(Mark One) | |
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended September 30, | |
or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ___________ |
Utah | 87-0543981 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x |
SecureAlert, Inc. | |||||||||
FORM 10-K | |||||||||
For the Fiscal Year Ended September 30, 2013 | |||||||||
INDEX | |||||||||
Page | |||||||||
PART I | |||||||||
Item 1 | Business | 3 | |||||||
Item 1A | Risk Factors | 9 | |||||||
Item 2 | Properties | 13 | |||||||
Item 3 | Legal Proceedings | 13 | |||||||
PART II | |||||||||
Item 5 | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 14 | |||||||
Item 7 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 16 | |||||||
Item 7A | Quantitative and Qualitative Disclosures About Market Risk | 22 | |||||||
Item 8 | Financial Statements and Supplementary Data | 22 | |||||||
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 22 | |||||||
Item 9A | Controls and Procedures | 23 | |||||||
Item 9B | Other Information | 23 | |||||||
PART III | |||||||||
Item 10 | Directors, Executive Officers and Corporate Governance | 23 | |||||||
Item 11 | Executive Compensation | 27 | |||||||
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 29 | |||||||
Item 13 | Certain Relationships and Related Transactions, and Director Independence | 30 | |||||||
Item 14 | Principal Accounting Fees and Services | 33 | |||||||
PART IV | |||||||||
Item 15 | Exhibits and Financial Statement Schedules | 35 | |||||||
Signatures | 40 |
· | BI Incorporated, |
· |
iSECUREtrac Corp., Omaha, |
· | Omnilink Systems, Inc., Alpharetta, |
· |
· | Satellite Tracking of People, LLC, |
· | Sentinel Offender Services, LLC, Augusta, |
· | Buddi, Ltd., Aylesbury, Binkghamshire, United Kingdom – This company was started in 2005 to provide consumer tracking for consumers such as the elderly or Alzheimer’s sufferers. Their major launch into offender monitoring was via an award of a United Kingdom Ministry of Justice contract. They also announced plans to enter the United States offender monitoring market by headquartering United States operations in Tampa, FL and hiring Steve Chapin, former Protech President and CEO. |
· | Corrisoft, LLC, Lexington, Kentucky – This company produces offerings for the monitoring of low and medium risk offenders, and distributes other companies’ products for higher risk offenders. They have announced that they will be developing additional products for the monitoring of all offender types. |
2013 | % | 2012 | % | |||||||||||||
Secretaría de Gobernación de México | $ | 5,252,959 | 34 | % | $ | 2,450,984 | 16 | % | ||||||||
The Ministry of National Security in the Bahamas | $ | 1,622,326 | 10 | % | $ | 1,876,285 | 12 | % |
2013 | % | 2012 | % | |||||||||||||
La Oficina de Servicios con Antelación al Juicio de Puerto Rico | $ | 887,233 | 24 | % | $ | 681,781 | 24 | % | ||||||||
The Ministry of National Security in the Bahamas | $ | 732,163 | 20 | % | $ | 475,800 | 17 | % | ||||||||
Secretaría de Gobernación de México | $ | 892,897 | 24 | % | $ | - | 0 | % |
· | We redesigned the shell of the ReliAlert device addressing several issues related to devices that were returned to us by our customers. |
· | |
· | We instituted a formal change control process to ensure that we have a structured, strategic, and documented approach to addressing and implementing changes. This also includes improvements in our internal communications processes to ensure that different groups within the Company have visibility into current |
· | We cross-trained technical support staff and returns analysis staff to enable them to have improved visibility of the customer experience. This has helped our staff to quickly and correctly diagnose issues in the field. |
Trademark | Application Number | Registration Number | Status/Next Action | |||
Mobile911 Siren with 2-Way Voice Communication & Design® | 76/013,886 | 2,595,328 | Registered | |||
PAL Services® | 78/ | 3,100,192 | Registered | |||
TrackerPAL® | 78/ | 3,345,878 | Registered | |||
Mobile911® | 78/ | 3,212,937 | Registered | |||
TrackerPAL® | 749,417 | Registered | ||||
TrackerPAL® | 960954 | Registered | ||||
Foresight® | 3481509 | Registered | ||||
Bishop Rock Software® | 3481474 | Registered | ||||
85/238,049 | In process | Pending | ||||
HomeAware™ | 85/238,064 | In process | Pending | |||
SecureCuff™ | 85/238,058 | In process | Pending | |||
TrueDetect™ | 85/237,202 | In process | Pending | |||
SecureAlert™ | 86/031,550 | In process | Pending |
Domestic Patents | Application# | Date Filed | Patent# | Issued | Status | ||||||||||
Emergency Phone for Automatically Summoning Multiple Emergency Response Services | 09/173645 | 16-Oct-98 | 6226510 | 1-May-01 | Issued | ||||||||||
Combination Emergency Phone and Personal Audio Device | 09/185191 | 3-Nov-98 | 6285867 | 4-Sep-01 | Issued | ||||||||||
Panic Button Phone | 09/044497 | 19-Mar-98 | 6044257 | 28-Mar-00 | Issued | ||||||||||
Interference Structure for Emergency Response System Wristwatch | 09/651523 | 29-Aug-00 | 6366538 | 2-Apr-02 | Issued | ||||||||||
Emergency Phone With Alternate Number Calling Capability | 09/684831 | 10-Oct-00 | 7092695 | 15-Aug-06 | Issued | ||||||||||
