Delaware
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87-0543981
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(State or other jurisdiction of
incorporation or organization )
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(I.R.S. Employer
Identification Number)
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Large accelerated filer [ ]
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Accelerated
filer [
]
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Non-accelerated filer [
]
(Do not check if a smaller reporting company)
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Smaller reporting company [X]
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December 31,
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September 30,
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Assets
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2016
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2016
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Current assets:
|
(Unaudited)
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Cash
|
$
2,486,390
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$
1,769,921
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Accounts
receivable, net of allowance for doubtful accounts of $2,695,060
and $2,335,508, respectively
|
5,920,597
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6,894,095
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Note
receivable, current
|
334,733
|
334,733
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Prepaid
expenses and other
|
515,000
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816,708
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Inventory,
net of reserves of $98,150 and $98,150, respectively
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464,151
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521,851
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Total current assets
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9,720,871
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10,337,308
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Property and equipment, net of accumulated depreciation of
$1,503,512 and $1,421,389, respectively
|
1,075,212
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1,226,461
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Monitoring equipment, net of accumulated amortization of $3,535,297
and $3,438,074, respectively
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4,583,890
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4,358,117
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Intangible assets, net of accumulated amortization of $8,821,745
and $8,233,659, respectively
|
25,286,897
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25,540,650
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Goodwill
|
7,841,220
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7,955,876
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Other assets
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3,016,318
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2,900,911
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Total
assets
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$
51,524,408
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$
52,319,323
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Liabilities and Stockholders’ Equity
|
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Current liabilities:
|
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Accounts
payable
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3,263,481
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2,771,101
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Accrued
liabilities
|
5,637,673
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3,976,192
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Current
portion of long-term debt, net of discount of $222,973 and
$222,973, respectively
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3,245,732
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3,245,732
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Total
current liabilities
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12,146,886
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9,993,025
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Stock payable - related party
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3,289,879
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3,289,879
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Long-term debt, net of current portion and discount of $130,068 and
$185,811, respectively
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30,379,358
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30,345,803
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Total
Liabilities
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45,816,123
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43,628,707
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Stockholders’ equity:
|
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Common stock, $0.0001 par value: 30,000,000 shares authorized;
10,333,516 outstanding at December 31 and September 30,
2016
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1,034
|
1,034
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Additional paid-in capital
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299,001,399
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298,876,399
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Accumulated deficit
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(291,955,262
)
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(289,341,503
)
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Accumulated other comprehensive income
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(1,338,886
)
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(845,314
)
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Total
equity
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5,708,285
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8,690,616
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Total
liabilities and stockholders’ equity
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$
51,524,408
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$
52,319,323
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Three Months
Ended
December 31, |
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2016
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2015
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Revenues:
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Monitoring
services
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$
7,265,013
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$
5,957,426
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Other
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406,477
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360,178
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Total
revenues
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7,671,490
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6,317,604
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Cost of revenues:
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Monitoring,
products and other related services
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2,933,622
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1,880,212
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Depreciation
& amortization included in cost of revenues
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445,493
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488,967
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Impairment
of monitoring equipment and parts
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74,787
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60,000
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Total
cost of revenues
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3,453,902
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2,429,179
