10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2013
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 number: 0-53570

ActiveCare, Inc.

 (Exact name of registrant as specified in its charter)

Delaware	87-0578125
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1365 West Business Park Drive, Orem, Utah  84058

(Address of principal executive offices, Zip Code)

(877) 219-6050

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.00001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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  þ    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 þ

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of March 29, 2013 was approximately $6 million, based on the average bid and asked price ($1.60 per share) and a total of 3,791,208 shares issued and outstanding on that date.

There were 32,860,314 shares of the registrant’s common stock outstanding as of January 13, 2014.  During the quarter ended June 30, 2013, the registrant implemented a 10-for-1 reverse common stock split.  The financial statements and data for all periods covered by this report have been retroactively adjusted to reflect the effect of the reverse stock split.

Documents Incorporated by Reference

None.

Transitional Small Business Disclosure Format (Check one):  Yes    ¨      No þ

ACTIVECARE, INC.

FORM 10-K

For the Fiscal Year Ended September 30, 2013

INDEX

		Page
	Part I
Item 1	Business	1
Item 1A	Risk Factors	10
Item 2	Properties	16
Item 3	Legal Proceedings	16
Item 4	Mine Safety Disclosures (omitted)
	Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6	Selected Financial Data (omitted)
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A	Quantitative and Qualitative Disclosures About Market Risk (omitted)
Item 8	Financial Statements and Supplementary Data	24
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	25
Item 9A	Controls and Procedures	25
Item 9B	Other Information	26
	Part III
Item 10	Directors, Executive Officers and Corporate Governance	26
Item 11	Executive Compensation	29
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
Item 13	Certain Relationships and Related Transactions, and Director Independence	34
Item 14	Principal Accounting Fees and Services	36
	Part IV
Item 15	Exhibits, Financial Statement Schedules	37
Signatures		39

PART I

Disclosure Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, relating to our operations, results of operations, and other matters that are based on our current expectations, estimates, assumptions, and projections. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that might not prove to be accurate. Actual outcomes and results could differ materially from what is expressed or forecast in these forward-looking statements. Risks, uncertainties, and other factors that might cause such differences, some of which could be material, include, but are not limited to, the factors discussed under the section of this report entitled “Risk Factors.”

Item 1.  Business

Background

ActiveCare, Inc. (“we,” “us,” “our,” the “Company” or “ActiveCare”) was formed March 5, 1998 as a wholly owned subsidiary of SecureAlert, Inc. [OTCBB: SCRA.OB], a Utah corporation, formerly known as RemoteMDx, Inc. (“SecureAlert”).  We were spun off from SecureAlert in February 2009.  Effective July 15, 2009, we changed our name to ActiveCare, Inc., and our state of incorporation to Delaware. Our fiscal year ends on September 30.

During fiscal year 2013, we announced a 10-for-1 reverse common stock split, and all periods presented have been retroactively adjusted to reflect the reverse common stock split.

In this Annual Report on Form 10-K, unless indicated otherwise, references to “dollars” and “$” are to United States dollars.

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business, including, without limitation, “CareCenter,” “4G,” “Green Wire,” “ActiveOne,” “ActiveOne+,” “ActiveHome,” “ActiveCare” and the stylized “ActiveCare” logo.  Solely for convenience, some of the trademarks, service marks and trade names referred to in this report are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trademarks, service marks, trade names and domain names. The trademarks, service marks and trade names of other companies appearing in this report are, to our knowledge, the property of their respective owners.

General

During fiscal years 2013 and 2012, we received valuable feedback through sales and focus groups reaching thousands of patients.  In fiscal year 2012, we launched an additional product line focused on technology for assisting the chronically ill.  Our primary focus is on markets addressing chronic conditions and disease states.  Remote patient monitoring (“RPM”) is a technology to enable monitoring of patient vital signs and physical functions outside of conventional clinical settings (e.g., in the home, work or travel).  Physiological data such as blood sugar levels, blood pressure, pulse rate, and blood oxygen levels are collected by sensors on medical peripheral devices.  Examples of these devices include glucometers, blood pressure cuffs, and pulse oximeters.  The data is stored for future assessment or transmitted to healthcare providers or third parties via wireless telecommunication devices.  Disease states targeted by RPM technology providers typically include diabetes, congestive heart failure, sleep apnea, activity monitoring, and diet management.  We believe that we can improve the lives of the chronically ill and the elderly through the use of technology, while reducing the cost of care.  Central to these efforts is our state-of-the-art “CareCenter.”  This service is designed to monitor and track patients’ health conditions and chronic illnesses on a real time basis.  As part of these efforts we have staffed this sophisticated CareCenter with highly trained specialists to assist the chronically ill and elderly in managing their daily lives; 24 hours per day, seven days per week.  In order for the CareCenter to service our customers, we have developed and continue to develop numerous products designed to improve the health of the chronically ill and to enable the elderly to maintain a more active and mobile lifestyle.

We made two acquisitions during fiscal year 2012: 4G Biometrics, LLC (“4G”); and Green Wire, LLC and affiliates (“Green Wire”).  4G expanded our penetration into the health monitoring market, monitoring members’ diabetic and other chronic illness parameters utilizing our CareCenter capabilities.  The Green Wire acquisition brought us thousands of new Personal Emergency Response System (“PERS”) members and a channel for marketing and up-selling our portfolio of products.

1

There are obvious problems associated with aging.  According to a 2004 presentation to the American Telemedicine Association, approximately one in every four Americans suffers from a chronic illness, which typically becomes more severe and prominent with age.  The demographics of chronic illnesses include over 15 million people with diabetes and close to 14 million with coronary heart disease (according to reports published by the American Heart Association), as well as over 10 million with osteoporosis (according to a study by the University of Maryland Medical Center).  According to studies published in the IBM Systems Journal in 2007 and one conducted by heart specialists from Columbia Presbyterian Medical Center Cardiac Transplant Service, significant cost savings can be realized by the daily monitoring of the chronically ill. 

With U.S. healthcare costs increasing annually, we believe that cost containment is a primary issue facing the industry. These escalating costs will only intensify as the baby-boom generation ages.  As of 2000, 35 million Americans were 65 years of age or older, and this number is projected to increase to 55 million by the year 2020, according to a study by the U.S. Department of Health and Human Services.  By that year, one in six Americans will be over the age of 65 and by the middle of the century, the number of elderly could reach more than 86 million people, more than double the present number.  According to an article published in the National Review Online and the sources cited therein, approximately 80% of healthcare costs occur in the last two years of life.  This combined with an aging population supports the assertion that the nation is in dire need of viable cost-saving options for health care.

We believe that “Aging in Place” – the ability to age in your own home with the proper care services and monitoring of health and wellness needs – will significantly mitigate health care costs for the elderly. Through the technologies we are developing, we believe we can both enhance the lives of the elderly and enable them to live more “normal” lifestyles by providing them mobility and peace of mind with the knowledge that their vital signs are being monitored and their locations are known at all times.  At the same time we can save millions of dollars in the health care sector as we identify problems and issues before they become crises.

We believe that through the technologies we have already developed and are continuing to develop, we can enhance the lives not only of the growing elderly segment of today’s population, but also the lives of other segments of the population, such as those with chronic illnesses.  The CareCenter is staffed around the clock with advisors that receive calls originating from our clients who utilize our products.  Our services enhance our clients’ mobility and provides them with peace of mind because they know that their vital signs are being monitored and their locations are known at all times.  We can immediately communicate with them and emergency personnel in times of need and communicate their location and an abbreviated medical history.

Our Product and Service Strategy

Our product/service strategy falls into two distinctly different categories; chronic illness monitoring and personal emergency response systems or care services.

Chronic Illness Monitoring

Chronic illness monitoring involves the use of biometric monitoring devices in combination with proprietary data and algorithms to assess and predict the wellbeing of an individual under care.  Individual care profiles are created through the aggregation of personal health and medical claims information from multiple data sources.  Real-time biometric readings for blood glucose levels, blood pressure, heart rate, weight, tidal volume and other vital readings are captured over time and added to the existing personal information.  This unique data set may now be used for proactive care protocols, care provider alerts to elevated readings, and behavioral intervention prior to crisis events.

Technology to facilitate data-driven chronic illness monitoring consists of three components: (1) biometric monitoring devices, (2) medical and claims data aggregation, and (3) algorithms for the analysis of the data.  Biometric monitoring devices are provided by numerous medical hardware providers and deliver a wide range of features and functionality.  ActiveCare is agnostic to any specific device requirement, and has as a core competency the ability to integrate to and capture data from any 510(k) or HL7 compliant monitoring device (see “Regulatory Matters”).  Strategic relationships have been created with technology and market leaders, and evaluation of new and emerging technology partners is ongoing.  Medical and claims data is aggregated from multiple source providers using a proprietary application programmatic interface and data storage architecture.  This data is analyzed to identify individual care needs of those entering the program.  Monitoring alerts, predictive informatics and individual care plans are created and managed using the ActiveCare technology platform.  Care for chronic conditions may now be performed in real-time, and outcomes may be measured on both a medical and claims cost basis.

During the fiscal year ended September 30, 2013, we spent approximately $832,000 on research and development primarily for chronic illness monitoring related to the development of prototype methods and systems for the capture and analysis of data, as well as the development of scalable architectures to migrate to production applications and deployments.  We will continue to identify claims and medical data sets as well as analytical and informatics technologies that advance our ability to provide unique services.  Core competency will continue to evolve in the methods and technologies for data analytics and predictive informatics. 

2

Care Services

We have developed products that incorporate GPS, cellular capability, and fall detection, all of which are connected to our 24-hour CareCenter with the push of a button.  The transmitter can be worn on a neck pendant or belt clip, or carried in a purse, and sends a cellular signal to our CareCenter.  When the wearer of the device pushes the button, the staff at the CareCenter evaluate the situation and decide whether to call emergency services or a designated friend or family member.

Currently, there are separate products on the market that provide service to the PERS industry as well as products that provide fall detection, geographical location, and clinical health parameters.  However, we believe that no product on the market today has successfully integrated all of these technologies in a single effective device.  Further, none of the current solutions in the market focus on providing CareServices – assistance with everyday needs – as an alternative to costly assisted living or in-home care services as we do.

CareCenter

The central point of our product offerings is our state-of-the-art CareCenter.  Our CareCenter is staffed 24x7 with CareCenter specialists who are 911-certified and trained.  In addition, we have nurses on duty and on call that are available to assist with medical issues or questions.  Our CareCenter specialists and CareCenter provide services ranging from responding to fall alerts detected and communicated by our devices, to full service concierge services.  The staff at the CareCenter provides assistance with everyday living needs of our members, and in an emergency situation, the 911 trained CareSpecialist evaluates the situation and decides whether to call emergency services and/or a designated friend or family member.

In contrast to a typical monitoring center, our CareCenter is equipped with hardware and software that pinpoints the location of the incoming caller by utilizing GPS and/or cellular triangulation technology.  This capability is referred to as “telemetric”.  The operator (or CareSpecialist) can locate the caller’s precise location on a detailed map.  In addition, the CareCenter’s software will identify the caller, access the individual’s medical information, and provide location services, emergency dispatch, and medical history to emergency responders.  We believe the CareCenter is the cornerstone of our business and will support current technology as well as evolve to support the integration of future technologies.

Recent Developments

We have financed operations primarily through securities purchase agreements, long-term debt and short-term debt.  If our revenues continue to be insufficient to meet our needs, we will attempt to secure additional financing through financial institutions or through the sale of our equity or debt securities.  There is no assurance that we will be able to obtain financing on satisfactory terms or at all.  In addition, if we only have nominal funds with which to conduct our business activities, it will negatively impact the results of our operations and our financial condition.

During fiscal year 2012, we established GWire Corporation (“GWire”) as a subsidiary.  Effective September 1, 2012, GWire acquired the net assets and interests of Green Wire.  We entered into employment agreements with two of Green Wire’s operating managers on November 1, 2012. These two individuals were granted 27% ownership in GWire; ActiveCare retained the remaining 73%.  During fiscal year 2013, the GWire operating managers subsequently converted their 27% ownership in GWire and 425,000 of related options to acquire shares of our common stock and as a result, we now own 100% of GWire as of September 30, 2013.

During fiscal year 2013, we sold the net assets and operations of our Reagents business segment for cash of $184,318.  We may receive additional annual payments equal to five percent of the net income from the Reagents business, through the fifth anniversary of the sale, provided that revenues from the Reagents business total at least $465,000 for the previous 12-month period ending on the closing date anniversary.  The sale of the Reagent segment allows us to focus our resources on the Chronic Illness Monitoring and CareService segments.

Our Growth Strategy

We anticipate that the primary growth segment for us for fiscal year 2014 will be the markets addressing chronic conditions and disease states. Our plan is to continue to focus on addressing the chronic illness and disease states markets and execute our existing business plan serving these markets.  We plan to invest in research and development and patent filings, as we broaden the services offered by our CareCenter.  Eventually we intend to add to the functionality of the ActiveOne+ to allow for vital sign monitoring for the chronically ill and additional services to assist both the mobile and homebound seniors, including those who may require a personal assistant to determine their location at any given time and to check on them during the day to ensure their safety and well being.

3

Marketing

We market our products through a number of distribution channels including: self-insured employers, direct-to-consumer, medical device and equipment distributors, and health care providers and other caregivers.

Self-Insured Companies

As a result of the acquisition of 4G, we expanded our fundamental business to include monitoring the well being of the rapidly growing number of diabetics in this country.  This business integrates well with our broader view towards furthering the improved health of the total population.

Our strategy is to develop a relationship with third-party administrators (TPAs).  TPAs administer the claims, payments, co-pays, and medical coding for self-insured companies.  They effectively act as the medical benefits administrators for their customers, most of which are not large enough to justify a fully operational in-house department.  Our strategy is achieved by providing to a TPA specific information related to the benefits to be realized by all parties, which, in most cases is substantial. Once the first customer of the TPA becomes part of the program, the key to monetary savings is the CareCenter, which operates 24/7 and is integral to chronic illness monitoring. The CareCenter is the real-time recipient of all test results which are delivered using state-of-the-art cellular glucometers. This information is gathered, sorted and reported. Each diabetic is then placed into one of three categories: (1) in compliance, (2) out of compliance, or (3) not testing. This information, which neither the TPA nor the customer has ever before seen, is then delivered to the TPA and the customer. The ultimate objective of this categorization is to increase the percentage of diabetics who are “in compliance”, which has been proven to be a major factor in reducing the cost of claims based on statistical history. Once the TPA recognizes the benefits to be realized from this information for one or more patients, it is a natural progression to add the rest of the TPA’s customer base to ActiveCare monitoring.

Our ultimate objective is to become a chronic illness monitor for the TPA’s customers, measuring not only blood sugar for diabetics, but also blood pressure, weight, and blood oxygen levels.

Research and Development Program

During fiscal year 2013, we spent approximately $832,000 compared to $187,000 spent during the year ended September 30, 2012, on research and development primarily related to chronic illness monitoring, including work related to the development of prototype methods and systems for the capture and analysis of data, as well as the development of scalable architectures to migrate to production applications and deployments.

Competition

We anticipate that the primary growth segment for us for fiscal year 2014 will be the markets addressing chronic illness conditions and disease states.  Over the past decade technology device manufacturers have rushed to provide peripheral devices to capture data related to chronic health conditions rather than provide any assessment or intelligence regarding the data being captured.  In most cases the data captured remains static on the peripheral device or data capture system, providing little to no perspective on the current and recent condition of the patient.  In cases in which the data are utilized, the application of that data is typically limited to the “point of care” or physician’s office.  The ActiveCare solution is a complex combination of components that provide an overall care system.  The analysis of the competitive landscape will focus on six primary market segments representing the primary components of our system, noting the implications for us resulting from the strengths of the leaders in each segment.

Legacy Consumer Oriented Monitoring and Communications Device Providers

Overview – While not a primary threat to our business model, several leading providers of health care technologies have targeted the patient monitoring market and made significant investments in pursuing the segment.  The primary business focus of these companies is high-end diagnostics equipment, point of care technologies, and health information technologies.  While the investments in telehealth technologies have totaled significant dollars they represent a very small component of these competitors’ overall business in the health care segment.  The approach to entering the market has typically been to acquire an existing technology and attempt to distribute that technology through existing distribution channels in complementary offerings.  Examples of providers in this segment include:

· Phillips – Telestation

· Bosch - HealthStation

· Honeywell – Genesis

Strengths – The strengths of this segment are the competitors’ overall position in the health care market, existing distribution channels and availability of capital to fund and pursue future opportunities.

4

Weaknesses – The value proposition of the providers in this segment has been focused on providing a consumer-based platform for “telemedicine,” or providing care to a patient not at the same location as the provider of care.  Solutions have been an extension of the videophone concept, and in some cases have included connectivity to blood pressure and blood oxygen measuring peripherals. The weaknesses in the execution of this approach include:

· The market / product strategy has been as a tertiary complement to the core business, lacking focus on execution.

· The business model has been hardware based, focusing on the product as a “part” of the primary hardware business.

· Solutions have been limited to facilitating the moment of care, and do not capture or make data available for later assessment.

· Products have been based on legacy technologies, lacking ease of use and rich functionality.

· Revenue models have been based on sources outside of the primary economics of health care; federal and state funded grants, patient payer, and as a bundled component of a sponsoring product line or business.

Summary – We do not directly compete with the offerings in this segment.  The possible threat is based on the competitors’ reassessment of strategy in this market and the ability to fund and customize products.  If they follow past patterns, we believe that we would be a prime candidate for partner relationship or acquisition by one of these competitors to gain an immediate presence in a more viable business model.

Current Consumer Peripheral Monitoring Device Providers

Overview – Competitors in this segment have specialized in the delivery of low cost diagnostic peripherals for measuring blood pressure, weight, pulse rate, blood sugar and activity.  Examples include:

· A and D Medical

· Foracare

Strengths – These competitors have refined the product requirements to meet the needs of the market.  Products are easy to use and accurately capture vitals and metrics.  In the past five years significant effort has been made to lower the cost of products as they compete more on cost rather than functionality or other benefits.

Weaknesses – These products continue to evolve as commodity offerings, differentiating on price rather than any other feature.  Solutions have been targeted on facilitating the moment of care, and lack complementing strategies to make data for later assessment.

Summary – Currently this segment provides us with some key partnerships.  They facilitate the means of capturing patient data with an easy to use, low cost offering.  While some devices have been innovative (e.g. the Telcare blood glucose monitor with embedded cellular communications) strategies continue to focus primarily on the manufacture and sale of hardware components.

Next Generation Monitoring Device Providers

Overview – The past five years have seen a proliferation of consumer-oriented devices to monitor individuals’ physical activity, sleep patterns and pulse rate.  The strategy of those in this segment has also been focused on integration with smartphones and other consumer devices.  Examples include:

· Activity monitoring

o MisFit

o Striiv

o Lark

· Consumer vital signs monitoring

o iHealth

o Digifit

· Sleep and diet monitoring

o FitBit

Strengths – The rapid evolution of product and strategy has been fueled by the culture and investors that innovated the technology segment.  Companies such as Apple, Google, Frog Design and Stanford Research Institute (SRI) are directly or indirectly funding and leading efforts of innovation.  Designs are state-of-the-art and are focused on attracting use by consumers in daily activity.  The segment has a strong first adopter appeal.

5

Weaknesses – To date, the business models of the products in the segment have been an evolution of the products produced by traditional monitoring device companies, with one notable exception; products are not yet qualified for clinical data capture and are relegated to providing consumers with the most basic of physical monitoring data.  Providers in this segment have noted intentions to become more robust, capturing clinical data type and securing federal 510(k) medical device certification in future products.  It has also been forecasted by technology thought leaders that the segment strategy will fail unless it adds complementing user value and revenue opportunities.

Summary – Competitors in this segment will become strategic partners for our business model as they evolve their ability to capture and transmit clinical data.  We expect to expand into strategic market segments complementing the strengths of these technologies, offering data analytics, and personal fitness planning and wellness management services.

Health / Insurance Data Service Providers

Overview – Health data informatics has become a strategic focus of health care providers and payer organizations over the past 30 years.  Aggregation, analytics, informatics and predictive modeling have enabled service providers to differentiate and better manage the process of health care.  Traditionally providers specialized in offering information or services based on a vertical focus of EHR patient data, geographic and regional health care information, or insurance claims processing data.  Examples include:

· CareFX – recently acquired by Harris Healthcare

· Medicity – recently acquired by Aetna

· Certify Data Systems

· Benefit Informatics

Strengths – Data aggregation and utilization are core competencies of the companies in this segment.  Product and service offerings have been successfully marketed to insurance companies and health plan providers.

Weaknesses – Sources of the data driving the product strategy of these competitors is becoming increasingly available, forcing an evolution of the business model in two directions; to become a provider of advanced services (rather than data), or to be acquired by large insurance and care groups to mine that specific groups’ data.  While significant federal and state funding has driven the efforts to create regional health information organizations, projects have become graveyards for careers and future funding.  The fallout of this effort has had a significant impact on the viability of several major data services providers.

Summary – This segment presents us with direct competition and business opportunities.  Forced to rapidly evolve their strategies, competitors are recognizing the value of real-time and “prior to care event” data.  Increasing efforts are being made to facilitate data at the point of care and make that data available to the entire care and reimbursement cycle. Having the ability to capture and assess the data upstream of current offerings strategically differentiates our business, giving visibility to health risks in advance of change of condition and cost.  Partnering with leaders in this segment should enable us to further gain expertise in this field as well as complement our data repository. Having data of past care from these partners in combination with data of current patient conditions allows for extremely valuable predictive modeling and services.

Wellness / Disease Management Service Providers

Overview – Wellness management services have been seen as a means of addressing a future illness before it happens.  Programs are primarily cultural, with the goal of promoting healthy activity, diet, and state of mind.  Disease management has been added to the traditional health care cycle as a means of providing regular outpatient and out-of-clinic care to those primarily with chronic conditions.  Examples include:

· OptumHealth

· Carenet

· TouchPoint

· Hines Associates

Strengths – Preventive care, both before illness as well as during chronic condition management, has great conceptual merit and acceptance.  Significant government and corporate efforts have been made to incorporate these services as a means of addressing health issues in advance of illness and disease onset.

6

Weaknesses – The majority of past and current service offerings lack the data strategies to monitor and measure the success of programs.  Continued expansion of the industry has been challenged by the absence of data to validate outcomes and the effectiveness of these programs.

Summary – The entire sector is undergoing a rapid evolution.  Those not able to provide validation of their offerings will struggle to survive in the coming years.  Through partnership, acquisition or organic growth we believe that we are uniquely positioned to expand into this market, providing programs to modify behavior and overall health.  Our ability to capture and assess individual and group data positions us as a differentiating provider in this segment.  The ability to capture member data provides the tool of accountability to managing individual care, and enables us to provide validation of our products and services.

Integrated Hardware / Software / CareServices Providers

Overview – Providers combining diagnostic monitoring, data analysis and healthcare services are those most similar to our business model.  The most notable of this segment have focused on providing services to cardiac monitoring.  Examples include:

· Alere

· CardioCom

· LifeWatch

Strengths – By leveraging multiple competencies and services, providers in this segment have been able to deliver complementing solutions rather than components to the industry.  The segment has focused on high cost disease states, providing solutions that are fully reimbursed by Medicare and payer groups.

Weaknesses – The competitors in this market typically produce proprietary hardware components, and lack much of the product innovation and lowered prices made possible by traditional hardware providers.  While having success in monitoring cardiac conditions, offerings for diabetes and other chronic conditions have been less successful.  While physicians continue to support the use of this care strategy, providers are under significant pressure from payers to reduce the prices for their offerings.

Summary – This segment provides our most significant competition.  Pressure on pricing will continue to strain the relationship between payers and providers of these services, forcing them to innovate features and solutions.  This pressure also presents an opportunity for us to aggressively pursue the segment and become a means of growth via partnership or acquisition for those currently in the space.

 Dependence on Major Customers

During fiscal year 2013, there were three Chronic Illness Monitoring customers that each accounted for more than 10% of that segment’s revenue and combined represented 72% of total revenue as follows; Region Advisors, LLC 25%, CK8 Financial, LLC 24%, and Catamaran, Inc. 23%.  During fiscal year 2012, there was one Chronic Illness Monitoring customer, Colorado Choice, that accounted for more than 10% of that segment’s revenue and represented 28% of total revenue.  See Note 2 to the consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Intellectual Property

Trademarks.  We have registered certain of our trademarks with the United States Patent and Trademark Office, including ActiveCare™, ActiveOne™, and ActiveOne+™.  We also use certain trademarks, trade names, and logos that have not been registered.  We claim common law rights to these unregistered trademarks, trade names and logos.  We also own domain names, including www.activecare.com and www.activecaresys.com, for our primary trademarks and we claim ownership of certain unregistered copyright rights of our website content.  We rely as well on a variety of property rights that we license from third parties as described below.

Patents.  We own the exclusive, irrevocable, perpetual, worldwide, transferable, sublicensable license of all rights conferred by the patents, patent applications, and provisional patent applications listed in the table below for the healthcare and personal safety industries/markets.

7

Patent or Application No.	Country	Issue/Filing Date	Title of Patent
11/486,989	United States	Pending/ 7/14/2006	Remote Tracking Device and System and Method for Two-Way Voice Communication Between Device and a Monitoring Center
11/486,991	United States	Pending/ 7/14/2006	Remote Tracking System and Device with Variable Sampling
11/830,398	United States	Pending/ 7/30/2007	Methods for Establishing Emergency Communications Between a Communications Device and a Response Center
12/614,242	United States	Pending/ 11/6/2009	Systems and Devices for Emergency Tracking and Health Monitoring
61/827,454	United States	Pending/ 5/24/2013	System and Method for Identifying, Tracking and Treating Chronic Illness Using Real-time Biometric Data

We obtained worldwide and exclusive rights to the patents and patent applications listed in the table below under a license agreement dated May 25, 2009.

Patent or Application No.	Country	Issue Date	Title of Patent
6,044,257	United States	March 28, 2000	Panic Button Phone
6,636,732	United States	October 21, 2003	Emergency Phone with Single Button Activation
6,226,510	United States	May 1, 2001	Emergency Phone for Automatically Summoning Multiple Emergency Response Services
7,092,695	United States	August 15, 2006	Emergency Phone with Alternate Number Calling Capability
7,251,471	United States	July 31, 2007	Emergency Phone with Single Button Activation
We were granted worldwide, non-exclusive rights to patents and patent applications listed in the table below under a license agreement dated May 15, 2010.

Patent or Application No.	Country	Issue Date	Title of Patent
10/588.833	United States	Pending 08/09/06	Nanostructures Containing Metal-Semiconductor Compounds
PCT/US2007/008540	International	Pending 04/06/07	Nanoscale Wires Methods and Devices
PCT/US2007/024222	International	Pending 11/20/06	Millimeter-Long Nanowires
PCT/US2007/021602	International	Pending 10/10/07	Liquid Films Containing Nanostructured Materials

Trade Secrets.  We own certain intellectual property, including trade secrets, that we seek to protect, in part, through confidentiality agreements with employees and other parties, although some employees who are involved in research and development activities have not entered into these agreements. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.

Regulatory Matters

The testing, manufacture, distribution, advertising and marketing of medical devices in the United States is subject to extensive regulation by federal, state and local governmental authorities, including the Food & Drug Administration (“FDA”).  Certain of our products may be subject to and required to receive regulatory clearances or approvals, as the case may be, before we may market them. Under United States law, a medical device is an article, which, among other things, is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease, in man or other animals (see Food, Drug & Cosmetic Act (the “Act”) § 201(h)).

Devices are subject to varying levels of regulatory control, the most comprehensive of which requires that a clinical evaluation be conducted before a device receives clearance or approval for commercial distribution. The FDA classifies medical devices into one of three classes. Class I devices are relatively simple and can be manufactured and distributed with general controls. Class II devices are somewhat more complex and require greater scrutiny. Class III devices are new and frequently help sustain life.  Examples of the varying levels of regulatory control are described in the following paragraphs.

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In the United States, a company generally can obtain permission to distribute a new device in two ways – through a Section 510(k) premarket notification application (“510(k) submission”), or through a Section 515 premarket approval (“PMA”) application. The 510(k) submission applies to any device that is substantially equivalent to a “Predicate Device” (a device first marketed prior to May 28, 1976 or a device marketed after that date which was substantially equivalent to a pre-May 28, 1976 device). These devices are either Class I or Class II devices. Under the 510(k) submission process, the FDA will issue an order finding substantial equivalence to a Predicate Device and permitting commercial distribution of that device for its intended use. A 510(k) submission must provide information supporting its claim of substantial equivalence to the Predicate Device. The FDA permits certain low risk medical devices to be marketed without requiring the manufacturer to submit a premarket notification. In other instances, the FDA may not only require that a premarket notification be submitted, but also that such notification be accompanied by clinical data. If clinical data from human experiences are required to support the 510(k) submission, these data must be gathered in compliance with Integral Device Exemption (“IDE”) regulations for clinical trials performed in the United States. The FDA review process for premarket notifications submitted pursuant to section 510(k) should take about 90 days on average, but it can take substantially longer if the FDA has concerns. Furthermore, there is no guarantee that the FDA will “clear” the device for marketing, in which case the device cannot be distributed in the United States. There is no guarantee that the FDA will deem the device subject to the 510(k) process, as opposed to the more time-consuming, resource intensive and problematic process described below.

The more comprehensive PMA approval process applies to a new device that is (a) not substantially equivalent to a Predicate Device or (b) to be used in supporting or sustaining life or preventing impairment. These devices are normally Class III devices and can only be marketed following approval of a PMA. For example, most implantable devices are subject to the PMA approval process. Two steps of FDA approval generally are required before a company can market a product in the U.S. that is subject to Section 515 PMA approval, as compared to a Section 510(k) clearance. First, a company must comply with IDE regulations in connection with any human clinical investigation of the device; however those regulations permit a company to undertake a clinical study of a “non-significant risk” device without formal FDA approval. Prior express FDA approval is required if the device is a significant risk device. If there is any doubt as to whether a device is a “non-significant risk” device, companies normally seek prior approval from the FDA. Second, the FDA must review a company’s PMA application, which contains, among other things, clinical information acquired under the IDE. The FDA will approve the PMA application if it finds there is reasonable assurance the device is safe and effective for its intended use. The PMA process takes substantially longer than the 510(k) process.

Even when a clinical study has been approved or cleared by the FDA or deemed approved, the study is subject to factors beyond a manufacturer’s control, including, but not limited to the fact that the institutional review board at a given clinical site might not approve the study, might decline to renew approval which is required annually, or might suspend or terminate the study before the study has been completed. The interim results of a study may also not be satisfactory, leading the sponsor to terminate or suspend the study on its own initiative or the FDA may terminate or suspend the study. There is no assurance that a clinical study at any given site will progress as anticipated; there may be an insufficient number of patients who qualify for or agree to participate in the study, or the investigator at the site may have priorities other than the study. Also, there can be no assurance that the clinical study will provide sufficient evidence to assure the FDA that the product is either (i) safe and effective, a prerequisite for FDA approval of a PMA, or (ii) substantially equivalent in terms of safety and effectiveness to a Predicate Device, a prerequisite for clearance under 510(k). Even if the FDA approves or clears a device, it may limit its intended uses in such a way that manufacturing and distributing the device may not be commercially feasible.

After clearance or approval to market is given, the FDA and foreign regulatory agencies, upon the occurrence of certain events, are authorized under various circumstances to require PMA post market surveillance and extended clinical follow up, the clearance or approval or require changes to a device, its manufacturing process or its labeling or additional proof that regulatory requirements have been met.

A manufacturer of a device approved through the PMA process is not permitted to make changes which could affect the device’s safety or effectiveness without first submitting a supplement application to its PMA and obtaining FDA approval for that supplement. In some instances, the FDA may require clinical trials to support a supplement application. A manufacturer of a device cleared through a 510(k) submission must submit another premarket notification if it intends to make a change or modification in the device that could significantly affect the safety or effectiveness of the device, such as a significant change or modification in design, material, chemical composition, energy source or manufacturing process. Any change in the intended uses of a PMA device or a 510(k) device requires an approval supplement or cleared premarket notification. Exported devices are subject to the regulatory requirements of each country to which the device is exported, as well as certain FDA and other federal export requirements and possible restrictions.

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We do not manufacture our own devices.  We have contracted with a third party to manufacture the device for us.  Manufacturers of medical devices are required to register with the FDA before they begin to manufacture devices for commercial distribution. As a result, any entity that manufactures products on our behalf will be subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation (“QSR”) requirements and other regulations. These regulations require us and our manufacturers to manufacture products and maintain documents in a prescribed manner with respect to design, manufacturing, testing and control activities. Further, we are required to comply with various FDA and other agency requirements for labeling and promotion. The Medical Device Reporting regulations require that we provide information to the FDA whenever there is evidence to reasonably suggest that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. In addition, the FDA prohibits us from promoting a medical device for unapproved indications.

The FDA in the course of enforcing the Act may subject a company to various sanctions for violating FDA regulations or provisions of the Act, including, by way of example, requiring recalls, issuing Warning Letters, seeking to impose civil money penalties, seizing devices that the agency believes are non-compliant, seeking to enjoin distribution of a specific type of device or other product, seeking to revoke a clearance or approval, seeking disgorgement of profits and seeking to criminally prosecute a company and its officers and other responsible parties.

In the United States, HIPAA regulations require national standards for some types of electronic health information transactions and the data elements used in those transactions, security standards to ensure the integrity and confidentiality of health information and standards to protect the privacy of individually identifiable health information. Covered entities under HIPAA, which include health care organizations such as our clients, our employer clinic business model and our claims processing, transmission and submission services, are required to comply with the privacy standards, the transaction regulations and the security regulations. As a business associate of our clients who are covered entities, we are generally required by contract to comply with the HIPAA regulations as they pertain to handling of covered client data. However, the extension of these HIPAA obligations to business associates by law has created additional liability risks related to the privacy and security of individually identifiable health information.

Employees

As of September 30, 2013, we had 50 full-time and 2 part-time employees in the U.S. and 13 full-time employees in the Philippines.  None of these employees are represented by a labor union or subject to a collective bargaining agreement.  We have never experienced a work stoppage and our management believes that our relations with employees are good.

Additional Available Information

We maintain executive offices and principal facilities at 1365 West Business Park Drive, Orem, Utah, 84058.  Our telephone number is (877) 219-6050. We maintain a World Wide Website at www.activecare.com. The information on our website should not be considered part of this report.  We make available, free of charge at our corporate website, copies of our annual reports filed under the Exchange Act with the United States Securities and Exchange Commission (“SEC”) on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and all amendments to these reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.  We also provide copies of our Forms 8-K, 10-K, 10-Q, proxy and annual report at no charge to investors upon request.

All reports filed with the SEC are available free of charge through the SEC website at www.sec.gov.  In addition, the public may read and copy materials we have filed with the SEC at the SEC’s public reference room located at 450 Fifth St., N.W., Washington, D.C. 20549.  

Item 1A.  Risk Factors  

We have identified the following important factors that could cause actual results to differ materially from those projected in any forward looking statements we may make from time to time.  We operate in a continually changing business environment in which new risk factors emerge from time to time.  We can neither predict these new risk factors, nor can we assess the impact, if any, of these new risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statement.  If any of these risks, or combination of risks, actually occur, our business, financial condition and results of operations could be seriously and materially harmed, and the trading price of our common stock could decline.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information.  Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst, regardless of the content of the statement or report.  Furthermore, we do not confirm financial forecasts or projections issued by others.  Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not the responsibility of ActiveCare.

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Because of our history of accumulated deficits, recurring losses and negative cash flows from operating activities, we must improve profitability and may be required to obtain additional funding if we are to continue as a “going concern.”

We incurred negative cash flows from operating activities and recurring net losses in fiscal years 2013 and 2012.  We had negative working capital at the end of each of those years.  As of September 30, 2013 and 2012, our accumulated deficit was $63,311,088 and $37,359,214, respectively.  These factors raise substantial doubt about our ability to continue as a going concern. The financial statements included with this report do not include any adjustments that might result from the outcome of this uncertainty.  In order for us to remove substantial doubt about our ability to continue as a going concern, we must improve gross margins, generate positive cash flows from operating activities and obtain the necessary debt or equity funding to meet our projected capital investment requirements.  Subsequent to year end, we completed the sale of $3,120,000 of 8% Series F variable rate convertible preferred stock, converted $2,241,195 of debt and accrued interest to common stock,  converted $573,868 of debt and accrued interest to Series F variable rate convertible preferred stock, and $83,473 debt and accrued interest to Series E preferred stock.  However, we require additional funding to remove the substantial doubt about our ability to continue as a going concern.  If we are unable to increase revenues or obtain additional financing, we will be unable to continue the development of our products and we may have to cease operations.

Our financial statements have been prepared on the assumption that we will continue as a going concern.  Our independent registered public accounting firm has issued their report dated January 13, 2014, which includes an explanatory paragraph stating that our recurring losses, among other things, raise substantial doubt about our ability to continue as a going concern.  It has been necessary to rely upon loans and the sale of our equity securities to sustain operations.  Our management anticipates that we may require additional capital over the next 12 months to fund ongoing operations.  There can be no guarantee that we will be able to obtain such funds, or obtain them on satisfactory terms, and that such funds would be sufficient.  If such additional funding is not obtained, we may be required to scale back or discontinue operations.

Our profitability depends upon achieving success in our future operations through implementing our business plan, increasing sales, and expanding our customer and distribution bases, for which there can be no assurance given.

Profitability depends upon many factors, including the success of our marketing program, our ability to identify and obtain the rights to additional products to add to our existing product line, expansion of distribution and customer base, maintenance or reduction of expense levels and the success of our business activities.  For a discussion of risks related to our accumulated deficits, please see the preceding risk factor. We anticipate that we will generate operating income in the next twelve months.  Our ability to achieve profitable operations will depend on our success in developing and maintaining an adequate marketing and distribution system.  There can be no assurance that we will be able to develop and maintain adequate marketing and distribution resources.  If adequate funds are not available, we may be required to materially curtail or cease operations.

Our products are not based entirely on technology that is proprietary to us, which means that we do not have a technological advantage over our competitors, and that we must rely on the owners of the proprietary technology that is the basis for our products to protect that technology.  We have no control over such protection.

Our ActiveOne and ActiveOne+ products utilize technology based in part on patents that have been licensed to us for use within our markets.  Our success in adding to our existing product line will depend on our ability to acquire or otherwise license competitive technologies and products and to operate without infringing the proprietary rights of others, both in the United States and internationally.  No assurance can be given that any licenses required from third parties will be made available on terms acceptable to us, or at all.  If we do not obtain such licenses, we could encounter delays in product introductions while we attempt to adopt alternate sources.  We could also find that the manufacture or sale of products requiring such licenses is not possible.  Litigation may be necessary to defend against claims of infringement, to protect trade secrets or know-how owned by us, or to determine the scope and validity of the proprietary rights of others.  Such litigation could have an adverse and material impact on us and on our operations.

Our products are subject to the risks and uncertainties associated with the protection of intellectual property and related proprietary rights. We believe that our success depends in part on our ability to obtain and enforce patents, maintain trade secrets and operate without infringing on the proprietary rights of others in the United States and in other countries.

We own or have license rights under several patents; we have also applied for several additional patents and those applications are awaiting action by the United States Patent Office. There is no assurance those patents will issue or that when they do issue they will include all of the claims currently included in the applications. Even if they do issue, those new patents and our existing patents must be protected against possible infringement. The enforcement of patent rights can be uncertain and involve complex legal and factual questions. The scope and enforceability of patent claims are not systematically predictable with absolute accuracy. The strength of our own patent rights depends, in part, upon the breadth and scope of protection provided by the patent and the validity of our patents, if any.

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Our inability to obtain or to maintain patents on our key products could adversely affect our business.

We own patents and have filed and intend to file additional patent applications in the United States and in key foreign jurisdictions relating to our technologies, improvements to those technologies and for specific products we may develop. We have also been licensed important rights under patents issued to third parties. There can be no assurance that patents will issue on any of these applications or that, if issued, any patents will not be challenged, invalidated or circumvented. The prosecution of patent applications and the enforcement of patent rights are expensive, and the expense may adversely affect our profitability and the results of our operations. In addition, there can be no assurance that the rights afforded by any patents will guarantee proprietary protection or competitive advantage. Our success will also depend, in part, on our ability to avoid infringing the patent rights of others. We must also avoid any material breach of technology licenses we may enter into with respect to our new products and services. Existing patent and license rights may require us to alter the designs of our products or processes, obtain licenses or cease certain activities. In addition, if patents have been issued to others that contain competitive or conflicting claims and such claims are ultimately determined to be valid and superior to our own, we may be required to obtain licenses to those patents or to develop or obtain alternative technology. If any licenses are required, there can be no assurance that we will be able to obtain any necessary licenses on commercially favorable terms, if at all. Any breach of an existing license or failure to obtain a license to any technology that may be necessary in order to commercialize our products may have a material adverse impact on our business, results of operations and financial condition. Litigation that could result in substantial costs may also be necessary to enforce patents licensed or issued to us or to determine the scope or validity of third-party proprietary rights. If our competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may have to participate in proceedings declared by the United States Patent and Trademark Office to determine priority of invention, which could result in substantial costs, even if we eventually prevail. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require that we cease using such technology.

We also rely on trade secrets laws to protect portions of our technology for which patent protection has not yet been pursued or is not believed to be appropriate or obtainable.

These laws may protect us against the unlawful or unpermitted disclosure of any information of a confidential and proprietary nature, including but not limited to our know-how, trade secrets, methods of operation, names and information relating to vendors or suppliers and customer names and addresses. We intend to protect this unpatentable and unpatented proprietary technology and processes, in addition to other confidential and proprietary information in part, by entering into confidentiality agreements with employees, collaborative partners, consultants and certain contractors. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and other confidential and proprietary information will not otherwise become known or be independently discovered or reverse-engineered by competitors.

Recent changes in insurance and health care laws have created uncertainty in the health care industry.

The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act, each enacted in March 2010, generally known as the Health Care Reform Law, significantly expanded health insurance coverage to uninsured Americans and changed the way health care is financed by both governmental and private payers. We expect expansion of access to health insurance to increase the demand for our products and services, but other provisions of the Health Care Reform Law could affect us adversely. Additionally, further federal and state proposals for health care reform are likely. We cannot predict what further reform proposals, if any, will be adopted, when they may be adopted, or what impact they may have on us.

The collection, retention and disclosure of personal information and patient health information is regulated by law and subjects us and our business associates to potential liability for unauthorized disclosure and other use of such information.

State, federal and foreign laws, such as the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), regulate the confidentiality of sensitive personal information and the circumstances under which such information may be released. These measures may govern the disclosure and use of personal and patient medical record information and may require users of such information to implement specified security measures, and to notify individuals in the event of privacy and security breaches. Evolving laws and regulations in this area could restrict the ability of our customers to obtain, use or disseminate patient information, or could require us to incur significant additional costs to re-design our products in a timely manner to reflect these legal requirements, either of which could have an adverse impact on our results of operations. Other health information standards, such as regulations under HIPAA, establish standards regarding electronic health data transmissions and transaction code set rules for specified electronic transactions, for example, transactions involving claims submissions to third-party payers. These also continue to evolve and are often unclear and difficult to apply. In addition, under the federal Health Information Technology for Economic and Clinical Health Act (HITECH Act), which was passed in 2009, some of our business that was previously only indirectly subject to federal HIPAA privacy and security rules became directly subject to such rules because we may serve as “business associates” to persons or entities that are subject to these rules. On January 17, 2013, the Office for Civil Rights of the Department of Health and Human Services released a final rule implementing the HITECH Act and making certain other changes to HIPAA privacy and security requirements. Compliance with the rule was required by September 23, 2013, and increased the requirements applicable to some of our business. Failure to maintain the confidentiality of sensitive personal information in accordance with the applicable regulatory requirements, or to abide by electronic health data transmission standards, could expose us to breach of contract claims, fines and penalties, costs for remediation and harm to our reputation.

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Our industry is fragmented, and we experience intense competition from a variety of sources, some of which are better financed and better managed than we are.

We face, and will continue to face, competition in the Chronic Illness Monitoring market.  In addition, competition in the CareServices market is also significant.  Many, if not most, of our competitors and potential competitors are much larger and consequently have greater access to capital.  Moreover, many of our competitors have far greater name recognition and experience in the Chronic Illness Monitoring and CareServices industry.  There can be no assurance that competition from other companies will not render our products noncompetitive.

We are highly dependent on our executive officers and certain of our scientific, technical and operations employees.

We depend heavily on our executive officers and certain scientific, technical, and operations employees, including David Derrick (Chief Executive Officer) and Michael Acton (Chief Financial Officer).  As of the date of this Report, we do not have an employment agreement with Michael Acton.  The loss of services of any of these individuals could impede the achievement of our objectives.  There can be no assurance that we will be able to attract and retain qualified executive, scientific, or technical personnel on acceptable terms.

We rely on third parties to manufacture our product line.

We do not own or operate manufacturing facilities for the manufacture of our ActiveOne+ devices and Chronic Illness Monitoring supplies.  Consequently, we are dependent on these contract manufacturers for the production of existing products and will depend on third-party manufacturing resources to manufacture equipment and devices we may add to our product line in the future.  In the event we are unable to obtain or retain third-party manufacturing, we will not be able to continue operations as they relate to the sale of equipment and devices.

From time to time, we may be subject to expensive claims relating to product liability law; our ability to insure against this risk is limited.

The use of any of our existing or potential products in clinical settings may expose us to liability claims. These claims could be made directly by persons who assert that inaccuracies or deficiencies in their test results were caused by defects in our products.  Alternatively, we could be exposed to liability indirectly by being named as a third-party defendant in actions brought against companies or persons who have purchased our products.  We have obtained limited product liability insurance coverage and we intend to expand our insurance coverage on an as needed basis as sales revenue increases.  However, insurance coverage is becoming increasingly expensive, and no assurance can be given that we will be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.  There can also be no assurance that we will be able to obtain commercially reasonable product liability insurance for any products added to our product line in the future.  A successful product liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations.

Ineffective internal controls could impact our business and operating results.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.  Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.  If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results may be harmed and we could fail to meet our financial reporting obligations.

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Risks Related to Ownership of Our Common Stock

Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Our executive officers, directors and principal stockholders own, in the aggregate, approximately 55% of our outstanding common stock.  In addition, certain of our officers and all of our directors have been granted warrants to purchase common stock and convertible Series D and Series E preferred stock, all of which are exercisable as of the date of this Report.  The exercise of such warrants and preferred stock might also result in substantial dilution to our existing stockholders.  As a result of the ownership of the shares currently held, their ownership and potential exercise of these options and preferred stock, these stockholders may be able to exercise significant control over matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions and will have significant control over our management and policies.  The interests of these stockholders may not be consistent with the interests of all other stockholders.

This control or the potential for such control may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in our best interests.

Penny stock regulations may impose certain restrictions on marketability of our securities.

The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.  As a result, our common stock is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse).  For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market.  The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.  Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our securities and may affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities. 

Investors should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse.  Such patterns include:

• Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

• Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

• “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

• Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

• The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

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Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price you paid for them.

The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

• Market conditions or trends in our industry or the economy as a whole and, in particular, in the retail sales environment;

• Timing of promotional events;

• Changes in key personnel;

• Entry into new markets;

• Announcements by us or our competitors of new product offerings or significant acquisitions;

• Actions by competitors;

• The level of expenses associated with new product development and marketing;

• Changes in operating performance and stock market valuations of competitors;

• The public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

• The financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• Changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;

• The development and sustainability of an active trading market for our common stock;

• Future sales of our common stock by our officers, directors and significant stockholders;

• Other events or factors, including those resulting from war, acts of terrorism, natural disasters or responses to these events; and

• Changes in accounting principles.

In addition, the stock markets have recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many retail companies.  In the past, stockholders in some companies have instituted securities class action litigation following periods of market volatility.  If we were involved in securities litigation, we could incur substantial costs and our resources, and the attention of management could be diverted from our business.

Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts.

Our certificate of incorporation and bylaws contain provisions that may make the acquisition of our Company more difficult without the approval of our Board of Directors. These provisions:

· Authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; and

· Establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These anti-takeover provisions and other provisions under Delaware law could discourage, delay, or prevent a transaction involving a change in control of our Company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.

Any future trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.  We do not currently have and may never obtain research coverage by securities and industry analysts.  If no securities or industry analysts commence coverage of us, the trading price for our common stock would be negatively impacted.  If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline.  If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline.  

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We do not expect to pay any cash dividends on our common stock for the foreseeable future.

The continued operation and expansion of our business will require substantial funding.  Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future.  Any determination to pay dividends on the common stock in the future will be at the discretion of our Board of Directors and will depend upon results of operations, financial condition, contractual restrictions, including our senior secured credit facility and other indebtedness we may incur, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.  No dividends may be paid on the common stock unless and until all accrued and unpaid dividends are paid on the preferred stock.  Accordingly, if you purchase or own shares of our common stock, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

Item 2.  Properties

We lease office facilities of approximately 17,350 square feet located at 1365 West Business Park Drive, Orem, Utah, 84058.  This lease expires in July 2018 and the monthly rent is approximately $15,900 subject to annual adjustments.

Our Philippines office is located at Unit 606 Keppel Center, Cebu Business Park, Cebu City, Philippines.  The lease has a three-year term expiring in May 2014.  The monthly rent begins at 64,975 Philippine Pesos (approximately $1,300) per month, with 10% annual increases.

Management believes the facilities described above are adequate to accommodate presently expected growth and needs of our operations.  As we continue to grow, additional facilities or the expansion of existing facilities likely will be required.

Item 3.  Legal Proceedings

On December 18, 2012, iLife Technologies, Inc. filed a lawsuit against nine companies, including ActiveCare, for patent infringement in the District Court for the Northern District of Texas.  The lawsuit alleged infringement of seven patents owned by iLife purportedly related to the use of accelerometers in devices used to monitor the status of a user.  In May 2013, ActiveCare entered into a settlement agreement and patent license agreement with iLife Technologies, Inc. and an agreed motion was filed to dismiss all claims of the lawsuit.  The final payment required by the settlement agreement and patent license patent agreement was made in December 2013.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has traded on the OTC Bulletin Board under the symbol “ACAR.OB.”  The following table sets forth the range of high and low market prices of our common stock as reported for the periods indicated.  The information is available online at http://finance.yahoo.com.  During the quarter ended June 30, 2013, we implemented a 10-for-1 reverse common stock split.  The data below have been retroactively adjusted to reflect the effects of the reverse stock split.

Fiscal Year Ended September 30, 2012	High		Low
First Quarter	$	5.20	$	2.00
Second Quarter	$	4.90	$	1.10
Third Quarter	$	1.30	$	0.50
Fourth Quarter	$	0.90	$	0.30
Fiscal Year Ended September 30, 2013	High		Low
First Quarter	$	1.50	$	0.40
Second Quarter	$	2.80	$	0.80
Third Quarter	$	11.00	$	0.90
Fourth Quarter	$	1.62	$	0.66

Holders

As of January 13, 2014, there were approximately 2,400 holders of record of our common stock and 32,860,314 shares of common stock outstanding. We have granted options and warrants for the purchase of approximately 7,094,000 shares of common stock.  We have issued and outstanding 70,539 shares of Series E preferred stock, 45,000 shares of Series D preferred stock, and 7,803 shares of Series F preferred stock.

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Dividends

Since incorporation, we have not declared any cash dividends on our common stock.  We do not anticipate declaring cash dividends on our common stock for the foreseeable future.   Our Series C and Series D preferred stock carry 8% annual dividend rates.  Our Series E preferred stock carries a 3.322% monthly dividend rate.  Subsequent to year-end we designated Series F preferred stock, which carries an 8% annual dividend rate until April 30, 2015, 16% from May 1, 2015 until July 31, 2015, 20% from August 1, 2015 until October 31, 2015, and 25% thereafter.

Dilution

The Board of Directors determines when and under what conditions and at what prices to issue stock.  In addition, a significant number of shares of common stock are reserved for issuance upon exercise of stock options and warrants.  The issuance of any shares of common stock for any reason will result in dilution of the equity and voting interests of existing stockholders. 

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 11219.

Equity Compensation Plans

Under management agreements in fiscal years 2009, 2012, and 2013, we granted our Chief Executive Officer and former Chief Executive Officer equity compensation in the form of restricted stock and warrants for the purchase of common stock.  We have also granted warrants for the purchase of common stock to our directors.  The following table summarizes certain information concerning equity plan awards outstanding as of September 30, 2013.

Equity Compensation Plan Information

Plan Category(1)	Number of securities to be issued upon exercise of outstanding options, warrants, and rights				Weighted-average exercise price of outstanding options, warrants, and rights warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
	(#)				($)		(#)
Equity compensation plans approved by security holders		-		$		-		-
Equity compensation plans not approved by security holders		2,038,253				1.21
Totals		2,038,253	(1)	$		1.21

(1)       Includes 1,110,487 shares of common stock issuable upon exercise of outstanding warrants granted to our former chief executive officers, 92,000 shares to our Board of Directors, and 835,766 shares of common stock issuable upon exercise of outstanding warrants granted to officers.

Recent Sales of Unregistered Securities

The following discussion summarizes sales of our common stock and other equity securities without registration of the offer and sale of such securities under the Securities Act of 1933 (the “Securities Act”) in reliance upon exemptions from registration pursuant to rules and regulations promulgated under the Securities Act not previously reported by the Company.

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During the three months ended September 30, 2013, we issued the following shares of common stock without registration under the Securities Act:

· 130,021 shares valued at $163,927 as compensation for services to three independent consultants;

· 120,000 shares valued at $168,000 as compensation for a key employee as an incentive to work for the Company.  The stock vests according to the terms of the employment agreements;

· 350,000 shares valued at $350,000 for options exercised by employees;

· 150,000 shares valued at $187,500 for an employment contract extension with a key employee;

· 25,000 shares valued at $31,750 to medical advisory board members for services through September 2014;

· 25,000 shares valued at $31,750 for service provided by a board member;

· 102,500 shares as loan origination fees at a value of $133,100;

· 10,903,463 shares for the conversion of outstanding debt in the amount of $15,282,464;

· 166,200 shares valued at $225,300 to settle an accrued liability of $126,200;

· 100,000 shares for the conversion of 20,000 shares of Series D preferred stock;

· 50,000 shares for 10,000 shares of Series D preferred stock canceled for loan origination fees to an unrelated party;

· 98,452 shares valued at $135,233 as dividends accrued for Series C and Series D preferred stock-holders;

· 1,313,334 shares valued at $1,842,334 for cash receipt of $985,000;

During the three months ended September 30, 2013, we issued the following shares of Series D preferred stock without registration under the Securities Act:

· 22,000 shares for a bonus to an officer, the value on the date of grant was $137,500;

· 1,893 shares for dividends on Series C preferred stock, the value on the date of grant was $13,610;

· 2,683 shares for dividends on Series D preferred stock, the value on the date of grant was $18,426;

· 80,717 shares for consulting services by an entity controlled by an officer of the Company, which were previously accrued in the amount of $542,878;

· 40,669 shares issued in exchange for 203,345 shares of common stock;

· 2,055 shares for prepaid service to an entity controlled by an officer, the value on the date of issuance was $14,899.

During the three months ended September 30, 2013, we issued the following shares of Series E preferred stock without registration under the Securities Act:

· 61,723 shares for the conversion of outstanding debenture loans and accrued interest of $614,765.

The shares of common stock and preferred stock issued in the above transactions were not registered under the Securities Act in reliance upon exemptions from registration under Section 4(a)(2) of the Securities Act.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader better understand our Company, our operations and our present business environment.  This information is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements for the fiscal years ended September 30, 2013 and 2012 and the accompanying notes thereto contained in this report.

Recent Developments

We have financed operations primarily through short-term debt and the sale of our equity securities.  Accordingly, if our revenues continue to be insufficient to meet our needs, we will attempt to secure additional financing through traditional bank financing or through the sale of equity securities or debt instruments.  However, because of our current financial condition, our attempts may be unsuccessful in obtaining such financing or the amount of the financing obtained may be inadequate to continue to implement our plan of operations.  There can be no assurance that we will be able to obtain financing on satisfactory terms or at all, or raise funds through debt or equity offerings.  If we only have nominal funds with which to conduct our business activities, this will negatively impact the results of operations and our financial condition.

During fiscal year 2013, we sold the net assets and operations of our Reagents business segment.  Net consideration received was $184,318 in cash in exchange for net assets of $129,222, which were comprised of $33,069 of accounts payable, $82,959 of net receivables, $53,500 of net inventory, and $25,832 of net property and equipment.  The Company may receive additional annual payments of five percent of the net income of the purchaser, through the fifth anniversary, if revenue from the purchaser is at least $465,000 for the previous twelve-month period ending on the closing date anniversary.  The sale of the Reagent business allows us to focus on our Chronic Illness Monitoring and CareService segments.

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Key Business Indicators

In assessing the performance of our business, we consider a variety of performance and financial measures.  The key measures for determining how our business is performing are net sales, gross profit margin and selling, general and administrative expenses.

Net Sales

Net sales constitute gross sales net of any returns and merchandise discounts.

Gross Profit

Gross profit is equal to our net sales minus our cost of revenues. Gross margin measures gross profit as a percentage of our net sales.  Cost of revenues includes the direct costs of purchased merchandise, commissions, distribution costs, freight costs and purchasing costs.

Our cost of revenues is substantially higher in higher volume quarters because cost of revenues generally increases as net sales increase.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include administration, stock-based compensation (discussed below) and occupancy costs.  These expenses do not generally vary proportionately with net sales.  As a result, selling, general and administrative expenses as a percentage of net sales are usually higher in lower volume quarters and lower in higher volume quarters.

Stock-based Compensation Expense

During fiscal year 2013, we granted 1,579,632 shares of common stock, 482,130 shares of Series D preferred stock, and 2,086,967 common stock purchase warrants to our consultants and employees. Stock-based compensation expense for fiscal year 2013 was approximately $3,447,000. See “Critical Accounting Policies” below.

Fiscal Year 2013 Compared to Fiscal Year 2012

Revenues

Net revenues for fiscal year 2013 were $11,400,000 compared to $1,059,000 for fiscal year 2012, an increase of $10,341,000 or 976%.  Revenues from Chronic Illness Monitoring were $9,739,000 for the fiscal year 2013, compared to $707,000 for fiscal year 2012.  The increase is due to significant new customers and improving our product and services.  Revenues from CareServices for fiscal year 2013 totaled $1,661,000, compared to $352,000 for fiscal year 2012.  The increase is due to having customers from the acquisition of Green Wire for a full fiscal year.

Cost of Revenues

Cost of revenues for fiscal year 2013 were $9,635,000, compared to $1,273,000 for fiscal year 2012, an increase of $8,362,000.  The increase in cost of revenues resulted primarily from expenses related to the growth of our revenue.  Chronic Illness Monitoring costs of revenue were $7,310,000 and CareServices costs of revenue were $2,325,000.

Gross Profit

Gross profit for fiscal year 2013 was $1,764,000, compared to a gross deficit for fiscal year 2012 of $214,000, an increase of $1,978,000.  The improvement in gross profit resulted primarily from Chronic Illness Monitoring revenue growth.  We expect gross profit to improve in fiscal year 2014 as we onboard more Chronic Illness Monitoring customers.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for fiscal year 2013 were $11,040,000, compared to $8,856,000 for fiscal year 2012, an increase of $2,184,000 or 25%.  The increase was primarily due to sales expenses related to the Chronic Illness Monitoring revenue growth and investor relation expenses as we secured debt and equity financing.  We expect our selling, general and administrative expenses will increase as we increase our marketing efforts and secure additional financing.

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Research and Development Expenses

Research and development expenses for fiscal year 2013 were $832,000, compared to $187,000 for fiscal year 2012.  The increase is primarily due to the development of the Chronic Illness Monitoring operation system.  We expect to continue investing in research and development as we develop new platforms for Chronic Illness Monitoring.

Loss on Derivatives Liability

Derivative loss for fiscal year 2013 was $333,000, compared to $2,104,000 for fiscal year 2012.  Derivative liabilities recorded as of September 30, 2013 include convertible debt instruments with variable conversion elements.  Derivative liabilities recorded as of September 30, 2012 included convertible debt instruments recorded as derivative liabilities due to insufficient remaining authorized shares for debt conversion, the exercise of outstanding options and the conversion of convertible preferred stock.  The derivative liabilities as of September 30, 2012 were eliminated during fiscal year 2013 due to the 10-for-1 reverse common stock split, which decreased the number of outstanding shares and convertible shares of “freestanding instruments,” which allows us to reserve sufficient shares to settle “freestanding instruments.”

Loss on Induced Conversion of Debt and Sale of Common Stock

During fiscal year 2013, we offered an induced conversion rate to all debt holders at a rate of $0.75 per share of common stock, which was below the market price of the stock.  Debt and accrued interest of $10,004,000 was converted to shares of common stock.  We also offered the private placement of common stock to existing investors at $0.75 per share, which was below the market price.  The difference between the offered price and the market price of all common stock issued was $9,356,000 and is recorded as a loss on induced conversion of debt and sale of common stock.  We believe this improved our balance sheet and positioned us to invest more resources in growing the Chronic Illness Monitoring business.