Remote Tracking and Communication Device | 11/202427 | 10-Aug-05 | 7330122 | 12-Feb-08 | Issued | ||||||||||
Remote Tracking System and Device With Variable Sampling and Sending Capabilities Based on Environmental Factors | 11/486991 | 14-Jul-06 | 7545318 | 9-Jun-09 | Issued | ||||||||||
Alarm and Alarm Management System for Remote Tracking Devices | 11/486992 | 14-Jul-06 | 7737841 | 15-Jun-10 | Issued | ||||||||||
Remote Tracking and Communication Device | 12/028088 | 8-Feb-08 | 7804412 | 28-Sep-10 | Issued | ||||||||||
A Remote Tracking System with a Dedicated Monitoring Center | 11/486976 | 14-Jul-06 | 7936262 | 3-May-11 | Issued | ||||||||||
Alarm and Alarm Management System for Remote Tracking Devices | 12/792572 | 2-Jun-10 | 8013736 | 6-Sep-11 | Issued | ||||||||||
Remote Tracking and Communication Device | 12/875988 | 3-Sep-10 | 8031077 | 4-Oct-11 | Issued | ||||||||||
Tracking Device Incorporating Enhanced Security Mounting Strap | 12/818,453 | 18-Jun-10 | 8514070 | 20-Aug-13 | Issued | ||||||||||
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device | 12/399151 | 6-Mar-09 | 8232876 | 31-Jul-12 | Issued | ||||||||||
Emergency Phone with Single-Button Activation | | ||||||||||||||
11/174191 | 30-Jun-05 | 7251471 | 7/31/2007 | Issued | |||||||||||
| |||||||||||||||
Tracking | | 13/970,007 | 19-Aug-13 | - | - | Pending | |||||||||
| |||||||||||||||
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device and a Monitoring Center | 11/486989 | 14-Jul-06 | - | - | |||||||||||
Pending |
Tracking Device Incorporating Enhanced Security Mounting Strap | 12/818,453 | 18-Jun-10 | - | - | Pending |
Remote Tracking and Communication Device | 12/875988 | 3-Sep-10 | - | - | Pending |
Secure Strap Mounting System for an Offender Tracking Device (Provisional Patent) | 61/321,788 | 7-Apr-10 | - | - | Pending |
International Patents | Application# | Date Filed | Patent# | Issued | Status |
Emergency Phone with Single-Button Activation - China | 01807350.6 | 28-Mar-01 | 01807350.6 | 5-Oct-05 | Issued |
Remote Tracking and Communication Device - Mexico | MX/a/2008/ 001932 | 4-Aug-06 | 278405 | 6-Oct-10 | Issued |
Remote Tracking and Communication Device - EPO | 6836098.1 | 4-Aug-06 | - | - | Pending |
Remote Tracking and Communication Device - Brazil | PI0614742.9 | 4-Aug-06 | - | - | Pending |
Remote Tracking and Communication Device - Canada | 2617923 | 4-Aug-06 | - | - | Pending |
A Remote Tracking System with a Dedicated Monitoring Center - EPO | 07812596.0 | 3-Jul-07 | - | - | Pending |
A Remote Tracking System with a Dedicated Monitoring Center - Brazil | PI0714367.2 | 3-Jul-07 | - | - | Pending |
Secure Strap Mounting System For an Offender Tracking Device - EPO | 10 009 091.9 | 1-Sep-10 | - | - | Pending |
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - Brazil | Filed. Number not yet available | 1-Sep-10 | - | - | Pending |
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - Mexico | MX/a/2010/ 009680 | 2-Sep-10 | - | - | Pending |
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - Canada | Filed. Number not yet available | 3-Sep-10 | - | - | Pending |
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device - EPO | 9716860.3 | 6-Oct-10 | - | - | Pending |
International Patents | Application# | Date Filed | Patent# | Issued | Status | |||||
A System and Method for Monitoring Individuals | ||||||||||
Using a Beacon and Intelligent Remote Tracking | ||||||||||
Device - EPO | 9716860.3 | 6-Oct-10 | 2260482 | 1/9/2013 | Issued | |||||
Remote Tracking and Communication Device - | MX/a/2008/ | |||||||||
Mexico | 1932 | 4-Aug-06 | 278405 | 24-Aug-10 | Issued | |||||
A System and Method for Monitoring Individuals | ||||||||||
Using a Beacon and Intelligent Remote Tracking | MX/a/2010/ | |||||||||
Device - Mexico | 9680 | 2-Sep-10 | 306920 | 1/22/2013 | Issued | |||||
A System and Method for Monitoring Individuals | ||||||||||
Using a Beacon and Intelligent Remote Tracking | ||||||||||
Device - Canada | 2717866 | 3-Sep-10 | - | - | Pending | |||||
Remote Tracking and Communication Device - EPO | 6836098.1 | 4-Aug-06 | - | - | Pending | |||||
Remote Tracking and Communication Device - | ||||||||||
Brazil | PI0614742.9 | 4-Aug-06 | - | - | Pending | |||||
Remote Tracking and Communication Device - | ||||||||||
Canada | 2617923 | 4-Aug-06 | - | - | Pending | |||||
A Remote Tracking System with a Dedicated | ||||||||||
Monitoring Center - EPO | 7812596 | 3-Jul-07 | - | - | Pending | |||||
A Remote Tracking System with a Dedicated | ||||||||||
Monitoring Center - Brazil | PI0714367.2 | 3-Jul-07 | - | - | Pending | |||||
Secure Strap Mounting System For an Offender | ||||||||||
Tracking Device - EPO | 10 009 091.9 | 1-Sep-10 | - | - | Pending | |||||
Secure Strap Mounting System For an Offender | ||||||||||
Tracking Device - Brazil | PI11001593 | 28-Feb-11 | - | - | Pending | |||||
Secure Strap Mounting System For an Offender | ||||||||||
Tracking Device - Mexico | MX/a/2011/002283 | 28-Feb-11 | - | - | Pending | |||||
Secure Strap Mounting System For an Offender | ||||||||||
Tracking Device - Canada | 2732654 | 23-Feb-11 | - | - | Pending | |||||
A System and Method for Monitoring Individuals | ||||||||||
Using a Beacon and Intelligent Remote Tracking | ||||||||||
