Utah
|
87-0543981
|
(State
or other jurisdiction of incorporation or organization )
|
(I.R.S.
Employer Identification
Number)
|
Large
accelerated filer [ ]
|
Accelerated
filer [X]
|
Non-accelerated
filer [ ]
|
Smaller
reporting company
[ ]
|
Page
|
||
PART
I. FINANCIAL INFORMATION
|
||
Item
1
|
Financial
Statements (unaudited)
|
|
Condensed
Consolidated Balance Sheets
|
3
|
|
Condensed
Consolidated Statements of Operations
|
5
|
|
Condensed
Consolidated Statements of Cash Flows
|
6
|
|
Notes
to Condensed Consolidated Financial Statements
|
8
|
|
Item
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
22
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
27
|
Item
4
|
Controls
and Procedures
|
27
|
PART
II. OTHER INFORMATION
|
||
Item
1
|
Legal
Proceedings
|
29
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds .
|
29
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
30
|
Item
6
|
Exhibits .
|
30
|
Signatures
|
33
|
June
30,
2009
|
September
30,
2008
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 1,592,167 | $ | 2,782,953 | ||||
Deposit
held in escrow
|
- | 500,000 | ||||||
Securities
held for sale
|
200,000 | - | ||||||
Accounts
receivable, net of allowance for doubtful accounts of $278,900
and $312,000, respectively
|
1,172,465 | 1,441,853 | ||||||
Receivable
from related party
|
- | 55,385 | ||||||
Inventory
|
177,253 | - | ||||||
Prepaid
expenses and other
|
331,524 | 224,842 | ||||||
Total
current assets
|
3,473,409 | 5,005,033 | ||||||
Property
and equipment, net of accumulated depreciation and amortization of
$2,423,378 and $1,937,710, respectively
|
1,339,313 | 1,581,558 | ||||||
Monitoring
equipment, net of accumulated depreciation of $4,147,765 and $3,061,321,
respectively
|
3,998,895 | 1,349,146 | ||||||
Goodwill
|
5,662,661 | 4,811,834 | ||||||
Intangible
assets, net of amortization of $31,350 and $16,500,
respectively
|
201,650 | 216,500 | ||||||
Other
assets
|
79,127 | 46,626 | ||||||
Total
assets
|
$ | 14,755,055 | $ | 13,010,697 |
June
30,
2009
|
September
30,
2008
|
|||||||
Liabilities
and Stockholders’ Equity (Deficit)
|
||||||||
Current
liabilities:
|
||||||||
Bank
line of credit
|
$ | - | $ | 3,462,285 | ||||
Accounts
payable
|
1,609,080 | 2,059,188 | ||||||
Accrued
liabilities
|
1,723,527 | 1,781,267 | ||||||
Deferred
revenue
|
39,915 | 21,343 | ||||||
SecureAlert
Series A Preferred stock redemption obligation
|
3,224,310 | 3,244,758 | ||||||
Related-party
line of credit and notes
|
1,547,620 | 792,804 | ||||||
Convertible
promissory note, net of debt discount of $77,287
|
2,522,713 | - | ||||||
Senior
secured convertible notes, net of debt discount of
$831,956
|
2,617,675 | - | ||||||
Series
A 15% debentures, net of debt discount of $1,631,453
|
1,568,547 | - | ||||||
Derivative
liability
|
3,917,537 | - | ||||||
Current
portion of long-term debt
|
531,387 | 465,664 | ||||||
Total
current liabilities
|
19,302,311 | 11,827,309 | ||||||
Series
A 15% debentures, net of debt discount of $506,318 , net of current
portion
|
400,432 | - | ||||||
Long-term
debt, net of current portion
|
519,671 | 1,147,382 | ||||||
Total
liabilities
|
20,222,414 | 12,974,691 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders’
equity (deficit):
|
||||||||
Preferred
stock:
|
||||||||
Series
A 10% dividend, convertible, non-voting, $0.0001 par value: 40,000 shares
designated; 0 and 19 shares outstanding, respectively (aggregate
liquidation preference of $0)
|
- | 1 | ||||||
Series
B convertible, $0.0001 par value: 2,000,000 shares designated; 0 and
10,999 shares outstanding, respectively (aggregate liquidation preference
of $0)
|
- | 1 | ||||||
Common
stock, $0.0001 par value: 250,000,000 shares authorized;
201,774,367 and 155,881,260 shares outstanding,
respectively
|
20,177 | 15,588 | ||||||
Additional
paid-in capital
|
193,869,321 | 186,203,084 | ||||||
Deferred
compensation
|
(2,385,404 | ) | (3,498,672 | ) | ||||
Subscription
receivable
|
(250,000 | ) | - | |||||
Accumulated
deficit
|
(196,721,453 | ) | (182,683,996 | ) | ||||
Total
stockholders’ equity (deficit)
|
(5,467,359 | ) | 36,006 | |||||
Total
liabilities and stockholders’ equity (deficit)
|
$ | 14,755,055 | $ | 13,010,697 |
Three months
ended
June 30,
|
Nine months ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues:
|
||||||||||||||||
Products
|
$
|
75,451
|
$
|
1,064,756
|
$
|
493,595
|
$
|
2,173,384
|
||||||||
Monitoring
