$	-	$	269,427	$	3,962,556	$	4,231,983
September 30, 2016
Derivatives liability		-		281,613		1,772,458		2,054,071

The following is a reconciliation of the opening and closing balances for the derivatives liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended June 30, 2017:

		Derivatives Liability
Balance, September 30, 2016	$	1,772,458
Issuance of warrants recorded as derivatives		2,511,288
Gain on termination of debt resulting from   payments on notes payable		(103,213)
Loss on derivatives liability resulting   from changes in fair value		(217,997)
Balance, June 30, 2017	$	3,962,556

The Company’s embedded derivative liabilities are re-measured to fair value as of each reporting date.  See Note 12 for more information about the valuation methods of derivatives and the inputs used for calculating fair value.

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12. Derivatives Liability

9 Months Ended

Jun. 30, 2017

Notes

12. Derivatives Liability

12.                Derivatives Liability

The derivatives liability as of June 30, 2017 and September 30, 2016, was$4,231,983 and $2,054,071, respectively. The derivatives liability as of June 30, 2017 and September 30, 2016 is related to a variable conversion price adjustment on outstanding notes payable and warrants.  All of the derivatives outstanding as of September 30, 2015, were eliminated during February 2016, due to the conversion of notes payable into shares of common stock.

During the nine months ended June 30, 2017, the Company estimated the fair value of some of the embedded derivatives upon issuance at the end of each reporting period using a binomial option-pricing model with the following assumptions, according to the instrument: exercise price of $8 to $15 per share; risk free interest rate of 0.85% to 1.14%; expected life of 0.53 to 1.03 years; expected dividends of 0%; volatility factor of 260.57% to 282.07%; and stock price of $8 to $15.  During the nine months ended June 30, 2017, the Company estimated the fair value of the remaining embedded derivatives upon issuance and at the end of each reporting period using a Monte Carlo valuation model with the following assumptions: exercise prices ranging from $2.50 to $25.00 per share; risk free interest rates ranging from 0.44% to 1.99%; expected lives ranging from 0.09 to 4.93 years; expected dividends of 0%; volatility factors of 128% - 194%; and stock prices ranging from $2.50 to $25.00. 

During fiscal year 2016, the Company estimated the fair value of some of the embedded derivatives upon issuance, at the end of each reporting period and prior to their conversion and elimination using a binomial option-pricing model with the following assumptions, according to the instrument: exercise prices ranging from $14.50 to $46.75 per share; risk free interest rates ranging from 0.16% to 1.06%; expected lives ranging from 0.05 to 2.09 years; expected dividends of 0%; volatility factors ranging from 125.33% to 510.03%; and stock prices ranging from $15 to $70. During fiscal 2016, the Company estimated the fair value of the remaining embedded derivatives upon issuance and at the end of each reporting period using a Monte Carlo valuation model with the following assumptions: exercise prices ranging from $20 to $125 per share; risk free interest rates ranging from 0.18% to 1.44%; expected lives ranging from 0.04 to 6.40 years; expected dividends of 0%; volatility factors of 129% to 140%; and stock prices ranging from $20 to $475 per share.  The expected lives of the instruments were equal to the average term of the conversion option or expected exercise period of the warrants.  The expected volatility is based on the historical price volatility of the Company's common stock.  The risk-free interest rate represents the US Treasury constant maturities rate for the expected life of the related conversion option. The dividend yield represents anticipated cash dividends to be paid over the expected life of the conversion option.  The Company recognized a gain on derivatives liability for the three months ended June 30, 2017 of $64,145 and a gain on derivatives liability for the three months ended June 30, 2016 of $5,603,411.  The Company recognized a gain on derivatives liability for the nine months ended June 30, 2017 of $230,163 and a gain on derivatives liability for the nine months ended June 30, 2016 of $2,796,542.

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13. Preferred Stock

9 Months Ended

Jun. 30, 2017

Notes

13. Preferred Stock

13.                Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.00001 per share.  Pursuant to the Company's Certificate of Incorporation, the Board of Directors has the authority to amend the Company's Certificate of Incorporation, without further stockholder approval, to designate and determine the preferences, limitations and relative rights of the preferred stock before any issuance of the preferred stock and to create one or more series of preferred stock, fix the number of shares of each such series, and determine the preferences, limitations and relative rights of each series of preferred stock, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, and liquidation preferences.

Series D Convertible Preferred Stock

The Board of Directors has designated 1,000,000 shares of preferred stock as Series D Convertible Preferred Stock ("Series D Preferred ").  The Series D Preferred votes on an as-converted basis.  The Series D Preferred has a dividend rate of 8%, payable quarterly.  The Company may redeem the Series D Preferred at a redemption price equal to 120% of the original purchase price with 15 days' notice. During the nine months ended June 30, 2017 and 2016, the Company accrued $24,800 and $18,617 of dividends on Series D preferred stock, respectively, and settled $0 and $12,434 of accrued dividends, respectively, by issuing 0 and 455 shares of common stock, respectively.

Series E Convertible Preferred Stock

During fiscal year 2013, the Board of Directors designated shares of preferred stock as Series E Convertible Preferred Stock ("Series E Preferred"), convertible into common stock at $500 per share, adjustable if there are distributions of common stock or stock splits by the Company.  The Series E Preferred is non-voting and receives a monthly dividend of 3.322% for 25 to 32 months.  In addition, the convertibility and the redemption price of the Series E Preferred is gradually reduced by dividend payments over 25 to 32 months.  After the dividend payment term, the redemption price of Series E Preferred is $0, the Series E Preferred has no convertibility to common stock and the holders are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company's gross profits payable quarterly for a two-year period.

During the three months ended June 30, 2017 and 2016, the Company accrued dividends of $34,178 and $39,598, respectively, payable to Series E Preferred.  During the nine months ended June 30, 2017 and 2016, the Company accrued dividends of $102,535 and $185,485, respectively, payable to Series E Preferred.  As of June 30, 2017 and September 30, 2016, the aggregate redemption price for the Series E Preferred was $477,829.

Series F Convertible Preferred Stock

During fiscal year 2014, the Board of Directors designated 7,803 shares of preferred stock as Series F Convertible Preferred Stock ("Series F Preferred").  In April 2014, the Company increased the authorized shares of Series F Preferred  to 10,000.  Series F Preferred is non-voting, has a stated value of $1,000 per share and is convertible into common stock at $166.85 per share (see Note 12).  Series F Preferred has a dividend rate, payable quarterly, of 8% until April 30, 2015, 16% from May 1, 2015 to July 31, 2015, 20% from August 1, 2015 to October 31, 2015, and 25% thereafter.  In February 2016, the Company redeemed all 5,361 outstanding shares and $673,848 of accrued dividends for 20,005 shares of common stock, $5,900,000 of notes payable and exchanged warrants for the purchase of 11,070 shares of common stock held by Series F Preferred stockholders for new warrants with new terms for the purchase of the same number of shares (see Note 15).  The Company recorded a deemed dividend of $6,484,236 as a result of the transactions.

During the three and nine months ended June 30, 2016, the Company accrued dividends of $0 and $495,148, respectively, payable to Series F Preferred stockholders.

Series G Convertible Preferred Stock

During January 2017, the Board of Directors designated 43,220 shares of preferred stock as Series G Convertible Preferred Stock ("Series F Preferred").  Series G Preferred votes on an as-converted basis, has a stated value of $500 per share. The Series G Preferred will automatically convert the stated value of such shares into fully paid and non-assessable shares of common stock (Series G Conversion Shares”) of the Company upon (i) the Company’s receipt of $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 $25,000,000 or more, or (iii) the closing of an underwritten offering by the Company pursuant to which the Company receives aggregate gross proceeds of at least $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 shall equal the stated value 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.

On January 31, 2017, the Company issued 32,415 shares of Series G Preferred to an entity affiliated with one of the Company’s former Chief Executive Officers and 10,805 shares of Series G Preferred to a different former Chief Executive Officer and consultant to the Company. The consideration for such issuance relates to services rendered to the Company. Each of the two recipients of the Series G Preferred stock have entered into lock-up agreements, as amended, prohibiting the sale or other transfer of the Common Shares issued pursuant to the conversion of the Series G Preferred securities of the Company owned by each of them for the longer of (i) 18 months or (ii) the date the Company first has annual gross revenues in an amount of at least $20,000,000. 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.  As of June 30, 2017, the agreements have expired.  On September 5, 2017, the Board of Directors of the Company agreed to modify the terms of the Series G Convertible Preferred stock to remove the 18-month lock-up period, however, no such amendment to the Series G Preferred has not been filed with the State of Delaware as of the date of this filing.

Liquidation Preference

Upon any liquidation, dissolution or winding up of the Company, before any distribution or payment may be made to the holders of the common stock, the holders of the Series D Preferred, Series E Preferred, and Series F Preferred are entitled to be paid out of the assets an amount equal to $1.00 per share plus all accrued but unpaid dividends.  If the assets of the Company are insufficient to make payment in full to all holders of preferred stock, then the assets shall be distributed among the holders of preferred stock ratably in proportion to the full amounts to which they would otherwise be entitled.

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14. Common Stock

9 Months Ended

Jun. 30, 2017

Notes

14. Common Stock

14.                Common Stock

In April 2014, the Company amended its Certificate of Incorporation increasing the total number of authorized shares of common stock from 50,000,000 shares to 200,000,000 shares.

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.

During the nine months ended June 30, 2017, the Company issued 7,000 shares of common stock (post reverse stock split) for services provided by an independent consultant; the value on the date of grant was $70,000.