Interest Expense

Interest expense for fiscal year 2013 was $5,584,000, compared to $858,000 for fiscal year 2012.  The increase was primarily due to $9,511,000 of net debt financing received to grow the Chronic Illness Monitoring business.  The majority of debt was converted to shares of common stock as noted above in “Loss on Induced Conversion of Debt”.

Other Income and Expense

The loss on disposal of equipment for fiscal year 2013 was $200,000, compared to $0 for fiscal year 2012.  The increase was due to the disposal of assets in connection with the move of our corporate headquarters to Orem Utah.

Discontinued Operations

In June 2013, we sold the net assets and operations of the Reagents business segment of the Company to a third party for $184,318 in cash.  During fiscal years 2013 and 2012, we recognized a loss from discontinued operations of $5,312 and $145,990, respectively.

Net Loss

Net loss for fiscal year 2013 was $25,631,000, compared to $12,366,000 for fiscal year 2012 for the reasons described above.

Liquidity and Capital Resources

Our primary sources of liquidity are the proceeds from the sale of our equity securities and borrowings.  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 securities and borrowings until we achieve positive cash flows from operating activities under our new business plan.

Our cash balance as of September 30, 2013 was $224,000.  At that time, we had a working capital deficit of $3,251,000, compared to a working capital deficit of $10,144,000 at September 30, 2012.  The increase in working capital is primarily due to an increase in accounts receivable due to an increase in Chronic Illness Monitoring revenue, the decrease in derivative liabilities, and the conversion of debt to equity.

Operating activities in fiscal year 2013 used cash of $8,945,000, compared to $2,948,000 in fiscal year 2012.  The increased cash used in operating activities was due to increased operating expenses of our Chronic Illness Monitoring segment, which had a significant revenue increase.

Investing activities in fiscal year 2013 used cash of $296,000, compared to $386,000 in fiscal year 2012.  The decreased use of cash in investing activities was due to no acquisitions being undertaken during fiscal year 2013.  During fiscal year 2012, we used $350,000 in the acquisition of 4G Biometrics, LLC.

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Financing activities in fiscal year 2013 provided cash of $8,935,000, compared to $3,686,000 in fiscal year 2012. The increase in cash from financing activities is due to the increase in debt and equity financing during fiscal year 2013.

We had an accumulated deficit at September 30, 2013 of $63,311,000, compared to $37,359,000 as of September 30, 2012.  Our total stockholders’ deficit at September 30, 2013 was $791,000 compared to $7,715,000 as of September 30, 2012.  These changes were primarily due to the induced conversion of debt to equity and our net loss in fiscal year 2013.

Going Concern

Although we had positive gross margin for fiscal year 2013, we incurred negative cash flows from operating activities and recurring net losses for fiscal years 2013 and 2013.  We had negative working capital at the end of each of those years.    As of September 30, 2013 and 2012, our accumulated deficit was $63,311,088 and $37,359,214, respectively.  These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements included in this Form 10-K do not include any adjustments that might result from the outcome of this uncertainty.

In order for us to remove substantial doubt about our ability to continue as a going concern, we must continue to improve gross profits, 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 include raising additional capital by issuing equity securities and increasing sales of our services and products.  There can be no assurance that we will be able to raise sufficient capital or that revenues will increase rapidly enough to offset operating losses and repay our debts as they come due.  If we are unable to increase revenues or obtain additional financing, we will be unable to continue the development of our products and may have to cease operations.

Off Balance Sheet Arrangements

We are not a party to any off balance sheet arrangements.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost.  While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial.

Recent Accounting Pronouncements

We have reviewed all recently issued, but not yet effective, accounting pronouncements and the future adoptions of any such pronouncements are not expected to have a material impact on our financial condition or our results of operations.

Critical Accounting Policies

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.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities; revenues and expenses for the reporting periods.  By their nature, these estimates and judgments are subject to an inherent degree of uncertainty.  On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue recognition, and income taxes.  We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable and the results provide a basis for making judgments about the carrying values of the related assets and liabilities.  Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.

In May 2013, we effected a 10-for-1 reverse common stock split.  The consolidated financial statements and notes for all periods presented have been retroactively adjusted to reflect the reverse common stock split.

We believe our accounting policies with  respect to fair value of financial instruments, concentrations of credit risk, allowances for doubtful accounts receivable, inventories, impairment of assets, and revenue recognition are critical to an understanding of our financial results as described below.

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Fair Value of Financial Instruments

The carrying values of cash, accounts receivable, accounts payable and accrued liabilities approximate their respective 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. We estimate that, based on current market conditions, the fair values of long-term debt obligations approximate their carrying values as of September 30, 2013.

Concentrations of Credit Risk

We have cash in bank accounts that, at times, may exceed federally insured limits.  We have not experienced any losses in these accounts.

In the normal course of business, we provide credit terms to its customers and requires no collateral.  We perform ongoing credit evaluations of our customers’ financial condition.  We maintain an allowance for doubtful accounts receivable based upon management’s specific review and assessment of each account at the period end.  During fiscal year 2013, we had revenues from three significant Chronic Illness Monitoring customers which represented 72% of total revenue.  As of September 30, 2013 accounts receivable from significant customers represented 92% of total accounts receivable.  During fiscal year 2012, we had revenues from one significant Chronic Illness Monitoring customers which represented 28% of total revenues.  As of September 30, 2012 accounts receivable from significant customers represented 51% of total accounts receivable.

Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  Specific allowances 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 deemed uncollectible.  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.

Inventories

Inventories are recorded at the lower of cost or market, cost being determined using the first-in, first-out (“FIFO”) method. Chronic Illness Monitoring inventory consists of diabetic supplies.  Provisions, when required, are made to reduce excess and obsolete inventories to their estimated net realizable values.  Due to competitive pressures and technological innovation, it is possible that estimates of the net realizable value could change in the near term.

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, typically three to seven years.  Leasehold improvements are amortized over the shorter of the estimated useful lives of the asset or the term 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 the results of operations.

Equipment Leased to Customers

Our leased equipment is stated at cost less accumulated depreciation and amortization.  We amortize the cost of leased equipment on a straight-line basis over 36 months, which is the estimated useful life of the equipment.  Amortization of leased equipment is recorded as cost of sales.

Goodwill

Goodwill is not amortized but is reviewed for potential impairment at least annually.  The identification and measurement of goodwill impairment involves the estimation of the fair value of our reporting units.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment, which primarily incorporate management assumptions about expected future cash flows.  Future cash flows can be affected by changes in industry or market conditions.  Goodwill was not impaired during fiscal years 2013 or 2012.

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 during fiscal years 2013 or 2012.

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Revenue Recognition

Our revenue has historically been from three sources: (i) sales of Chronic Illness Monitoring services and supplies; (ii) sales from CareServices; (iii) sales of medical diagnostic stains from our Reagents segment, which was sold during fiscal year 2013.  Information regarding revenue recognition policies relating to our remaining business segments is contained in the following paragraphs.

Chronic Illness Monitoring

We began chronic illness monitoring sales through our acquisition of 4G Biometrics, LLC in the quarter ended March 31, 2012.  We recognize Chronic Illness Monitoring revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable and collection is reasonably assured.

Shipping and handling fees billed to customers are included as part of net revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.  Sales of Chronic Illness Monitoring products and services do not contain multiple deliverables.

We enter into agreements with insurance companies, disease management companies, and self-insured companies (collectively, customers) to lower medical expenses by distributing diabetic testing supplies to their customers or employees (members) and monitoring their test results.  Customers are obligated to pay for the supplies at the time of shipment and cash is due from these customers as the product is deployed to the members.  The term of these contracts are generally one year and, unless terminated by either party, will automatically renew for another year.  Collection terms are net 30-days after claims are submitted.  The Chronic Illness Monitoring sales for fiscal year 2013 were $9,738,988.

To qualify for the recognition of revenue at the time of sale, the following must exist:

· The price to the contracted self-insured company is fixed or determinable at the date of sale.

· The self-insured company has paid, or is obligated to pay us within terms.

· The self-insured company’s obligation to the Company would not be changed in the event of theft or physical destruction or damage of the product.

· Once the product is shipped, the end user does not have the right of return.

CareServices

“CareServices” include contracts in which we provide monitoring services to end users and sell devices to distributors.  We typically enter into contracts on a month-to-month basis with customers (members) that use our CareServices.  However, these contracts may be cancelled by either party at any time with 30-days notice.  Under our standard contract, the device becomes billable on the date the member orders the product, and remains billable until the device is returned to us.  We recognize revenue on devices at the end of each month that CareServices have been provided.  In those circumstances in which payment is received in advance, the Company records these payments as deferred revenue.

We recognize CareServices revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable and collection is reasonably assured.  Shipping and handling fees are included as part of net revenues.  The related freight costs and supplies directly associated with shipping products to members are included as a component of cost of revenues.  All CareServices sales are made with net 30-day payment terms.

To qualify for the recognition of revenue at the time of sale, the following must exist:

· The price to the buyer is fixed or determinable at the date of sale.

· The buyer has paid or the buyer is obligated to pay within terms, and the obligation is not contingent on resale of the product.

· The buyer’s obligation would not be changed in the event of theft or physical destruction or damage of the product.

· The buyer acquiring the product for resale has economic substance apart from that provided by us.

· We do not have significant obligations for future performance to directly bring about resale of the product by the buyer.

· The amount of future returns can be reasonably estimated and are not significant.

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The vast majority of sales for CareServices are service revenues.  Because equipment sales are not material, we present services and equipment sales together in the accompanying financial statements.

Our distributors are not required to maintain specified amounts of product on hand or make minimum purchases to maintain distributor status.  Distributors have no stock rotation rights or additional rights of return.  Revenues from products sold with long-term service contracts are recognized ratably over the expected life of the contract.  Revenues are recorded net of sales returns and discounts. There are no significant judgments or estimates associated with the recording of revenues.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain written and oral statements made by us in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 as amended (the Exchange Act).  Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “project,” or words or phrases of similar meaning.  In our reports and filings we may make forward looking statements regarding our expectations about future sales growth, future training and consulting sales activity, renewal of existing contracts, anticipated expenses, the adequacy of existing capital resources, projected cost reduction and strategic initiatives, expected levels of depreciation and amortization expense, expectations regarding tangible and intangible asset valuation expenses, future compliance with the terms and conditions of our debt obligations, the expected repayment of our liabilities in future periods, expectations regarding income tax expenses as well as tax assets and credits and the amount of cash expected to be paid for income taxes, estimated capital expenditures, and cash flow estimates used to determine the fair value of long-lived assets.  These, and other forward-looking statements, are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements.  These risks and uncertainties are disclosed from time to time in reports filed by us with the SEC, including reports on Forms 8-K, 10-Q, and 10-K.  Such risks and uncertainties include, but are not limited to, the matters discussed in Item 1A of this annual report on Form 10-K for the fiscal year ended September 30, 2013, entitled “Risk Factors.”  

The risks included here are not exhaustive.  Other sections of this report may include additional factors that could adversely affect our business and financial performance.  Moreover, we operate in a very competitive and rapidly changing environment.  New risk factors may emerge and it is not possible for our management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any single factor, or combination of factors, may cause actual results to differ materially from those contained in forward-looking statements.  Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

The market price of our common stock has been and may remain volatile.  In addition, the stock markets in general have experienced increased volatility.  Factors such as quarter-to-quarter variations in revenues and earnings or losses and our failure to meet expectations could have a significant impact on the market price of our common stock.  In addition, the price of our common stock can change for reasons unrelated to our performance.  Due to our low market capitalization, the price of our common stock may also be affected by conditions such as a lack of analyst coverage and fewer potential investors.

Forward-looking statements are based on management’s expectations as of the date made, and we do not undertake any responsibility to update any of these statements in the future except as required by law.  Actual future performance and results will differ and may differ materially from that contained in or suggested by forward-looking statements as a result of the factors set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in our filings with the SEC.

Item 8.  Financial Statements and Supplementary Data

The following consolidated financial statements are included beginning on page F-1 of this report:

	Page
Report of Independent Registered Public Accounting Firms	F-2
Consolidated Balance Sheets as of September 30, 2013 and 2012	F-3
Consolidated Statements of Operations for the years ended September 30, 2013 and 2012	F-5
Consolidated Statements of Stockholders' Deficit for the years ended September 30, 2013 and 2012	F-6
Consolidated Statements of Cash Flows for the years ended September 30, 2013 and 2012	F-8
Notes to Consolidated Financial Statements	F-10

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Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the years ended September 30, 2013 and 2012, there were no: (i) disagreements with our independent registered public account firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to such firm’s satisfaction, would have caused the independent registered public account firm to make reference to the subject matter thereof in connection with their reports for such years; or (ii) reportable events, as described under Item 304(a)(1)(v) of Regulation S-K, except for the material weaknesses noted in Item 9A.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our 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 Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of September 30, 2013, our disclosure controls and procedures were not effective.  During the audit process, we identified material weaknesses discussed below in the Report of Management on Internal Control over Financial Reporting.

Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(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 transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to our annual or interim financial statements will not be prevented or detected.

In the course of management's assessment, it identified the following material weaknesses in internal control over financial reporting:

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:

· Ineffective controls over period end financial disclosure and reporting processes.

· Ineffective controls over the segregation of incompatible duties of various accounting functions.

· Ineffective controls over the review and approval of manual journal entries.

Financial Reporting Process

We did not maintain an effective financial reporting process to prepare financial statements in accordance with U.S. generally accepted accounting principles. Specifically, we initially failed to appropriately account for and disclose the valuation and recording of certain derivatives, equity and financing arrangements.

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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, but additional effort and staffing is needed to fully remedy these deficiencies. Our management, audit committee, and directors will continue to work with outside advisors to ensure that our controls and procedures become adequate and effective.

This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this annual report Form 10-K.

Changes in Internal Control over Financial Reporting

During fiscal year 2013, we hired additional finance and accounting personnel to improve internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

Inherent Limitations on the Effectiveness of Internal Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to completely eliminate misconduct. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Item 9B.  Other Information

None.

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Set forth below are the name, age, position and a description of the business experience of each of our executive officers, directors and other key employees as of September 30, 2013.

Name	Age	Position
David G. Derrick	60	Chairman (Director) and Chief Executive Officer
James G. Carter	74	Director
William K. Martin	70	Director
Jack J. Johnson	71	Director
Robert J. Welgos	75	Director
Michael G. Acton	50	Chief Financial Officer, Secretary-Treasurer

David G. Derrick – Chief Executive Officer and Chairman

Mr. Derrick has been our Chief Executive Officer and Chairman of our Board of Directors since July 2012.  From February 2001 until June 30, 2011, Mr. Derrick was the Chairman and Chief Executive Officer of SecureAlert, our former parent corporation.  Prior to joining SecureAlert, Mr. Derrick occupied directorship and management positions in other companies.  From 1979 to 1982, Mr. Derrick was a faculty member at the University of Utah, College of Business.  Mr. Derrick graduated from the University of Utah with a Bachelor of Arts degree in Economics and a Masters in Business Administration degree with an emphasis in Finance.  Our Board of Directors believes Mr. Derrick’s long association with our business and its development and his long support of the Company uniquely qualify him to serve as our principal executive officer and Chairman.

James G. Carter - Director

Mr. Carter joined our board in September 2008.  He is the founder and principal of J. Carter Wine & Spirits, Inc. (1989-2002) and is a director and former president of White Beeches Golf & Country Club since 1990.  Mr. Carter’s business experience includes Vice President of Sales & Marketing (North America and Caribbean) for Suntory International Corp. (1981-1989), National Sales Director Wines for Austin Nichols & Company, Inc. (1975-1980).  He is a former Councilman and Council President for the Township of Washington (Bergen County, New Jersey).  He retired in 2000.  Mr. Carter attended Villanova University. Mr. Carter has a very strong sales and marketing background with Suntory International Corp. and Austin Nichols & Company.  We believe that Mr. Carter’s experiences in starting, owning, and operating his own business and his extensive sales experience, qualify him to serve as a member of our Board of Directors as we continue to develop our distribution networks and design our marketing and sales programs.

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William K. Martin - Director

Mr. Martin joined our board in September 2008.  He is a founder/partner/broker of Commerce CRG, and has served as its managing director from 1993 through the present, as well as acting as the Associate Broker in the firm’s Park City, Utah, office since 2007.  Commerce CRG is a commercial real estate and management business, and is an independently owned and operated member of the Cushman & Wakefield Alliance, which focuses on commercial real estate and management. Mr. Martin has also been a board member of a number of national and international real estate service firms.  Mr. Martin has also been active in industry organizations and is currently a member of the Economic Development Corporation of Utah and sits on that organization’s executive board.  Mr. Martin has a Bachelor of Science degree from Utah State University in Applied Statistical and Computer Science and has earned the rank of Captain in the United States Air Force (retired).  Mr. Martin has a very strong sales and marketing background with Commerce CRG and Cushman Wakefield.  Mr. Martin’s qualifications to serve on our board include his experience as a member of the State of Utah’s Economic Development board which gives him insight into governmental affairs and government relations, and his sales experience, assisting us we begin to bring our products and services to market and establish our distribution channels.

Jack J. Johnson – Director

Mr. Johnson joined our board in October 2008.  In 1976, he founded the Jack Johnson Company, a land planning, civil engineering and architectural company specializing in residential and resort communities.  He has served as President of that company since its inception.  He also formed Land Equity Partners, a residential subdivision development company, and Resort Development Services, a company focusing on development of hotels and condominiums.  He received a degree in Civil Engineering from the University of Illinois in the late 1960s, and is a licensed civil engineer in several states.  His qualifications to serve on our board include his engineering background, which will help as we enter into research and development contracts related to our products and service solutions.  He is also well qualified as a result of his extensive business experience and sales expertise.

Robert J. Welgos – Director

Mr. Welgos joined our Board of Directors in June 2009.  He has a BS in engineering from the Newark College of Engineering (1962), and worked for 38 years with Allied Signal Corp (now Honeywell International), in various technical department management positions, including being responsible for operations of Customer Technical Service Dept., Design Engineering, Testing Laboratories, and Process Laboratories.  He also served as the Manager, North American Distributor Sales and Director of International Operations, where he established distribution networks throughout the Pacific Rim and South America.  During this period, he was instrumental in the creation of joint ventures with Lucky Goldstar in Korea and Japan Synthetic Rubber in Japan.  Mr. Welgos retired from Allied Signal Corp in 2000.  Mr. Welgos is the Chairman of our board’s Audit Committee.  Among other things, Mr. Welgos’ education and extensive experience in the industries described above qualify him to advise our Company in our research and development agenda and customer service solutions.  In addition, his experience in Asia is important as we source our products and manufacturing.

Michael G. Acton – Secretary, Treasurer and Chief Financial Officer

Mr. Acton joined us as Secretary-Treasurer at the time of our incorporation.  He has over 25 years of accounting experience in both the public and private sector and has been our Chief Financial Officer since June 2008. Mr. Acton is a Certified Public Accountant in the State of Utah and is a member of the AICPA and the UACPA. Mr. Acton served 10 years as the Secretary-Treasurer and as the Chief Financial Officer of SecureAlert, where he was responsible for numerous regulatory and fiscal decisions along with Corporate Governance issues. Mr. Acton's focus is on improving the Company’s financial organization, processes and reporting. He has significant knowledge and experience in business planning, financial planning, and cash flow improvement and with senior level financial matters such as acquisitions, investor relations, risk management and SEC reporting. He graduated from the University of Utah with a Masters of Professional Accountancy in June 1990 and received his Bachelors of Science in Accounting from the University of Utah in June 1989.

Compensatory Arrangement with Principal Executive Officer

On July 12, 2012, we entered into a written Employment Agreement containing compensation and other terms related to David G. Derrick’s appointment as our Chief Executive Officer and Chairman of the Board of Directors.  The term of the Employment Agreement is two years. The term and the employment of Mr. Derrick will continue for successive one-year periods unless terminated prior to the expiration of the current term by either the Company or Mr. Derrick.

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The compensation payable to Mr. Derrick under the Employment Agreement includes a base salary of $300,000 per year plus $15,000 of business expense reimbursement per month.  The Company also granted Mr. Derrick 80,000 Series D preferred shares as a signing bonus, however according to the agreement such shares cannot be converted into Common Stock until the Company has 20,000 members. The Company recognized $320,000 of compensation expense due to the vesting of the Series D preferred stock during fiscal year 2013.  The Employment Agreement also includes the grant of an option to purchase 1,000,000 shares common stock at an exercise price of $1.00 per share, vesting at the rate of 100,000 shares for every 5,000 members added by the Company during Mr. Derrick’s employment by the Company.  During fiscal year 2013, $782,885 was recorded as deferred compensation due to the issuance of the options.  $660,140 was recognized as compensation expense, and the remaining value will be amortized over the expected period of certain milestones reached.    During fiscal year 2013, the Company also granted Mr. Derrick a $350,000 bonus for option exercises for service for fiscal year 2013 and 2014.  $175,000 of the bonus was recognized as compensation expense, and $175,000 was recorded as deferred compensation and will be amortized through fiscal year 2014

Director Compensation

The table below summarizes the compensation we paid to our outside directors for their services as directors for the fiscal year ended September 30, 2013.

Name	Fees Earned or  Paid in Cash		Stock Awards		Option Awards		Non-Equity  Incentive Plan  Compensation		Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other  Compensation		Total
	($)		($)		($)		($)		($)		($)		($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)
David G. Derrick (1)		--		--		--		--		--		--		--
James G. Carter (2)	$	37,500	$	33,512		--		--		--		--	$	71,012
William K. Martin (3)	$	37,500	$	11,460		--		--		--		--	$	48,960
Robert J. Welgos (4)	$	37,500	$	35,530		--		--		--		--	$	73,030
Jack Johnson (5)	$	37,500	$	12,900		--		--		--		--	$	50,400

(1) Mr. Derrick is Chief Executive Officer and Chairman of the Board of Directors. His compensation for the year ended September 30, 2013 is disclosed in the Summary Compensation Table, below. Mr. Derrick did not receive additional compensation for his service on the Board of Directors;

(2)	Mr. Carter received 17,753 shares of Series D preferred stock for $37,500 of BOD fees accrued and $33,512 of bonus;
(3)	Mr. Martin received 12,240 shares of Series D preferred stock for $37,500 of BOD fees accrued and $11,460 of bonus;
(4)	Mr. Welgos received 10,320 shares of Series D preferred stock and 25,000 shares of common for $37,500 of BOD fees accrued and $35,530 of bonus;
(5)	Mr. Johnson received 12,600 shares of Series D preferred stock for $37,500 of BOD fees accrued and $12,900 of bonus.

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Item 11.  Executive Compensation

Chief Executive’s Management Agreement

During the fiscal year ended September 30, 2011, we entered into a four-year management contract with our then Chief Executive Officer, James J. Dalton, with an effective term of October 1, 2010 through September 30, 2014.  Under that agreement, we paid Mr. Dalton for his services as follows:

· 400,000 restricted shares of common stock were granted to Mr. Dalton at a price of $4.60 per share, which vested immediately; and

· Warrants for the purchase of 300,000 shares of common stock at a price of $5.00 per share.

During the fiscal year ended September 30, 2012, we accelerated the above non-cash compensation to Mr. Dalton with total expense of $1,973,576. During the fiscal year ended September 30, 2012, we also granted Mr. Dalton warrants to purchase 360,000 shares of common stock at a price of $4.00 per share for his services.  The exercise price of these warrants was reduced to $1.00 per share during the fiscal year ended September 30, 2012, which resulted in additional compensation expense of $55,671.

On October 17, 2011, we engaged David S. Boone as our Chief Executive Officer.  Mr. Boone assumed the post previously occupied by James J. Dalton, whose resignation took effect with the appointment of Boone.  Mr. Dalton continued to serve as the Chairman of our Board of Directors (until July 12, 2012 – see below).  On February 16, 2012, David S. Boone resigned as Chief Executive Officer and Director of the Company to pursue other interests.  The Board of Directors then re-appointed James Dalton to the position of Chief Executive Officer of the Company.

During the fiscal year ended September 30, 2012, we paid Mr. Boone for his services as follows:

· $68,742 in cash for consulting services; and

· Warrants for the purchase of 125,288 shares of common stock at a price of $4.40 per share.

On July 12, 2012, Mr. Dalton resigned as Chief Executive Officer and Chairman of the Board of Directors of the Company to pursue other interests.  The Board of Directors then appointed Mr. David G. Derrick to the position of Chief Executive Officer and Chairman of the Board of Directors of the Company.  The compensation payable to Mr. Derrick is described above and in the Summary Compensation Table, below.

Mr. Dalton continues to serve the Company as a consultant in the area of investor relations.  During the fiscal years ended September 30, 2013 and 2012, we paid Mr. Dalton the sum of $300,000 and $120,000, respectively, for his consulting services to the Company.  Mr. Dalton also received bonus payments ranging from 5% to 10% on financing he raised for the Company.

Section 162(m) Compliance

Section 162(m) of the Internal Revenue Code (“Code”), limits us to a deduction for federal income tax purposes of no more than $1,000,000 of compensation paid to certain executive officers in a taxable year. Compensation in excess of $1,000,000 may be deducted if it is “performance-based compensation” within the meaning of the Code.

Our Board of Directors has determined that the stock purchase warrants granted under management contracts as described above, with an exercise price at least equal to the fair value of our common stock on the date of grant should be treated as “performance-based compensation.”  Our Board of Directors believes that we should be able to continue to manage our executive compensation program for our Named Executive Officers, defined below, so as to preserve the related federal income tax deductions, although individual exceptions may occur.

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Summary Compensation Table

The following table summarizes information concerning the compensation awarded to, earned by, or paid to, three of our top paid officers including our Chief Executive Officer (principal executive officer) during fiscal years 2013 and 2012 (collectively, the “Named Executive Officers”) who were serving in such capacities as of September 30, 2013.

Name and principal position	Year ended September 30	Salary		Bonus		Stock awards		Option awards		Nonequity incentive plan compensation		Nonqualified  deferred  compensation earnings		All other  compensation		Total
		($)		($)		($)		($)		($)		($)		($)		($)
(a)	(b)	(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)
James Dalton,	2012		-		-	$	1,380,000	$	1,601,140		-		-	$	7,153	$	2,988,293
PEO
David Boone,	2012	$	68,742		-		-	$	343,378		-		-		-	$	412,120
PEO
David G. Derrick,	2013	$	300,000			$	1,010,140		-		-		-	$	33,343	$	1,343,483
PEO	2012	$	150,000		-	$	320,000									$	470,000
Jeffery Peterson	2013	$	125,800		-	$	685,378		-		-		-		-	$	811,178
Vice President of Finance	2012	$	77,200		-	$	1,445,308		-		-		-		-	$	1,522,508
Darrell Meador,	2013	$	180,000		-	$	282,299		-		-		-	$	24,071	$	486,370
President of 4G Biometrics	2012	$	90,000		-		-		-		-		-		-	$	90,000

(1)	Column (i) includes long-term care insurance and other personal benefits. The amounts included in that column, representing premiums paid by us for the applicable insurance policies, include the following:
(2)	All amounts paid under the management agreement described above.  All amounts except those reported in column (c) and column (i) are non-cash amounts and represent stock or option grants.

	Health Insurance		Dental, Vision, & Term Life Insurance
David G. Derrick	$	31,937	$	1,406
Darrell Meador	$	23,342	$	729

(3)         Amounts in column (e) represent non-cash compensation expense of stock grants based on the market value of the stock on the grant date.  During the fiscal year ended September 30, 2013, we granted Mr. Derrick non-cash compensation as described above.   During fiscal year 2013, we granted Mr. Peterson 115,717 shares of Series D preferred stock for sign up bonus and service provided valued at $685,378, and during fiscal year 2013, we granted Mr. Meador options to purchase 433,333 shares of common stock at $1.00 per share associated with the 4G acquisition.  We recorded the option valued at $382,388 as deferred compensation, $282,299 was recognized as compensation expense.  The remaining value of the option will be amortized over the terms of expected milestones reached.  During fiscal year 2013, we also granted 150,000 shares of common stock to Mr. Meador for extending his employment agreement to fiscal year 2015, $187,500 of value was recorded to deferred compensation.  The value will be amortized over fiscal year 2015.

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Outstanding Equity Awards at Fiscal Year-End

The following table summarizes information regarding options and other equity awards owned by the Named Executive Officers as of September 30, 2013.

Name	Number of Securities Underlying Unexercised Options		Number of Securities Underlying Unexercised Options		Equity Inventive Plan Awards: Number of Securities Underlying Unexercised Unearned Options		Option Exercise Price		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested		Market Value of Shares or Units of Stock That Have Not Vested		Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested
	(#)		(#)		(#)		($)		(f)	(#)		($)		(#)		($)
	Exercisable		Unexercisable
(a)	(b)		(c)		(d)		(e)			(g)		(h)		(i)		(j)
David G. Derrick,		50,000		-		-	$	1.00	9/29/2015		-	$	-		-	$	-
President and Chief		34,100		-		-	$	1.00	11/3/2016		-	$	-		-	$	-
Executive Officer		500,000		150,000		-	$	1.00	7/11/2017		-	$	-		-	$	-
James Dalton,		360,000		-		-	$	1.00	10/3/2016		-	$	-		-	$	-
Former President and Chief		225,000		-		-	$	1.00	6/21/2016		-	$	-		-	$	-
Executive Officer		400,200		-		-	$	1.00	5/11/2014		-	$	-		-	$	-
David Boone,
Former President and Chief		125,287		-		-	$	4.40	10/3/2016		-	$	-		-	$	-
Executive Officer
Michael G. Acton,
Chief Financial		15,000		-		-	$	1.00	6/21/2016		-	$	-		-	$	-
Officer
Darrell Meador,
President of 4G		86,666		346,667		-	$	1.00	6/20/2017		-	$	-		-	$	-
Biometrics

Options Exercised and Vested

During the fiscal year ended September 30, 2013, warrants for the purchase of 2,086,967 shares of common stock were vested and options for the purchase of 875,000 shares of common stock were exercised.

Indemnification of Officers and Directors

Our certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, or DGCL.  We expect to obtain directors’ and officers’ liability insurance that insures such persons against the costs of defense, settlement or payment of a judgment under certain circumstances.

In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty.

We entered into indemnification agreements with each of our executive officers and directors.  The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL.

There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

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Board of Directors

Election and Vacancies

Directors hold office until the next annual meeting of the stockholders and until their successors have been elected or appointed and duly qualified.  Vacancies on the board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members of the board, with such new director serving the remainder of the term or until his successor shall be elected and qualify.

Item 12.              Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following tables set forth information as of January 13, 2014 (the “Table Date”) by:

· each person or group who is known by us to own beneficially more than 5% of our outstanding shares of common stock;

· each of our Named Executive Officers serving as of such date;

· each of our directors; and

· all of the executive officers and directors as a group.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC.  These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days.  Common stock subject to options that are currently exercisable or exercisable within 60 days of the Table Date is deemed to be outstanding and beneficially owned by the person holding the options.  These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Percentage of beneficial ownership is based on 32,860,314 shares of common stock outstanding as of the Table Date.  Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.  Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o ActiveCare, Inc., 1365 West Business Park Drive, Orem, Utah 84058.

5% Stockholders
		Amount and Nature
		Of Beneficial
Title of Class	Name and address of Beneficial Owner	Ownership		Percent of Class
Common	Advance Technology (1)		4,966,046		14.91	%
	154 Rock Hill Road
	Spring Valley, NY 10977
Common	Hillair Capital Investments L.P. (2)		1,904,000		5.48	%
	330 Primrose Road, Suite 660
	Burlingame, CA 94010
Executive Officers and Directors
		Amount and Nature
		Of Beneficial
Title of Class	Name and address of Beneficial Owner	Ownership		Percent of Class
Common	Jeffery Peterson (3)		8,572,027		25.49	%
Common	David G. Derrick (4)		6,883,530		20.58	%
Common	William K. Martin (5)		735,596		2.24	%
Common	Michael G. Acton (6)		516,127		1.57	%
Common	Darrell Meador (7)		428,816		1.30	%
Common	Michael Jones (8)		367,063		1.12	%
Common	David Lee (9)		213,125		0.65	%
Common	James G. Carter (10)		205,230		0.62	%
Common	Robert J. Welgos (11)		179,763		0.55	%
Common	Jack Johnson (12)		150,599		0.46	%
All executive officers and directors as a group (10 persons)(13)			18,251,876		54.57	%

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(1) Includes 4,516,046 shares of common stock, and options to purchase 450,000 shares of common stock, owned by Advanced Technology Investors LLC (“ATI”) and its related entity. By agreement, ATI may not vote or take delivery of common shares that would result in ATI becoming the beneficial owner of more than 9.99% of the issued and outstanding common stock of the Company at any given time

 (2) Includes 1,904 shares of Series F preferred stock, which is convertible to 1,904,000 shares of common stock, owned by Hillair Capital Investments L.P. (“Hillair”).  By agreement, Hillair may not vote it’s common shares or common share equivalent in excess of 4.99% of the issued and outstanding common stock of the Company at any given time.

(3) Includes 7,797,027 shares of common stock, 25,000 shares of Series D preferred stock, which is convertible to 125,000 shares of common stock, and options to purchase 650,000 shares of common stock, owned by entities that are controlled by Mr. Jeffery Peterson, our Vice President  of Finance.

(4) Includes 6,299,430 shares of common stock and options to purchase 584,100 shares of common stock owned by entities that are controlled by Mr. David G. Derrick, our Chief Executive Officer and Chairman of our Board of Directors.

(5) Includes 712,896 shares of common stock and options to purchase 22,700 shares of common stock owned by entities that are controlled by Mr. William K. Martin, a member of our Board of Directors.

(6) Includes 501,127 shares of common stock and options to purchase 15,000 shares of common stock owned by Mr. Michael G. Acton, our Chief Financial Officer and Secretary-Treasurer.

(7) Includes 342,149 shares of common stock and 86,667 warrants owned by Mr. Darrell Meador and his related party.  Mr. Meador is the President of 4G.

(8) Includes 367,063 shares of common stock, owned by Mr. Michael Jones, our Chief Strategy Officer.

(9) Includes 213,125 shares of common stock, owned by David Lee, our Chief Operating Officer.

(10) Includes 189,460 shares of common stock and options to purchase 15,770 shares of common stock owned by Mr. James G. Carter, a member of our Board of Directors.

(11) Includes 154,663 shares of common stock and options to purchase 25,100 shares of common stock owned by Mr. Robert J. Welgos, a member of our Board of Directors.

(12) Includes 129,099 shares of common stock and options to purchase 21,500 shares of common stock owned by Mr. Jack Johnson, a member of our Board of Directors.

 (13) Duplicate entries eliminated.

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Item 13.              Certain Relationships and Related Transactions, and Director Independence

Related-Party Transactions

Related-Party Notes Payable

As of September 30, 2013, we owed $1,896,135 of related-party notes to four of our officers, or entities controlled by officers, and one of our board members, with annual interest rates ranging from 12% to 18%.  Two entities controlled by Jeffery Peterson, Vice President of Finance, were owed $1,637,770 on related-party notes and all notes were repaid or converted to common stock subsequent to year end.  An entity under control of David Derrick, Chief Executive Officer, was owed $175,000 on a related-party note and $160,000 was converted to common stock subsequent to year end.  Michael Acton, Chief Financial Officer, was owed $43,000 on a related-party note.  Bill Martin, Board of Director, was owed $26,721 on a related-party note.  Michael Jones, Chief Strategy Officer, was owed $13, 644 on a related-party note.  During the fiscal year ended September 30, 2013, we also issued 341,000 warrants exercisable at a price of $0.10 per share and 80,000 shares of Series D preferred stock with total value of $347,130 at the date of grant related to notes payable.

As of September 30, 2012, we owed $1,957,161 of related-party notes to three of our officers, or entities controlled by officers, and one former officer, with annual interest rates ranging from 12% to 18%.  Three entities controlled by Jeffery Peterson, Vice President of Finance, were owed $1,059,278 on related-party notes.  An entity under control of David Derrick, Chief Executive Officer, was owed $620,687 on a related-party note. James Dalton, former Chief Executive Officer, was owed $244,196 on a related-party note.  Michael Acton, Chief Financial Officer, was owed $33,000 on a related-party note.

Loan conversion and Preferred stock conversion

Subsequent to the year ended September 30, 2013, we entered into loan conversion agreements with related parties.  We issued 3,197,119 shares of common stock for the conversion of notes payable representing principal and interest in the amount of $1,945,500.  We also issued 650,000 warrants exercisable at a price of $1.10 per share for five year.

Subsequent to the year ended September 30, 2013, we entered into Series D preferred stock conversion agreements with related parties.  We issued 4,391,667 shares of common stock for the conversion of 627,381 shares of Series D preferred stock.

Indemnification Agreements

We have entered into indemnification agreements with each of our current directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and executive officers.

Procedures for Related-Party Transactions

Under our code of business conduct and ethics adopted in June 2009, our employees, officers and directors are discouraged from entering into any transaction that may cause a conflict of interest for us.  In addition, they must report any potential conflict of interest, including related-party transactions, to their managers or our corporate counsel who then reviews and summarizes the proposed transaction for our audit committee.  Pursuant to its charter, our audit committee is required to then approve any related-party transactions, including those transactions involving our directors. In approving or rejecting such proposed transactions, the audit committee will be required to consider the relevant facts and circumstances available and deemed relevant to the audit committee, including the material terms of the transactions, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director’s independence.  Our audit committee will approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our audit committee determines in the good faith exercise of its discretion.  A copy of our code of business conduct and ethics and audit committee charter are available on our corporate website at www.activecare.com.

Corporate Governance and Director Independence

Board Composition

Our business and affairs are managed under the direction of our Board of Directors.  Our Board of Directors is comprised of five directors, four of whom (Mr. Carter, Mr. Martin, Mr. Johnson, and Mr. Welgos) are independent within the meaning of the Nasdaq Marketplace Rules.  This means that the Board of Directors has determined that those directors (1) are not officers or employees of ActiveCare or its subsidiary and (2) have no direct or indirect relationship with ActiveCare that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director.  We have determined that it is in our best interest to have directors who would meet the requirements of being “independent” under the rules of the Nasdaq Stock Market.

34

Board Committees

Our Board of Directors has established an audit committee and a compensation committee.  The composition and responsibilities of each committee are described below.  Members serve on these committees until their resignation or until otherwise determined by our Board of Directors.  

Audit Committee

Our audit committee is comprised of two of our independent directors: Mr. Welgos and Mr. Martin.  Mr. Welgos serves as chair of the audit committee and is considered to be the financial expert on that committee.  Our audit committee has responsibility for, among other things:

· selecting and hiring our independent registered public accounting firm, and approving the audit and non-audit services to be performed by and the fees to be paid to our independent registered public accounting firm;

· evaluating the qualifications, performance and independence of our independent registered public accounting firm;

· monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

· reviewing the adequacy and effectiveness of our internal control policies and procedures;

· discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results; and

· preparing the audit committee report required by the SEC, to be included in our annual proxy statement.

As indicated above, our Board of Directors has affirmatively determined that Mr. Welgos and Mr. Martin meet the definition of “independent directors” for purposes of serving on an audit committee under applicable SEC rules, and we intend to comply with these independence requirements within the time periods specified.  In addition, the Board of Directors has determined that Mr. Welgos meets the standards established by the SEC to qualify as a “financial expert” under Item 407 of Regulation S-K under the Securities Act.  Our Board of Directors has adopted a written charter for our audit committee, which is available on our corporate website at www.activecaresys.com.

Compensation Committee

Our compensation committee consists of two independent directors, Mr. Johnson and Mr. Carter.  Mr. Johnson is the chairman of our compensation committee.  The compensation committee is responsible for, among other things:  

· reviewing and approving compensation of our executive officers including annual base salary, annual incentive bonuses, specific goals, equity compensation, employment agreements, severance and change in control arrangements, and any other benefits, compensations or arrangements;

· reviewing succession planning for our executive officers;

· reviewing and recommending compensation goals, bonus and stock compensation criteria for our employees;

· preparing the compensation committee report required by the SEC to be included in our annual proxy statement; and

· administering, reviewing and making recommendations with respect to our equity compensation plans.

Our Board of Directors has adopted a written charter for our compensation committee, which is available on our corporate website at www.activecaresys.com.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics applicable to our principal executive, financial and accounting officers and all persons performing similar functions.  A copy of that code is available on our corporate website at www.activecaresys.com.  We expect that any amendments to such code, or any waivers of its requirements, will be disclosed on our website.

35

Meetings of the Board of Directors and Committees

The Board of Directors is elected by and is accountable to our stockholders.  The Board establishes policy and provides our strategic direction, oversight, and control.  The Board met seven times during fiscal year 2013.  All directors attended 100% of the meetings of the Board and the Board committees of which they are members.

Item 14.              Principal Accounting Fees and Services

Audit Related Fees, Tax Fees, Audit Related Fees, and All Other Fees

            Audit services consist of the audit of our annual consolidated financial statements, and other services related to filings and registration statements filed by us and other pertinent matters.

During the years ended September 30, 2013 and 2012, Tanner LLC (“Tanner”) performed audit and audit related services including the audit of the annual consolidated financial statements of the Company and its subsidiaries for 2013, reviews of the quarterly financial information and Forms 10-Q  and audit related services for the audits of 4G and Green Wire (in connection with their acquisitions) and certain filings by the Company on Form 8-K.  Tanner did not perform any financial information systems design and implementation services for the Company.

Tanner incurred fees of $176,300 and $99,000 for audit services and $0 and $141,000 for audit-related services with respect to the years ended September 30, 2013 and 2012, respectively.

Auditor Independence

Our audit committee considered that the work done for us in fiscal year 2013 by Tanner was compatible with maintaining that firm’s independence.

Tanner has advised us that it has no direct or indirect financial interest in the Company or in any of its subsidiaries and that it has had, during the last three years, no connection with the Company or any of its subsidiaries, other than as independent auditors or in connection with certain other activities, as described above.

Report of the Audit Committee

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors.  Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The directors who serve on the Audit Committee are all independent for purposes of applicable SEC Rules.  The Audit Committee operates under a written charter that has been adopted by the Board of Directors.

We have reviewed and discussed with management and Tanner the audited financial statements for the year ended September 30, 2013.  The Audit Committee has discussed with Tanner the matters that are required to be discussed under PCAOB standards.  Tanner has provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and the committee has discussed with Tanner that firm’s independence.  The Audit Committee has concluded that Tanner is independent from the Company and its management.

Based on our review and discussions referred to above, we have recommended to the Board of Directors that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2013, for filing with the Securities and Exchange Commission.

Respectfully submitted by the members of the Audit Committee:

Robert J. Welgos, Chair

William K. Martin

36

PART IV

Item 15.  Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this Form:
1.	Financial Statements—all consolidated financial statements of the Company as set forth under Item 8, of this Form 10-K.
2.	Financial Statement Schedules.    [N/A, because the required information is included in the Consolidated Financial Statements or Notes thereto, or is not applicable.]
3.	Exhibits. The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission:

Exhibit No.	Title of Document
(3)(i)	Certificate of Designations of Preferences, Rights and Limitations of Series F Variable Rate Convertible Preferred Stock *
(10)(i)	Asset Purchase Agreement with GreenWire, LLC and Related Entities
(10)(ii)	Promissory Notes with GreenWire, LLC and Related Entities
(10)(iii)	Security Agreement with GreenWire, LLC and Related Entities
(10)(iv)	Guaranty Agreement with GreenWire, LLC and Related Entities
(10)(v)	Employment Agreement with Andrew Ball, Former Key Manager of GreenWire, LLC
(10)(vi)	Employment Agreement with David Lee, Former Key Manager of GreenWire, LLC
(10)(vii)	Voting Agreement and Proxy with Adrew Ball and David Lee
(10)(viii)	Form of Securities Purchase Agreement, dated December 16, 2013 *
(10)(ix)	Form of Warrant to Purchase Common Stock *
(10)(x)	Form of Exchange Agreement *
(10)(xi)	Form of Loan Conversion Agreement *
(10)(xii)	Form of Preferred Stock Series C  and Series D Conversino Notice *
(10)(xiii)	Form of Stock Purchase Warrant *
(10)(xiv)	Employment Agreement with David Derrick, Chief Executive Officer. *
(10)(xv)	Common Stock Purchase Warrant Agreement with David Derrick, Chief Executive Officer.*
(10)(xvi)	Office Lease Agreement between the Company and Countryview  Properties, LLC.*
(31)(i)	Certifications of Chief Executive (Principal) Executive Officer under Rule 13a-14(a)/15d-14(a)
(31)(ii)	Certifications of Chief Financial (Principal Financial and Accounting) Officer under Rule 13a-14(a)/15d-14(a)
(32)(i)	Certification of Chief Executive Officer Pursuant to 18 U.S.C.Section 1350
(32)(ii)	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.Section 1350

101 INS	XBRL Instance Document**
101 SCH	XBRL Schema Document**
101 CAL	XBRL Calculation Linkbase Document**
101 DEF	XBRL Definition Linkbase Document**
101 LAB	XBRL Labels Linkbase Document**
101 PRE	XBRL Presentation Linkbase Document**
*	Previously filed.
**	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.

37

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

ActiveCare, Inc.

By:   /s/ David G. Derrick

       David G. Derrick, Chief Executive Officer

       (Principal Executive Officer)

Date:  January 13, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ David G. Derrick	Director, Chairman, and	January 13, 2014
David G. Derrick	Chief Executive Officer
	(Principal Executive Officer)
/s/ James G. Carter
James G. Carter	Director	January 13, 2014
/s/ Robert J. Welgos		January 13, 2014
Robert J. Welgos	Director
/s/ William K. Martin		January 13, 2014
William K. Martin	Director
/s/ Jack J. Johnson
Jack J. Johnson	Director	January 13, 2014
/s/ Michael G. Acton	Chief Financial Officer
Michael G. Acton	(principal financial officer)	January 13, 2014
	(principal accounting officer)

38

ACTIVECARE, INC. and Subsidiaries

Consolidated Financial Statements

As of September 30, 2013 and 2012 and for the Years then Ended

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of September 30, 2013 and 2012	F-3
Consolidated Statements of Operations for the Years Ended September 30, 2013 and 2012	F-5
Consolidated Statements of Stockholders’ Deficit for the Years Ended September 30, 2013 and 2012	F-6
Consolidated Statements of Cash Flows for the Years Ended September 30, 2013 and 2012	F-8
Notes to Consolidated Financial Statements	F-10

F - 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of ActiveCare, Inc.

We have audited the accompanying consolidated balance sheets of ActiveCare, Inc. and subsidiaries (collectively, the Company) as of September 30, 2013 and 2012, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ActiveCare, Inc. and subsidiaries as of September 30, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has incurred recurring losses, has negative cash flows from operating activities, has negative working capital, and has negative total equity.  These conditions, among others, raise substantial doubt about its ability to continue as a going concern.  Management’s plans regarding these matters are also discussed in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Tanner LLC

Salt Lake City, Utah

January 13, 2014

F - 2

ActiveCare, Inc. and Subsidiaries
Consolidated Balance Sheets
As of September 30, 2013 and 2012
	2013		2012
Assets
Current assets:
Cash	$	223,835	$	529,839
Accounts receivable, net		7,345,912		644,974
Inventory		1,249,220		290,768
Prepaid expenses and other		38,998		7,277
Total current assets		8,857,965		1,472,858
Customer contracts, net of accumulated amortization of $935,361 and $102,330, respectively		1,434,521		2,267,552
Goodwill		825,894		825,894
Patents, net of accumulated amortization of $355,458 and $228,587, respectively		566,920		693,790
Equipment leased to customers, net		273,630		312,993
Property and equipment, net		296,730		266,078
Deposits and other assets		106,950		24,634
Domain name, net of accumulated amortization of $2,860 and $2,145,respectively		11,440		12,155
Total assets	$	12,374,050	$	5,875,954

See accompanying notes to consolidated financial statements.

F - 3

Consolidated Balance Sheets
As of September 30, 2013 and 2012
(Continued)
	2013			2012
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	6,621,234		$	1,132,611
Accounts payable, related-party		251,386			150,395
Accrued expenses		1,253,616			2,104,623
Derivatives liability		795,151			4,015,855
Current portion of notes payable		1,278,585			2,569,221
Current portion of notes payable, related-party		1,892,415			1,563,923
Deferred revenue		13,585			61,608
Dividends payable		3,471			18,322
Total current liabilities		12,109,443			11,616,558
Notes payable, net of current portion		1,055,918			1,804,929
Notes payable, related-party, net of current portion		-			169,857
Total long-term liabilities		1,055,918			1,974,786
Total liabilities		13,165,361			13,591,344
Stockholders’ deficit:
Preferred stock, $.00001 par value: 10,000,000 shares authorized; 480,000 and 480,000 shares of Series C; 938,218 and 386,103 shares of Series D; and 61,723 and 0 shares of Series E, outstanding, respectively		15			9
Common stock, $.00001 par value: 50,000,000 shares authorized; 21,775,303 and 4,636,977 shares outstanding,  respectively		220			46
Additional paid-in capital, common and preferred)		62,519,542			29,643,769
Accumulated deficit		(63,311,088	)		(37,359,214	)
Total stockholders’ deficit		(791,311	)		(7,715,390	)
Total liabilities and stockholders’ deficit	$	12,374,050		$	5,875,954

See accompanying notes to financial statements.

F - 4

ActiveCare, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Fiscal Years Ended September 30, 2013 and 2012
	2013			2012
Revenues:
Chronic illness monitoring	$	9,738,988		$	706,888
CareServices		1,660,544			352,223
Total revenues		11,399,532			1,059,111
Cost of revenues:
Chronic illness monitoring		7,309,999			536,790
CareServices		2,325,226			736,520
Total cost of revenues		9,635,225			1,273,310
Gross profit (deficit)		1,764,307			(214,199	)
Operating expenses:
Selling, general and administrative (including $2,159,828 and $3,927,214, respectively, of stock-based compensation)		11,039,645			8,855,724
Research and development		832,271			187,230
Total operating expenses		11,871,916			9,042,954
Loss from operations		(10,107,609	)		(9,257,153	)
Other income (expense):
Loss on derivatives liability		(333,406	)		(2,104,389	)
Loss on induced conversion of debt and sale of common stock		(9,355,587	)		-
Interest expense, net		(5,583,932	)		(858,224	)
Loss on disposal of property and equipment		(200,149	)		-
Other expense		(45,011	)		-
Total other income (expense)		(15,518,085	)		(2,962,613	)
Net loss from continuing operations		(25,625,694	)		(12,219,766	)
Loss from discontinued operations		(5,312	)		(145,990	)
Net loss		(25,631,006	)		(12,365,756	)
Dividends on preferred stock		(320,868	)		(57,183	)
Net loss attributable to common stockholders	$	(25,951,874	)	$	(12,422,939	)
Net loss per common share - basic and diluted
Continuing operations	$	(3.52	)	$	(2.89	)
Discontinued operations		(0.00	)		(0.03	)
Net loss per common share	$	(3.52	)	$	(2.92	)
Weighted average common shares outstanding – basic and diluted		7,369,000			4,251,500

See accompanying notes to financial statements.

F - 5

ActiveCare, Inc.

Consolidated Statements of Stockholders’ Deficit
For the Years Ended September 30, 2013 and 2012
	Preferred Stock
	Series C				Series D				Series E				Common Stock				Additional			Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Total
Balance, September 30, 2011		-	$	-		-	$	-		-	$	-		3,856,816	$	39	$	24,394,848		$	(24,936,275	)	$	(541,388	)
Issuance of common stock for:
Services		-		-		-		-		-		-		129,161		1		218,905			-			218,906
Accrued expenses														60,000		1		311,999			-			312,000
Loan origination fees		-		-		-		-		-		-		100,000		1		69,999			-			70,000
Debt conversion		-		-		-		-		-		-		231,000		1		92,399			-			92,400
Settlement agreement		-		-		-		-		-		-		200,000		2		499,998			-			500,000
Issuance of Series D preferred stock for:
Debt conversion		-		-		55,000		1		-		-		-		-		109,999			-			110,000
Loan origination fees		-		-		140,000		1		-		-		-		-		389,999			-			390,000
Acquisitions		-		-		180,000		2		-		-		-		-		679,998			-			680,000
Dividends		-		-		11,103		-		-		-		-		-		38,861			-			38,861
Stock-based compensation		-		-		-		-		-		-		-		-		3,708,308			-			3,708,308
Issuance of options for loan origination fees		-		-		-		-		-		-		-		-		117,551			-			117,551
Derivatives liability		-		-		-		-		-		-		-		-		(1,911,466	)		-			(1,911,466	)
Issuance of common and Series C preferred stock for patents		480,000		5		-		-		-		-		60,000		1		922,371			-			922,377
Net loss		-		-		-		-		-		-		-		-		-			(12,365,756	)		(12,365,756	)
Dividends on preferred stock		-		-		-		-		-		-		-		-		-			(57,183	)		(57,183	)
Balance, September 30, 2012		480,000	$	5		386,103	$	4		-	$	-		4,636,977	$	46	$	29,643,769		$	(37,359,214	)	$	(7,715,390	)

F - 6

ActiveCare, Inc.

Consolidated Statements of Stockholders’ Deficit (continued)

For the Years Ended September 30, 2013 and 2012

	Preferred Stock
	Series C				Series D						Series E				Common Stock				Additional			Accumulated
	Shares		Amount		Shares			Amount			Shares		Amount		Shares		Amount		Paid-in Capital			Deficit			Total
Balance, September 30, 2012		480,000	$	5		386,103		$	4			-	$	-		4,636,977	$	46	$	29,643,769		$	(37,359,214	)	$	(7,715,390	)
Issuance of common stock for:
Services		-		-		-			-			-		-		1,579,632		16		475,484			-			475,500
Accrued expenses		-		-		-			-			-		-		166,200		2		225,298			-			225,300
Loan origination fees		-		-		-			-			-		-		189,345		2		334,265			-			334,267
Debt conversion		-		-		-			-			-		-		13,439,190		136		18,466,987			-			18,467,123
Cash		-		-		-			-			-		-		1,313,334		13		1,838,820			-			1,838,833
Dividends		-		-		-			-			-		-		200,625		2		251,562			-			251,564
Conversion of Series D preferred stock		-		-		(50,000	)		(1	)		-		-		250,000		3		(2	)		-			-
Issuance of Series D preferred stock for:
Services		-		-		484,185			5			-		-		-		-		1,800,526			-			1,800,531
Loan origination fees		-		-		103,843			1			-		-		-		-		817,482			-			817,483
Dividends		-		-		14,087			-			-		-		-		-		66,881			-			66,881
Issuance of Series E preferred stock for debt conversions		-		-		-			-			61,723		1		-		-		614,764			-			614,765
Stock-based compensation		-		-		-			-			-		-		-		-		1,750,274			-			1,750,274
Issuance of options for:
Loan origination fees		-		-		-			-			-		-		-		-		289,732			-			289,732
Services		-		-		-			-			-		-		-		-		202,572			-			202,572
Derivatives liability		-		-		-			-			-		-		-		-		4,417,456			-			4,417,456
Beneficial conversion features on debt		-		-		-			-			-		-		-		-		1,323,672			-			1,323,672
Net loss		-		-		-			-			-		-		-		-		-			(25,631,006	)		(25,631,006	)
Dividends on preferred stock		-		-		-			-			-		-		-		-		-			(320,868	)		(320,868	)
Balance, September 30, 2013		480,000	$	5		938,218		$	9			61,723	$	1		21,775,303	$	220	$	62,519,542		$	(63,311,088	)	$	(791,311	)

See accompanying notes to financial statements.

F - 7

ActiveCare, Inc.

Consolidated Statements of Cash Flows

For the Years Ended September 30, 2013 and 2012

	2013			2012
Cash flows from operating activities:
Net loss	$	(25,631,006	)	$	(12,365,756	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,232,734			385,485
Derivatives loss		333,406			2,104,389
Stock-based compensation expense		2,159,828			3,927,214
Stock and warrants issued for services		1,286,999			-
Stock and warrants issued for interest expense		601,220			-
Amortization of debt discounts		3,097,009			418,084
Loss on induced conversion of debt and sale of common stock		9,355,587			-
Loss on disposal of property and equipment		200,149			-
Gain on sale of discontinued operations		(55,096	)		-
Settlement agreement		-			500,000
Changes in operating assets and liabilities:
Accounts receivable		(6,783,896	)		(527,954	)
Inventory		(1,011,952	)		(174,758	)
Prepaid expenses and other		(16,822	)		18,101
Accounts payable		5,787,603			676,766
Accrued expenses		629,879			2,063,859
Deferred revenue		(48,023	)		26,101
Deposits and other assets		(82,316	)		-
Net cash used in operating activities		(8,944,697	)		(2,948,469	)
Cash flows from investing activities:
Purchases of property and equipment		(249,771	)		(47,826	)
Purchases of equipment leased to customers		(235,917	)		-
Proceeds from sale of discontinued operations		184,318			-
Proceeds from sale of equipment		4,900			-
Net cash acquired from Green Wire		-			12,215
Acquisition of 4G Biometrics, LLC		-			(350,000	)
Net cash used in investing activities		(296,470	)		(385,611	)
Cash flows from financing activities:
Principal payments on related-party notes payable		(198,606	)		(165,325	)
Proceeds from related-party notes payable, net		5,720,799			2,190,000
Proceeds from  notes payable, net		3,790,496			1,746,113
Principal payments on notes payable		(1,341,755	)		(85,000	)
Proceeds from the sale of common stock, net		981,500			-
Payment of dividends		(17,271	)		-
Net cash provided by financing activities		8,935,163			3,685,788
Net increase (decrease) in cash		(306,004	)		351,708
Cash, beginning of the period		529,839			178,131
Cash, end of the period	$	223,835		$	529,839

See accompanying notes to financial statements.

F - 8

ActiveCare, Inc.

Consolidated Statements of Cash Flows (continued)

For the Years Ended September 30, 2013 and 2012

	2013		2012
Supplemental Cash Flow Information:
Cash paid for interest	$	745,423	$	530,891
Non-Cash Investing and Financing Activities:
Reclassification of derivatives liability to equity	$	4,484,801	$	-
Issuance of stock for loan origination fees		2,252,376		460,000
Conversion of notes payable to debentures		1,920,797		-
Issuance of derivatives		1,410,147		1,911,466
Issuance of common and prefered stock for settlement of liabilities		991,750		312,000
Dividends on preferred stock		320,868		57,183
Issuance of stock for dividends		318,445		38,861
Issuance of stock for prepaid expenses		14,899		-
Issuance of common and Series C preferred stock for patents		-		922,377
Issuance of stock for debt conversion		-		202,400
Accrued interest transferred to notes payable		-		174,273
Issuance of options for loan origination fees		-		117,551

See accompanying notes to condensed consolidated financial statements

F - 9

ActiveCare, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

1.             Organization and Nature of Operations

ActiveCare, Inc. ( “ActiveCare”) was formed March 5, 1998 as a wholly owned subsidiary of SecureAlert, Inc. [OTCBB: SCRA.OB], a Utah corporation, formerly known as RemoteMDx, Inc. (“SecureAlert”).  ActiveCare was spun off from SecureAlert in February 2009 and SecureAlert retained no ownership interest in ActiveCare.  In July 2009, ActiveCare was reincorporated in Delaware.  ActiveCare and its wholly owned subsidiaries (collectively “the Company”) is a technology and service provider that provides real-time visibility to health conditions and risk, and has a unique active approach in caring for members, resulting in improved outcomes.

Going Concern

Although the Company had positive gross margin for fiscal year 2013, it has incurred negative cash flows from operating activities, recurring net losses, negative working capital, and negative total equity. 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.

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In order for the Company to remove substantial doubt about its ability to continue as a going concern, it must improve gross margins, 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 include raising additional capital by issuing equity securities and increasing the sales of the Company’s services and products. Subsequent to year end, the Company (1) completed the sale of $3,120,000 of 8% Series F variable rate convertible preferred stock (“Series F preferred stock”); (2) converted $2,301,801 of debt and accrued interest to common stock; and (3) converted $573,886 of debt and accrued interest to Series F variable rate convertible preferred stock (see Note 20). There can be no assurance that the Company will be able to raise sufficient additional capital or that revenues will increase rapidly enough to offset operating losses. If the Company is unable to increase revenues or obtain additional financing, it will be unable to continue the development of its products and may have to cease operations.

2.             Summary of Significant Accounting Policies

Principles of Accounting and Consolidation

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).  The consolidated financial statements include the accounts of ActiveCare and its wholly owned subsidiaries.  All significant intercompany balances and transactions have been eliminated.

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 disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

In May 2013, the Company effected a 10-for-1 reverse common stock split.  The consolidated financial statements and notes for all periods presented have been retroactively adjusted to reflect the reverse common stock split.