services
|
3,133,518
|
2,422,901
|
8,985,386
|
7,272,006
|
||||||||||||
Total
revenues
|
3,208,969
|
3,487,657
|
9,478,981
|
9,445,390
|
||||||||||||
Cost of
revenues:
|
||||||||||||||||
Products
|
28,891
|
851,214
|
246,310
|
1,502,900
|
||||||||||||
Monitoring
services
|
2,391,935
|
2,538,283
|
8,049,230
|
7,834,560
|
||||||||||||
Total cost of
revenues
|
2,420,826
|
3,389,497
|
8,295,540
|
9,337,460
|
||||||||||||
Gross
margin
|
788,143
|
98,160
|
1,183,441
|
107,930
|
||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling, general and
administrative (including
non-cash expenses
of $281,604, $11,923,678, $2,355,600 and
$19,720,720,
respectively)
|
3,178,333
|
16,597,727
|
11,078,059
|
28,034,657
|
||||||||||||
Research and
development
|
431,201
|
646,335
|
1,277,102
|
4,359,715
|
||||||||||||
Loss from
operations
|
(2,821,391)
|
(17,145,902)
|
(11,171,720)
|
(32,286,442)
|
||||||||||||
Other income
(expense):
|
||||||||||||||||
Gain on sale of intellectual
property
|
-
|
-
|
-
|
2,400,000
|
||||||||||||
Redemption of SecureAlert Series A
Preferred
|
24,060
|
48,648
|
20,449
|
(8,428,520)
|
||||||||||||
Minority interest
allocation
|
-
|
306,797
|
-
|
692,389
|
||||||||||||
Interest
income
|
8,215
|
920
|
11,658
|
35,184
|
||||||||||||
Interest expense (including
non-cash expense
of $1,099,707, $285,844,
$1,929,306, $665,332,
respectively)
|
(1,255,103)
|
(389,838)
|
(2,790,006)
|
(1,163,586)
|
||||||||||||
Acquisition option extension
cost
|
(147,566)
|
-
|
(347,066)
|
-
|
||||||||||||
Derivative valuation loss
(non-cash
expense)
|
(1,014,045)
|
-
|
(1,014,045)
|
-
|
||||||||||||
Settlement
expense
|
(23,046)
|
-
|
(23,046)
|
-
|
||||||||||||
Other income (expense),
net
|
196,568
|
16,905
|
1,276,319
|
49,486
|
||||||||||||
Net loss from continuing
operations
|
(5,032,308)
|
(17,162,470)
|
(14,037,457)
|
(38,701,489)
|
||||||||||||
Discontinued
operations
|
-
|
(340,348)
|
-
|
(1,261,353)
|
||||||||||||
Net
loss
|
(5,032,308)
|
(17,502,818)
|
(14,037,457)
|
(39,962,842)
|
||||||||||||
Dividends on Series A Preferred
stock
|
-
|
(107)
|
(175)
|
(345,246)
|
||||||||||||
Net loss attributable to common
stockholders
|
$
|
(5,032,308)
|
$
|
(17,502,925)
|
$
|
(14,037,632)
|
$
|
(40,308,088)
|
||||||||
Net loss per common
share from continuing
operations, basic and
diluted
|
$
|
(0.03)
|
$
|
(0.12)
|
$
|
(0.08)
|
$
|
(0.28)
|
||||||||
Net loss per common
share from
discontinued operations, basic and
diluted
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(0.01)
|
||||||||
Net loss per common share, basic
and diluted
|
$
|
(0.03)
|
$
|
(0.12)
|
$
|
(0.08)
|
$
|
(0.29)
|
||||||||
Weighted average common shares
outstanding, basic and diluted
|
191,962,000
|
146,085,000
|
173,137,000
|
136,097,000
|
Nine
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (14,037,457 | ) | $ | (39,962,842 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
1,676,541 | 1,617,309 | ||||||
Common
stock issued for services
|
668,874 | 13,833,585 | ||||||
Amortization
of deferred financing and consulting costs
|
1,497,936 | 4,472,262 | ||||||
Stock
options and warrants issued during the period for services
|
345,838 | 804,205 | ||||||
Common stock issued for acquisition
option extension cost
|
19,500 | - | ||||||
Amortization
of debt discount
|
1,067,037 | - | ||||||
Common
stock issued to settle lawsuit
|
292,207 | 1,276,000 | ||||||
Redemption
of SecureAlert series A preferred stock
|
(20,448 | ) | 8,477,168 | |||||
Loss
on discontinued operations
|
- | 1,261,353 | ||||||
Increase
in related-party line of credit for services
|
218,684 | 497,443 | ||||||
Impairment
of monitoring equipment
|
- | 570,948 | ||||||
Minority
interest expense, net
|
- | (692,389 | ) | |||||
Derivative
liability valuation
|
1,014,045 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, net
|
269,388 | 2,394,276 | ||||||
Deposit
released from escrow
|
500,000 | - | ||||||
Interest
receivable (payable)
|
- | (9,068 | ) | |||||
Inventories
|
(177,253 | ) | - | |||||
Prepaid
expenses and other assets
|
(139,184 | ) | 789,736 | |||||
Receivables
|
55,385 | - | ||||||
Accounts
payable
|
14,929 | (754,721 | ) | |||||
Accrued
liabilities
|
10,202 | 876,822 | ||||||
Deferred
revenue
|
18,572 | (378,309 | ) | |||||
Net
cash used in operating activities
|
(6,705,204 | ) | (4,926,222 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Net
purchase of property and equipment