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15. Common Stock Options and Warrants

9 Months Ended

Jun. 30, 2017

Notes

15. Common Stock Options and Warrants

15.                Common Stock Options and Warrants

The fair value of each stock option or warrant is estimated on the date of grant using a binomial option-pricing model or the Monte Carlo valuation model.  The expected life of stock options or warrants represents the period of time that the stock options or warrants are expected to be outstanding, based on the simplified method.  Expected volatilities are based on historical volatility of the Company's common stock, among other factors.  The Company uses the simplified method within the binomial option-pricing valuation model due to the Company's short trading history.  The risk-free rate related to the expected term of the stock options or warrants is based on the US Treasury yield curve in effect at the time of grant.  The dividend yield is zero.

During fiscal 2016, the Company granted warrants to purchase 24,032 common shares with an exercise price of $32.50 per share in connection with the acquisition of a note payable and line of credit; warrants for the purchase of 14,786 shares vested immediately, 3,696 vested upon the disbursement of the second tranche of the related note payable, and 5,550 vest evenly in the event of three available increases on the related line of credit (see Note 9). The warrants expire in February 2023, may be exercised via cashless exercise and are puttable upon expiration or liquidation for the greater of $500,000 or up to 6.5% of the equity value of the Company, depending on the number of warrants vested. The fair value of the warrants upon grant of $3,731,969 was recorded as a derivative and the Company received cash of $2,967 upon issuance of the warrants. The Company recognized $1,419,541 as debt discount for the portion allocated to the note payable and the debt discount is being amortized over the life of the note payable to interest expense. During September 2016, the Company entered into a conditionally effective warrant cancellation agreement with the warrant holders, which has expired (see Note 17).

During February 2016, the Company exchanged warrants held by the holders of its Series F Preferred for the purchase of 11,070 shares of common stock in connection with the redemption of Series F Preferred for new warrants for the purchase of the same number of shares on different terms. The new warrants were initially exercisable for $150 per share, 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. During September 2016, the Company issued warrants for the purchase of common stock that adjusted the warrants to have 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. On December 11, 2017, the Company entered into Securities Purchase Agreements that adjusted the conversion rate to exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in a contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the “Private Placement”) (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment (see Note 18). The new warrants expire in February 2021, and may be exercised via cashless exercise. Additional warrants for the purchase of 16,000 shares of common stock may be issued in the event of default on the related notes payable, exercisable at $0.50 per share, with 25% issuable upon the first event of default, 37.5% upon the second event, and 37.5% upon the third event. The warrants issuable upon default expire in February 2026 (if issued), may be exercised via cashless exercise, and are puttable upon expiration or liquidation with the primary warrants. The new warrants may only be exercised to the extent the respective holder would own a maximum of 4.99% of the Company’s common stock after exercise, but the holders may elect to increase the maximum to 9.99%. The Company recognized a deemed dividend of $6,484,236 as a result of the exchange and related redemption of Series F Preferred.

During September 2016, the Company granted warrants to purchase 20,000 shares in connection with the acquisition of a note payable 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. Upon the closing of the Offering, the number of shares issuable under the warrant will reset to an amount of shares equal to the aggregate exercise amount of the warrants (as defined therein) divided by the exercise price then in effect. The warrants expire in September 2021, and may be exercised via cashless exercise. 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 Company recognized $220,000 of the $493,590 fair value of the warrants as a debt discount, which is being amortized over the life of the borrowing, and recognized the remaining $273,590 as a loss on derivatives liability. In the event the Company borrows additional amounts above the initial $500,000 under the note payable, 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 warrants issued as part of the initial borrowing. During the nine months ended June 30, 2017, the Company borrowed an additional $1,000,000 on the note and issued warrants for the purchase of 40,000 shares of common stock with the same terms as the initial warrants. The Company recognized the $2,103,341 fair value of the warrants as debt discounts, which are being amortized over the remaining life of the borrowing.  Effective March 3, 2017, the note was amended to increase the maximum principal sum from $1,500,000 to $2,000,000 under which the Company borrowed an additional $200,000 in consideration and issued the lender a warrant to purchase up to 8,000 shares of common stock with the same terms as the warrants previously issued under the previous terms of the note.  The Company recognized the $407,947 fair value of the warrants as part of the total on extinguishment of debt of $501,969.

During the nine months ended June 30, 2017, the Company measured the fair value of warrants classified as liabilities on the date of issuance and on each re-measurement date using the Monte Carlo valuation model. For this liability, the Company and specialist developed their own assumptions that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company’s common stock, stock price volatility, the contractual term of the warrants, risk–free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants uses Level 3 measurements. The following assumptions were used:

Exercise price	$2.50 - $25.00
Expected term (years)	0.21 - 4.93
Volatility	128% - 194%
Risk-free rate	0.49% - 1.99%
Dividend rate	0%
Common stock price	$2.50 - $25.00

The following table summarizes information about stock options and warrants outstanding as of June 30, 2017:

Options and Warrants	Number of Options and Warrants		Weighted- Average Exercise Price
Outstanding as of October 1, 2016	65,045	$	35.06
Granted	48,000		25.00
Forfeited	(3,871)		357.84
Outstanding as of June 30, 2017	109,174		37.12
Exercisable as of June 30, 2017	102,225		34.46

As of June 30, 2017, the outstanding warrants have an aggregate intrinsic value of $0 and the weighted average remaining term of the warrants was 4.52 years. The total compensation cost related to unvested awards not yet recognized (warrants and shares) was $38,468.

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16. Related-party Transactions Not Otherwise Disclosed

9 Months Ended

Jun. 30, 2017

Notes

16. Related-party Transactions Not Otherwise Disclosed

16.                Related-Party Transactions Not Otherwise Disclosed

In February 2016, the Company amended a consulting agreement dated September 2015, with an entity controlled by a former Executive Chairman of the Board of Directors, effective January 2016.  The amendment extended the agreement through December 2016, which automatically renews on a monthly basis until otherwise cancelled in accordance with the terms therein, changing the monthly compensation of $6,000 to an hourly rate of $250 per hour, and eliminated the previously included bonus structure.  During May 2017, the Company granted 1,719 shares of common stock, with a value of $17,207 on the date of grant, to the consultant as a bonus for services performed.  As of June 30, 2017, the shares have not been issued and the value has been included in accrued expenses.  On September 5, 2017, the Company granted 1,500 shares of the Company’s Series H Preferred stock to an entity controlled by a former Executive Chairman of the Board of Directors for past services rendered in addition to amounts earned under an existing consulting agreement.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  On November 13, 2017, the former Executive Chairman of the Board of Directors terminated the consulting agreement.

In July 2016, the Company entered into a Consulting Agreement with a former Executive Chairman and Chief Executive Officer of the Company.  This Consulting Agreement is for an initial period of one year, and shall automatically renew for consecutive one month periods unless terminated by the Company or the former Executive Chairman and Chief Executive Officer. As consideration for the services to be performed thereunder, the Company shall pay the former Executive Chairman and Chief Executive Officer at the rate of $250 per hour, but such compensation may not exceed $20,000 during any calendar month.  During May 2017, the Company granted 10,324 shares of common stock, with a value of $103,343 on the date of grant, to the consultant as a bonus for services performed.  As of June 30, 2017, the shares have not been issued and the value has been included in accrued expenses.  On September 5, 2017, the agreement was replaced with a new agreement for an initial period of one year, and shall automatically renew for consecutive one month periods unless terminated by the Company or the former Executive Chairman and Chief Executive Officer.  As consideration for the services, the Company shall pay the former Executive Chairman and Chief Executive Officer at the rate of $250 per hour, but such compensation may not exceed $20,000 during any calendar month, plus 1,500 shares of the Company’s Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.

In August 2016, the Company received a cash advance for $135,000 from a former Executive Chairman and Chief Executive Officer of the Company.  During the nine months ended June 30, 2017, the Company repaid the advance.

During May 2017, the Company granted 96,275 shares of common stock, with a value of $963,713 on the date of grant, to a former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, as a bonus for services performed.  As of June 30, 2017, the shares have not been issued and the value has been included in accrued expenses.  On September 5, 2017, the Board of Directors of the Company granted 963 shares of Series H Preferred stock to the former Executive Chairman and Chief Executive Officer of the Company in lieu of the 96,275 shares of previously granted common stock.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  The Series H Preferred shares have not yet been issued.

In September 2017, the Company entered into an employment agreement with the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, for a period of two years for services as the Executive Chairman and Chief Executive Officer of the Company.  The initial term of the agreement is for two years and shall automatically renew on a year to year basis, unless terminated sooner.  The base compensation is $360,000 per year plus 1,500 shares of the Company’s Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  An additional cash or stock bonus may be awarded, subject to the attainment of such individual of certain objectives as the Board of Directors of the Company shall establish from time to time.  Upon certain termination conditions contained in the agreement, the Company may be required to pay severance of twice the base compensation at its highest point during the five-year period prior to termination.  Effective October 12, 2017, the former Executive Chairman and Chief Executive Officer has waived any constructive termination in relation to changes in title, working conditions or duties such that his powers are diminished, reduced or otherwise changed to include powers, duties, or working conditions which are note materially consistent with title, continuing after written notice and 10 days to cure.

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17. Commitments and Contingencies

9 Months Ended

Jun. 30, 2017

Notes

17. Commitments and Contingencies

17.                Commitments and Contingencies

During the nine months ended June 30, 2017, the Company leased office space under a non-cancelable operating lease.  In February 2015, the Company entered into a sublease agreement for part of the office space under the non-cancelable operating lease through the end of the original lease period.  Payments under the sublease were made by the sublessee directly to the Company's landlord.  The non-cancelable operating lease was terminated during June 2015.

During June 2015, the Company entered into a new non-cancelable operating lease for its existing office space, excluding the previously subleased space, with payments beginning in July 2015.  Future minimum rental payments under the non-cancelable operating lease as of June 30, 2017, were as follows:

Years Ending September 30,
2017	$	32,908
2018		111,340
	$	144,248

The Company's rent expense under the new non-cancelable operating lease for nine months ended June 30, 2017 and 2016, was approximately $97,000 and $94,000, respectively.