Device - Brazil | PI0909172-6 | 1-Sep-10 | - | - | Pending | |||||
Secure Strap Mounting System For an Offender | ||||||||||
Tracking Device - Mexico - DIV | MX/a/2013/12524 | 25-Oct-13 | - | - | Pending | |||||
• | making it more difficult for us to make payments on our debt; |
• | increasing our vulnerability to general economic and industry conditions; |
• | requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, and future business opportunities; |
• | restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; |
• | limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and |
• | limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less highly leveraged. |
· | Develop and introduce functional and attractive product and service offerings; |
· | Increase awareness of our brand and develop consumer loyalty; |
· | Respond to competitive and technological developments; |
· | Increase gross profit margins; |
· | Build an operational structure to support our business; and |
· | Attract, retain and motivate qualified personnel. |
Fiscal Year Ended September 30, 2009 | High | Low | |||
First Quarter ended December 31, 2008 | $ | 1.20 | $ 0.18 | ||
Second Quarter ended March 31, 2009 | $ | 0.27 | $ 0.10 | ||
Third Quarter ended June 30, 2009 | $ | 0.26 | $ 0.14 | ||
Fourth Quarter ended September 30, 2009 | $ | 0.20 | $ 0.11 | ||
Fiscal Year Ended September 30, 2010 | High | Low | |||
First Quarter ended December 31, 2009 | $ | 0.15 | $ 0.09 | ||
Second Quarter ended March 31, 2010 | $ | 0.16 | $ 0.08 | ||
Third Quarter ended June 30, 2010 | $ | 0.15 | $ 0.10 | ||
Fourth Quarter ended September 30, 2010 | $ | 0.13 | $ 0.09 |
Fiscal Year Ended September 30, 2012 | High | Low | ||||||
First Quarter ended December 31, 2011 | $ | 20.00 | $ | 13.20 | ||||
Second Quarter ended March 31, 2012 | $ | 15.40 | $ | 8.00 | ||||
Third Quarter ended June 30, 2012 | $ | 10.80 | $ | 5.60 | ||||
Fourth Quarter ended September 30, 2012 | $ | 7.80 | $ | 4.00 | ||||
Fiscal Year Ended September 30, 2013 | High | Low | ||||||
First Quarter ended December 31, 2012 | $ | 14.60 | $ | 3.22 | ||||
Second Quarter ended March 31, 2013 | $ | 14.60 | $ | 11.00 | ||||
Third Quarter ended June 30, 2013 | $ | 14.70 | $ | 7.00 | ||||
Fourth Quarter ended September 30, 2013 | $ | 20.90 | $ | 14.40 |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance |
Equity compensation plans approved by security holders* | 10,000,000 | $0.18 | 0 |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 21,433 | $ | 16.66 | 60,000 | ||||||||
Equity compensation plans not approved by security holders | 568,533 | $ | 15.28 | - | ||||||||
Total | 589,966 | $ | 16.12 | 60,000 |
· | Overview |
· |
Results of Operations |
· | Liquidity and Capital Resources |
· | Critical Accounting Policies |
2013 | 2012 | |||||||
Revenues | $ | 477,298 | $ | 6,676,513 | ||||
Cost of revenues | (163,487 | ) | (4,112,410 | ) | ||||
Gross profit | 313,811 | 2,564,103 | ||||||
Selling, general and administrative expense | (319,976 | ) | (2,782,628 | ) | ||||
Loss from operations | (6,165 | ) | (218,525 | ) | ||||
Other expense | (295 | ) | (89,294 | ) | ||||
Net loss from discontinued operations | $ | (6,460 | ) | $ | (307,819 | ) |
· | Current inventory quantities on hand; |
· | Product acceptance in the marketplace; |
· | Customer demand; |
· | Historical sales; |
· | Forecast sales; |
· | Product obsolescence; and |
· | Technological innovations. |
Name | Age | Position | ||
53 | Director | |||
55 | Director | |||
Rene Klinkhammer | 33 | Director | ||
48 | Director | |||
Dan L. Mabey | 62 | Director | ||
George F. Schmitt | 70 | Director |
Name | Age | Position | ||
Principal Executive Officer | ||||
Chad D. Olsen | 42 | Chief Financial Officer | ||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||||||
Name and | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||||||||||
Principal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||
David G. Derrick (1) Chief Executive Officer | 2010 2009 | $ $ | 240,000 240,000 | $ $ | - 300,000 | $ $ | - - | $ $ | 83,991 185,571 | $ $ | - - | $ $ | - - | $ $ | 74,197 5,929 | $ $ | 398,188 731,500 | |||||||||||||||||||
John L. Hastings, III (2) President Chief Operating Officer | 2010 2009 | $ $ | 325,000 302,885 | $ $ | - 94,330 | $ $ | - - | $ $ | 131,326 46,393 | $ $ | - - | $ $ | - - | $ $ | 174,853 18,868 | $ $ | 631,179 462,476 | |||||||||||||||||||
Michael G. Acton (3) Chief Financial Officer | 2010 2009 | $ $ | 3,076 81,538 | $ $ | - - | $ $ | - - | $ $ | - - | $ $ | - - | $ $ | - - | $ $ | - 9,806 | $ $ | 3,076 91,344 | |||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Chad Olsen (4) Chief Financial Officer | 2010 | $ | 165,000 | $ | 17,580 | $ | - | $ | 14,264 | $ | - | $ | - | $ | 25,845 | $ | 222,689 | |||||||||||||||||||
Bernadette Suckel (5) Managing Director of Sales and Marketing | 2010 2009 | $ $ | 121,541 126,161 | $ $ | - - | $ $ | - 11,500 | $ $ | 81,313 104,520 | $ $ | - - | $ $ | - - | $ $ | 5,259 - | $ $ | 208,113 242,181 |
(b) | our most highly compensated executive officer who was serving as an executive officer at the end of the fiscal year ended September 30, |