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Gross profit
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4,217,588
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3,888,425
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Operating expenses:
|
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General
& administrative
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3,768,099
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3,411,643
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Restructuring
costs
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566,330
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-
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Selling
& marketing
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627,749
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620,029
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Research
& development
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530,806
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547,159
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Depreciation
& amortization
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575,111
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700,035
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Total
operating expenses
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6,068,095
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5,278,866
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Loss from operations
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(1,850,507
)
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(1,390,441
)
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Other income (expense):
|
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Loss
on disposal of equipment
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-
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(33,805
)
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Interest
expense, net
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(647,103
)
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(694,508
)
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Currency
exchange rate loss
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(116,442
)
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(18,149
)
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Other
income, net
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293
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9,665
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Net loss attributable to common shareholders
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(2,613,759
)
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(2,127,238
)
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Foreign
currency translation adjustments
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(493,572
)
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215,095
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Comprehensive loss
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$
(3,107,331
)
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$
(1,912,143
)
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Net
loss per common share, basic and diluted
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$
(0.25
)
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$
(0.21
)
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Weighted
average common shares outstanding, basic and diluted
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10,333,516
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10,261,288
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Three Months Ended
December 31, |
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2016
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2015
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Cash flows from operating activities:
|
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Net
loss
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$
(2,613,759
)
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$
(2,127,238
)
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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Depreciation
and amortization
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1,020,604
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1,189,003
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Impairment
of monitoring equipment and parts
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74,787
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60,000
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Bad
debt expense
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359,551
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199,854
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Amortization
of debt discount
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55,743
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55,743
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Stock
based compensation
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225,374
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159,469
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Vesting
and re-pricing of stock options
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-
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196,114
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Loss
on disposal of property and equipment
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-
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33,805
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Change
in assets and liabilities:
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Accounts
receivable, net
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660,834
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(836,330
)
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Notes
receivable
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-
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(9,099
)
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Inventories
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57,700
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131,348
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Prepaid
expenses and other assets
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149,428
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(76,313
)
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Accounts
payable
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684,987
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146,921
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Accrued
expenses
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1,461,547
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418,593
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Net
cash provided by (used in) operating activities
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2,136,796
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(458,130
)
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Cash flow from investing activities:
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Purchase
of property and equipment
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(12,762
)
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(46,970
)
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Capitalized
software
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(570,093
)
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(442,578
)
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Purchase
of monitoring equipment and parts
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(818,600
)
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(898,500
)
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Net
cash used in investing activities
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(1,401,455
)
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(1,388,048
)
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Cash flow from financing activities:
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Principal
payments on notes payable
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(17,266
)
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(587,608
)
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Net
cash used in financing activities
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(17,266
)
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(587,608
)
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Effect of exchange rate changes on cash
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(1,606
)
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3,766
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|
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Net increase (decrease) in cash
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716,469
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(2,430,020
)
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Cash, beginning of period
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1,769,921
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4,903,045
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Cash, end of period
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$
2,486,390
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$
2,473,025
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December 31,
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December 31,
|
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2016
|
2015
|
Exercise
of outstanding common stock options and warrants
|
526,901
|
411,390
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Total
common stock equivalents
|
526,901
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411,390
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December 31,
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September 30,
|
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2016
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2016
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Finished
goods inventory
|
$
562,301
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$
620,001
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Reserve
for damaged or obsolete inventory
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(98,150
)
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(98,150
)
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Total
inventory, net of reserves
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$
464,151
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$
521,851
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December 31,
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September 30,
|
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2016
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2016
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Equipment,
software and tooling
|
$
1,003,659
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$
1,028,173
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Automobiles
|
79,814
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87,313
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Leasehold
improvements
|
1,245,329
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1,279,500
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Furniture
and fixtures
|
249,921
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252,864
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Total
property and equipment before accumulated depreciation
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2,578,723
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2,647,850
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Accumulated
depreciation
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(1,503,512
)
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(1,421,389
)
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Property
and equipment, net of accumulated depreciation
|
$
1,075,211
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$
1,226,461
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December 31,
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September 30,
|
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2016
|
2016
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Monitoring
equipment
|
$
8,119,187
|
$
7,796,191
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Less:
accumulated amortization
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(3,535,297
)
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(3,438,074
)
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Monitoring
equipment, net of accumulated depreciation
|
$
4,583,890
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$
4,358,117
|
|
December 31,
2016
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September 30,
2016
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Other
intangible assets:
|
|
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Patent
& royalty agreements
|
21,170,565
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21,170,565
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Technology
|
10,009,880
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9,651,074
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Customer
relationships
|
2,535,721
|
2,555,086
|
Trade
name
|
314,275
|
319,383
|
Website
|
78,201
|
78,201
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Total
intangible assets
|
34,108,642
|
33,774,309
|
Accumulated
amortization
|
(8,821,745
)
|
(8,233,659
)
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Intangible
assets, net of accumulated amortization
|
$
25,286,897
|
$
25,540,650
|
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December 31,
|
September 30,
|
|
2016
|
2016
|
Balance
- beginning of period
|
$
7,955,876
|
$
7,782,903
|
Effect
of foreign currency translation on goodwill
|
(114,656
)
|
172,973
|
Balance
- end of period
|
$
7,841,220
|
$
7,955,876
|
|
December 31,
|
September 30,
|
|
2016
|
2016
|
Accrued
royalties
|
$
11,070
|
$
16,977
|
Accrued
payroll, taxes and employee benefits
|
1,772,606
|
1,424,812
|
Accrued
consulting
|
96,708
|
123,114
|
Accrued
taxes - foreign and domestic
|
115,824
|
311,614
|
Accrued
board of directors fees
|
119,468
|
96,000
|
Accrued
other expenses
|
156,880
|
143,101
|
Accrued
cellular costs
|
77,280
|
84
|
Accrued
outside services
|
216,413
|
13,768
|
Accrued
restructuring costs
|
566,330
|
-
|
Accrued
warranty and manufacturing costs
|
156,025
|
103,441
|
Accrued
interest
|
2,349,069
|
1,743,281
|
Total
accrued liabilities
|
$
5,637,673
|
$
3,976,192
|
|
Employee
-related
|
Other
costs
|
Total
|
Liability at
September 30, 2016
|
$
-
|
$
-
|
$
-
|
Accrued
|
448,330
|
118,000
|
566,330
|
Payments
|
-
|
-
|
-
|
Liability at
December 31, 2016
|
$
448,330
|
$
118,000
|
$
566,330
|
|
|
December 31,
2016
|
September 30,
2016
|
Unsecured
facility agreement with an entity whereby, as of June 30, 2015, the
Company may borrow up to $30.4 million bearing interest at a rate
of 8% per annum, payable in arrears semi-annually, with all
principal and accrued and unpaid interest due on July 31, 2018. A
$1.2 million origination fee was paid and recorded as a debt
discount and will be amortized as interest expense over the term of
the loan. As of December 31, 2016, the remaining debt discount was
$353,041. The Company did not pay interest on this loan during the
three months ended December 31, 2016.
|
|
$
30,046,959
|
$
29,991,216
|
|
|
|
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Loan
Agreement whereby the Company can borrow up to $5.0 million at 8%
interest per annum on borrowed funds maturing on September 30,
2017.
|
|
3,399,644
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3,399,644
|
|
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Non-interest
bearing notes payable to a Canadian governmental agency assumed in
conjunction with the G2 acquisition.
|
|
161,227
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182,002
|
|
|
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|
Capital
lease with effective interest rate of 12%. Lease matures
August 15, 2019.