During February 2016, the Company entered into an agreement with one if its vendors to purchase a minimum of $200,000 of inventory per quarter through January 2018.  The agreement was cancelled subsequent to June 30, 2017.

During February 2016, the Company redeemed all of its Series F preferred stock in exchange for 20,005 shares of common stock and $5,900,000 of notes payable (see Note 9).  As part of the redemption, the Company exchanged warrants held by the Series F Preferred stockholders for the purchase of 11,070 shares of common stock for new warrants to purchase the same number of shares with different terms.  As part of the redemption, the Company may be required to issue additional warrants for the purchase of up to 16,000 shares of common stock upon three events of default on the notes payable (see Note 15).

During February 2016, the Company converted notes payable and accrued interest payable to an entity controlled by a former Executive Chairman of the Board of Directors into a convertible note payable (see Note 10).  The Company may be required to issue 1,469 shares of common stock if the note is not paid by maturity.

During February 2016, the Company amended notes payable to an entity controlled by an officer of the Company to subordinate to notes payable also issued during February 2016, reduced the conversion price per share to $30 per share and limited the shares into which it is convertible (see Note 10).  The Company may be required to issue 8,407 shares of common stock if the note is not paid by maturity.

During September 2016, the Company issued a note payable to a third party for up to $1,500,000.  The Company initially borrowed $500,000 under the note and may borrow up to $1,500,000 upon meeting certain milestones.  The Company subsequently drew an additional $1,000,000 under the note and issued additional warrants for the purchase of 40,000 shares of common stock at similar terms to warrants issued as part of the initial borrowing.  During March 2017, the note was amended to increase the maximum principal sum from $1,500,000 to $2,000,000 under which the Company borrowed an additional $200,000 in consideration and issued the lender a warrant to purchase up to 8,000 shares of common stock with the same terms as the warrants previously issued under the previous terms of the note.  In the event the Company borrows any part of the remaining $300,000 available, 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 warrants issued as part of the initial borrowing.

During September 2016, the Company entered into a conditionally effective warrant cancellation agreement (the "Warrant Cancellation Agreement") with certain warrant holders who were issued the warrants in connection with a secured note payable and line of credit. Pursuant to the terms of the Warrant Cancellation Agreement, upon the Company's consummation of an equity financing of at least $15,000,000, the warrant holders agree to terminate and cancel the warrants they currently hold. As an inducement to enter into the Warrant Cancellation Agreement, the warrant holders will receive upon termination and cancelation of the warrants an aggregate of 10,800 shares of the Company's common stock, which will be subject to a 6-month lock-up agreement. Additionally, if the warrant holders terminate and cancel the warrants, the Company will issue the related note holder a new unsecured promissory note with an initial principal amount of $180,000, no cash interest, and a three-year term. In lieu of cash interest, the principal of the note will increase in the amount $3,333 each month not to exceed a maximum of $300,000.

Effective November 1, 2016, the Board approved the 2016 Incentive Stock Option plan providing for the issuance of options to purchase up to 377,250 shares.  No shares have been approved under the Plan as of June 30, 2017.

On April 17, 2017 the Company entered into a Joint Venture Agreement, effective March 31, 2017 (the "JV Agreement") with Colorado Choice Health Plans ("CCHP"), a customer. Under the JV Agreement: (i) CCHP is providing various services to the Company to improve the Company's diabetes programs, (ii) the Company loaned CCHP $500,000 under a debenture note (recorded as a note receivable in the accompanying consolidated condensed balance sheets), and (iii) the JV Agreement will terminate upon the later of (a) repayment of the debenture note or (b) the one year anniversary of the JV Agreement. The debenture note: (i) bears interest at the rate of five percent per annum, (ii) is subordinated to the rights of CCHP policyholders, claimants and beneficiary claims and all other classes of CCHP creditors other than subordinated debenture holders, (iii) does not become a liability of CCHP until and unless the Commissioner of the Colorado Department of Regulatory Agencies, Division of Insurance ("Division of Insurance") authorizes repayment of the debenture agreement, and shall be treated by CCHP as surplus until the time of such approval, (iv) is only repayable from available funds in excess of CCHP's minimum net surplus required to be maintained by the Division of Insurance, and (v) is otherwise repayable on March 31, 2018, assuming approval by the Division of Insurance.

On May 28, 2015, an investor of the Company filed a lawsuit claiming damages of $1,000,000 exclusive of interest and costs against the Company, a former Executive Chairman, an entity controlled by another former Executive Chairman, and 4G Biometrics, a wholly owned subsidiary of the Company, for breach of contract. The Company has engaged legal counsel regarding the matter.  The Company has assessed a high probability of settling the matter for $750,000 in cash, equity, or a combination thereof.  The Company has accrued a contingent liability of $750,000 and loss on settlement as of June 30, 2017.

On November 4, 2015, the Company received a demand for payment of $275,000 from a former employee of the Company and former principal of 4G Biometrics whose employment was terminated for cause.  On December 4, 2015, the Company filed a complaint against the former owners of 4G Biometrics, including this former employee, seeking damages in excess of $300,000 related to alleged misrepresentations made to induce the Company to acquire 4G Biometrics.  Between February 4, 2016 and February 8, 2016, the Company settled the complaint with each of the former owners of 4G Biometrics and all parties released each other from all outstanding claims, including any current monetary obligations to each party, excluding one former owner of 4G Biometrics who continues to be employed by the Company.  A Stipulation for Order of Dismissal with Prejudice of all Claims and Counterclaims has been filed and is in the process of being approved.  The settlement resulted in the termination of $39,863 of related-party accounts payable.

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18. Subsequent Events

9 Months Ended

Jun. 30, 2017

Notes

18. Subsequent Events

18.                Subsequent Events

Subsequent to June 30, 2017, the Company entered into the following agreements and transactions:

(1)    On August 2, 2017, the Company received a cash advance from a third party in the amount of $100,000, which incurs fees of $1,500 per day until repaid.  During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date.

(2)    On August 7, 2017, the Company received a cash advance from a third party in the amount of $50,000, which incurs fees of $750 per day until repaid. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date.

(3)    During August 2017, the Company received letters related to unsecured notes payable with third parties with principal balances totaling $5,900,000 as of June 30, 2017 where the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.

(4)    During August 2017, the Company received a letter related to an unsecured note payable with a third party with a principal balance of $334,464 as of June 30, 2017 wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018.

(5)    During August 2017, the Company received a letter related to secured and unsecured notes payable with entities controlled by the Company’s former chief executive officer and Executive Chairman of the Board of Directors, who was in office at the time, with principal balances of $1,721,100, $1,303,135, $250,000 and $25,463 as of June 30, 2017, wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through January 12, 2018 and extended maturity date was extended through January 12, 2018.

(6)    During August 2017, the Company received a letter related to an unsecured note payable with a former Executive Chairman of the Board of Directors with a principal balance of $542,004 as of June 30, 2017 wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017.  On December 18, 2017, another letter was received wherein the lender waived any historical and future events of default through January 12, 2018 and extended maturity date was extended through January 12, 2018.

(7)    During July 2017, the Company granted 1,562 shares of common stock, with a value of $12,496 on the date of grant, to the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, as a bonus for services performed during the three months ended June 30, 2017.  The value of the shares has been included in accrued expenses as of June 30, 2017.

(8)    On August 16, 2017, the Company sold $248,500 of future customer receipts to a third party for $175,000 in cash.  The $73,500 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 and is guaranteed by the Company’s former Executive Chairman and Chief Executive Officer, who was in office at the time.

(9)    During July 2017, the Company granted 50,000 shares of common stock, with a value of $400,000 on the date of grant, to a third party as part of a one-year consulting agreement.  The value of the shares will be amortized to selling, general and administrative expenses evenly over the service period.  On September 5, 2017, the Board of Directors granted the issuance of 500 shares of Series H Preferred stock in lieu of the 50,000 shares of common stock, to which the third party has verbally agreed.  The Series H Preferred shares have not yet been issued.

(10) During July 2017, the Company granted 3,937 shares of common stock to employees for bonuses.  The $31,500 fair value of the shares has been included in accrued expenses as of June 30, 2017.

(11) On August 28, 2017, the Company sold $224,850 of future customer receipts to a third party for $150,000 in cash.  The $74,850 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 and is guaranteed by the Company’s former Executive Chairman and Chief Executive Officer, who was in office at the time.

(12) On August 31, 2017, the Company sold $119,920 of future customer receipts to a third party for $80,000 in cash.  The $39,920 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 and is guaranteed by the Company’s former Executive Chairman and Chief Executive Officer, who was in office at the time.

(13) On September 5, 2017, the Board of Directors of the Company modified the terms of the Series G Convertible Preferred stock to remove the 18-month lock-up period.  The amendment has not been filed with the State of Delaware as of the date of this filing.

(14) On September 5, 2017, the Board of Directors of the Company ratified a change to the Series H Preferred stock, previously contemplated and approved by the Board of Directors, to where each share of the Series H Preferred stock is convertible into 100 shares of the Company’s common stock, is limited to a total ownership of 4.99% of the outstanding common stock at the time of conversion, is to be non-voting stock, does not bear interest or dividends, and is transferable with the same terms.  The Certificate of Designation for the Series H Preferred stock has not been filed with the State of Delaware as of the time of this filing and no shares had been issued prior to September 5, 2017.