(c) | an additional individual for whom disclosure would have been provided under |
Name and | |||||||||||||||||||||||||
Principal | Stock | Option | All Other | ||||||||||||||||||||||
Position | Year | Salary | Bonus | Awards | Awards | Compensation | Total | ||||||||||||||||||
( a ) | ( b ) | ( c ) | ( d ) | ( e ) | ( f ) | ( g ) | ( h ) | ||||||||||||||||||
Chad D. Olsen (1) | 2013 | $ | 192,000 | $ | - | $ | - | $ | - | $ | 8,740 | $ | 200,740 | ||||||||||||
Chief Financial Officer | 2012 | $ | 192,000 | $ | 35,000 | $ | 124,000 | $ | 432,352 | $ | 42,195 | $ | 825,547 | ||||||||||||
Bernadette Suckel (2) | 2013 | $ | 168,000 | $ | - | $ | - | $ | - | $ | 8,061 | $ | 176,061 | ||||||||||||
Managing Director Global Customer Service | 2012 | $ | 168,000 | $ | 35,000 | $ | 77,500 | $ | 270,219 | $ | 7,950 | $ | 558,669 |
Mr. |
Mrs. Suckel has served as Managing Director of |
Outstanding Equity Awards at Fiscal Year-End |
Option awards | Stock Awards | ||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | ||
Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive 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 ($) | ||
David G. Derrick | 2,000,000 | - | - | $0.13 | Various (1) | - | $ - | - | $ - | ||
John L. Hastings, III | 1,500,000 | - | - | $0.13 | Various (2) | - | $ - | - | $ - | ||
Chad D. Olsen | 2,461,000 | - | 538,500 | Various (3) | Various (3) | ||||||
Bernadette Suckel | 1,000,000 | - | 525,000 | Various (4) | Various (4) | - | $ - | - | $ - |
Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: Number of underlying unexercised unearned options (#) | Option exercise price ($) | Option expiration date | Number of shares or units of stock tha t have not vested (#) | Market value of shares or units of stock that have not vested ($) | Equity incentive plan awards: Number of Unearned shares, units or other rights that have not vested (#) | |||||||||||||||||||||
Chad D. Olsen | 1,000 | - | - | $ | 15.00 | 1/15/14 | - | - | - | ||||||||||||||||||||
125 | - | - | $ | 15.00 | 3/14/14 | - | - | - | |||||||||||||||||||||
3,590 | - | - | $ | 15.00 | 9/29/15 | - | - | - | |||||||||||||||||||||
30,000 | - | - | $ | 16.66 | 9/29/14 | - | - | - | |||||||||||||||||||||
Bernadette Suckel | 1,000 | - | - | $ | 60.00 | 1/15/14 | - | - | - | ||||||||||||||||||||
18,750 | - | - | $ | 16.66 | 9/29/14 | - | - | - | |||||||||||||||||||||
3,500 | - | - | $ | 30.00 | 9/29/15 | - | - | - |
· | Mr. |
· | Mr. |
· | Mr. |
· | Mr. |
· | Mr. Mabey, a director, filed one late Form 4 reporting one transaction. |
· | Mr. Kunz, a director, filed one late Form 4 reporting one transaction. |
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Fees earned | Stock awards | Option awards | Total | |||||||||||||
Name | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||
David S. Boone | $ | - | $ | - | $ | 76,385 | $ | 76,385 | ||||||||
Guy Dubois | $ | - | $ | - | $ | 335,322 | $ | 335,322 | ||||||||
Rene Klinkhammer | $ | - | $ | 7,500 | $ | 46,859 | $ | 54,359 | ||||||||
Winfried Kunz | $ | - | $ | - | $ | 55,706 | $ | 55,706 | ||||||||
Dan L. Mabey | $ | - | $ | 15,000 | $ | 35,047 | $ | 50,047 | ||||||||
George F. Schmitt | $ | - | $ | - | $ | 55,706 | $ | 55,706 |
Effective January 1, 2012, we accrued $2,500 per month for each director to be issued in shares of |
Name | Grant Date | Expiration Date | Exercise Price | Number of Options | Compensation Expense |
David Hanlon | 9/8/06 | 9/7/11 | $1.41 | 50,000 | $ 3,107 |
8/29/07 | 8/28/12 | $2.15 | 100,000 | $ 6,761 | |
7/14/08 | 7/13/13 | $1.22 | 459,000 | $ 23,530 | |
Robert Childers | 10/5/06 | 10/4/11 | $1.73 | 50,867 | $ 3,336 |
8/29/07 | 8/28/12 | $2.15 | 150,000 | $ 10,141 | |
7/14/08 | 7/13/13 | $1.22 | 610,000 | $ 31,271 | |
Larry Schafran | 9/8/06 | 9/7/11 | $1.41 | 53,900 | $ 3,350 |
8/29/07 | 8/28/12 | $2.15 | 150,000 | $ 10,141 | |
12/5/07 | 12/4/12 | $4.05 | 50,000 | $ 3,894 | |
7/14/08 | 7/13/13 | $1.22 | 610,000 | $ 31,271 |
Name | Grant Date | Expiration Date | Exercise Price | Number of Options |
David Hanlon | 9/8/06 | 9/7/11 | $1.41 | 50,000 |
8/29/07 | 8/28/12 | $2.15 | 100,000 | |
7/14/08 | 7/13/13 | $1.22 | 459,000 | |
Robert Childers | 10/5/06 | 10/4/11 | $1.73 | 50,867 |
8/29/07 | 8/28/12 | $2.15 | 150,000 | |
7/14/08 | 7/13/13 | $1.22 | 610,000 | |
Larry Schafran | 9/8/06 | 9/7/11 | $1.41 | 53,900 |
8/29/07 | 8/28/12 | $2.15 | 150,000 | |
12/5/07 | 12/4/12 | $4.05 | 50,000 | |
7/14/08 | 7/13/13 | $1.22 | 610,000 |
Grant | Expiration | Exercise | Number of | Compensation | ||||||||||||||||
Name | Date | Date | Price | Options | Expense | |||||||||||||||
David S. Boone | 3/22/13 | 3/21/15 | $ | 12.58 | 8,943 | $ | 43,809 | |||||||||||||
7/1/13 | 6/30/15 | $ | 14.70 | 4,083 | $ | 23,640 | ||||||||||||||
Guy Dubois | 3/22/13 | 3/21/15 | $ | 12.58 | 2,385 | $ | 11,682 | |||||||||||||
4/16/13 | 4/15/15 | $ | 9.00 | 64,665 | $ | 300,000 | ||||||||||||||
7/1/13 | 6/30/15 | $ | 14.70 | 4,083 | $ | 23,640 | ||||||||||||||
Rene Klinkhammer | 1/20/10 | 1/19/15 | $ | 26.00 | 1,000 | $ | 21,036 | |||||||||||||
3/22/13 | 3/21/15 | $ | 12.58 | 8,943 | $ | 43,809 | ||||||||||||||
7/1/13 | 6/30/15 | $ | 14.70 | 2,040 | $ | 11,811 | ||||||||||||||
Winfried Kunz | 3/22/13 | 3/21/15 | $ | 12.58 | 8,943 | $ | 43,809 | |||||||||||||
