13. Preferred Stock	6 Months Ended
Mar. 31, 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 six months ended March 31, 2016, the Company accrued $12,434 of dividends on Series D Preferred. On January 12, 2017, the Company entered into a letter agreement with a third-party investor, whereby the investor agreed to convert 20,000 shares of Series D Preferred of the Company owned into common stock of the Company based on current redemption value contingent upon the completion of the Offering. As of the date hereof, the current redemption value of such Series D Preferred was $72,000. Pursuant to the letter agreement, the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the redemption value by 80% of the per share price of the common stock in the Offering and all dividends cease accruing beginning July 1, 2016. The investor has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by him for a period of 12 months. If the Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 13, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017. On March 27, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to April 30, 2017. The Company is in the process of negotiating an extension to the letter agreement and lock-up agreement, however, there is no assurance that an extension will be agreed upon. On January 12, 2017, the Company entered into a letter agreement with an entity affiliated with the Chief Executive Officer, whereby the entity agreed to convert 25,000 shares of Series D Preferred of the Company owned into common stock of the Company based on current redemption value, contingent upon the completion of the Offering. As of the date hereof, the current redemption value of such Series D Preferred was $300,000. Pursuant to the letter agreement, the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the redemption value by $22.50 or 13,334 shares and all dividends cease accruing beginning July 1, 2016. The entity has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by it for a period of 12 months. If the Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 10, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017. On March 27, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to April 30, 2017. On March 27, 2017, the Company replaced the letter agreement with a new letter agreement where the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the redemption value by $6.00 or 50,000 shares and all dividends cease accruing beginning July 1, 2016. If the Offering is not completed by April 15, 2017, the letter agreement will terminate. The Company is in the process of negotiating an extension to the letter agreement and lock-up agreement, however, there is no assurance that an extension will be agreed upon. The Company did not accrue dividends on Series D Preferred during the three and six months ended March 31, 2017 due to these letter agreements. 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 March 31, 2017 and 2016, the Company accrued dividends of $34,178 and $61,315, respectively, payable to Series E Preferred. During the six months ended March 31, 2017 and 2016, the Company accrued dividends of $68,356 and $145,887, respectively, payable to Series E Preferred. As of March 31, 2017 and September 30, 2016, the aggregate redemption price for the Series E Preferred was $477,829. On January 12, 2017, the Company entered into a letter agreement with a director, whereby the director agreed to convert 13,843 shares of Series E Preferred of the Company owned into common stock of the Company, contingent upon the completion of the Offering. As of September 30, 2016, the aggregate amount of $181,297 consisting of accrued dividends, royalty and interest was owed to the director with respect to his Series E Preferred. Pursuant to the letter agreement, the aggregate amount will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the aggregate amount by $17.72 or 10,223 shares. The director has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned for a period of 12 months. If such Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 10, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017. On March 27, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to April 30, 2017. The Company is in the process of negotiating an extension to the letter agreement and lock-up agreement, however, there is no assurance that an extension will be agreed upon. 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 six months ended March 31, 2016, the Company accrued dividends of $182,423 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 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 the Company’s Chief Executive Officer and 10,805 shares of Series G Preferred to a 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. The Company is in the process of negotiating extensions to the lock-up agreements, however, there is no assurance that the extensions will be agreed upon. 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.

13. Preferred Stock

6 Months Ended

Mar. 31, 2017

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 six months ended March 31, 2016, the Company accrued $12,434 of dividends on Series D Preferred.

On January 12, 2017, the Company entered into a letter agreement with a third-party investor, whereby the investor agreed to convert 20,000 shares of Series D Preferred of the Company owned into common stock of the Company based on current redemption value contingent upon the completion of the Offering. As of the date hereof, the current redemption value of such Series D Preferred was $72,000. Pursuant to the letter agreement, the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the redemption value by 80% of the per share price of the common stock in the Offering and all dividends cease accruing beginning July 1, 2016. The investor has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by him for a period of 12 months. If the Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 13, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017. On March 27, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to April 30, 2017. The Company is in the process of negotiating an extension to the letter agreement and lock-up agreement, however, there is no assurance that an extension will be agreed upon.

On January 12, 2017, the Company entered into a letter agreement with an entity affiliated with the Chief Executive Officer, whereby the entity agreed to convert 25,000 shares of Series D Preferred of the Company owned into common stock of the Company based on current redemption value, contingent upon the completion of the Offering. As of the date hereof, the current redemption value of such Series D Preferred was $300,000. Pursuant to the letter agreement, the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the redemption value by $22.50 or 13,334 shares and all dividends cease accruing beginning July 1, 2016. The entity has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned by it for a period of 12 months. If the Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 10, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017. On March 27, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to April 30, 2017. On March 27, 2017, the Company replaced the letter agreement with a new letter agreement where the redemption value will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the redemption value by $6.00 or 50,000 shares and all dividends cease accruing beginning July 1, 2016. If the Offering is not completed by April 15, 2017, the letter agreement will terminate. The Company is in the process of negotiating an extension to the letter agreement and lock-up agreement, however, there is no assurance that an extension will be agreed upon.

The Company did not accrue dividends on Series D Preferred during the three and six months ended March 31, 2017 due to these letter agreements.

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 March 31, 2017 and 2016, the Company accrued dividends of $34,178 and $61,315, respectively, payable to Series E Preferred. During the six months ended March 31, 2017 and 2016, the Company accrued dividends of $68,356 and $145,887, respectively, payable to Series E Preferred. As of March 31, 2017 and September 30, 2016, the aggregate redemption price for the Series E Preferred was $477,829.

On January 12, 2017, the Company entered into a letter agreement with a director, whereby the director agreed to convert 13,843 shares of Series E Preferred of the Company owned into common stock of the Company, contingent upon the completion of the Offering. As of September 30, 2016, the aggregate amount of $181,297 consisting of accrued dividends, royalty and interest was owed to the director with respect to his Series E Preferred. Pursuant to the letter agreement, the aggregate amount will automatically convert upon consummation of the Offering into such number of restricted shares of the Company’s common stock calculated by dividing the aggregate amount by $17.72 or 10,223 shares. The director has entered into a lock-up agreement prohibiting the sale or other transfer of all securities of the Company owned for a period of 12 months. If such Offering is not completed by February 15, 2017, the letter agreement and lock-up agreement will terminate. On February 10, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to March 31, 2017. On March 27, 2017, the Company signed an amendment to the letter agreement and lock-up agreement to extend the expiration dates to April 30, 2017. The Company is in the process of negotiating an extension to the letter agreement and lock-up agreement, however, there is no assurance that an extension will be agreed upon.

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 six months ended March 31, 2016, the Company accrued dividends of $182,423 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 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 the Company’s Chief Executive Officer and 10,805 shares of Series G Preferred to a 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. The Company is in the process of negotiating extensions to the lock-up agreements, however, there is no assurance that the extensions will be agreed upon.

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.