|
(240,984 | ) | (275,728 | ) | ||||
Purchase
of monitoring equipment
|
(1,047,043 | ) | (404,123 | ) | ||||
Purchase
of securities
|
(200,000 | ) | - | |||||
Disposal
of monitoring equipment
|
33,519 | - | ||||||
Net
cash used in investing activities
|
(1,454,508 | ) | (679,851 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Principal
payments on related-party line of credit
|
(713,868 | ) | (715,625 | ) | ||||
Principal
payments on notes payable
|
(453,766 | ) | (257,510 | ) | ||||
Cash
acquired through acquisitions
|
- | 160,898 | ||||||
Net
borrowings (reductions) on bank line of credit
|
87,346 | (2,367,633 | ) | |||||
Proceeds
from notes payable
|
55,744 | 889,263 | ||||||
Principal
payments on notes payable related to acquisitions
|
- | (2,100,000 | ) | |||||
Proceeds
from issuance of subsidiary stock
|
- | 2,049,999 | ||||||
Proceeds
from related-party notes payable
|
1,500,000 | - | ||||||
Proceeds
from issuance of common stock, net of commissions
|
3,250,000 | 2,000,000 | ||||||
Payment
on related-party notes payable
|
(603,280 | ) | - | |||||
Proceeds
from exercise of options and warrants
|
- | 2,658,380 | ||||||
Proceeds
from Series A 15% debenture, net of commissions
|
3,846,750 | - | ||||||
Net
cash provided by financing activities
|
6,968,926 | 2,317,772 | ||||||
Net
decrease in cash
|
(1,190,786 | ) | (3,288,301 | ) | ||||
Cash,
beginning of period
|
2,782,953 | 4,803,871 | ||||||
Cash,
end of period
|
$ | 1,592,167 | $ | 1,515,570 |
Nine
Months Ended
June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
paid for interest
|
$ | 1,121,715 | $ | 498,254 | ||||
Supplemental
schedule of non-cash investing and financing activities:
|
||||||||
Issuance
of shares of common stock in exchange for shares of Series B
Preferred
stock
|
2 | 2 | ||||||
Issuance
of shares of common stock and warrants in exchange for deferred consulting
services and financing costs
|
384,667 | 672,824 | ||||||
Accrual
of Series A Preferred stock dividends
|
175 | 345,246 | ||||||
Issuance
of common stock for payment of SecureAlert Series A Preferred
dividends
|
- | 643,601 | ||||||
Issuance
of common stock in acquisition of Midwest Monitoring & Surveillance,
Inc.
|
- | 1,668,780 | ||||||
Issuance
of common stock in acquisition of Court Programs, Inc. Court Programs of
Florida, Inc. and Court Programs of Northern Florida, Inc.
|
- | 847,500 | ||||||
Issuance
of shares of common stock for subscription receivable
|
250,000 | - | ||||||
Issuance
of shares of common stock for accounts payable
|
550,000 | - | ||||||
Discount
from issuance of convertible debt
|
4,114,052 | - | ||||||
Cancellation
of common stock issued
|
175 | - | ||||||
Acquisition
of monitoring equipment through issuance of debt
|
2,770,000 | - | ||||||
Stock
and options issued in connection with acquisition of Bishop Rock Software,
Inc.
|
856,522 | - | ||||||
Issuance
of common stock to settle notes payable and accrued
interest
|
187,793 | - | ||||||
Line
of credit paid through the issuance of Senior convertible
notes
|
3,549,630 | - | ||||||
Acquisition
of property and equipment through issuance of debt
|
38,991 | - |
Shares
Under
Option
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
as of September 30, 2008
|
3,600,000
|
$
|
1.08
|
||||||||||
Granted
|
1,517,714
|
$
|
0.21
|
||||||||||
Exercised
|
-
|
$
|
-
|
||||||||||
Forfeited
|
-
|
$
|
-
|
||||||||||
Expired
/ Cancelled
|
(408,500)
|
$
|
1.45
|
||||||||||
Outstanding
as of June 30, 2009
|
4,709,214
|
$
|
0.76
|
2.95
years
|
$
|
72,699
|
|||||||
Exercisable
as of June 30, 2009
|
1,694,880
|
$
|
0.31
|
3.21
years
|
$
|
72,699
|
June
30,
2009
|
September
30,
2008
|
|||||||
Equipment,
software and tooling
|
$ | 2,652,207 | $ | 2,472,076 | ||||
Automobiles
|
305,658 | 287,736 | ||||||
Building
and land
|
377,555 | 377,555 | ||||||
Leasehold
improvements
|
127,408 | 102,190 | ||||||
Furniture
and fixtures
|
299,865 | 279,711 | ||||||
3,762,693 | 3,519,268 | |||||||
Accumulated
depreciation
|
(2,423,380 | ) | (1,937,710 | ) | ||||
Property
and equipment, net of accumulated depreciation
|
$ | 1,339,313 | $ | 1,581,558 |
June
30,
2009
|
September
30,
2008
|
|||||||
Monitoring
equipment
|
$ | 8,146,660 | $ | 4,410,467 | ||||
Less:
accumulated depreciation
|
(4,147,765 | ) | (3,061,321 | ) | ||||
Total
|
$ | 3,998,895 | $ | 1,349,146 |
Midwest
Monitoring
&
Surveillance
|
Court
Programs,
Inc.