7/1/13 | 6/30/15 | $ | 14.70 | 2,040 | $ | 11,811 | ||||||||||||||
Dan L. Mabey | 3/22/13 | 3/21/15 | $ | 12.58 | 8,943 | $ | 43,809 | |||||||||||||
George F. Schmitt | 3/22/13 | 3/21/15 | $ | 12.58 | 8,943 | $ | 43,809 | |||||||||||||
7/1/13 | 6/30/15 | $ | 14.70 | 2,040 | $ | 11,811 |
Title or Class of Securities: | |||||||||||||
Common Stock | Series D Preferred Stock | ||||||||||||
Name and Address of Beneficial Owner (1) | Shares | % | Shares | % | |||||||||
5% Stockholders: | |||||||||||||
Winfried Kill (2) | 53,361,305 | 18.1% | - | * | |||||||||
Advance Technology Investors, LLC (3) | 34,690,665 | 11.8% | 3,403 | 8.7% | |||||||||
Borinquen Container Corp (4) | 29,400,000 | 10.0% | 4,900 | 12.6% | |||||||||
Kofler Ventures S.a.r.l (5) | 24,456,161 | 8.3% | - | * | |||||||||
Radenko Milakovic (6) | 24,726,562 | 8.4% | 4,000 | 10.3% | |||||||||
Laemi Real Estate, Inc. (7) | 21,040,304 | 7.1% | 3,330 | 8.6% | |||||||||
Stephan Goetz (8) | 18,635,901 | 6.3% | 3,000 | 7.7% | |||||||||
Commerce Financial, LLC (9) | 13,684,508 | 4.6% | 2,149 | 5.5% | |||||||||
Comediahill Business S.A. (10) | 14,026,868 | 4.8% | 2,220 | 5.7% | |||||||||
Tim Whyte (11) | 12,349,010 | 4.2% | 2,000 | 5.1% | |||||||||
Directors and Named Executive Officers: | |||||||||||||
David G. Derrick (12) | 19,698,313 | 6.7% | 2,233 | 5.7% | |||||||||
Chad D. Olsen (13) | 3,285,656 | 1.1% | 172 | * | |||||||||
John L. Hastings, III (14) | 1,500,000 | * | 0 | * | |||||||||
Robert Childers (15) | 2,374,975 | * | 50 | * | |||||||||
Larry Schafran (16) | 1,933,500 | * | 110 | * | |||||||||
David Hanlon (17) | 1,716,635 | * | 115 | * | |||||||||
Bernadette Suckel (18) | 525,000 | * | 0 | * | |||||||||
Edgar Bernardi (19) | 1,400,000 | * | 200 | * | |||||||||
Rene Klinkhammer (20) | 200,000 | * | 0 | * | |||||||||
All directors and executive officers as a group (9 persons) (21) | 32,634,079 | 11.1% | 2,880 | 7.4% |
Title or Class of Securities: | ||||||||||||||||
Name and Address of | Common Stock | Series D Preferred Stock | ||||||||||||||
Beneficial Owner (1) | Shares | Percent | Shares | Percent | ||||||||||||
5% Beneficial Owners: | ||||||||||||||||
Sapinda Asia Limited (2) | 4,534,168 | 46.2 | % | - | - | |||||||||||
Advance Technology Investors, LLC (3) | 581,288 | 5.9 | % | - | - | |||||||||||
Directors and Named Executive Officers: | ||||||||||||||||
David S. Boone (4) | 15,306 | * | - | - | ||||||||||||
Guy Dubois (5) | 73,413 | * | - | - | ||||||||||||
Rene Klinkhammer (6) | 12,363 | * | - | - | ||||||||||||
Winfried Kunz (7) | 12,123 | * | - | - | ||||||||||||
Dan L. Mabey (8) | 10,008 | * | - | - | ||||||||||||
George F. Schmitt (9) | 18,906 | * | - | - | ||||||||||||
Chad D. Olsen (10) | 21,587 | * | 207 | 44.2 | % | |||||||||||
All directors and executive officers as a group | ||||||||||||||||
(7 persons) | 163,706 | 1.6 | % | 207 | 44.2 | % |
Except as otherwise indicated, the business address for |
2) | Address is Rooms 803-4, 8F, Hang Seng Bank Building, 200 Hennessy Road, Wanchai, Hong Kong. Based on a Form 4 filed by Sapinda Asia Limited on November 5, 2013. |
Includes |
Mr. |
5) |
6) | Mr. Klinkhammer is a director. Includes 380 shares of common stock owned of record and 11,983 shares of common stock issuable upon exercise of stock purchase warrants. |
7) | Mr. Kunz is a director. Includes 12,123 shares of common stock issuable upon exercise of stock purchase warrants. |
8) | Mr. Mabey is a director. Includes 1,065 shares of common stock owned of record and 8,943 shares of common stock issuable upon exercise of stock purchase warrants. |
9) | Mr. Schmitt is a director. Includes 6,783 shares of common stock owned of record and 12,123 shares of common stock issuable upon exercise of stock purchase warrants. |
10) | Mr. Olsen is our Chief Financial Officer. Includes 4,914 shares or common stock owned of record, as well as 16,673 shares of common stock issuable upon conversion of 207 shares of Series D Preferred stock. |
2013 | 2012 | |||||||
Note payable in connection with the redemption of a royalty agreement for $10,768,555. The note required installment payments and was paid off by the proceeds of the loan. | $ | - | $ | 10,050,027 | ||||
Note payable in connection with the purchase of the remaining ownership of Court Programs, Inc., interest at 12% per annum, with monthly payments of $10,000. This note was assumed through the sale of Court Programs, Inc. | - | 46,693 | ||||||
We received $500,000 from Mr. Derrick, a shareholder and former officer. This was converted into 111,112 shares of common stock. | - | 500,000 | ||||||
Convertible debenture from a director with an interest rate of 8% per annum. The debenture matured December 17, 2012 and was secured by our domestic patents. The debenture and accrued interest was converted into 117,784 shares of common stock. | - | 500,000 | ||||||
Convertible debenture with a significant shareholder with an interest rate of 8% per annum. The debenture matured December 17, 2012 and was secured by our domestic patents. The debenture and accrued interest was converted into 472,548 shares of common stock. | - | 2,000,000 | ||||||