(15) On September 5, 2017, the Company entered into a consulting agreement with a former Executive Chairman and Chief Executive Officer of the Company, which replaced and existing consulting agreement, for certain consulting services to the Company including, but not limited to (i) developing business plans, (ii) making introductions to potential customers and/or suppliers, (iii) identifying qualified employees and other service providers, (iv) sales, marketing, manufacturing and other operating activities, and (v) meeting with the Company's and its affiliates' respective managers, officers, employees, agents, and other service providers regarding the business, prospects and affairs of the Company and its affiliates. The former officer may not engage in and shall not be entitled to any fees or consideration for (i) negotiating the purchase and/or sale of Company securities, (ii) making recommendations regarding transactions involving Company securities, (iii) or any other matters involving transactions of Company securities.  The agreement is for one year and includes compensation of $250.00 per hour, but such compensation may not exceed $20,000 during any calendar month, plus 1,500 shares of the Company’s Series H Preferred stock.  The shares of Series H Preferred stock have not been issued at the time of this filing.

(16) On September 5, 2017, the Company renewed an existing license and royalty agreement with an entity controlled by a former Executive Chairman and Chief Executive Officer of the Company (the “licensee”).  Under the agreement, the licensee receives the right to make, sell and use products related to the Company’s intellectual property regarding diabetics, cellular, GPS and CareCenter arena and generally characterized as the CareCenter Technology in a certain region.  The Company shall receive a royalty of 15% of the licensee’s gross sales price for the product.  The initial term is for three years whereby the licensee must achieve a minimum royalty of $10,000 per month to maintain the agreement, whereby the agreement will be extended for one addition year unless terminated.  If the minimum monthly royalty is not maintained, the licensee may pay a sum to bring the total payment up to $360,000 within 60 days of the end of the three-year term to extend the agreement for one additional year.  The Company may terminate the agreement if the licensee does not commence to manufacture, distribute and sell product within a 6-month period after the execution of the agreement.

(17) On September 5, 2017, the Company granted 1,500 shares of the Company’s Series H Preferred stock to an entity controlled by a former Executive Chairman of the Board of Directors for past services rendered in addition to amounts earned under an existing consulting agreement.  The shares of Series H Preferred stock have not been issued at the time of this filing.

(18) On September 5, 2017, the Company entered into an employment agreement with the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, for a period of two years for services as the Executive Chairman and Chief Executive Officer of the Company.  The initial term of the agreement is for two years and shall automatically renew on a year to year basis, unless terminated sooner.  The base compensation is $360,000 per year plus 1,500 shares of the Company’s Series H Preferred stock.  The shares of Series H Preferred stock have not yet been issued.  The terms of the Series H Preferred stock have been approved by the Board of Directors of the Company, but no Certificate of Designation has been filed with the appropriate authoritative body.  An additional cash or stock bonus may be awarded, subject to the attainment of such individual and ActiveCare objectives as the Board of Directors of the Company shall establish from time to time as determined by the Board of Directors of the Company.  Upon certain termination conditions upon termination of the agreement, the Company may be required to pay severance of twice the base compensation of the former Executive Chairman and Chief Executive Officer at its highest point during the five-year period prior to termination. In addition, the Board of Directors approved compensation at a level of $360,000 per year retroactive from July 2017, when the former Executive Chairman and Chief Executive Officer was appointed, until the employment agreement was signed. Effective October 12, 2017, the agreement was amended to waive any constructive termination in relation to changes in title, working conditions or duties such that his powers are diminished, reduced or otherwise changed to include powers, duties, or working conditions which are note materially consistent with title, continuing after written notice and 10 days to cure.

(19) On September 5, 2017, the Board of Directors granted 963 shares of Series H Preferred stock to the former Executive Chairman and Chief Executive Officer of the Company, who was in office at the time, in lieu of 96,275 shares of previously granted common stock as a bonus for services performed.  The Series H Preferred shares have not yet been issued.

(20) On September 5, 2017, the Board of Directors granted 200 shares of Series H Preferred stock to the holder of an unsecured note payable with a balance of $300,000 as of June 30, 2017 for the extension of the note payable.  The Series H Preferred shares have not yet been issued.

(21) From September 21, 2017 through December 1, 2017, the Company received cash advances totaling $230,000 from an entity controlled by the Company’s former Executive Chairman and Chief Executive Officer, who was in office at the time, and repaid $10,000 plus the reimbursement of bank fees of $200.

(22) On September 25, 2017, the Company entered into agreements with its primary product vendor that supersedes all prior agreements with the vendor.  Under the agreements, the vendor will provide all products and services to the Company’s service members as they are assigned to the vendor.  In return, the vendor will pay the Company a fee for services rendered to the vendor and to the members for monitoring and reporting.  The Company also earns commissions on all members assigned under the agreement to be paid upon completion of certain milestones met with each individual member.  The agreements also modify the terms of an existing note payable to the vendor.  The note accrues interest at 0.65% per annum, is reduced by the amount of commissions earned by the Company under the agreements and matures on September 25, 2019.  The agreements also add interest fees on existing accounts payable at 0.65% per annum and the accounts payable are reduced by the amount of commissions earned by the Company under the agreements for a minimum of 24 months.

(23) On September 27, 2017, the Company received a cash advance from a third party in the amount of $40,000, which incurs fees of $600 per day until repaid.

(24) In October 2017, the Company entered into a settlement agreement related to an unsecured note payable with a principal balance of $300,000 as of June 30, 2017.  As part of the agreement, the lender lent the Company an additional $200,000 which has been added to the principal balance of the note payable.  The agreement modified the terms of the note payable to become secured by inventory owned by the Company, requires issuance of 3,000 shares of Series H Preferred Stock, which were granted by the Board of Directors on September 5, 2017 and are required to be able to convert the lender’s shares into 300,000 shares of the Company’s common stock, and requires payments of $8,600 for 72 consecutive weeks.  If any payment is late, the Company is required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default.  The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor.  The fair value of the shares will be amortized over the life of the amended note.  The note terms are adjustable for any terms subsequently provided to other investors.

(25) On November 7, 2017, the Company entered into individual agreements related to secured borrowings from four different parties that each previously purchased customer receivables that require daily payments.  The agreements modified each agreement to reduce the amount of the respective daily payment to approximately half of the amount previously drawn through January 7, 2018, whereafter the amount of the payment returns to the payment required under the respective agreement plus an additional amount equal to the amount shorted during the period of lower payments divided by the number of remaining payments remaining on the original term of the respective note payable.  Three of the four agreements are verbal.  On January 5, 2018, the Company further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018.  Three of the four agreements are verbal.

(26) On November 13, 2017, an entity controlled by a former Executive Chairman of the Board of Directors, with whom we contracted for consulting, terminated the existing consulting arrangement.

(27) On November 13, 2017, the Company entered into a sales broker agreement with an entity controlled by a former Executive Chairman of the Board (the “Sales Broker”).  Under the Sales Broker agreement, the Company will provide services to certain customers referred to the Company and the Sales Broker will receive administration fees in the amount of 15% of gross revenues, as defined by the Sales Broker agreement, as long as the Company services the respective customer even in the event the Sales Broker agreement is terminated.  The Sales Broker will promote the Company, its services and products, and introduce potential customers to the Company as a sales representative.  The initial term of the Sales Broker agreement is one year, which automatically renews for additional one-year periods until cancelled by either party.

(28) On November 30, 2017, the Company signed a letter of understanding with a former consultant where the Company agreed to convert $100,000 of past consulting fees owed into an equivalent value of equity in the Company upon a qualifying capital raise.

(29) On November 10, 2017, the Company signed a formal agreement replacing a former verbal agreement with an unsecured note holder, with principal due of $350,000 as of June 30, 2017.  The new agreement memorialized previously agreed upon terms whereby the lender converted a $350,000 advance into an unsecured note payable, with interest at 2.8% of revenues, for $143,987 in fees and a future payoff fee of 20% of the principal, or $70,000, which are included in accrued liabilities and interest expense as of June 30, 2017.  The written agreement adjusted the verbal agreement to where the Company is required to pay any outstanding interest at the end of the first month following a quarter end. The lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and the written agreement includes a most favored nations clause in relation to conversion features.

(30) On November 27, 2017, the Company signed a formal agreement memorializing previous agreements with the holder of an unsecured note and cash advance, with aggregate principal due of $1,200,000 as of June 30, 2017, as well as additional advances with aggregate principal of $190,000 that were received subsequent to June 30, 2017.  The new agreement memorialized the terms of the note payable whereby the lender converted $617,500 in advances into a $1,100,000 unsecured note payable, with interest at 18% per annum for $95,226 in fees, which have been included in accrued liabilities and interest expense as of June 30, 2017.  In addition, the new agreement allows for advances to incur fees at 1.5% of the advance principal per calendar day until paid in full.  The written agreement adjusted the verbal agreements to where the note payable and advance balances and fees may be called by the lender at any time and are due by May 30, 2018, and the new agreement includes a most favored nations clause in relation to conversion features on the note payable and advances.  The new agreement also assigned $2,000,000 of note payable principal held by an entity controlled by an officer of the Company to the lender.  All interest accrued on the assigned balance is payable to the officer.

(31) On December 6, 2017 the Company entered into those certain forbearance and lock up letter agreements with three (3) debtors which held convertible debentures in the aggregate principal amount of $1,109,345 at the time of the agreements, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more.  Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents.  The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.  In addition, two (2) of the debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity.