|
Bishop
Rock
Software
|
Total
|
|||||||||||||
Goodwill
|
$ | 3,603,748 | $ | 1,208,086 | $ | 850,827 | $ | 5,662,661 | ||||||||
Other
Intangible Assets
|
||||||||||||||||
Trade
name
|
120,000 | 99,000 | - | 219,000 | ||||||||||||
Customer
relationships
|
- | 6,000 | - | 6,000 | ||||||||||||
Non-compete
agreements
|
2,000 | 6,000 | - | 8,000 | ||||||||||||
Total
Other Intangible Assets
|
122,000 | 111,000 | - | 233,000 | ||||||||||||
Accumulated
amortization
|
(14,250 | ) | (17,100 | ) | - | (31,350 | ) | |||||||||
Total
goodwill and other intangible assets, net of amortization
|
$ | 3,711,498 | $ | 1,301,986 | $ | 850,827 | $ | 5,864,311 |
|
1)
|
150,000
shares of common stock valued at $0.13 per share for a total of
$19,500.
|
|
2)
|
$75,000
in cash upon execution of the
agreement.
|
|
3)
|
$105,000
in cash paid in ten equal payments of $10,500 beginning April 15, 2009
through January 15, 2010.
|
Three Months
Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Revenues:
|
||||||||
Products
|
$
|
75,451
|
$
|
1,064,756
|
||||
Monitoring
services
|
3,133,518
|
2,422,901
|
||||||
Total
revenues
|
3,208,969
|
3,487,657
|
||||||
Cost of
revenues:
|
||||||||
Products
|
(28,891
|
)
|
(851,214)
|
|||||
Monitoring
services
|
(2,391,935
|
)
|
(2,538,283)
|
|||||
Total
cost of revenues
|
(2,420,826
|
)
|
(3,389,497)
|
|||||
Gross
margin
|
788,143
|
98,160
|
||||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
(3,178,333
|
)
|
(16,602,727)
|
|||||
Research
and development
|
(431,201
|
)
|
(646,335)
|
|||||
Loss
from operations
|
(2,821,391
|
)
|
(17,150,902)
|
|||||
Other income
(expense):
|
||||||||
Redemption SecureAlert Series A Preferred
stock
|
-
|
48,648
|
||||||
Minority
interest allocation
|
-
|
306,797
|
||||||
Change from estimate to
actual
|
24,060
|
-
|
||||||
Settlement income
(expense)
|
(23,046)
|
-
|
||||||
Acquisition option extension
cost
|
(147,566)
|
-
|
||||||
Derivative valuation
loss
|
(1,014,045)
|
-
|
||||||
Other
income (loss)
|
196,568
|
16,905
|
||||||
Interest
income
|
8,215
|
920
|
||||||
Interest
expense
|
(1,255,103
|
)
|
(389,838)
|
|||||
Net loss from continuing
operations
|
(5,032,308
|
)
|
(17,167,470)
|
|||||
Discontinued
operations
|
-
|
(340,348)
|
||||||
Net loss
|
$
|
(5,032,308
|
)
|
$
|
(17,507,818)
|
|||
Dividends on Series A Preferred
stock
|
-
|
(107)
|
||||||
Net loss attributable to common
stockholders
|
$
|
(5,032,308
|
)
|
$
|
(17,507,925)
|
|||
Net loss per common share
from continuing
operations, basic and
diluted
|
$
|
(0.03
|
)
|
$
|
(0.12)
|
|||
Net loss per common share
from discontinued
operations, basic and
diluted
|
$
|
(0.00
|
)
|
$
|
(0.00)
|
|||
Net loss per common share – basic
and diluted
|
$
|
(0.03
|
)
|
$
|
(0.12)
|
|||
Weighted average common shares
outstanding – basic and diluted
|
191,962,000
|
146,085,000
|
Nine Months Ended
June 30,
|
||||||||
2009
|
2008
|
|||||||
Revenues:
|
||||||||
Products
|
$
|
493,595
|
$
|
2,173,384
|
||||
Monitoring
services
|
8,986,068
|
7,272,006
|
||||||
Total
revenues
|
9,479,663
|
9,445,390
|
||||||
Cost of
revenues:
|
||||||||
Products
|
(246,310)
|
(1,502,900)
|
||||||
Monitoring
services
|
(8,049,230)
|
(7,834,560)
|
||||||
Total
cost of revenues
|
(8,295,540)
|
(9,337,460)
|
||||||
Gross
margin
|
1,184,123
|
107,930
|
||||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
(11,238,788)
|
(28,039,657)
|
||||||
Research
and development
|
(1,277,102)
|
(4,359,715)
|
||||||
Loss
from operations
|
(11,331,767)
|
(32,291,442)
|
||||||