Convertible debenture of $16,700,000 from a shareholder with an interest rate of 8% per annum. The debenture matured on August 14, 2014. On September 30, 2013, $16,640,000 plus accrued interest of $936,627 was converted into 3,905,917 shares of Common Stock. A debt discount of $14,296,296 and $605,281, respectively, was recorded to reflect a beneficial conversion feature. As of September 30, 2013, the remaining debt discount was $0. The remaining balance of $60,000 plus accured interest of $3,143 was paid in cash on October 3, 2013. | 60,000 | 1,288,693 | ||||||
Total related-party debt obligations | 60,000 | 14,385,413 | ||||||
Less current portion | (60,000 | ) | (12,654,701 | ) | ||||
Long-term debt, net of current portion | $ | - | $ | 1,730,712 |
· | We issued to directors for services rendered during the fourth fiscal quarter ended September 30, 2013, warrants to purchase 6,840 shares of common stock with an exercise price of $19.46 per share, valued at the date of grant at $53,091 using the Black-Scholes model. |
· | We issued 483 shares of common stock as payment of fourth quarter Series D Preferred stock dividends, valued at $5,650. |
· | We issued a total of 760 shares of common stock to several of our directors for services rendered, valued at $15,000. |
· | We issued 500 shares of common stock to a consultant upon the exercise of warrants at an exercise price of $16.00 per share and received cash proceeds of $8,000. |
· | We issued 4,700 shares of common stock to an officer upon the cashless exercise of warrants with exercise prices ranging from $15.00 to $16.66 per share. |
· | We entered into an Employment Agreement with our Chief Financial Officer, filed as an exhibit to this report. The term of this agreement commenced on November 14, 2013 and continues until the earlier of (i) 30 days following the closing of an acquisition of or by us; or (ii) November 13, 2014. Thereafter, the agreement will be reviewed and renewed upon the mutual agreement by the parties. If Mr. Olsen’s employment terminates as a result of an involuntary termination other than for cause or at the end of the term of the agreement, he will be entitled to receive separation benefits which include payment of salary of $192,000 paid over a 120-day period and other benefits as outlined in the agreement. In addition, we agreed with Mr. Olsen that he may convert his Series D Preferred shares into common stock at a rate of 155% of each share’s original investment; provided that Mr. Olsen must convert all of his Series D Preferred shares before the next annual shareholder meeting. |
·�� | On November 15, 2013, we entered into a 41-month agreement with the Gendarmeria de Chile (the Republic of Chile’s uniformed prison service) to provide electronic (GPS and residential) monitoring of offenders and other services to the Chilean government. The agreement calls for us to put into service up to 9,400 electronic monitoring (GPS) devices over the contract term. We were required under the agreement, to post a performance bond in the amount of $3,382,082. In addition, we will design and construct a real-time monitoring and data center to be staffed by Chilean government employees. Training from the monitoring center personnel will also be provided by us. The maximum sum to be paid for the services provided by us is approximately $70,000,000, at current exchange rates, over the term of the agreement. |
· | We borrowed $1,200,000 under a line-of-credit with a related party to be used with other available cash on hand to post the performance bond under our agreement for the Chilean contract described above. |
· | We borrowed $1,500,000 from Sapinda Asia, a shareholder, for working capital. The unsecured loan bears interest at a rate of 8% per annum and matures on November 18, 2014. |
· | On December 17, 2013, we filed a claim in the United States District Court, District of Utah, Central Division against STOP, LLC seeking declaratory relief and other claims related to a Settlement Agreement entered into by and between us and STOP, effective January 29, 2010. The complaint was filed under seal and is not publicly available. We believe the relief sought in the case is warranted based on the language and intent of the parties and we will pursue the matter vigorously. |
· | On December 17, 2013, we entered into a non-binding letter of intent to acquire all of the issued and outstanding stock of GPS Global, an Israeli corporation located in Tel Aviv. The parties are currently negotiating a definitive agreement for the stock purchase; compensation for the stock will be a combination of cash and our common stock. It is the intent of the parties to close the transaction as soon as possible. |
· | On January 3, 2014, we entered into an unsecured Facility Agreement with Tetra House Pte. Ltd., a related-party entity, controlled by our Chairman, Guy Dubois. Under this agreement, we may borrow up to $25,000,000 for working capital and acquisitions purposes. The loan bears interest at a rate of 8% per annum due and payable in arrears semi-annually, with a maturity date for all principal and unpaid interest of January 3, 2016. In addition, we agreed to pay an arrangement fee equal to 3 percent of the aggregate maximum amount under the loan. As of the date of this report, we borrowed and received $10,000,000 from the Facility Agreement. |