|
|
17,260
|
18,673
|
|
|
|
|
Total
debt obligations
|
|
33,625,090
|
33,591,535
|
Less
current portion
|
|
(3,245,732
)
|
(3,245,732
)
|
Long-term
debt, net of current portion
|
|
$
30,379,358
|
$
30,345,803
|
Fiscal Year
|
Total
|
2017
|
$
3,468,705
|
2018
|
30,448,018
|
2019
|
42,250
|
2020
|
19,158
|
2021
& thereafter
|
-
|
Debt
discount
|
(353,041
)
|
Total
|
$
33,625,090
|
|
December 31,
|
September 30,
|
|
2016
|
2016
|
Beginning
balance
|
$
3,289,879
|
$
3,501,410
|
P
ayment
of shares for achieving performance milestones
|
-
|
(211,531
)
|
Ending
balance
|
$
3,289,879
|
$
3,289,879
|
|
Three Months Ended
December 31
|
|
|
2016
|
2015
|
Expected
stock price volatility
|
119
%
|
51
%
|
Risk-free
interest rate
|
0.60
%
|
0.64
%
|
Expected
life of options/warrants
|
2
years
|
2
years
|
|
|
Shares Under Option
|
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value
|
|
|||
Outstanding as of September 30, 2016
|
|
|
504,991
|
|
|
$
|
10.78
|
|
1.15 years
|
|
$
|
182,095
|
|
Granted
|
|
|
154,410
|
|
|
$
|
4.97
|
|
|
|
|
|
|
Expired/Cancelled
|
|
|
(32,500)
|
|
|
$
|
(19.58
|
)
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
Outstanding as of December 31, 2016
|
|
|
626,901
|
|
|
$
|
8.90
|
|
1.34 years
|
|
$
|
75,000
|
|
Exercisable as of December 31, 2016
|
|
|
526,901
|
|
|
$
|
9.87
|
|
0.89 years
|
|
$
|
-
|
|
(a)
|
Exhibits Required by Item 601 of Regulation S-K
|
Exhibit Number
|
|
Title of Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31(i)
|
|
Certification of Chief Executive Officer under Section 302 of
Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
|
|
|
31(ii)
|
|
Certification of Chief Financial Officer under Section 302 of
Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
|
|
|
32
|
|
Certifications under Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350) (filed herewith).
|
|
|
|
|
|
10.1
|
|
Employment Agreement by and between Track Group, Inc. and Derek
Cassell dated, December 1, 2016.
|
|
|
|
|
|
10.2
+
|
|
Services Agreement, dated December 7, 2016.
|
|
|
|
|
|
10.3
|
|
Amendment to Employment Agreement by and between Track Group Inc.
and Derek Cassell, dated February 13, 2017.
|
|
|
|
|
101.INS
|
|
XBRL INSTANCE DOCUMENT
|
|
|
|
|
|
101.SCH
|
|
XBRL TAXONOMY EXTENSION SCHEMA
|
|
|
|
|
|
101.CAL
|
|
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
|
|
|
|
|
|
101.DEF
|
|
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
|
|
|
|
|
|
101.LAB
|
|
XBRL TAXONOMY EXTENSION LABEL LINKBASE
|
|
|
|
|
|
101.PRE
|
|
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
|
|
Track Group, Inc.
|
||
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|
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Date: February 14, 2017
|
By:
|
/s/ Guy Dubois
|
|
|
|
Guy Dubois
Principal Executive Officer
|
|
|
|
|
|
Date: February 14, 2017
|
By:
|
/s/ Peter K. Poli
|
|
|
|
Peter K. Poli, Chief Financial Officer
(Principal Accounting Officer)
|
If to the
Executive:
|
Derek
Cassell
|
|
{at
Executive’s most recent address on file with the
Company}
|
If to the
Company:
|
Attn: Chief
Executive Officer
Track
Group, Inc.
1215
W. Lakeview Court
Romeoville,
IL 60446
|
Track
Group, Inc.
|
Executive
|
|
|
By:
/s/
|
/s/
|
GuyDubois
|
Derek
Cassell
|
Chief Executive
Officer
Chairman of
the Board
|
|
Date:
|
Date:
|
TRACK
GROUP, INC.
|
EXECUTIVE
|
|
|
By:___________________________
|
___________________________
|
Guy
Dubois
|
Derek
Cassell
|
Chief Executive
Officer
|
|
Chairman of the
Board
|
|
|
|
Date: February 14, 2017
|
/s/
Guy Dubois
Guy Dubois
Principal Executive Officer
|
Date: February 14, 2017
|
/s/
Peter K. Poli
Peter K. Poli
Chief Financial & Principal Accounting Officer
|
|
By:
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/s/ Guy Dubois
|
|
|
Guy Dubois
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Peter K. Poli
|
|
|
Peter K. Poli,
Chief Financial Officer
(Principal Accounting Officer)
|