Other income
(expense):
|
||||||||
Gain
on sale of intellectual property
|
-
|
2,400,000
|
||||||
Redemption SecureAlert Series A Preferred
stock
|
-
|
(8,428,520)
|
||||||
Minority
interest allocation
|
-
|
692,389
|
||||||
Change
from estimate to actual
|
20,449
|
-
|
||||||
Settlement
expense
|
(23,046)
|
-
|
||||||
Acquisition option extension
cost
|
(347,066)
|
-
|
||||||
Derivative valuation
loss
|
(1,014,045)
|
-
|
||||||
Other
income (loss)
|
1,276,319
|
49,486
|
||||||
Interest
income
|
11,658
|
35,184
|
||||||
Interest
expense
|
(2,790.006)
|
(1,163,586)
|
||||||
Net loss from continuing
operations
|
(14,197,504)
|
(38,706,489)
|
||||||
Discontinued
operations
|
-
|
(1,261,353)
|
||||||
Net loss
|
$
|
(14,197,504)
|
$
|
(39,967,842)
|
||||
Dividends on Series A Preferred stock
|
(175)
|
(345,246)
|
||||||
Net loss attributable to common
stockholders
|
$
|
(14,197,679)
|
$
|
(40,313,088)
|
||||
Net loss per common share
from continuing
operations, basic and
diluted
|
$
|
(0.08)
|
$
|
(0.29)
|
||||
Net loss per common share
from discontinued
operations, basic and
diluted
|
$
|
(0.00)
|
$
|
(0.01)
|
||||
Net loss per common share – basic
and diluted
|
$
|
(0.08)
|
$
|
(0.30)
|
||||
Weighted average common shares
outstanding – basic and diluted
|
173,137,000
|
136,097,000
|
June
30,
2009
|
September
30,
2008
|
|||||||
Accrued
payroll and employee benefits
|
$ | 532,944 | $ | 451,485 | ||||
Accrued
interest
|
345,291 | 97,383 | ||||||
Accrued
board of directors fees
|
300,000 | 205,000 | ||||||
Accrued
warranty and manufacturing costs
|
246,622 | 291,423 | ||||||
Accrued
outside services and other expenses
|
123,543 | 118,665 | ||||||
Accrued
legal and consulting fees
|
101,627 | 91,720 | ||||||
Accrued
extension payments
|
73,500 | - | ||||||
Accrued
lawsuit liability
|
- | 385,000 | ||||||
Accrued
bonuses
|
- | 83,763 | ||||||
Commissions
|
- | 56,828 | ||||||
Total
|
$ | 1,723,527 | $ | 1,781,267 |
(15)
|
CONVERTIBLE
PROMISSORY NOTE
|
(16)
|
SENIOR
SECURED CONVERTIBLE NOTES
|
(17)
|
SERIES
A 15% DEBENTURES
|
June
30,
2009
|
September
30,
2008
|
|||||||
SecureAlert,
Inc.
|
||||||||
Unsecured
note payable to a former subsidiary bearing interest at 5%. The
note matures on December 31, 2009.
|
$ | 295,513 | $ | 598,793 | ||||
Unsecured
notes payable to former SecureAlert stockholders, with interest at 5.00%,
payable in installments of $80,000 per month. These notes were paid off
during the six months ended March 31, 2009 in connection with the
settlement of the Natale and Boling lawsuit.
|
- | 169,676 | ||||||
Unsecured
note payable with interest rate of 12%. Note matures on
February 1, 2010.
|
15,075 | - | ||||||
Unsecured
note payable with interest rate of 8%. Note matures on June 6,
2011.
|
13,774 | - |
Court
Programs
|
||||||||
Note
payable due to the Small Business Administration (“SBA”). Note
bears interest at 4% and matures on April 6, 2037. The note is
secured by monitoring equipment.
|
225,137 | 229,100 | ||||||
Unsecured
revolving lines of credit with two banks, with interest rates between 4.85
% and 9.24%
|
20,110 | 48,499 | ||||||
Unsecured
note payable with interest rate of 8%. The note matures on May 31,
2010.
|
2,031 | 16,028 | ||||||
Automobile
loan secured by the vehicle. Loan bears interest at 7.09%, and
matures on June 21, 2014.
|
31,827 | - | ||||||
Midwest
|
||||||||
Notes
payable to a financial institution bearing interest at
6.37%. Notes mature in July 2011 and July 2016. The
notes are secured by property.