Report of | |
Report of Hansen, Barnett & Maxwell, P.C. | 44 |
Consolidated Balance Sheets | |
Consolidated Statements of Operations | |
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income | |
Consolidated Statements of Cash Flows | |
Notes to the Consolidated Financial Statements |
Exhibit Number | Title of Document | ||
3(i)(1) | Articles of Incorporation (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997). | ||
3(i)(2) | Amendment to Articles of Incorporation for Change of Name (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2001). | ||
3(i)(3) | Amendment to Articles of Incorporation Amending Rights and Preferences of Series A Preferred Stock | ||
3(i)(4) | Amendment to Articles of Incorporation Adopting Designation of Rights and Preferences of Series B Preferred Stock (previously filed as Exhibit on Form | ||
3(i)(5) | Certificate of Amendment to the Designation of Rights and Preferences Related to Series A 10% Cumulative Convertible Preferred Stock of SecureAlert, Inc. (incorporated by reference to our annual report on Form 10-KSB for the fiscal year ended September 30, 2001). | ||
3(i)(6) | Certificate of Amendment to the Designation of Rights and Preferences Related to Series C 8% Convertible Preferred Stock of SecureAlert, Inc. (incorporated by reference to our Current Report on Form 8-K, filed with the Commission on March 24, 2006). | ||
3(i)(7) | Articles of Amendment to Articles of Incorporation filed July 12, 2006 (previously filed as exhibits to our current report on Form 8-K filed July 18, 2006, and incorporated herein by reference). | ||
3(i)(8) | Articles of Amendment to the Fourth Amended and Restated Designation of Right and Preferences of Series A 10% Convertible Non-Voting Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-QSB for the nine months ended June 30, 2007, filed in August 2007). |
3(i)(9) | Articles of Amendment to the Designation of Right and Preferences of Series A Convertible Redeemable Non-Voting Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-QSB for the nine months ended June 30, 2007, filed in August 2007). | ||
3(i)(10) | Articles of Amendment to the Articles of Incorporation and Certificate of Amendment to the Designation of Rights and Preferences Related to Series D 8% Convertible Preferred Stock of SecureAlert, |
3(i)(11) | |
3(i)(12) | Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed August 1, 2011 (previously filed as Exhibit on Form 10-Q filed August 15, 2011). |
3(i)(13) | Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed December 28, 2011 (previously filed as Exhibit to Definitive Proxy Statement, filed October 25, 2011) |
3(i)(14) | Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed April 11, 2013 (previously filed as Exhibit on Form 10-Q filed May 15, 2013). |
3(ii) | Bylaws (incorporated by reference to our Registration Statement on Form 10-SB, effective December 1, 1997). |
3(iii) | Amended and Restated Bylaws (previously filed in February 2011 as an Exhibit to the Form 10-Q for the three months ended December 31, 2010). |
4.01 | 2006 Equity Incentive Award Plan (previously filed in August 2006 as an Exhibit to the Form | ||
4.02 | |||
10.1 | |||
10.2 | Patent Assignment Agreement between Futuristic Medical Devices, LLC, dated September 14, 2007 | |
10.3 | Patent Assignment Agreement between Futuristic Medical Devices, LLC, dated September 14, 2007 | |
10.4 | Patent Assignment Agreement between Futuristic Medical Devices, LLC, dated |
10.5 | |||
Distribution and License Agreement between euromicron AG, a German corporation, and the Company, dated May 28, 2009 (previously filed as Exhibit on Form 10-Q for the nine months ended June 30, 2009, filed in August 2009). | |||
10.6 | Agreement for Monitoring & Associated Services among I.C.S. of the Bahamas Co., Ltd., SecureAlert, Inc., International Surveillance Services Corp and The Ministry of National Security, dated November 19, 2010 (previously filed with Form 8-K in November 2010). | ||
10.7 | Agreement and Royalty Agreement between Borinquen Container Corporation and SecureAlert, effective July 1, 2011 (previously filed with Form 8-K in August 2011). | ||
10.8 | Addendum to the Royalty Agreement between Borinquen Container Corporation and SecureAlert, effective July 1, 2011 (previously filed as Exhibit on Form 10-Q for the six months ended March 31, 2012, filed in May 2012). | ||
10.9 | Stock Purchase Agreement between Gary Shelton, Larry and Sue Gardner and SecureAlert, effective October 1, 2012 (previously filed on Form 8-K in | ||
10.10 | Loan and Security Agreement between Sapinda Asia Limited and SecureAlert, effective December 3, 2012 (previously filed on Form 8-K in December 2012). | ||
10.11 | Stock Purchase Agreement between David Rothbart and SecureAlert, effective February 8, 2013 (previously filed on Form 10-Q in February 2012). | ||
10.12 | Settlement and Royalty and Share Buy Back among Borinquen Container Corporation, Sapinda Asia Limited, and SecureAlert, effective February 4, 2013 (previously filed on Form 8-K in February 2013). | ||
