| 10. Related Party Notes Payable |
10. Related-Party Notes Payable The Company had the following related-party notes payable outstanding as of: | | | March 31, | | | | 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 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 (see Note 17). | $ | 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 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 (see Note 17). | | 1,303,135 | | | | 1,303,135 | | | | | | | | | | | | Unsecured note payable to an entity controlled by a former Executive Chairman of the Board of Directors with interest at 18% per annum, due January 2017. In February 2016, notes payable to the same entity, with outstanding balances of $511,005 plus accrued interest of $30,999 combined into this note. The note is subordinated to notes payable to unrelated parties and is convertible into shares of common stock at $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 (see Note 17). | | 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. 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 (see Note 17). | | 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. 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. | | 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. | | 6,912 | | | | 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 | | 3,875,335 | | | | 3,898,124 | | | | | | | | | | | | Less current portion | | (3,875,335 | ) | | | (3,898,124 | ) | | | | | | | | | | | Notes payable, related-party, net of current portion | $ | - | | | $ | - | |
|