(32) Effective December 11, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with four accredited investors, including the Company’s new Chief Executive Officer in connection with the closing of a bridge financing (the “Bridge Financing”) in the gross amount of $600,000. The three remaining accredited investors hold notes payable with an aggregate principal balance of $3,865,865 as of June 30, 2017. Pursuant to the Purchase Agreements, the Investors purchased from the Company (i) Promissory Notes in the aggregate principal amount of $631,578.06 (the “Notes”) due and payable six months from the Effective Date and (ii) Common Stock Purchase Warrants (the “Warrant”), exercisable for five years from the date of issuance, to purchase up that certain amount of shares with an aggregate exercise amount equal to $600,000 at an exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in the companies contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the “Private Placement”) (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment hereunder (the “Exercise Price”). The Notes were issued in favor of the Investors with an original issue discount equal to five percent (5%). Additionally, pursuant to the Purchase Agreement, the Company will issue the investors common stock (the “Origination Shares”) worth 30% of the purchase price paid by each investor (the “Origination Dollar Amount”) on the 5th trading day after the pricing of the Private Placement, but in no event later than six months from the Effective Date. The Origination Dollar amount will divided by the lowest of (i) $3.00 (subject to adjustment for stock splits), (ii) 80% of the common stock offering price in the Private Placement, (iii) 80% of the offering price of the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement.  At the closing of the Private Placement the Note shall automatically convert into a subscription into the Private Placement in an amount equal to 125% of the Note balance, subject to certain conditions as outlined therein. If the Company fails to repay the balance due under the Note on its Maturity the Investors have the right, at any time, at their election, to convert all or part of the outstanding and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company pursuant to the following conversion formula: number of shares receivable upon conversion equals the dollar amount being converted divided by the Conversion Price. The Conversion Price is the lesser of $3.00 (subject to adjustment for stock splits) or 60% of the lowest trade price in the 25 trading days. Further, in the event of any default, the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof through the date of acceleration (the “Note Balance”), shall become, at the Investor’s election, immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the investor’s choice of (this choice may be made at any time without presentment, demand, or notice of any kind): (i) the Note Balance divided by the Conversion Price on the date of the default multiplied by the closing price on the date of the default; or (ii) the Note Balance divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a lower Conversion Price, multiplied by the closing price on the date the Mandatory Default Amount is either (a) demanded or (b) paid in full, whichever has a higher closing price; or (iii) 150% of the Note Balance. If, at any time the Note is outstanding, the Company issues a Variable Security (as defined therein), then in such event the Investors shall have the right to convert all or any portion of the outstanding balance of the Notes into shares of Common Stock on the same terms as granted in any applicable Variable Security issued by the Company.

(33) On November 17, 2017, the Company received cash advances from third parties totaling $60,000.  On January 5, 2018, the advances converted into agreements with the same terms as the Bridge Financing entered into on December 11, 2017.

(34) On December 11, 2017, Eric Robinson voluntarily resigned as Chief Financial Officer, Secretary and In-House Counsel, and all other positions with the Company to which he has been assigned regardless of whether he served in such capacity, effective immediately. On the same date, Jeffrey S. Peterson voluntarily resigned as Chairman of the Board of Directors, while acknowledging that he will continue to serve the Company as a Director and Executive Vice President.  On the same date, Robert J. Welgos and Bradley Robinson voluntarily resigned as members of the Board of Directors and all other positions with the Company to which they may have been assigned, regardless of whether they served in such capacity, effective immediately.  These resignations were not as a result of any disagreements with the Company.

(35) On December 11, 2017, Isaac Onn was appointed as a member of the Company’s board of Directors and Mark J. Rosenblum was appointed as the Company’s Chairman of the Board of Directors and Chief Executive Officer in connection with the Bridge Financing.  In connection with Mr. Rosenblum’s appointment as the Company’s Chief Executive Officer, on December 11, 2017, the Company and Mr. Rosenblum finalized the terms of his employment and entered into an employment agreement (the “Rosenblum Employment Agreement”). Mr. Rosenblum shall have such duties, responsibilities and authority which shall include, but not be limited to the responsibility for the overall management, direction and strategy of the Company. The Company shall pay Mr. Rosenblum a salary at a rate of Three Hundred Thousand and 00/100 Dollars ($300,000) per year (the “Initial Base Salary”). The Initial Base Salary shall increase to an annual rate of Three Hundred and Sixty Thousand Dollars ($360,000) (the “Base Salary”) upon the Company closing a financing of at least Five Million Dollars ($5,000,000). Mr. Rosenblum shall be eligible for an annual performance-based cash bonus of up to 100% of the Base Salary (as further defined in the Rosenblum Employment Agreement”). The Rosenblum Employment Agreement is for a term of three (3) years and will be automatically renewed for one year periods, unless otherwise terminated by the Company or Mr. Rosenblum. Upon execution of the Rosenblum Employment Agreement the Company agreed to issue restricted shares equal to $300,000 valued at the offering price of the next equity offering of the Company (“RSU”) and an option to purchase an aggregate $600,000 valued at the offering price of the next equity offering of the Company at an exercise price equal to the market price for the next equity offering of the Company (the “Options”). One-third of these Options shall vest immediately, another third on the first anniversary of the Rosenblum Employment Agreement, and the final third on the second anniversary of the Rosenblum Employment Agreement. The RSUs shall vest 50% immediately upon issuance and 25% on each of the first and second anniversaries of the Rosenblum Employment Agreement. If the Company terminates Mr. Rosenblum’s employment without just cause or if Mr. Rosenblum’s employment is terminated due to Disability (as defined therein), Mr. Rosenblum shall be entitled to receive, in addition to any accrued and unpaid Base Salary, plus any accrued but unused vacation time and unpaid expenses that have been earned as of the date of such termination, the following severance payments (the “Severance Payments”): (i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following such termination and continuing until the later of (A) the expiration of the Term or (B) the expiration of (i) six (6) months following the effective termination date; provided, however, that if the Company terminates the Agreement without Just Cause (as defined in the Rosenblum Employment Agreement) within six (6) months of the effective date, then Mr. Rosenblum will only be entitled to three (3) months of severance instead of six (6) months; and (ii) during the Severance Period (as defined in the Rosenblum Employment Agreement), health and life insurance benefits substantially similar to those which Mr. Rosenblum was receiving or entitled to receive immediately prior to termination; provided, however, such insurance benefits shall be reduced to the extent comparable benefits during such period following Mr. Rosenblum’s termination, and any benefits actually received shall be reported by Mr. Rosenblum to the Company.  The Company will reimburse Mr. Rosenblum for any reasonably travel and relocation expenses.

(36) During December 2017, the Company entered into those certain forbearance and lock up letter agreements with a debtor which holds convertible debentures in the principal amount of $25,312 as of December 5, 2017, whereby the debtor agreed that, without prior written consent of the Company, the debtor will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more. Additionally, the debtor agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the convertible debentures. The forbearance and lock up letter agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.

(37) On January 12, 2018, the Company received letters from four (4) debtors which hold convertible debentures with principal balances totaling $3,162,955 as of June 30, 2017 where the debtors forbear against any historical and future events of default and remedies through February 15, 2018. Further, the maturity date was extended through February 15, 2018.  As part of the letters, the Company agreed not to initiate any new financing arrangements without the consent of the debtors.

(38) On January 12, 2018, the Company received a letter from a lender who holds two unsecured notes payable with principal balances totaling $550,000 as of June 30, 2017 where the lender forbears against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock.

(39)  On December 22, 2017, the Company entered into a Services Agreement (the “Cleveland Clinic Agreement”) with the Cleveland Clinic Foundation d.b.a. Cleveland Clinic, an Ohio nonprofit corporation (“Cleveland Clinic”). Pursuant to the Cleveland Clinic Agreement, the Company will be providing services to Cleveland Clinic as agreed to by the parties in any mutually agreed form pursuant to a “Statement of Work”. Pursuant to the Statement of Work included in the Cleveland Clinic Agreement, the Company will provide monitoring services to Cleveland Clinic’s expected beneficiary diabetic population within the Cleveland Clinic Medicare ACO. The initial term of the Cleveland Clinic Agreement is for three years and shall automatically renew after the term for a successive twelve (12) month period from year to year unless sooner terminated by either party in accordance with the terms of the Cleveland Clinic Agreement. As consideration for the Company’s Services, the Company is to receive a fixed monthly fee per Covered Diabetic Patient (as defined in the Cleveland Clinic Agreement). In addition, at such time the Cleveland Clinic Accountable Care Organization (“CCACO”) shall receive a shared savings payment from the Centers for Medicare and Medicaid Services, CCACO shall share such savings with the Company based on a formula defined in the Cleveland Clinic Agreement. Cleveland Clinic may, by written notice to the Company, terminate the Agreement, any purchase order or any portion of a purchase order if the Company (i) is in material breach of any of the terms and conditions of the Cleveland Clinic Agreement or any Purchase Order, which breach in not cured within thirty (30) days after notification of such breach, (ii) terminates or suspends its business, becomes insolvent, or becomes subject to any bankruptcy or insolvency proceeding under Federal or State law. Cleveland Clinic further may terminate the Cleveland Clinic Agreement, any Purchase Order or any portion of any Purchase Order for convenience upon ninety (90) days’ prior written notice to Company (“Termination for Convenience”). In connection with any Termination for Convenience, Cleveland Clinic will reimburse Company for the actual cost reasonably incurred for work in process up to the time of cancellation, as well as any non-cancellable contract of Company, or non-cancellable purchase order to a third party, entered into for the benefit of Cleveland Clinic. The Cleveland Clinic Agreement is nonexclusive, and Cleveland Clinic may contract with others to perform similar services. Accordingly, the Company may also perform similar services for others.

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1. Organization and Nature of Operations: Going Concern (Policies)

9 Months Ended

Jun. 30, 2017

Policies

Going Concern

Going Concern

The Company continues to incur negative cash flows from operating activities and net losses.  The Company had minimal cash, negative working capital and negative total equity as of June 30, 2017 and September 30, 2016.  In addition, the Company is in technical default on certain notes payable although the lenders in each case are working with the Company to resolve the defaults.  These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In order for the Company to eliminate substantial doubt about its ability to continue as a going concern, it must achieve profitability, generate positive cash flows from operating activities and obtain the necessary debt or equity funding to meet its projected capital investment requirements.  Management's plans with respect to this uncertainty consist of raising additional capital by issuing debt or equity securities and increasing the sales of the Company's services and products.  There can be no assurance that the Company will be able to raise sufficient additional capital or that revenues will increase rapidly enough to achieve operating profits.  If the Company is unable to increase revenues or obtain additional financing, it will be unable to continue the development of its products and services and may have to cease operations.

