Note 4 - Convertible Notes Payable

12 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

4.

CONVERTIBLE NOTES PAYABLE

On

December

30,

2011,

management entered into a Convertible Loan Agreement (“Convertible Loan”) with Roundball, LLC (“Roundball”). The Convertible Loan provides approximately

$467,000

of liquidity to meet on going working capital requirements of the Company and allows

$250,000

of borrowing on the agreement at the Company's discretion at an interest rate of

0.25%.

Roundball, a major shareholder of the Company, is an affiliate of Steven Rosen and Matthew Crawford, Directors of the Company.

There have been several amendments to the original agreement over the years for the purpose of extending the existing terms of the Convertible Loan. On

December

20,

2016,

management entered into Amendment No.

5

of the Convertible Loan Agreement with Roundball. The amended Convertible Loan:

? Continues to provide approximately $467,000 of liquidity to meet on going working capital requirements;

? Continues to allow $250,000 of borrowing on the agreement at the Company's discretion at an interest rate of 0.34%; and

? Extends the due date of the loan agreement from December 30, 2016 to December 30, 2017.

The outstanding balance on the Convertible Loan as of

September

30,

2016,

is

$200,000.

As part of the Convertible Loan Agreement between the Company and Roundball, the parties entered into a Warrant Agreement, dated  

December

30,

2012,

whereby the Company issued a warrant to Roundball to purchase, at its option, up to

100,000

shares of Class A Common Stock of the Company at an exercise price of

$2.50

per share, subject to certain anti - dilution and other adjustments. If not exercised or amended, this warrant would have expired on

December

30,

2015.

In connection with the amendments to the Convertible Loans, the Company has also entered into several amendments to Warrant Agreement for the purpose of extending the terms of the warrants with Roundball. Amendment No.

1

of the Warrant Agreement extended the due date of the agreement from

December

30,

2015

to

December

30,

2016.

Amendment No.

2

of the Warrant Agreement extended the due date of the agreement from

December

30,

2016

to

December

30,

2017.

The Company used the Black - Scholes option pricing model to determine the fair value estimate for recognizing the cost of services received in exchange for an award of equity instruments. The Black - Scholes option pricing model requires the use of subjective assumptions which can materially affect the fair value estimates. The warrants are immediately exercisable and expire in

December

2017.

The fair value of the warrants issued was amortized over the

one

- year amended convertible loan agreement period. The following weighted - average assumptions were used in the option pricing model for the fiscal year ended

September

30,

2013:

a risk - free interest rate of

0.42%;

an expected life of

3

years; an expected dividend yield of

0.0%;

and a volatility factor of

.84.

The Company recorded interest expense on the Roundball note of

$691

for fiscal

2016,

$644

for fiscal

2015,

and

$228

for fiscal

2014.

As of

September

30,

2016,

and

September

30,

2015,

$691

and

$1,176

of interest was paid respectively.