Discontinued Operations

In June 2013, the Company sold the net assets and operations of its reagents business segment to a third party for $184,318 in cash.  During fiscal years 2013 and 2012, the Company recognized a loss from discontinued operations of $5,312 and $145,990, respectively.

F - 10

Fair Value of Financial Instruments

The carrying values of cash, accounts receivable and accounts payable approximate their respective 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. Based on current market condition, the Company estimates the fair values of its long-term debt obligations approximate their carrying values as of September 30, 2013.

Concentrations of Credit Risk

The Company has cash in bank accounts that, at times, may exceed federally insured limits.  The Company has not experienced any losses in these accounts.

In the normal course of business, the Company provides credit terms to its customers and requires no collateral.  The Company performs ongoing credit evaluations of its customers’ financial condition.  The Company maintains an allowance for doubtful accounts receivable based upon management’s specific review and assessment of each account at the period end.

During fiscal year 2013, the Company had revenues from three significant Chronic Illness Monitoring customers, which represented 72% of total revenue.  As of September 30, 2013, accounts receivable from significant customers represented 92% of total accounts receivable.  During fiscal year 2012, the Company had revenues from one significant Chronic Illness Monitoring customer, which represented 28% of total revenues.  As of September 30, 2012, accounts receivable from the significant customer represented 51% of total accounts receivable.

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 $76,544 and $20,195 as of September 30, 2013 and 2012, respectively.

F - 11

Inventories

Inventories are recorded at the lower of cost or market, cost being determined using the first-in, first-out (“FIFO”) method. Chronic Illness Monitoring inventory consists of diabetic supplies. The Company writes down inventory for obsolescence and excessive levels to estimated net realizable value. Due to competitive pressures and technological innovation, it is possible that estimates of net realizable values could change in the near term. Inventories consist of the following as of September 30:

	2013			2012
Revenues	$	351,645		$	467,259
Cost of revenues		(300,396	)		(392,049	)
Gross profit		51,249			75,210
Selling, general and administrative expenses		(111,657	)		(221,200	)
Loss from discontinued operations		(60,408	)		(145,990	)
Gain on sale discontinued operations		55,096			-
Net loss from discontinued operations	$	(5,312	)	$	(145,990	)

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 the results of operations.

Equipment Leased to Customers

Leased equipment is stated at cost less accumulated depreciation and amortization.  The Company amortizes the cost of leased equipment on a straight-line basis over 36 months, which is the estimated useful life of the equipment.  Amortization of leased equipment is recorded as cost of revenues.

Goodwill

Goodwill is not amortized but is reviewed for potential impairment at least annually.  The identification and measurement of goodwill impairment involves the estimation of the fair value of the Company’s reporting units.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment and incorporate management assumptions about expected future cash flows.  Future cash flows can be affected by changes in Company performance, industry or market conditions, or overall economic trends.  Management determined goodwill that was not impaired during fiscal years 2013 or 2012.

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 2 to 20 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.  Management determined that long-lived assets were not impaired during fiscal years 2013 or 2012.

Revenue Recognition

The Company’s revenue has historically been from three sources: (i) sales from Chronic Illness Monitoring services and supplies; (ii) sales from CareServices; and (iii) sales of medical diagnostic stains from the reagents segment, which was sold during fiscal year 2013 and reported as discontinued operations.

F - 12

Chronic Illness Monitoring

The Company began chronic illness monitoring sales as a result of its acquisition of 4G Biometrics, LLC in the quarter ended March 31, 2012 (see Note 4).  The Company recognizes Chronic Illness Monitoring revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured.

Shipping and handling billed to customers are included in revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.  Sales of Chronic Illness Monitoring products and services do not contain multiple deliverables.

The Company enters into agreements with insurance companies, disease management companies, and self-insured companies (collectively, customers) to lower medical expenses by distributing diabetic testing supplies to their customers or employees (members) and monitoring their test results.  Customers are obligated to pay for the supplies at the time of shipment and cash is due from these customers as the product is deployed to the members.  The terms of these contracts are generally one year and, unless terminated by either party, will automatically renew for another year.  Collection terms are net 30-days after claims are submitted.

Revenue is recognized on the date of sale because the following exist:

· The price to the contracted customer is fixed or determinable at the date of sale.

· The customer has paid or is obligated to pay the Company within terms.

· The customer’s obligation to the Company is not changed in the event of theft or physical destruction or damage of the product.

· Once the product is shipped, there is no right of return.

CareServices

The “CareServices” segment sells devices to distributors as well as provides monitoring services to end users on a contractual basis.  The Company typically enters into contracts on a month-to-month basis with customers (members) that use the Company’s CareServices.  However, either party may cancel these contracts at any time with 30-days notice.  Under the Company’s standard contract, the device becomes billable on the date the member orders the product, and remains billable until the device is returned to the Company.  The Company recognizes revenue on devices at the end of each month that CareServices have been provided.  In those circumstances in which the Company receives payment in advance, the Company records these payments as deferred revenue.

The Company recognizes CareServices revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured.  Shipping and handling fees billed to the customer are included in revenues.  The related freight costs and supplies directly associated with shipping products to members are included as a component of cost of revenues.  All CareServices sales are made with net 30-day payment terms.

Revenue is recognized on the date of sale because the following exist:

· The price to the customer is fixed or determinable at the date of sale.

· The customer has paid or is obligated to pay within terms, and the obligation is not contingent on resale of the product.

· The customer’s obligation is not changed in the event of theft or physical destruction or damage of the product.

· The customer acquiring the product for resale has economic substance apart from the Company.

· The Company does not have significant obligations for future performance to bring about resale of the product by the customer.

· The amount of future returns are estimatable and are not significant.

The vast majority of CareServices revenues are for services.  Because equipment sales are not material, the Company presents services and equipment sales together in the accompanying financial statements.

F - 13

The Company’s distributors are not required to maintain specified amounts of product on hand, and distributors are not required to make minimum purchases to maintain distributor status.  Distributors have no stock rotation rights or additional rights of return.  Revenues from products sold with long-term service contracts are recognized ratably over the expected life of the contract.  Revenues are recorded net of estimated returns and discounts.

Reagents

Prior to the sale of the reagent segment, the Company recognized reagents revenues when persuasive evidence of an arrangement with the customer existed, title passed to the customer, prices were fixed or determinable, and collection was reasonably assured.  Prior to the sale of the reagent segment, shipping and handling fees billed to customers were included in revenues and the related freight costs and supplies directly associated with shipping products to customers were included as a component of cost of revenues.

Research and Development Costs

All expenditures for research and development are charged to expense as incurred. Research and development expenses for fiscal years 2013 and 2012 were $832,271 and $187,230, respectively. The expenditures for fiscal year 2013 were primarily for the development of the Chronic Illness Monitoring operating system. The expenditures for fiscal year 2012 were for software development efforts for the chronic illness market.

Advertising Costs

The Company expenses advertising costs as incurred.  Advertising expenses for fiscal years 2013 and 2012 were $59,330 and $176,300, respectively.  Advertising expenses primarily relate to the Company’s Chronic Illness Monitoring segment.

Income Taxes

The Company recognizes deferred income tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or income tax returns. Deferred income tax assets or liabilities are determined based upon the difference between the financial reporting bases and tax reporting bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized.  Deferred income tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary.  As of September 30, 2013, management has determined to provide a 100% allowance against deferred income tax assets as it is more likely than not these assets will not be realized.  Interest and penalties related to income tax liabilities, when incurred, are classified in interest expense and income tax provision, respectively.

Warrant Exercises

The Company issues common shares in connection with warrant exercises when it has received verification that the proceeds have been deposited and when it has received an exercise letter from the warrant holder.  The Company issues common shares in connection with note conversion after it verifies the outstanding note balance and the eligibility of conversion, and has received a conversion letter from the lender.

Stock-Based Compensation

The Company measures 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.

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 year.

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 common share equivalents then outstanding.  The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

F - 14

Common share equivalents consist of shares issuable upon the exercise of common stock warrants, shares issuable from restricted stock grants, shares issuable from convertible notes and convertible Series C, Series D and Series E preferred stock.  As of September 30, 2013 and 2012, there were 13,127,396 and 8,202,219 outstanding common share equivalents, respectively, that were not included in the computation of Diluted EPS as their effect would be anti-dilutive.  The common stock equivalents outstanding consist of the following as of September 30:

	2013		2012
Common stock options and warrants		3,598,554		2,386,587
Series C convertible preferred stock		480,000		480,000
Series D convertible preferred stock		4,691,090		1,830,515
Series E convertible preferred stock		601,585		-
Convertible debt		3,738,917		3,444,217
Restricted shares of common stock		17,250		60,900
Total common stock equivalents		13,127,396		8,202,219

Reclassifications

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

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and has concluded that the future adoption of any such pronouncements will not have a material impact on the Company’s financial position, results of operations, or liquidity.

3.             Discontinued Operations

In June 2013, the Company sold its assets and liabilities related to the reagents segment.  This segment was engaged in the business of manufacturing and marketing medical diagnostic stains, solutions and related equipment to hospitals and medical testing labs.  The purchaser was a former employee.  The sale consisted solely the Company's reagents business.

The Company no longer holds any ownership interest in the reagents segment and has ceased incurring costs related to its operations and development. The sale included all applicable segment assets and liabilities including, accounts receivable, inventory, accounts payable, property, equipment and leased equipment.  The purchaser also assumed the lease for general office and warehouse space.

As a result of the sale of the reagents business, the Company has reflected this segment as discontinued operations in the consolidated financial statements for fiscal years 2013 and 2012.  The following table summarizes certain operating data for discontinued operations for fiscal years 2013 and 2012:

	2013			2012
Revenues	$	351,645		$	467,259
Cost of revenues		(300,396	)		(392,049	)
Gross profit		51,249			75,210
Selling, general and administrative expenses		(111,657	)		(221,200	)
Loss from discontinued operations		(60,408	)		(145,990	)
Gain on sale discontinued operations		55,096			-
Net loss from discontinued operations	$	(5,312	)	$	(145,990	)

F - 15

4.             Acquisitions

4G Biometrics, LLC

On March 8, 2012, the Company acquired 4G Biometrics, LLC, a Texas limited liability company (“4G”).  Pursuant to the acquisition agreement, the Company acquired 100 percent of the member interests of 4G and 4G is operated as a wholly owned subsidiary of the Company.  The consideration for the member interests of 4G was comprised as follows:

· $350,000 in cash;

· The assumption of $50,000 of accounts payable and accrued liabilities;

· 160,000 shares of Series D convertible preferred stock;

· Options for the purchase of up to 433,333 shares of common stock of the Company at $1.00 per share to each of the three sellers with vesting as follows:

o Options for 43,333 shares vest when 4G has 9,300 members

o Options for another 43,333 shares vest when an additional 5,000 4G members are added, or a total of 14,300 members;

o Options for another 43,333 shares vest when an additional 5,000 4G members are added, or a total of 19,300 members;

o Options for another 43,333 shares vest when an additional 5,000 4G members are added, or a total of 24,300 members; and

o so forth until fully vested.

As of September 30, 2013, options to purchase 260,000 shares of common stock have vested.

Three of the 4G key operational managers are under two-year written employment agreements with the Company.

Under the purchase method of accounting, the purchase price was allocated to 4G’s assets and assumed liabilities based on their estimated fair values as of the closing date of the acquisition.  The excess of the purchase price over the fair values of the net assets acquired was recorded as goodwill.

The purchase price for 4G reflects total consideration paid of $1,040,000, of which $825,894 was allocated to goodwill and $214,106 was allocated to customer contracts.

GWire

During fiscal year 2012, the Company established GWire Corporation (“GWire”) as a subsidiary.  Effective September 1, 2012, GWire acquired the assets and assumed certain liabilities of Green Wire, LLC, Green Wire Outsourcing, Inc., Orbit Medical Response, LLC, and Rapid Medical Response, LLC (collectively, “Green Wire”).  The Company entered into employment agreements with two of Green Wire’s operating managers on November 1, 2012. These two individuals were granted 27% ownership in GWire and ActiveCare retained the remaining 73%.  The purchase consideration for Green Wire consisted of the following:

· $2,236,737 in the form of a note payable with a 36-month initial term (including imputed interest at 12%); and

· 20,000 shares of ActiveCare’s Series D convertible preferred stock, valued at $40,000.

Under the purchase method of accounting, the purchase price for Green Wire was allocated to the assets purchased and liabilities assumed based on their estimated fair values as of the closing date of the acquisition.

The purchase price for Green Wire reflects total consideration paid of $2,276,737, which has been allocated to $12,215 of cash, $13,976 of accounts receivable, $92,022 of property and equipment, $16,964 of deposits and other assets, $229,249 of leased equipment, $2,155,776 of customer contracts, $154,206 of accounts payable, $55,117 of accrued expenses and $34,142 of deferred revenue.

F - 16

During fiscal year 2013, the two operating managers converted their 27% ownership in GWire and 425,000 of related options into 425,000 shares of the Company’s common stock.  As a result, the Company owns 100% of GWire as of September 30, 2013.

5.             Property and Equipment

Property and equipment consisted of the following as of September 30:

	2013			2012
Equipment	$	255,339		$	374,229
Leasehold improvements		145,147			402,016
Software		87,361			65,111
Furniture		32,855			50,123
Total gross property and equipment		520,702			891,479
Accumulated depreciation and amortization		(223,972	)		(625,401	)
Property and equipment, net	$	296,730		$	266,078

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 fiscal years 2013 and 2012, the Company recorded a loss on the disposal of assets of $200,149 and $0, respectively, and disposed of $25,832 of assets related to the sale of the Reagents segment during fiscal year 2013. Depreciation expense for fiscal years 2013 and 2012 was $97,068 and $64,632, respectively.

6.             Patent License Agreement

During fiscal year 2009, the Company licensed the use of certain patents from a third party.  Under the license agreement, the Company was required to pay $300,000 plus a 5% royalty on the net sales of all licensed products. As of September 30, 2009, the Company had capitalized the initial license fee as a long-term asset and had recorded a corresponding current liability as the fee was not yet paid.

During fiscal year 2012, the Company agreed to purchase the related patents and settle amounts owed under the license agreement by issuing 600,000 shares of common stock and 480,000 shares of Series C preferred stock.  The patents were valued at $922,378, based on a valuation performed by an independent valuation expert.  The value of the common stock issued was $240,000, based on the market price of the common stock on the date of issuance. The implied value of the Series C was $682,378, which was based on the difference between the value of the patents and the common stock issued in settlement of the existing liability.

The Company is amortizing the patents over their remaining useful lives (through 2018).  Amortization expense for fiscal years 2013 and 2012 was $126,870 and $147,277, respectively.  The Company’s future patent amortization as of September 30, 2013, is as follows:

Years Ending September 30,
2014	$	126,870
2015		126,870
2016		126,870
2017		126,870
2018		59,440
	$	566,920

F - 17

7.             Customer Contracts

During the fiscal year ended 2012, the Company recorded customer contracts of $2,369,882 acquired in its purchase of 4G and GWire.  The Company is amortizing the customer contracts over their estimated useful lives (through 2015).  Amortization expense for fiscal years 2013 and 2012 was $833,032 and $102,329, respectively.  The Company’s future customer contract amortization as of September 30, 2013, is as follows:

Years Ending September 30,
2014	$	775,812
2015		658,709
	$	1,434,521

8.             Equipment Leased to Customers

Equipment leased to customers consisted of the following as of September 30:

	2013			2012
Leased equipment	$	389,492		$	457,898
Accumulated depreciation		(115,862	)		(144,905	)
Leased equipment, net	$	273,630		$	312,993

The Company leases monitoring equipment to customers for CareServices.  The leased equipment is depreciated using the straight-line method over the 3-year estimated useful lives of the related equipment, regardless of whether the equipment is leased to a customer or remaining in stock.  Leased equipment depreciation expense for fiscal years 2013 and 2012 was $175,049 and $70,531, respectively.  The depreciation expense is recorded in cost of revenues for CareServices. Customers have the right to cancel the service agreements at any time.  During fiscal years 2013 and 2012, the Company recorded a loss on the disposal of leased equipment of $75,124 and $0, respectively.

9.             Notes Payable

The Company had the following notes payable outstanding as of September 30:

	2013		2012
Note payable to the former owners of Green Wire, secured by customer contracts, imputed interest rate of 12%, with monthly installments over a 38-month term.  In March 2013, the Company issued 15,000 shares of common stock to extend two past due payments without penalty and the grant date fair value was $24,000, which will be amortized over the remaining life of the note.	$	1,766,971	$	2,236,737
Notes payable with interest at 12%, secured by the Company's assets, due August 2014 and convertible into the shares of common stock at $0.75 per share.  The notes required $51,250 in due diligence and legal fees.  The Company issued warrants to purchase 36,667 shares of common stock as due diligence fees with a grant date fair value of $51,452.  The Company issued 25,000 shares of common stock with a grant date fair value of $31,250 to a related party as consideration for signing a personal guarantee.  The notes and accrued interest were converted to Series F preferred stock subsequent to September 30, 2013 (see note 20).		550,000		-
Unsecured note with interest at 12%, due March 2013.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).		250,000		250,000

F - 18

	2013			2012
Unsecured notes with interest at 15% (18% after due date), due March and April 2013, respectively.  The Company issued 20,000 shares of Series D preferred stock as loan origination fees with a grant date fair value of  $195,000.   Principal of $50,000 was converted to common stock subsequent to September 30, 2013 (see note 20).	$	185,476		$	-
Series A debenture loans payable, secured by customer contracts and payable in 36 monthly installments, original due dates between September and April 2016. The loans bear interest at 12% and are convertible into common stock after 180 days.  After payment of principal and interest, the holders of the Series A and Series B debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out each lender's royalty by paying the respective lender $20,000 for every $25,000 loaned.  The note included a beneficial conversion feature valued at $901,000 at inception, which the Company is amortizing over the life of the loan.  The feature had an unamortized value of $47,934 as of September 30, 2013.  The majority of loans were converted during fiscal year 2013.   The remaining balance was converted to Series E preferred stock subsequent to September 30, 2013 (see note 20).		85,719			300,000
Unsecured note with interest at 15%, due March 2013, currently in default. Note included a $25,000 cash and 100,000 shares of common stock as loan origination fees with a grant date fair value of $70,000.   The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).		25,000			275,000
Unsecured note with interest at 15% (18% after due date), due November 2012.  The Company issued 60,000 shares of Series D stock as loan origination fees with a grant date fair value of $150,000.  The note was guaranteed by the Company’s Chief Executive Officer.		-			1,500,000
Total before discount and current portion		2,863,166			4,561,737
Less discount		(528,663	)		(187,587	)
Total notes payable		2,334,503			4,374,150
Less current portion		(1,278,585	)		(2,569,221	)
Total notes payable, net of current portion	$	1,055,918		$	1,804,929

Scheduled principal payments on notes payable are as follows:

Years Ending September 30,
2014	$	1,768,820
2015		854,522
2016		239,824
	$	2,863,166

F - 19

10.           Related-Party Notes Payable

The Company had the following related-party notes payable outstanding as of September 30:

	2013		2012
Unsecured notes payable to an entity controlled by an officer of the Company with interest at 15% (18% in the event of default), due September 30, 2013.  The Company issued 60,000 shares of common stock as loan origination fees with a grant date fair value of $93,000.  The notes and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	$	600,000	$	-
Unsecured note payable to an entity controlled by an officer of the Company,  with interest at 3% (18% in the event of default), due July 2013.  In July the lender agreed to extend the maturity date to September 30, 2013 with an interest at 12% (18% in the event of default).  The Company issued 30,000 shares of common stock with grant date fair value of $38,100 as loan origination fees.  In the event of default, the note is convertible into share of common stock at $0.75 per share. The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).		300,000		-
Unsecured note payable to an entity controlled by an officer of the Company,  interest at 12% (18% in the event of default), due September 30, 2013.  The Company issued 30,000 shares of common stock with a grant date fair value of $37,500 as loan origination fees.  In the event of default, the note is convertible into shares of common stock at $0.75 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).		300,000		-
Unsecured notes payable to an entity controlled by an officer of the Company, interest at 12% (18% in the event of default), due April 2013.  In the event of default, the note is convertible into shares of common stock at $0.40 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).		200,000		-
Unsecured note payable to a lender under the control of the Company’s CEO, interest at 12%, due upon demand. The note is convertible into shares of common stock at $0.75 per share.  The Company recognized $148,750 in connection with the beneficial conversion feature.  The Company issued 17,500 shares of common stock with a grant date fair value of $26,250 as loan origination fees.  Subsequent to September 30, 2013 $160,000 of the note was converted to common stock (see note 20).		175,000		-
Unsecured note payable with zero interest to an entity controlled by an officer of the Company.  The note was repaid in full subsequent to September 30, 2013.		150,000		-

F - 20

	2013		2012
Unsecured note payable to an entity controlled by an officer of the Company, with interest at 12%, due August 2012.   During fiscal year 2013, the lender agreed to extend the maturity date to June 30, 2013 with an interest at 18% and 5,600 shares of Series D with a grant date fair value of $56,252 paid as a loan origination fee.  The note is currently in default.  The note also included $7,500 of loan origination fees added to the principal. In the event of default, the note is convertible into shares common stock at $0.40 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	$	82,500	$	543,278
Unsecured note payable to an officer of the Company with interest at 15%, due June 2012, currently in default.  The note includes $3,000 of loan origination fees added to the principal and is convertible into common stock at $0.50 per share.		33,000		33,000
Unsecured note payable to an officer of the Company with interest at 12%, due September 30, 2013, currently in default.  The loan is convertible into the Company's common stock at a rate of $0.75 per share.  The Company recognized $22,820 in connection with the beneficial conversion feature.		26,721		-
Unsecured note payable to an officer of the Company with interest at 12%, due upon demand.		13,644		-
Unsecured notes payable with zero interest to an individual related to an officer of the Company.  The loan was repaid in full subsequent to September 30, 2013.		10,000		-
Series B unsecured debenture loans from entities controlled by an officer of the Company, including $68,914 in loan origination fees added to the principal of the loans, payable in 36 monthly installments, maturing December 2015 and January 2016.  Of the debenture, $554,556 was issued to settle a related-party note payable with a total outstanding balance of $460,778 and $43,364 of related accrued interest.  Of the loan, $35,000 was issued to settle an accrued service fee.  The loans bear interest at 12% and are convertible into common stock after 180 days. After payment of principal and interest, the holders of the Series B and Series A debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out the royalty by paying the lender $22,000 for every $25,000 loaned.  During the fiscal year ended September 30, 2013, the Company issued 34,400 shares of Series D with a fair market value of $343,748 at date of grant as additional loan origination fees, and paid $30,102 of the loan principal.  The Company is late on certain monthly payments.  The notes include beneficial conversion features valued at $167,000 at inception, which the Company is amortizing over the life of the loan.  The feature had an unamortized value of $3,348 as of September 30, 2013.  During fiscal year  2013, $722,684 of  outstanding principal and $49,895 of accrued interest were converted into 1,030,107 common shares at a rate of $0.75 per share.  The Company recorded $535,656 of expense associated with the induced conversion of these debenture loans. The majority of loans were converted during fiscal year 2013.  The remaining note of $5,270 and accrued interest were converted to common stock subsequent to September 30, 2013 (see note 20)		5,270		-

F - 21

	2013		2012
Unsecured notes payable to a lender under the control of the Company’s CEO with a line of credit borrowing capacity of $2,000,000, interest at 12%, due July 2013. The notes were convertible into shares of common stock at $5.00 per share.  In connection with the notes payable, the Company issued 80,000 shares of Series D preferred stock (valued at $240,000).  The Company granted warrants to purchase 341,000 shares of common stock as a loan origination fee. These warrants vested immediately and are exercisable at $4.40 per share through November 3, 2016. The fair value of the warrants was $107,130, and was measured using a binomial valuation model with the following assumptions: exercise price $4.40; risk-free interest rate of .39%; expected life of 2.5 years; expected dividends of zero; a volatility factor of 134.57%; and market price on date of grant of $4.40.  During fiscal year 2012, the Company re-priced the exercise price of the warrants from $4.40 to $1.00 per share.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the lender in satisfaction of the outstanding balance of $620,687 plus $21,585 of accrued interest.  Upon the conversion of the note, the Company immediately recognized the unamortized debt discount of $209,143.	$	-	$	620,687
Note payable to an entity controlled by an officer of the Company, interest at 12%, due December 2012.  This note was secured by real estate.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $300,000 plus $14,992 of accrued interest.		-		300,000
Series A debenture loans from a former CEO and Chairman of the Company, secured by customer contracts, payable in 36 monthly installments, maturing September and December 2015.  The loans bear interest at 12% and are convertible into common stock after 180 days. After payment of principal and interest, the holders of the Series B and Series A debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out each royalty by paying the lender $20,000 for every $25,000 loaned.  During fiscal year 2013, the Company paid $41,682 of the loan principal.  During fiscal year 2013, $342,912 of principal and interest were converted into 457,216 common shares.  The Company recorded $297,191 of expense associated with the induced conversion of these notes.		-		244,196
Unsecured note payable to an entity controlled by an officer of the Company, including a $7,500 loan origination fee, interest at 12%, due August 2012.  The note was convertible into common stock at 50% of fair market value or $0.40 per share, whichever is less.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $82,500 plus $3,716 of accrued interest.		-		82,500
Unsecured note payable to an entity controlled by an officer of the Company, including a $7,500 loan origination fee, interest at 12%, due September 2012. The note was convertible into common stock at $0.40 per share or 50% of market value, whichever was less.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $82,500 plus $3,173 of accrued interest.		-		82,500

F - 22

	2013			2012
Notes payable to an entity controlled by an officer of the Company, including a $26,000 loan origination fee which was convertible into Series D preferred stock at any time at $2.00 per share, interest at 15%, due December 2012.  This note was secured by real estate.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $51,000 plus $3,186 of accrued interest.  Upon the conversion of the note, the Company immediately recognized the unamortized debt discount of $14,238.	$	-		$	51,000
Total before discount and current portion		1,896,135			1,957,161
Less discount		(3,720	)		(223,381	)
Total notes payable, related-party		1,892,415			1,733,780
Less current portion		(1,892,415	)		(1,563,923	)
Total  notes payable, related-party, net of current portion	$	-		$	169,857

The total principal on related-party notes payable of $1,892,415 is schedule to be repaid during the fiscal year ending September 30, 2014.

11.           Loss on Induced Conversion of Debt and Sale of Common Stock

The Company offered an induced conversion rate to all debt holders at a rate of $0.75 per share of common stock, which was below the market price of the stock.  Debt and accrued interest of approximately $10,004,000 was converted to shares of common stock. The Company also offered the private placement of common stock to existing investors at $0.75 per share, which was below the market price.  The difference between the offered price and the market price of all common stock issued was approximately $9,356,000 and is recorded as a loss on induced conversion of debt and sale of common stock.

12.           Fair Value Measurements

The Company measured 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	The Company’s embedded derivative liabilities are measured on a recurring basis using Level 2 inputs.
Level 3	The Company’s goodwill is measured using Level 3 inputs.

The Company’s embedded derivative liabilities are re-measured to fair value as of each reporting date until the contingency is resolved.  See Note 13 below for more information about these liabilities and the inputs used for calculating fair value.

13.           Derivative Liabilities

As described in Notes 9 and 10, the Company has issued convertible notes payable with variable conversion options.  The Company has determined the conversion options of certain notes payable are subject to derivative liability treatment and are required to be accounted for at fair value.  The derivative liabilities for the fiscal years ended September 30, 2013 and 2012 totaled $795,151 and $4,015,855, respectively.  The derivative liability as of September 30, 2012 was eliminated during fiscal year 2013 as a result of the 10-for-1 reverse common stock split, this decreased the number of outstanding shares and convertible shares of “freestanding instruments”, such that the Company can reserve sufficient shares to settle “freestanding instruments.”

F - 23

During fiscal year 2013, the Company estimated the fair value of the embedded derivatives using a binomial option-pricing model with the following assumptions: conversion price of $0.75 per share according to the agreements; risk free interest rate of 0.10% to 0.11%; expected life of 0.83 to 1.00 years; expected dividends of zero; a volatility factor of 200% to 229%; and a stock price of $1.45.  The expected lives of the instruments are equal to the average term of the conversion option.  The expected volatility is based on the historical price volatility of the Company’s common stock.  The risk-free interest rate represents the U.S. 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 loss on derivative liabilities for the fiscal years 2013 and 2012 was $333,406 and $2,104,389, respectively.

14.          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 C Convertible Preferred Stock

On October 4, 2011, the Company issued 480,000 shares of Series C convertible preferred stock (“Series C preferred stock”) in connection with the patent license agreement settlement (see Note 6).  The par value of the Series C is $0.00001 per share.  The Series C preferred stock is non-voting stock.  Each share of Series C preferred stock may be converted into one share of common stock, provided, however, that a holder may not convert shares of Series C preferred stock which, upon conversion, would result in the holder becoming the beneficial owner of more than 4.99% of the issued and outstanding common stock of the Company.

During fiscal year 2012, the Company amended the rights and preferences of the Series C preferred stock as follows:

· Required payment of dividends at a rate of 8% per annum in either cash or common stock at the Company’s discretion.  If paid in common stock, the price of the common stock is the average closing price of the last 10 trading days of each quarter; and

· Permitted conversion of the Series C preferred stock into common stock at any time after June 30, 2012.

During fiscal year 2013, the Company issued 9,062 shares of Series D preferred stock for accrued dividends of $53,992 associated with Series C preferred stock.  During fiscal year 2012, the Company issued 10,218 shares of Series D preferred stock for accrued dividends of $35,763 associated with Series C preferred stock.

Series D Convertible Preferred Stock

On October 4, 2011, the Board of Directors designated 1,000,000 shares of preferred stock as Series D convertible preferred stock (“Series D preferred stock”).  As originally designated, the Series D preferred stock vested immediately upon issuance, and each share of Series D preferred stock was convertible into one share of common stock.  The original designation also provided that the Series D preferred stock was non-voting and would not receive dividends.  In addition, conversion of the Series D preferred stock was limited to not more than 4.99% of the issued and outstanding common stock.

F - 24

During fiscal year 2012, the Board of Directors approved the following amendments to the designation of the rights and preferences of the Series D preferred stock prior to the issuance of any of the shares:

· Changed the conversion ratio from  one share of common stock for one share of Series D preferred stock to  five shares of common stock for one share of Series D preferred stock;

· Added an annual dividend rate of 8%, payable in stock or cash quarterly beginning April 1, 2012;

· Changed the shares from non-voting to voting, on an as-converted basis;

· Eliminated the 4.99% conversion limitation;

· Permitted conversion of the Series D preferred stock, commencing April 1, 2012;

· Permitted the Company, at its option, to redeem the Series D preferred shares at a redemption price equal to 120% of the original purchase with 15 days notice.

During fiscal year 2013, the Company issued the following shares of Series D preferred stock:

· 103,843 shares for $817,482 in loan origination fees;

· 71,800 shares for advisory services through December 2014, the value on the date of grant was $230,800;

· 20,000 shares for consulting services through December 2013, the value on the date of grant was $60,000;

· 52,913 shares for $150,000 in previously accrued Board of Directors’ fees and $61,652 of compensation for services;

· 46,300 shares for a bonus to an officer for services, the value on the date of grant was $234,700;

· 9,062 shares for dividends on Series C preferred stock, the value on the date of grant was $53,992;

· 5,025 shares for dividends on Series D preferred stock, the value on the date of grant was $31,689;

· 126,117 shares for consulting services by an entity controlled by an officer of the Company, which were previously accrued in the amount of $564,280;

· 85,000 shares to an entity controlled by an officer of the Company for consulting services, the value on the date of grant was $455,000;

· 80,000 shares for a bonus to the CEO of the Company for signing an employment agreement with the Company, the value at the date of grant was $320,000, which cannot convert to common stock until the Company has 20,000 members;

· 2,055 shares for services with value of $14,899 on the date of grant.

During fiscal year 2013, an employee of the Company converted 50,000 shares of Series D preferred stock into 250,000 shares of common stock.  The Company also accrued $232,834 of dividends on Series D preferred stock and settled the accrued dividends by issuing 5,025 shares of Series D preferred stock and 143,465 shares of common stock during fiscal year 2013.

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 stock”).  The Series E preferred stock vests immediately upon issuance. Series E preferred stock is convertible into common stock at $1.00 per share, the conversion price is adjustable if there are distributions of common stock or stock split by the Company.  The designation also provides that the Series E preferred stock would be non-voting and would receive a monthly dividend of 3.322% for 25 to 32 months.  In addition, the convertibility and the redemption price of the Series E preferred stock is gradually reduced by dividend payments over 25 to 32 months.  After the dividend payment term, the redemption price of Series E preferred stock is $0 and the Series E preferred stock has no convertibility to common stock.

During fiscal year 2013, $614,765 of debenture loans and accrued interests converted into 61,723 shares of Series E preferred stock.  During fiscal year 2013, the Company paid dividends of $17,271 to Series E shareholders.  As of September 30, 2013, the redemption price for the Series E preferred stock was $601,585.

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 C, Series D, and Series E preferred stock 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 respectively entitled.

F - 25

15.          Common Stock

During fiscal year 2013, the Company issued the following shares of common stock:

· 327,382 shares valued at $458,929 as compensation for services to six independent consultants;

· 220,000 shares valued at $318,000 as compensation for two key employees as an incentive to work for the Company.  The stock vests according to the terms of the employment agreements;

· 27,650 shares for employee bonuses valued at the date of grant at $39,825;

· 350,000 shares valued at $350,000 for option exercises from employee bonuses granted by the Company;

· 150,000 shares valued at $187,500 for an employment contract extension with a key employee;

· 25,000 shares valued at $31,750 to medical advisory board members for services through September 2014;

· 25,000 shares valued at $31,750 for services provided by a board member;

· 141,987 shares as loan origination fees at a value of $387,849;

· 4,758 shares valued at $7,137 for the extension of related-party payables;

· 40,000 shares valued at $61,500 for the extension of third-party notes payable;

· 13,439,190 shares for the conversion of outstanding debt in the amount of $18,467,123;

· 2,600 shares valued at $3,900 as part of the issuance of $26,000 of new debt to a related party;

· 166,200 shares valued at $225,300 to settle an accrued liability of $126,200;

· 250,000 shares for the conversion of 50,000 shares of Series D preferred stock;

· 425,000 shares for the exercise of options held by two key managers of GWire;

· 200,625 shares valued at $232,765 as dividends accrued for Series C and Series D preferred stock holders;

· 1,313,334 shares valued at $1,842,334 for cash of $985,000;

· 29,600 shares to employees in accordance with a restricted stock agreement:

During fiscal year 2012, the Company issued the following shares of common stock:

· 60,000 shares for settlement of a patent license agreement, with value on the date of grant of $240,000;

· 129,161 shares for consulting services, with value on the date of grant of $218,906;

· 60,000 shares for settlement of $312,000 of accrued liabilities;

· 200,000 shares in connection with a settlement agreement.  During fiscal year 2010, the Company granted Class D warrants for the purchase of 158,416 shares of common stock and Class E warrants for the purchase of 41,584 shares of common stock.  During fiscal year 2012, the Company entered into a settlement agreement with the holders of these warrants to resolve claims of the holders regarding their conversion of shares of preferred stock.  Under the settlement agreement, the holders exchanged the Class D and Class E warrants for 200,000 shares of common stock and the warrants were cancelled.  The Company recognized $500,000 of expense due to the conversion;

· 231,000 shares from conversion of related–party, short-term notes payable in the amount of $92,400; and

· 100,000 shares for loan origination fees of $70,000.

In June 2011, the Company entered into a service contract with a former CEO for services to be rendered from October 2010 through September 2014.  As part of this service contract, the Company issued 400,000 shares of restricted common stock with a fair value on the date of grant of $1,840,000, as payment for past and future services.  During fiscal year 2012, the Company accelerated the vesting of the shares and recognized the residual compensation expense of $1,380,000 related to the issuance of these shares.

F - 26

In fiscal year 2010, the Company awarded certain employees restricted stock totaling 67,900 shares, valued at $916,650, in connection with Company milestones.  In fiscal year 2013, the Company issued 29,600 restricted shares of common stock valued at $399,600, and reduced the shares of non-vested common stock by 25,700 shares due to the change of employment status of individuals.  In fiscal year 2012, no restricted shares of common stock were issued to employees.  During fiscal years 2013 and 2012, the Company recognized compensation expense of $0 and $168,419, respectively.  As of September 30, 2013 and 2012, the unrecognized stock-based compensation was $0 and $245,952, respectively, and will be recognized over the remaining vesting terms.

16.           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.  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 valuation model due to the Company’s short trading history.  The risk-free rate related to the expected term of the stock option or warrants is based on the U.S. Treasury yield curve in effect at the time of grant.  The dividend yield is zero.

During fiscal years 2013 and 2012, the Company measured the fair value of the warrants using a binomial valuation model with the following assumptions:

	2013	2012
Exercise price	$0.75 - $10.00	$0.40 - .44
Expected term (years)	1.5 - 2.5	2.5
Volatility	219% - 298%	131% - 135%
Risk-free rate	0.23% - 0.88%	0.39% - 0.44%
Dividend rate	0%	0%

During fiscal year 2013, the Company recorded stock-based compensation expense relating to the following stock options and warrants:

· Options to purchase 433,333 shares were granted to each of three employees of 4G, 1,300,000 total shares, as part of their employment agreements dated June 21, 2012, with an exercise price of $1.00 per share. These options vest as described in Note 4. The options expire in June 2017. The value of the options at the date of grant was $1,147,163. The Company amortizes the expense based on expected completion dates of the milestones. During fiscal year 2013, the Company recognized $846,898 of the total compensation expense. As of September 30, 2013, options for 260,000 shares have vested.

· Options to purchase 1,000,000 shares were granted to the Company’s CEO for services as part of his employment agreement dated July 2012, with an exercise price of $1.00 per share. One tenth (100,000 shares) of the options vest for each milestone of 5,000 additional members added to the Company since the beginning of his employment in July 2012 until fully vested. The options expire in July 2017. The Company amortizes the expense based on expected completion dates of the milestones. During fiscal year 2013, the Company recognized $660,140 of the total compensation expense. As of September 30, 2013, options for 500,000 shares have vested due to the Company reaching certain milestones according to the contract. In August 2013, the CEO exercised options to purchase 350,000 shares of common stock at $1.00 per share.

· Options to purchase 212,500 shares were granted to both key managers of GWire, 425,000 in aggregate, with an exercise price of $1.00 per share. Under the option agreements, the only method of exercise requires the employee to submit up to 212,500 shares of GWire stock, awarded as part of the employment agreements dated November 1, 2012 to the Company in exchange for equivalent shares of the Company’s common stock, up to $425,000 in total. The options were fully vested upon issuance. In April 2013, both managers converted all of these options together with 4,250,000 shares of GWire stock into 425,000 shares of the Company’s common stock. As a result, the Company owns 100% of GWire as of June 30, 2013.

· Options to purchase 25,300 shares were granted to GWire employees, with an exercise price of $1.00 per share. The options vested immediately and the Company recognized $32,572 as compensation expense during fiscal year 2013.

· Options to purchase 100,000 shares were granted as part of an employment agreement signed with a new employee dated May 2013, with an exercise price of $1.65 per share. One quarter (25,000 shares) of the options vest after one year and the remaining balance vests equally over the following nine quarters (8,333 per quarter). The options expire in May 2018. During fiscal year 2013, the Company recognized $12,689 of compensation expense associated with the options.

· Options to purchase 100,000 shares were granted as part of a loan extension agreement with an unrelated party, with an exercise price of $1.00 per share. The options vested immediately and the Company recognized $103,495 of interest expense during fiscal year 2013.

· Options to purchase 100,000 shares were granted for consulting services rendered by a third party, with an exercise price of $1.00 per share. The options vested immediately and the Company recognized $134,785 of consulting expense during fiscal year 2013.

· Options to purchase 36,667 shares were granted as loan due diligence fees to an unrelated party, with an exercise price of $0.75 per share. The options vested immediately and the Company recorded $51,492 as loan discount, which is being amortized over the life of the loan.  During fiscal year 2013, the Company recognized $8,317 as interest expense for the loan discount amortization.

F - 27

The following table summarizes information about stock options and warrants outstanding as of September 30, 2013:

Options and Warrants	Number of Options  and Warrants			Weighted-Average Exercise Price
Outstanding as of October 1, 2012		2,386,587		$	1.47
Granted		2,086,967			1.04
Exercised		(875,000	)		1.00
Forfeited		-			-
Outstanding as of September 30, 2013		3,598,554			1.33
Exercisable as of September 30, 2013		2,271,887			1.50

As of September 30, 2013, the outstanding warrants have an aggregate intrinsic value of $434,890, and the weighted average remaining term of the warrants is 3.13 years.

17.           Segment Information

The Company operates two business segments based primarily on the nature of the Company’s products. The Chronic Illness Monitoring segment is engaged in the business of developing, distributing and marketing mobile monitoring of patient vital signs and physical activity to self-insured companies. The CareServices segment is engaged in the business of developing, distributing and marketing mobile health monitoring and concierge services to distributors and consumers. The Company previously operated a reagents business which was sold in June 2013.  The Company no longer holds any ownership interest in the reagents business.

Additionally, at the corporate level, the Company raises capital and provides for the administrative operations of the Company as a whole.

F - 28

The following table reflects certain financial information relating to each reportable segment for fiscal years 2013 and 2012:

	Corporate			Chronic  Illness Monitoring			CareServices			Reagents			Total
Fiscal year ended September 30, 2013
Sales to external customers	$	-		$	9,738,988		$	1,660,544		$	351,645		$	11,751,177
Segment loss		(21,986,526	)		(460,017	)		(3,179,151	)		(5,312	)		(25,631,006	)
Interest expense, net		5,583,932			-			-			-			5,583,932
Segment assets		600,892			9,482,037			2,291,121			-			12,374,050
Fixed assets and leased equipment purchases		243,273			-			241,527			888			485,688
Depreciation and amortization		124,269			114,440			984,663			9,362			1,232,734
Fiscal year ended September 30, 2012
Sales to external customers	$	-		$	706,888		$	352,223		$	467,259		$	1,526,370
Segment loss		(11,298,372	)		(532,207	)		(389,187	)		(145,990	)		(12,365,756	)
Interest expense, net		858,224			-			-			-			858,224
Segment assets		397,557			1,957,779			3,224,579			296,039			5,875,954
Fixed assets and leased equipment purchases		93,315			-			257,857			-			351,172
Depreciation and amortization		304,841			-			64,348			16,296			385,485

18.           Income Taxes

As of September 30, 2013, the Company had net operating loss carryforwards available to offset future taxable income, if any, of approximately $51,800,000, which will begin to expire in 2027.  The utilization of the net operating loss carryforwards is dependent upon the tax laws in effect at the time the net operating loss carryforwards can be utilized.  The Internal Revenue Code contains provisions that likely could reduce or limit the availability and utilization of these net operating loss carryforwards.  For example, limitations are imposed on the utilization of net operating loss carryforwards if certain ownership changes have taken place or will take place.  The Company will perform an analysis to determine whether any such limitations have occurred as the net operating losses are utilized.

The amount and ultimate realization of the benefits from the net operating loss carryforwards are dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. The Company has established a valuation allowance against all deferred income tax assets not offset by deferred income tax liabilities due to the uncertainty of their realization. Accordingly, there is no benefit for income taxes in the accompanying statements of operations.

Deferred income taxes are determined based on the estimated future effects of differences between the consolidated financial reporting and income tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws and the tax rates expected to be in place.  For fiscal years 2013 and 2012, the Company’s expected federal tax rate was 34%.

The deferred income tax assets (liabilities) were comprised of the following as of September 30:

	2013			2012
Net operating loss carryforwards	$	19,330,000		$	11,807,000
Depreciation, amortization and reserves		453,000			101,000
Stock-based compensation		1,863,000			1,113,000
Accrued vacation		2,000			20,000
Valuation allowance		(21,648,000	)		(13,041,000	)
Total	$	-		$	-

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Reconciliations between the benefit for income taxes at the federal statutory income tax rate and the Company’s benefit for income taxes for fiscal years 2013 and 2012 were as follows:

	2013			2012
Federal income tax benefit at statutory rate	$	8,715,000		$	4,204,000
State income tax benefit, net of federal income tax effect		846,000			408,000
Non-deductible expenses		(954,000	)		(804,000	)
Change in valuation allowance		(8,607,000	)		(3,808,000	)
Benefit for income taxes	$	-		$	-

During fiscal years 2013 and 2012, the Company recognized no interest or penalties, and there were no changes in unrecognized tax benefits from tax positions taken or from lapsed statutes of limitations.  There were no settlements with taxing authorities.  As of September 30, 2013, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate, and there are no positions that are anticipated to significantly increase or decrease.  The Company had no tax examinations beginning, ending, or remaining in process as of and for the years ended September 30, 2013 and 2012.  Tax returns for fiscal years subsequent to 2009 remain subject to examination.

19.           Commitments and Contingencies

The Company leases office space under non-cancelable operating leases.  Future minimum rental payments under non-cancelable operating leases as of September 30, 2013 were as follows:

Years Ending September 30,
2014	$	277,603
2015		308,330
2016		317,580
2017		327,107
2018		280,077
	$	1,510,697

The Company’s rent expense for facilities held under non-cancelable operating leases for fiscal years 2013 and 2012 was approximately $268,000 and $204,000, respectively.

In May 2013, the Company entered into a settlement agreement and patent license agreement and an agreed motion was filed to dismiss all claims of a lawsuit.  The final payment required by the settlement agreement and patent license patent agreement was made in December, 2013.

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20.           Subsequent Events

Subsequent to September 30, 2013, the Company entered into the following agreements and transactions:

(1)	In October 2013, the Company entered into a loan conversion agreement with an investor.  The Company issued 8,347 shares of Series E preferred stock for the conversion of a Series A debenture agreement representing principal and interest in the amount of $83,473.
(2)	In November 2013, the Company entered into a loan conversion agreements with two investors.  The Company issued 441,735 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $331,301.
(3)	In December 2013, the Company designated 7,803 shares of preferred stock as Series F variable rate convertible preferred stock and completed the sale of $3,120,000 in 8% original issue shares of Series F preferred stock.  The Company received $2,835,771 cash after fees and expenses.   As part of the transaction consultants invested an additional $220,000 under subscription agreements to purchase 247 shares of Series F preferred stock.  In addition, the Company issued 3,495,000 warrants exercisable at $1.10 per share for five years as part of the overall transaction.
(4)	In December 2013, the Company entered into a loan conversion agreement with one of its debt holders.  The Company issued 857 shares of Series F preferred stock for the conversion of a note payable representing principal and interest in the amount of $573,868.  In addition, the Company issued 856,977 warrants exercisable at $1.10 per share for five years.
(5)	In December 2013, the Company entered into a loan conversion agreement with a related party.  The Company issued 1,883,675 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $1,126,026.  In addition, the Company issued 410,348 warrants exercisable at $1.10 per share for five years.
(6)	In December 2013, the Company entered into a loan conversion agreement with a related party.  The Company issued 1,100,110 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $659,474.  In addition, the Company issued 239,652 warrants exercisable at $1.10 per share for five years.
(7)	In December 2013, the Company entered into a loan conversion agreement with the Company’s chief executive officer.  The Company issued 213,334 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $160,000.
(8)	In December 2013, an investor converted 480,000 shares of Series C preferred stock to 672,000 shares of common stock.
(9)	In December 2013, related party and non-related party investors converted 893,218 shares of Series D preferred stock to 6,252,526 shares of common stock.
(10)	In December 2013, the Company entered into a loan conversion agreement with one of its debt holders.  The Company issued 66,667 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $50,000.

F - 31

EX-10.1

Exhibit 10.1

ASSET PURCHASE AGREEMENT

by and among

GWIRE CORPORATION

as the Purchaser,

RAPID MEDICAL RESPONSE, LLC,

ORBIT MEDICAL RESPONSE

and

GREEN WIRE, LLC

as the Sellers

Dated Effective as of September 1, 2012

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated effective as of September 1, 2012, is made and entered into by and among GWire Corporation, a Utah corporation (the “Purchaser”), ActiveCare, Inc., a Delaware corporation (“ActiveCare”), Rapid Medical Response, LLC, a Utah limited liability company (“Rapid”), Orbit Medical Response, LLC, a Utah limited liability company (“Orbit”), and Green Wire, LLC, a Utah limited liability company (“Green Wire” with each of Rapid, Orbit and Green Wire a “Seller”, and collectively, the “Sellers”). The Purchaser and the Sellers are sometimes individually referred to herein as a “Party” and collectively as the “Parties.”

A.           Sellers provide personal medical response products and services to consumers and operate a call center relating thereto (the “Business”) in the state of Utah.

B.           The Parties desire to enter into this Agreement pursuant to which the Sellers propose to sell to the Purchaser, and the Purchaser proposes to purchase from the Sellers, certain of the assets used or held for use by the Sellers in the conduct of the Business as a going concern, and the Purchaser proposes to assume certain of the liabilities and obligations of the Sellers (the “Acquisition”).

C.           The Parties desire to make certain representations, warranties and agreements in connection with the Acquisition.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1.                      Definitions.

The following Terms, as used herein, have the following meanings:

“Accounts Payable” means monies owed to vendors for goods and services received that are not yet paid.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Business Day” means any day except Saturday, Sunday or any day on which banks are generally not open for business in the City of Salt Lake City, Utah.

“Code” means the Internal Revenue Code of 1986, as amended.

“Employee Benefit Plan” means each plan, fund, program, agreement or arrangement (i) with respect to which the Sellers has any liability, whether actual or contingent, direct or indirect and (ii) which provide employee benefits or for the remuneration, direct or indirect, of employees, former employees, directors, officers, consultants, independent contractors, contingent workers or leased employees of the Sellers or any Person that together with the Sellers would be a single employer within the meaning of Section 414 of the Code (whether written or oral), including, without limitation, each “welfare” plan (within the meaning of Section 3(1) of ERISA) and each “pension” plan (within the meaning of Section 3(2) of ERISA).

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“Computer Software” means all computer programs, materials, tapes, source and object code, and all prior and proposed versions, releases, modifications, updates, upgrades and enhancements thereto, as well as all documentation and listings related thereto used by the Sellers.

“Contract” means any written or oral contract, Permit, loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase order or other agreement, instrument, concession, franchise or license.

“Databases” means databases in all forms, versions and media, together with prior and proposed updates, modifications and enhancements thereto, as well as all documentation and listings therefor used by the Sellers.

“Effective Time” means 12:01 a.m. on September 1, 2012.

“Environmental Laws” means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or any agreement with any Governmental Entity or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Equity Interests” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether voting or nonvoting) of capital stock, including each class of common stock and preferred stock of such Person, and (ii) with respect to any Person that is not a corporation, any and all general partnership interests, limited partnership interests, membership or limited liability company interests, beneficial interests or other equity interests of or in such Person (including any common, preferred or other interest in the capital or profits of such Person, and whether or not having voting or similar rights).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Federal Health Care Program” shall have the meaning given in 42 U.S.C. § 1320a-7b(f), as amended.

“GAAP” means United States generally accepted accounting principles.

“Governmental Entity” means any federal, state or local or foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (including, without limitation, regulatory authorities, carriers, intermediaries or other instrumentalities administering Federal Health Care Programs).

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“Hazardous Materials” mean any waste, pollutant, contaminant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, special waste, industrial substance, by-product, process intermediate product or waste, petroleum or petroleum-derived substance or waste, chemical liquids or solids, liquid or gaseous products or any constituent of any such substance or waste, the use, handling or disposal of which by the Sellers is in any way governed by or subject to any applicable Environmental Law.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and any rules or regulations promulgated thereunder.

“Intellectual Property” means the tangible and intangible rights or interests and intellectual property rights evidenced by, embodied in, or associated with (A)  any patents, patent applications and inventions and discoveries that may be patentable, (B) any works of authorship or expression which includes but is not limited to Computer Software, Databases and business plans, whether or not copyrightable, including moral rights and copyrights recognized by law, together with any renewal or extension thereof, (C) any logos, trademarks, domain names, service marks, trade names and trade dress, and all goodwill relating thereto, (D) any trade secrets, technology licenses, confidential information, shop rights and other intellectual property rights owned or claimed and embodied therein, or associated therewith, or similar rights protectable under any laws or international conventions throughout the world, and (E) in each case of the foregoing items (A) through (D), the right to apply for registrations, certificates, or renewals with respect thereto and the right to prosecute, enforce, obtain damages relating to, settle or release any past, present, or future infringement thereof.

“Knowledge” shall mean, as follows:

(A)           an individual will be deemed to have “Knowledge” of a particular fact or other matter if:

(i)           such individual is actually aware of such fact or other matter; or

(ii)           a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter.

(B)           a Person (other than an individual) will be deemed to have “Knowledge” of a particular fact or other matter if any individual who is serving as a director, officer, partner, member, manager, executor or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter.

“Law” means any law (both common and statutory law and civil and criminal law), treaty, convention, rule, directive, legislation, ordinance, regulatory code (including, without limitation, statutory instruments, guidance notes, circulars, directives, decisions, rules and regulations) or similar provision having the force of law or an Order of any Governmental Entity or any self regulatory organization.

“Liability” means any actual or potential liability or obligation (including as related to Taxes), whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due, regardless of when asserted.

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“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, easement, reservation, cloud, servitude, right of way, option, right of first refusal, community property interest, equitable interest, restriction of any kind, conditional sale or other title retention agreement, any agreement to provide any of the foregoing and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money, whether imposed Contract, Law, equity or otherwise, or other adverse claim of any kind in respect of such property or asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“Material Adverse Effect” means any state of facts, change, event, effect or occurrence (whether or not constituting a breach of a representation, warranty or covenant set forth in this Agreement) that, individually or in the aggregate, is or may be reasonably likely to be materially adverse to the Sellers’ near-term or long-term projected business, financial condition, results of operations, properties, assets or Liabilities (including, without limitation, contingent Liabilities) or the Assets taken as a whole. A Material Adverse Effect shall also include any state of facts, change, event or occurrence that shall have occurred or been threatened that (when taken together with all other adverse state of facts, changes, events, effects or occurrences that have occurred or been threatened) is or would be reasonably likely to prevent or materially delay the performance by the Sellers of any of its obligations under this Agreement or the consummation of the transactions contemplated hereby.

“Medical Reimbursement Program” means all private and government reimbursement programs to which the Sellers participates, including, as applicable, health maintenance organizations, preferred provider organizations, other managed care plans, Medicare, Medicaid and all other programs that qualify as a Federal Health Care Program or State Health Care Program.

“Orders” means judgments, writs, decrees, compliance agreements, injunctions or judicial or administrative orders and legally binding determinations of any Governmental Entity or arbitrator.

“Permits” means all permits, licenses, authorizations, filings or registrations, franchises, approvals, certificates, exemptions, variances and similar rights obtained, or required to be obtained, from Governmental Entities.

“Permitted Liens” means (i) Liens for Taxes not yet due and payable, (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the ordinary course of business consistent with past practice and not yet delinquent and (iii) zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, (A) interfere in any material respect with the present use of or occupancy of such parcel by the Sellers, (B) have more than an immaterial effect on the value thereof or their use or (C) would impair the ability of such parcel to be sold for their present use.

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“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

“Proceedings” means actions, suits, claims, litigations, reviews and investigations and legal, administrative or arbitration proceedings.

“Straddle Period” means any taxable period that includes (but does not end on) the Closing Date. For Taxes imposed on a periodic basis, the portion of such Taxes that is payable for the portion of such taxable period ending on the Closing Date shall be the amount of such Tax for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Tax for the preceding period) multiplied by a fraction, the numerator of which is the number of days in the portion of such taxable period ending on such Closing Date and the denominator of which is the number of days in the entire taxable period).

“Taxes” means all taxes, assessments, charges, duties, fees, levies or other governmental charges (including interest, penalties, additions to tax or additional amounts associated therewith), including income, franchise, capital stock, real property, personal property, tangible, withholding, employment, payroll, social security, social contribution, unemployment compensation, disability, transfer, sales, use, excise, gross receipts, value-added and all other taxes of any kind whatsoever (whether estimated or not) imposed by any Governmental Entity, whether disputed or not, imposed by any Governmental Entity.

“Tax Return” shall mean any report, return, declaration or other information required to be supplied to a Governmental Entity in connection with Taxes, including estimated returns, claims for refund and schedules and reports of every kind with respect to Taxes.

ARTICLE II

PURCHASE AND SALE

Section 2.1.                      Agreement to Purchase and Sell.

Subject to the terms and conditions of this Agreement, effective as of the Effective Time and except for the Excluded Assets, the Sellers will grant, sell, assign, transfer and deliver to the Purchaser, and the Purchaser will purchase and acquire from the Sellers, all right, title and interest of the Sellers in, to and under the assets, properties and business, of every kind and description, wherever located, real, personal or mixed, tangible or intangible, owned or held or used in the conduct of the Business by the Sellers as the same shall exist as of the Effective Time, and all of the assets of the Business thereafter acquired by the Sellers (which assets, properties and rights, other than the Excluded Assets, are collectively referred to in this Agreement as the “Assets”), free and clear of all Liens, other than Permitted Liens, and the Purchaser will assume the Assumed Liabilities (as hereinafter defined).

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Section 2.2.                      Assets.

Except as otherwise expressly set forth in Section 2.3, the Assets shall include, without limitation, the following assets, properties and rights of the Sellers as of the Effective Time:

(a)           all cash, cash equivalents and marketable securities and all rights to any bank accounts of the Sellers, all deposits, advances and overpayments, including, without limitation, all customer deposits and overpayments relating to the period after the Effective Time or deposits and overpayments related to ongoing customer services deposited prior to the Effective Time and performed and earned after the Effective Time;

(b)           all furniture, fixtures, equipment and all other tangible assets and personal property;

(c)           all rights of the Sellers under those Contracts, to the extent transferable in accordance with applicable Law, set forth on Schedule 4.11 (unless indicated to the contrary thereon) or that are of the type that would have been listed thereon except that they involve payments in an amount less than the applicable amount set forth in Section 4.11 (collectively, the “Assumed Contracts”);

(d)           all Computer Software;

(e)           all goodwill, going concern value, patents, patent applications, patent rights, copyrights, copyright applications, URLs, domain names, methods, know-how, software, technical documentation, processes, procedures, inventions, trade secrets, trademarks, trade names, trade dress, logos, fictitious business names (d/b/as), telephone numbers, confidential information, franchises, customer lists, customer files, employee files, instructions, marketing materials, advertising records, service marks, service names, registered user names, technology, research records, data, designs, plans, drawings, manufacturing know-how and formulas, and other intellectual property, whether patentable or unpatentable, and other intellectual or proprietary rights or property of the Business (and all rights thereto and applications therefor), including, without limitation, the Intellectual Property;

(f)           all Leased Real Property and all licenses, permits, approvals, qualifications, easements and other rights relating thereto;

(g)           all rights in and under all express or implied guarantees, warranties, representations, covenants, indemnities and similar rights in favor of the Sellers;

(h)           all Permits, qualifications, product registrations, safety certifications, authorizations or similar rights to the extent that they are assignable, including those Permits set forth on Schedule 4.19;

(i)           all information, files, correspondence, records, data, plans, reports, Contracts and recorded knowledge (other than customer and employee files), including customer, supplier, price and mailing lists, and all accounting or other books and records of the Business in whatever media retained or stored, including, without limitation, computer programs and disks; and

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(j)           all issued and outstanding member interests of Discount Health Group LLC

(k)           all other tangible and intangible assets of any kind or description, wherever located, that are (i) carried on the books of the Business or (ii) owned by the Sellers and related to the Business.

Section 2.3.                      Excluded Assets.

Notwithstanding anything to the contrary set forth in this Agreement, the Assets will not include the following assets, properties and rights of or owned by the Sellers (collectively, the “Excluded Assets”):

(a)           any intercompany notes;

(b)           all ownership and other rights with respect to the Sellers’ Employee Benefit Plans;

(c)           any Permit, qualification, registration, certification, authorization or similar right that by its terms is not transferable to the Purchaser, including those indicated on Schedule 4.19 as not being transferable;

(d)           all rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Sellers, whether arising by way of counterclaim or otherwise;

(e)           the charter documents of the Sellers, minute books, stock ledgers, Tax Returns, books of account and other constituent records relating to the organization of the Sellers;

(f)           tax refunds relating to periods prior the Effective Time;

(g)           deposits (other than those deposits related to the Assumed Contracts) except as otherwise provided in Section 2.2(a);

(h)           all pre-paid expenses and pre-paid insurance premiums;

(i)           all accounts receivable, notes receivable and other receivables and any security therefor (other than customer deposits and overpayments) except as otherwise provided in Section 2.2(a);

(j)           employee files, to the extent required by Law to be retained by the Sellers;

(k)           all rights of the Sellers under this Agreement all other agreements and documents contemplated hereby; and

(l)           those specific assets listed on Schedule 2.3.

Section 2.4.                      Assumed Liabilities.