|
201,256 | 247,675 | ||||||
Notes
payable for monitoring equipment. Interest rates range between
7.8% to 18.5% and mature January 2009 through November
2011. The notes are secured by monitoring
equipment.
|
148,189 | 199,747 | ||||||
Automobile
loans with several financial institutions secured by the
vehicles. Interest rates range between 6.9% and 8.5%, due
between January 2010 and October 2011.
|
47,324 | 43,570 | ||||||
Note
payable to a stockholder of Midwest. The note bears interest at
4.9% maturing on February 22, 2013.
|
50,823 | 59,958 | ||||||
Total
debt obligations
|
$ | 1,051,059 | $ | 1,613,046 | ||||
Less
current portion
|
(531,388 | ) | (465,664 | ) | ||||
Long-term
debt, net of current portion
|
$ | 519,671 | $ | 1,147,382 |
(22)
|
COMMON
STOCK
|
|
·
|
3,812,500
shares were issued for services performed for a value of
$868,875.
|
|
·
|
150,000
shares were issued to extend the purchase agreement between Midwest and
the Company valued at $19,500.
|
|
·
|
5,400,000
shares were issued to settle lawsuits valued at
$1,030,000.
|
|
·
|
17,850,000
shares were issued for net cash proceeds of
$3,250,000.
|
|
·
|
17,553,016
shares were issued in connection with debt valued at
$1,118,989.
|
|
·
|
9,306
shares were issued from the conversion of 19 shares of Series A Preferred
stock.
|
|
·
|
10,999
shares were issued from the conversion of 10,999 shares of Series B
Preferred stock.
|
|
·
|
2,857,286
shares were issued in connection with the purchase of Bishop Rock Software
valued at $657,176.
|
(23)
|
SUBSEQUENT
EVENTS
|
|
1)
|
The
Company received $100,000 in cash from an entity in connection with the
issuance of the Series A 15%
debentures.
|
|
2)
|
The
Company entered into a promissory note in the amount of $1,000,000 payable
on December 31, 2010. The note bears interest at a rate of 15%
per annum paid quarterly. As additional consideration for the
loan and as a settlement to resolve a registration-rights dispute between
the investor and the Company, the Company granted 8,000,000 shares of
common stock.
|
|
1)
|
The
Company received $100,000 in cash from an entity in connection with the
issuance of the Series A 15%
debentures.
|
|
2)
|
The
Company entered into a promissory note in the amount of $1,000,000 payable
on December 31, 2010. The note bears interest at a rate of 15%
per annum paid quarterly. As additional consideration for the
loan and as a settlement to resolve a registration-rights dispute between
the investor and the Company, the Company granted 8,000,000 shares of
common stock.
|
Three
Months Ended June 30,
2008
|
Nine
Months Ended June 30,
2008
|
|||||||
Net
revenues
|
$ | 122,721 | $ | 467,148 | ||||
Net
loss
|
$ | (340,348 | ) | $ | (1,261,353 | ) |
|
(i)
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our
assets;
|
|
(ii)
|
provide
reasonable assurance that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors;
and
|
|
(iii)
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could have a
material effect on the financial
statements.
|
|
·
|
Control
Environment – We did not maintain an effective control environment
for internal control over financial reporting. Specifically, we concluded
that we did not have appropriate controls in the following
areas:
|
|
o
|
Segregation of Duties –
As a result of limited resources and the addition of multiple majority
owned subsidiaries, we did not maintain proper segregation of incompatible
duties. The effect of the lack of segregation of duties potentially
affects multiple processes and
procedures.
|
|
o
|
Implementation of Effective
Controls – We failed to complete the implementation of effective
internal controls over our newly acquired majority owned subsidiaries as
of December 31, 2008 due to limited
resources.
|
|
·
|
Tracking
of Leased Equipment – We failed to maintain effective internal
controls over the tracking of leased equipment as it relates to the
assignment and leasing of monitoring
equipment.
|
|
·
|
Financial
Reporting Process – We did not maintain an effective financial
reporting process to prepare financial statements in accordance with
generally accepted accounting principles. Specifically, we initially
failed to appropriately account for and disclose the effects of issuing
derivatives.
|
|
·
|
12,500,000
shares were sold in May 2009 for net cash proceeds of $2,250,000. The
shares were issued to the licensee in connection with a distribution and
licensing agreement entered into with a European corporation in a
transaction exempt from registration under Section 4(2) of the Securities
Act.
|
|
·
|
5,000,000
shares were sold in March 2009 for net cash proceeds of $900,000. The
shares were issued to an accredited investor in a transaction exempt from
registration under Section 4(2) of the Securities
Act.
|
|
·
|
350,000
shares were sold in December 2008 for net cash proceeds of $100,000. The
shares were issued to an accredited investor in a transaction exempt from
registration under Section 4(2) of the Securities
Act.