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1. Organization and Nature of Operations: Use of Estimates in The Preparation of Financial Statements (Policies)

9 Months Ended

Jun. 30, 2017

Policies

Use of Estimates in The Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ from these estimates.

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1. Organization and Nature of Operations: Fair Value of Financial Instruments (Policies)

9 Months Ended

Jun. 30, 2017

Policies

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company measures the fair values of its assets and liabilities using the US GAAP hierarchy.  The carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, accounts payable, and accrued liabilities approximate fair values due to the short-term nature of these financial instruments. Derivative financial instruments are recorded at fair value based on current market pricing models. The carrying amounts reported for notes payable approximate fair values because the underlying instruments are at interest rates which approximate current market rates.

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1. Organization and Nature of Operations: Reclassifications (Policies)

9 Months Ended

Jun. 30, 2017

Policies

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period’s presentation. The reclassifications had no effect on the previously reported net loss.

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3. Recent Accounting Pronouncements: New Accounting Pronouncements (Policies)

9 Months Ended

Jun. 30, 2017

Policies

New Accounting Pronouncements

In May 2014, August 2015 and May 2016, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, ASU 2017-13 Revenue Recognition, Revenue from Contracts with Customers, Leases, and Leases: Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, and ASU 2017-14 Income Statement—Reporting Comprehensive Income, Revenue Recognition, and Revenue from Contracts with Customers, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This standard sets forth management's responsibility to evaluate, each reporting period, whether there is substantial doubt about the Company's ability to continue as a going concern, and if so, to provide related disclosures. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its evaluation of going concern.

In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. The purpose of ASU 2015-11 is to more closely align the measurement of inventory in US GAAP with the measurement of inventory in International Financial Reporting Standards. ASU 2015-11 requires entities to measure most inventory at the "lower of cost or net realizable value." Additionally, some of the amendments are designed to more clearly articulate the requirements for the measurement and disclosure of inventory. ASU 2015-11 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU 2016-02, Leases.  The purpose of ASU 2016-02 is to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting.  The purpose of ASU 2016-09 is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equities or liabilities, and classification of amounts in the statement of cash flows.  ASU 2016-09 is effective for fiscal years and interim periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In May 2017, the FASB issued ASU 2017-09, Stock Compensation: Scope of Modification Accounting. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017, which will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivative and Hedging (Topic 815). The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down-round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down-round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down-round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down-round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Accounting Standards Codification, to a scope exception. Those amendments do not have an accounting effect. ASU 2017-11 is effective for fiscal years and interim periods beginning after December 15, 2018, which will be effective for the Company for the quarter ending December 31, 2019. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

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2. Net Loss per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended June 30,					Nine Months Ended June 30,
		2017		2016		2017		2016
Numerator:
Net loss attributable to common stockholders	$	(5,873,988)	$	3,304,133	$	(15,151,168)	$	(14,924,907)
Effect of dilutive securities on net loss:
Common stock warrants		-		(2,427,640)		-		-
Convertible debt		-		(1,860,373)		-		(1,790,407)
Total net loss for purpose of   calculating diluted net loss   per common share	$	(5,873,988)	$	(983,880)	$	(15,151,168)	$	(16,715,314)
Number of shares used in per common share   calculations:
Total shares for purposes of calculating basic   net loss per common share		237,100		217,595		233,767		182,979
Weighted-average effect of dilutive securities:
Common stock warrants		-		3,337		-		-
Convertible debt		-		39,334		-		18,949
Total shares for purpose of calculating diluted   net loss per common share		237,100		260,266		233,767		201,928
Net loss per common share:
Basic	$	(24.77)	$	15.18	$	(64.81)	$	(81.57)
Diluted	$	(24.77)	$	(3.78)	$	(64.81)	$	(82.78)

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2. Net Loss per Common Share: Schedule of Common Stock Equivalents (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Common Stock Equivalents

	Three Months Ended June 30,			Nine Months Ended June 30,
		2017	2016	2017	2016
Common stock warrants		109,174	18,346	109,174	42,378
Series D convertible preferred stock		450	450	450	450
Series E convertible preferred stock		961	961	961	961
Convertible debt		158,798	95,799	158,798	95,799
Restricted shares of common stock		15	15	15	15
Liability to issue common stock and warrants		358,097	2,246	358,097	2,246
Total common stock equivalents		627,495	117,817	627,495	141,849

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5. Inventory: Schedule of Inventory (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Inventory

		June 30, 2017		September 30, 2016
Finished goods	$	503,477	$	206,444
Inventory reserve		(1,708)		(1,708)
Net inventory	$	501,769	$	204,736

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6. Prepaid Expenses and Other Current Assets: Schedule of Other Current Assets (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Other Current Assets

		June 30, 2017		September 30, 2016
Prepaid information technology services	$	38,081	$	57,073
Other		12,249		112,117
Prepaid insurance		6,225		14,602
Prepaid legal and professional fees		-		333,741
Research and development		-		96,346
Line of credit acquisition fees		-		30,978
Total prepaid expenses and    other current assets	$	56,555	$	644,857

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7. Property and Equipment: Property, Plant and Equipment (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Property, Plant and Equipment

		June 30, 2017		September 30, 2016
Software	$	47,974	$	47,974
Leasehold improvements		98,023		98,023
Furniture		68,758		68,758
Equipment		47,191		49,772
Total property and equipment		261,946		264,527
Accumulated depreciation and amortization		(205,501)		(177,793)
Property and equipment, net	$	56,445	$	86,734

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8. Accrued Expenses: Schedule of Accrued Liabilities (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Accrued Liabilities

		June 30, 2017		September 30, 2016
Interest	$	2,694,545	$	1,206,387
Liability to issue warrants for the purchase    shares of common stock		2,081,254		-
Liability to issue common stock		2,000,933		240,000
Finance fees		333,000		-
Payroll expense		329,615		207,052
Other		141,394		89,828
Deferred revenue		85,399		111,803
Warranty liability		58,300		134,330
Commissions and fees		40,997		52,311
Severance		-		60,000
Total accrued expenses	$	7,765,437	$	2,101,711

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9. Notes Payable: Schedule of Debt - Other (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Debt - Other