(a)           ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, EXCEPT FOR THE ASSUMED LIABILITIES DESCRIBED IN SECTION 2.4(b), THE PURCHASER SHALL NOT AND THE PURCHASER DOES NOT ASSUME ANY LIABILITIES OF THE SELLERS WHETHER OR NOT ARISING OUT OF OR RELATING TO THE ASSETS OR THE BUSINESS OR ANY OTHER BUSINESS OF THE SELLERS, ALL OF WHICH LIABILITIES SHALL, AT AND AFTER THE EFFECTIVE TIME, REMAIN THE EXCLUSIVE RESPONSIBILITY OF THE SELLERS (AS APPLICABLE).

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(b)           As the sole exception to the provisions in Section 2.4(a), effective as of the Effective Time, the Purchaser will assume and agree to pay, discharge or perform, as appropriate, (i) all liabilities and obligations of the Sellers under the Assumed Contracts to the extent such obligations are not required to be performed prior to the Effective Time and accrue and relate to the operations of the Business subsequent to the Effective Time,(ii) all Liabilities that arise out of the ownership or operation of any of the Assets by the Purchaser after the Effective Time, (iii) the Accounts Payable of the Sellers that are set out on Schedule 2.4(b)(iii),and (iv) amounts advanced by Rob Gallup and Shawn Ross, two Affiliates of the Sellers, to cover operating expenses of Sellers following the Effective Time through the Closing, as set forth on Schedule 2.4(b)(iv), the final amount of which shall not exceed $______1 and shall be provided by the Sellers to the Purchaser at the Closing (collectively, the “Assumed Liabilities”).

Section 2.5.                      Excluded Liabilities.

Specifically, and without in any way limiting the Assumed Liabilities as set forth in Section 2.4, the Assumed Liabilities shall not include, and in no event shall the Purchaser assume, agree to pay, discharge or satisfy, or otherwise have any responsibility for, any Liability (together with all other Liabilities of the Sellers that are not Assumed Liabilities, the “Excluded Liabilities”):

(a)           for any accrued or unaccrued expenses related to the Sellers’ employees (or former employees), including, without limitation, payroll, payroll Taxes, business expenses, bonus, salary (including, without limitation, salary related to overtime and work-related travel), accrued vacations, fringe, pension or profit sharing benefits or severance pay, other than those expenses set forth on Schedule 2.4(b)(iv);

(b)           for Accounts Payable of the Sellers not identified on Schedule 2.4(b)(iii);

(c)           for any Taxes of the Sellers, any Affiliate of the Sellers or of any other Person imposed on the Sellers as a transferee or successor by Contract, Law or otherwise;

(d)           for any indebtedness with respect to borrowed money and notes payable, including any interest or penalties accrued thereon (collectively, the “Sellers’ Debt”);

(e)           relating to, resulting from or arising out of (i) claims made in pending or future Proceedings or (ii) claims based on violations of Law as in effect on or prior to the Closing, breach of contract, employment practices or environmental, health and safety matters or any other actual or alleged failure of the Sellers to perform any obligation, in each case arising out of or relating to events which shall have occurred, or services performed, or the operation of the Business prior to the Closing and which do not arise from services performed by Purchaser after the Closing or to Purchaser’s operation of the Business after the Closing;

(f)           pertaining to any Excluded Asset;

____________________

1 Amount and relevant schedule to be finalized in connection with the closing

8

(g)           relating to, resulting from or arising out of any former operations of the Sellers that have been discontinued or disposed of prior to the Closing;

(h)           under or relating to any Employee Benefit Plan, if applicable, whether or not such Liability arises prior to or after the Closing Date;

(i)           of the Sellers arising or incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby and any fees and expenses of counsel, accountants, brokers, financial advisors or other experts of the Sellers; or

(j)           any Liabilities that are not Assumed Liabilities.

Such Excluded Liabilities shall include all Proceedings relating to any or all of the foregoing and all costs and expenses in connection therewith.

ARTICLE III

PURCHASE PRICE; ALLOCATIONS

Section 3.1.                      Purchase Price.

The aggregate amount to be paid for the Assets shall be up to Two Million Seven Hundred Forty Thousand One Hundred and Eighty-one Dollars $2,740,181 (the “Purchase Price”) consisting of (a) Purchaser’s promissory notes issued to the Sellers in such names and proportions determined in accordance with the allocation of the Purchase Price among the Sellers set forth in Schedule 3.3 in the aggregate amount of Two Million Six Hundred Ninety Thousand One Hundred and Eighty-one Dollars ($2,690,181) payable in thirty-six (36) monthly aggregate installments of Seventy-five Thousand Dollars ($75,000) with the first such payment due on the Closing Date (the “First Note Payment”), each in the form attached hereto as Exhibit A (the “Purchaser’s Promissory Notes”) and secured by the assets of the Purchaser as set forth in the Security Agreement in the form attached as Exhibit B (the “Security Agreement”) and guaranteed by ActiveCare pursuant to the Guaranty in the form attached as Exhibit C (the “Guaranty”), and (b) Twenty Thousand (20,000) shares (the “ActiveCare Shares”) of the Preferred Series D  Stock of ActiveCare having an aggregate value as of the date of this Agreement of Fifty Thousand Dollars ($50,000). Certificates representing the ActiveCare Shares shall be issued to the Sellers in such names and proportions as directed by Sellers on the Closing Date.  In addition to the foregoing payments, as consideration for the grant, sale, assignment, transfer and delivery of the Assets, the Purchaser shall assume and discharge fully the Assumed Liabilities as such Assumed Liabilities mature according to their terms.

Section 3.2.                      Payment of Purchase Price; Delivery of ActiveCare Shares.

On the Closing Date, (a) the Purchaser shall deliver executed Purchaser’s Promissory Notes to the Sellers, (b) the Purchaser shall deliver the executed Security Agreement to the Sellers, (c) ActiveCare shall deliver the executed Guaranty, (d) ActiveCare shall deliver stock certificates representing the ActiveCare Shares to the Sellers, (e) the Purchaser shall deliver the First Note Payment, less $13,154.99 (the “Estimated Philippines Bonus Reimbursement Amount”), which offset amount shall be allocated among the Sellers ratably in accordance with the allocation of the Purchase Price among the Sellers set forth on Schedule 3.3, and (f) the Purchaser shall deliver to Rob Gallup and Shawn Ross the amounts set forth on Schedule 2.4(b)(iv).

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Section 3.3.                      Allocation of Purchase Price.

The allocation of the Purchase Price (and all other capitalized costs) among the Sellers, and among the Assets and the non-competition covenants contained in Section 6.4 in accordance with Code Section 1060 and the U.S. Treasury regulations thereunder (and any similar provision of state, local or foreign Law, as appropriate), shall be as set forth on Schedule 3.3. The parties, except as required by applicable Law, shall report, act and file Tax Returns in all respects and for all purposes in a manner consistent with such allocation, and shall not take any position before any Governmental Entity that is in any way inconsistent with such allocation. The Sellers shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as the Purchaser may reasonably request to prepare such allocation.

Section 3.4.                      Allocation of Certain Items.

With respect to certain expenses incurred with respect to the Assets in the operation of the Business, the following allocations will be made between the Purchaser and the Sellers:

(a)           Taxes. Real and ad valorem property Taxes (or any other Tax that is imposed on a periodic basis) will be apportioned at the Closing based upon the number of days in the taxable period before and after the Effective Time and the amounts set forth in the current Tax bills.

(b)           Utilities. Utilities, water and sewer charges will be apportioned based upon the number of Business Days occurring before and after the Effective Time during the billing period for each such charge.

(c)           Lease Payments. All lease payments under the Real Property Leases will be apportioned based upon the number of days occurring before and after the Effective Time during the rental period for each such payment.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY AND THE SELLERS

The Sellers, jointly and severally, represent and warrant to the Purchaser as follows:

Section 4.1.                      Organization; Ownership.

(a)           Organization.  Each Seller is a limited liability company duly formed and validly existing under the laws of Utah and has all requisite power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted.  Each Seller is duly qualified or registered as a foreign entity to transact business under the laws of each jurisdiction where the character of its activities or the location of the properties owned or leased by it requires such qualification or registration.  Each Seller has heretofore made available to the Purchaser true, correct and complete copies of such Seller’s organizational documents as currently in effect and the Seller’s record books with respect to actions taken by such Seller’s members, managers or officers, as applicable. Schedule 4.1(a) contains a true and correct list of the only jurisdictions in which each Seller is qualified or registered to do business as a foreign corporation.  No Seller owns any Equity Interests in any Person.

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(b)           Ownership.  Exhibit D hereto contains a true and complete list of the Ownership Percentage of each Seller.  There has been no change in the ownership of the Sellers since January 1, 2012.

Section 4.2.                      Authorization.

Each Seller has full power and authority to execute and deliver this Agreement and any other certificate, agreement, document or other instrument to be executed and delivered by it in connection with the transactions contemplated by this Agreement (collectively, the “Sellers’ Ancillary Documents”) and to perform its obligations under this Agreement and such Seller’s Sellers’ Ancillary Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Sellers’ Ancillary Documents by the Sellers and the performance by the Sellers of their respective obligations hereunder and thereunder and the consummation of the transactions provided for herein and therein have been duly and validly authorized by all necessary corporate action on the part of each of the Sellers. The managers or the board of managers of each of the Sellers have approved the execution, delivery and performance of this Agreement and the Sellers’ Ancillary Documents and the consummation of the transactions contemplated by this Agreement and by the Sellers’ Ancillary Documents.  This Agreement and the Sellers’ Ancillary Documents have been duly executed and delivered by the Sellers and constitute the valid and binding agreements of the Sellers, enforceable against the Sellers in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

Section 4.3.                      Absence of Restrictions and Conflicts.

The execution, delivery and performance of this Agreement and the Sellers’ Ancillary Documents, the consummation of the transactions contemplated by this Agreement and the Sellers’ Ancillary Documents and the fulfillment of and compliance with the terms and conditions of this Agreement and the Sellers’ Ancillary Documents do not or will not, as the case may be, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, permit the acceleration of any obligation under or create in any Person the right to terminate, modify or cancel, or otherwise require any action, consent, approval, order, authorization, registration, declaration or filing with respect to (i) any term or provision of the charter documents of the Sellers, (ii) to the Knowledge of the Sellers, except as indicated on Schedule 4.11, any Assumed Contract or any other Contract or other instrument applicable to the Sellers or the Business, (iii) any judgment, decree or order of any court or Governmental Entity or agency to which any of the Sellers is a party or by which the Business or any of the Assets are bound or (iv) to the Knowledge of the Sellers, except as set forth on Schedule 4.3, any Permit, Law or arbitration award of any Governmental Entity or public or regulatory unit, agency or authority applicable to the Sellers or the Business.

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Section 4.4.                      Real Property.

(a)           Schedule 4.4(a) sets forth a complete and accurate list and description of all of the owned real property of the Sellers (together with all fixtures and improvements thereon, the “Owned Real Property”) and all real property (together with all fixtures and improvements thereon, the “Leased Real Property”) in which any of the Sellers has a leasehold interest held under leases, subleases, licenses and/or other types of occupancy agreements (the “Real Property Leases”), including any requirement of consent of the lessor to consummate the transactions contemplated hereby.  The Owned Real Property and the Leased Real Property (together, the “Real Property”) constitute all real properties used or occupied by the Sellers in connection with the Business.

(b)           With respect to the Real Property, except as set forth on Schedule 4.4(a):

(i)           no portion thereof is subject to any pending condemnation or eminent domain Proceeding or other Proceeding by any public or quasi-public authority and, to the Knowledge of the Sellers, there is no threatened condemnation or eminent domain Proceeding or other Proceeding with respect thereto;

(ii)           the improvements on the Real Property are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, are adequate and suitable for the purposes for which they are presently being used;

(iii)           with respect to the Leased Real Property, the respective Seller is the owner and holder of all of the leasehold estates purported to be granted by each applicable Real Property Lease, each Real Property Lease is in full force and effect and constitutes a valid and binding obligation of the Sellers enforceable in accordance with their respective terms and there does not exist under any such Real Property Lease any default or any event which with notice or lapse of time or both would constitute a default;

(iv)           there are no Contracts, written or oral, to which any of the Sellers is a party, granting to any other party the right of use or occupancy of any portion of the Real Property; and

(v)           there are no parties (other than the Sellers or their respective lessees disclosed pursuant to paragraph (iii) above) in possession of any portion of the Real Property.

Section 4.5.                      Title to Assets; Related Matters.

The Assets constitute all of the assets necessary and sufficient to conduct the operations of the Business in accordance with the Sellers’ past practices and as presently conducted by the Sellers. Except as set forth in Schedule 4.5, the Sellers have (and will convey to the Purchaser at the Closing) good and marketable title to the Assets, free and clear of all Liens other than Permitted Liens. To the Knowledge of the Sellers, all equipment and other items of tangible personal property and assets included in the Assets (a) are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, consistent with standards generally followed in the industry, (b) are usable in the regular and ordinary course of business and (c) conform to all applicable Laws, ordinances, codes, rules and regulations applicable thereto.  The Sellers have no Knowledge of any failure of any of the Assets to conform to all applicable Laws, ordinances, codes, rules and regulations applicable thereto, or of any defects or problems with any of the Assets, ordinary wear and tear excepted.  No Person other than the Sellers owns any equipment or other tangible personal property or assets situated on the premises of the Sellers which are necessary to the operation of the Business, except for the leased items that are subject to personal property leases. Since September 30, 2012 (the “Latest Balance Sheet Date”), the Sellers have not sold, transferred or disposed of any assets, except for the disposition of obsolete or useless assets and the consumption of assets in the ordinary course of business.  There are no developments affecting any of the Assets pending or, to the Knowledge of the Sellers, threatened, which might materially detract from the value, materially interfere with any present or intended use or adversely affect the marketability of such Assets.

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Section 4.6.                      Financial Statements.

Schedule 4.6 contains true, correct and complete copies of (a) the unaudited consolidated balance sheets of the Sellers as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in stockholders’ equity and cash flow for the fiscal years ended December 31, 2011 and 2010 (collectively, the “Sellers’ Annual Financial Statements”) and (b) an unaudited consolidated balance sheets of the Sellers as of September 30, 2012 and the related unaudited consolidated statements of income, changes in stockholders’ equity and cash flow for the nine (9) months then ended (the “Interim Balance Sheet”, and together with the Sellers’ Annual Financial Statements, the “Financial Statements”).The Financial Statements (i) have been prepared from the books and records of the Sellers, (ii) fairly present the consolidated financial position, results of operations and cash flows of the Sellers as of the dates and for the periods indicated, subject to typical year-end and/or audit adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes (that, if presented, would not differ materially from those included in the Interim Balance Sheet) and (iii) have been prepared in accordance with GAAP applied on a consistent basis (except for the absence of footnotes, disclosures and typical year-end and/or audit adjustments, none of which, if reflected, would be material).

Section 4.7.                      No Undisclosed Liabilities.

Except as set forth on the Latest Balance Sheet, the Sellers have no Liabilities, except for (i) the Liabilities set forth on Schedule 4.7; (ii) Liabilities reflected or reserved against in the Financial Statements, (iii) Liabilities that have arisen since the Latest Balance Sheet Date in the ordinary course of business (provided that there is no such Liability that is material that relates to breach of Contract, breach of warranty, tort, infringement, violation of Law, Order or Permit, or any Proceeding, in each case as in effect on or before the Closing Date); and (iv) Liabilities disclosed in this Agreement or any Schedule to this Agreement.

Section 4.8.                      Absence of Certain Changes.

Since the Latest Balance Sheet Date and except as set forth in Schedule 4.8, there has not been (i) any event, occurrence, development or state of circumstances or facts which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect, (ii) any material damage, destruction, loss or casualty to property or assets of the Business, whether or not covered by insurance, (iii) any sale, transfer, license, pledge, mortgage or other disposal of tangible or intangible assets by the Sellers other than in the ordinary course of business, (iv) to the Knowledge of Sellers, any violation by the Sellers of any Laws, (v) any change in any of the accounting (and Tax accounting) policies, practices or procedures of the Sellers or (vi) any Contract for the Sellers to take any of the actions specified in this Section 4.8.

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Section 4.9.                      Legal Proceedings.

(a)           Except as set forth in Schedule 4.9(a), there are no Proceedings (or any basis therefor) pending or, to the Knowledge of the Sellers, threatened against, relating to or involving the operation of the Business, the Assets or the Assumed Liabilities. The Sellers have delivered or made available to the Purchaser true, correct and complete copies of all material documents and correspondence relating to such matters required to be referred to in Schedule 4.9(a).

(b)           Except as set forth in Schedule 4.9(b), there are no Proceedings that (i) resulted in any criminal sanctions or (ii) within the last three (3) years, resulted in any payments, in each case by or against the Sellers or any of its officers or directors in their capacity as officers or directors (whether as a result of a judgment, civil fine, settlement or otherwise).

Section 4.10.                      Compliance with Laws.

(a)           To the Knowledge of Sellers, each Seller is (and has been at all times during the past five (5) years) in compliance with all Laws and Orders applicable to the Assets or the conduct of the Business. Except as set forth in Schedule 4.10(a), with respect to the Business, the Assets or the Assumed Liabilities, (i) such Seller has not been charged and is not now under investigation with respect to, a violation of any applicable Law or Order, (ii) the Seller is not a party to or bound by any Order of any Governmental Entity and (iii) the Seller has filed all reports required to be filed with any Governmental Entity on or before the date hereof and all such reports are accurate and complete in all material respects and in material compliance with all applicable Laws.

(b)           Except as set forth on Schedule 4.10(b), during the past five (5) years, the Sellers have filed all claims or other reports required to be filed in order to receive reimbursement with respect to the provision of services, products and supplies covered under any Medical Reimbursement Program, in accordance with all Laws and requirements applicable to the Medical Reimbursement Programs, each as in effect on or before the Closing Date. The Sellers have no Knowledge of any unresolved material overpayment, false or improper claims, civil money penalties, or any material offsets or recoupments against future reimbursement, nor is there any reasonable basis for the delivery of any notice thereof.  Except as set forth on Schedule 4.10(b), there are no pending appeals, adjustments, challenges, audits, litigation, or notices of intent to reopen or open cost reports or claims, in connection with the operation of the Business with respect to any Medical Reimbursement Program.

(c)           Except as set forth on Schedule 4.10(c), no Seller (i) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under Medicare, Medicaid or any other Federal Health Care Program or State Health Care Program, or relating to the unlawful distribution, prescription, dispensing or delivery of a controlled substance; (ii) has been debarred, excluded or suspended from participation in Medicare, Medicaid or any other Federal State Health Care Program or State Health Care Program; (iii) has had a civil monetary penalty assessed against such Person under Section 1128A of the Social Security Act; (iv) is currently listed on the General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; and (v) to the Knowledge of the Sellers is the target or subject of any current or potential investigation relating to any Medicare, Medicaid or any other Federal Health Care Program or State Health Care Program related offense.

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(d)           Except as disclosed on Schedule 4.10(d), neither the Sellers nor any of their respective managers, officers, or to the Knowledge of the Sellers, employees has engaged in any activities which are in violation of the federal or state Medicare and Medicaid statutes, Sections 1128, 1128A, 1128B, 1128C or 1877 of the Social Security Act (42 U.S.C. §§ 1320a-7, 1320a7a, 1320a-7b, 1320a-7c and 1395nn), the federal TRICARE statute (10 U.S.C. § 1071 et seq.), the False Claims Act (31 U.S.C. § 3729 et seq.), the False Statements Accountability Act (18 U.S.C. § 1001), the Program Fraud Civil Remedies Act (31 U.S.C. § 3801 et seq.), the anti-fraud and related provisions of HIPAA (e.g., 18 U.S.C. §§ 1035 and 1347), Federal Communications Commission regulations, or related regulations or other federal or state laws and regulations in effect on or before the Closing Date, including, without limitation, the following:

(i)           knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment;

(ii)           knowingly and willfully making or causing to be made a false statement or representation of a material fact for use in determining rights to any benefit or payment;

(iii)           failure to disclose knowledge by a Medicare or Medicaid claimant or a claimant under any Medical Reimbursement Program of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment;

(iv)           knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or kind (A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by any Federal Health Care Program; or (B) in return for purchasing, leasing, or ordering, or arranging, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part by any Federal Health Care Program; or

(v)           any other activity which violates any state or federal Law in effect on or before the Closing Date relating to prohibiting fraudulent, abusive or unlawful practices connected in any way with the provision of health care items or services or the billing for such items or services provided to a beneficiary of any Medical Reimbursement Program.

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(e)           Except as set forth in Schedule 4.10(e), to the Knowledge of the Sellers, the business and operations of the Sellers have been and are in material compliance with all applicable Laws in effect on or before the Closing Date and relating to customer or individual healthcare information, including the Administrative Simplification requirements of HIPAA, as amended.

(f)           Except as set forth in Schedule 4.10(f), the Sellers have made available to the Purchaser copies of all reports of audits, surveys or inspections by or on behalf of any Governmental Entity or accrediting agency to the extent such reports reflect any material adverse findings, deficiencies or other failure to meet any applicable Laws or accreditation standards in effect on or before the Closing Date, as applicable.

(g)           Attached hereto as Schedule 4.10(g) is a list as of the date of this Agreement of the Sellers’ location, provider type, Licenses, certifications (including Certificates of Need), accreditations, tax identification number, Medicare and Medicaid provider number(s) and any additional provider and/or billing numbers, owner, and owner’s taxpayer status (taxable or tax-exempt) which list is true and correct in all material respects.

Section 4.11.                      Sellers’ Contracts.

(a)           Schedule 4.11 sets forth a true, correct and complete list of the following Contracts related to the Business to which any Seller is a party:

(i)           all bonds, debentures, notes, loans, credit or loan agreements or loan commitments, mortgages, indentures, guarantees or other contracts relating to the borrowing of money or binding upon any of the Assets;

(ii)           all Contracts with Governmental Entities;

(iii)           all Contracts for monitoring services, each of which may be canceled by Sellers or their respective successors and assigns without penalty upon giving no more than thirty (30) days’ notice or at least thirty (30) days’ notice prior to the next anniversary of the term of the applicable agreement;

(iv)           all Real Property Leases or other leases or licenses involving any properties or assets (whether real, personal or mixed, tangible or intangible) involving an annual commitment or payment of more than $10,000 individually by the Sellers;

(v)           all Contracts which limit or restrict the Sellers or any of its officers or key employees from engaging in any business in any jurisdiction;

(vi)           all franchising and licensing agreements;

(vii)           all employment agreements;

(viii)           a list of all customers and all customer relationships, which Sellers represent to number not fewer than 3,000 in number as of the Effective Date;

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(ix)           any Contract for capital expenditures or the acquisition or construction of fixed assets requiring the payment by the Sellers of an amount in excess of $10,000 per year;

(x)           any Contract that provides for an increased payment or benefit, or accelerated vesting, upon the execution of this Agreement or in connection with the transactions contemplated hereby;

(xi)           any Contract granting any Person a Lien on all or any part of any of the Assets;

(xii)           any Contract for the cleanup, abatement or other actions in connection with any Hazardous Materials, the remediation of any existing environmental condition or relating to the performance of any environmental audit or study;

(xiii)           any Contract granting to any Person an option or a first refusal, first-offer or similar preferential right to purchase or acquire any assets;

(xiv)           any Contract with any agent, distributor or representative that is not terminable without penalty on thirty (30) calendar days’ or less notice;

(xv)           any Contract for the granting or receiving of a license or sublicense or under which any Person is obligated to pay or have the right to receive a royalty, license fee or similar payment;

(xvi)           any Contract providing for the indemnification or holding harmless of any officer, member, manager, employee or other Person;

(xvii)           any joint venture or partnership Contract;

(xviii)           any customer Contract for the provision of goods or services by the Sellers;

(xix)           any outstanding power of attorney empowering any Person to act on behalf of the Sellers; and

(xx)           all existing Contracts and commitments (other than those described in subparagraphs (i) through (xviii) of this Section 4.11) to which any Seller is a party or by which any of the Assets are bound involving an annual commitment or annual payment to or from any Sellers of at least $10,000.

(b)           True, correct and complete copies of all Assumed Contracts have been made available to the Purchaser.  All of the Contracts identified on Schedule 4.11 shall be Assumed Contracts unless otherwise indicated on Schedule 4.11.

(c)           The Assumed Contracts are legal, valid, binding and enforceable in accordance with their respective terms with respect to the Sellers and with respect to each other party to such Assumed Contracts, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.  There are no existing defaults or breaches of the Sellers under any Assumed Contract (or events or conditions which, with notice or lapse of time or both would constitute a default or breach) and, to the Sellers’ Knowledge, there are no such defaults (or events or conditions which, with notice or lapse of time or both, would constitute a default or breach) with respect to any third party to any Assumed Contract.  The Sellers have no Knowledge of any pending or threatened bankruptcy, insolvency or similar proceeding with respect to any party to such agreements. The Sellers are not participating in any discussions or negotiations regarding modification of or amendment to any Assumed Contract or entry in any new material Contract applicable to the Business or the Assets.Schedule 4.11 identifies each Assumed Contract set forth therein that requires the consent of or notice to the other party thereto to avoid any breach, default or violation of such contract, agreement or other instrument in connection with the transactions contemplated hereby, including the assignment of such Assumed Contract to the Purchaser.

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Section 4.12.                      Insurance Policies.

(a)           The Sellers maintain insurance with reputable insurers for the Business and Assets against those risks and in such amounts as required by the State of Utah, or any other jurisdiction in which Sellers or any of them may conduct business, as applicable, as set forth on Schedule 4.12, and. to the Knowledge of the Sellers, Green Wire Outsourcing, Inc., a Philippines company (“Green Wire Outsourcing”), maintains insurance with reputable insurers for its business against those risks and in such amounts as required by the Philippines.  All insurance policies and bonds with respect to the Business and Assets are in full force and effect, and the Sellers have not reached or exceeded policy limits for any insurance policies in effect at any time during the past five (5) years. There is no claim by the Sellers pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights. All premiums payable under all such policies and bonds have been timely paid, and the Sellers have otherwise complied fully with the terms and conditions of all such policies and bonds. The Sellers have no Knowledge of any threatened termination of, premium increase with respect to, or material alteration of coverage under, any of such policies or bonds.

Section 4.13.                      Environmental, Health and Safety Matters.

Except as set forth in Schedule 4.13, with respect to the Business, the Real Property and the Assets:

(a) the Sellers possess all Permits and have filed, all notices that are required under Environmental Laws, and the Sellers, to the Sellers’ Knowledge, are in full compliance with all Permits and all applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in those Laws or contained in any Law issued, entered, promulgated or approved thereunder;

(b)           there are no Liabilities arising in connection with or in any way relating to the Assets, the Business or the Real Property of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law, and there are no facts, events, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any such Liability;

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(c)           no notice, notification, demand, request for information, citation, summons or Order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, suite, proceeding or review is pending or, to the Knowledge of the Sellers, threatened by any Governmental Entity or other Person with respect to any matters relating to the Sellers and relating to or arising out of any Environmental Law;

(d)           the Sellers are not subject to any Liability incurred or imposed or based upon any provision of any Environmental Law or arising out of any act or omission of any of the Sellers, or the Sellers’ employees, agents or representatives or arising out of the ownership, use, control or operation by the Sellers of any plant, facility, site, area or property (including, without limitation, any plant, facility, site, area or property currently or previously owned or leased by the Sellers) from which any Hazardous Materials were released into the environment (the term “release” meaning any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment, and the term “environment” meaning any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, or the ambient air);

(e)           the Sellers have not imported, manufactured, stored, used, operated, transported, treated or disposed of any Hazardous Materials other than in compliance with all Environmental Laws and no Hazardous Material has been discharged, disposed of, dumped, injected, pumped, deposited, spilled, leaked, emitted or released at, on or under any Real Property or any other property now or previously owned, leased or operated by the Sellers; and

Section 4.14.                      Intellectual Property.

Schedule 4.14 sets forth a true and correct list of all Intellectual Property used in the Business or related to the Assets or Assumed Liabilities and the jurisdictions where each is registered (if any). The Sellers have good and marketable title to or possesses adequate licenses or other valid rights to use such Intellectual Property, free and clear of all Liens, and has paid all maintenance fees, renewals or expenses related to such Intellectual Property.  To the Knowledge of the Sellers, neither the use of such Intellectual Property nor the conduct of the Business in accordance with the Sellers’ past practices misappropriates, infringes upon or conflicts with any Intellectual Property rights of any third party.  No party has filed a claim or, to the Knowledge of the Sellers, threatened to file a claim against the Sellers alleging that the Sellers have violated, infringed on or otherwise improperly used the Intellectual Property rights of such party.

Section 4.15.                      Transactions with Affiliates.

Except as set forth in Schedule 4.15, no officer, member or manager of any Seller, or any Person with whom any such officer, member or manager has any direct or indirect relation by blood, marriage or adoption, or any entity in which any such Person, owns any beneficial interest (other than a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than five percent (5%) of the stock of which is beneficially owned by all such Persons in the aggregate) or any Affiliate of any of the foregoing or any current or former Affiliate of the Sellers have any interest in: (a) any Contract, arrangement or understanding with, or relating to, the Business, the Assets or the Assumed Liabilities; (b) any loan, arrangement, understanding, or Contract for or relating to the Business, the Assets or the Assumed Liabilities; or (c) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used by the Sellers relating to the Business, the Assets or the Assumed Liabilities. Schedule 4.15 also sets forth a complete list of all accounts receivable, notes receivable and other receivables and accounts payable owed to or due from any Affiliate to the Sellers relating to the Business, the Assets or the Assumed Liabilities.

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Section 4.16.                      Undisclosed Payments.

Neither the Sellers nor the officers, directors, members or managers of the Sellers, nor, to the Sellers’ Knowledge, anyone acting on behalf of any of them, has made or received payments not correctly categorized and fully disclosed in the Sellers’ books and records in connection with or in any way relating to or affecting the Business, the Assets or the Assumed Liabilities.

Section 4.17.                      Payor Relations.

Schedule 4.17 contains a true and complete list of the name and address of those payors of the Sellers that, on a consolidated basis, constitute ten percent (10%) or more of the Sellers’ gross revenue (including, without limitation, private insurers, hospitals, clinics, agencies, Medicare and Medicaid), together with the amounts paid and the percentage of gross revenue attributable to each such payor during the periods covered by the Financial Statements, and since the Latest Balance Sheet Date no such payor has terminated its relationship with or adversely curtailed its payments to the Sellers or indicated to the Sellers (for any reason) its intention to so terminate its relationship or curtail its payments.

Section 4.18.                      Employee Matters.

(a)           Except as set forth in Schedule 4.18(a), there are no Sellers Employee Benefit Plans.

(b)           The Sellers have provided to the Purchaser a true and complete list of all of the employees and independent contractors of the Business as of the date of this Agreement, specifying the annual salary, hourly wages, or independent contractor fees and position for such employee or independent contractor (the “Employee List”).  The Sellers have not received a claim from any Governmental Entity that the Sellers improperly classified as an independent contractor any person named on the Employee List. The Sellers have not made any written or oral commitment to any employee or independent contractor with respect to compensation, promotion, retention, termination, severance or similar matters in connection with the transactions contemplated by this Agreement.

(c)           Except as set forth on Schedule 4.18(c), (i) none of the Sellers is delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by them to date or amounts required to be reimbursed to such employees, and (ii) to the Knowledge of the Sellers, each of the Sellers is in compliance in all material respects with all Laws respecting labor, employment and employment practices, terms and conditions of employment and wages and hours.

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(d)           The employees of the Business have not been, and currently are not, represented by any labor organization or group whatsoever.  The Sellers have not been and are not a signatory to any collective bargaining agreement, and no union organizing campaign or other attempt to organize or establish a labor union, employee organization or labor organization involving or representing employees of the Sellers has occurred, is in progress or is threatened.

(e)           Except as set forth on Schedule 4.18(e), no workers’ compensation or retaliation claim, complaint, charge or investigation has been filed or is pending against the Sellers which is not currently being handled by the Sellers’ insurance carrier(s), and the Sellers have maintained and currently maintain adequate insurance as required by applicable Law with respect to workers’ compensation claims and unemployment benefits claims.

(f)           To the Knowledge of the Sellers, each of the Sellers is in compliance with all applicable Laws and Orders and all Contracts or collective bargaining agreements governing or concerning labor relations, unions and collective bargaining, conditions of employment, employment discrimination and harassment, wages, hours or occupations safety and health, including, without limitation, ERISA, the Immigration Reform and Control Act of 1986, the National Labor Relations Act, the Civil Rights Acts of 1866 and 1964, the Equal Pay Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Occupational Safety and Health Act, the Davis Bacon Act, the Walsh-Healey Act, the service Contract Act, Executive Order 11246, the Fair Labor Standards Act and the Rehabilitation Act of 1973 and all applicable regulations under such acts, as well as the counterparts of such acts and laws in any foreign jurisdiction in which Sellers, or any of them, conduct business.

Section 4.19.                      Permits.

Except as set forth on Schedule 4.19, each Seller has all Permits necessary for its operations in the conduct of the Business, such Permits are in full force and effect and no violations are or have been recorded in respect of any thereof, and no Proceeding is pending or to the Knowledge of the Sellers threatened to revoke or limit any thereof.  Each Seller has taken all action reasonably necessary to maintain each Permit.  Schedule 4.19 contains a true, correct and complete list of all such Permits under which each of the Sellers is operating or bound, and the Sellers have furnished or made available to the Purchaser true, correct and complete copies of the Permits set forth on Schedule 4.19. To the Knowledge of the Sellers there is no proposed change in any applicable Law which would require the Sellers to obtain any Permits not set forth on Schedule 4.19 in order to conduct the Business as presently conducted. Except as set forth on Schedule 4.19, none of the Permits set forth on Schedule 4.19 shall be adversely affected as a result of any Seller’s execution and delivery of, or the performance of its obligations under, this Agreement or the consummation of the transactions contemplated hereby.

Section 4.20.                      Brokers, Finders and Investment Bankers.

Except as set forth on Schedule 4.20, none of the Sellers nor any officer, member, manager or employee of the Sellers or any Affiliate of the Sellers has employed any broker, finder or investment banker or incurred any Liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated by this Agreement.

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Section 4.21.                      Taxes.

(a)           Except as set forth on Schedule 4.21(a), each Seller has timely filed (or caused to be timely filed) or has filed all appropriate extensions for time to file all Tax Returns required to be filed by it for all Pre-Closing Tax Periods that will have been required to be filed on or prior to the Closing Date and all such Tax Returns are true, correct and complete in all material respects.

(b)           Each Seller has timely paid (or caused to be timely paid) all Taxes for all Pre-Closing Tax Periods, whether or not shown (or required to be shown) on any Tax Return, that will have been required to be paid on or prior to the Closing Date, the non-payment of which would result in a Lien on any of the Assets, would otherwise adversely affect the Business or would result in the Purchaser becoming liable or responsible therefor.  Each Seller has complied with all applicable Laws relating to the collection, payment and withholding of Taxes.

(c)           Each Seller has adequate funds for the payment of all Tax Liabilities, assessments, interest and penalties which arise from or with respect to the Assets or the operation of the Business and are incurred in or attributable to the Pre-Closing Tax Period, the non-payment of which would result in a Lien on any of the Assets, would otherwise adversely affect the Business or would result in the Purchaser becoming liable therefor.

(d)           Schedule 4.21(d) sets forth as of the Closing Date those taxable years for which the Sellers’ Tax Returns are currently being audited by any taxing authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as set forth in Schedule 4.21(d), neither of the Sellers has been notified that any Tax authority has raised any issues in connection with any Tax Return relating to Taxes, and to the Knowledge of the Sellers, no basis exists for any such issues to be raised; there are no pending Tax audits and no waivers of statutes of limitations have been given or requested and no Seller has otherwise agreed to any extension of time with respect to a Tax assessment or deficiency. Except as set forth in Schedule 4.21(d), neither of the Sellers nor any of their respective predecessors is liable for any Taxes: (i) under any agreement (including any Tax sharing agreements), (ii) as a transferee or (iii) under Treasury Regulation Section 1.1502-6(a) or any analogous or similar state, local or foreign Law or regulation.

(e)           Neither of the Sellers nor any predecessor of either Seller is liable for any Taxes of any other Person: (A) under any agreement (including any Tax sharing or similar agreements), (B) as a transferee or successor by Contract, Law or otherwise or (C) as a result of being a member of a combined, consolidated or unitary group, including under Treasury Regulation Section 1.1502-6(a) or any analogous or similar state, local or foreign Law or regulation.

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(f)           There are no Liens for Taxes of any Seller or any other Person (other than Taxes not yet due and payable) upon any of the Assets, and as a result of the transactions contemplated hereby, none of the Assets will or could in the hands of the Purchaser subject the Purchaser to any Liability for Taxes of the Sellers or any other Person as a transferee or successor by Contract, Law or otherwise, nor would the nonpayment of any Taxes otherwise adversely affect the Business.

(g)           As of the Closing Date, the Sellers have not agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise.

(h)           Neither of the Sellers is a foreign Person within the meaning of §1.1445-2(b) of the U.S. Treasury regulations promulgated under Section 1445 of the Code.

Section 4.22.                      Ethical Practices.

To the Knowledge of the Sellers, neither the Sellers, nor any representative of either of the Sellers, nor any other Person on their behalf has offered or given on their behalf, anything of material value to: (i) any official of a Governmental Entity, any political party or official thereof, or any candidate for political office; (ii) any customer or member of the government; or (iii) any other Person, in any such case while knowing or having reason to know that all or a portion of such money or thing of value may be offered, given or promised, directly or indirectly, to any customer, member of the government or candidate for political office for the purpose of the following: (x) influencing any action or decision of such Person, in such Person’s official capacity, including a decision to fail to perform such Person’s official function; (y) inducing such Person to use such Person’s influence with any government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality to assist the Sellers in obtaining or retaining business for, or with, or directing business to, any Person; or (z) where such payment would constitute a bribe, kickback or illegal or improper payment to assist the Sellers in obtaining or retaining business for, or with, or directing business to, any Person.

Section 4.23.                      Solvency, Etc.

No Seller is involved in any proceeding by or against it as a debtor before any Governmental Entity under Title 11 of the United States Bankruptcy Code or any other insolvency or debtors’ relief act, whether state, federal or foreign, or for the appointment of a trustee, receiver, liquidator, assignee, sequestrator or other similar official for any part of such Seller’s property.

Section 4.24.                      ActiveCare Shares.

(a)           Entirely for Own Account. The Sellers are acquiring the ActiveCare Shares for investment and have not previously solicited the transfer, resale or disposal of the ActiveCare Shares and presently do not have a view to, or the purpose of, engaging in a distribution thereof or of any interest therein in any transaction that would be in violation of the securities Laws of the United States or any state thereof.

(b)           Restricted Securities. The Sellers understand that the ActiveCare Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and will be “restricted securities” within the meaning of the regulations under the Securities Act, and by reason of the foregoing the ActiveCare Shares may not be resold in the absence of an effective registration statement under, or applicable exemption from, the Securities Act. Notwithstanding the foregoing, any of the Sellers holding the ActiveCare Shares may transfer or distribute the ActiveCare Shares to any other Seller or Affiliate of such Seller in accordance with applicable Law, including applicable securities laws.

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(c)           Transferability. The Sellers understand that there are substantial restrictions on the transferability of the ActiveCare Shares.  Accordingly, except as provided in Section 6.11, the Sellers may have to hold the ActiveCare Shares indefinitely and it may not be possible for the Sellers to liquidate their investment in the ActiveCare Shares.

(d)           Disclosure. Sellers have had an opportunity to review the Exchange Act Documents of ActiveCare, as defined in Section 5.8, and to ask questions and receive answers concerning ActiveCare and the Purchaser and to obtain such additional information as they have requested.  The Sellers are knowledgeable, sophisticated and experienced in business and financial matters and with respect to securities similar to the ActiveCare Shares, and are capable of evaluating the merits and risks of acquiring the ActiveCare Shares.  Each of the Sellers is able to bear the economic risk of its investment in the ActiveCare Shares and is able to afford the complete loss of such investment.  Each of the Sellers has relied solely on the representations and warranties contained herein and its own knowledge about the Sellers and ActiveCare and its subsidiaries in making its decision to acquire the ActiveCare Shares.  If the box relating to “Accredited Investor” status on the Investor Questionnaire, the form of which is set forth on Exhibit E (the “Investor Questionnaire”) has been checked by a Seller, such Seller is an “Accredited Investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act.

(e)           Legends. The Sellers understand that the certificates representing the ActiveCare Shares shall bear a legend substantially as follows:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER SAID ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.”

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

The Purchaser and ActiveCare hereby jointly and severally represent and warrant to the Sellers as follows:

Section 5.1.                      Organization.

The Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. ActiveCare is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.  The Purchaser is a wholly owned subsidiary of ActiveCare.

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Section 5.2.                      Authorization.

The Purchaser and ActiveCare have full corporate power and authority to execute and deliver this Agreement and any other certificate, agreement, document or other instrument to be executed and delivered by them in connection with the transactions contemplated by this Agreement (collectively, the “Purchaser Ancillary Documents”), to perform their obligations under this Agreement and the Purchaser Ancillary Documents and to consummate the transactions contemplated by this Agreement and the Purchaser Ancillary Documents.  The execution and delivery of this Agreement and the Purchaser Ancillary Documents by the Purchaser and ActiveCare, the performance by the Purchaser and ActiveCare of their obligations under this Agreement and the Purchaser Ancillary Documents, and the consummation of the transactions provided for in this Agreement and the Purchaser Ancillary Documents have been duly and validly authorized by all necessary corporate action on the part of the Purchaser and ActiveCare.  This Agreement has been and, as of the Closing Date, the Purchaser Ancillary Documents will be, duly executed and delivered by the Purchaser and ActiveCare and do or will, as the case may be, constitute the valid and binding agreements of the Purchaser and ActiveCare, as applicable, enforceable against the Purchaser and ActiveCare, as applicable, in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

Section 5.3.                      Absence of Restrictions and Conflicts.

The execution, delivery and performance of this Agreement and the Purchaser Ancillary Documents, the consummation of the transactions contemplated by this Agreement and the Purchaser Ancillary Documents and the fulfillment of and compliance with the terms and conditions of this Agreement and the Purchaser Ancillary Documents do not or will not, as the case may be, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, or permit the acceleration of any obligation under, or otherwise require any action, approval, order, authorization, registration, declaration or filing with respect to (a) any term or provision of the charter documents of the Purchaser or ActiveCare, (b) any Contract to which the Purchaser or ActiveCare is a party, (c) any judgment, decree or order of any Governmental Entity to which either the Purchaser or ActiveCare is a party or by which the Purchaser or ActiveCare or any of their properties are bound or (d) any Permit or Law of any Governmental Entity or public or regulatory unit, agency or authority applicable to the Purchaser or ActiveCare, that in any case would be reasonably likely to prevent or materially delay the performance by the purchase of any of its obligations under this Agreement or the consummation of any of the transactions contemplated hereby.

Section 5.4.                      Brokers, Finders and Investment Bankers.

Neither the Purchaser, nor any officers, directors or employees of the Purchaser nor any Affiliate of the Purchaser, has employed any broker, finder or investment banker or incurred any Liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated by this Agreement.

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Section 5.5.                      Investigations.

To the Knowledge of ActiveCare and Purchaser, neither the Purchaser nor any Affiliate of Purchaser is the subject of any investigation by the Securities and Exchange Commission or by any Governmental Entity and no basis exists for any such investigation that would be material to the Purchaser or such Affiliate’s finances, operations, or prospects.

Section 5.6.                      Offering Exemption.

Assuming the accuracy of the representations and warranties of the Sellers in Section 4.24, the ActiveCare Shares to be issued by ActiveCare as set forth in this Agreement will be issued pursuant to valid exemptions from registration under the Securities Act and all applicable state securities or “blue sky” laws.

Section 5.7.                      ActiveCare Shares.

As of the date of issuance, the ActiveCare Shares will have been duly authorized and will be validly issued, fully paid and non-assessable.  The authorized capital stock of ActiveCare consists of 50,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.  As of September 30, 2012, (i) approximately 46,369,771 shares of ActiveCare Common Stock were issued and outstanding, (ii) 480,000 shares of non-voting Series C Preferred Stock were issued and outstanding, (iii) approximately 491,503 shares of Series D Preferred Stock were issued and outstanding, (iv) options to purchase approximately 13,865,871 shares of ActiveCare Common Stock were issued and outstanding pursuant to ActiveCare’s stock option plans and (v) 0 shares of ActiveCare Common Stock were reserved for future issuance pursuant to ActiveCare’s stock option plans.  ActiveCare will have as of the Closing Date a sufficient number of authorized shares available to issue the ActiveCare Shares.  The ActiveCare Shares when issued will be free of restrictions on transfer other than the restrictions on transfer under this Agreement and under applicable state and federal securities laws.  Except as set forth in this Section 5.7, there are no options, warrants or other rights outstanding to purchase any of ActiveCare’s authorized but unissued capital stock.  [Note information required from ActiveCare.]

Section 5.8.                      Reporting Status.

Since October 1, 2009, ActiveCare has filed or furnished with the Securities and Exchange Commission (the “SEC”) all of the documents (each, an “Exchange Act Document”) that ActiveCare was required to file or furnish under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  As of the date of filing thereof, each Exchange Act Document (a) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such Exchange Act Document and (b) to the Knowledge of ActiveCare, did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Exchange Act Document or necessary in order to make the statements in such Exchange Act Documents, in light of the circumstances under which they were made, not misleading.

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Section 5.9.                      Litigation.

There is no action, suit, proceeding, claim, arbitration or investigation that has not been disclosed in the Exchange Act Documents or that, since the date of the latest Exchange Act Document, would give rise to a requirement that ActiveCare file a Current Report on Form 8-K or otherwise would be required to be disclosed under Item 103 for Regulation S-K in any future filing by ActiveCare with the SEC.

ARTICLE VI

CERTAIN COVENANTS AND AGREEMENTS

Section 6.1.                      Consents; Liens.

(a)           To the extent that third party consents relating to (i) Assumed Contracts and (ii) all other Assets (subject to regulatory and other third party procedures) have not been obtained by the Sellers as of the Closing, the Sellers shall, during the remaining term of such Assumed Contracts and other Assets (the “Non-Assignable Contracts”), use each of their respective commercially reasonable efforts to (a) obtain the consent of the applicable third party, (b) make the benefit of such Non-Assignable Contracts and other Assets available to the Purchaser and (c) enforce at the request of the Purchaser and at the expense and for the account of the Purchaser, any rights of the Sellers arising from such Non-Assignable Contracts and other Assets against the other party or parties thereto (including the right to elect or terminate any such Non-Assignable Contracts in accordance with the terms thereof).  The Sellers will not take any action or suffer any omission which would limit or restrict or terminate in any material respect the benefits to the Purchaser of such Non-Assignable Contracts or other Assets unless, in good faith and after consultation with and prior written notice to the Purchaser, the Sellers are ordered orally or in writing to do so by a Governmental Entity of competent jurisdiction or the Sellers are otherwise required to do so by Law; provided that if any such order is appealable, the Sellers will, at the Sellers’ cost and expense, take such actions as are reasonably requested by the Purchaser to file and pursue such appeal and to obtain a stay of such order.  With respect to any such Non-Assignable Contract or other Assets as to which the necessary approval or consent for the assignment or transfer to the Purchaser is obtained following the Closing, the Sellers shall transfer such Non-Assignable Contract to the Purchaser by execution and delivery of an instrument of conveyance reasonably satisfactory to the Purchaser within three (3) Business Days following receipt of such approval or consent. The Purchaser shall cooperate promptly and fully with all reasonable requests from any third party, and all reasonable requests from the Sellers, in each case, relating to an approval or consent to assignment of one or more Assumed Contracts.  Notwithstanding anything in this Section 6.1(a) to the contrary, the Purchaser shall be responsible for the expense of transferring, assigning, or reissuing Permits (including provider numbers).  For the avoidance of doubt, the provisions of this Section 6.1(a) shall apply to any Real Property Leases that qualify as Non-Assignable Contracts.

(b)           To the extent that, as of the Closing, (i) any Liens other than Permitted Liens relating to the Assets, the Business or the Sellers have not been released or (ii) any evidence of the release of any Liens other than Permitted Liens relating to the Assets, the Business or the Sellers has not been obtained or delivered to the Purchaser, the Sellers shall use each of their respective best efforts to have such Liens released and/or such evidence obtained and delivered to the Purchaser as soon as possible, at the Sellers’ expense.

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Section 6.2.                      Public Announcements.  Subject to their respective legal obligations, the Purchaser and the Sellers shall consult with one another regarding the timing and content of all announcements regarding any aspect of this Agreement or the transactions contemplated hereby to the financial community, Governmental Entities, employees, customers or the general public and shall use reasonable efforts to agree upon the text of any such announcement prior to its release. Notwithstanding the foregoing, none of the Sellers shall publicly announce the existence of the Agreement, the terms of the Agreement or the transactions contemplated hereby until the Purchaser or ActiveCare files with the SEC a Current Report on Form 8-K regarding this Agreement. The Purchaser or its Affiliate shall give the Sellers prompt written notice of the filing of such Form 8-K. In addition, the Purchaser shall be responsible for the timing and content of communications to customers of the Sellers and acknowledges that it has already made some such communications in the course of its due diligence and/or in preparation for the closing of the transactions contemplated hereby.

Section 6.3.                      Insurance.  If requested by the Purchaser, the Sellers shall in good faith cooperate with the Purchaser and take all actions reasonably requested by the Purchaser, at Purchaser’s sole expense and no additional risk to the Sellers, for deductible, stop loss or similar provisions that are necessary or desirable to permit the Purchaser to have available to it following the Closing the benefits (whether direct or indirect) of the insurance policies maintained by or on behalf of the Sellers with respect to the Business, the Assets or the Assumed Liabilities that are currently in force.

Section 6.4.                      Non-Competition.

(a)           Until three (3) years after the Closing Date (the “Three Year Non-Compete Period”), neither the Sellers nor their Affiliates Rob Gallup and Shawn Ross (together with the Sellers, collectively the “Restricted Sellers”) shall, and neither the Sellers nor the Restricted Sellers shall permit their respective Affiliates to, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in or represent any business within any Restricted Territory that is competitive with the business of the Purchaser and its Affiliates, including in particular, the Business conducted by Sellers and purchased from Sellers hereunder (the “Restricted Business”) or any product of the Restricted Business. As used in this Agreement, “Restricted Territory” means any portion of the United States.

(b)           Nothing herein shall prohibit the Sellers from being a passive owner of not more than one percent (1.0%) of the outstanding stock of any class of a corporation which is publicly traded, so long as the Sellers have no active participation in the business of such corporation.

(c)           The Restricted Sellers understand that the foregoing restrictions may limit the their ability to earn a livelihood in a business similar to the Business, but nevertheless believe that each Restricted Seller has received and will receive sufficient consideration and other benefits as provided hereunder to clearly justify such restrictions which, in any event (given each Restricted Seller’s education, skills and ability), the Restricted Sellers do not believe would prevent them from otherwise earning a living.  Each Restricted Seller has carefully considered the nature and extent of the restrictions placed upon him, her or it by this Agreement, and hereby acknowledges and agrees that the same are reasonable in time, scope and territory, do not confer a benefit upon the Purchaser or any of its Affiliates disproportionate to the detriment of the Restricted Sellers, are reasonable and necessary for the protection of the Purchaser and its Affiliates and are an essential inducement to the Purchaser to consummate the transactions contemplated by this Agreement.

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(d)           If, at the time of enforcement of this Section 6.4, a court or arbitrator holds that the restrictions stated herein are unreasonable under the circumstances then existing, the Parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area determined to be reasonable under the circumstances by such court or arbitrator, as applicable.

(e)           The Sellers and each Restricted Seller covenants and agrees that the Sellers and such Restricted Seller will not seek to challenge the enforceability of the covenants contained in this Section 6.4 against the Purchaser or ActiveCare, nor will any of them assert as a defense to any action seeking enforcement of the provisions contained in this Section 6.4 (including an action seeking injunctive relief) that such provisions are not enforceable due to lack of sufficient consideration received by the Restricted Sellers.  The Parties hereto agree and acknowledge that money damages would be an inadequate remedy for any breach of this Section 6.4.  Therefore, in the event of a breach or threatened breach by the Restricted Sellers of this Section 6.4, the Purchaser or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions of this Section 6.4 (without posting a bond or other security).

Section 6.5.                      No Intent to Induce Referrals.  Each of the Purchaser and the Sellers acknowledges and agrees that no portion of the Purchase Price payable by the Purchaser to the Sellers pursuant to this Agreement is intended to represent a payment for any referral of future business to the Purchaser, or to any of the Purchaser’s officers, directors, employees, or Affiliates, that is prohibited by 42 U.S.C. §1320a-7b, commonly referred to as the “Anti-Kickback Statute.”

Section 6.6.                      Cooperation.

(a)           The Purchaser and the Sellers shall reasonably cooperate with each other in connection with the preparation or audit of any Tax Return(s) and any Tax claim or litigation in respect of the Business and the Assets, which cooperation shall include, but not be limited to, making reasonably available documents and employees at the expense of the requesting party for the documented out-of-pocket costs of the providing party, if any, capable of providing information or testimony.

(b)           The Purchaser and the Sellers shall reasonably cooperate with each other in making available, at the expense of the requesting party for the documented out-of-pocket costs of the providing party and subject to reasonable security and confidentiality requirements, documents and employees of the Purchaser, if any, capable of providing information or testimony regarding any matter related to the Sellers for which the Sellers or either of them retains or may retain a duty or obligation following the Closing, including those duties or obligations arising under Section 6.12 herein.

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Section 6.7.                      Transfer Taxes.  All excise, sales, use, value added, registration stamp, recording, documentary, conveyancing, franchise, property, transfer, gains and similar Taxes (collectively, “Transfer Taxes”) incurred in connection with the transactions contemplated by this Agreement shall be borne by the Sellers.  The Purchaser and the Sellers shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation.  The Party that is required by applicable law to make the filings, reports, or returns with respect to any applicable Transfer Taxes shall do so, and the other Party shall cooperate with respect thereto as necessary.

Section 6.8.                      Employees.

(a)           Commencing on the Closing Date, the Sellers shall terminate all employees of the Business who are actively at work on the Closing Date, and, at the Purchaser’s sole discretion, the Purchaser may offer employment, on an “at will” basis, to any such employees.

(b)           The Sellers shall be solely responsible and the Purchaser shall have no obligations whatsoever for any compensation or other amounts payable to any employee (or former employee) of the Sellers, including, without limitation, bonus, salary (including, without limitation, salary related to overtime and work-related travel), fringe, pension or profit sharing benefits, or severance pay payable to any employee (or former employee) of the Sellers for any period relating to the service with the Sellers at any time prior to the Effective Time (except accrued vacation and sick days as set forth on Schedule 2.4(b)) and the Sellers shall pay all such amounts to all entitled employees on or prior to the Effective Time or otherwise in accordance with its routine payroll procedures.

(c)           The Sellers shall remain solely responsible for the satisfaction of all claims for medical, dental, life insurance, health accident or disability benefits brought by or in respect of employees (or former employees), agents or “leased” employees of the Sellers which claims relate to events occurring prior to the Effective Time.  The Sellers also shall remain solely responsible for all worker’s compensation claims of any employees (or former employees), agents or “leased” employees of the Sellers which relate to events occurring prior to the Effective Time.  The Sellers shall pay, or cause to be paid, all such amounts to the appropriate Persons as and when due.

Section 6.9.                      Cooperation with Financial Statements.  The Sellers will cooperate with the Purchaser and provide reasonable assistance to the Purchaser (including causing its personnel to be available for interviews during normal working hours and subject to the Sellers’ reasonable security and confidentiality requirements) in connection with the preparation by the Purchaser or its Affiliates or accountants and other representatives of any historical or pro forma financial statements.

Section 6.10.                      Philippines Bonus Reimbursement.  The Seller’s shall reimburse the Purchaser an amount equal to (x) two-thirds of the actual aggregate amount Green Wire Outsourcing pays to its employees in the Philippines as a bonus for calendar year 2012, which amount shall be determined substantially in accordance with past practices, (the “Philippines Bonus Amount”), less (y) $12,593.02, less (z) the Estimated Philippines Bonus Reimbursement Amount (the “Final Philippines Bonus Reimbursement Amount”).  When the Philippines Bonus Reimbursement Amount has been paid in full to the applicable employees, the Purchaser shall notify the Sellers’ in writing of its calculation of the Final Philippines Bonus Reimbursement Amount.  If the Final Philippines Bonus Amount is a positive amount, then the Purchaser may offset such amount from the amount of its then next payment due to the Sellers under the Purchaser’s Promissory Notes with such offset amount being allocated among the Sellers ratably in accordance with the allocation of the Purchase Price among the Sellers set forth on Schedule 3.3.  If the Final Philippines Bonus Reimbursement Amount is a negative amount, then the Purchaser shall pay such amount to the Sellers with the next payment due to the Sellers under the Purchaser’s Promissory Notes with such offset amount being allocated among the Sellers ratably in accordance with the allocation of the Purchase Price among the Sellers set forth on Schedule 3.3.  The parties agree that the Final Philippines Bonus Reimbursement Amount shall in no event exceed $5,000 either in the positive or the negative.

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Section 6.11.                      Restrictions on ActiveCare Shares.  Except as otherwise provided in Section 4.24(b) the Sellers shall not, without the prior written consent of the Purchaser (which consent shall not be withheld unreasonably), directly or indirectly, sell, offer, contract or grant any option to sell (including, without limitation, any short sale), pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of (each, a “Transfer”) any ActiveCare Shares, options or warrants to acquire ActiveCare Shares, or securities exchangeable or exercisable for or convertible into ActiveCare Shares currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the Sellers (or such spouse or family member), or publicly announce an intention to do any of the foregoing, for a period commencing on the date hereof and continuing through the close of trading six months after the first day of the first full month following the Closing Date.  Thereafter, each Seller shall be permitted to Transfer up to one-third (1/3) of the sum of (i) the number of ActiveCare Shares originally issued to such Seller pursuant to this Agreement plus (ii) the number of ActiveCare Shares transferred to such Seller by any other Seller pursuant to Section 4.24(b), in each successive three month period, without the prior written consent of the Purchaser.  If a Seller elects to not Transfer all or a portion of the ActiveCare Shares he or she is permitted to so Transfer in any three month period, such Seller may Transfer, upon five (5) Business Days written notice to the Purchaser, all or a portion of such un-Transferred ActiveCare Shares in any subsequent three month period, in addition to the ActiveCare Shares that could otherwise be Transferred by the Seller in such subsequent three month period.  At the end of the third (3rd) three-month period, no restrictions on the Transfer of the ActiveCare Shares other than those imposed by Rule 144 of the Securities Act or other applicable securities laws shall exist, and no notice to Purchaser of a Seller’s intent to Transfer the ActiveCare Shares shall be required.

Section 6.12.                      [Reserved.]

Section 6.13.                      Retained Employees.  Within twenty (20) days following Closing, the Purchaser shall deliver to Andrew Ball and David Lee (each a “Retained Employee”) offers of employment on terms reasonably acceptable to the Retained Employees and the Purchaser.

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ARTICLE VII

DELIVERIES AT CLOSING

Section 7.1.                      Deliveries by the Sellers.

At the Closing, the Sellers, as applicable, shall deliver the following items to Purchaser, each in form and substance satisfactory to Purchaser, in its sole discretion:

(a)           Consents. All written consents (or waivers with respect to thereto) as described on Schedule 4.11 (all such consents and waivers shall be in full force and effect);

(b)           Sellers’ Debt; Release of Liens. Evidence of satisfaction of all obligations for Sellers’ Debt (including any interest, prepayment premiums or penalties and other fees and charges), including (i) true, correct and complete payoff letters, which shall state that, if payment of the amounts set forth in the payoff letters is paid to the parties entitled to such amounts on the Closing Date, such parties will release any and all Liens that they or their Affiliates may have with respect to the Sellers or any of their respective assets and will take all actions necessary to effectuate such release (including executing and delivering to the Purchaser all reasonably necessary documentation in form suitable for filing with all appropriate Governmental Entities) and (ii) satisfactory evidence that all Liens affecting the Assets have been released;

(c)           [Reserved.]

(d)           Ancillary Documents.