|
|
·
|
17,553,016
shares were issued in connection with debt financings in transactions
exempt from registration under Section 4(2) of the Securities Act and
rules promulgated thereunder as
follows:
|
|
o
|
4,000,000
shares were sold on various dates between December 2008 and June 2009 to
eight purchasers of the Company’s Series A 15% Debentures in a private
placement of the Debentures and shares. The offer and sale of
the Debentures and shares were not registered under the Securities Act in
reliance upon the exemption from registration provided by Section 4(2) of
the Securities Act. The purchasers of these securities were accredited
investors.
|
|
o
|
100,000
shares were issued to Mr. Derrick in connection with a loan made to the
Company by Mr. Derrick in November 2008. Mr. Derrick is an executive
officer and director of the
Company.
|
|
o
|
106,750
shares were issued to a consultant on June 4, 2009 in partial satisfaction
of consulting fees owed to him.
|
|
o
|
3,549,630
shares were issued between May and July 2009 to five accredited investors
pursuant to senior secured convertible notes to payoff bank line of
credit.
|
|
o
|
9,796,636
shares were issued in February to an accredited investor to compensate for
a decline in the Company’s share price following the investor’s initial
investment in September 2008.
|
Exhibit
Number
|
Title of
Document
|
|
3(i)(1)
|
Articles
of Incorporation (incorporated by reference to the Company's Registration
Statement and Amendments thereto on Form 10-SB, effective December 1,
1997).
|
|
3(i)(2)
|
Amendment
to Articles of Incorporation for Change of Name (previously filed as
Exhibit on Form 10-KSB for the year ended September 30,
2001)
|
|
3(i)(3)
|
Amendment
to Articles of Incorporation Amending Rights and Preferences of Series A
Preferred Stock (previously filed as Exhibit on Form 10-KSB for the year
ended September 30, 2001)
|
|
3(i)(4)
|
Amendment
to Articles of Incorporation Adopting Designation of Rights and
Preferences of Series B Preferred Stock (previously filed as Exhibit on
Form 10-QSB for the six months ended March 31, 2002)
|
|
3(i)(5)
|
Certificate
of Amendment to the Designation of Rights and Preferences Related to
Series A 10% Cumulative Convertible Preferred Stock of RemoteMDx, Inc.
(incorporated by reference to the Company’s annual report on Form 10-KSB
for the year ended September 30, 2001)
|
|
3(i)(6)
|
Certificate
of Amendment to the Designation of Rights and Preferences Related to
Series C 8% Convertible Preferred Stock of RemoteMDx, Inc. (incorporated
by reference to the Company’s Current Report on Form 8-K, filed with the
Commission on March 24, 2006)
|
|
3(i)(7)
|
Articles
of Amendment to Articles of Incorporation filed July 12, 2006 (previously
filed as exhibits to the Company’s current report on Form 8-K filed July
18, 2006, and incorporated herein by reference).
|
|
3(i)(8)
|
Articles
of Amendment to the Fourth Amended and Restated Designation of Right and
Preferences of Series A 10% Convertible Non-Voting Preferred Stock of
RemoteMDx, Inc. (previously filed as Exhibit on Form 10-QSB for the nine
months ended June 30, 2007, filed in August 2007).
|
|
3(i)(9)
|
Articles
of Amendment to the Designation of Right and Preferences of Series A
Convertible Redeemable Non-Voting Preferred Stock of SecureAlert, Inc.
(previously filed as Exhibit on Form 10-QSB for the nine months ended June
30, 2007, filed in August 2007).
|
|
3(ii)
|
Bylaws
(incorporated by reference to the Company’s Registration Statement on Form
10-SB, effective December 1, 1997)
|
|
4.01
|
2006
Equity Incentive Award Plan (previously filed in August 2006 the Form
10-QSB for the nine months ended June 30, 2006)
|
|
10.01
|
Distribution
and Separation Agreement (incorporated by reference to the Company's
Registration Statement and Amendments thereto on Form 10-SB, effective
December 1, 1997).
|
|
10.02
|
1997
Stock Incentive Plan of the Company, (incorporated by reference to the
Company’s Registration Statement and Amendments thereto on Form 10-SB,
effective December 1, 1997).
|
|
10.03
|
1997
Transition Plan (incorporated by reference to the Company’s Registration
Statement and Amendments thereto on Form 10-SB, effective December 1,
1997).
|
10.04
|
Securities
Purchase Agreement for $1,200,000 of Series A Preferred Stock
(incorporated by reference to the Company’s Registration Statement and
Amendments thereto on Form 10-SB, effective December 1,
1997)
|
|
10.05
|
Loan
Agreement (as amended) dated June 2001 between ADP Management and the
Company (incorporated by reference to the Company’s annual report on Form
10-KSB for the year ended September 30, 2001)
|
|
10.06
|
Loan
Agreement (as amended and extended) dated March 5, 2002 between ADP
Management and the Company, effective December 31, 2001 (filed as an
exhibit to the Company’s quarterly report on Form 10-QSB for the quarter
ended December 31, 2001)
|
|
10.07
|
Agreement
with ADP Management, Derrick and Dalton (April 2003) (previously filed as
Exhibit on Form 10-QSB for the six months ended March 31,
2003)
|
|
10.08
|
Security
Agreement between Citizen National Bank and the Company (previously filed
on Form 8-K in July 2006).