		June 30,		September 30,
		2017		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.  Some of the notes are currently in technical default. However, as of the time of this report, the lenders have informally agreed to work with the Company until such time as the note can be repaid.    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 to be offered in the proposed offering that is described in the Form S-1 filed on July 19, 2016 (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.  On December 11, 2017, the Company entered into Securities Purchase Agreements that adjusted the conversion rate to exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in a contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the “Private Placement”) (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment (see Note 18).  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.  During the three months ended March 31, 2017, 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 Offering, which also removes the maximum share limitation conversion, which have expired (see Note 17).  Subsequent to June 30, 2017, the Company received letters related to the notes wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 (see Note 18).  In December 2017, the Company entered into those certain forbearance and lock up letter agreements with four of the eight debtors, with principal balances in the aggregate amount of $1,134,658, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more.  Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents.  The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company.  In addition, two of the five debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity (see Note 18). On January 12, 2018, the Company received letters from four of the debtors where the debtors forbear against any historical and future events of default and remedies through February 15, 2018. Further, the maturity date was extended through February 15, 2018.  As part of the letters, the Company agreed not to initiate any new financing arrangements without the consent of the debtors. (see Note 18).  On December 11, 2017, the Company borrowed an aggregate additional $300,000 from two of the lenders under new note payable agreements (see Note 18).	$	5,900,000	$	5,900,000
Secured borrowings from a third party that purchased $3,257,600 of customer receivables for $2,100,000, with due dates ranging from January 2018 to October 2018, and payable in daily payments ranging from $5,000 to $13,000.  The $1,157,600 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 a former chief executive officer of the Company and are subordinated to other notes payable. On April 17, 2017, the Company entered into a factoring agreement which provides for an advance of $1,794,000, comprised of $1,000,000 in cash and the consolidation of $794,000 from four prior factoring agreements into the amounts owed under the factoring agreement (collectively, the "Funds"). In consideration for the Funds, the Company sold to the lender all future receipts until the total amount of $2,511,601 has been paid. The factoring agreement requires payment of the minimum daily amount of $12,999.99 for 193 days. The $2,511,601 can be reduced if repayment occurs more quickly. Repayment of the amounts owing is with recourse and secured by all accounts, chattel paper, documents, equipment, general intangibles, instruments, and inventory of the Company and subordinated to other notes payable.  In June 2017, the lender verbally agreed to reduce the minimum daily amount to $5,000 and, in November 2017, verbally agreed to further reduce the minimum daily amount to $2,600 through January 7, 2018, after which the daily amount would return to $13,000.  Subsequent to June 30, 2017, the Company entered into similar secured borrowings and related verbal or written reductions in the daily amounts.  On January 5, 2018, the Company further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018  (see Note 18).		1,974,602		689,318
Unsecured note payable with a vendor with interest at 0.65% per annum payable at the end of each calendar year, due January 2018, issued in March 2016 upon the conversion of $2,523,937 in accounts payable to the vendor.  The note requires payments of $50,000 per month in April 2016 through December 2016, $100,000 per month in January 2017 through December 2017 and the remaining balance due in January 2018.  In September 2017, the Company entered into agreements with the vendor which supersedes the unsecured note payable agreement and provides new terms (see Note 18).		1,773,937		2,223,937
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. The note is currently in technical default. However, as of the time of this report, the lender has provided bridge capital since going in default and has informally agreed to work with the Company until such time as the note can be repaid.  Pursuant to the note, the Company may borrow up to $1,500,000 upon meeting certain milestones and may be converted into shares of common stock upon default.  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 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.  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.  On January 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants.  The fair value of $567,753 related to the January 3, 2017 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. On January 30, 2017, the Company amended the note to extend the maturity date to the earlier of March 15, 2017 or the third business day after the closing of the Offering. Also on January 30, 2017. the Company borrowed the remaining $300,000 on the note and issued an additional warrant for the purchase of 12,000 shares of common stock with similar terms to the original warrants.  The fair value of $899,598 related to the January 30, 2017 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.  On March 3, 2017, the Company amended the note to increase the maximum sum from $1,500,000 to $2,000,000. Also on March 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants.  The fair value of $407,947 related to the March 3, 2017 warrants was recorded as a derivative (see Notes 12 and 15).  The Company recorded a loss on extinguishment of debt of $501,969 related to the March 3, 2017 amendment and additional borrowing. Effective March 27, 2017, the Company amended the note to extend the maturity date to the earlier of April 15, 2017 or the third business day after the closing of the Offering. Additionally, the lender agreed to enter into a lock up prohibiting the sale or other transfer of all securities of the Company owned by them for a period of 6 months. In consideration for entering into the lock-up agreement the Company has agreed to pay a $340,000 fee, payable in shares of common stock at a rate of the lowest of (i) 80% of the common stock Offering price of the Offering, (ii) 80% of the unit price Offering price of the Offering (if applicable), or (iii) 80% of the exercise price of any warrants issued in the Offering.  The lock-up agreement was signed during April 2017, which has expired. Effective April 19, 2017, the Company amended the note to extend the maturity date to the earlier of May 20, 2017 or the third business day after the closing of the Offering. On December 11, 2017, the Company borrowed an additional $250,000 from the lender under a new note payable agreement (see Note 18).		1,700,000		500,000
Secured note payable to a third party with interest at 12.75% per annum, due February 2019, in default.  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 a lender entered into a forbearance and consent under a 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 previous forbearance agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous 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, (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 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 12-month lock-up agreement.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016.  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 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 previous two forbearances.  Additionally, pursuant to the December 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 December 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 $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017.  $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. The forbearance set forth in the December Forbearance was in effect through February 15, 2017.  On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017.  On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017.  In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $15,470 on the note payable.		1,152,778		1,652,778
Secured line of credit with a third party with interest at 12.25% per annum, due February 2018, in default.  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 a lender entered into a forbearance and consent under a 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 previous forbearance agreement.  Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous 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, (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 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 12-month lock-up agreement.  The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016.  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 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 previous two forbearances.  Additionally, pursuant to the December 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 December 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 $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017.  $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. The forbearance set forth in the December Forbearance was in effect through February 15, 2017.  On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017.  On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017.  In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $16,997 on the note payable.		1,259,007		929,518
Unsecured note payable with interest at 18% per annum, with no maturity date.  The note payable is from a verbal agreement with the lender which converted $617,500 of advances into $1,100,000 of principal on the note payable.  The additional $482,500 of principal plus agreed upon fees of $95,226 have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).		1,100,000		-
Unsecured note payable with interest at 2.8% of total revenue per annum, with no maturity date.  The note payable is from a verbal agreement with the lender which converted a $350,000 advance into the note payable.  Agreed upon fees of $143,987 and a future payoff fee of 20%, or $70,000, have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to where the Company is required to pay any outstanding interest at the end of the first month following a quarter end, the lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).		350,000		-
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, February 2017 and March 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, March 31, 2017, and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 (see Note 18).		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.  During September 2017, the Board of Directors granted 200 shares of Series H Preferred Stock for extension fees. In October 2017, the Company entered into a settlement agreement related to the note where the Company borrowed an additional $200,000 and modified the terms of the note payable to become secured by inventory owned by the Company, requires issuance of 3,000 shares of Series H Preferred Stock, which were authorized for grant by the Board of Directors on September 5, 2017 and are required to be able to convert the lender’s shares into 300,000 shares of the Company’s common stock, and requires payments of $8,600 for 72 consecutive weeks.  If any payment is late, the Company is required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default.  The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor.  The fair value of the shares will be amortized over the life of the amended note.  The note terms are adjustable for any terms subsequently provided to other investors (see Note 18).		300,000		300,000
Secured note payable with interest at 12.25% per annum, due May 2017, in default. 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 agreement in conjunction with a modification to another note payable and line of credit. The note requires payment of a $3,000 modification fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding.  The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $4,050 on the note payable.		300,000		-
Unsecured note payable with interest at 12.75% per annum, due June 2017, in default, subordinated to other notes payable. The note requires payment of a $3,000 closing fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding.  The $3,000 closing fee is being amortized to interest expense over the remaining term of the note and the $50,000 fees are being accrued as incurred.  On January 12, 2018, the lender forbore against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18).		300,000		-
Unsecured note payable with interest at 12% per annum, due September 2016, in default, 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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). On January 12, 2018, the lender forbore against9/ any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18).		250,000		250,000
Unsecured cash advance with fees at $1,000 per day for the first 15 days and $1,500 per day thereafter, with no maturity date.  The terms of the advance are verbal. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement.  The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18).		100,000		-
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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17).		64,261		64,261
Secured note payable to a third party with interest at 18% per annum, due June 2017.  The note was 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 was 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 were 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 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 by paying the remaining principal and accrued interest in cash with no additional consideration.		-		162,539
Total notes payable before discount		16,859,049		13,006,815
Less discount		(1,468,335)		(1,930,060)
Total notes payable		15,390,714		11,076,755
Less current portion		(9,501,544)		(3,722,899)
Notes payable, net of current portion	$	5,889,170	$	7,353,856

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10. Related Party Notes Payable: Schedule of Related Party Transactions (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Related Party Transactions

		June 30,		September 30,
		2017		2016
Secured borrowings from entities controlled by an officer who purchased a $2,813,175 customer receivable for $1,710,500.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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 note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  During the three months ended March 31, 2017, 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, which has expired (see Note 17). Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.  The note is currently in technical default. However, as of the time of this report, the lender has informally agreed to work with the Company until such time as the note can be repaid.  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.  In January 2017 and February 2017, the note was amended to extend the maturity date to February 15, 2017 and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lenders waived any historical and future events of default through January 12, 2018 and extended the maturity date through January 12, 2018 (see Note 18).  In November 2017, the officer assigned $2,000,000 of principal all of the notes payable held by the related-party entities to a third party who the Company owed aggregate principal of $1,200,000 as of June 30, 2017.  Interest accrued on the $2,000,000 assigned principal will continue to be payable to the related-party entities (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.		1,260		17,227
Unsecured note payable to a former officer with interest at 12% per annum, due on demand.		-		12,474
Total notes payable, related-party		3,869,683		3,898,124
Less current portion		(3,869,683)		(3,898,124)
Notes payable, related-party, net of current portion	$	-	$	-

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11. Fair Value Measurements: Fair Value, Liabilities Measured on Recurring Basis (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Fair Value, Liabilities Measured on Recurring Basis

		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2017
Derivatives liability	$	-	$	269,427	$	3,962,556	$	4,231,983
September 30, 2016
Derivatives liability		-		281,613		1,772,458		2,054,071

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11. Fair Value Measurements: Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

		Derivatives Liability
Balance, September 30, 2016	$	1,772,458
Issuance of warrants recorded as derivatives		2,511,288
Gain on termination of debt resulting from   payments on notes payable		(103,213)
Loss on derivatives liability resulting   from changes in fair value		(217,997)
Balance, June 30, 2017	$	3,962,556

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15. Common Stock Options and Warrants: Schedule of Share Based Payment Award Stock Options Valuation Assumptions, Level 3 (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Share Based Payment Award Stock Options Valuation Assumptions, Level 3

Exercise price	$2.50 - $25.00
Expected term (years)	0.21 - 4.93
Volatility	128% - 194%
Risk-free rate	0.49% - 1.99%
Dividend rate	0%
Common stock price	$2.50 - $25.00

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15. Common Stock Options and Warrants: Schedule of Share-based Compensation, Activity (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Share-based Compensation, Activity

Options and Warrants	Number of Options and Warrants		Weighted- Average Exercise Price
Outstanding as of October 1, 2016	65,045	$	35.06
Granted	48,000		25.00
Forfeited	(3,871)		357.84
Outstanding as of June 30, 2017	109,174		37.12
Exercisable as of June 30, 2017	102,225		34.46

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17. Commitments and Contingencies: Schedule of Future Minimum Rental Payments for Operating Leases (Tables)

9 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

Years Ending September 30,
2017	$	32,908
2018		111,340
	$	144,248

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2. Net Loss per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Net income (loss), excluding discontinued operations	$ (5,873,988)	$ 3,304,133	$ (15,151,168)	$ (14,924,907)
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities	$ (5,873,988)	$ (983,880)	$ (15,151,168)	$ (16,715,314)
Weighted average common shares outstanding - basic	237,100	217,595	233,767	182,979
Weighted average common shares outstanding - diluted	237,100	260,266	233,767	201,928
Income (Loss) from Continuing Operations, Per Basic Share	$ (24.77)	$ 15.18	$ (64.81)	$ (81.57)
Income (Loss) from Continuing Operations, Per Diluted Share	$ (24.77)	$ (3.78)	$ (64.81)	$ (82.78)
CommonStockOptionsAndWarrantsMember
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities		$ (2,427,640)
Antidilutive Securities Excluded from Computation of Net Income, Per Outstanding Unit, Amount		$ 3,337
Convertible debt
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities		$ (1,860,373)		$ (1,790,407)
Antidilutive Securities Excluded from Computation of Net Income, Per Outstanding Unit, Amount		$ 39,334		$ 18,949