(i)           executed deeds, bills of sale, instruments of assignment, certificates of title and other conveyance documents, dated the Closing Date, transferring to the Purchaser all of the Sellers’ right, title and interest in and to the Assets, together with possession of the Assets, including the Bill of Sale (the “Bill of Sale”) substantially in the form of Exhibit F attached hereto;

(ii)           documents evidencing the assignment of the Assumed Contracts and the assignment of any Permits, including the Assignment and Assumption Agreement (the “Assignment and Assumption Agreement”) substantially in the form of Exhibit G attached hereto;

(iii)           a copy of resolutions of the managers and or the members of the Sellers, as applicable, authorizing the execution, delivery and performance of this Agreement by the Sellers and a certificate executed by the managers of the Sellers, dated the Closing Date, certifying that such resolutions were duly adopted and are in full force and effect;

(iv)           copies of all filings and/or notices, if any, made by the Sellers with Governmental Entities in connection with the consummation of the transactions contemplated by this Agreement and the Sellers’ Ancillary Documents;

(v)           a certificate of the Secretary of State (or other applicable office) of the state in which each of the Sellers is organized and qualified to do business, dated as of a date not more than thirty (30) Business Days prior to the Closing Date, certifying as to the existence of the Sellers;

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(vi)           a list of all customers on service with the Sellers as of the Closing Date (the “Customer List”);

(vii)           duly executed and delivered Investor Questionnaires from each Seller;

(viii)           a duly executed Security Agreement; and

(ix)           all other documents required to be entered into by the Sellers pursuant to this Agreement or reasonably requested by the Purchaser to convey the Assets to the Purchaser or to otherwise consummate the transactions contemplated by this Agreement.

Section 7.2.                      Deliveries by the Purchaser to the Sellers.

At the Closing, the Purchaser shall deliver the following items to the Sellers:

(a)           documents evidencing the assumption of the Assumed Contracts, the acceptance of Permits and the assumption of the Assumed Liabilities, including the Assignment and Assumption Agreement;

(b)           a copy of the resolutions of the board of directors of the Purchaser and ActiveCare authorizing the execution, delivery and performance of this Agreement by the Purchaser and ActiveCare and a certificate of its secretary or assistant secretary, dated as of the Closing Date, that such resolutions were duly adopted and are in full force and effect;

(c)           [Reserved.]

(d)           all other documents required to be entered into or delivered by the Purchaser at or prior to the Closing pursuant to this Agreement or the Purchaser Ancillary Documents;

(e)           the Purchaser’s Promissory Notes, duly executed by Purchaser;

(f)           the Security Agreement, duly executed by the Purchaser; and

(g)           the Guaranty, duly executed by ActiveCare.

No later than four (4) Business Days following the Closing Date, the Purchaser shall deliver stock certificates representing the ActiveCare Shares.

ARTICLE VIII

CLOSING

The closing of the transactions contemplated by this Agreement (the “Closing”), unless another date is agreed to by the Parties, shall take place at the offices of Durham Jones & Pinegar, PC, 111 East Broadway, Suite 900, Salt Lake City, Utah 84111 on November __, 2012 (the “Closing Date”) or at such other place as the Parties may agree, and will be effective as of the Effective Time.

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ARTICLE IX

INDEMNIFICATION

Section 9.1.                      Indemnification Obligations of the Sellers.

Subject to the limitations set forth in Sections 9.3 and 9.5, and the provisions of Section 9.6, the Sellers will, jointly and severally, indemnify, defend and hold harmless the Purchaser and its Affiliates, each of their respective officers, directors, employees, agents and representatives and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Purchaser Indemnified Parties”) from, against and in respect of any and all claims, Liabilities, losses (whether or not involving a third party claim), costs, expenses, penalties, fines and judgments (at equity or at law) and damages whenever arising or incurred (including, without limitation, amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses) arising out of, relating to or in connection with:

(a)           any Liability of the Sellers arising out of the ownership or operation of the Assets prior to the Effective Time, except the Assumed Liabilities;

(b)           any breach or inaccuracy of any representation or warranty made by the Sellers in this Agreement or in the Sellers’ Ancillary Documents;

(c)           any breach of any covenant, agreement or undertaking made by the Sellers in this Agreement or in the Sellers’ Ancillary Documents;

(d)           any fraud or willful misconduct of the Sellers in connection with this Agreement or the Sellers’ Ancillary Documents; and

(e)           any fees, expenses or other payments incurred or owed by the Sellers to any brokers, financial advisors or comparable other Persons retained or employed by the Sellers in connection with the transactions contemplated by this Agreement, and the Sellers’ Ancillary Documents.

The claims, Liabilities, losses (including, without limitation, diminution in value of the Assets), costs, expenses (including reasonable attorneys’ and accountants’ and other professionals’ fees and litigation expenses), penalties, fines and damages as to which the Purchaser Indemnified Parties are entitled to indemnification are hereinafter collectively referred to as the “Purchaser Losses.”

Section 9.2.                      Indemnification Obligations of the Purchaser.

Subject to the limitations set forth in Sections 9.3 and 9.5, the Purchaser and ActiveCare will, jointly and severally, indemnify, defend and hold harmless the Sellers and their respective managers, officers, members, employees, agents and representatives (collectively, the “Sellers’ Indemnified Parties”) from, against and in respect of any and all claims, Liabilities, costs, losses (whether or not involving a third party claim), expenses, penalties, fines and judgments (at equity or at law) and damages whenever arising or incurred (including, without limitation, amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses) arising out of or incurred (including without limitation, amounts paid in settlement costs of investigation and reasonable attorneys’ fees and expenses) arising out of, relating to or in connection with:

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(a)           the Purchaser’s failure to perform, discharge or satisfy the Assumed Liabilities as such Assumed Liabilities come due;

(b)           any breach or inaccuracy of any representation or warranty made by the Purchaser or ActiveCare in this Agreement or in any of the Purchaser Ancillary Documents;

(c)           any breach of any covenant, agreement or undertaking made by the Purchaser in this Agreement or in any of the Purchaser Ancillary Documents; or

(d)           any fraud or willful misconduct of the Purchaser in connection with this Agreement or the Purchaser Ancillary Documents.

The claims, Liabilities, costs, expenses (including reasonable attorneys’ fees and accountants and other professional fees and litigation expenses), penalties, fines and damages of the Sellers’ Indemnified Parties described in this Section 9.2 as to which the Sellers’ Indemnified Parties are entitled to indemnification are hereinafter collectively referred to as “Sellers’ Losses.”

Section 9.3.                      Limitations on Indemnification.

(a)           Indemnity Baskets for the Sellers. Subject to Section 9.3(c), the Purchaser Indemnified Parties shall not have the right to be indemnified pursuant to Section 9.1(c) for breaches of representations and warranties unless and until the Purchaser Indemnified Parties shall have incurred on a cumulative basis aggregate Losses in an amount exceeding $25,000 (the “Indemnity Threshold”), in which event the right to be indemnified shall apply to all such Losses, including the amount of the Indemnity Threshold.

(b)           Exceptions to the Indemnity Limitations for the Sellers.

(i)The amount of any Loss for which the Purchaser Indemnified Parties shall be entitled to recover under Section 9.1 shall be net of any insurance proceeds actually received by the Purchaser Indemnified Parties (net of enforcement costs, deductibles, premium increases and other similar items) in respect of such Losses.

(ii)           The amount of Losses for which the Purchaser Indemnified Parties shall be entitled to recover under Section 9.1 shall not exceed $500,000 except any indemnification obligation pursuant to Section 9.1(d) shall not be subject to such limitation.

(c)           Indemnity Limitations for the Purchaser. The Sellers’ Indemnified Parties shall not have the right to be indemnified pursuant to Section 9.2(c) for breaches of representations and warranties unless and until the Seller Indemnified Parties shall have incurred on a cumulative basis aggregate Losses in an amount exceeding the Indemnity Threshold, in which event the right to be indemnified shall apply to all such Losses, including the amount of the Indemnity Threshold.

Section 9.4.                      Indemnification Procedure.

(a)Promptly after receipt by a Purchaser Indemnified Party or a Sellers’ Indemnified Party (hereinafter collectively referred to as an “Indemnified Party”) of notice by a third party (including any Governmental Entity) of any complaint or the commencement of any audit, investigation, action or proceeding with respect to which such Indemnified Party may be entitled to receive payment from the other Party for any Purchaser Losses or Sellers’ Losses, as the case may be, such Indemnified Party will notify the Purchaser or the Sellers, as the case may be (the “Indemnifying Party”); provided, however, that the failure to so notify the Indemnifying Party will relieve the Indemnifying Party from Liability under this Agreement with respect to such claim only if, and only to the extent that, such failure to notify the Indemnifying Party results in the forfeiture by the Indemnifying Party of rights and defenses otherwise available to the Indemnifying Party with respect to such claim.  Such notice shall contain a copy of such complaint or other notice of commencement. The Indemnifying Party will have the right, upon written notice delivered to the Indemnified Party within ten (10) days thereafter of assuming full responsibility for any Purchaser Losses or Sellers’ Losses, as the case may be, resulting from such audit, investigation, action or proceeding, to assume the defense of such audit, investigation, action or proceeding, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel.  If, however, the Indemnifying Party declines or fails to assume the defense of the audit, investigation, action or proceeding on the terms provided above or to employ counsel reasonably satisfactory to the Indemnified Party, in either case within such ten (10) day period, then such Indemnified Party may employ counsel to represent or defend it in any such audit, investigation, action or proceeding and the Indemnifying Party will pay the reasonable and documented fees and disbursements of such counsel as incurred; provided, however, that the Indemnifying Party will not be required to pay the fees and disbursements of more than one (1) counsel for all Indemnified Parties in any jurisdiction in any single audit, investigation, action or proceeding. In any audit, investigation, action or proceeding with respect to which indemnification is being sought hereunder, the Indemnified Party or the Indemnifying Party, whichever is not assuming the defense of such action, will have the right to participate in such matter and to retain its own counsel at such Party’s own expense.  The Indemnifying Party or the Indemnified Party, as the case may be, will at all times use reasonable efforts to keep the Indemnifying Party or the Indemnified Party, as the case may be, reasonably apprised of the status of the defense of any matter the defense of which they are maintaining and to cooperate in good faith with each other with respect to the defense of any such matter.

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(b)           No Indemnified Party may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder without the prior written consent of the Indemnifying Party, unless (i) the Indemnifying Party fails to assume and maintain the defense of such claim pursuant to Section 9.4(a) or (ii) such settlement, compromise or consent includes an unconditional release of the Indemnifying Party from all Liability arising out of such claim. An Indemnifying Party may not, without the prior written consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless (i) such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all Liability arising out of such claim, (ii) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Indemnified Party and (iii) does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s Affiliates.

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(c)           In the event any Indemnified Party should have a claim for indemnity against any Indemnifying Party that does not involve a third party claim, the Indemnified Party shall deliver notice of such claim with reasonable promptness to the Indemnifying Party.  Such notice shall specify the basis for such claim.  The failure by any Indemnified party so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any Liability that it may have to such Indemnified Party with respect to any claim made pursuant to this Section 9.4(c), it being understood that notices for claims in respect of a breach of a representation or warranty must be delivered prior to the expiration of the survival period for such representation or warranty under Section 9.5.  If the Indemnifying Party does not notify the Indemnified Party within thirty (30) calendar days following its receipt of such notice that the Indemnifying Party disputes its liability to the Indemnified Party under this Article IX, or the amount thereof, the claim specified by the Indemnified Party in such notice shall be conclusively deemed a liability of the Indemnifying Party under this Article IX, and the Indemnifying Party shall pay the amount of such Liability to the Indemnified Party on demand or, in the case of any notice in which the amount of the claim (or any portion of the claim) is estimated, on such later date when the amount of such claim (or such portion of such claim) becomes finally determined. If the Indemnifying Party has timely disputed its liability with respect to such claim as provided above, as promptly as possible, such Indemnifying Party and the Indemnified Party will establish the merits and amount of such claim (by mutual agreement, litigation, arbitration or otherwise) and, within five (5) Business Days of the final determination of the merits and amount of such claim, the Indemnifying Party will pay to the Indemnified Party immediately available funds in an amount equal to such claim as determined hereunder.

Section 9.5.                      Claims Period.

For purposes of this Agreement, a “Claims Period” shall be the period during which a claim for indemnification may be asserted under this Agreement by an Indemnified Party.  The Claims Periods under this Agreement shall begin on the date hereof and terminate as follows:

(a)           with respect to Purchaser Losses or Sellers’ Losses arising out of (x) any covenant or obligation to be performed or complied with prior to the Closing, or (y) a representation or warranty other than in Sections 4.1 (Organization; Ownership), 4.2 (Authorization), 4.3 (Absence of Restrictions and Conflicts) or4.5 (second sentence only) (Title to Assets; Related Matters), the Claims Period shall terminate on the date that is eighteen (18) months after the Closing Date; and

(b)           with respect to all other Purchaser Losses or Sellers’ Losses, the Claims Period shall terminate upon the expiration of the applicable statute of limitation with respect to the underlying claim.

Notwithstanding the foregoing, if, prior to the close of business on the last day of the applicable Claims Period, an Indemnifying Party shall have been properly notified of a claim for indemnity hereunder specifying the factual basis of such claim in reasonable detail and such claim shall not have been finally resolved or disposed of at such date, such claim shall continue to survive and shall remain a basis for indemnity hereunder until such claim is finally resolved or disposed of in accordance with the terms hereof.  The Sellers’ indemnification obligations under this Article IX include, without limitation, the obligation to pay and reimburse the Purchaser for all Purchaser Losses, whether or not arising due to third party claims.

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Section 9.6. Payment of Claims; Obligation to Set off.

(a)           Subject to the limitations set forth in Section 9.3, any obligation of the Sellers, as applicable, to indemnify any Purchaser Indemnified Party under this Article XI shall be satisfied by the Sellers, jointly and severally, by prompt payment in cash from the Sellers to the Purchaser or the appropriate Purchaser Indemnified Party, provided the aggregate amount the Sellers shall be obligated to pay in cash shall be limited to the difference between (x) the aggregate amount of cash previously received by the Sellers at the time such indemnification claim arises from the Purchaser in respect of payments of principal of and interest on Purchaser’s Promissory Notes and from the sale by the Sellers of the ActiveCare Shares and (y) the aggregate amount of cash payments made to any Purchaser Indemnified Party in respect of any indemnification claims (the “Cash Cap”).

(b)           Thereafter, to the extent the Sellers make cash payments in the amount of the Cash Cap and the applicable indemnification claim has not been satisfied, the Purchaser shall satisfy such remaining indemnification obligation by reducing any continuing payment obligation (including without limitation principal or interest) to the Sellers under the Purchaser’s Promissory Notes (ratably, based upon the amount of the Purchase Price allocated to each Seller) (a “Note Set Off”). The Purchaser shall deliver a written notice to the Sellers that sets forth the amount of any Note Set off and the basis therefor.

(c)           For any remaining indemnification obligation not satisfied first pursuant to Section 9.6(a) or (b), the Sellers, jointly and severally, will satisfy such obligation by prompt payment in cash from the Sellers to the Purchaser or the appropriate Purchaser Indemnified Party.

(d)           The provisions of this Section 9.6 shall not apply to indemnification obligations pursuant to Section 9.1(d).

Section 9.7.                      Sole Remedy for Breach of Representation or Warranty.

Except with respect to claims in connection with fraud or intentional misrepresentation, upon and after the Closing, the provisions of Article IX of this Agreement will be the sole and exclusive remedy available to any party to this Agreement for any misstatement or omission by any other party relating to any representation or warranty contained herein, and each party hereby unconditionally waives any other rights that it may have at law or in equity for any misstatement or omission by any other party from any representation or warranty contained herein.

ARTICLE X

MISCELLANEOUS PROVISIONS

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Section 10.1.                      Notices.

All notices, communications and deliveries under this Agreement will be made in writing signed by or on behalf of the Party making the same, will specify the Section under this Agreement pursuant to which it is given or being made, and will be delivered personally or by facsimile or other electronic transmission or sent by registered or certified mail (return receipt requested) or by next day courier (with evidence of delivery and postage and other fees prepaid) as follows:

To the Purchaser:

GWire Corporation

c/o ActiveCare, Inc.

5095 West 2100 South

Salt Lake City, UT 84120

801-974-9474 (Telephone)

801-974-9553 (Facsimile)

E-Mail: macton@activecare.com

with a copy to:

Durham Jones & Pinegar, PC

111 East Broadway, Suite 900

Salt Lake City, Utah 84111

Attn:   Kevin R. Pinegar

Facsimile: 801-415-3500

E-Mail: kpinegar@djplaw.com

To the Sellers:

Green Wire, LLC

Rapid Medical Response, LLC

Orbit Medical Response, LLC

c/o BPE Management, LLC

Attn: Shawn Ross

4424 South 700 East, Suite 200

Salt Lake City, Utah 84107

Facsimile: 801-713-5347

E-mail: sross@tibromedical.com

with a copy (which shall not constitute notice) to:

Dorsey & Whitney LLP

136 So. Main Street, Suite 1000

Salt Lake City, Utah 84101

Attn:  Samuel P. Gardiner

Facsimile:  (801) 880-6941

Email:  gardiner.sam@dorsey.com

or to such other representative or at such other address of a Party as such Party may furnish to the other Parties in writing.  Any notice which is delivered personally or by facsimile or other electronic transmission in the manner provided herein shall be deemed to have been duly given to the Party to whom it is directed upon actual receipt by such Party or its agent.  Any notice which is addressed and mailed in the manner herein provided shall be conclusively presumed to have been duly given to the Party to which it is addressed at the close of business, local time of the recipient, on the fourth Business Day after the day it is so placed in the mail (or on the first Business Day after placed in the mail if sent by overnight courier) or, if earlier, the time of actual receipt.

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Section 10.2.                      Schedules and Exhibits.

The Schedules and Exhibits to this Agreement are hereby incorporated into this Agreement and are hereby made a part of this Agreement as if set out in full in this Agreement.

Section 10.3.                      Assignment; Successors in Interest.

No assignment or transfer by any Party of such Party’s rights and obligations under this Agreement will be made except with the prior written consent of the other Parties to this Agreement; provided, however, that the Purchaser may assign any or all of its rights, obligations and interests hereunder without any such written consent to any Affiliate of the Purchaser or to any of the Purchaser’s lenders as security for any obligations arising in connection with the financing of the transactions contemplated hereby; provided, further, that Purchaser unconditionally guarantees the full and timely performance by each such assignee of all of Purchaser’s obligations hereunder to the Sellers, Sellers and the Seller Representative (or any combination thereof). Notwithstanding the foregoing, any of the Sellers may, without the prior written consent of and upon reasonable notice to the Purchaser, assign any or all of its rights (but not its obligations) hereunder to any other of the Sellers, or in the case of the Sellers, in the course of bona fide estate planning or estate administration. This Agreement will be binding upon and will inure to the benefit of the Parties and their successors and permitted assigns, and any reference to a Party will also be a reference to a successor or permitted assign.

Section 10.4.                      Number; Gender.

Whenever the context so requires, the singular number will include the plural and the plural will include the singular, and the gender of any pronoun will include the other genders.

Section 10.5.                      Captions.

The titles, captions and table of contents contained in this Agreement are inserted in this Agreement only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement. Unless otherwise specified to the contrary, all references to Articles and Sections are references to Articles and Sections of this Agreement and all references to Schedules or Exhibits are references to Schedules and Exhibits, respectively, to this Agreement.

Section 10.6.                      Controlling Law; Amendment.

This Agreement will be governed by and construed and enforced in accordance with the internal laws of the State of Utah without reference to its choice of law rules. This Agreement may not be amended, modified or supplemented except by written agreement of the Parties.

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Section 10.7.                      Consent to Jurisdiction, Etc.

Except as otherwise expressly provided in this Agreement, the Parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought only to the exclusive jurisdiction of the courts of the State of Utah or the federal courts located in the State of Utah, and each of the Parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  The Parties agree that, after a legal dispute is before a court as specified in this Section 10.7, and during the pendency of such dispute before such court, all actions, suits, or proceedings with respect to such dispute or any other dispute, including without limitation, any counterclaim, cross-claim or interpleader, shall be subject to the exclusive jurisdiction of such court.  Process in any such suit, action or Proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court.  Each Party hereto agrees that a final judgment in any action, suit or Proceeding described in this Section 10.7 after the expiration of any period permitted for appeal and subject to any stay during appeal shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable laws.

Section 10.8.                      WAIVER OF JURY TRIAL.

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 10.9.                      Severability.

Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the Parties waive any provision of law which renders any such provision prohibited or unenforceable in any respect.

Section 10.10.                                Counterparts.

This Agreement may be executed in two (2) or more counterparts (delivery of which may be by facsimile or via email as a portable document format (.pdf)), each of which will be deemed an original, and it will not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one (1) of such counterparts.

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Section 10.11.                                Enforcement of Certain Rights.

Nothing expressed or implied in this Agreement is intended, or will be construed, to confer upon or give any Person other than the Parties, and their successors or permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, or result in such Person being deemed a third party beneficiary of this Agreement.

Section 10.12.                                Waiver.

Any agreement on the part of a Party to any extension or waiver of any provision of this Agreement will be valid only if set forth in an instrument in writing signed on behalf of such Party. A waiver by a Party of the performance of any covenant, agreement, obligation, condition, representation or warranty will not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by a Party of a condition to Closing will not be considered as a waiver of any rights to indemnification that may be claimed by such Party with respect to the matters relating to such waived condition. A waiver by any Party of the performance of any act will not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time.

Section 10.13.                                Integration.

This Agreement and the documents executed pursuant to this Agreement supersede all negotiations, agreements and understandings (both written and oral) among the Parties with respect to the subject matter of this Agreement and constitutes the entire agreement between and among the Parties. The Parties hereby agree that for purposes of this Agreement (including, but not limited to, indemnification obligations) neither Party has made to the other any representations, warranties or covenants or other disclosures other than those contained in this Agreement.

Section 10.14. Cooperation Following the Closing.

Following the Closing, each of the Parties shall deliver to the others such further information and documents and shall execute and deliver to the others such further instruments and agreements as the other Party shall reasonably request to consummate or confirm the transactions provided for in this Agreement, to accomplish the purpose of this Agreement or to assure to the other Party the benefits of this Agreement.

Section 10.15.                                Transaction Costs.

Except as provided above or as otherwise expressly provided herein, (a) the Purchaser will pay its own fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement, including the fees, costs and expenses of its financial advisors, accountants and counsel, and (b) the Sellers will pay the fees, costs and expenses of the Sellers, the Seller Representative and the Sellers incurred in connection with this Agreement and the transactions contemplated by this Agreement, including the fees, costs and expenses of their financial advisors, accountants and counsel.

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Section 10.16.                                Interpretation; Constructions.

(a)           The term “Agreement” means this agreement together with all Schedules and Exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. Unless the context otherwise requires, words importing the singular shall include the plural, and vice versa. The use in this Agreement of the term “including” means “including, without limitation.”  The words “herein”, “hereof,” “hereunder”, “hereby”, “hereto”, “hereinafter”, and other words of similar import refer to this Agreement as a whole, including the Schedules and Exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular article, section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to articles, sections, subsections, clauses, paragraphs, schedules and exhibits mean such provisions of this Agreement and the Schedules and Exhibits attached to this Agreement, except where otherwise stated. The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require.  The use in this Agreement of the terms “furnished,” “provided,” “delivered,” “made available” and similar terms refers, with respect to the provision of information and documents to the Purchaser, in addition to the physical delivery of such information or documents to the Purchaser, to such information and/or documents as are made available by the Sellers, or any of their respective employees, consultants, advisors or attorneys.

(b)           The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

(c)           The Sellers hereby acknowledge and agree that he, she or it has had the opportunity to consult with his, her or its own counsel with respect to the subject matter of this Agreement, has read and understands all of the provisions of this Agreement (including the Schedules and Exhibits to this Agreement) and has had the opportunity to ask questions of, and to seek additional information from, the Purchaser with respect to each of the matters set forth in this Agreement (including the Schedules and Exhibits to this Agreement).

[Signature page follows]

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 IN WITNESS WHEREOF, the Parties have caused this Asset Purchase Agreement to be duly executed, as of the date first above written.

SELLERS

RAPID MEDICAL RESPONSE, LLC

By:

Name:

Title:

GREEN WIRE, LLC

By:

Name:

Title:

ORBIT MEDICAL RESPONSE, LLC

By:

Name:

Title:

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PURCHASER

GWIRE CORPORATION

By:

Name:

Title:

The undersigned hereby agree to be bound by the provisions of Section 6.4 of this Agreement.

________________________

Rob Gallup

_________________________

Shawn Ross

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EXHIBIT A

FORM OF PURCHASERS’ PROMISSORY NOTE

46

EXHIBIT B

SECURITY AGREEMENT

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EXHIBIT C

GUARANTY

48

EXHIBIT D

OWNERSHIP PERCENTAGES OF SELLERS

49

EXHIBIT E

INVESTOR QUESTIONNAIRE

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EXHIBIT F

BILL OF SALE

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EXHIBIT G

ASSIGNMENT AND ASSUMPTION AGREEMENT

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EX-10.2

Exhibit 10.2

SECURED PROMISSORY NOTE

$1,713,000.00  November __, 2012

THIS SECURED PROMISSORY NOTE (this “Note”) is made by GWIRE CORPORATION, a Utah corporation (“Maker”), having an address of 5095 West 2100 South, Salt Lake City, Utah 84120, to and in favor of Green Wire, LLC, a Utah limited liability company (“Payee” or “Holder”), having an address at 4424 South 700 East, Suite 200, Salt Lake City, Utah 84107.  Maker has executed and delivered this Note pursuant to the terms of that certain Asset Purchase Agreement dated as of even date herewith (the “Purchase Agreement”), by and among Maker, as Purchaser, and Payee, as a Seller along with ActiveCare, Inc. and the other Sellers identified therein.  All promissory notes issued pursuant to the Asset Purchase Agreement are collectively referred to herein as the “Notes.”  Capitalized terms used but not otherwise defined herein, shall have the meaning ascribed to them in the Purchase Agreement.

FOR VALUE RECEIVED, Maker promises to pay to the Holder or registered assigns, the principal sum of ONE MILLION SEVEN HUNDRED THIRTEEN THOUSAND AND 00/100 DOLLARS ($1,713,000.00), representing 63.67601% of the aggregate principal amount of all of the Notes issued pursuant to the Purchase Agreement, together with interest on the unpaid principal balance thereof at the rate of one fourth of one percent (0.25%) per annum on the basis of a 365-day year, payable in monthly payments of interest and principal in the amount of FORTY-SEVEN THOUSAND SEVEN HUNDRED FIFTY-SEVEN AND 01/100 DOLLARS ($47,757.01), with the first payment commencing on November __, 2012, and subsequent payments continuing on the first day of each calendar month thereafter (each a “Payment Date” and collectively the “Payment Dates”) until 63.67601% of the aggregate principal and accrued interest is paid in full to all Sellers as provided in the Payment Schedule attached as Attachment I.  All payments received on account of this Note shall be applied as follows: First to any costs of collection incurred by Holder in collecting the same; Second, to any late charge; Third, to accrued interest; and Fourth, to principal.  Maker shall pay all payments of principal and interest hereunder in United States currency and shall deliver the same to Holder at the address of Holder set forth above, provided that Holder may direct payment to another address by written notice to Maker at the address of Maker listed above, or such other address of Maker as Maker may advise in writing.

This Note is subject to the following additional provisions:

Section 1.                      Default.

(a)           “Event of Default” wherever used herein means any one or more of the following events or conditions (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i)           any default by Maker in the payment of principal or interest payable in respect of any of the Notes;

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(ii)           any material inaccuracy of any representation or warranty of Maker contained in this Note, the Purchase Agreement, the Security Agreement, the Assignment and Assumption Agreement, or any other document or instrument given, made or entered into by Maker with respect to the sale of the Assets contemplated by the Purchase Agreement (collectively, the “Transaction Agreements”);

(iii)           any failure of Maker to timely observe or perform any material covenant or agreement set forth in this Note or in any other Transaction Agreement, and such failure or breach shall not have been remedied within thirty (30) days after the date on which reasonably detailed notice of such failure or breach shall have been given by Holder or its successor;

(iv)           Maker commences a voluntary case under the United States Bankruptcy Code or insolvency laws as now or hereafter in effect or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against Maker under the Bankruptcy Code and the petition is not dismissed within sixty (60) days, after commencement of such involuntary case; or a “custodian” (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of Maker or Maker commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Maker or there is commenced against Maker any such proceeding that remains undismissed for a period of sixty (60) days; or Maker is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Maker suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty (60) days; or Maker makes a general assignment for the benefit of creditors; or Maker fails to pay, or states that it is unable to pay its debts generally as they become due; or Maker calls a meeting of all of its creditors with a view to arranging a composition or adjustment of its debts; or Maker by any act or failure to act indicates its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by Maker for the purpose of effecting any of the foregoing; or

(v)           Maker is a party to any Change of Control Transaction (as defined in Section 6 below), or agrees to sell or dispose of all or in excess of 49% of its assets (based on book value calculation as reflected in Maker’s most recent financial statements) in one or more transactions (whether or not such sale would constitute a Change of Control Transaction).

(vi)           The maturity of any material indebtedness of Maker (other than the indebtedness on this Note) shall be accelerated or Maker shall fail to pay any such material indebtedness when due or, in the case of indebtedness payable on demand, when demanded, or any event shall occur or condition shall exist and shall have the effect of causing, or permitting the holder of any such indebtedness to cause, such material indebtedness to become due prior to its stated maturity or to realize upon and collateral given as security therefor.  For these purposes, indebtedness of Maker shall be deemed material if it exceeds $25,000 as to any item of indebtedness or in the aggregate for all items of indebtedness with respect to which any of the events described in this paragraph has occurred.

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(vii)           A judgment or judgments for the payment of money in excess of the sum of $25,000 in the aggregate shall be rendered against Maker and Maker shall not discharge the same or provide for its discharge, or procure a stay of execution thereof, prior to any execution on such judgment, within 30 days from the date of entry thereof, and within said period of 30 days, or such longer period during which execution shall be stayed, appeal therefrom and cause the execution to be stayed during such appeal.

(viii)           Any execution or attachment shall be issued whereby any substantial part of the property of Maker shall be taken or attempted to be taken and the same shall not have been vacated or stayed within 30 days after the issuance thereof.

Section 2.                      Effect of Default.

(a)           Upon the occurrence of an Event of Default, Holder may (i) without further notice or demand (which are hereby waived), declare the entire unpaid principal amount of this Note and all accrued interest thereon immediately due and payable, except that upon the occurrence of an Event of Default described in Section 1(a)(iv), the entire principal amount and all accrued interest thereon shall automatically be deemed to be immediately due and payable without any action by Holder; and (ii) proceed to protect and enforce its rights either by suit in equity and/or by action at law, or by other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in this Note or any other Transaction Agreement or in aid of the exercise of any power or right granted by this Note or any other Transaction Agreement or to enforce any other legal or equitable right of Holder.

(b)           Upon the occurrence of an Event of Default, as defined herein, all amounts due hereunder shall bear interest at the rate of eighteen percent (18%) per annum from the day an Event of Default occurs through and including the date of payment of any delinquent amount.

Section 3.                      Late Fee.  If any installment or payment provided to be made hereunder has not been paid in full by the Payment Date for such payment, Holder, in addition to any and all other remedies, shall have the right to receive from Maker a late charge equal to five percent (5%) of the amount of the delinquent payment.

Section 4.                      Interest Rate Limitation. The parties intend to conform strictly to the applicable usury laws in effect from time to time during the term hereof.  Accordingly, if any transaction contemplated hereby would be usurious under such laws, then notwithstanding any other provision hereof: (i) the aggregate of all interest that is contracted for, charged, or received under this Agreement shall not exceed the maximum amount of interest allowed by applicable law (the “Highest Lawful Rate”), and any excess shall be promptly credited to Maker by Holder (or, to the extent that such consideration shall have been paid, such excess shall be promptly refunded to Maker by Holder); (ii) neither Maker nor any other Person now or hereafter liable hereunder shall be obligated to pay the amount of such interest to the extent that it is in excess of the Highest Lawful Rate; and (iii) the effective rate of interest shall be reduced to the Highest Lawful Rate.

Section 5.                      Prepayment. Maker shall have the right to prepay this Note in whole or in part at any time.  Any such prepayment shall be applied to then accrued interest and then principal but shall not affect the amount of each payment of principal and interest otherwise required hereunder except in the case of any prepayment in full of this Note, the amount due and payable in full satisfaction of this Note shall be determined as if the Maker’s obligation under this Note were to pay 63.67601% of the aggregate principal and accrued interest that would be payable to the Sellers according to the Hypothetical Payment Schedule attached as Attachment II (and as if the annual interest rate applicable to this Note were the nominal annual rate set forth in such Hypothetical Payment Schedule).

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Section 6.                      Definitions.  For the purposes hereof, the following terms shall have the following meanings:

(a)           “Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Utah are authorized or required by law or other government action to close.

(b)           “Change of Control Transaction” means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934) of in excess of 49% of the voting securities of Maker, or (ii) the merger of Maker with or into another entity, consolidation or sale of all or substantially all of the assets of Maker in one or a series of related transactions, unless following such transaction, the holders of Maker’s securities continue to hold a majority of the total outstanding voting securities of the entity surviving such transaction or series of transactions.  The execution by Maker of an agreement to which Maker is a party or by which it is bound providing for any of the events set forth above in clauses (i) or (ii) above shall constitute the occurrence of an Event of Default without regard to whether an actual Change of Control Transaction in fact occurs.

Section 7.                      Substitution.  If this Note is mutilated, lost, stolen or destroyed, Maker shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to Maker.

Section 8.                      Choice of Law; Venue.  This Note shall be governed by and construed in accordance with the laws of the State of Utah.  Maker consents to the exclusive jurisdiction of the federal courts or the state courts of the State of Utah sitting in Salt Lake County, Utah in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, Maker shall reimburse Holder for any reasonable legal fees and disbursements incurred by Holder in enforcement of or protection of any of its rights under this Note or the Security Agreement. MAKER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS NOTE.

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Section 9.                      Waiver.  Any waiver by Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note.  Any waiver must be in writing.

Section 10.                      Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

Section 11.                      Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

Section 12.                      Notices.  All notices, requests, demands, claims, and other communications hereunder will be in writing and shall be given in the manner set forth in the Purchase Agreement.

Section 13.                      Security.  The obligation of Maker for payment of principal, interest and all other sums hereunder, in the event of default by Maker to perform hereunder, is secured by the Security Agreement, by reference made a part of the terms of this Note.

Section 14.                      Waiver of Presentment. The Maker hereby waives presentment for payment, notice of dishonor, protest and notice of protest.

Section 15.                      Costs of Collection.  If this Note is not paid when due, the Maker shall pay all of the Payee’s costs of collection including reasonable attorneys’ fees.

Section 16.                      Amendment.  Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of the Notes representing a majority of the aggregate face value of all Notes then outstanding; provided, however, that the written consent of any holder of a Note that would be adversely affected by such amendment or waiver in a manner disproportionate to the other holders of Notes shall be also be required.

[Signature page follows immediately]

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IN WITNESS WHEREOF, Maker has caused this Secured Promissory Note to be duly executed by an officer duly authorized for such purpose, as of the date first above indicated.

MAKER:	GWIRE CORPORATION
By:
Its:

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Attachment I

Payment Schedule

7

Attachment II

Hypothetical Payment Schedule

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EX-10.3

Exhibit 10.3

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”) is dated as of November ___, 2012, and is entered into by and between GWire Corporation, a Utah corporation (the “Company”); Rapid Medical Response, LLC, a Utah limited liability company (“Rapid”); Orbit Medical Response, LLC, a Utah limited liability company (“Response”);  and Green Wire, LLC, a Utah limited liability company (“Green Wire”).  Rapid, Response and Green Wire are referred to individually herein as a “Secured Party” and collectively as the “Secured Parties.”  Green Wire shall act as the collateral agent (the “Collateral Agent”) for the Secured Parties.

WHEREAS, the Company has entered into an Asset Purchase Agreement dated of even date herewith by and among the Company and the Secured Parties (the “Purchase Agreement”), pursuant to which the Company issued Secured Promissory Notes in the aggregate principal amount of $2,690,181 (the “Loan Amount”) to the Secured Parties (as they may hereafter be further amended, restated, supplemented or otherwise modified from time to time, the “Notes”).

WHEREAS, it is a condition precedent to the Secured Parties’ purchase of the Notes pursuant to the Purchase Agreement that the Company shall have granted the security interest and undertaken the obligations contemplated by this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises, the agreements and covenants set forth herein, and in order to induce the Secured Parties to purchase the Notes, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1.Security Interest.  The Company hereby pledges to the Collateral Agent and grants to the Collateral Agent, for the ratable benefit of each Security Party, a security interest (a “Security Interest”) in all of the Company’s right, title, interest, claims and demands in and to the Assets as defined in Section 2.1 and further described in Section 2.2 of the Purchase Agreement, by this reference made a part hereof, and restated on the attached Schedule I (the “Collateral”), together with:

(a)without limiting the generality of the foregoing, in addition to the customer lists and relationships included in the Assets, all additional customers obtained by the Company from the Effective Time (as defined in the Purchase Agreement) until the Closing Date (as defined in the Purchase Agreement);

(b)all books, records, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; and

(c)all proceeds, products, rents and profits of or from any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent or any Secured Party is the loss payees thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral.  For purposes of this Agreement, the term “proceeds” includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.

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Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and the Company shall not be deemed to have granted a security interest in (i) any item of Collateral that is leased to it and for which it has not exercised any applicable purchase option; (ii) any of its rights or interests in any license, contract or agreement to which it is a party or any of its rights or interests thereunder to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under, any license, contract or agreement to which it is a party (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406 of the UCC or any other applicable law (including the United States Bankruptcy Code (the “Bankruptcy Code”)) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and the Company shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect; or (iii) any real property leasehold.

2.Priority.  It is intended that the Security Interest will be of equal priority as among, and for the ratable benefit of, the Secured Parties.

3.Obligations.  This Security Interest is given as security for all indebtedness and obligations owed by the Company to each Secured Party, whether now existing or hereafter incurred, under this Agreement, the Purchase Agreement, or the Notes, together with all extensions, modifications, or renewals thereof (collectively, the “Obligations”).

4.Title; Filing.  The Company warrants that it is the owner of the Collateral free and clear of all Material Liens (as defined below), claims, encumbrances, and security interests.  The Company authorizes the Collateral Agent to file financing statements, continuation statements, amendments, and other similar documents and instruments covering the Collateral and containing such legends as the Collateral Agent shall deem necessary or desirable to perfect or protect the interests of the Secured Parties in the Collateral.  The Company agrees to pay all taxes, fees and costs (including attorneys’ fees) paid or incurred by the Collateral Agent in connection with the preparation, filing or recordation thereof.  The Company waives receipt of any such financing statements that are registered by the Collateral Agent and any confirmation of registration.  On written demand by the Collateral Agent, the Company shall (i) furnish further assurance of title, (ii) execute any written instrument or do any other acts reasonably necessary to make effective the purposes and provisions of this Agreement, (iii) execute any instrument or statement required by law or otherwise in order to perfect or continue in full force and effect the security interest of the Secured Parties in the Collateral and pay all costs of filing in connection therewith, and (iv) join with the Collateral Agent in executing one or more financing and continuation statements pursuant to the Uniform Commercial Code (the “UCC”) in form satisfactory to the Collateral Agent and will pay the cost of filing the same or filing or recording this Agreement in all public offices wherever filing or recording is deemed by the Collateral Agent to be necessary or desirable.  At the option of the Collateral Agent, a carbon, photographic or other reproduction of this Agreement or of a financing statement executed in connection herewith shall be sufficient as and constitute a financing statement.  “Material Liens,” for purposes of this Agreement, shall mean liens of any kind other than liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other similar liens imposed by law arising in the ordinary course of business for sums not yet due and payable, and other liens or imperfections on property other than liens securing indebtedness which do not adversely affect title to, detract from the value of, or impair the existing use of or marketability of, the property affected by such lien or imperfection.

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5.Care of Collateral; Performance.  The Company will: (a) keep in effect all licenses, permits and franchises required by law or contract relating to the Company’s business (if applicable), property, or the Collateral; maintain insurance on the Collateral; (b) keep the Collateral in good repair (other than ordinary wear and tear) and be responsible for any loss or damage to it; (c) at all times warrant and defend the Company’s ownership and possession of the Collateral; (d) keep the Collateral free from all Material Liens, claims, encumbrances and security interests (except liens created under this Agreement); (e) pay when due all taxes, license fees, and other charges upon the Collateral or upon the Company’s business, property or the income therefrom; (f) remain liable under any contracts, agreements and other documents relating to or affecting the Collateral to the extent set forth therein and perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; and (g) not misuse, conceal or in any way use or dispose of the Collateral unlawfully or contrary to the provisions of this Agreement or of any insurance coverage.  Loss of, damage to, or uncollectibility of the Collateral or any part thereof will not release the Company from the Obligations.  The exercise by any Secured Party or the Collateral Agent of any of the rights hereunder shall not release the Company from any of its duties or obligations under such contracts, agreements and other documents relating to or affecting the Collateral, and neither the Collateral Agent nor any Secured Party shall have any obligation or liability under any contracts, agreements and other documents relating to or affecting the Collateral by reason of this Agreement, nor shall the Collateral Agent or any Secured Party be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any such contract, agreement or other document relating to or affecting the Collateral.

6.Other Covenants.

(a)The Company shall give prompt written notice to the Collateral Agent of (and in any event not later than thirty (30) days after)  (i) any change in the location of the Company’s chief executive office or principal place of business; (ii) any change in its name; (iii) any changes in its identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading; (iv) any change in its registration as an organization (or any new such registration); or (v) any change in its jurisdiction of organization.

(b)Except as otherwise specifically permitted herein (including Section 6(c)), the Company will not surrender or lose possession of (other than to the Secured Parties or, with the prior consent of Collateral Agent, to a depositary or financial intermediary), transfer, assign or otherwise dispose of or transfer the Collateral or any right, title or interest therein.

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(c)Prior to the occurrence of an Event of Default (as defined in the Notes), the Company will Company shall not transfer or otherwise dispose of all or any portion of the Collateral, or enter into any lease or license for the use of the Collateral, other than in the ordinary course of business and in all cases for fair and reasonable consideration.  After an Event of Default, any attempted sale or transfer of the Collateral not otherwise consented to by the Collateral Agent in writing shall be void and of no force or effect.

(d)The Company shall not, at any time, make or become obligated to make, directly or indirectly, any: (i) payment or distribution in respect of any capital stock or other equity interests in the Company; (ii) payment or distribution on account of the purchase, repurchase, redemption or other retirement of any capital stock or other interests in Company; (iii) loans, advances or payments to any affiliate or stockholder of the Company, including, without limitation, any officer or director of the Company; or (iv) investment in third parties other than in money market funds for purposes of cash management.

7.Default.  The occurrence and continuance of any Event of Default (as defined in the Notes) shall constitute an Event of Default hereunder.  Waiver of any default will not constitute a waiver of any other or subsequent default.

8.Remedies.

(a)Upon the occurrence and continuance of any Event of Default, at the option of any Secured Party without further notice or demand, declare the entire unpaid principal and accrued and unpaid interest of all of the outstanding Notes (including all Notes held by the other Secured Parties) shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable.  Any Secured Party that exercises the remedy under this Section 7(a) shall provide prompt written notice thereof to the other Secured Parties.

(b)Upon the occurrence and continuance of any Event of Default, the Collateral Agent may, immediately and without expiration of any period of grace, enforce payment of all amounts due and owing under the Notes and exercise any and all other remedies granted to the Collateral Agent at law, in equity or otherwise, including without limitation all rights of the Collateral Agent under the UCC as in effect from time to time in the State of Utah and other jurisdictions.

9.Application of Proceeds of Collateral.  In the event of the repossession, sale, collection or other disposition of any of the Collateral pursuant to the terms of this Agreement, the proceeds thereof shall be applied as follows:

(a)First, to the satisfaction of any costs and expenses, including attorneys’ fees, incurred by the Collateral Agent in pursuing the enforcement action.

(b)Second, to the payment to each Secured Party on a pro-rata basis based upon the amount of the Obligations owed thereto (to be applied first to late charges, second to accrued interest and third to outstanding principal).

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(c)Third, to the payment of the surplus, if any, to the Company, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

10.Collateral Agent’s Appointment as Attorney-in-Fact.  The Company hereby irrevocably appoints Collateral Agent as its attorney-in-fact (which appointment is coupled with an interest), and the Company and each Secured Party agree that Collateral Agent may perform (but Collateral Agent shall not be obligated to and shall incur no liability to the Company, the Secured Parties or any third party for failure so to do) any act which the Company is obligated by this Security Agreement to perform and fails to perform, and to exercise such rights and powers as the Company might exercise with respect to the Collateral and fails to exercise, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (d) insure, process and preserve the Collateral; (e) pay any indebtedness of the Company relating to the Collateral; and (f) execute and file UCC financing statements and other documents, instruments and agreements required hereunder; provided, however, that Collateral Agent shall not exercise any such powers granted pursuant to subsections (a) through (c) prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default.  The Company agrees to reimburse Collateral Agent upon demand for any reasonable costs and expenses, including attorneys’ fees, Collateral Agent may incur while acting as the Company’s attorney-in-fact hereunder, all of which costs and expenses are included in the Obligations.  It is further agreed and understood between the parties hereto that such care as Collateral Agent gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Collateral Agent’s possession; provided, however, that Collateral Agent shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other person in connection with the Obligations or with respect to the Collateral.

11.Agreements Among Secured Parties.

(a)Agreement to Cooperate and Pursue Remedies.

(i)Each Secured Party hereby agrees to cooperate fully with Collateral Agent and the other Secured Parties in order to promptly discharge the terms and provisions of this Agreement.  Each Secured Party also agrees, from time to time, to execute and deliver any and all other agreements, documents or instruments and to take such other actions, all as may be reasonably necessary or desirable to effectuate the terms, provisions and the intent of this Security Agreement.

(ii)Each Secured Party agrees that, until Obligations owed thereto have been paid in full, if an Event of Default has occurred and is continuing, it will diligently pursue, or cause Collateral Agent to diligently pursue, any and all collection actions and remedies available to such Secured Party or to the Collateral Agent under applicable law which actions and remedies such Secured Party deems reasonably likely to result in the recovery of amounts to be applied to Obligations for the benefit of the Secured Parties.

5

(b)Parity of Treatment.  Except to the extent permitted under the Notes, each Secured Party agrees that it will not accept from the Company or any other person any benefit or consideration (whether immediate or prospective, definite or contingent) with respect to the Obligations (including, without limitation, any guaranty from any third party or any collateral security) without the prior written consent of the other Secured Parties unless such benefit or consideration shall also be conferred upon or paid to such other Secured Party on a pro rata basis based upon the amount of Obligations owed thereto.

(c)           Authorization to Collect and Distribute Payments Under the Notes.  Each Secured Party hereby authorizes the Collateral Agent to collect from the Company all payments payable to the Secured Parties under the Notes and then to promptly, and in any event within five business days, disperse such payments to the applicable Secured Parties in accordance with the amounts payable to each of them under the applicable Note.

12.Collateral Agent.  Collateral Agent accepts the duties hereunder and agrees to perform the same, but only upon the terms and conditions hereof, including the following, to all of which the Company and the Secured Parties by their acceptance hereof agree:

(a)Actions of Collateral Agent.  As long as any Secured Party, including any Additional Purchaser which may become a Secured Party in accordance with this Agreement and the Purchase Agreement, holds any outstanding Notes, Collateral Agent shall not take any material actions in relation to this Agreement or the Notes, including without limitation any action under Sections 9(b) and (c) or any material action under Section 7 in respect to enforcing the payment under the Notes or the exercise of any other remedies under this Agreement, without the written consent of the Secured Parties representing a majority of the aggregate face value of the Notes then outstanding, including any Notes currently held by the Collateral Agent, which consent shall not be unreasonably withheld.

(b)Duties of Collateral Agent.

(i)Collateral Agent shall not have any duty or obligation to take or refrain from taking any action under, or in connection with, this Agreement, except as expressly provided by the terms and conditions of this Agreement, or expressly provided in written instructions received pursuant to the terms of this Agreement.

(ii)Collateral Agent may, but shall not be under any obligation to, take any action which is discretionary with Collateral Agent or otherwise requires judgment to be made by Collateral Agent under the provisions hereof, except if Collateral Agent is required to take such action on the written request of the Secured Parties, as provided herein.

(c)Collateral Agent’s Liability.  No provision of this Security Agreement shall be construed to relieve Collateral Agent from liability for its own grossly negligent action, grossly negligent failure to act, or its own willful misconduct.  Collateral Agent shall not be liable except for the performance of such duties as are specifically set forth in this Security Agreement and no implied covenants or obligations of Collateral Agent shall be read into this Security Agreement.  The duties and obligations of Collateral Agent shall be determined solely by the express provisions of this Security Agreement.

6

(d)Resignation of Collateral Agent.  Collateral Agent may resign as Collateral Agent upon not less than thirty (30) days’ written notice to each of the Secured Parties.  Upon any such resignation, the Secured Parties shall have the right to jointly appoint a successor Collateral Agent.  If no successor Collateral Agent shall have been so appointed, and shall have accepted such appointment in writing within 30 days after the retiring Collateral Agent’s giving of notice of resignation, then the retiring Collateral Agent may, on behalf of the Secured Parties, appoint a successor Collateral Agent, which shall be a commercial bank organized under the laws of the United States of America or of any state thereof with the legal capacity to act as Collateral Agent hereunder, and the Company agrees to pay such reasonable fees and expenses of any such commercial bank as shall be necessary to induce such commercial bank to agree to become a successor Collateral Agent hereunder.  Upon acceptance of appointment as Collateral Agent, such successor shall thereupon and forthwith succeed to and become vested with all the rights, powers and privileges, immunities and duties of the retiring Collateral Agent, and the retiring Collateral Agent, upon the signing, transferring and setting over to such successor Collateral Agent all rights, moneys and other collateral held by it in its capacity as Collateral Agent, shall be discharged from its duties and obligations hereunder.  After any retiring Collateral Agent’s resignation as Collateral Agent, the provisions of this Section 11, shall inure to its benefit as to any actions taken or omitted to be taken by it while it acted as Collateral Agent.

(e)Indemnification of Collateral Agent.

(i)the Company agrees to indemnify Collateral Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this Agreement, including, but not limited to, the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, and any loss, liability, expense or claim arising out of its possession, management, control, use or operation of the Collateral.

(ii)Each Secured Party agrees to indemnify Collateral Agent on a pro rata basis based upon the amount of the Obligations owed thereto, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Collateral Agent arising out of the actions of Collateral Agent hereunder or the transactions contemplated thereby or the enforcement of any of the terms thereof or of any such other documents, provided that none of the Secured Parties (other than any Secured Party that also is Collateral Agent) shall be liable for any of the foregoing to the extent they arise from the gross negligence, willful misconduct or knowing violations of law by Collateral Agent.

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(iii)Notwithstanding any other provision of this Agreement, Collateral Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be indemnified to its satisfaction by the Company and each Secured Party against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

(f)Credit Analysis.  Each of the Secured Parties has made, and shall continue to make, its own independent investigation or evaluation of the operations, business, property and condition, financial and otherwise, of the Company in connection with entering into this Agreement and the Notes and has made its own appraisal of the creditworthiness of the Company.  Except as explicitly provided herein, Collateral Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit or other information with respect to such operations, business, property, condition or creditworthiness, whether such information comes into its possession on or before the first Event of Default or at any time thereafter

13.Termination.  This Agreement shall terminate and the Collateral herein shall be released from the lien of the Secured Party at such time as the Obligation to all of the Secured Parties has been satisfied or terminated.

14.General.

(a)Notices.  All notices, communications and deliveries under this Agreement will be made in writing signed by or on behalf of the party making the same, will be delivered personally or by facsimile or other electronic transmission or sent by registered or certified mail (return receipt requested) or by next day courier (with evidence of delivery and postage and other fees prepaid) as follows:

To the Purchaser:

GWire Corporation

c/o ActiveCare, Inc.

5095 West 2100 South

Salt Lake City, UT 84120

801-974-9474 (Telephone)

801-974-9553 (Facsimile)

E-Mail: macton@activecare.com

with a copy to:

Durham Jones & Pinegar, PC

111 East Broadway, Suite 900

Salt Lake City, Utah 84111

Attn:   Kevin R. Pinegar

Facsimile: 801-415-3500

E-Mail: kpinegar@djplaw.com

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To the Collateral Agent or the Secured Parties:

Green Wire, LLC

Rapid Medical Response, LLC

Orbit Medical Response, LLC

c/o BPE Management, LLC

Attn: Shawn Ross

4424 South 700 East, Suite 200

Salt Lake City, Utah 84107

Facsimile: 801-713-5347

E-mail: sross@tibromedical.com

with a copy (which shall not constitute notice) to:

Dorsey & Whitney LLP

136 So. Main Street, Suite 1000

Salt Lake City, Utah 84101

Attn:  Samuel P. Gardiner

Facsimile:  (801) 880-6941

Email:  gardiner.sam@dorsey.com

or to such other representative or at such other address of a party as such party may furnish to the other parties in writing.  Any notice which is delivered personally or by facsimile or other electronic transmission in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party or its agent.  Any notice which is addressed and mailed in the manner herein provided shall be conclusively presumed to have been duly given to the party to which it is addressed at the close of business, local time of the recipient, on the fourth business day after the day it is so placed in the mail (or on the first business day after placed in the mail if sent by overnight courier) or, if earlier, the time of actual receipt.

(b)Assignment; Binding upon Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  This Agreement is not assignable except by the Secured Parties to any of their affiliates and any other purported assignment shall be null and void.  Nothing contained in this Agreement shall be deemed to confer any right or benefit upon any person other than the parties hereto to the extent herein provided.

(c)Entire Agreement.  This Agreement, the Purchase Agreement, the Notes and the other documents and instruments contemplated by the Purchase Agreement set forth the entire agreement between the Company, the Collateral Agent and the Secured Parties with respect to all matters herein, and supersede all prior and contemporaneous security agreements, representations, and understandings of the parties.

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(d)Amendment and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Secured Parties representing a majority of the aggregate face value of all of the Notes then outstanding; provided, however, that the written consent of any Secured Party that would be adversely affected by such amendment in a manner disproportionate to the other Secured Parties shall also be required.  The Company may, without the consent or vote of any Secured Party, amend this Agreement at any time to accept executed signature pages from Additional Purchasers pursuant to the Purchase Agreement, and such Additional Purchasers will thereafter become Secured Parties under this Agreement.

(e)Governing Law.  This Agreement will be governed by and construed and enforced in accordance with the internal laws of the State of Utah without reference to its choice of law rules.

(f)Jurisdiction.  Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought only to the exclusive jurisdiction of the courts of the State of Utah or the federal courts located in the State of Utah, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  The parties agree that, after a legal dispute is before a court as specified in this Section 13(f), and during the pendency of such dispute before such court, all actions, suits, or proceedings with respect to such dispute or any other dispute, including without limitation, any counterclaim, cross-claim or interpleader, shall be subject to the exclusive jurisdiction of such court.  Process in any such suit, action or Proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Each party hereto agrees that a final judgment in any action, suit or proceeding described in this Section 13(f) after the expiration of any period permitted for appeal and subject to any stay during appeal shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable laws.

(g)Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10

(h)Attorneys’ Fees.  In the event that any action or proceeding, including arbitration, is commenced by any party hereto for the purpose of enforcing any provision of this Agreement, the parties to such action, proceeding or arbitration may receive as part of any award, judgment, decision or other resolution of such action, proceeding or arbitration their costs and reasonable attorneys’ fees as determined by the person or body making such award, judgment, decision or resolution.  Should any claim hereunder be settled short of the commencement of any such action or proceeding, including arbitration, the parties in such settlement may include, as part of the damages alleged to have been incurred, reasonable costs of attorneys or other professionals in investigating or counseling on such claim.

(i)Severability of Provisions.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the parties waive any provision of law which renders any such provision prohibited or unenforceable in any respect.

(j)Counterparts.  This Agreement may be executed in two (2) or more counterparts (delivery of which may be by facsimile or via email as a portable document format (.pdf)), each of which will be deemed an original, and it will not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one (1) of such counterparts.

[Signature pages follow]

11

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

SECURED PARTIES:

RAPID MEDICAL RESPONSE, LLC

BY:

NAME:

TITLE:

GREEN WIRE, LLC

BY:

NAME:

TITLE:

ORBIT MEDICAL RESPONSE, LLC

BY:

NAME:

TITLE:

COMPANY:

GWIRE CORPORATION

BY:

NAME:

TITLE:

12

EX-10.4

Exhibit 10.4

GUARANTY AGREEMENT

This GUARANTY AGREEMENT (the “Guaranty”) is made as of November ___, 2012, by ActiveCare, Inc. a Delaware corporation (“Guarantor”), for the benefit of Rapid Medical Response, LLC, a Utah limited liability company (“Rapid”), Orbit Medical Response, LLC, a Utah limited liability company (“Orbit”), and Green Wire, LLC, a Utah limited liability company (“Green Wire,” with each of Rapid, Orbit and Green Wire a “Seller”, and collectively, the “Sellers”).  Guarantor and the Sellers are individually referred to herein as a “Party” and collectively as the “Parties.”

WHEREAS,GWire Corporation, a Utah corporation (“Buyer”), and Guarantor have entered into an Asset Purchase Agreement dated concurrently herewith (the “Purchase Agreement”) with the Sellers relating to the purchase of assets and assumption of liabilities of the Sellers;

WHEREAS, pursuant to the Purchase Agreement, Buyer has issued  Secured Promissory Notes with an aggregate principal amount of $2,690,181 (the “Secured Notes”) to the Sellers; and

WHEREAS, Buyer is a wholly owned subsidiary of Guarantor;

WHEREAS, Guarantor is willing to enter into this Guaranty to guarantee certain obligations of the Buyer under the Purchase Agreement and the Secured Notes.

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the Parties hereto agree as follows:

1.Guaranty.  Guarantor hereby irrevocably, absolutely and unconditionally guarantees the prompt payment of all obligations of Buyer under the Purchase Agreement and under the Secured Notes, including without limitation the Assumed Liabilities, whether now existing or hereafter created or arising, whether voluntary or involuntary and however arising, absolute or contingent, liquidated or unliquidated, determined or undetermined (collectively, the “Obligations”).  This Guaranty shall remain in full force and effect until all Obligations shall have been fully paid or performed.

2.Independent and Primary Obligation. The obligations of Guarantor under this Guaranty are independent of the obligations of Buyer, and a separate action or actions may be brought and prosecuted against Guarantor whether or not an action is brought against Buyer and whether or not Buyer is joined in any such action.  This Guaranty represents the primary obligation of Guarantor.  Guarantor waives any right to require the Sellers to proceed against Buyer or any other party or to pursue any other remedy in Sellers’ power whatsoever.

3.Dissolution or Insolvency of Guarantor.  The dissolution or adjudication of bankruptcy of Guarantor shall not revoke this Guaranty, except upon actual receipt of written notice thereof by the Sellers and only prospectively, as to future transactions.

4.Guarantor’s Representations and Warranties.  Guarantor represents and warrants to the Sellers that (i) Guarantor is a Delaware corporation duly organized and existing in good standing and has full power and authority to make and deliver this Guaranty; (ii) the execution, delivery and performance of this Guaranty by Guarantor have been duly authorized by all necessary action and do not and will not violate the provisions of, or constitute a default under, any presently applicable law or its charter documents or bylaws or any agreement presently binding on it; (iii) this Guaranty has been duly executed and delivered by the authorized officers of Guarantor and constitutes its lawful, binding and legally enforceable obligation; and (iv) the authorization, execution, delivery and performance of this Guaranty do not require notification to, registration with, or consent or approval by, any federal, state or local regulatory body or administrative agency.

5.Waivers by Guarantor.  Guarantor will not assert, plead or enforce against the Sellers any defense of waiver, release, discharge or disallowance relating to bankruptcy, any anti-deficiency statute, or unenforceability which may be available to Buyer or any other person liable in respect of any of the Obligations.  Without limiting the foregoing, the liability of Guarantor shall not be affected or impaired by any voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar event or proceeding affecting, Buyer or any of its assets.  Guarantor waives any and all defenses and discharges available to a surety, guarantor or accommodation co-obligor.  This Guaranty shall not be affected by any delay or lack of diligence in the enforcement of the Obligations.

6.No Duties Owed by the Sellers.  Guarantor acknowledges and agrees that the Sellers (i) have not made any representations or warranties with respect to, (ii) does not assume any responsibility to Guarantor for, and (iii) has no duty to provide information to Guarantor regarding, the enforceability of any of the Obligations or the financial condition of Buyer.  Guarantor has independently determined the creditworthiness of Buyer and the enforceability of the Obligations.

7.No Waiver by the Sellers.  No failure on the part of the Sellers to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right by the Sellers.

8.Expenses.  Guarantor will reimburse the Sellers for all costs, expenses and reasonable attorneys’ fees incurred by the Sellers in enforcing this Guaranty.