|
|
10.09
|
Promissory
Note between Citizen National Bank and the Company (previously filed on
Form 8-K in July 2006).
|
|
10.10
|
Common
Stock Purchase Agreement dated as of August 4, 2006 (previously filed as
an exhibit to the Company’s current report on Form 8-K filed August 7,
2006 and incorporated herein by reference).
|
|
10.11
|
Change
in Terms Agreement between Citizen National Bank and the Company
(previously filed as Exhibit on Form 10-KSB for the year ended September
30, 2006)
|
|
10.12
|
Securities
Purchase Agreement between the Company and VATAS Holding GmbH, a German
limited liability company (previously filed on Form 8-K in November
2006).
|
|
10.13
|
Common
Stock Purchase Warrant between the Company and VATAS Holding GmbH dated
November 9, 2006 (previously filed as Exhibit on Form 10-QSB for the three
months ended December 31, 2006, filed in February
2007).
|
|
10.14
|
Settlement
Agreement and Mutual Release between the Company and Michael Sibbett and
HGR Enterprises, LLC, dated as of February 1, 2007 (previously filed as
Exhibit on Form 10-QSB for the three months ended December 31, 2006, filed
in February 2007).
|
|
10.15
|
Distributor
Sales, Service and License Agreement between the Company and Seguridad
Satelital Vehicular S.A. de C.V., dated as of February 5, 2007 (previously
filed as Exhibit on Form 10-QSB for the three months ended December 31,
2006, filed in February 2007).
|
|
10.16
|
Distributor
Agreement between the Company and QuestGuard, dated as May 31,
2007. Portions of this exhibit were redacted pursuant to a
request for confidential treatment filed with the Securities and Exchange
Commission (previously filed as Exhibit on Form 10-QSB for the nine months
ended June 30, 2007, filed in August 2007).
|
|
10.17
|
Stock
Purchase Agreement between the Company and Midwest Monitoring &
Surveillance, Inc., dated effective December 1, 2007 (previously filed as
Exhibit on Form 10-KSB for the year ended September 30, 2007, filed in
January 2008).
|
|
10.18
|
Stock
Purchase Agreement between the Company and Court Programs, Inc., Court
Programs of Florida Inc., and Court Programs of Northern Florida, Inc.,
dated effective December 1, 2007 (previously filed as Exhibit on Form
10-KSB for the year ended September 30, 2007, filed in January
2008).
|
|
10.19
|
Sub-Sublease
Agreement between the Company and Cadence Design Systems, Inc., a Delaware
corporation, dated March 10, 2005 (previously filed as Exhibit on Form
10-KSB/A for the year ended September 30, 2007, filed in June
2008).
|
|
10.20
|
Patent
Assignment Agreement between Futuristic Medical Devices, LLC, dated
September 14, 2007 (previously filed as Exhibit on Form 10-KSB/A for the
year ended September 30, 2007, filed in June
2008).
|
10.21
|
Patent
Assignment Agreement between Futuristic Medical Devices, LLC, dated
September 14, 2007 (previously filed as Exhibit on Form 10-KSB/A for the
year ended September 30, 2007, filed in June 2008).
|
|
10.22
|
Patent
Assignment Agreement between Futuristic Medical Devices, LLC, dated
September 14, 2007 (previously filed as Exhibit on Form 10-KSB/A for the
year ended September 30, 2007, filed in June 2008).
|
|
10.23
|
Patent
Assignment Agreement between Futuristic Medical Devices, LLC, dated
December 20, 2007 (previously filed as Exhibit on Form 10-KSB/A for the
year ended September 30, 2007, filed in June 2008).
|
|
10.24
|
Stock
Purchase Agreement (sale of Volu-Sol Reagents Corporation shares to
Futuristic Medical, LLC), dated January 15, 2008, including voting
agreement (previously filed as Exhibit on Form 10-KSB/A for the year ended
September 30, 2007, filed in June 2008).
|
|
10.25
|
Distribution
and License Agreement between euromicron AG, a German corporation, and the
Company, dated May 28, 2009
|
|
31(i)
|
Certification of Chief Executive
Officer under Section 302 of Sarbanes-Oxley Act of
2002
|
|
31(ii)
|
Certification of Chief Financial
Officer under Section 302 of Sarbanes-Oxley Act of
2002
|
|
32
|
Certifications
under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350)
|
REMOTEMDX,
INC.
|
||||
Date:
August 17, 2009
|
By:
|
/s/
David G. Derrick
|
|
|
David
G. Derrick,
|
||||
Chief
Executive Officer
|
||||
(Principal
Executive Officer)
|
||||
Date:
August 17, 2009
|
By:
|
/s/
Michael G. Acton
|
||
Michael
G. Acton,
|
||||
Chief
Financial Officer
|
||||
(Principal
Financial Officer)
|
||||
Date:
August 17, 2009
|
By:
|
/s/
Chad D. Olsen
|
||
Chad
D. Olsen,
|
||||
Principal
Accounting Officer
|