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2. Net Loss per Common Share: Schedule of Common Stock Equivalents (Details) - shares	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Details
Exercise of outstanding common stock warrants	109,174	18,346	109,174	42,378
Conversion of Series D preferred stock	450	450	450	450
Conversion of Series E preferred stock	961	961	961	961
Conversion of debt	158,798	95,799	158,798	95,799
Issuance of employee restricted shares	15	15	15	15
Liability to issue common stock	358,097	2,246	358,097	2,246
Common stock equivalents	627,495	117,817	627,495	141,849

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4. Accounts Receivable (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Details
Allowance for Doubtful Accounts Receivable	$ 25,468	$ 75,161

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5. Inventory: Schedule of Inventory (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Details
Inventory, Finished Goods, Gross	$ 503,477	$ 206,444
Inventory Valuation Reserves	(1,708)	(1,708)
Inventory	$ 501,769	$ 204,736

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6. Prepaid Expenses and Other Current Assets: Schedule of Other Current Assets (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Prepaid expenses and other	$ 56,555	$ 644,857
Prepaid information technology services
Prepaid expenses and other	38,081	57,073
Other
Prepaid expenses and other	12,249	112,117
Prepaid insurance
Prepaid expenses and other	$ 6,225	14,602
Prepaid professional fees
Prepaid expenses and other		333,741
Research and Development
Prepaid expenses and other		96,346
Line of credit acquisition fees
Prepaid expenses and other		$ 30,978

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7. Property and Equipment: Property, Plant and Equipment (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Property and equipment, net	$ 56,445	$ 86,734
Property, Plant and Equipment, Gross	261,946	264,527
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	(205,501)	(177,793)
Computer Software, Intangible Asset
Property and equipment, net	47,974	47,974
Leaseholds and Leasehold Improvements
Property and equipment, net	98,023	98,023
Furniture and Fixtures
Property and equipment, net	68,758	68,758
Equipment
Property and equipment, net	$ 47,191	$ 49,772

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7. Property and Equipment (Details) - USD ($)	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Details
Gain on disposal of property and equipment		$ 245
Depreciation, Amortization and Accretion, Net	$ 33,107	$ 38,817

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8. Accrued Expenses: Schedule of Accrued Liabilities (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Accrued expenses	$ 7,765,437	$ 2,101,711
Interest Expense
Accrued expenses	2,694,545	1,206,387
LiabilityToIssueWarrantsMember
Accrued expenses	2,081,254
Liability To Issue Common Stock
Accrued expenses	2,000,933	240,000
Finance Fees
Accrued expenses	333,000
Payroll Expense
Accrued expenses	329,615	207,052
Other
Accrued expenses	141,394	89,828
DeferredRevenueMember
Accrued expenses	85,399	111,803
Warranty Liability
Accrued expenses	58,300	134,330
CommissionsAndFeesMember
Accrued expenses	$ 40,997	52,311
Severance
Accrued expenses		$ 60,000

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9. Notes Payable: Schedule of Debt - Other (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Gross notes payable before discount	$ 16,859,049	$ 13,006,815
Discount on notes payable	(1,468,335)	(1,930,060)
Notes payable current and noncurrent	15,390,714	11,076,755
Current portion of notes payable	(9,501,544)	(3,722,899)
Notes payable, net of current portion	5,889,170	7,353,856
Note 1
Gross notes payable before discount	5,900,000	5,900,000
Note 2
Gross notes payable before discount	1,974,602	689,318
Note 3
Gross notes payable before discount	1,773,937	2,223,937
Note 4
Gross notes payable before discount	1,700,000	500,000
Note 5
Gross notes payable before discount	1,152,778	1,652,778
Note 6
Gross notes payable before discount	1,259,007	929,518
Note 7
Gross notes payable before discount	1,100,000
Note 8
Gross notes payable before discount	350,000
Note 9
Gross notes payable before discount	334,464	334,464
Note 10
Gross notes payable before discount	300,000	300,000
Note 11
Gross notes payable before discount	300,000
Note12Member
Gross notes payable before discount	300,000
Note13Member
Gross notes payable before discount	250,000	250,000
Note14Member
Gross notes payable before discount	100,000
Note15Member
Gross notes payable before discount	$ 64,261	64,261
Note16Member
Gross notes payable before discount		$ 162,539

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10. Related Party Notes Payable: Schedule of Related Party Transactions (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Notes Payable, Related Parties	$ 3,869,683	$ 3,898,124
Notes payable, related party	(3,869,683)	(3,898,124)
RelatedPartyNote1Member
Notes Payable, Related Parties	1,721,100	1,721,100
RelatedPartyNote2Member
Notes Payable, Related Parties	1,303,135	1,303,135
RelatedPartyNote3Member
Notes Payable, Related Parties	542,004	542,004
RelatedPartyNote4Member
Notes Payable, Related Parties	250,000	250,000
RelatedPartyNote5Member
Notes Payable, Related Parties	26,721	26,721
RelatedPartyNote6Member
Notes Payable, Related Parties	25,463	25,463
RelatedPartyNote7Member
Notes Payable, Related Parties	$ 1,260	17,227
RelatedPartyNote8Member
Notes Payable, Related Parties		$ 12,474

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11. Fair Value Measurements: Fair Value, Liabilities Measured on Recurring Basis (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016
Derivatives liability	$ 4,231,983	$ 2,054,071
Fair Value, Inputs, Level 2
Derivatives liability	269,427	281,613
Fair Value, Inputs, Level 3
Derivatives liability	$ 3,962,556	$ 1,772,458

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11. Fair Value Measurements: Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - USD ($)	3 Months Ended
	Jun. 30, 2017	Sep. 30, 2016
Derivatives liability	$ 4,231,983	$ 2,054,071
Fair Value, Inputs, Level 3
Derivatives liability	3,962,556	$ 1,772,458
Issuance of warrants recorded as derivative	2,511,288
Issuance of embedded derivatives related to notes payable	(103,213)
Loss (gain) on derivative liability resulting from changes in fair value	$ (217,997)

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12. Derivatives Liability (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Details
Derivatives liability	$ 4,231,983		$ 4,231,983		$ 2,054,071
Gain on derivatives liability	$ 64,145	$ 5,603,411	$ 230,163	$ 2,796,542

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13. Preferred Stock (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2014	Sep. 30, 2016
Preferred stock shares authorized	10,000,000		10,000,000			10,000,000
Preferred stock par value	$ 0.00001		$ 0.00001			$ 0.00001
Series D Preferred Stock
Convertible Preferred Stock Shares Designated	1,000,000
IncreaseDecreaseInDividendsPayable			$ 24,800	$ 18,617
Series E Preferred Stock
IncreaseDecreaseInDividendsPayable	$ 34,178	$ 39,598	102,535	185,485
Redemption Price of Series E preferred stock	$ 477,829		$ 477,829			$ 477,829
Series F Preferred Stock
Convertible Preferred Stock Shares Designated					7,803
IncreaseDecreaseInDividendsPayable		$ 0		$ 495,148
Series G Preferred Stock
Convertible Preferred Stock Shares Designated			43,220

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14. Common Stock (Details) - USD ($)	9 Months Ended
	Jun. 30, 2017	Sep. 30, 2016
Details
Common stock shares authorized	200,000,000	200,000,000
Stockholders' Equity, Reverse Stock Split	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.
Stock Issued During Period, Shares, Issued for Services	7,000
Stock Issued During Period, Value, Issued for Services	$ 70,000

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15. Common Stock Options and Warrants (Details)	9 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)
Details
Deemed dividends on redemption of preferred stock		$ 6,484,236
Aggregate Intrinsic Value	$ 0
Weighted average remaining term of the warrants	4.52
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	$ 38,468

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15. Common Stock Options and Warrants: Schedule of Share Based Payment Award Stock Options Valuation Assumptions, Level 3 (Details) - Fair Value, Inputs, Level 3	3 Months Ended
	Jun. 30, 2017 $ / shares
Minimum
Fair Value Assumptions, Exercise Price	$ 2.50
Fair Value Assumptions, Expected Term	2 months 16 days
Fair Value Assumptions, Expected Volatility Rate	128.00%
Fair Value Assumptions, Risk Free Interest Rate	0.49%
Fair Value Assumptions Common Stock Price	$ 2.50
Maximum
Fair Value Assumptions, Exercise Price	$ 25.00
Fair Value Assumptions, Expected Term	4 years 11 months 5 days
Fair Value Assumptions, Expected Volatility Rate	194.00%
Fair Value Assumptions, Risk Free Interest Rate	1.99%
Fair Value Assumptions Common Stock Price	$ 25.00

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15. Common Stock Options and Warrants: Schedule of Share-based Compensation, Activity (Details) - $ / shares	3 Months Ended
	Jun. 30, 2017	Sep. 30, 2016
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	109,174	65,045
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 37.12	$ 35.06
Share-based compensation arrangement by share-based payment award, Options, Grants in period	48,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 25.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	(3,871)
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	$ 357.84
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	102,225
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 34.46

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16. Related-party Transactions Not Otherwise Disclosed (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2017	Jun. 30, 2016
Principal payments on notes payable		$ 3,325,427	$ 3,175,603
FormerExecutiveChairmanOfTheBoardOfDirectorsMember
Related Party Compensation, Hourly Rate	$ 250
FormerExecutiveChairmanAndChiefExecutiveOfficerMember
Related Party Compensation, Hourly Rate	$ 250
Principal payments on notes payable		$ 135,000

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17. Commitments and Contingencies: Schedule of Future Minimum Rental Payments for Operating Leases (Details)	Jun. 30, 2017 USD ($)
Details
Operating Leases, Future Minimum Payments, Next Rolling Twelve Months	$ 32,908
Operating Leases, Future Minimum Payments, Due in Two Years	111,340
Operating Leases, Future Minimum Payments Due	$ 144,248

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17. Commitments and Contingencies (Details) - USD ($)	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Details
Operating Leases, Rent Expense, Net	$ 97,000	$ 94,000