9.Miscellaneous.  This Guaranty shall be binding upon Guarantor and the successors and assigns of Guarantor and shall inure to the benefit of the Sellers and their successors and assigns.  Any invalidity or unenforceability of any provision or application of this Guaranty shall not affect other lawful provisions and application thereof, and to this end the provisions of this Guaranty are declared to be severable.  This Guaranty shall continue to be effective or shall be reinstated, as the case may be (i) notwithstanding any insolvency, bankruptcy or reorganization of Buyer and (ii) regardless of whether any payment of an Obligation is rescinded or must otherwise be returned upon the insolvency, bankruptcy or reorganization of Buyer.  This Guaranty may not be waived, modified, amended, terminated, released or otherwise changed except by a writing signed by Guarantor and the Sellers holding Secured Notes representing a majority of the aggregate face value of all Secured Notes.  This Guaranty shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the State of Utah.  Guarantor’s rights and obligations under this Guaranty may not be assigned without the prior written consent of the the Sellers holding Secured Notes representing a majority of the aggregate face value of all Secured Notes, which consent may be withheld in the sole discretion of such Sellers.

The undersigned hereby agrees to, executes and delivers this Guaranty as of the date first set forth above.

ACTIVECARE, INC., a Delaware corporation

By:

Name:

Its:

EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

By and between:

GWIRE CORPORATION

a Utah corporation

and

ANDREW BALL

November 1, 2012

TABLE OF CONTENTS

			Page
1	Position and Responsibilities.		1
	(a)	Position	1
	(b)	Other Activities	1
	(c)	No Conflict	1
2	Compensation and Benefits.		1
	(a)	Compensation	1
	(b)	Equity Incentive Share Bonus	1
	(c)	Stock Options..	2
	(d)	Vacation	2
	(e)	Benefits	2
	(f)	Expenses	2
3	Term		2
4	Termination of Employment.		2
	(a)	Definitions	2
	(b)	Termination Without Cause	3
	(c)	Termination for Cause	4
	(d)	Death	4
	(e)	Disability	4
	(f)	Voluntary Termination	4
5	Severance		5
6	Termination Obligations.		5
	(a)	Return of Property	5
	(b)	Resignation and Cooperation	5
7	Confidential Information		6
8	Non-Competition and Non-Solicitation Covenants		7
	(a)	Prohibited Activities	7
	(b)	Non-Solicitation	7
	(c)	Communication of Contents of Covenants	7
	(d)	Tolling of Covenants	7
	(e)	Employee’s Acknowledgments	7
	(f)	Specific Performance	8
9	Miscellaneous.		8
	(a)	Severability	8
	(b)	Taxes	8
	(c)	Governing Law	8
	(d)	Dispute Resolution	8
	(e)	WAIVER OF RIGHT TO JURY TRIAL	9
	(f)	Fees and Costs	9
	(g)	Amendments; Waivers	9
	(h)	Section 409A.	9
	(i)	Remedies	10
	(j)	Assignment	11
	(k)	Parties in Interest	11
	(l)	Construction	11
	(m)	Interpretation	11
	(n)	Notice	11
	(o)	Survival	11
	(p)	Counterparts	12
	(q)	Authority	12
	(r)	Entire Agreement	12
	(s)	EMPLOYEE ACKNOWLEDGEMENT	12

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of November 2012, by and between GWire Corporation, a Utah corporation (the “Company”), and Andrew Ball (“Employee”).

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

1.           Position and Responsibilities.

(a)           Position

.  The Company shall employ Employee to render services to the Company in the position of President.  Employee shall perform such duties and responsibilities as are normally related to such position in accordance with the standards of the industry and any additional duties now or hereafter assigned to Employee by the Company.  Employee shall abide by the rules, regulations, and practices as adopted or modified from time to time in the Company’s sole discretion.

(b)           Other Activities

.  Except upon the prior written consent of the Company, Employee will not, during Employee’s employment with the Company, (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that might interfere with Employee’s duties and responsibilities hereunder or create a conflict of interest with the Company.

(c)           No Conflict

.  Employee represents and warrants that Employee’s execution of this Agreement, Employee’s employment with the Company, and the performance of Employee’s duties under this Agreement shall not violate any obligations Employee may have to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.

2.           Compensation and Benefits.

(a)           Compensation

.  In consideration of the services to be rendered under this Agreement, the Company shall compensate Employee at a rate of One Hundred Fifty Thousand Dollars ($150,000) per year (as adjusted from time to time in accordance herewith, “Base Salary”).  The Base Salary shall be paid in accordance with the Company’s regularly established payroll practices.  Employee’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company.  Employee’s Base Salary does not include bonuses paid by the Company.

(b)           Equity Incentive Share Bonus

.  In addition to the Base Salary, the Company hereby awards to Employee an equity bonus of Two Million, One Hundred Twenty-five Thousand (2,125,000) shares of the Company’s common stock (the “Bonus Shares”) to vest immediately upon the date hereof. The Bonus Shares are subject to certain restrictions contained in that certain Voting Agreement and Proxy of even date herewith (the “Voting Agreement”), entered into by and among the Company, the Employee and ActiveCare, Inc., a Delaware corporation (“ActiveCare”) and the parent of the Company.

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(c)           Stock Options.  As additional compensation to Employee, the Company hereby grants to Employee non-qualified stock options to purchase Two Million, One Hundred Twenty-five Thousand (2,125,000) shares of the Common Stock of ActiveCare at a purchase price of Ten Cents ($0.10) per share (the “Options”).  The Options shall vest on the date hereof.  The exercise of the Options is restricted and limited by the terms of the Stock Option Agreement under which the Options are granted to Employee.

(d)           Vacation

.  Employee shall be entitled to vacation and other leave in accordance with the Company’s policies generally applicable to similarly-situated employees.  Subject to applicable law, the amount of vacation and other leave available to Employee as well as the policies applicable thereto can be adjusted, reduced or eliminated from time to time in the Company’s sole discretion.  Initially, Employee shall be entitled to twenty (20) days of Paid Time Off (PTO), to be accrued and used in accordance with the Company’s vacation and other leave policies, as such policies may be amended from time to time.

(e)           Benefits

.  Employee shall be eligible to participate in the benefits, if any, made generally available by the Company to similarly-situated employees, in accordance with the benefit plans established by the Company, and as may be amended from time to time in the Company’s sole discretion.  Such benefits and perquisites can be adjusted, reduced or eliminated from time to time in the Company’s sole discretion.

(f)           Expenses

.  The Company shall reimburse Employee for reasonable business expenses incurred in the performance of Employee’s duties hereunder in accordance with the Company’s expense reimbursement guidelines, provided that such expenses are properly documented and accounted for in accordance with the requirements of the Internal Revenue Service.

3.           Term

. The term of this Agreement and of Employee’s employment hereunder shall be two (2) years from the date hereof, subject to termination prior to the end of such term as provided in Section 4, below. Upon such termination of employment, all obligations of the Company under this Agreement shall cease except as otherwise specifically provided herein.

4.           Termination of Employment.

(a)           Definitions

.  For purposes of this Agreement:

(i)           “Cause” shall mean a finding by the Company, in its sole discretion, that (A) Employee has committed of an act of fraud, dishonesty or embezzlement against the Company or any customer or client thereof; (B) Employee has been convicted (or entered a plea of nolo contendere in lieu thereof) of a felony or of a crime involving fraud, dishonesty, moral turpitude, or physical harm to any person; (C) Employee has materially breached one or more terms of this Agreement; (D) Employee has disclosed Confidential Information (as defined below) without authorization which disclosure Employee knew or reasonably should have known would result in material damage to the Company; (E) Employee has engaged in conduct that is in bad faith and materially injurious to the Company, including, but not limited to, misappropriation of trade secrets or a business opportunity; (F) Employee has refused to implement or follow a lawful rule, policy, regulation, or directive of the Company; (G) Employee has used drugs or alcohol in violation of Company policy or that impedes Employee’s job performance; (H) Employee has committed any act to secure or attempting to secure any personal profit not fully disclosed to and approved by the Company in connection with any transaction entered into on behalf of the Company; (I) Employee has engaged in any gross, willful or wanton negligence, intentional misconduct, or conduct which constitutes a breach of any fiduciary duty owed to the Company by Employee; or (J) Employee has accepted employment with any other employer.

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(A)           A breach by the Company of any material provision of this Agreement.

(ii)           “Termination Notice” shall mean a written notice that: (A) indicates the specific termination provision in this Agreement relied upon; (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated, to the extent applicable; and (C) specifying the effective date of termination of employment which, if submitted by Employee, shall be at least four (4) weeks following the date of such notice; provided, however, that in the event that Employee delivers a Termination Notice to the Company, the Company may, in its sole discretion, change the effective date of termination of employment to any date that occurs following the date of the Company’s receipt of such Termination Notice (even if such date is prior to the date specified in such Termination Notice).  A Termination Notice submitted by the Company may provide for an effective date of termination of employment on the date Employee receives the Termination Notice, or any date thereafter elected by the Company in its sole discretion.  The failure by the Company to set forth in the Termination Notice any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company’s rights hereunder.

(iii)           “Voluntary Termination” shall mean the termination by Employee of Employee’s employment with the Company other than: (A) due to death or disability (as provided in Section 4(e) below); (B) simultaneous with termination for Cause; or (C) simultaneous with or following an event which, whether or not known to the Company at the time of such Voluntary Termination by Employee would constitute Cause.  In the event of a Voluntary Termination, Employee shall deliver to the Company a Termination Notice in accordance with Section 4(a)(ii).

(b)           Termination Without Cause

.  After the initial two year period set forth in Section 3, the Company may terminate Employee’s employment hereunder at any time without Cause by delivering a Termination Notice to Employee specifying that Employee’s termination is without Cause pursuant to this Section 4(b).  If the Company terminates Employee’s employment without Cause, then the Company shall pay to Employee any compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time, and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement (except any obligation that may exist under Section 5) shall cease.

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(c)           Termination for Cause

.  The Company may terminate Employee’s employment hereunder at any time for Cause by delivering a Termination Notice to Employee specifying that Employee’s termination is for Cause pursuant to this Section 4(c).  If the Company terminates Employee’s employment for Cause, then the Company shall pay to Employee any compensation to which Employee is entitled up through the date of termination (excluding any amounts for any accrued but unused vacation time and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination, subject in each case to any other rights or remedies of the Company under this Agreement or any other agreement, or at law or in equity.  Thereafter, all obligations of the Company under this Agreement shall cease.

(d)           Death

.  Employee’s employment shall terminate automatically upon Employee’s death.  The Company shall pay to Employee’s beneficiaries or estate, as appropriate, any compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time, and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee’s beneficiaries or estate, as appropriate, for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement shall cease.  Nothing in this Section 4(d) shall affect any entitlement of Employee’s heirs or devisees to the benefits of any life insurance plan or applicable benefit.

(e)           Disability

.  If Employee becomes eligible for the Company’s long-term disability benefits or if, in the sole opinion of the Company, Employee is unable to carry out the responsibilities and functions of the position held by Employee by reason of any physical or mental impairment for more than ninety (90) consecutive days or more than one hundred twenty (120) days in any twelve-month period, then, to the extent permitted by law, the Company may terminate Employee’s employment by delivering a Termination Notice to Employee specifying that Employee’s termination is made pursuant to this Section 4(e).  The Company shall pay to Employee all compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time, and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement shall cease.  Nothing in this Section 4(e) shall affect Employee’s rights under any disability plan in which Employee is a participant.

(f)           Voluntary Termination

.  Employee may terminate his employment voluntarily in accordance with a Termination Notice delivered to the Company specifying that Employee’s termination is a Voluntary Termination pursuant to this Section 4(f).  In the event of a Voluntary Termination, the Company shall pay to Employee any compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time but excluding any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement shall cease.

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5.           Severance

.  If the Company terminates the employment of Employee without Cause (as provided in Section 4(b)), provided that such termination of employment constitutes a “separation from service” with the Company as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto (“Separation from Service”), and only in such event, Employee shall be eligible to receive his then-current Base Salary payable in the form of salary continuation (“Severance”) for the longer of (a) three (3) months, or (b) the balance of the Initial Period (as defined below), so long as Employee does not violate any of the terms of Section 7 or Section 8.  Employee’s eligibility for Severance is subject to and conditioned on Employee’s execution of and compliance with the terms of a general release and waiver in the form acceptable to the Company (the “Separation and Release Agreement”).  For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment of Severance that Employee may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.  Should the Company learn that Employee has violated any of the terms of Section 7 or Section 8 during the salary continuation period (the “Severance Period”), then the Company may immediately cease such payments and Employee must, on demand, repay to the Company the payments for each month in which Employee breached any of the terms of Section 7 or Section 8.  Furthermore, such Severance shall be reduced by any remuneration paid to Employee because of Employee’s employment or self-employment during the Severance Period.  Employee shall promptly report all such remuneration to the Company in writing.  Employee shall not be entitled to any Severance if: (i) Employee’s employment is terminated for Cause (in accordance with Section 4(c)), by death (as provided in Section 4(d)) or by disability (as provided in Section 4(e)), or (ii) Employee chooses not to sign the Separation and Release Agreement, or chooses to revoke the Separation and Release Agreement in accordance with the terms thereof once signed.  For purposes of this Section 5, the term “Initial Period” means the twenty-four (24) month period commencing on Employee’s first day of employment with the Company.

6.           Termination Obligations.

(a)           Return of Property

.  Employee agrees that all property (including without limitation, all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials, furnished to or created or prepared by Employee incident to Employee’s employment belongs to the Company and shall be promptly returned to the Company promptly upon termination of Employee’s employment.

(b)           Resignation and Cooperation

.  Upon termination of Employee’s employment, Employee shall be deemed to have resigned from all offices, directorships and managerships then held with the Company or any of its subsidiaries or other Affiliates.  Following any termination of employment, Employee 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 employees.  Employee shall also cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Employee’s employment by the Company.

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7.           Confidential Information

.  In exchange for Employee’s promises and covenants contained in this Section 7 and elsewhere in this Agreement, including Section 8, the Company agrees to provide Employee with access to Confidential Information (as defined below) of the Company, including, without limitation, trade secrets and proprietary information regarding the Company’s business, necessary for Employee to perform his duties under this Agreement.  In connection therewith, Employee acknowledges that because of Employee’s position with the Company, Employee will have access to Confidential Information of the Company.  Accordingly, Employee hereby agrees that, during his employment and at all times thereafter, he will hold the Confidential Information of the Company in strict confidence and will neither use (for himself or any third party) the information nor furnish, make available or disclose it to anyone, except to the extent necessary to carry out his responsibilities as an employee of the Company or as specifically authorized in writing by a duly authorized officer of the Company other than Employee.  As used in this Agreement, “Confidential Information” means any information relating to the business or affairs of the Company and its Affiliates (as defined below), including, but not limited to, this Agreement, information relating to financial statements, operations manuals, systems manuals, customer identities, customer profiles, customer preferences, partner or investor identities, employees, suppliers, project designs, project methods, know-how, computer programs, procedures, advertising programs, advertising techniques, target markets, servicing methods, equipment, programs, strategies and information, market analyses, profit margins, past, current or future marketing strategies, or any other proprietary information used by the Company or its subsidiaries; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no act on the part of Employee.  Employee acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company and that he is under a contractual and common law duty to not disclose the Confidential Information to any third party at any time.  Employee acknowledges and agrees that his non-disclosure obligation applies to all Confidential Information of the Company, no matter when he obtained knowledge of or access to such Confidential Information.  Employee further acknowledges that the Company would not employ him or provide him with access to its Confidential Information, but for his promises and covenants contained in this Section 7 and elsewhere in this Agreement, including Section 8.  For purposes of this Agreement, the term “Affiliate” means (a) with respect to a Person (as defined below): (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any officer, director, manager or general partner of such Person, or (iv) any Person who is an officer, director, manager, general partner, trustee, or holder of ten percent (10%) or more of the outstanding voting interests of any Person described in item (i) or (ii) of this clause (a); and (b) with respect to the Company: (i) ActiveCare and its Affiliates, and (ii) any Person for whom the Company provides management or administrative services, and their respective Affiliates.  For purposes of clause (a) in the definition of Affiliate above, the term “controls,” “is controlled by,” or “is under common control with” shall mean the possession, whether direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.  For purposes of this Agreement, the term “Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, trust, joint venture, governmental agency, or other entity, whether domestic or foreign.

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8.           Non-Competition and Non-Solicitation Covenants

(a)           Prohibited Activities

.  In the event Employee is terminated for Cause  or Employee voluntarily terminates his employment with the Company, during the term of Employee’s employment and for twenty-four (24) months thereafter (the “Non-Compete Period”), in addition to Employee’s other obligations hereunder, Employee shall not, in any manner, directly or indirectly, in the Restricted Territory: (i) engage or invest in, (ii) own, manage, operate, finance, control, (iii) participate in the ownership, management, operation, financing, or control of, or (iv) be employed by, work for or with, or in any way assist, any business, person, firm, corporation, partnership, limited liability company, governmental or private entity, or any other entity of whatever kind, engaged in providing PERS, products and/or services that are substantially similar to or competitive with those offered or provided by the Company or any of its subsidiaries at any time during the Non-Compete Period or for which the Company or any of its subsidiaries has adopted a plan or authorized a budget prior to the effective date of Employee’s termination of employment (collectively, the “Restricted Business”).  For purposes of this Agreement, the “Restricted Territory” means the geographic area consisting of the United States of America.  Nothing contained in this Agreement, including this Section8(a), shall prohibit Employee from being a passive owner of not more than two percent (2%) of the outstanding stock of any class of a corporation, any securities of which are publicly traded, so long as Employee has no active participation in the business of such corporation.

(b)           Non-Solicitation

.  During the term of Employee’s employment and for twenty-four (24) months thereafter (the “Non-Solicitation Period”), Employee shall not directly or indirectly (i) divert or attempt to divert from the Company or any of its subsidiaries any business of any kind, including without limitation the solicitation of or interference with any of the Company’s or its affiliates’ customers, clients, members, investors, business partners or suppliers or (ii) solicit, induce, recruit or encourage any person employed by or otherwise providing services to the Company or any of its subsidiaries to terminate his or her employment or services with the Company or any such subsidiary or to take employment with another person.

(c)           Communication of Contents of Covenants

.  During the Non-Compete Period, Employee shall communicate the contents of this Section 8 to any person (including any business) that Employee intends to be retained or employed by, associated with, or represent and which Employee knows is engaged in the Restricted Business in the Restricted Territory.

(d)           Tolling of Covenants

.  If it is judicially determined that Employee has violated any of his or her obligations under this Agreement, then the Non-Compete Period or the Non-Solicitation Period, as the case may be, will automatically be extended by a period of time equal in length to the period during which such violation or violations occurred.

(e)           Employee’s Acknowledgments

.  Employee acknowledges that the obligations of Employee under this Section 8 (including the geographic boundaries, scope of prohibited activities and the time duration of the provisions) are reasonable in the context of the nature of the Restricted Business and the competitive injuries likely to be sustained by the Company if Employee were to violate such obligations, and are no broader than are necessary to protect the legitimate business interests of the Company.  Employee further acknowledges that the Company would not have employed Employee in the absence of this Section 8 and the other covenants and representations and warranties of Employee made herein, which Employee acknowledges constitutes good, valuable and sufficient consideration.  Employee also acknowledges that, in the event Employee’s employment with the Company is terminated for any reason, Employee will be able to earn a livelihood without violating his obligations under this Section 8 and that Employee’s ability to earn a livelihood without violating such obligations is a material condition to Employees employment and continued employment with the Company.

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(f)           Specific Performance

.  The parties agree (i) that it is impossible to measure in money the damages that will accrue to the Company if Employee fails to perform his obligations under this Section 8, (ii) that failure by Employee to substantially and materially perform such obligations may result in irreparable damage to the Company, and (iii) that specific performance of Employee’s obligations may, therefore, be obtained by suit in equity.  Employee therefore agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, temporary and permanent injunctive relief may be granted in any proceeding that may be brought to enforce any provision contained in this Section 8, without the requirement of posting any bond or the necessity of proof of actual damage.  Without limiting the generality of the preceding sentence, the Company shall be entitled to an injunction from any federal or state court located in the County of Utah, in the State of Utah restraining Employee from committing or continuing any violation of this Section 8.  Employee will not assert as a claim or defense in any action or proceeding to enforce any provision hereof that the Company has or had an adequate remedy at law.

9.           Miscellaneous.

(a)           Severability

.  If any provision of this Agreement shall be held by a court to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect.  In the event that the time period or scope of any provision is declared by a court of competent jurisdiction to exceed the maximum time period or scope that such court deems enforceable, then such court shall reduce the time period or scope to the maximum time period or scope permitted by law.

(b)           Taxes

.  All amounts paid under this Agreement (including, without limitation, Base Salary, bonuses and Severance) shall be paid less all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction.

(c)           Governing Law

.  This Agreement shall be governed by the laws of the State of Utah without regard to conflict of law principles.

(d)           Dispute Resolution

.  All disputes and controversies arising out of or in connection with this Agreement, Employee’s employment with the Company, or the transactions contemplated hereby shall be resolved exclusively by the state and federal courts located in Utah County in the State of Utah, and each party hereto agrees to submit to the jurisdiction of said courts and agrees that venue shall lie exclusively with such courts.  Each party hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which such party may raise now, or hereafter have, to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum.  Each party agrees that, to the fullest extent permitted by applicable law, a final judgment in any such suit, action, or proceeding brought in such a court shall be conclusive and binding upon such party, and may be enforced in any court of the jurisdiction in which such party is or may be subject by a suit upon such judgment.

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(e)           WAIVER OF RIGHT TO JURY TRIAL

.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR EMPLOYEE’S EMPLOYMENT BY THE COMPANY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  EACH PARTY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

(f)           Fees and Costs

.  The prevailing party in any arbitration, court action or other adjudicative proceeding arising out of or relating to this Agreement or Employee’s employment with the Company shall be reimbursed by the party who does not prevail for their reasonable attorneys’, accountants’, and experts’ fees and for the costs of such proceeding.  The provisions set forth in this Section shall survive the merger of these provisions into any judgment.

(g)           Amendments; Waivers

.  This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by Employee and by a duly authorized representative of the Company other than Employee.  No waiver or consent shall be binding except in a writing signed by the party making the waiver or giving the consent.  No waiver of any provision or consent to any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar.  No waiver or consent shall constitute a continuing waiver or consent except to the extent specifically set forth in writing.

(h)           Section 409A.

(i)           Notwithstanding anything to the contrary in this Agreement, if at the time of Employee’s Separation from Service with the Company, Employee is a “specified employee,” as determined by the Company in accordance with Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in the payments or benefits ultimately paid or provided to Employee) until the date that is at least six (6) months following Employee’s Separation from Service with the Company (or the earliest date permitted under Section 409A of the Code), whereupon the Company will pay Employee a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to Employee under this Agreement during the period in which such payments or benefits were deferred.  Thereafter, payments will resume in accordance with this Agreement.

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(ii)           This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (A) the gross income inclusion set forth within Section 409A(a)(1)(A) of the Code or (B) the interest and additional tax set forth within Section 409A(a)(1)(B) of the Code (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties.  In no event shall the Company be required to provide a tax gross-up payment to Employee with respect to any Section 409A Penalties.

(iii)           Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Employee and, if timely submitted, reimbursement payments shall be promptly made to Employee following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred.  In no event shall Employee be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred.  This Section 9(h)(iii) shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Employee.

(iv)           Additionally, in the event that following the date hereof the Company or Employee reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and Employee shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (A) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (B) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

(i)           Remedies

.  All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law.

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(j)           Assignment

.  The performance of Employee is personal hereunder, and Employee agrees that Employee shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement.  This Agreement may be assigned or transferred by the Company; and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets.  Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those specifically enumerated in this Agreement.

(k)           Parties in Interest

.  Nothing in this Agreement shall confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective successors and permitted assigns nor shall anything in this Agreement relieve or discharge the obligation or liability of any third person to any party to this Agreement, nor shall any provision give any third person any right of subrogation or action over or against any party to this Agreement.

(l)           Construction

.  The terms of this Agreement have been negotiated by the parties hereto, and no provision of this Agreement shall be construed against either party as the drafter thereof.

(m)           Interpretation

.  This Agreement shall be construed as a whole, according to its fair meaning.  Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement.  Unless the context of this Agreement otherwise requires, (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words shall refer to this entire Agreement.

(n)           Notice

.  Any notices, consents, agreements, elections, amendments, approvals and other communications provided for or permitted by this Agreement or otherwise relating to this Agreement shall be in writing and shall be deemed effectively given upon the earliest to occur of the following: (i) upon personal delivery to such party; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) upon actual receipt by the party to be notified via any other means (including public or private mail, electronic mail or telegram); provided, however, that notice sent via electronic mail shall be deemed duly given only when actually received and opened by the party to whom it is addressed.  All communications shall be sent to the party’s address set forth on the signature page below, or at such other address as such party may designate by ten (10) days advance written notice to the other parties in accordance with this Section 9(n).

(o)           Survival

.  The terms and provisions of the Company’s and Employee’s obligations or agreements under Sections 4, 5, 6, 7, 8 and 9 herein shall survive any termination of Employee’s employment hereunder, the termination of this Agreement and will be construed as agreements independent of any other provisions of this Agreement.

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(p)           Counterparts

.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.  This Agreement may be executed and delivered by facsimile, or by email in portable document format (.pdf) and delivery of the executed signature page by such method will be deemed to have the same effect as if the original signature had been delivered to other the parties.

(q)           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.

(r)           Entire Agreement

.  This Agreement is intended to be the final, complete, and exclusive statement of the terms of Employee’s employment by the Company and may not be contradicted by evidence of any prior or contemporaneous statements or agreements, except for agreements specifically referenced herein.  To the extent that the practices, policies or procedures of the Company, nor or in the future, apply to Employee and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control.  Any subsequent change in Employee’s duties, position, or compensation will not affect the validity or scope of this Agreement.

(s)           EMPLOYEE ACKNOWLEDGEMENT

.  EMPLOYEE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT AND HAS OBTAINED AND CONSIDERED THE ADVICE OF SUCH LEGAL COUNSEL TO THE EXTENT EMPLOYEE DEEMS NECESSARY OR APPROPRIATE, THAT EMPLOYEE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT EMPLOYEE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EMPLOYEE HAS ENTERED INTO IT FREELY BASED ON EMPLOYEE’S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

[SIGNATURES TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the day and year first above written.

“COMPANY”
GWIRE CORPORATION,
a Utah corporation
By:
Name:
Title:
Address:
“EMPLOYEE”
Andrew Ball
Address:
	Telephone:
	Facsimile:
	Email:

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EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

By and between:

GWire CORPORATION

a Utah corporation

and

DAVID LEE

TABLE OF CONTENTS

			Page
1	Position and Responsibilities.		1
	(a)	Position	1
	(b)	Other Activities	1
	(c)	No Conflict	1
2	Compensation and Benefits.		1
	(a)	Compensation	1
	(b)	Equity Incentive Share Bonus	1
	(c)	Stock Options..	2
	(d)	Vacation	2
	(e)	Benefits	2
	(f)	Expenses	2
3	Term		2
4	Termination of Employment.		2
	(a)	Definitions	2
	(b)	Termination Without Cause	3
	(c)	Termination for Cause	4
	(d)	Death	4
	(e)	Disability	4
	(f)	Voluntary Termination	4
5	Severance		5
6	Termination Obligations.		5
	(a)	Return of Property	5
	(b)	Resignation and Cooperation	5
7	Confidential Information		6
8	Non-Competition and Non-Solicitation Covenants		7
	(a)	Prohibited Activities	7
	(b)	Non-Solicitation	7
	(c)	Communication of Contents of Covenants	7
	(d)	Tolling of Covenants	7
	(e)	Employee’s Acknowledgments	7
	(f)	Specific Performance	8
9	Miscellaneous.		8
	(a)	Severability	8
	(b)	Taxes	8
	(c)	Governing Law	8
	(d)	Dispute Resolution	8
	(e)	WAIVER OF RIGHT TO JURY TRIAL	9
	(f)	Fees and Costs	9
	(g)	Amendments; Waivers	9
	(h)	Section 409A.	9
	(i)	Remedies	10
	(j)	Assignment	11
	(k)	Parties in Interest	11
	(l)	Construction	11
	(m)	Interpretation	11
	(n)	Notice	11
	(o)	Survival	11
	(p)	Counterparts	12
	(q)	Authority	12
	(r)	Entire Agreement	12
	(s)	EMPLOYEE ACKNOWLEDGEMENT	12

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of November 2012, by and between GWire Corporation, a Utah corporation (the “Company”), and David Lee (“Employee”).

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

1.Position and Responsibilities.

(a)Position

.  The Company shall employ Employee to render services to the Company in the position of Chief Executive Officer.  Employee shall perform such duties and responsibilities as are normally related to such position in accordance with the standards of the industry and any additional duties now or hereafter assigned to Employee by the Company.  Employee shall abide by the rules, regulations, and practices as adopted or modified from time to time in the Company’s sole discretion.

(b)Other Activities

.  Except upon the prior written consent of the Company, Employee will not, during Employee’s employment with the Company, (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that might interfere with Employee’s duties and responsibilities hereunder or create a conflict of interest with the Company.

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(c)No Conflict

.  Employee represents and warrants that Employee’s execution of this Agreement, Employee’s employment with the Company, and the performance of Employee’s duties under this Agreement shall not violate any obligations Employee may have to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.

2.Compensation and Benefits.

(a)Compensation

.  In consideration of the services to be rendered under this Agreement, the Company shall compensate Employee at a rate of One Hundred Fifty Thousand Dollars ($150,000) per year (as adjusted from time to time in accordance herewith, “Base Salary”).  The Base Salary shall be paid in accordance with the Company’s regularly established payroll practices.  Employee’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company.  Employee’s Base Salary does not include bonuses paid by the Company.

(b)Equity Incentive Share Bonus

.  In addition to the Base Salary, the Company hereby awards to Employee an equity bonus of Two Million, One Hundred Twenty-five Thousand (2,125,000) shares of the Company’s common stock (the “Bonus Shares”) to vest immediately upon the date hereof. The Bonus Shares are subject to certain restrictions contained in that certain Voting Agreement and Proxy of even date herewith (the “Voting Agreement”), entered into by and among the Company, the Employee and ActiveCare, Inc., a Delaware corporation (“ActiveCare”) and the parent of the Company.

(c)Stock Options.  As additional compensation to Employee, the Company hereby grants to Employee non-qualified stock options to purchase Two Million, One Hundred Twenty-five Thousand (2,125,000) shares of the Common Stock of ActiveCare at a purchase price of Ten Cents ($0.10) per share (the “Options”).  The Options shall vest on the date hereof.  The exercise of the Options is restricted and limited by the terms of the Stock Option Agreement under which the Options are granted to Employee.

(d)Vacation

.  Employee shall be entitled to vacation and other leave in accordance with the Company’s policies generally applicable to similarly-situated employees.  Subject to applicable law, the amount of vacation and other leave available to Employee as well as the policies applicable thereto can be adjusted, reduced or eliminated from time to time in the Company’s sole discretion.  Initially, Employee shall be entitled to twenty (20) days of Paid Time Off (PTO), to be accrued and used in accordance with the Company’s vacation and other leave policies, as such policies may be amended from time to time.

(e)Benefits

.  Employee shall be eligible to participate in the benefits, if any, made generally available by the Company to similarly-situated employees, in accordance with the benefit plans established by the Company, and as may be amended from time to time in the Company’s sole discretion.  Such benefits and perquisites can be adjusted, reduced or eliminated from time to time in the Company’s sole discretion.

(f)Expenses

.  The Company shall reimburse Employee for reasonable business expenses incurred in the performance of Employee’s duties hereunder in accordance with the Company’s expense reimbursement guidelines, provided that such expenses are properly documented and accounted for in accordance with the requirements of the Internal Revenue Service.

3.Term

. The term of this Agreement and of Employee’s employment hereunder shall be two (2) years from the date hereof, subject to termination prior to the end of such term as provided in Section 4, below. Upon such termination of employment, all obligations of the Company under this Agreement shall cease except as otherwise specifically provided herein.

4.Termination of Employment.

(a)Definitions

.  For purposes of this Agreement:

(i)“Cause” shall mean a finding by the Company, in its sole discretion, that (A) Employee has committed of an act of fraud, dishonesty or embezzlement against the Company or any customer or client thereof; (B) Employee has been convicted (or entered a plea of nolo contendere in lieu thereof) of a felony or of a crime involving fraud, dishonesty, moral turpitude, or physical harm to any person; (C) Employee has materially breached one or more terms of this Agreement; (D) Employee has disclosed Confidential Information (as defined below) without authorization which disclosure Employee knew or reasonably should have known would result in material damage to the Company; (E) Employee has engaged in conduct that is in bad faith and materially injurious to the Company, including, but not limited to, misappropriation of trade secrets or a business opportunity; (F) Employee has refused to implement or follow a lawful rule, policy, regulation, or directive of the Company; (G) Employee has used drugs or alcohol in violation of Company policy or that impedes Employee’s job performance; (H) Employee has committed any act to secure or attempting to secure any personal profit not fully disclosed to and approved by the Company in connection with any transaction entered into on behalf of the Company; (I) Employee has engaged in any gross, willful or wanton negligence, intentional misconduct, or conduct which constitutes a breach of any fiduciary duty owed to the Company by Employee; or (J) Employee has accepted employment with any other employer.

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(A)A breach by the Company of any material provision of this Agreement.

(ii)“Termination Notice” shall mean a written notice that: (A) indicates the specific termination provision in this Agreement relied upon; (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated, to the extent applicable; and (C) specifying the effective date of termination of employment which, if submitted by Employee, shall be at least four (4) weeks following the date of such notice; provided, however, that in the event that Employee delivers a Termination Notice to the Company, the Company may, in its sole discretion, change the effective date of termination of employment to any date that occurs following the date of the Company’s receipt of such Termination Notice (even if such date is prior to the date specified in such Termination Notice).  A Termination Notice submitted by the Company may provide for an effective date of termination of employment on the date Employee receives the Termination Notice, or any date thereafter elected by the Company in its sole discretion.  The failure by the Company to set forth in the Termination Notice any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company’s rights hereunder.

(iii)“Voluntary Termination” shall mean the termination by Employee of Employee’s employment with the Company other than: (A) due to death or disability (as provided in Section 4(e) below); (B) simultaneous with termination for Cause; or (C) simultaneous with or following an event which, whether or not known to the Company at the time of such Voluntary Termination by Employee would constitute Cause.  In the event of a Voluntary Termination, Employee shall deliver to the Company a Termination Notice in accordance with Section 4(a)(ii).

(b)Termination Without Cause

.  After the initial two year period set forth in Section 3, the Company may terminate Employee’s employment hereunder at any time without Cause by delivering a Termination Notice to Employee specifying that Employee’s termination is without Cause pursuant to this Section 4(b).  If the Company terminates Employee’s employment without Cause, then the Company shall pay to Employee any compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time, and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement (except any obligation that may exist under Section 5) shall cease.

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(c)Termination for Cause

.  The Company may terminate Employee’s employment hereunder at any time for Cause by delivering a Termination Notice to Employee specifying that Employee’s termination is for Cause pursuant to this Section 4(c).  If the Company terminates Employee’s employment for Cause, then the Company shall pay to Employee any compensation to which Employee is entitled up through the date of termination (excluding any amounts for any accrued but unused vacation time and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination, subject in each case to any other rights or remedies of the Company under this Agreement or any other agreement, or at law or in equity.  Thereafter, all obligations of the Company under this Agreement shall cease.

(d)Death

.  Employee’s employment shall terminate automatically upon Employee’s death.  The Company shall pay to Employee’s beneficiaries or estate, as appropriate, any compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time, and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee’s beneficiaries or estate, as appropriate, for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement shall cease.  Nothing in this Section 4(d) shall affect any entitlement of Employee’s heirs or devisees to the benefits of any life insurance plan or applicable benefit.

(e)Disability

.  If Employee becomes eligible for the Company’s long-term disability benefits or if, in the sole opinion of the Company, Employee is unable to carry out the responsibilities and functions of the position held by Employee by reason of any physical or mental impairment for more than ninety (90) consecutive days or more than one hundred twenty (120) days in any twelve-month period, then, to the extent permitted by law, the Company may terminate Employee’s employment by delivering a Termination Notice to Employee specifying that Employee’s termination is made pursuant to this Section 4(e).  The Company shall pay to Employee all compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time, and any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement shall cease.  Nothing in this Section 4(e) shall affect Employee’s rights under any disability plan in which Employee is a participant.

(f)Voluntary Termination

.  Employee may terminate his employment voluntarily in accordance with a Termination Notice delivered to the Company specifying that Employee’s termination is a Voluntary Termination pursuant to this Section 4(f).  In the event of a Voluntary Termination, the Company shall pay to Employee any compensation to which Employee is entitled up through the date of termination (including amounts for any accrued but unused vacation time but excluding any bonus declared by the Company but not yet paid to Employee) and shall reimburse Employee for any reimbursable business expenses incurred by Employee on behalf of the Company prior to the effective date of termination.  Thereafter, all obligations of the Company under this Agreement shall cease.

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5.Severance

.  If the Company terminates the employment of Employee without Cause (as provided in Section 4(b)), provided that such termination of employment constitutes a “separation from service” with the Company as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto (“Separation from Service”), and only in such event, Employee shall be eligible to receive his then-current Base Salary payable in the form of salary continuation (“Severance”) for the longer of (a) three (3) months, or (b) the balance of the Initial Period (as defined below), so long as Employee does not violate any of the terms of Section 7 or Section 8.  Employee’s eligibility for Severance is subject to and conditioned on Employee’s execution of and compliance with the terms of a general release and waiver in the form acceptable to the Company (the “Separation and Release Agreement”).  For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment of Severance that Employee may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.  Should the Company learn that Employee has violated any of the terms of Section 7 or Section 8 during the salary continuation period (the “Severance Period”), then the Company may immediately cease such payments and Employee must, on demand, repay to the Company the payments for each month in which Employee breached any of the terms of Section 7 or Section 8.  Furthermore, such Severance shall be reduced by any remuneration paid to Employee because of Employee’s employment or self-employment during the Severance Period.  Employee shall promptly report all such remuneration to the Company in writing.  Employee shall not be entitled to any Severance if: (i) Employee’s employment is terminated for Cause (in accordance with Section 4(c)), by death (as provided in Section 4(d)) or by disability (as provided in Section 4(e)), or (ii) Employee chooses not to sign the Separation and Release Agreement, or chooses to revoke the Separation and Release Agreement in accordance with the terms thereof once signed.  For purposes of this Section 5, the term “Initial Period” means the twenty-four (24) month period commencing on Employee’s first day of employment with the Company.

6.Termination Obligations.

(a)Return of Property

.  Employee agrees that all property (including without limitation, all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials, furnished to or created or prepared by Employee incident to Employee’s employment belongs to the Company and shall be promptly returned to the Company promptly upon termination of Employee’s employment.

(b)Resignation and Cooperation

.  Upon termination of Employee’s employment, Employee shall be deemed to have resigned from all offices, directorships and managerships then held with the Company or any of its subsidiaries or other Affiliates.  Following any termination of employment, Employee 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 employees.  Employee shall also cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Employee’s employment by the Company.

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7.Confidential Information

.  In exchange for Employee’s promises and covenants contained in this Section 7 and elsewhere in this Agreement, including Section 8, the Company agrees to provide Employee with access to Confidential Information (as defined below) of the Company, including, without limitation, trade secrets and proprietary information regarding the Company’s business, necessary for Employee to perform his duties under this Agreement.  In connection therewith, Employee acknowledges that because of Employee’s position with the Company, Employee will have access to Confidential Information of the Company.  Accordingly, Employee hereby agrees that, during his employment and at all times thereafter, he will hold the Confidential Information of the Company in strict confidence and will neither use (for himself or any third party) the information nor furnish, make available or disclose it to anyone, except to the extent necessary to carry out his responsibilities as an employee of the Company or as specifically authorized in writing by a duly authorized officer of the Company other than Employee.  As used in this Agreement, “Confidential Information” means any information relating to the business or affairs of the Company and its Affiliates (as defined below), including, but not limited to, this Agreement, information relating to financial statements, operations manuals, systems manuals, customer identities, customer profiles, customer preferences, partner or investor identities, employees, suppliers, project designs, project methods, know-how, computer programs, procedures, advertising programs, advertising techniques, target markets, servicing methods, equipment, programs, strategies and information, market analyses, profit margins, past, current or future marketing strategies, or any other proprietary information used by the Company or its subsidiaries; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no act on the part of Employee.  Employee acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company and that he is under a contractual and common law duty to not disclose the Confidential Information to any third party at any time.  Employee acknowledges and agrees that his non-disclosure obligation applies to all Confidential Information of the Company, no matter when he obtained knowledge of or access to such Confidential Information.  Employee further acknowledges that the Company would not employ him or provide him with access to its Confidential Information, but for his promises and covenants contained in this Section 7 and elsewhere in this Agreement, including Section 8.  For purposes of this Agreement, the term “Affiliate” means (a) with respect to a Person (as defined below): (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any officer, director, manager or general partner of such Person, or (iv) any Person who is an officer, director, manager, general partner, trustee, or holder of ten percent (10%) or more of the outstanding voting interests of any Person described in item (i) or (ii) of this clause (a); and (b) with respect to the Company: (i) ActiveCare and its Affiliates, and (ii) any Person for whom the Company provides management or administrative services, and their respective Affiliates.  For purposes of clause (a) in the definition of Affiliate above, the term “controls,” “is controlled by,” or “is under common control with” shall mean the possession, whether direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.  For purposes of this Agreement, the term “Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, trust, joint venture, governmental agency, or other entity, whether domestic or foreign.

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8.Non-Competition and Non-Solicitation Covenants

(a)Prohibited Activities

.  In the event Employee is terminated for Cause  or Employee voluntarily terminates his employment with the Company, during the term of Employee’s employment and for twenty-four (24) months thereafter (the “Non-Compete Period”), in addition to Employee’s other obligations hereunder, Employee shall not, in any manner, directly or indirectly, in the Restricted Territory: (i) engage or invest in, (ii) own, manage, operate, finance, control, (iii) participate in the ownership, management, operation, financing, or control of, or (iv) be employed by, work for or with, or in any way assist, any business, person, firm, corporation, partnership, limited liability company, governmental or private entity, or any other entity of whatever kind, engaged in providing PERS, products and/or services that are substantially similar to or competitive with those offered or provided by the Company or any of its subsidiaries at any time during the Non-Compete Period or for which the Company or any of its subsidiaries has adopted a plan or authorized a budget prior to the effective date of Employee’s termination of employment (collectively, the “Restricted Business”).  For purposes of this Agreement, the “Restricted Territory” means the geographic area consisting of the United States of America.  Nothing contained in this Agreement, including this Section8(a), shall prohibit Employee from being a passive owner of not more than two percent (2%) of the outstanding stock of any class of a corporation, any securities of which are publicly traded, so long as Employee has no active participation in the business of such corporation.

(b)Non-Solicitation

.  During the term of Employee’s employment and for twenty-four (24) months thereafter (the “Non-Solicitation Period”), Employee shall not directly or indirectly (i) divert or attempt to divert from the Company or any of its subsidiaries any business of any kind, including without limitation the solicitation of or interference with any of the Company’s or its affiliates’ customers, clients, members, investors, business partners or suppliers or (ii) solicit, induce, recruit or encourage any person employed by or otherwise providing services to the Company or any of its subsidiaries to terminate his or her employment or services with the Company or any such subsidiary or to take employment with another person.

(c)Communication of Contents of Covenants

.  During the Non-Compete Period, Employee shall communicate the contents of this Section 8 to any person (including any business) that Employee intends to be retained or employed by, associated with, or represent and which Employee knows is engaged in the Restricted Business in the Restricted Territory.

(d)Tolling of Covenants

.  If it is judicially determined that Employee has violated any of his or her obligations under this Agreement, then the Non-Compete Period or the Non-Solicitation Period, as the case may be, will automatically be extended by a period of time equal in length to the period during which such violation or violations occurred.

(e)Employee’s Acknowledgments

.  Employee acknowledges that the obligations of Employee under this Section 8 (including the geographic boundaries, scope of prohibited activities and the time duration of the provisions) are reasonable in the context of the nature of the Restricted Business and the competitive injuries likely to be sustained by the Company if Employee were to violate such obligations, and are no broader than are necessary to protect the legitimate business interests of the Company.  Employee further acknowledges that the Company would not have employed Employee in the absence of this Section 8 and the other covenants and representations and warranties of Employee made herein, which Employee acknowledges constitutes good, valuable and sufficient consideration.  Employee also acknowledges that, in the event Employee’s employment with the Company is terminated for any reason, Employee will be able to earn a livelihood without violating his obligations under this Section 8 and that Employee’s ability to earn a livelihood without violating such obligations is a material condition to Employees employment and continued employment with the Company.

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(f)Specific Performance

.  The parties agree (i) that it is impossible to measure in money the damages that will accrue to the Company if Employee fails to perform his obligations under this Section 8, (ii) that failure by Employee to substantially and materially perform such obligations may result in irreparable damage to the Company, and (iii) that specific performance of Employee’s obligations may, therefore, be obtained by suit in equity.  Employee therefore agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, temporary and permanent injunctive relief may be granted in any proceeding that may be brought to enforce any provision contained in this Section 8, without the requirement of posting any bond or the necessity of proof of actual damage.  Without limiting the generality of the preceding sentence, the Company shall be entitled to an injunction from any federal or state court located in the County of Utah, in the State of Utah restraining Employee from committing or continuing any violation of this Section 8.  Employee will not assert as a claim or defense in any action or proceeding to enforce any provision hereof that the Company has or had an adequate remedy at law.

9.Miscellaneous.

(a)Severability

.  If any provision of this Agreement shall be held by a court to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect.  In the event that the time period or scope of any provision is declared by a court of competent jurisdiction to exceed the maximum time period or scope that such court deems enforceable, then such court shall reduce the time period or scope to the maximum time period or scope permitted by law.

(b)Taxes

.  All amounts paid under this Agreement (including, without limitation, Base Salary, bonuses and Severance) shall be paid less all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction.

(c)Governing Law

.  This Agreement shall be governed by the laws of the State of Utah without regard to conflict of law principles.

(d)Dispute Resolution

.  All disputes and controversies arising out of or in connection with this Agreement, Employee’s employment with the Company, or the transactions contemplated hereby shall be resolved exclusively by the state and federal courts located in Utah County in the State of Utah, and each party hereto agrees to submit to the jurisdiction of said courts and agrees that venue shall lie exclusively with such courts.  Each party hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which such party may raise now, or hereafter have, to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum.  Each party agrees that, to the fullest extent permitted by applicable law, a final judgment in any such suit, action, or proceeding brought in such a court shall be conclusive and binding upon such party, and may be enforced in any court of the jurisdiction in which such party is or may be subject by a suit upon such judgment.

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(e)WAIVER OF RIGHT TO JURY TRIAL

.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR EMPLOYEE’S EMPLOYMENT BY THE COMPANY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  EACH PARTY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

(f)Fees and Costs

.  The prevailing party in any arbitration, court action or other adjudicative proceeding arising out of or relating to this Agreement or Employee’s employment with the Company shall be reimbursed by the party who does not prevail for their reasonable attorneys’, accountants’, and experts’ fees and for the costs of such proceeding.  The provisions set forth in this Section shall survive the merger of these provisions into any judgment.

(g)Amendments; Waivers

.  This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by Employee and by a duly authorized representative of the Company other than Employee.  No waiver or consent shall be binding except in a writing signed by the party making the waiver or giving the consent.  No waiver of any provision or consent to any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar.  No waiver or consent shall constitute a continuing waiver or consent except to the extent specifically set forth in writing.

(h)Section 409A.

(i)Notwithstanding anything to the contrary in this Agreement, if at the time of Employee’s Separation from Service with the Company, Employee is a “specified employee,” as determined by the Company in accordance with Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in the payments or benefits ultimately paid or provided to Employee) until the date that is at least six (6) months following Employee’s Separation from Service with the Company (or the earliest date permitted under Section 409A of the Code), whereupon the Company will pay Employee a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to Employee under this Agreement during the period in which such payments or benefits were deferred.  Thereafter, payments will resume in accordance with this Agreement.

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(ii)This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (A) the gross income inclusion set forth within Section 409A(a)(1)(A) of the Code or (B) the interest and additional tax set forth within Section 409A(a)(1)(B) of the Code (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties.  In no event shall the Company be required to provide a tax gross-up payment to Employee with respect to any Section 409A Penalties.

(iii)Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Employee and, if timely submitted, reimbursement payments shall be promptly made to Employee following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred.  In no event shall Employee be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred.  This Section 9(h)(iii) shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Employee.

(iv)Additionally, in the event that following the date hereof the Company or Employee reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and Employee shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (A) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (B) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

(i)Remedies

.  All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law.

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(j)Assignment

.  The performance of Employee is personal hereunder, and Employee agrees that Employee shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement.  This Agreement may be assigned or transferred by the Company; and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets.  Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those specifically enumerated in this Agreement.

(k)Parties in Interest

.  Nothing in this Agreement shall confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective successors and permitted assigns nor shall anything in this Agreement relieve or discharge the obligation or liability of any third person to any party to this Agreement, nor shall any provision give any third person any right of subrogation or action over or against any party to this Agreement.

(l)Construction

.  The terms of this Agreement have been negotiated by the parties hereto, and no provision of this Agreement shall be construed against either party as the drafter thereof.

(m)Interpretation

.  This Agreement shall be construed as a whole, according to its fair meaning.  Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement.  Unless the context of this Agreement otherwise requires, (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words shall refer to this entire Agreement.

(n)Notice

.  Any notices, consents, agreements, elections, amendments, approvals and other communications provided for or permitted by this Agreement or otherwise relating to this Agreement shall be in writing and shall be deemed effectively given upon the earliest to occur of the following: (i) upon personal delivery to such party; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) upon actual receipt by the party to be notified via any other means (including public or private mail, electronic mail or telegram); provided, however, that notice sent via electronic mail shall be deemed duly given only when actually received and opened by the party to whom it is addressed.  All communications shall be sent to the party’s address set forth on the signature page below, or at such other address as such party may designate by ten (10) days advance written notice to the other parties in accordance with this Section 9(n).

(o)Survival

.  The terms and provisions of the Company’s and Employee’s obligations or agreements under Sections 4, 5, 6, 7, 8 and 9 herein shall survive any termination of Employee’s employment hereunder, the termination of this Agreement and will be construed as agreements independent of any other provisions of this Agreement.

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(p)Counterparts

.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.  This Agreement may be executed and delivered by facsimile, or by email in portable document format (.pdf) and delivery of the executed signature page by such method will be deemed to have the same effect as if the original signature had been delivered to other the parties.

(q)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.

(r)Entire Agreement

.  This Agreement is intended to be the final, complete, and exclusive statement of the terms of Employee’s employment by the Company and may not be contradicted by evidence of any prior or contemporaneous statements or agreements, except for agreements specifically referenced herein.  To the extent that the practices, policies or procedures of the Company, nor or in the future, apply to Employee and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control.  Any subsequent change in Employee’s duties, position, or compensation will not affect the validity or scope of this Agreement.

(s)EMPLOYEE ACKNOWLEDGEMENT

.  EMPLOYEE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT AND HAS OBTAINED AND CONSIDERED THE ADVICE OF SUCH LEGAL COUNSEL TO THE EXTENT EMPLOYEE DEEMS NECESSARY OR APPROPRIATE, THAT EMPLOYEE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT EMPLOYEE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EMPLOYEE HAS ENTERED INTO IT FREELY BASED ON EMPLOYEE’S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

[SIGNATURES TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the day and year first above written.

“COMPANY”
GWIRE CORPORATION,
a Utah corporation
By:
Name:
Title:
Address:
“EMPLOYEE”
David Lee
Address:
	Telephone:
	Facsimile:
	Email:

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EX-10.7

Exhibit 10.7

VOTING AGREEMENT AND IRREVOCABLE PROXY

THIS VOTING AGREEMENT AND IRREVOCABLE PROXY (this “Agreement”) is effective as of September 1, 2012, by and among GWire Corporation, a Utah corporation (the “Corporation”), and each of Andrew Ball (“Ball”), David Lee (“Lee”) and ActiveCare, Inc., a Delaware corporation (“ActiveCare” and, with each of Ball and Lee, a “Shareholder”.

WHEREAS, Ball, Lee and ActiveCare are the holders of all of the issued and outstanding shares of the Common Stock of the Corporation (the “Shares”);

WHEREAS, Ball and Lee are the holders of a majority of the issued and outstanding member interests (the “GWO Interests”) of Green Wire Outsourcing, LLC, a Utah limited liability company (“GWO”);

WHEREAS, in order to insure the management of the Corporation in the interest of all of the shareholders and as a material inducement and condition to the Corporation issuing shares of its capital stock to the Shareholders, the Shareholders have agreed to enter into this Agreement; and

WHEREAS, the parties hereto are entering into this Agreement in accordance with Sections 722 and 731 of the Utah Revised Business Corporation Act;

NOW, THEREFORE, in consideration of covenants, conditions and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.           Representations and Warranties.  Ball and Lee (each a “Shareholder”), and each of them individually and not jointly or severally, hereby represents and warrants to ActiveCare and the Corporation as follows:

(a)           This Agreement has been duly executed and delivered by, and constitutes the valid and binding agreement of, such Shareholder, enforceable against such Shareholder in accordance with its terms.

(b)           The execution and delivery of this Agreement will not violate or result in a default under or conflict with any agreement, indenture, mortgage, note, bond, lease or other contract or instrument to which such Shareholder is a party.

(c)           The Shares owned by such Shareholder and the certificates representing such Shares, if any, are now and at all times during the term hereof shall be held by such Shareholder, free and clear of any and all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever which would interfere with the voting of such Shares or the granting of any proxy, except for any such encumbrances or proxies arising hereunder.

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2.           Voting Agreement.

(a)           Each Shareholder covenants and agrees that, during the term of this Agreement, at any and all meetings of shareholders of the Corporation, or at any adjournment thereof or in any other circumstances upon which a vote, consent (including written consents), agreement or other approval is sought, such Shareholder shall vote (or cause to be voted) all of the Shares and the GWO Interests owned by such Shareholder and shall otherwise consent or agree in such manner as may be directed by David G. Derrick, President and CEO of ActiveCare, in his sole and absolute discretion, including without limitation to elect individuals to the Corporation’s Board of Directors or GWO’s board of managers (whether at any annual election of the Board of Directors, in connection with filling any vacancy as a result of any termination, removal or resignation of any member of the Board of Directors of the Corporation or any manager or member of the board of managers of GWO or otherwise) as designated by David G. Derrick. It is agreed that initially, Lee shall be appointed to the Corporation’s Board of Directors and shall serve for one (1) year, to be succeeded by Ball and that they shall alternate thereafter for one-year terms during the effectiveness of this Agreement.

(b)           In the event that David G. Derrick is unable or unwilling to provide the direction or designation contemplated by this Section 2, then in such event each Shareholder covenants and agrees that, during the term of this Agreement, at any and all meetings of shareholders of the Corporation, or at any adjournment thereof or in any other circumstances upon which a vote, consent (including written consents), agreement or other approval is sought, such Shareholder shall vote (or cause to be voted) all of the Shares and GWO Interests owned by such Shareholder and shall otherwise consent or agree in such manner as may be directed by Michael G. Acton in his sole and absolute discretion, including without limitation to elect individuals to the Corporation’s Board of Directors or GWO’s board of managers (whether at any annual election of the Board of Directors, in connection with filling any vacancy as a result of any termination, removal or resignation of any member of the Board of Directors of the Corporation or any manager or member of the board of managers of GWO or otherwise) as designated by Michael G. Acton.

(c)           In the event that both David G. Derrick and Michael G. Acton are unable or unwilling to provide the direction or designation contemplated by this Section 2, then in such event the Shares and GWO Interests shall be voted as directed by the Board of Directors of ActiveCare, acting by majority of such Board.

(d)           Each Shareholder, as a holder of Shares and GWO Interests, shall be present in person or by proxy at all meetings of shareholders of the Corporation and GWO so that all Shares and GWO Interests are counted for purposes of determining the presence of a quorum at such meeting.

3.           Covenants. Each Shareholder hereby covenants and agrees that prior to the termination of this Agreement, such Shareholder shall not without the prior written consent of the Corporation and Shareholders holding a majority of the Corporation’s outstanding Common Stock (a) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge, transfer, encumbrance or other form of disposition of any kind or nature whatsoever) any of the Shares owned by such Shareholder or any interest therein or enter into any contract, option or other arrangement or understanding with respect to any such transfer; (b) grant any proxy, power of attorney or other authorization in or with respect to any of the Shares owned by such Shareholder; (c) deposit any of the Shares owned by such Shareholder into any voting trust or enter into any voting agreement or other understanding or arrangement with respect to such Shares; or (d) take any other action which would make any representations or warranties of such Shareholder contained herein untrue or incorrect or have the effect of preventing or disabling such Shareholder from performing his or her obligations under this Agreement.

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Each of Ball and Lee hereby covenants and agrees that prior to the termination of this Agreement, he shall not without the prior written consent of ActiveCare (a) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge, transfer, encumbrance or other form of disposition of any kind or nature whatsoever) any of the GWO Interests owned by him or any interest therein or enter into any contract, option or other arrangement or understanding with respect to any such transfer; (b) grant any proxy, power of attorney or other authorization in or with respect to any of the GWO Interests owned by him; (c) deposit any of the GWO Interests owned by him into any voting trust or enter into any voting agreement or other understanding or arrangement with respect to such GWO Interests; or (d) take any other action which would make any representations or warranties of his contained herein untrue or incorrect or have the effect of preventing or disabling him from performing his obligations under this Agreement.

4.           Grant of Irrevocable Proxy; Appointment of Proxy. In furtherance of Section 2 hereof:

(a)           Each Shareholder hereby irrevocably grants to, and appoints the following person as the Shareholder’s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote all of the Shares and GWO Interests owned by such Shareholder at any meeting of the shareholders of the Corporation or any meeting of the members of GWO, or at any adjournment thereof or in any other circumstances upon which a vote, agreement, consent (including unanimous written consents) or other approval is sought, as set forth in Section 2 hereof:  (i) David G. Derrick, or (ii) if David G. Derrick is unable or unwilling to act as such proxy and attorney-in-fact, then Michael G. Acton, or (iii) if both David G. Derrick and Michael G. Acton are unable or unwilling to act as such proxy and attorney-in-fact, then to the Board of Directors of ActiveCare, acting by majority of such Board.

(b)           Such attorney-in-fact may evidence the taking of any action, giving of any consent or the voting of such Shares or GWO Interests by the execution of any document or instrument for such purpose in the name of such Shareholder.

(c)           Each Shareholder hereby represents that any proxies given in respect of the Shares or GWO Interests owned by such Shareholder prior to the granting of the proxy set forth in this Agreement are not irrevocable, and that any such proxies are hereby revoked.

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(d)           The proxy and attorney-in-fact acting pursuant to this Section 4 agrees to vote for Ball or Lee or their nominee as a member of the three-person Board of Directors of the Corporation during for the period that this Agreement continues in effect.

(e)           Each Shareholder hereby affirms that the irrevocable proxy set forth in this Section 4 is given in connection with, and in consideration of, the issuance of Shares by the Corporation to the Shareholder and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement.  Each Shareholder hereby further affirms that this irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Each Shareholder hereby ratifies and confirms all that the proxy and attorney-in-fact appointed pursuant to this Section 4 may lawfully do or cause to be done by virtue hereof. SUCH IRREVOCABLE PROXY IS EXECUTED AND INTENDED TO BE IRREVOCABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 722 OF THE UTAH REVISED BUSINESS CORPORATION ACT.

5.           Certain Events. Each Shareholder agrees that this Agreement and the obligations hereunder shall attach to all of the Shares and GWO Interests owned by such Shareholder and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation such Shareholder’s successors and assigns.  In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Corporation or the acquisition of additional shares of the Corporation’s stock or other voting securities of the Corporation or GWO by such Shareholder after the date hereof, the number of Shares and GWO Interests subject to the terms of this Agreement shall be adjusted automatically as appropriate and this Agreement and the obligations hereunder shall attach automatically to any such additional shares of the Corporation’s stock or other voting securities of the Corporation or GWO issued to or acquired by such Shareholder.

6.           Further Assurances. Each Shareholder shall, upon request of the Corporation, execute and deliver such additional documents and take such further actions as may reasonably be deemed by the Corporation to be necessary or desirable to carry out the provisions hereof and to vest the power to vote Shares as contemplated by Section 4 in the attorney-in-fact described therein.

7.           Call Option.

(a)           Grant of the Call Option for the Shares.  Each Shareholder hereby grants to ActiveCare the option and right, and not the obligation, to cause such Shareholder to sell to ActiveCare all (and not less than all) of the Shares held by such Shareholder upon the terms and conditions set forth in this Section 7 (the “Call Option”).  The purchase price for such Shares shall be $0.10 per Share. The Call Option shall be exercisable by ActiveCare at any time and from time to time following the date hereof (the “Call Option Exercise Period”).

