Annual report pursuant to Section 13 and 15(d)

NOTES PAYABLE

NOTES PAYABLE

12 Months Ended

Sep. 30, 2015

6.	NOTES PAYABLE

Notes payable consist of the following as of September 30, 2015 and 2014:

	September 30,
	2015		2014
Vendor Notes (Unsecured)
Short term vendor note issued on December 31, 2013 at a stated interest rate of 5% per annum. Note is payable in 4 quarterly installments of principal and interest beginning on August 31, 2014. The note is past due.	$	130,970	$	130,970
Short term vendor notes (“Vendor Notes”) issued during August 2014 at 0% stated interest. Terms range from 4 months to 12 months. These notes are past due.		103,000		106,000
Non-interest bearing note issued during July 2015 to settle litigation. The note is payable in monthly installments from September 2015 to November 2016.		150,000		-

Senior Secured Notes
Senior secured notes issued between October 2011 and January 2012, secured by the assets of the Company, at a stated interest rate of 15%. The notes are past due.		3,550,012		3,550,012

Equipment Notes
Obligations under capital leases, bearing interest between 4.1% and 8.2% per annum, secured by equipment having a value that approximates the debt value. Terms range from 48 to 60 months.		339,583		-
Various equipment notes, bearing interest rates between 2% to 41%, per annum, secured by equipment have a value that approximates the debt value. Terms range from 36 months to 72 months.		884,108		-

Other Notes Payable
Bridge note, bearing interest at 10% per annum, issued on November 15, 2007, one-half payable 60 days following the consummation of the Merger, and the remainder due in 12 monthly installments beginning the following month; convertible into shares of the Company’s common stock at a conversion price equal to the greater of $0.50 per share or a 10% discount to the 10 day Volume Weighted Average Price of the Company’s common stock. The note is past due.		100,000		100,000
Bridge note, bearing interest at 12% per annum, issued on June 29, 2012, due 24 months from date of issuance. This note is past due.		609,000		609,000
Total Notes Payable		5,866,673		4,495,982
Less: current portion		(1,295,271)		(945,970)
Notes Payable, non current portion	$	4,571,402	$	3,550,012

As of September 30, 2015, the Company had suspended payments on most of its notes payable, pending completion of its anticipated refinancing. The Company has continued to service only those notes payable that are secured by specific assets under financing agreements entered into by the Company at the time those specific assets were purchased. The holders of the Senior Secured Notes (the “Senior Secured Noteholders”) agreed to forebear collection until the refinancing was completed. During the first quarter of fiscal year 2016, the Senior Secured Notes were refinanced on a long term basis (see Note 13 – Subsequent Events). Accordingly, the Senior Secured Notes are classified as non-current liabilities on the accompanying consolidated balance sheet, pursuant to the accounting guidance in ASC 470-10.

As of September 30, 2015, future minimum payments related to the notes payable, are as follows:

For the Fiscal Years Ending September 30,	Notes Payable		Obligations under Capital Leases		Total
Past due or demand notes [1]	$	4,492,982	$	-	$	4,492,982
2016		296,164		76,137		372,301
2017		168,705		80,497		249,201
2018		149,149		89,005		238,153
2019		147,181		83,505		230,686
2020		149,802		10,439		160,241
Thereafter		123,109		-		123,109
	$	5,527,091	$	339,582	$	5,866,673

[1] The $3,550,012 Senior Secured Notes were subsequently extinguished.

See Note 13 - Subsequent Events

During the years ended September 30, 2015 and 2014, the Company recorded interest expense of $659,611 and $754,212, respectively, related to the non-related party notes payable.