Note 7 - Notes Payable

12 Months Ended

Sep. 30, 2012

Debt Disclosure [Text Block]

7. Notes Payable

Notes payable consist of the following:

		September 30, 2012		September 30, 2011
Notes payable - related parties
Unsecured notes payable to related party directors with interest ranging from 10% to 18% with principal and interest due December 31, 2011. These notes are currently in default.	(1)	$	207,500	$	207,500
Unsecured notes payable to stockholders with interest ranging from 10% to 18% with principal and interest due December 31, 2011. These notes are currently in default.	(2)		30,000		30,000
Unsecured notes payable issued at Merger for prior consulting fees owed to two directors. Principal and interest at 5% per annum was due on December 31, 2011. These notes are currently in default.	(3)		243,175		243,175
Unsecured 11% note payable to a stockholder resulting from non-conversion of convertible note issued in April 2009. This note is currently in default with the default interest rate being 16%.			50,000		50,000
Unsecured 15% note payable to a company owned by the Company's CEO. This note is currently in default with the default interest rate being 18%.			125,000		125,000
Unsecured 15% note payable to a company owned by the Company's CEO. This note is currently in default with the default interest rate being 18%.			140,000		-
Unsecured note payable to a company owned by the Company's CEO. Principal and interest at 15% per annum is due on November 26, 2013.			50,600		-
Total notes payable - related parties (current)		$	846,275	$	655,675

		September 30, 2012			September 30, 2011
Notes payable - other current
Unsecured installment note, at 5% compounded monthly, with minimum monthly payments of $20,000 commencing July 2010. The balance is increased by additional invoices billed. This note is currently in default.	(4)	$	503,213		$	503,213
Installment debt payable with interest at 11.24% per annum, with monthly installments of $3,026, due March 2012. Secured by gross unearned premiums and loss payments on the insurance policy financed.			-			17,236
Installment debt payable with interest at 10.75% per annum, with monthly installments of $3,173, due March 2013. Secured by gross unearned premiums and loss payments on the insurance policy financed.			18,200			-
Unsecured installment debt payable with interest at 0% per annum, with monthly installments of $2,164, due February 2013.			8,655			-
Total notes payable - other current		$	530,068		$	520,449
Notes payable - other long-term
Five year term bank debt with interest at prime plus 1%, with monthly installments of $4,167 plus interest. Note is guaranteed by the Company's CEO.	(5)		137,491			187,495
Less: Long-term portion of bank term debt			(87,491	)		(137,495	)
Notes payable - other (current portion)		$	50,000		$	50,000

Approximate principal repayments of long-term debt are as follows:

09/30/2013		50,000
09/30/2014		50,000
09/30/2015		37,491
Total	$	137,491

(1) Effective as of the Merger on May 28, 2010, new unsecured notes at the same interest rates were issued for previous secured notes with no stated repayment date. The Company issued warrants exercisable for 17,550 common shares at $2.50 per share until May 28, 2013 as an inducement for the note restructuring. The value of the warrants of $19,169 is a note discount which was amortized to interest expense over the original term of the notes.

(2) Effective as of the Merger on May 28, 2010, new unsecured notes at the same interest rates were issued for previous secured notes with no stated repayment date. The Company issued warrants exercisable for 3,900 common shares at $2.50 per share until May 28, 2013 as an inducement for the note restructuring. The value of the warrants of $4,260 is a note discount which was amortized to interest expense over the original term of the notes.

(3) The Company issued warrants exercisable for 14,591 common shares at $2.50 per share until May 28, 2013 as an inducement for converting consulting fees for unsecured notes. The value of the warrants of $15,937 is a note discount which was amortized over the original term of the notes.

(4) New unsecured note issued at Merger effective May 28, 2010, to replace prior secured notes and payables related to legal fees. In November 2011, the Company negotiated revised terms on this loan. The note is due on demand, but was due not later than June 1, 2012, including interest at 5% per annum. Payments are to be made as excess cash flow permits after covering only ordinary operating expenses.  The note is secured by the Company assets.

(5) The Company issued warrants exercisable for 15,000 common shares at $2.50 per share until May 28, 2013 as an inducement to Dr. Robertson for his continuing guarantee of a bank line of credit (due through affiliate RRI) that has been renegotiated as a term loan. The value of the warrants of $16,384 was a note discount expensed to interest at issuance as the note was due immediately until subsequently renegotiated as a five year term note.

In September 2011 the Company entered into Agreements with certain stockholders and directors to convert $120,000 of notes payable and accrued interest of $72,464 into shares of the Company’s common stock at $1.00 per share or an aggregate of 192,464 shares of common stock.