(b)           Grant of the Call Option for the GWO Interests.  Ball and Lee each hereby grants to ActiveCare the option and right, and not the obligation, to cause such Shareholder to sell to ActiveCare all (and not less than all) of the GWO Interests held by such Shareholder upon the terms and conditions set forth in this Section 7 (the “GWO Call Option”).  The purchase price for all GWO Interests held by each such Shareholder shall be $1.00. The GWO Call Option shall be exercisable by ActiveCare at any time and from time to time during the Call Exercise Period.

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(c)           Call Option Procedure. If at any time during the Call Option Exercise Period, ActiveCare elects to exercise its Call Option or the GWO Call Option, ActiveCare shall exercise the Call Option by providing written notice to the Shareholder whose Shares or GWO Interests ActiveCare intends to purchase (the “Call Option Notice”) during the Option Exercise Period. The Call Option Notice shall constitute an irrevocable election by Company to exercise the Call Option.  The purchase price shall be paid by ActiveCare’s certified check or bank cashier’s check to the Shareholder on the date specified by the Call Option Notice as the closing date.

8.           Transfer Restriction.  Except as otherwise provided herein, the Shareholders may not sell, transfer or otherwise dispose of all or any portion of their Shares or GWO Interests (whether now owned or hereafter acquired).  Any attempted or purported transfer or disposition of any of the Shares or GWO Interests by a Shareholder that is not in conformity with the terms, conditions and provisions of this Agreement shall be null and void, and shall have no force or effect whatsoever.

9.           Certain Transfers or Dispositions of Shares by Shareholders.

(a)           Death.  In the event of a Shareholder’s death, unless otherwise agreed by the Shareholder and ActiveCare in writing, ActiveCare shall purchase all of the Shares and GWO Interests then owned by Shareholder on the date of his death, and Shareholder’s estate, personal representative, surviving spouse or heirs shall sell and transfer all of such Shares and GWO Interests to ActiveCare as provided below.  Any options for the purchase of ActiveCare shares by the deceased Shareholder shall terminate.

(i)           Immediate Shift of Voting Control upon Death; Termination of Voting Agreement.  Immediately upon the death of a Shareholder, Section 2 of this Agreement shall automatically be terminated and become of no further force or effect and ActiveCare shall become entitled to vote one hundred percent (100%) of the deceased Shareholder’s Shares and GWO Interests, in ActiveCare’s sole and absolute discretion at any and all meetings of the shareholders, however called or noticed, and in any and all actions taken by written consent of the shareholders of the Corporation.

(ii)           Purchase of Shares.  Within sixty (60) days after the death of a Shareholder, ActiveCare shall purchase from the Shareholder’s estate, surviving spouse or heirs all of the Shares and GWO Interests that were owned by Shareholder on the date of his death (collectively, “Deceased Shareholder’s Securities”), and the Shareholder’s estate, personal representative, surviving spouse or heirs shall sell and transfer and take all actions necessary to sell and transfer such Securities to ActiveCare.  The purchase price for the Deceased Shareholder’s Securities shall be as provided under the Call Option (the “Purchase Price”).  ActiveCare shall have the right, in its sole discretion, to assign this right to purchase granted pursuant to this Section 9 to any other person or entity.

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(b)           Disability or Authorized Leave of Absence.

(i)           Mandatory Purchase.

(A)           Disability.  In the event a Shareholder becomes Disabled, as defined below, unless otherwise agreed by ActiveCare in writing, ActiveCare shall purchase from such Shareholder or from his legal custodian, representative or guardian (the “Guardian”), and such Shareholder or his Guardian, as the case may be, shall promptly sell to ActiveCare, all of the Shareholder’s Shares and GWO Interests.

(B)           Definition of Disability.  For purposes of this Section 9(b), “Disabled” and “Disability” shall be deemed to mean that, in the judgment of a licensed physician in the State of Utah selected by ActiveCare, subject to a Shareholder’s or his Guardian’s reasonable approval, a Shareholder is unable to perform his regular and customary job functions because of a physical or mental impairment or if a Shareholder has been unable to perform his regular and customary job functions for more than ninety (90) consecutive days or more than one hundred twenty (120) days during any twelve (12) month period for any reason whatsoever.  The determination by said physician shall be binding and conclusive on the parties for all purposes.

(C)           Sale and Closing.  Unless otherwise agreed by ActiveCare in writing, in the event a Shareholder does not return to full time employment with the Corporation within the period of any leave previously agreed to by the Corporation, ActiveCare may purchase from such Shareholder or Guardian within sixty (60) days after the expiration of such leave, and such Shareholder or his Guardian shall sell to ActiveCare, all of such Shareholder’s Shares.  The purchase price for such Shares and GWO Interests shall be the Purchase Price established under Section 9(a), above.  ActiveCare shall have the right, in its sole discretion, to assign this right to purchase granted pursuant to this Section 9 to any other person or entity.

(c)           Divorce.

(i)           Shareholder’s Divorce.  In the event of the divorce, dissolution, separate maintenance or the entry of a decree of separation (each, a “Divorce Action”) between a Shareholder and a Shareholder’s former spouse (“Former Spouse”), the Parties agree that (a) any instrument or agreement relating to the Divorce Action shall include provisions whereby such Shareholder, without regard to fault in such Divorce Action, shall purchase from his Former Spouse within twenty (20) days after the finalization of the Divorce Action, and (b) such Former Spouse shall sell any and all Shares and GWO Interests that may be awarded to or otherwise be owned or controlled by such Former Spouse, as a result of such Divorce Action or otherwise (including any and all rights, titles and interests therein) to the Shareholder.  The purchase price for each Share and the GWO Interests sold or purchased pursuant to this Section 9(c) shall be the Purchase Price.

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(ii)           Immediate Shift of Voting Control upon Filing of Divorce Action; Termination of Voting Agreement.  Immediately upon the filing of a Divorce Action against a Shareholder, Section 2 of this Agreement shall automatically be terminated and become of no further force or effect and ActiveCare shall become entitled to vote one hundred percent (100%) of the Shareholder’s Shares and GWO Interests, in ActiveCare’s sole and absolute discretion, at any and all meetings of the shareholders, however called or noticed, and in any and all actions taken by written consent of the shareholders.

(iii)           Divorce Call Option.  Notwithstanding Section 9(c)(i) hereof, in the event a Shareholder for any reason does not or is not able to purchase from his Former Spouse all of such Former Spouse’s Shares and GWO Interests as required hereunder ActiveCare shall have the option to call and purchase all, but not less than all, of the Shares and GWO Interests that are awarded to or otherwise held, owned or controlled by the Former Spouse of a Shareholder (the “Divorce Call Option”).  The Divorce Call Option will be exercisable by ActiveCare for as long as such Former Spouse holds, owns or controls or has any rights, titles or interests in or to any of the Shares or GWO Interests.  The purchase price for any Shares and GWO Interests purchased by ActiveCare pursuant to the Divorce Call Option shall be the Purchase Price, which shall be paid within sixty (60) days of the date of notice of ActiveCare’s exercise of its option hereunder.

(d)           Execution by Spouse.  The spouse of each Shareholder is executing this Agreement for the purpose of acknowledging and agreeing to this Section 9.  By executing this Agreement, each Shareholder’s spouse does hereby evidence her understanding of this Section 9, and does thereby acknowledge and agree to this Section 9 and each of the terms, conditions and provisions hereof.

10.           Termination.  This Agreement, and all rights and obligations of the parties hereunder, including without limitation, the proxy set forth in Section 4, shall continue until terminated upon the unanimous written consent of all of the Parties hereto; provided, however, that the Agreement shall terminate as to a Shareholder, at such time as he shall have transferred his Shares in exercise of the Option granted to him by ActiveCare to acquire common stock of Active Care, or shall have disposed of such Shares pursuant to the terms of this Agreement.  If this Agreement and the rights and obligations of the Parties hereunder are not earlier terminated, then such rights and obligations, including without limitation, the proxy set forth in Section 4, shall terminate on September 30, 2032.

11.           Legends.  Each certificate representing Shares, whether now held or hereafter acquired, shall be endorsed by the Corporation with a legend reading substantially as follows:

“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT AND IRREVOCABLE PROXY, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATION AND IS AVAILABLE UPON REQUEST, AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH VOTING AGREEMENT AND IRREVOCABLE PROXY. ANY ATTEMPTED SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF SUCH AGREEMENT AND PROXY SHALL BE VOID AND OF NO FORCE AND EFFECT.”

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12.           Miscellaneous.

(a)           This Agreement may be executed (whether by electronic signature or otherwise) in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall be considered one and the same instrument.

(b)           This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

(c)           This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah without regard to the principles of conflicts of laws thereof.

(d)           Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the Shareholders without the prior written consent of the Corporation. Any assignment in violation of the foregoing shall be null and void and of no force or effect whatsoever. This Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

(e)           Each Shareholder hereby acknowledges and agrees that irreparable damage would occur and that the Shareholders, ActiveCare, and the Corporation would not have any adequate remedy at law in the event that any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached.  Each Shareholder further acknowledges and agrees that ActiveCare and the Corporation shall each be entitled to an injunction or injunctions to prevent breaches by such Shareholder of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

(f)           If any term, provision, covenant or restriction herein, or the application thereof to any circumstance, shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, such term, provision, covenant or restriction shall be modified or voided, as may be necessary to achieve the intent of the parties to the extent possible, and the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law.

(g)           Any term or provision of this Agreement may be waived by the party entitled to the benefit thereof.  Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement, if, as to any party, it is duly authorized in writing by such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any such other breach.

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(h)           No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party.

(i)           By executing this Agreement, each of the undersigned revokes all proxies previously given by such Shareholder with respect to all of his or her shares of capital stock in the Corporation and with respect to the matters covered herein.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Corporation and the Shareholders have executed this Voting Agreement and Irrevocable Proxy effective as of September 1, 2012.  Additional Shareholders may become parties to this Voting Agreement and Irrevocable Proxy by executing Counterpart Signature Pages referencing their agreement to be bound by the terms of this Voting Agreement and Irrevocable Proxy, with dates later than the date other parties so agreed.  Notwithstanding such later dates, the date of this Voting Agreement and Irrevocable Proxy shall be referred to as September 1, 2012.

CORPORATION:

GWire Corporation

By:

Name:

Title:

Andrew Ball

[Mrs. Ball]

David Lee

[Mrs. Lee]

ActiveCare, Inc., a Delaware corporation

By: David G. Derrick, President

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VOTING AGREEMENT AND IRREVOCABLE PROXY

Shareholder Counterpart Signature Page

The undersigned Shareholder hereby revokes all proxies previously given by such Shareholder with respect to all of his or her shares of capital stock in GWire Corporation, a Utah corporation.

The undersigned Shareholder waives his or her right to cancel this Voting Agreement and Irrevocable Proxy at any time during the time period described herein.

The undersigned Shareholder acknowledges that the irrevocable proxy made herein is coupled with an interest, because the undersigned Shareholder is party to a voting agreement created under Section 731 of the Utah Revised Business Corporation Act.

IN WITNESS WHEREOF, I have executed this Voting Agreement and Irrevocable Proxy on November 1, 2012.

_____________________________

Shareholder

_____________________________

Print Name

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, David G. Derrick, certify that:

1. I have reviewed this annual report on Form 10-K 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 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; and

5. The registrant’s other certifying officer 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.

/s/ David G. Derrick

Name: David G. Derrick

Title: Chief Executive Officer (Principal Executive Officer)

Date: January 13, 2014

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michael G. Acton, certify that:

1. I have reviewed this annual report on Form 10-K 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 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; and

5. The registrant’s other certifying officer 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.

/s/ Michael G. Acton

Name: Michael G. Acton

Title: Chief Financial Officer (Principal Accounting and Financial Officer)

Date: January 13, 2014

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

I, David G. Derrick, Chairman of the Board and Chief Executive Officer of ActiveCare, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the year ended September 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 13, 2014

/s/ David G. Derrick

David G. Derrick

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

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.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC REPORT

I, Michael G. Acton, Chief Financial Officer of ActiveCare, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the year ended September 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 13, 2014

/s/ Michael G. Acton

Michael G. Acton

Chief Financial Officer

(Principal Financial and Accounting Officer)

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.

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2. Summary of Significant Accounting Policies: Research and Development Costs (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Research and Development Costs

Research and Development Costs

All expenditures for research and development are charged to expense as incurred. Research and development expenses for fiscal years 2013 and 2012 were $832,271 and $187,230, respectively. The expenditures for fiscal year 2013 were primarily for the development of the Chronic Illness Monitoring operating system. The expenditures for fiscal year 2012 were for software development efforts for the chronic illness market.  

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9. Notes Payable: Schedule of principal payments on notes payable (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of principal payments on notes payable

Years Ending September 30,
2014	$	1,768,820
2015		854,522
2016		239,824
	$	2,863,166

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3. Discontinued Operations: Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures

		2013		2012
Revenues	$	351,645	$	467,259
Cost of revenues		(300,396)		(392,049)
Gross margin		51,249		75,210
Selling, general and administrative expenses		(111,657)		(221,200)
Loss from discontinued operations		(60,408)		(145,990)
Gain on sale discontinued operations		55,096		-
Net loss from discontinued operations	$	(5,312)	$	(145,990)

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4. Acquisitions (Details) (USD $)		1 Months Ended
	Sep. 30, 2013	Mar. 31, 2012 4G Biometrics, LLC	Sep. 30, 2013 4G Biometrics, LLC	Mar. 08, 2012 4G Biometrics, LLC	Sep. 01, 2012 GWire
Business Acquisition, Cost of Acquired Entity, Cash Paid				$ 350,000
Business Acquisition, Cost of Acquired Entity, Liabilities Incurred				50,000
Business Acquisition Equity Interests Issued Or Issuable Number Of Series D Convertible Shares Issued				160,000	20,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		433,333
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 1.50			$ 1.00
Vested Common Stock Options			260,000
Business Acquisition, Cost of Acquired Entity, Purchase Price				1,040,000	2,276,737
Business Acquisition, Purchase Price Allocation, Goodwill Amount				825,894
Business Acquisition, Purchase Price Allocation, Other Assets				214,106	2,155,776
Business Acquisition, Cost of Acquired Entity, Other Noncash Consideration					2,236,737
Business Acquisition Equity Interests Issued Or Issuable Number Of Series D Convertible Shares Issued Value					40,000
Business Acquisition, Purchase Price Allocation, Current Assets, Cash and Cash Equivalents					12,215
Business Acquisition, Purchase Price Allocation, Current Assets, Receivables					13,976
Business Acquisition, Purchase Price Allocation, Property, Plant and Equipment					92,022
Business Acquisition, Purchase Price Allocation, Current Assets					16,964
Business Acquisition, Purchase Price Allocation, Equipment					229,249
Business Acquisition, Purchase Price Allocation, Current Liabilities, Accounts Payable					154,206
Business Acquisition, Purchase Price Allocation, Current Liabilities, Accrued Liabilities					55,117
Business Acquisition, Purchase Price Allocation, Current Liabilities, Deferred Revenue					$ 34,142

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10. Related-party Notes Payable: Schedule of related party notes payable (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of related party notes payable

	2013	2012
Unsecured notes payable to an entity controlled by an officer of the Company with interest at 15% (18% in the event of default), due September 30, 2013.  The Company issued 60,000 shares of common stock as loan origination fees with a grant date fair value of $93,000.  The notes and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	$            600,000	$                     -
Unsecured note payable to an entity controlled by an officer of the Company, with interest at 3% (18% in the event of default), due July 2013.  In July the lender agreed to extend the maturity date to September 30, 2013 with an interest at 12% (18% in the event of default).  The Company issued 30,000 shares of common stock with grant date fair value of $38,100 as loan origination fees.  In the event of default, the note is convertible into share of common stock at $0.75 per share. The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	300,000	-
Unsecured note payable to an entity controlled by an officer of the Company, interest at 12% (18% in the event of default), due September 30, 2013.  The Company issued 30,000 shares of common stock with a grant date fair value of $37,500 as loan origination fees.  In the event of default, the note is convertible into shares of common stock at $0.75 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	300,000	-
Unsecured notes payable to an entity controlled by an officer of the Company, interest at 12% (18% in the event of default), due April 2013.  In the event of default, the note is convertible into shares of common stock at $0.40 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	200,000	-
Unsecured note payable to a lender under the control of the Company’s CEO, interest at 12%, due upon demand. The note is convertible into shares of common stock at $0.75 per share.  The Company recognized $148,750 in connection with the beneficial conversion feature.  The Company issued 17,500 shares of common stock with a grant date fair value of $26,250 as loan origination fees.  Subsequent to September 30, 2013 $160,000 of the note was converted to common stock (see note 20).	175,000	-
Unsecured note payable with zero interest to an entity controlled by an officer of the Company.  The note was repaid in full subsequent to September 30, 2013.	150,000	-
Unsecured note payable to an entity controlled by an officer of the Company, with interest at 12%, due August 2012.   During fiscal year 2013, the lender agreed to extend the maturity date to June 30, 2013 with an interest at 18% and 5,600 shares of Series D with a grant date fair value of $56,252 paid as a loan origination fee.  The note is currently in default.  The note also included $7,500 of loan origination fees added to the principal. In the event of default, the note is convertible into shares common stock at $0.40 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	82,500	543,278
Unsecured note payable to an officer of the Company with interest at 15%, due June 2012, currently in default.  The note includes $3,000 of loan origination fees added to the principal and is convertible into common stock at $0.50 per share.	33,000	33,000
Unsecured note payable to an officer of the Company with interest at 12%, due September 30, 2013, currently in default.  The loan is convertible into the Company's common stock at a rate of $0.75 per share.  The Company recognized $22,820 in connection with the beneficial conversion feature.	26,721	-
Unsecured note payable to an officer of the Company with interest at 12%, due upon demand.	13,644	-
Unsecured notes payable with zero interest to an individual related to an officer of the Company.  The loan was repaid in full subsequent to September 30, 2013.	10,000	-
Series B unsecured debenture loans from entities controlled by an officer of the Company, including $68,914 in loan origination fees added to the principal of the loans, payable in 36 monthly installments, maturing December 2015 and January 2016.  Of the debenture, $554,556 was issued to settle a related-party note payable with a total outstanding balance of $460,778 and $43,364 of related accrued interest.  Of the loan, $35,000 was issued to settle an accrued service fee.  The loans bear interest at 12% and are convertible into common stock after 180 days. After payment of principal and interest, the holders of the Series B and Series A debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out the royalty by paying the lender $22,000 for every $25,000 loaned.  During the fiscal year ended September 30, 2013, the Company issued 34,400 shares of Series D with a fair market value of $343,748 at date of grant as additional loan origination fees, and paid $30,102 of the loan principal.  The Company is late on certain monthly payments.  The notes include beneficial conversion features valued at $167,000 at inception, which the Company is amortizing over the life of the loan.  The feature had an unamortized value of $3,348 as of September 30, 2013.  During fiscal year 2013, $722,684 of outstanding principal and $49,895 of accrued interest were converted into 1,030,107 common shares at a rate of $0.75 per share.  The Company recorded $535,656 of expense associated with the induced conversion of these debenture loans. The majority of loans were converted during fiscal year 2013.  The remaining note of $5,270 and accrued interest were converted to common stock subsequent to September 30, 2013 (see note 20)	5,270	-
Unsecured notes payable to a lender under the control of the Company’s CEO with a line of credit borrowing capacity of $2,000,000, interest at 12%, due July 2013. The notes were convertible into shares of common stock at $5.00 per share.  In connection with the notes payable, the Company issued 80,000 shares of Series D preferred stock (valued at $240,000).  The Company granted warrants to purchase 341,000 shares of common stock as a loan origination fee. These warrants vested immediately and are exercisable at $4.40 per share through November 3, 2016. The fair value of the warrants was $107,130, and was measured using a binomial valuation model with the following assumptions: exercise price $4.40; risk-free interest rate of .39%; expected life of 2.5 years; expected dividends of zero; a volatility factor of 134.57%; and market price on date of grant of $4.40.  During fiscal year 2012, the Company re-priced the exercise price of the warrants from $4.40 to $1.00 per share.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the lender in satisfaction of the outstanding balance of $620,687 plus $21,585 of accrued interest.  Upon the conversion of the note, the Company immediately recognized the unamortized debt discount of $209,143.	-	620,687
Note payable to an entity controlled by an officer of the Company, interest at 12%, due December 2012.  This note was secured by real estate.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $300,000 plus $14,992 of accrued interest.	-	300,000
Series A debenture loans from a former CEO and Chairman of the Company, secured by customer contracts, payable in 36 monthly installments, maturing September and December 2015.  The loans bear interest at 12% and are convertible into common stock after 180 days. After payment of principal and interest, the holders of the Series B and Series A debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out each royalty by paying the lender $20,000 for every $25,000 loaned.  During fiscal year 2013, the Company paid $41,682 of the loan principal.  During fiscal year 2013, $342,912 of principal and interest were converted into 457,216 common shares.  The Company recorded $297,191 of expense associated with the induced conversion of these notes.	-	244,196
Unsecured note payable to an entity controlled by an officer of the Company, including a $7,500 loan origination fee, interest at 12%, due August 2012.  The note was convertible into common stock at 50% of fair market value or $0.40 per share, whichever is less.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $82,500 plus $3,716 of accrued interest.	-	82,500
Unsecured note payable to an entity controlled by an officer of the Company, including a $7,500 loan origination fee, interest at 12%, due September 2012. The note was convertible into common stock at $0.40 per share or 50% of market value, whichever was less.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $82,500 plus $3,173 of accrued interest.	-	82,500
Notes payable to an entity controlled by an officer of the Company, including a $26,000 loan origination fee which was convertible into Series D preferred stock at any time at $2.00 per share, interest at 15%, due December 2012.  This note was secured by real estate.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $51,000 plus $3,186 of accrued interest.  Upon the conversion of the note, the Company immediately recognized the unamortized debt discount of $14,238.	-	51,000
Total before discount and current portion	1,896,135	1,957,161
Less discount	(3,720)	(223,381)
Total notes payable, related-party	1,892,415	1,733,780
Less current portion	(1,892,415)	(1,563,923)
Total  notes payable, related-party, net of current portion	$                     -	$            169,857

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8. Equipment Leased to Customers (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Property Subject To Or Available For Operating Lease Depreciation Expense	$ 175,049	$ 70,531
Disposal Group, Not Discontinued Operation, Gain (Loss) on Disposal	$ 75,124

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2. Summary of Significant Accounting Policies: Inventories: Schedule of Utility Inventory (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Utility Inventory

				2013		2012
Chronic Illness Monitoring
	Finished goods		$	1,249,220	$	185,884
Careservices
	ActiveHomeTM			-		56,767
Reagents
	Raw materials			-		36,211
	Work in process			-		5,745
	Finished goods			-		6,161
		Total inventories	$	1,249,220	$	290,768

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2. Summary of Significant Accounting Policies: Accounts Receivable (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Accounts Receivable

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 $76,544 and $20,195 as of September 30, 2013 and 2012, respectively.

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9. Notes Payable: Schedule of Debt (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Gross notes payable before discount	$ 2,863,166	$ 4,561,737
Discount on notes payable	(528,663)	(187,587)
Notes payable current and noncurrent	2,334,503	4,374,150
Notes payable current portion	(1,278,585)	(2,569,221)
Notes payable, net of current portion	1,055,918	1,804,929
Note1Member
Gross notes payable before discount	1,766,971	2,236,737
Note2Member
Gross notes payable before discount	550,000
Note3Member
Gross notes payable before discount	250,000	250,000
Note4Member
Gross notes payable before discount	185,476
Note5Member
Gross notes payable before discount	85,719	300,000
Note6Member
Gross notes payable before discount	25,000	275,000
Note7Member
Gross notes payable before discount		$ 1,500,000

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6. Patent License Agreement (Details) (USD $)	12 Months Ended		60 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2018
Details
Common stock shares issued in purchase of patents		600,000
Series C stock shares issued in purchase of patents		480,000
Independent valuation of patents		$ 922,378
Value of the Common Stock issued		240,000
Value of the Series C Preferred Stock issued		682,378
Amortization of Intangible Assets	$ 126,870	$ 147,277	$ 566,920

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17. Segment Information: Schedule of Segment Reporting Information, by Segment (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Total revenues	$ 11,399,532	$ 1,059,111
Net loss	(25,631,006)	(12,365,756)
Interest expense, net	5,583,932	858,224
Total assets	12,374,050	5,875,954
Corporate
Net loss	(11,298,372)	(21,986,526)
Interest expense, net	858,224	5,583,932
Total assets	397,557	600,892
Fixed assets and leased equipment purchases	93,315	243,273
Depreciation, Depletion and Amortization, Nonproduction	304,841	124,269
Chronic Illness Monitoring
Total revenues	706,888	9,738,988
Net loss	(532,207)	(460,017)
Total assets	1,957,779	9,482,037
Depreciation, Depletion and Amortization, Nonproduction		114,440
CareServices
Total revenues	352,223	1,660,544
Net loss	(389,187)	(3,179,151)
Total assets	3,224,579	2,291,121
Fixed assets and leased equipment purchases	257,857	241,527
Depreciation, Depletion and Amortization, Nonproduction	64,348	984,663
Reagents
Total revenues	467,259	351,645
Net loss	(145,990)	(5,312)
Total assets	296,039
Fixed assets and leased equipment purchases		888
Depreciation, Depletion and Amortization, Nonproduction	16,296	9,362
Total
Total revenues	1,526,370	11,751,177
Net loss	(12,365,756)	(25,631,006)
Interest expense, net	858,224	5,583,932
Total assets	5,875,954	12,374,050
Fixed assets and leased equipment purchases	351,172	485,688
Depreciation, Depletion and Amortization, Nonproduction	$ 385,485	$ 1,232,734

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

12 Months Ended

Sep. 30, 2013

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, 2012	2,386,587	$              1.47
Granted	2,086,967	1.04
Exercised	(875,000)	1.00
Forfeited	-	-
Outstanding as of September 30, 2013	3,598,554	1.33
Exercisable as of September 30, 2013	2,271,887	1.50

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7. Customer Contracts: Schedule of Future Customer Contract Amortization (Details) (USD $)	12 Months Ended
	Sep. 30, 2013
Details
Future customer contract amortization year 1	$ 775,812
Future customer contract amortization year 2	658,709
Future customer contract amortization	$ 1,434,521

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16. Stock Options and Warrants: Schedule of fair value assumptions (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Minimum
Fair Value Assumptions, Exercise Price	$ 0.75	$ 0.40
Fair Value Assumptions, Expected Term	1 year 6 months
Fair Value Assumptions, Expected Volatility Rate	219.00%	131.00%
Fair Value Assumptions, Risk Free Interest Rate	0.23%	0.39%
Maximum
Fair Value Assumptions, Exercise Price	$ 10.00	$ 0.44
Fair Value Assumptions, Expected Term	2 years 6 months	2 years 6 months
Fair Value Assumptions, Expected Volatility Rate	298.00%	135.00%
Fair Value Assumptions, Risk Free Interest Rate	0.88%	0.44%

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10. Related-party Notes Payable: Schedule of related party notes payable (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Gross notes payable related party before discount	$ 1,896,135	$ 1,957,161
Discount on notes payable related party	(3,720)	(223,381)
Notes payable related party current and noncurrent	1,892,415	1,733,780
Notes payable related party current portion	(1,892,415)	(1,563,923)
Notes payable, related-party, net of current portion	0	169,857
Note1Member
Gross notes payable related party before discount	600,000
Note2Member
Gross notes payable related party before discount	300,000
Note3Member
Gross notes payable related party before discount	300,000
Note4Member
Gross notes payable related party before discount	200,000
Note5Member
Gross notes payable related party before discount	175,000
Note6Member
Gross notes payable related party before discount	150,000
Note7Member
Gross notes payable related party before discount	82,500	543,278
Note8Member
Gross notes payable related party before discount	33,000	33,000
Note9Member
Gross notes payable related party before discount	26,721
Note10Member
Gross notes payable related party before discount	13,644
Note11Member
Gross notes payable related party before discount	10,000
Note12Member
Gross notes payable related party before discount	5,270
Note13Member
Gross notes payable related party before discount		620,687
Note14Member
Gross notes payable related party before discount		300,000
Note15Member
Gross notes payable related party before discount		244,196
Note16Member
Gross notes payable related party before discount		82,500
Note17Member
Gross notes payable related party before discount		82,500
Note18Member
Gross notes payable related party before discount		$ 51,000

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16. Stock Options and Warrants (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Interest expense, net	$ 5,583,932	$ 858,224
Aggregate Intrinsic Value	434,890
Weighted average remaining term of the warrants	3.13
Warrant1Member
Warrants	1,300,000
Exercise price	$ 1.00
Additional compensation expense	846,898
Warrant2Member
Warrants	1,000,000
Exercise price	$ 1.00
Additional compensation expense	660,140
Warrant3Member
Warrants	425,000
Exercise price	$ 1.00
Warrant4Member
Warrants	25,300
Exercise price	$ 1.00
Additional compensation expense	32,572
Warrant5Member
Warrants	100,000
Exercise price	$ 1.65
Additional compensation expense	12,689
Warrant6Member
Warrants	100,000
Exercise price	$ 1.00
Interest expense, net	103,495
Warrant7Member
Warrants	100,000
Exercise price	$ 1.00
Consulting Expense	134,785
Warrant8Member
Warrants	36,667
Exercise price	$ 0.75
Interest expense, net	$ 8,317

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8. Equipment Leased to Customers: Schedule of leased equipment (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Details
Property Subject to or Available for Operating Lease, Gross	$ 389,492	$ 457,898
Property Subject to or Available for Operating Lease, Accumulated Depreciation	(115,862)	(144,905)
Equipment leased to customers, net	$ 273,630	$ 312,993

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5. Property, Plant and Equipment Disclosure: Schedule of Property and Equipment (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Property and equipment, net	$ 296,730	$ 266,078
Property, Plant and Equipment, Gross	520,702	891,479
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	(223,972)	(625,401)
Equipment
Property and equipment, net	255,339	374,229
Leaseholds and Leasehold Improvements
Property and equipment, net	145,147	402,016
Computer Software, Intangible Asset
Property and equipment, net	87,361	65,111
Furniture and Fixtures
Property and equipment, net	$ 32,855	$ 50,123

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18. Income Tax Disclosure

12 Months Ended

Sep. 30, 2013

Notes

18. Income Tax Disclosure

18. Income Taxes

As of September 30, 2013, the Company had net operating loss carryforwards available to offset future taxable income, if any, of approximately $51,800,000, which will begin to expire in 2027.  The utilization of the net operating loss carryforwards is dependent upon the tax laws in effect at the time the net operating loss carryforwards can be utilized.  The Internal Revenue Code contains provisions that likely could reduce or limit the availability and utilization of these net operating loss carryforwards.  For example, limitations are imposed on the utilization of net operating loss carryforwards if certain ownership changes have taken place or will take place.  The Company will perform an analysis to determine whether any such limitations have occurred as the net operating losses are utilized.

The amount and ultimate realization of the benefits from the net operating loss carryforwards are dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined.  The Company has established a valuation allowance against all deferred income tax assets not offset by deferred income tax liabilities due to the uncertainty of their realization.  Accordingly, there is no benefit for income taxes in the accompanying statements of operations. 

Deferred income taxes are determined based on the estimated future effects of differences between the consolidated financial reporting and income tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws and the tax rates expected to be in place.  For fiscal years 2013 and 2012, the Company’s expected federal tax rate was 34%.

The deferred income tax assets (liabilities) were comprised of the following as of September 30:

	2013	2012
Net operating loss carryforwards	$ 19,330,000	$  11,807,000
Depreciation, amortization and reserves	453,000	101,000
Stock-based compensation	1,863,000	1,113,000
Accrued vacation	2,000	20,000
Valuation allowance	(21,648,000)	(13,041,000)
Total	$                -	$                -

Reconciliations between the benefit for income taxes at the federal statutory income tax rate and the Company’s benefit for income taxes for fiscal years 2013 and 2012 were as follows:

	2013	2012
Federal income tax benefit at statutory rate	$       8,715,000	$         4,204,000
State income tax benefit, net of federal income tax effect	846,000	408,000
Non-deductible expenses	(954,000)	(804,000)
Change in valuation allowance	(8,607,000)	(3,808,000)
Benefit for income taxes	$                     -	$                      -

During fiscal years 2013 and 2012, the Company recognized no interest or penalties, and there were no changes in unrecognized tax benefits from tax positions taken or from lapsed statutes of limitations.  There were no settlements with taxing authorities.  As of September 30, 2013, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate, and there are no positions that are anticipated to significantly increase or decrease.  The Company had no tax examinations beginning, ending, or remaining in process as of and for the years ended September 30, 2013 and 2012.  Tax returns for fiscal years subsequent to 2009 remain subject to examination.

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6. Patent License Agreement: Schedule of Expected Amortization Expense (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Expected Amortization Expense

Years Ending September 30,
2014	$	126,870
2015		126,870
2016		126,870
2017		126,870
2018		59,440
	$	566,920

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2. Summary of Significant Accounting Policies: Stock-based Compensation (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Stock-based Compensation

Stock-Based Compensation

The Company measures 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.

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7. Customer Contracts (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Customer contracts acquired		$ 2,369,882
Amortization	$ 833,032	$ 102,329

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2. Summary of Significant Accounting Policies: Impairment of Long-lived Assets (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Impairment of Long-lived Assets

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 2 to 20 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.  Management determined that long-lived assets were not impaired during fiscal years 2013 or 2012. 

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8. Equipment Leased to Customers: Schedule of leased equipment (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of leased equipment

		2013		2012
Leased equipment	$	389,492	$	457,898
Accumulated depreciation		(115,862)		(144,905)
Leased equipment, net	$	273,630	$	312,993

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2. Summary of Significant Accounting Policies: Net Loss Per Common Share (Details)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	13,127,396	8,202,219

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

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

Years Ending September 30,
2014	$            277,603
2015	308,330
2016	317,580
2017	327,107
2018	280,077
	$         1,510,697

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2. Summary of Significant Accounting Policies: Net Loss Per Common Share: Schedule of common stock equivalents (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of common stock equivalents

		2013	2012
Common stock options and warrants		3,598,554	2,386,587
Series C convertible preferred stock		480,000	480,000
Series D convertible preferred stock		4,691,090	1,830,515
Series E convertible preferred stock		601,585	-
Convertible debt		3,738,917	3,444,217
Restricted shares of common stock		17,250	60,900
	Total common stock equivalents	13,127,396	8,202,219

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2. Summary of Significant Accounting Policies

12 Months Ended

Sep. 30, 2013

Notes

2. Summary of Significant Accounting Policies

2.     Summary of Significant Accounting Policies

Principles of Accounting and Consolidation

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).  The consolidated financial statements include the accounts of ActiveCare and its wholly owned subsidiaries.  All significant intercompany balances and transactions have been eliminated. 

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 disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

In May 2013, the Company effected a 10-for-1 reverse common stock split.  The consolidated financial statements and notes for all periods presented have been retroactively adjusted to reflect the reverse common stock split.

Discontinued Operations

In June 2013, the Company sold the net assets and operations of its reagents business segment to a third party for $184,318 in cash.  During fiscal years 2013 and 2012, the Company recognized a loss from discontinued operations of $5,312 and $145,990, respectively. 

Fair Value of Financial Instruments

The carrying values of cash, accounts receivable and accounts payable approximate their respective 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. Based on current market condition, the Company estimates the fair values of its long-term debt obligations approximate their carrying values as of September 30, 2013.

Concentrations of Credit Risk

The Company has cash in bank accounts that, at times, may exceed federally insured limits.  The Company has not experienced any losses in these accounts. 

In the normal course of business, the Company provides credit terms to its customers and requires no collateral.  The Company performs ongoing credit evaluations of its customers’ financial condition.  The Company maintains an allowance for doubtful accounts receivable based upon management’s specific review and assessment of each account at the period end.

During fiscal year 2013, the Company had revenues from three significant Chronic Illness Monitoring customers, which represented 72% of total revenue.  As of September 30, 2013, accounts receivable from significant customers represented 92% of total accounts receivable.  During fiscal year 2012, the Company had revenues from one significant Chronic Illness Monitoring customers, which represented 28% of total revenues.  As of September 30, 2012, accounts receivable from the significant customer represented 51% of total accounts receivable.  

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 $76,544 and $20,195 as of September 30, 2013 and 2012, respectively.

Inventories

                Inventories are recorded at the lower of cost or market, cost being determined using the first-in, first-out (“FIFO”) method. Chronic Illness Monitoring inventory consists of diabetic supplies.  The Company writes down inventory for obsolescence and excessive levels to estimated net realizable value.  Due to competitive pressures and technological innovation, it is possible that estimates of net realizable values could change in the near term.  Inventories consist of the following as of September 30:

				2013		2012
Chronic Illness Monitoring
	Finished goods		$	1,249,220	$	185,884
Careservices
	ActiveHomeTM			-		56,767
Reagents
	Raw materials			-		36,211
	Work in process			-		5,745
	Finished goods			-		6,161
		Total inventories	$	1,249,220	$	290,768

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 the results of operations.

Equipment Leased to Customers

Leased equipment is stated at cost less accumulated depreciation and amortization.  The Company amortizes the cost of leased equipment on a straight-line basis over 36 months, which is the estimated useful life of the equipment.  Amortization of leased equipment is recorded as cost of revenues.

Goodwill

Goodwill is not amortized but is reviewed for potential impairment at least annually.  The identification and measurement of goodwill impairment involves the estimation of the fair value of the Company’s reporting units.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment and incorporate management assumptions about expected future cash flows.  Future cash flows can be affected by changes in Company performance, industry or market conditions, or overall economic trends.  Management determined goodwill that was not impaired during fiscal years 2013 or 2012. 

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 2 to 20 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.  Management determined that long-lived assets were not impaired during fiscal years 2013 or 2012. 

Revenue Recognition

The Company’s revenue has historically been from three sources: (i) sales from Chronic Illness Monitoring services and supplies; (ii) sales from CareServices; and (iii) sales of medical diagnostic stains from the reagents segment, which was sold during fiscal year 2013 and reported as discontinued operations.

Chronic Illness Monitoring

The Company began chronic illness monitoring sales as a result of its acquisition of 4G Biometrics, LLC in the quarter ended March 31, 2012 (see Note 4).  The Company recognizes Chronic Illness Monitoring revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured.

Shipping and handling billed to customers are included in revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.  Sales of Chronic Illness Monitoring products and services do not contain multiple deliverables.

The Company enters into agreements with insurance companies, disease management companies, and self-insured companies (collectively, customers) to lower medical expenses by distributing diabetic testing supplies to their customers or employees (members) and monitoring their test results.  Customers are obligated to pay for the supplies at the time of shipment and cash is due from these customers as the product is deployed to the members.  The terms of these contracts are generally one year and, unless terminated by either party, will automatically renew for another year.  Collection terms are net 30-days after claims are submitted. 

Revenue is recognized on the date of sale because the following exist:  

·         The price to the contracted customer is fixed or determinable at the date of sale.

·         The customer has paid or is obligated to pay the Company within terms.

·         The customer’s obligation to the Company is not changed in the event of theft or physical destruction or damage of the product.

·         Once the product is shipped, there is no right of return.

CareServices

The “CareServices” segment sells devices to distributors as well as provides monitoring services to end users on a contractual basis.  The Company typically enters into contracts on a month-to-month basis with customers (members) that use the Company’s CareServices.  However, either party may cancel these contracts at any time with 30-days notice.  Under the Company’s standard contract, the device becomes billable on the date the member orders the product, and remains billable until the device is returned to the Company.  The Company recognizes revenue on devices at the end of each month that CareServices have been provided.  In those circumstances in which the Company receives payment in advance, the Company records these payments as deferred revenue.

The Company recognizes CareServices revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured.  Shipping and handling fees billed to the customer are included in revenues.  The related freight costs and supplies directly associated with shipping products to members are included as a component of cost of revenues.  All CareServices sales are made with net 30-day payment terms.

Revenue is recognized on the date of sale because the following exist:  

·         The price to the customer is fixed or determinable at the date of sale.

·         The customer has paid or is obligated to pay within terms, and the obligation is not contingent on resale of the product.

·         The customer’s obligation is not changed in the event of theft or physical destruction or damage of the product.

·         The customer acquiring the product for resale has economic substance apart from the Company.

·         The Company does not have significant obligations for future performance to bring about resale of the product by the customer.

·         The amount of future returns are estimatable and are not significant.

The vast majority of CareServices revenues are for services.  Because equipment sales are not material, the Company presents services and equipment sales together in the accompanying financial statements.

The Company’s distributors are not required to maintain specified amounts of product on hand, and distributors are not required to make minimum purchases to maintain distributor status.  Distributors have no stock rotation rights or additional rights of return.  Revenues from products sold with long-term service contracts are recognized ratably over the expected life of the contract.  Revenues are recorded net of estimated returns and discounts.

Reagents

Prior to the sale of the reagent segment, the Company recognized reagents revenues when persuasive evidence of an arrangement with the customer existed, title passed to the customer, prices were fixed or determinable, and collection was reasonably assured.  Prior to the sale of the reagent segment, shipping and handling fees billed to customers were included in revenues and the related freight costs and supplies directly associated with shipping products to customers were included as a component of cost of revenues.

Research and Development Costs

All expenditures for research and development are charged to expense as incurred. Research and development expenses for fiscal years 2013 and 2012 were $832,271 and $187,230, respectively. The expenditures for fiscal year 2013 were primarily for the development of the Chronic Illness Monitoring operating system. The expenditures for fiscal year 2012 were for software development efforts for the chronic illness market.  

Advertising Costs

The Company expenses advertising costs as incurred.  Advertising expenses for fiscal years 2013 and 2012 were $59,330 and $176,300, respectively.  Advertising expenses primarily relate to the Company’s Chronic Illness Monitoring segment.

Income Taxes

The Company recognizes deferred income tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or income tax returns. Deferred income tax assets or liabilities are determined based upon the difference between the financial reporting bases and tax reporting bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized.  Deferred income tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary.  As of September 30, 2013, management has determined to provide a 100% allowance against deferred income tax assets as it is more likely than not these assets will not be realized.  Interest and penalties related to income tax liabilities, when incurred, are classified in interest expense and income tax provision, respectively.

Warrant Exercises

The Company issues common shares in connection with warrant exercises when it has received verification that the proceeds have been deposited and when it has received an exercise letter from the warrant holder.  The Company issues common shares in connection with note conversion after it verifies the outstanding note balance and the eligibility of conversion, and has received a conversion letter from the lender.

Stock-Based Compensation

The Company measures 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.

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 year.

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 common share equivalents then outstanding.  The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Common share equivalents consist of shares issuable upon the exercise of common stock warrants, shares issuable from restricted stock grants, shares issuable from convertible notes and convertible Series C, Series D and Series E preferred stock.  As of September 30, 2013 and 2012, there were 13,127,396 and 8,202,219 outstanding common share equivalents, respectively, that were not included in the computation of Diluted EPS as their effect would be anti-dilutive.  The common stock equivalents outstanding consist of the following as of September 30:

		2013	2012
Common stock options and warrants		3,598,554	2,386,587
Series C convertible preferred stock		480,000	480,000
Series D convertible preferred stock		4,691,090	1,830,515
Series E convertible preferred stock		601,585	-
Convertible debt		3,738,917	3,444,217
Restricted shares of common stock		17,250	60,900
	Total common stock equivalents	13,127,396	8,202,219

Reclassifications

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

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and has concluded that the future adoption of any such pronouncements will not have a material impact on the Company’s financial position, results of operations, or liquidity.

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2. Summary of Significant Accounting Policies: Discontinued Operations, Policy (Details) (USD $)	1 Months Ended	12 Months Ended
	Jun. 30, 2013	Sep. 30, 2013	Sep. 30, 2012
Details
Proceeds from Sales of Business, Affiliate and Productive Assets	$ 184,318
Loss from discontinued operations		$ 5,312	$ 145,990

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2. Summary of Significant Accounting Policies: Net Loss Per Common Share (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Net Loss Per Common Share

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 year.

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 common share equivalents then outstanding.  The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Common share equivalents consist of shares issuable upon the exercise of common stock warrants, shares issuable from restricted stock grants, shares issuable from convertible notes and convertible Series C, Series D and Series E preferred stock.  As of September 30, 2013 and 2012, there were 13,127,396 and 8,202,219 outstanding common share equivalents, respectively, that were not included in the computation of Diluted EPS as their effect would be anti-dilutive.  The common stock equivalents outstanding consist of the following as of September 30:

		2013	2012
Common stock options and warrants		3,598,554	2,386,587
Series C convertible preferred stock		480,000	480,000
Series D convertible preferred stock		4,691,090	1,830,515
Series E convertible preferred stock		601,585	-
Convertible debt		3,738,917	3,444,217
Restricted shares of common stock		17,250	60,900
	Total common stock equivalents	13,127,396	8,202,219

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2. Summary of Significant Accounting Policies: Use of Estimates in The Preparation of Financial Statements (Policies)

12 Months Ended

Sep. 30, 2013

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 disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

In May 2013, the Company effected a 10-for-1 reverse common stock split.  The consolidated financial statements and notes for all periods presented have been retroactively adjusted to reflect the reverse common stock split.

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

12 Months Ended

Sep. 30, 2013

Policies

Going Concern

Going Concern

                Although the Company had positive gross margin for fiscal year 2013, it has incurred negative cash flows from operating activities, recurring net losses, negative working capital, and negative total equity.  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 remove substantial doubt about its ability to continue as a going concern, it must improve gross margins, 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 include raising additional capital by issuing equity securities and increasing the sales of the Company’s services and products.  Subsequent to year end, the Company (1) completed the sale of $3,120,000 of 8% Series F variable rate convertible preferred stock (“Series F preferred stock”); (2) converted $2,301,801 of debt and accrued interest to common stock; and (3) converted $573,886 of debt and accrued interest to Series F variable rate convertible preferred stock (see Note 20). There can be no assurance that the Company will be able to raise sufficient additional capital or that revenues will increase rapidly enough to offset operating losses.  If the Company is unable to increase revenues or obtain additional financing, it will be unable to continue the development of its products and may have to cease operations. 

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16. Stock Options and Warrants: Schedule of fair value assumptions (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of fair value assumptions

	2013	2012
Exercise price	$0.75 - $10.00	$0.40 - .44
Expected term (years)	1.5 - 2.5	2.5
Volatility	219% - 298%	131% - 135%
Risk-free rate	0.23% - 0.88%	0.39% - 0.44%
Dividend rate	0%	0%

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2. Summary of Significant Accounting Policies: Reclassifications (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Reclassifications

Reclassifications

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

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2. Summary of Significant Accounting Policies: Discontinued Operations, Policy (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Discontinued Operations, Policy

Discontinued Operations

In June 2013, the Company sold the net assets and operations of its reagents business segment to a third party for $184,318 in cash.  During fiscal years 2013 and 2012, the Company recognized a loss from discontinued operations of $5,312 and $145,990, respectively. 

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2. Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying values of cash, accounts receivable and accounts payable approximate their respective 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. Based on current market condition, the Company estimates the fair values of its long-term debt obligations approximate their carrying values as of September 30, 2013.

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1. Organization and Nature of Operations

12 Months Ended

Sep. 30, 2013

Notes

1. Organization and Nature of Operations

1.       Organization and Nature of Operations

ActiveCare, Inc. ( “ActiveCare”) was formed March 5, 1998 as a wholly owned subsidiary of SecureAlert, Inc. [OTCBB: SCRA.OB], a Utah corporation, formerly known as RemoteMDx, Inc. (“SecureAlert”).  ActiveCare was spun off from SecureAlert in February 2009 and SecureAlert retained no ownership interest in ActiveCare.  In July 2009, ActiveCare was reincorporated in Delaware.  ActiveCare and its wholly owned subsidiaries (collectively “the Company”) is a technology and service provider that provides real-time visibility to health conditions and risk, and has a unique active approach in caring for members, resulting in improved outcomes.

Going Concern

                Although the Company had positive gross margin for fiscal year 2013, it has incurred negative cash flows from operating activities, recurring net losses, negative working capital, and negative total equity.  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 remove substantial doubt about its ability to continue as a going concern, it must improve gross margins, 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 include raising additional capital by issuing equity securities and increasing the sales of the Company’s services and products.  Subsequent to year end, the Company (1) completed the sale of $3,120,000 of 8% Series F variable rate convertible preferred stock (“Series F preferred stock”); (2) converted $2,301,801 of debt and accrued interest to common stock; and (3) converted $573,886 of debt and accrued interest to Series F variable rate convertible preferred stock (see Note 20). There can be no assurance that the Company will be able to raise sufficient additional capital or that revenues will increase rapidly enough to offset operating losses.  If the Company is unable to increase revenues or obtain additional financing, it will be unable to continue the development of its products and may have to cease operations. 

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2. Summary of Significant Accounting Policies: Concentrations of Credit Risk (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Concentrations of Credit Risk

Concentrations of Credit Risk

The Company has cash in bank accounts that, at times, may exceed federally insured limits.  The Company has not experienced any losses in these accounts. 

In the normal course of business, the Company provides credit terms to its customers and requires no collateral.  The Company performs ongoing credit evaluations of its customers’ financial condition.  The Company maintains an allowance for doubtful accounts receivable based upon management’s specific review and assessment of each account at the period end.

During fiscal year 2013, the Company had revenues from three significant Chronic Illness Monitoring customers, which represented 72% of total revenue.  As of September 30, 2013, accounts receivable from significant customers represented 92% of total accounts receivable.  During fiscal year 2012, the Company had revenues from one significant Chronic Illness Monitoring customers, which represented 28% of total revenues.  As of September 30, 2012, accounts receivable from significant customers represented 51% of total accounts receivable.  

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13. Derivative Liabilities (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Derivatives liability	$ 795,151	$ 4,015,855
Loss on derivatives liability	$ 333,406	$ 2,104,389

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2. Summary of Significant Accounting Policies: Advertising Costs (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Advertising Costs

Advertising Costs

The Company expenses advertising costs as incurred.  Advertising expenses for fiscal years 2013 and 2012 were $59,330 and $176,300, respectively.  Advertising expenses primarily relate to the Company’s Chronic Illness Monitoring segment.

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9. Notes Payable: Schedule of Debt (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Debt

	2013	2012
Note payable to the former owners of Green Wire, secured by customer contracts, imputed interest rate of 12%, with monthly installments over a 38-month term.  In March 2013, the Company issued 15,000 shares of common stock to extend two past due payments without penalty and the grant date fair value was $24,000, which will be amortized over the remaining life of the note.	$         1,766,971	$         2,236,737
Notes payable with interest at 12%, secured by the Company's assets, due August 2014 and convertible into the shares of common stock at $0.75 per share.  The notes required $51,250 in due diligence and legal fees.  The Company issued warrants to purchase 36,667 shares of common stock as due diligence fees with a grant date fair value of $51,452.  The Company issued 25,000 shares of common stock with a grant date fair value of $31,250 to a related party as consideration for signing a personal guarantee.  The notes and accrued interest were converted to Series F preferred stock subsequent to September 30, 2013 (see note 20).	550,000	-
Unsecured note with interest at 12%, due March 2013.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	250,000	250,000
Unsecured notes with interest at 15% (18% after due date), due March and April 2013, respectively.  The Company issued 20,000 shares of Series D preferred stock as loan origination fees with a grant date fair value of $195,000.   Principal of $50,000 was converted to common stock subsequent to September 30, 2013 (see note 20).	185,476	-
Series A debenture loans payable, secured by customer contracts and payable in 36 monthly installments, original due dates between September and April 2016. The loans bear interest at 12% and are convertible into common stock after 180 days.  After payment of principal and interest, the holders of the Series A and Series B debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out each lender's royalty by paying the respective lender $20,000 for every $25,000 loaned.  The note included a beneficial conversion feature valued at $901,000 at inception, which the Company is amortizing over the life of the loan.  The feature had an unamortized value of $47,934 as of September 30, 2013.  The majority of loans were converted during fiscal year 2013.   The remaining balance was converted to Series E preferred stock subsequent to September 30, 2013 (see note 20).	85,719	300,000
Unsecured note with interest at 15%, due March 2013, currently in default. Note included a $25,000 cash and 100,000 shares of common stock as loan origination fees with a grant date fair value of $70,000.   The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	25,000	275,000
Unsecured note with interest at 15% (18% after due date), due November 2012.  The Company issued 60,000 shares of Series D stock as loan origination fees with a grant date fair value of $150,000.  The note was guaranteed by the Company’s Chief Executive Officer.	-	1,500,000
Total before discount and current portion	2,863,166	4,561,737
Less discount	(528,663)	(187,587)
Total notes payable	2,334,503	4,374,150
Less current portion	(1,278,585)	(2,569,221)
Total notes payable, net of current portion	$         1,055,918	$         1,804,929

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5. Property, Plant and Equipment Disclosure (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Loss on disposal of property and equipment	$ 200,149	$ 0
Assets of Disposal Group, Including Discontinued Operation	25,832
Depreciation, Amortization and Accretion, Net	$ 97,068	$ 64,632

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Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2013	Sep. 30, 2012
Condensed Consolidated Balance Sheets
Cash	$ 223,835	$ 529,839
Accounts receivable, net	7,345,912	644,974
Inventory	1,249,220	290,768
Prepaid expenses and other	38,998	7,277
Total current assets	8,857,965	1,472,858
Customer contracts, net of accumulated amortization of $935,361and $102,330, respectively	1,434,521	2,267,552
Goodwill	825,894	825,894
Patents, net of accumulated amortization of $355,458 and $228,587,respectively	566,920	693,790
Equipment leased to customers, net	273,630	312,993
Property and equipment, net	296,730	266,078
Deposits and other assets	106,950	24,634
Domain name, net of accumulated amortization of $2,860 and $2,145,respectively	11,440	12,155
Total assets	12,374,050	5,875,954
Accounts payable	6,621,234	1,132,611
Accounts payable, related-party	251,386	150,395
Accrued expenses	1,253,616	2,104,623
Derivatives liability	795,151	4,015,855
Current portion of notes payable	1,278,585	2,569,221
Current portion of notes payable, related-party	1,892,415	1,563,923
Deferred revenue	13,585	61,608
Dividends payable	3,471	18,322
Total current liabilities	12,109,443	11,616,558
Notes payable, net of current portion	1,055,918	1,804,929
Notes payable, related-party, net of current portion	0	169,857
Total long-term liabilities	1,055,918	1,974,786
Total liabilities	13,165,361	13,591,344
Preferred stock, $.00001 par value: 10,000,000 shares authorized;480,000 and 480,000 shares of Series C; 938,218 and 386,103shares of Series D; and 61,723 and 0 shares of Series E, outstanding, respectively	15	9
Common stock, $.00001 par value: 50,000,000 shares authorized;21,775,303 and 4,636,977 shares outstanding, respectively	220	46
Additional paid-in capital, common and preferred)	62,519,542	29,643,769
Accumulated deficit	(63,311,088)	(37,359,214)
Total stockholders' deficit	(791,311)	(7,715,390)
Total liabilities and stockholders' deficit	$ 12,374,050	$ 5,875,954

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2. Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and has concluded that the future adoption of any such pronouncements will not have a material impact on the Company’s financial position, results of operations, or liquidity.

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Condensed Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Condensed Consolidated Statements of Cash Flows
Net loss	$ (25,631,006)	$ (12,365,756)
Depreciation and amortization	1,232,734	385,485
Derivatives loss	333,406	2,104,389
Stock-based compensation expense	2,159,828	3,927,214
Stock and warrants issued for services	1,286,999	0
Stock and warrants issued for interest expense	601,220	0
Amortization of debt discounts	3,097,009	418,084
Loss on induced conversion of debt and sale of common stock	9,355,587	0
Loss on disposal of property and equipment	200,149	0
Gain on sale of discontinued operations	(55,096)	0
Settlement agreement	0	500,000
Change in accounts receivable	(6,783,896)	(527,954)
Change in inventories	(1,011,952)	(174,758)
Change in prepaid expenses and other assets	(16,822)	18,101
Change in accounts payable	5,787,603	676,766
Change in accrued expenses	629,879	2,063,859
Change in deferred revenue	(48,023)	26,101
Change in deposits and other assets	(82,316)	0
Net cash used in operating activities	(8,944,697)	(2,948,469)
Purchases of property and equipment	(249,771)	(47,826)
Purchases of equipment leased to customers	(235,917)	0
Proceeds from sale of discontinued operations	184,318	0
Proceeds from sale of equipment	4,900	0
Net cash acquired from Green Wire	0	12,215
Acquisition of 4G Biometrics, LLC	0	(350,000)
Net cash used in investing activities	(296,470)	(385,611)
Principal payments on related-party notes payable	(198,606)	(165,325)
Proceeds from related-party notes payable, net	5,720,799	2,190,000
Proceeds from notes payable, net	3,790,496	1,746,113
Principal payments on notes payable	(1,341,755)	(85,000)
Proceeds from the sale of common stock, net	981,500	0
Payment of dividends	(17,271)	0
Net cash provided by financing activities	8,935,163	3,685,788
Net increase (decrease) in cash	(306,004)	351,708
Cash, beginning of the year	529,839	178,131
Cash, end of the year	$ 223,835	$ 529,839

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20. Subsequent Events (Details) (USD $)	3 Months Ended
	Dec. 31, 2013
Event 1
Shares issued for conversion of Series A debenture	8,347
Principal and interest balance	$ 83,473
Event 2
Shares issued for conversion of Note Payable	441,735
Principal and interest balance	331,301
Event 3
Preferred Stock Designated As Series F Variable Rate Convertible Preferred Stock	7,803
Proceeds From Sale of Series F Preferred Stock	2,835,771
Warrants Issued	3,495,000
Event 4
Shares issued for conversion of Note Payable	857
Principal and interest balance	573,868
Event 5
Shares issued for conversion of Note Payable	1,883,675
Principal and interest balance	1,126,026
Warrants Issued	410,348
Event 6
Shares issued for conversion of Note Payable	1,100,110
Principal and interest balance	659,474
Warrants Issued	239,652
Event 7
Shares issued for conversion of Note Payable	213,334
Principal and interest balance	160,000
Event 8
Series C Preferred Stock Convertible	480,000
Preferred Stock Converted To Common Stock	672,000
Event 9
Series D Preferred Stock Convertible	893,218
Preferred Stock Converted To Common Stock	6,252,526
Event 10
Shares issued for conversion of Note Payable	66,667
Principal and interest balance	$ 50,000

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18. Income Tax Disclosure: Schedule of Deferred Tax Assets and Liabilities (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Deferred Tax Assets and Liabilities

	2013	2012
Net operating loss carryforwards	$ 19,330,000	$  11,807,000
Depreciation, amortization and reserves	453,000	101,000
Stock-based compensation	1,863,000	1,113,000
Accrued vacation	2,000	20,000
Valuation allowance	(21,648,000)	(13,041,000)
Total	$                -	$                -

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2. Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Property, Plant and Equipment, Policy

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 the results of operations.

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2. Summary of Significant Accounting Policies: Research and Development Costs (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Research and development	$ 832,271	$ 187,230

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15. Common Stock

12 Months Ended

Sep. 30, 2013

Notes

15. Common Stock

15. Common Stock

During fiscal year 2013, the Company issued the following shares of common stock:

·         327,382 shares valued at $458,929 as compensation for services to six independent consultants;

·         220,000 shares valued at $318,000 as compensation for two key employees as an incentive to work for the Company.  The stock vests according to the terms of the employment agreements;

·         27,650 shares for employee bonuses valued at the date of grant at $39,825;

·         350,000 shares valued at $350,000 for option exercises from employee bonuses granted by the Company;

·         150,000 shares valued at $187,500 for an employment contract extension with a key employee;

·         25,000 shares valued at $31,750 to medical advisory board members for services through September 2014;

·         25,000 shares valued at $31,750 for services provided by a board member;

·         141,987 shares as loan origination fees at a value of $387,849;

·         4,758 shares valued at $7,137 for the extension of related-party payables;

·          40,000 shares valued at $61,500 for the extension of third-party notes payable;

·         13,439,190 shares for the conversion of outstanding debt in the amount of $18,467,123;

·         2,600 shares valued at $3,900 as part of the issuance of $26,000 of new debt to a related party;

·         166,200 shares valued at $225,300 to settle an accrued liability of $126,200;

·         250,000 shares for the conversion of 50,000 shares of Series D preferred stock;

·         425,000 shares for the exercise of options held by two key managers of GWire;

·         200,625 shares valued at $232,765 as dividends accrued for Series C and Series D preferred stock holders;

·         1,313,334 shares valued at $1,842,334 for cash of $985,000;

·         29,600 shares to employees in accordance with a restricted stock agreement:

During fiscal year 2012, the Company issued the following shares of common stock:

·         60,000 shares for settlement of a patent license agreement, with value on the date of grant of $240,000;

·         129,161 shares for consulting services, with value on the date of grant of $218,906;

·         60,000 shares for settlement of $312,000 of accrued liabilities;

·         200,000 shares in connection with a settlement agreement.  During fiscal year 2010, the Company granted Class D warrants for the purchase of 158,416 shares of common stock and Class E warrants for the purchase of 41,584 shares of common stock.  During fiscal year 2012, the Company entered into a settlement agreement with the holders of these warrants to resolve claims of the holders regarding their conversion of shares of preferred stock.  Under the settlement agreement, the holders exchanged the Class D and Class E warrants for 200,000 shares of common stock and the warrants were cancelled.  The Company recognized $500,000 of expense due to the conversion;

·         231,000 shares from conversion of related–party, short-term notes payable in the amount of $92,400; and

·         100,000 shares for loan origination fees of $70,000.

In June 2011, the Company entered into a service contract with a former CEO for services to be rendered from October 2010 through September 2014.  As part of this service contract, the Company issued 400,000 shares of restricted common stock with a fair value on the date of grant of $1,840,000, as payment for past and future services.  During fiscal year 2012, the Company accelerated the vesting of the shares and recognized the residual compensation expense of $1,380,000 related to the issuance of these shares.

In fiscal year 2010, the Company awarded certain employees restricted stock totaling 67,900 shares, valued at $916,650, in connection with Company milestones.  In fiscal year 2013, the Company issued 29,600 restricted shares of common stock valued at $399,600, and reduced the shares of non-vested common stock by 25,700 shares due to the change of employment status of individuals.  In fiscal year 2012, no restricted shares of common stock were issued to employees.  During fiscal years 2013 and 2012, the Company recognized compensation expense of $0 and $168,419, respectively.  As of September 30, 2013 and 2012, the unrecognized stock-based compensation was $0 and $245,952, respectively, and will be recognized over the remaining vesting terms.

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2. Summary of Significant Accounting Policies: Goodwill (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Goodwill

Goodwill

Goodwill is not amortized but is reviewed for potential impairment at least annually.  The identification and measurement of goodwill impairment involves the estimation of the fair value of the Company’s reporting units.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment and incorporate management assumptions about expected future cash flows.  Future cash flows can be affected by changes in Company performance, industry or market conditions, or overall economic trends.  Management determined goodwill that was not impaired during fiscal years 2013 or 2012. 

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17. Segment Information

12 Months Ended

Sep. 30, 2013

Notes

17. Segment Information

17. Segment Information

The Company operates two business segments based primarily on the nature of the Company’s products. The Chronic Illness Monitoring segment is engaged in the business of developing, distributing and marketing mobile monitoring of patient vital signs and physical activity to self-insured companies. The CareServices segment is engaged in the business of developing, distributing and marketing mobile health monitoring and concierge services to distributors and consumers. The Company previously operated a reagents business which was sold in June 2013.  The Company no longer holds any ownership interest in the reagents business.

Additionally, at the corporate level, the Company raises capital and provides for the administrative operations of the Company as a whole. 

The following table reflects certain financial information relating to each reportable segment for fiscal years 2013 and 2012:

	Corporate	Chronic Illness Monitoring	CareServices	Reagents	Total
Fiscal year ended September 30, 2013
Sales to external customers	$                  -	$ 9,738,988	$    1,660,544	$     351,645	$ 11,751,177
Segment loss	(21,986,526)	(460,017)	(3,179,151)	(5,312)	(25,631,006)
Interest expense, net	5,583,932	-	-	-	5,583,932
Segment assets	600,892	9,482,037	2,291,121	-	12,374,050
Fixed assets and leased equipment purchases	243,273	-	241,527	888	485,688
Depreciation and amortization	124,269	114,440	984,663	9,362	1,232,734
Fiscal year ended September 30, 2012
Sales to external customers	$                -	$   706,888	$       352,223	$ 467,259	$    1,526,370
Segment loss	(11,298,372)	(532,207)	(389,187)	(145,990)	(12,365,756)
Interest expense, net	858,224	-	-	-	858,224
Segment assets	397,557	1,957,779	3,224,579	296,039	5,875,954
Fixed assets and leased equipment purchases	93,315	-	257,857	-	351,172
Depreciation and amortization	304,841	-	64,348	16,296	385,485

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2. Summary of Significant Accounting Policies: Net Loss Per Common Share: Schedule of common stock equivalents (Details)	Sep. 30, 2013	Sep. 30, 2012
Details
Common stock options and warrants	3,598,554	2,386,587
Series C convertible preferred stock	480,000	480,000
Series D convertible preferred stock	4,691,090	1,830,515
Series E convertible preferred stock	601,585
Convertible debt - Shares	3,738,917	3,444,217
Restricted shares of common stock	17,250	60,900
Total common stock equivalents	13,127,396	8,202,219

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Statements of Stockholders' Equity (USD $)	Series C Preferred Stock	Series D Preferred Stock	Series E Preferred Stock	Common stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Sep. 30, 2011				$ 39	$ 24,394,848	$ (24,936,275)	$ (541,388)
Balance - shares at Sep. 30, 2011				3,856,816			3,856,816
Issuance of common stock for services				1	218,905		218,906
Issuance of common stock for services - shares				129,161			129,161
Issuance of common stock for accrued expenses				1	311,999		312,000
Issuance of common stock for accrued expenses - shares				60,000			60,000
Issuance of common stock for loan origination fee				1	69,999		70,000
Issuance of common stock for loan origination fee - shares				100,000			100,000
Issuance of common stock for debt conversion				1	92,399		92,400
Issuance of common stock for debt conversion - shares				231,000			231,000
Issuance of common stock for settlement agreement				2	499,998		500,000
Issuance of common stock for settlement agreement - shares				200,000			200,000
Issuance of Series D preferred stock for debt conversion		1			109,999		110,000
Issuance of Series D preferred stock for debt conversion - shares		55,000					55,000
Issuance of Series D preferred stock for loan origination fee		1			389,999		390,000
Issuance of Series D preferred stock for loan origination fee - shares		140,000					140,000
Issuance of Series D preferred stock for acquisitions		2			679,998		680,000
Issuance of Series D preferred stock for acquisitions - shares		180,000					180,000
Issuance of Series D preferred stock for dividends					38,861		38,861
Issuance of Series D preferred stock for dividends - shares		11,103					11,103
Stock based compensation					3,708,308		3,708,308
Issuance of options for loan origination fees							117,551
Issuance of options for laon origination fees					117,551		117,551
Derivatives liabilites					(1,911,466)		(1,911,466)
Issuance of common and Series C preferred stock for patents	5			1	922,371		922,377
Issuance of common and Series C preferred stock for patents - shares	480,000			60,000			540,000
Net loss						(12,365,756)	(12,365,756)
Dividends on preferred stock						(57,183)	(57,183)
Issuance of common stock for dividends							38,861
Balance at Sep. 30, 2012	5	4		46	29,643,769	(37,359,214)	(7,715,390)
Balance - shares at Sep. 30, 2012	480,000	386,103		4,636,977			5,503,080
Issuance of common stock for services				16	475,484		475,500
Issuance of common stock for services - shares				1,579,632			1,579,632
Issuance of common stock for accrued expenses				2	225,298		225,300
Issuance of common stock for accrued expenses - shares				166,200			166,200
Issuance of common stock for loan origination fee				2	334,265		334,267
Issuance of common stock for loan origination fee - shares				189,345			189,345
Issuance of common stock for debt conversion				136	18,466,987		18,467,123
Issuance of common stock for debt conversion - shares				13,439,190			13,439,190
Issuance of Series D preferred stock for loan origination fee		1			817,482		817,483
Issuance of Series D preferred stock for loan origination fee - shares		103,843					103,843
Issuance of Series D preferred stock for dividends					66,881		66,881
Issuance of Series D preferred stock for dividends - shares		14,087					14,087
Stock based compensation					1,750,274		1,750,274
Issuance of options for loan origination fees					289,732		289,732
Derivatives liabilites					4,417,456		4,417,456
Issuance of common and Series C preferred stock for patents							0
Net loss						(25,631,006)	(25,631,006)
Dividends on preferred stock						(320,868)	(320,868)
Issuance of common stock for cash				13	1,838,820		1,838,833
Issuance of common stock for cash - shares				1,313,334			1,313,334
Issuance of common stock for dividends				2	251,562		251,564
Issuance of common stock for dividends - shares				200,625			200,625
Issuance of Series D preferred stock for services		5			1,800,526		1,800,531
Issuance of Series D preferred stock for services - shares		484,185					484,185
Issuance of Series E preferred stock for debt conversions			1		614,764		614,765
Issuance of Series E preferred stock for debt conversions - shares			61,723				61,723
Issuance of options for services					202,572		202,572
Beneficial conversion features on debt					1,323,672		1,323,672
Conversion of Series D preferred stock		(1)		3	(2)
Conversion of Series D preferred stock - shares		(50,000)		250,000			200,000
Balance at Sep. 30, 2013	$ 5	$ 9	$ 1	$ 220	$ 62,519,542	$ (63,311,088)	$ (791,311)
Balance - shares at Sep. 30, 2013	480,000	938,218	61,723	21,775,303			23,255,244

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Condensed Consolidated Balance Sheets Parenthetical (USD $)	Sep. 30, 2013	Sep. 30, 2012
Condensed Consolidated Balance Sheets Parenthetical
Domain name accumulated amortization	$ 2,860	$ 2,145
Patent accumulated amortization	355,458	228,587
Contracted customer accumulated amortization	$ 935,361	$ 102,330
Preferred stock par value	$ 0.00001	$ 0.00001
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares outstanding	1,479,941	866,103
Common stock par value	$ 0.00001	$ 0.00001
Common stock shares authorized	50,000,000	50,000,000
Common stock shares outstanding	21,775,303	4,636,977

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10. Related-party Notes Payable

12 Months Ended

Sep. 30, 2013

Notes

10. Related-party Notes Payable

10. Related-Party Notes Payable

                  The Company had the following related-party notes payable outstanding as of September 30:

	2013	2012
Unsecured notes payable to an entity controlled by an officer of the Company with interest at 15% (18% in the event of default), due September 30, 2013.  The Company issued 60,000 shares of common stock as loan origination fees with a grant date fair value of $93,000.  The notes and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	$            600,000	$                     -
Unsecured note payable to an entity controlled by an officer of the Company, with interest at 3% (18% in the event of default), due July 2013.  In July the lender agreed to extend the maturity date to September 30, 2013 with an interest at 12% (18% in the event of default).  The Company issued 30,000 shares of common stock with grant date fair value of $38,100 as loan origination fees.  In the event of default, the note is convertible into share of common stock at $0.75 per share. The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	300,000	-
Unsecured note payable to an entity controlled by an officer of the Company, interest at 12% (18% in the event of default), due September 30, 2013.  The Company issued 30,000 shares of common stock with a grant date fair value of $37,500 as loan origination fees.  In the event of default, the note is convertible into shares of common stock at $0.75 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	300,000	-
Unsecured notes payable to an entity controlled by an officer of the Company, interest at 12% (18% in the event of default), due April 2013.  In the event of default, the note is convertible into shares of common stock at $0.40 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	200,000	-
Unsecured note payable to a lender under the control of the Company’s CEO, interest at 12%, due upon demand. The note is convertible into shares of common stock at $0.75 per share.  The Company recognized $148,750 in connection with the beneficial conversion feature.  The Company issued 17,500 shares of common stock with a grant date fair value of $26,250 as loan origination fees.  Subsequent to September 30, 2013 $160,000 of the note was converted to common stock (see note 20).	175,000	-
Unsecured note payable with zero interest to an entity controlled by an officer of the Company.  The note was repaid in full subsequent to September 30, 2013.	150,000	-
Unsecured note payable to an entity controlled by an officer of the Company, with interest at 12%, due August 2012.   During fiscal year 2013, the lender agreed to extend the maturity date to June 30, 2013 with an interest at 18% and 5,600 shares of Series D with a grant date fair value of $56,252 paid as a loan origination fee.  The note is currently in default.  The note also included $7,500 of loan origination fees added to the principal. In the event of default, the note is convertible into shares common stock at $0.40 per share.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	82,500	543,278
Unsecured note payable to an officer of the Company with interest at 15%, due June 2012, currently in default.  The note includes $3,000 of loan origination fees added to the principal and is convertible into common stock at $0.50 per share.	33,000	33,000
Unsecured note payable to an officer of the Company with interest at 12%, due September 30, 2013, currently in default.  The loan is convertible into the Company's common stock at a rate of $0.75 per share.  The Company recognized $22,820 in connection with the beneficial conversion feature.	26,721	-
Unsecured note payable to an officer of the Company with interest at 12%, due upon demand.	13,644	-
Unsecured notes payable with zero interest to an individual related to an officer of the Company.  The loan was repaid in full subsequent to September 30, 2013.	10,000	-
Series B unsecured debenture loans from entities controlled by an officer of the Company, including $68,914 in loan origination fees added to the principal of the loans, payable in 36 monthly installments, maturing December 2015 and January 2016.  Of the debenture, $554,556 was issued to settle a related-party note payable with a total outstanding balance of $460,778 and $43,364 of related accrued interest.  Of the loan, $35,000 was issued to settle an accrued service fee.  The loans bear interest at 12% and are convertible into common stock after 180 days. After payment of principal and interest, the holders of the Series B and Series A debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out the royalty by paying the lender $22,000 for every $25,000 loaned.  During the fiscal year ended September 30, 2013, the Company issued 34,400 shares of Series D with a fair market value of $343,748 at date of grant as additional loan origination fees, and paid $30,102 of the loan principal.  The Company is late on certain monthly payments.  The notes include beneficial conversion features valued at $167,000 at inception, which the Company is amortizing over the life of the loan.  The feature had an unamortized value of $3,348 as of September 30, 2013.  During fiscal year 2013, $722,684 of outstanding principal and $49,895 of accrued interest were converted into 1,030,107 common shares at a rate of $0.75 per share.  The Company recorded $535,656 of expense associated with the induced conversion of these debenture loans. The majority of loans were converted during fiscal year 2013.  The remaining note of $5,270 and accrued interest were converted to common stock subsequent to September 30, 2013 (see note 20)	5,270	-
Unsecured notes payable to a lender under the control of the Company’s CEO with a line of credit borrowing capacity of $2,000,000, interest at 12%, due July 2013. The notes were convertible into shares of common stock at $5.00 per share.  In connection with the notes payable, the Company issued 80,000 shares of Series D preferred stock (valued at $240,000).  The Company granted warrants to purchase 341,000 shares of common stock as a loan origination fee. These warrants vested immediately and are exercisable at $4.40 per share through November 3, 2016. The fair value of the warrants was $107,130, and was measured using a binomial valuation model with the following assumptions: exercise price $4.40; risk-free interest rate of .39%; expected life of 2.5 years; expected dividends of zero; a volatility factor of 134.57%; and market price on date of grant of $4.40.  During fiscal year 2012, the Company re-priced the exercise price of the warrants from $4.40 to $1.00 per share.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the lender in satisfaction of the outstanding balance of $620,687 plus $21,585 of accrued interest.  Upon the conversion of the note, the Company immediately recognized the unamortized debt discount of $209,143.	-	620,687
Note payable to an entity controlled by an officer of the Company, interest at 12%, due December 2012.  This note was secured by real estate.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $300,000 plus $14,992 of accrued interest.	-	300,000
Series A debenture loans from a former CEO and Chairman of the Company, secured by customer contracts, payable in 36 monthly installments, maturing September and December 2015.  The loans bear interest at 12% and are convertible into common stock after 180 days. After payment of principal and interest, the holders of the Series B and Series A debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out each royalty by paying the lender $20,000 for every $25,000 loaned.  During fiscal year 2013, the Company paid $41,682 of the loan principal.  During fiscal year 2013, $342,912 of principal and interest were converted into 457,216 common shares.  The Company recorded $297,191 of expense associated with the induced conversion of these notes.	-	244,196
Unsecured note payable to an entity controlled by an officer of the Company, including a $7,500 loan origination fee, interest at 12%, due August 2012.  The note was convertible into common stock at 50% of fair market value or $0.40 per share, whichever is less.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $82,500 plus $3,716 of accrued interest.	-	82,500
Unsecured note payable to an entity controlled by an officer of the Company, including a $7,500 loan origination fee, interest at 12%, due September 2012. The note was convertible into common stock at $0.40 per share or 50% of market value, whichever was less.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $82,500 plus $3,173 of accrued interest.	-	82,500
Notes payable to an entity controlled by an officer of the Company, including a $26,000 loan origination fee which was convertible into Series D preferred stock at any time at $2.00 per share, interest at 15%, due December 2012.  This note was secured by real estate.  During the three months ended December 31, 2012, the Company issued a Series A debenture payable to the entity in satisfaction of the outstanding balance of $51,000 plus $3,186 of accrued interest.  Upon the conversion of the note, the Company immediately recognized the unamortized debt discount of $14,238.	-	51,000
Total before discount and current portion	1,896,135	1,957,161
Less discount	(3,720)	(223,381)
Total notes payable, related-party	1,892,415	1,733,780
Less current portion	(1,892,415)	(1,563,923)
Total  notes payable, related-party, net of current portion	$                     -	$            169,857

The total principal on related-party notes payable of $1,892,415 is schedule to be repaid during the fiscal year ending September 30, 2014.

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19. Commitments and Contingencies (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Operating Leases, Rent Expense, Net	$ 268,000	$ 204,000

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18. Income Tax Disclosure: Schedule of Components of Income Tax Expense (Benefit) (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Current Federal Tax Expense (Benefit)	$ 8,715,000	$ 4,204,000
Current State and Local Tax Expense (Benefit)	846,000	408,000
Income Tax Reconciliation, Nondeductible Expense	(954,000)	(804,000)
Income Tax Reconciliation, Change in Deferred Tax Assets Valuation Allowance	$ (8,607,000)	$ (3,808,000)

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Document and Entity Information (USD $)	12 Months Ended
	Sep. 30, 2013	Jan. 13, 2014	Mar. 29, 2013
Document and Entity Information
Entity Registrant Name	ACTIVECARE, INC.
Document Type	10-K
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Entity Central Index Key	0001429896
Current Fiscal Year End Date	--09-30
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	2013
Document Fiscal Period Focus	FY
Entity Common Stock, Shares Outstanding		32,860,314
Entity Public Float			$ 6,000,000

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11. Loss On Induced Conversion of Debt and Sale of Common Stock

12 Months Ended

Sep. 30, 2013

Notes

11. Loss On Induced Conversion of Debt and Sale of Common Stock

11. Loss on Induced Conversion of Debt and Sale of Common Stock

The Company offered an induced conversion rate to all debt holders at a rate of $0.75 per share of common stock, which was below the market price of the stock.  Debt and accrued interest of approximately $10,004,000 was converted to shares of common stock. The Company also offered the private placement of common stock to existing investors at $0.75 per share, which was below the market price.  The difference between the offered price and the market price of all common stock issued was approximately $9,356,000 and is recorded as a loss on induced conversion of debt and sale of common stock. 

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9. Notes Payable: Schedule of principal payments on notes payable (Details) (USD $)	12 Months Ended
	Sep. 30, 2013
Details
Notes payable principal payments in 2014	$ 1,768,820
Notes payable principal payments in 2015	854,522
Notes payable principal payments in 2016	239,824
Notes payable principal payments	$ 2,863,166

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18. Income Tax Disclosure: Schedule of Deferred Tax Assets and Liabilities (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Details
Deferred Tax Assets, Operating Loss Carryforwards	$ 19,330,000	$ 11,807,000
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals	453,000	101,000
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits	1,863,000	1,113,000
Deferred Tax Assets, Tax Deferred Expense, Other	2,000	20,000
Deferred Tax Assets, Valuation Allowance	$ (21,648,000)	$ (13,041,000)

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Statements of Operations (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Statements of Operations
Chronic Illness Monitoring Revenue	$ 9,738,988	$ 706,888
Care Services Revenue	1,660,544	352,223
Total revenues	11,399,532	1,059,111
Chronic Illness Monitoring Cost of Revenue	7,309,999	536,790
Care Services Cost of Revenue	2,325,226	736,520
Total cost of revenues	9,635,225	1,273,310
Gross profit (deficit)	1,764,307	(214,199)
Selling, general and administrative (including $2,159,828 and $3,927,214, respectively, of stock-based compensation)	11,039,645	8,855,724
Research and development	832,271	187,230
Total operating expenses	11,871,916	9,042,954
Loss from operations	(10,107,609)	(9,257,153)
Loss on derivatives liability	(333,406)	(2,104,389)
Loss on induced conversion of debt and sale of common stock	(9,355,587)	0
Interest expense, net	(5,583,932)	(858,224)
Loss on disposal of property and equipment	(200,149)	0
Other expense	(45,011)	0
Total other income (expense)	(15,518,085)	(2,962,613)
Net loss from continuing operations	(25,625,694)	(12,219,766)
Loss from discontinued operations	(5,312)	(145,990)
Net loss	(25,631,006)	(12,365,756)
Dividends on preferred stock	(320,868)	(57,183)
Net loss attributable to common stockholders	$ (25,951,874)	$ (12,422,939)
Continuing operations	$ (3.52)	$ (2.89)
Discontinued operations	$ 0.00	$ (0.03)
Net loss per common share	$ (3.52)	$ (2.92)
Weighted average common shares outstanding - basic and diluted	7,369,000	4,251,500

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5. Property, Plant and Equipment Disclosure

12 Months Ended

Sep. 30, 2013

Notes

5. Property, Plant and Equipment Disclosure

5. Property and Equipment

Property and equipment consisted of the following as of September 30:

			2013		2012
Equipment		$	255,339	$	374,229
Leasehold improvements			145,147		402,016
Software			87,361		65,111
Furniture			32,855		50,123
	Total gross property and equipment		520,702		891,479
Accumulated depreciation and amortization			(223,972)		(625,401)
	Property and equipment, net	$	296,730	$	266,078

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 fiscal years 2013 and 2012, the Company recorded a loss on the disposal of assets of $200,149 and $0, respectively, and disposed of $25,832 of assets related to the sale of the Reagents segment during fiscal year 2013. Depreciation expense for fiscal years 2013 and 2012 was $97,068 and $64,632, respectively.

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4. Acquisitions

12 Months Ended

Sep. 30, 2013

Notes

4. Acquisitions

4. Acquisitions

4G Biometrics, LLC

On March 8, 2012, the Company acquired 4G Biometrics, LLC, a Texas limited liability company (“4G”).  Pursuant to the acquisition agreement, the Company acquired 100 percent of the member interests of 4G and 4G is operated as a wholly owned subsidiary of the Company.  The consideration for the member interests of 4G was comprised as follows:

·         $350,000 in cash;

·         The assumption of $50,000 of accounts payable and accrued liabilities;

·         160,000 shares of Series D convertible preferred stock;

·         Options for the purchase of up to 433,333 shares of common stock of the Company at $1.00 per share to each of the three sellers with vesting as follows:

o    Options for 43,333 shares vest when 4G has 9,300 members

o    Options for another 43,333 shares vest when an additional 5,000 4G members are added, or a total of 14,300 members;

o    Options for another 43,333 shares vest when an additional 5,000 4G members are added, or a total of 19,300 members;

o    Options for another 43,333 shares vest when an additional 5,000 4G members are added, or a total of 24,300 members; and

o    so forth until fully vested.

As of September 30, 2013, options to purchase 260,000 shares of common stock have vested. 

Three of the 4G key operational managers are under two-year written employment agreements with the Company.  

Under the purchase method of accounting, the purchase price was allocated to 4G’s assets and assumed liabilities based on their estimated fair values as of the closing date of the acquisition.  The excess of the purchase price over the fair values of the net assets acquired was recorded as goodwill.

The purchase price for 4G reflects total consideration paid of $1,040,000, of which $825,894 was allocated to goodwill and $214,106 was allocated to customer contracts.

GWire

During fiscal year 2012, the Company established GWire Corporation (“GWire”) as a subsidiary.  Effective September 1, 2012, GWire acquired the assets and assumed certain liabilities of Green Wire, LLC, Green Wire Outsourcing, Inc., Orbit Medical Response, LLC, and Rapid Medical Response, LLC (collectively, “Green Wire”).  The Company entered into employment agreements with two of Green Wire’s operating managers on November 1, 2012. These two individuals were granted 27% ownership in GWire and ActiveCare retained the remaining 73%.  The purchase consideration for Green Wire consisted of the following:

·         $2,236,737 in the form of a note payable with a 36-month initial term (including imputed interest at 12%); and

·         20,000 shares of ActiveCare’s Series D convertible preferred stock, valued at $40,000.

Under the purchase method of accounting, the purchase price for Green Wire was allocated to the assets purchased and liabilities assumed based on their estimated fair values as of the closing date of the acquisition.

The purchase price for Green Wire reflects total consideration paid of $2,276,737, which has been allocated to $12,215 of cash, $13,976 of accounts receivable, $92,022 of property and equipment, $16,964 of deposits and other assets, $229,249 of leased equipment, $2,155,776 of customer contracts, $154,206 of accounts payable, $55,117 of accrued expenses and $34,142 of deferred revenue.

During fiscal year 2013, the two operating managers converted their 27% ownership in GWire and 425,000 of related options into 425,000 shares of the Company’s common stock.  As a result, the Company owns 100% of GWire as of September 30, 2013.

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16. Stock Options and Warrants

12 Months Ended

Sep. 30, 2013

Notes

16. Stock Options and Warrants

16. 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.  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 valuation model due to the Company’s short trading history.  The risk-free rate related to the expected term of the stock option or warrants is based on the U.S. Treasury yield curve in effect at the time of grant.  The dividend yield is zero. 

During fiscal years 2013 and 2012, the Company measured the fair value of the warrants using a binomial valuation model with the following assumptions:

	2013	2012
Exercise price	$0.75 - $10.00	$0.40 - .44
Expected term (years)	1.5 - 2.5	2.5
Volatility	219% - 298%	131% - 135%
Risk-free rate	0.23% - 0.88%	0.39% - 0.44%
Dividend rate	0%	0%

During fiscal year 2013, the Company recorded stock-based compensation expense relating to the following stock options and warrants:

·         Options to purchase 433,333 shares were granted to each of three employees of 4G, 1,300,000 total shares, as part of their employment agreements dated June 21, 2012, with an exercise price of $1.00 per share. These options vest as described in Note 4. The options expire in June 2017. The value of the options at the date of grant was $1,147,163. The Company amortizes the expense based on expected completion dates of the milestones. During fiscal year 2013, the Company recognized $846,898 of the total compensation expense. As of September 30, 2013, options for 260,000 shares have vested.

·         Options to purchase 1,000,000 shares were granted to the Company’s CEO for services as part of his employment agreement dated July 2012, with an exercise price of $1.00 per share. One tenth (100,000 shares) of the options vest for each milestone of 5,000 additional members added to the Company since the beginning of his employment in July 2012 until fully vested. The options expire in July 2017. The Company amortizes the expense based on expected completion dates of the milestones. During fiscal year 2013, the Company recognized $660,140 of the total compensation expense. As of September 30, 2013, options for 500,000 shares have vested due to the Company reaching certain milestones according to the contract. In August 2013, the CEO exercised options to purchase 350,000 shares of common stock at $1.00 per share.

·         Options to purchase 212,500 shares were granted to both key managers of GWire, 425,000 in aggregate, with an exercise price of $1.00 per share. Under the option agreements, the only method of exercise requires the employee to submit up to 212,500 shares of GWire stock, awarded as part of the employment agreements dated November 1, 2012 to the Company in exchange for equivalent shares of the Company’s common stock, up to $425,000 in total. The options were fully vested upon issuance. In April 2013, both managers converted all of these options together with 4,250,000 shares of GWire stock into 425,000 shares of the Company’s common stock. As a result, the Company owns 100% of GWire as of June 30, 2013.

·         Options to purchase 25,300 shares were granted to GWire employees, with an exercise price of $1.00 per share. The options vested immediately and the Company recognized $32,572 as compensation expense during fiscal year 2013.

·         Options to purchase 100,000 shares were granted as part of an employment agreement signed with a new employee dated May 2013, with an exercise price of $1.65 per share. One quarter (25,000 shares) of the options vest after one year and the remaining balance vests equally over the following nine quarters (8,333 per quarter). The options expire in May 2018. During fiscal year 2013, the Company recognized $12,689 of compensation expense associated with the options.

·         Options to purchase 100,000 shares were granted as part of a loan extension agreement with an unrelated party, with an exercise price of $1.00 per share. The options vested immediately and the Company recognized $103,495 of interest expense during fiscal year 2013.

·         Options to purchase 100,000 shares were granted for consulting services rendered by a third party, with an exercise price of $1.00 per share. The options vested immediately and the Company recognized $134,785 of consulting expense during fiscal year 2013.

·         Options to purchase 36,667 shares were granted as loan due diligence fees to an unrelated party, with an exercise price of $0.75 per share. The options vested immediately and the Company recorded $51,492 as loan discount, which is being amortized over the life of the loan.  During fiscal year 2013, the Company recognized $8,317 as interest expense for the loan discount amortization.

The following table summarizes information about stock options and warrants outstanding as of September 30, 2013:

Options and Warrants	Number of Options and Warrants	Weighted-Average Exercise Price
Outstanding as of October 1, 2012	2,386,587	$              1.47
Granted	2,086,967	1.04
Exercised	(875,000)	1.00
Forfeited	-	-
Outstanding as of September 30, 2013	3,598,554	1.33
Exercisable as of September 30, 2013	2,271,887	1.50

As of September 30, 2013, the outstanding warrants have an aggregate intrinsic value of $434,890, and the weighted average remaining term of the warrants is 3.13 years.

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12. Fair Value Measurements

12 Months Ended

Sep. 30, 2013

Notes

12. Fair Value Measurements

12. Fair Value Measurements

The Company measured 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	The Company’s embedded derivative liabilities are measured on a recurring basis using Level 2 inputs.
Level 3	The Company’s goodwill is measured using Level 3 inputs.

The Company’s embedded derivative liabilities are re-measured to fair value as of each reporting date until the contingency is resolved.  See Note 13 below for more information about these liabilities and the inputs used for calculating fair value.

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14. Preferred Stock (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Series C stock shares issued in purchase of patents		480,000
Dividends payable	$ 3,471	$ 18,322
Series D preferred shares converted	50,000
Shares issued from conversion of Series D preferred stock	250,000
Accrued Dividends on Series D preferred stock	232,834
Series D Preferred Stock issued to settle accrued dividends	5,025
Shares issued to settle accrued dividends	143,465
Debenture loans and accrued interest converted into shares of Series E preferred stock	614,765
Debenture loans and accrued interest converted into shares of Series E preferred stock - shares	61,723
Dividends paid to Series E Shareholders	17,271
Redemption Price of Series E preferred stock	601,585
LoanOriginationFeesMember
Shares Series D Preferred Stock Issued	103,843
Loan origination fees	817,482
FutureAdvisoryServicesMember
Shares Series D Preferred Stock Issued	71,800
Shares Series D Preferred Stock Issued Value	230,800
FutureConsultingServicesMember
Shares Series D Preferred Stock Issued	20,000
Shares Series D Preferred Stock Issued Value	60,000
AccruedBoardOfDirectorFeesAndCompensationMember
Shares Series D Preferred Stock Issued	52,913
Shares Series D Preferred Stock Issued Value	61,652
BonusToAnOfficerMember
Shares Series D Preferred Stock Issued	46,300
Shares Series D Preferred Stock Issued Value	234,700
DividendsOnSeriesCPreferredStockMember
Shares Series D Preferred Stock Issued	9,062
Shares Series D Preferred Stock Issued Value	53,992
DividendsOnSeriesDPreferredStockMember
Shares Series D Preferred Stock Issued	5,025
Shares Series D Preferred Stock Issued Value	31,689
PastConsultingServicesMember
Shares Series D Preferred Stock Issued	126,117
Shares Series D Preferred Stock Issued Value	564,280
BonusForConsultingServicesMember
Shares Series D Preferred Stock Issued	85,000
Shares Series D Preferred Stock Issued Value	455,000
BonusToCeoMember
Shares Series D Preferred Stock Issued	80,000
Shares Series D Preferred Stock Issued Value	320,000
Services Member
Shares Series D Preferred Stock Issued	2,055
Shares Series D Preferred Stock Issued Value	14,899
Series C Preferred Stock
Dividends payable	$ 53,992	$ 35,763

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8. Equipment Leased to Customers

12 Months Ended

Sep. 30, 2013

Notes

8. Equipment Leased to Customers

8. Equipment Leased to Customers

Equipment leased to customers consisted of the following as of September 30:

		2013		2012
Leased equipment	$	389,492	$	457,898
Accumulated depreciation		(115,862)		(144,905)
Leased equipment, net	$	273,630	$	312,993

The Company leases monitoring equipment to customers for CareServices.  The leased equipment is depreciated using the straight-line method over the 3-year estimated useful lives of the related equipment, regardless of whether the equipment is leased to a customer or remaining in stock.  Leased equipment depreciation expense for fiscal years 2013 and 2012 was $175,049 and $70,531, respectively.  The depreciation expense is recorded in cost of revenues for CareServices. Customers have the right to cancel the service agreements at any time.  During fiscal years 2013 and 2012, the Company recorded a loss on the disposal of leased equipment of $75,124 and $0, respectively.  

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18. Income Tax Disclosure: Schedule of Components of Income Tax Expense (Benefit) (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Components of Income Tax Expense (Benefit)

	2013	2012
Federal income tax benefit at statutory rate	$       8,715,000	$         4,204,000
State income tax benefit, net of federal income tax effect	846,000	408,000
Non-deductible expenses	(954,000)	(804,000)
Change in valuation allowance	(8,607,000)	(3,808,000)
Benefit for income taxes	$                     -	$                      -

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6. Patent License Agreement

12 Months Ended

Sep. 30, 2013

Notes

6. Patent License Agreement

6. Patent License Agreement

During fiscal year 2009, the Company licensed the use of certain patents from a third party.  Under the license agreement, the Company was required to pay $300,000 plus a 5% royalty on the net sales of all licensed products. As of September 30, 2009, the Company had capitalized the initial license fee as a long-term asset and had recorded a corresponding current liability as the fee was not yet paid.

During fiscal year 2012, the Company agreed to purchase the related patents and settle amounts owed under the license agreement by issuing 600,000 shares of common stock and 480,000 shares of Series C preferred stock.  The patents were valued at $922,378, based on a valuation performed by an independent valuation expert.  The value of the common stock issued was $240,000, based on the market price of the common stock on the date of issuance. The implied value of the Series C was $682,378, which was based on the difference between the value of the patents and the common stock issued in settlement of the existing liability.

The Company is amortizing the patents over their remaining useful lives (through 2018).  Amortization expense for fiscal years 2013 and 2012 was $126,870 and $147,277, respectively.  The Company’s future patent amortization as of September 30, 2013, is as follows:

Years Ending September 30,
2014	$	126,870
2015		126,870
2016		126,870
2017		126,870
2018		59,440
	$	566,920

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7. Customer Contracts

12 Months Ended

Sep. 30, 2013

Notes

7. Customer Contracts

7. Customer Contracts

During the fiscal year ended 2012, the Company recorded customer contracts of $2,369,882 acquired in its purchase of 4G and GWire.  The Company is amortizing the customer contracts over their estimated useful lives (through 2015).  Amortization expense for fiscal years 2013 and 2012 was $833,032 and $102,329, respectively.  The Company’s future customer contract amortization as of September 30, 2013, is as follows:

Years Ending September 30,
2014	$	775,812
2015		658,709
	$	1,434,521

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9. Notes Payable

12 Months Ended

Sep. 30, 2013

Notes

9. Notes Payable

9. Notes Payable

The Company had the following notes payable outstanding as of September 30:

	2013	2012
Note payable to the former owners of Green Wire, secured by customer contracts, imputed interest rate of 12%, with monthly installments over a 38-month term.  In March 2013, the Company issued 15,000 shares of common stock to extend two past due payments without penalty and the grant date fair value was $24,000, which will be amortized over the remaining life of the note.	$         1,766,971	$         2,236,737
Notes payable with interest at 12%, secured by the Company's assets, due August 2014 and convertible into the shares of common stock at $0.75 per share.  The notes required $51,250 in due diligence and legal fees.  The Company issued warrants to purchase 36,667 shares of common stock as due diligence fees with a grant date fair value of $51,452.  The Company issued 25,000 shares of common stock with a grant date fair value of $31,250 to a related party as consideration for signing a personal guarantee.  The notes and accrued interest were converted to Series F preferred stock subsequent to September 30, 2013 (see note 20).	550,000	-
Unsecured note with interest at 12%, due March 2013.  The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	250,000	250,000
Unsecured notes with interest at 15% (18% after due date), due March and April 2013, respectively.  The Company issued 20,000 shares of Series D preferred stock as loan origination fees with a grant date fair value of $195,000.   Principal of $50,000 was converted to common stock subsequent to September 30, 2013 (see note 20).	185,476	-
Series A debenture loans payable, secured by customer contracts and payable in 36 monthly installments, original due dates between September and April 2016. The loans bear interest at 12% and are convertible into common stock after 180 days.  After payment of principal and interest, the holders of the Series A and Series B debentures, as a class, are entitled to receive a pro-rata share of cumulative royalties totaling 4% of the Company’s gross profits payable for the two-year period commencing at the maturity date; provided that no royalties are payable following conversion of any Series A or Series B debenture to the holder thereof.  The Company has the right to buy out each lender's royalty by paying the respective lender $20,000 for every $25,000 loaned.  The note included a beneficial conversion feature valued at $901,000 at inception, which the Company is amortizing over the life of the loan.  The feature had an unamortized value of $47,934 as of September 30, 2013.  The majority of loans were converted during fiscal year 2013.   The remaining balance was converted to Series E preferred stock subsequent to September 30, 2013 (see note 20).	85,719	300,000
Unsecured note with interest at 15%, due March 2013, currently in default. Note included a $25,000 cash and 100,000 shares of common stock as loan origination fees with a grant date fair value of $70,000.   The note and accrued interest was converted to common stock subsequent to September 30, 2013 (see note 20).	25,000	275,000
Unsecured note with interest at 15% (18% after due date), due November 2012.  The Company issued 60,000 shares of Series D stock as loan origination fees with a grant date fair value of $150,000.  The note was guaranteed by the Company’s Chief Executive Officer.	-	1,500,000
Total before discount and current portion	2,863,166	4,561,737
Less discount	(528,663)	(187,587)
Total notes payable	2,334,503	4,374,150
Less current portion	(1,278,585)	(2,569,221)
Total notes payable, net of current portion	$         1,055,918	$         1,804,929

Scheduled principal payments on notes payable are as follows:

Years Ending September 30,
2014	$	1,768,820
2015		854,522
2016		239,824
	$	2,863,166

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2. Summary of Significant Accounting Policies: Inventories: Schedule of Utility Inventory (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Inventory	$ 1,249,220	$ 290,768
Chronic Illness Monitoring
Inventory, Finished Goods, Gross	1,249,220	185,884
CareServices
ActiveHome		56,767
Reagents
Inventory, Finished Goods, Gross		6,161
Inventory, Raw Materials, Gross		36,211
Inventory, Finished Goods and Work in Process, Gross		$ 5,745

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15. Common Stock (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
ServiceCompensationMember
Common Shares Issued	327,382
Common Shares Issued Value	$ 458,929
CompensationForNewEmployeesMember
Common Shares Issued	220,000
Common Shares Issued Value	318,000
EmployeeBonusesMember
Common Shares Issued	27,650
Common Shares Issued Value	39,825
OptionExercisesFromEmployeeBonusesMember
Common Shares Issued	350,000
Common Shares Issued Value	350,000
EmploymentContractExtensionMember
Common Shares Issued	150,000
Common Shares Issued Value	187,500
MedicalAdvisoryBoardMembersMember
Common Shares Issued	25,000
Common Shares Issued Value	31,750
BoardMemberMember
Common Shares Issued	25,000
Common Shares Issued Value	31,750
LoanOriginationFeesMember
Common Shares Issued	141,987	100,000
Common Shares Issued Value	387,849	70,000
ExtentionOfRelatedPartyPayablesMember
Common Shares Issued	4,758
Common Shares Issued Value	7,137
ExtentionOfUnrelatedPartyPayablesMember
Common Shares Issued	40,000
Common Shares Issued Value	61,500
ConversionOfDebtMember
Common Shares Issued	13,439,190
Common Shares Issued Value	18,467,123
IssuanceOfNewDebtMember
Common Shares Issued	2,600
Common Shares Issued Value	3,900
New debt to related party	26,000
SettleAccruedLiabilityMember
Common Shares Issued	166,200	60,000
Common Shares Issued Value	225,300
Accrued Liability Settled	126,200	312,000
ConversionOfSeriesDPreferredStockMember
Common Shares Issued	250,000
ExerciseOfOptionsMember
Common Shares Issued	425,000
DividendsAccruedSeriesCAndDPreferredStockMember
Common Shares Issued	200,625
Common Shares Issued Value	232,765
Cash
Common Shares Issued	1,313,334
Common Shares Issued Value	1,842,334
Shares Issued For Cash	985,000
SharesToEmployeesMember
Common Shares Issued	29,600
PatentLicenseAgreementMember
Common Shares Issued		60,000
Common Shares Issued Value		240,000
ConsultingServicesMember
Common Shares Issued		129,161
Common Shares Issued Value		218,906
SettlementAgreementMember
Common Shares Issued		200,000
ShortTermNotesPayableMember
Common Shares Issued		231,000
Common Shares Issued Value		$ 92,400

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2. Summary of Significant Accounting Policies: Advertising Costs (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Advertising Expense	$ 59,330	$ 176,300

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2. Summary of Significant Accounting Policies: Accounts Receivable (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Details
Allowance for Doubtful Accounts Receivable	$ 76,544	$ 20,195

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19. Commitments and Contingencies: Schedule of Future Minimum Rental Payments for Operating Leases (Details) (USD $)	Sep. 30, 2013
Details
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 277,603
Operating Leases, Future Minimum Payments, Due in Two Years	308,330
Operating Leases, Future Minimum Payments, Due in Three Years	317,580
Operating Leases, Future Minimum Payments, Due in Four Years	327,107
Operating Leases, Future Minimum Payments, Due in Five Years	280,077
Operating Leases, Future Minimum Payments Due	$ 1,510,697

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2. Summary of Significant Accounting Policies: Inventories (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Inventories

Inventories

                Inventories are recorded at the lower of cost or market, cost being determined using the first-in, first-out (“FIFO”) method. Chronic Illness Monitoring inventory consists of diabetic supplies.  The Company writes down inventory for obsolescence and excessive levels to estimated net realizable value.  Due to competitive pressures and technological innovation, it is possible that estimates of net realizable values could change in the near term.  Inventories consist of the following as of September 30:

				2013		2012
Chronic Illness Monitoring
	Finished goods		$	1,249,220	$	185,884
Careservices
	ActiveHomeTM			-		56,767
Reagents
	Raw materials			-		36,211
	Work in process			-		5,745
	Finished goods			-		6,161
		Total inventories	$	1,249,220	$	290,768

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7. Customer Contracts: Schedule of Future Customer Contract Amortization (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Future Customer Contract Amortization

Years Ending September 30,
2014	$	775,812
2015		658,709
	$	1,434,521

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14. Preferred Stock

12 Months Ended

Sep. 30, 2013

Notes

14. Preferred Stock

14. 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 C Convertible Preferred Stock

On October 4, 2011, the Company issued 480,000 shares of Series C convertible preferred stock (“Series C preferred stock”) in connection with the patent license agreement settlement (see Note 6).  The par value of the Series C is $0.00001 per share.  The Series C preferred stock is non-voting stock.  Each share of Series C preferred stock may be converted into one share of common stock, provided, however, that a holder may not convert shares of Series C preferred stock which, upon conversion, would result in the holder becoming the beneficial owner of more than 4.99% of the issued and outstanding common stock of the Company. 

During fiscal year 2012, the Company amended the rights and preferences of the Series C preferred stock as follows:

·         Required payment of dividends at a rate of 8% per annum in either cash or common stock at the Company’s discretion.  If paid in common stock, the price of the common stock is the average closing price of the last 10 trading days of each quarter; and

·         Permitted conversion of the Series C preferred stock into common stock at any time after June 30, 2012.

During fiscal year 2013, the Company issued 9,062 shares of Series D preferred stock for accrued dividends of $53,992 associated with Series C preferred stock.  During fiscal year 2012, the Company issued 10,218 shares of Series D preferred stock for accrued dividends of $35,763 associated with Series C preferred stock.

Series D Convertible Preferred Stock

On October 4, 2011, the Board of Directors designated 1,000,000 shares of preferred stock as Series D convertible preferred stock (“Series D preferred stock”).  As originally designated, the Series D preferred stock vested immediately upon issuance, and each share of Series D preferred stock was convertible into one share of common stock.  The original designation also provided that the Series D preferred stock was non-voting and would not receive dividends.  In addition, conversion of the Series D preferred stock was limited to not more than 4.99% of the issued and outstanding common stock. 

During fiscal year 2012, the Board of Directors approved the following amendments to the designation of the rights and preferences of the Series D preferred stock prior to the issuance of any of the shares:

·         Changed the conversion ratio from  one share of common stock for one share of Series D preferred stock to  five shares of common stock for one share of Series D preferred stock;

·         Added an annual dividend rate of 8%, payable in stock or cash quarterly beginning April 1, 2012;

·         Changed the shares from non-voting to voting, on an as-converted basis;

·         Eliminated the 4.99% conversion limitation;

·         Permitted conversion of the Series D preferred stock, commencing April 1, 2012;

·         Permitted the Company, at its option, to redeem the Series D preferred shares at a redemption price equal to 120% of the original purchase with 15 days notice.

During fiscal year 2013, the Company issued the following shares of Series D preferred stock:

·         103,843 shares for $817,482 in loan origination fees;

·         71,800 shares for advisory services through December 2014, the value on the date of grant was $230,800;

·         20,000 shares for consulting services through December 2013, the value on the date of grant was $60,000;

·         52,913 shares for $150,000 in previously accrued Board of Directors’ fees and $61,652 of compensation for services;

·         46,300 shares for a bonus to an officer for services, the value on the date of grant was $234,700;

·         9,062 shares for dividends on Series C preferred stock, the value on the date of grant was $53,992;

·         5,025 shares for dividends on Series D preferred stock, the value on the date of grant was $31,689;

·         126,117 shares for consulting services by an entity controlled by an officer of the Company, which were previously accrued in the amount of $564,280;

·         85,000 shares to an entity controlled by an officer of the Company for consulting services, the value on the date of grant was $455,000;

·         80,000 shares for a bonus to the CEO of the Company for signing an employment agreement with the Company, the value at the date of grant was $320,000, which cannot convert to common stock until the Company has 20,000 members;

·         2,055 shares for services with value of $14,899 on the date of grant.

During fiscal year 2013, an employee of the Company converted 50,000 shares of Series D preferred stock into 250,000 shares of common stock.  The Company also accrued $232,834 of dividends on Series D preferred stock and settled the accrued dividends by issuing 5,025 shares of Series D preferred stock and 143,465 shares of common stock during fiscal year 2013.

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 stock”).  The Series E preferred stock vests immediately upon issuance. Series E preferred stock is convertible into common stock at $1.00 per share, the conversion price is adjustable if there are distributions of common stock or stock split by the Company.  The designation also provides that the Series E preferred stock would be non-voting and would receive a monthly dividend of 3.322% for 25 to 32 months.  In addition, the convertibility and the redemption price of the Series E preferred stock is gradually reduced by dividend payments over 25 to 32 months.  After the dividend payment term, the redemption price of Series E preferred stock is $0 and the Series E preferred stock has no convertibility to common stock. 

During fiscal year 2013, $614,765 of debenture loans and accrued interests converted into 61,723 shares of Series E preferred stock.  During fiscal year 2013, the Company paid dividends of $17,271 to Series E shareholders.  As of September 30, 2013, the redemption price for the Series E preferred stock was $601,585.  

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 C, Series D, and Series E preferred stock 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 respectively entitled.

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19. Commitments and Contingencies

12 Months Ended

Sep. 30, 2013

Notes

19. Commitments and Contingencies

19. Commitments and Contingencies

The Company leases office space under non-cancelable operating leases.  Future minimum rental payments under non-cancelable operating leases as of September 30, 2013 were as follows:

Years Ending September 30,
2014	$            277,603
2015	308,330
2016	317,580
2017	327,107
2018	280,077
	$         1,510,697

The Company’s rent expense for facilities held under non-cancelable operating leases for fiscal years 2013 and 2012 was approximately $268,000 and $204,000, respectively.

In May 2013, the Company entered into a settlement agreement and patent license agreement and an agreed motion was filed to dismiss all claims of a lawsuit.  The final payment required by the settlement agreement and patent license patent agreement was made in December, 2013.

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5. Property, Plant and Equipment Disclosure: Schedule of Property and Equipment (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Property and Equipment

			2013		2012
Equipment		$	255,339	$	374,229
Leasehold improvements			145,147		402,016
Software			87,361		65,111
Furniture			32,855		50,123
	Total gross property and equipment		520,702		891,479
Accumulated depreciation and amortization			(223,972)		(625,401)
	Property and equipment, net	$	296,730	$	266,078

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2. Summary of Significant Accounting Policies: Income Taxes (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Income Taxes

Income Taxes

The Company recognizes deferred income tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or income tax returns. Deferred income tax assets or liabilities are determined based upon the difference between the financial reporting bases and tax reporting bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized.  Deferred income tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary.  As of September 30, 2013, management has determined to provide a 100% allowance against deferred income tax assets as it is more likely than not these assets will not be realized.  Interest and penalties related to income tax liabilities, when incurred, are classified in interest expense and income tax provision, respectively.

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Statements of Operations Parenthetical (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Statements of Operations Parenthetical
Compensation expense paid in stock or amortization of stock options and warrants	$ 2,159,828	$ 3,927,214

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16. Stock Options and Warrants: Schedule of Share-based Compensation, Activity (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance	2,386,587	3,598,554
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Beginning Balance	$ 1.47	$ 1.33
Share-based compensation arrangement by share-based payment award, Options, Grants in period	2,086,967
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 1.04
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	(875,000)
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price	$ 1.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number		2,271,887
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price		$ 1.50

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3. Discontinued Operations

12 Months Ended

Sep. 30, 2013

Notes

3. Discontinued Operations

3.     Discontinued Operations

In June 2013, the Company sold its assets and liabilities related to the reagents segment.  This segment was engaged in the business of manufacturing and marketing medical diagnostic stains, solutions and related equipment to hospitals and medical testing labs.  The purchaser was a former employee.  The sale consisted solely the Company's reagents business. 

The Company no longer holds any ownership interest in the reagents segment and has ceased incurring costs related to its operations and development. The sale included all applicable segment assets and liabilities including, accounts receivable, inventory, accounts payable, property, equipment and leased equipment.  The purchaser also assumed the lease for general office and warehouse space.

As a result of the sale of the reagents business, the Company has reflected this segment as discontinued operations in the consolidated financial statements for fiscal years 2013 and 2012.  The following table summarizes certain operating data for discontinued operations for fiscal years 2013 and 2012:

		2013		2012
Revenues	$	351,645	$	467,259
Cost of revenues		(300,396)		(392,049)
Gross margin		51,249		75,210
Selling, general and administrative expenses		(111,657)		(221,200)
Loss from discontinued operations		(60,408)		(145,990)
Gain on sale discontinued operations		55,096		-
Net loss from discontinued operations	$	(5,312)	$	(145,990)

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17. Segment Information: Schedule of Segment Reporting Information, by Segment (Tables)

12 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Segment Reporting Information, by Segment

	Corporate	Chronic Illness Monitoring	CareServices	Reagents	Total
Fiscal year ended September 30, 2013
Sales to external customers	$                  -	$ 9,738,988	$    1,660,544	$     351,645	$ 11,751,177
Segment loss	(21,986,526)	(460,017)	(3,179,151)	(5,312)	(25,631,006)
Interest expense, net	5,583,932	-	-	-	5,583,932
Segment assets	600,892	9,482,037	2,291,121	-	12,374,050
Fixed assets and leased equipment purchases	243,273	-	241,527	888	485,688
Depreciation and amortization	124,269	114,440	984,663	9,362	1,232,734
Fiscal year ended September 30, 2012
Sales to external customers	$                -	$   706,888	$       352,223	$ 467,259	$    1,526,370
Segment loss	(11,298,372)	(532,207)	(389,187)	(145,990)	(12,365,756)
Interest expense, net	858,224	-	-	-	858,224
Segment assets	397,557	1,957,779	3,224,579	296,039	5,875,954
Fixed assets and leased equipment purchases	93,315	-	257,857	-	351,172
Depreciation and amortization	304,841	-	64,348	16,296	385,485

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11. Loss On Induced Conversion of Debt and Sale of Common Stock (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Details
Debt and accrued interest converted to shares of common stock	$ 10,004,000
Loss on induced conversion of debt and sale of common stock	$ 9,355,587	$ 0

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3. Discontinued Operations: Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures (Details) (USD $)	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Gross profit (deficit)	$ 1,764,307	$ (214,199)
Selling, general and administrative (including $2,159,828 and $3,927,214, respectively, of stock-based compensation)	11,039,645	8,855,724
Loss from discontinued operations	(5,312)	(145,990)
Segment, Discontinued Operations
Revenues	351,645	467,259
Cost of Revenue	(300,396)	(392,049)
Gross profit (deficit)	51,249	75,210
Selling, general and administrative (including $2,159,828 and $3,927,214, respectively, of stock-based compensation)	(111,657)	(221,200)
Discontinued Operation, Amount of Other Income (Loss) from Disposition of Discontinued Operation, Net of Tax	(60,408)	(145,990)
Gain (Loss) on Sale of Other Assets	55,096
Loss from discontinued operations	$ (5,312)	$ (145,990)

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20. Subsequent Events

12 Months Ended

Sep. 30, 2013

Notes

20. Subsequent Events

20. Subsequent Events

Subsequent to September 30, 2013, the Company entered into the following agreements and transactions:

(1)     In October 2013, the Company entered into a loan conversion agreement with an investor.  The Company issued 8,347 shares of Series E preferred stock for the conversion of a Series A debenture agreement representing principal and interest in the amount of $83,473. 

(2)     In November 2013, the Company entered into a loan conversion agreements with two investors.  The Company issued 441,735 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $331,301. 

(3)     In December 2013, the Company designated 7,803 shares of preferred stock as Series F variable rate convertible preferred stock and completed the sale of $3,120,000 in 8% original issue shares of Series F preferred stock.  The Company received $2,835,771 cash after fees and expenses.   As part of the transaction consultants invested an additional $220,000 under subscription agreements to purchase 247 shares of Series F preferred stock.  In addition, the Company issued 3,495,000 warrants exercisable at $1.10 per share for five years as part of the overall transaction.

(4)     In December 2013, the Company entered into a loan conversion agreement with one of its debt holders.  The Company issued 857 shares of Series F preferred stock for the conversion of a note payable representing principal and interest in the amount of $573,868.  In addition, the Company issued 856,977 warrants exercisable at $1.10 per share for five years.

(5)     In December 2013, the Company entered into a loan conversion agreement with a related party.  The Company issued 1,883,675 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $1,126,026.  In addition, the Company issued 410,348 warrants exercisable at $1.10 per share for five years. 

(6)     In December 2013, the Company entered into a loan conversion agreement with a related party.  The Company issued 1,100,110 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $659,474.  In addition, the Company issued 239,652 warrants exercisable at $1.10 per share for five years.

(7)     In December 2013, the Company entered into a loan conversion agreement with the Company’s chief executive officer.  The Company issued 213,334 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $160,000. 

(8)     In December 2013, an investor converted 480,000 shares of Series C preferred stock to 672,000 shares of common stock.

(9)     In December 2013, related party and non-related party investors converted 893,218 shares of Series D preferred stock to 6,252,526 shares of common stock. 

(10) In December 2013, the Company entered into a loan conversion agreement with one of its debt holders.  The Company issued 66,667 shares of common stock for the conversion of a note payable representing principal and interest in the amount of $50,000.   

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6. Patent License Agreement: Schedule of Expected Amortization Expense (Details) (USD $)	12 Months Ended		60 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2018
Details
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	$ 126,870
Finite-Lived Intangible Assets, Amortization Expense, Year Two	126,870
Finite-Lived Intangible Assets, Amortization Expense, Year Three	126,870
Finite-Lived Intangible Assets, Amortization Expense, Year Five	59,440
Amortization of Intangible Assets	$ 126,870	$ 147,277	$ 566,920

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2. Summary of Significant Accounting Policies: Revenue Recognition (Policies)

12 Months Ended

Sep. 30, 2013

Policies

Revenue Recognition

Revenue Recognition

The Company’s revenue has historically been from three sources: (i) sales from Chronic Illness Monitoring services and supplies; (ii) sales from CareServices; and (iii) sales of medical diagnostic stains from the reagents segment, which was sold during fiscal year 2013 and reported as discontinued operations.

Chronic Illness Monitoring

The Company began chronic illness monitoring sales as a result of its acquisition of 4G Biometrics, LLC in the quarter ended March 31, 2012 (see Note 4).  The Company recognizes Chronic Illness Monitoring revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured.

Shipping and handling billed to customers are included in revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.  Sales of Chronic Illness Monitoring products and services do not contain multiple deliverables.

The Company enters into agreements with insurance companies, disease management companies, and self-insured companies (collectively, customers) to lower medical expenses by distributing diabetic testing supplies to their customers or employees (members) and monitoring their test results.  Customers are obligated to pay for the supplies at the time of shipment and cash is due from these customers as the product is deployed to the members.  The terms of these contracts are generally one year and, unless terminated by either party, will automatically renew for another year.  Collection terms are net 30-days after claims are submitted. 

Revenue is recognized on the date of sale because the following exist:  

·         The price to the contracted customer is fixed or determinable at the date of sale.

·         The customer has paid or is obligated to pay the Company within terms.

·         The customer’s obligation to the Company is not changed in the event of theft or physical destruction or damage of the product.

·         Once the product is shipped, there is no right of return.

CareServices

The “CareServices” segment sells devices to distributors as well as provides monitoring services to end users on a contractual basis.  The Company typically enters into contracts on a month-to-month basis with customers (members) that use the Company’s CareServices.  However, either party may cancel these contracts at any time with 30-days notice.  Under the Company’s standard contract, the device becomes billable on the date the member orders the product, and remains billable until the device is returned to the Company.  The Company recognizes revenue on devices at the end of each month that CareServices have been provided.  In those circumstances in which the Company receives payment in advance, the Company records these payments as deferred revenue.

The Company recognizes CareServices revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured.  Shipping and handling fees billed to the customer are included in revenues.  The related freight costs and supplies directly associated with shipping products to members are included as a component of cost of revenues.  All CareServices sales are made with net 30-day payment terms.

Revenue is recognized on the date of sale because the following exist:  

·         The price to the customer is fixed or determinable at the date of sale.

·         The customer has paid or is obligated to pay within terms, and the obligation is not contingent on resale of the product.

·         The customer’s obligation is not changed in the event of theft or physical destruction or damage of the product.

·         The customer acquiring the product for resale has economic substance apart from the Company.

·         The Company does not have significant obligations for future performance to bring about resale of the product by the customer.

·         The amount of future returns are estimatable and are not significant.

The vast majority of CareServices revenues are for services.  Because equipment sales are not material, the Company presents services and equipment sales together in the accompanying financial statements.

The Company’s distributors are not required to maintain specified amounts of product on hand, and distributors are not required to make minimum purchases to maintain distributor status.  Distributors have no stock rotation rights or additional rights of return.  Revenues from products sold with long-term service contracts are recognized ratably over the expected life of the contract.  Revenues are recorded net of estimated returns and discounts.

Reagents

Prior to the sale of the reagent segment, the Company recognized reagents revenues when persuasive evidence of an arrangement with the customer existed, title passed to the customer, prices were fixed or determinable, and collection was reasonably assured.  Prior to the sale of the reagent segment, shipping and handling fees billed to customers were included in revenues and the related freight costs and supplies directly associated with shipping products to customers were included as a component of cost of revenues.

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13. Derivative Liabilities

12 Months Ended

Sep. 30, 2013

Notes

13. Derivative Liabilities

13. Derivative Liabilities

As described in Notes 9 and 10, the Company has issued convertible notes payable with variable conversion options.  The Company has determined the conversion options of certain notes payable are subject to derivative liability treatment and are required to be accounted for at fair value.  The derivative liabilities for the fiscal years ended September 30, 2013 and 2012 totaled $795,151 and $4,015,855, respectively.  The derivative liability as of September 30, 2012 was eliminated during fiscal year 2013 as a result of the 10-for-1 reverse common stock split, this decreased the number of outstanding shares and convertible shares of “freestanding instruments”, such that the Company can reserve sufficient shares to settle “freestanding instruments.” 

During fiscal year 2013, the Company estimated the fair value of the embedded derivatives using a binomial option-pricing model with the following assumptions: conversion price of $0.75 per share according to the agreements; risk free interest rate of 0.10% to 0.11%; expected life of 0.83 to 1.00 years; expected dividends of zero; a volatility factor of 200% to 229%; and a stock price of $1.45.  The expected lives of the instruments are equal to the average term of the conversion option.  The expected volatility is based on the historical price volatility of the Company’s common stock.  The risk-free interest rate represents the U.S. 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 loss on derivative liabilities for the fiscal years 2013 and 2012 was $333,406 and $2,104,389, respectively.