10.13 | Acknowledgement and Agreement between Sapinda Asia Limited, and SecureAlert, dated August 13, 2013 (previously filed on Form 10-Q in August 2013). | ||
10.14 | Notice of Conversion from Sapinda Asia Limited, dated September 24, 2013 (filed herewith). |
10.15 | Facility Agreement between Tetra House Pte. Ltd. and SecureAlert, Inc., dated January 3, 2014 (previously filed on Form 8-K in January 2014). | |
14.1 | Code of Ethics (filed herewith). | |
21 | Subsidiaries of the Registrant (filed herewith). | |
31(i) | Certification of Chief Executive Officer under Section 302 of Sarbanes-Oxley Act of | |
31(ii) | Certification of Chief Financial Officer under Section 302 of Sarbanes-Oxley Act of | |
32 | Certifications under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith). | |
99.1 | Insider Trading Policy Adopted, dated April 16, 2013 (filed herewith). | |
99.2 | Employment agreement between SecureAlert, Inc. and Chief Financial Officer, dated November 14, 2013 (filed herewith). |
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 |
Signature | Title | Date | |||||||
/s/ Guy Dubois | |||||||||
Guy Dubois | (Acting Principal Executive Officer) | ||||||||
Chief | |||||||||
Chad D. Olsen | Officer and Principal Accounting Officer) | ||||||||
David S. Boone | |||||||||
Winfried Kunz | |||||||||
Director | |||||||||
Rene Klinkhammer | |||||||||
Director | |||||||||
Dan L. Mabey | |||||||||
Director | January 14, 2014 | ||||||||
George F. Schmitt | |||||||||
Page | ||
Report of | ||
Report of Hansen, Barnett & Maxwell, P.C. | 44 | |
Consolidated Balance Sheets as of September 30, | ||
Consolidated Statements of Operations for the fiscal years ended September 30, | ||
Consolidated Statements of Stockholders’ Equity | ||
Consolidated Statements of Cash Flows for the fiscal years ended September 30, | ||
Notes to Consolidated Financial Statements |
Assets | 2010 | 2009 | ||||||
Current assets | ||||||||
Cash | $ | 1,126,232 | $ | 602,321 | ||||
Accounts receivable, net of allowance for doubtful accounts of $366,800 and $266,000, respectively | 1,339,513 | 1,441,648 | ||||||
Prepaid expenses and other | 791,986 | 275,390 | ||||||
Inventory, net of reserves of $47,118 and $83,092, respectively | 345,529 | 603,329 | ||||||
Total current assets | 3,603,260 | 2,922,688 | ||||||
Property and equipment, net of accumulated depreciation of $2,235,683 and $2,525,180, respectively | 1,485,322 | 1,313,306 | ||||||
Monitoring equipment, net of accumulated depreciation of $2,788,309 and $2,944,197, respectively | 1,683,356 | 1,316,493 | ||||||
Goodwill | 3,910,063 | 2,468,081 | ||||||
Intangible assets, net of amortization of $274,159 and $126,655, respectively | 398,842 | 496,346 | ||||||
Other assets | 107,618 | 76,675 | ||||||
Total assets | $ | 11,188,461 | $ | 8,593,589 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Bank line of credit | $ | 1,000,000 | $ | 252,600 | ||||
Accounts payable | 2,059,896 | 2,339,786 | ||||||
Accrued liabilities | 1,904,295 | 3,506,680 | ||||||
Dividends payable | 555,110 | - | ||||||
Deferred revenue | 80,890 | 56,858 | ||||||
Related-party note payable and line of credit | 150,000 | 1,576,022 | ||||||
SecureAlert Monitoring Series A Preferred stock redemption obligation | 114,032 | 3,148,943 | ||||||
Derivative liability (Note 10) | - | 1,219,426 | ||||||
Promissory notes payable, net of debt discount of $0 and $41,556, respectively | �� | - | 2,008,444 | |||||
Senior secured note payable, net of debt discount of $0 and $529,109, respectively | - | 2,890,522 | ||||||
Current portion of Series A 15% debentures, net of debt discount of $0 and $1,272,189, respectively | - | 2,127,811 | ||||||
Current portion of long-term debt | 1,133,969 | 272,493 | ||||||
Total current liabilities | 6,998,192 | 19,399,585 | ||||||
Series A 15% debentures net of current portion, net of debt discount of $0 and $549,531, respectively | - | 557,219 | ||||||
Long-term debt, net of current portion, net of debt discount of $0 and $525,665, respectively | 1,060,418 | 1,009,606 | ||||||
Total liabilities | 8,058,610 | 20,966,410 | ||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock: | ||||||||
Series D 8% dividend, convertible, voting, $0.0001 par value: 50,000 shares designated; 35,407 and zero shares outstanding, respectively (aggregate liquidation preference of $23,009,086) | 4 | - | ||||||
Common stock, $0.0001 par value: 600,000,000 shares authorized; 280,023,255 and 210,365,988 shares outstanding, respectively | 28,002 | 21,037 | ||||||
Additional paid-in capital | 222,501,863 | 193,371,638 | ||||||
Subscription receivable | (50,000 | ) | - | |||||
Accumulated deficit | (219,164,945 | ) | (205,380,903 | ) | ||||
Total SecureAlert, Inc. stockholders’ equity (deficit) | 3,314,924 | (11,988,228 | ) | |||||
Non-controlling interest | (185,073 | ) | (384,593 | ) | ||||
Total equity (deficit) | 3,129,851 | (12,372,821 | ) | |||||
Total liabilities and stockholders’ equity | $ | 11,188,461 | $ | 8,593,589 |
Assets | 2013 | 2012 | ||||||
Current assets: | ||||||||
Cash | $ | 3,382,428 | $ | 458,029 | ||||
Accounts receivable, net of allowance for doubtful accounts of $3,968,000 and $772,000, respectively | 3,721,964 | 2,411,701 | ||||||
Note receivable, current portion | 176,205 | 74,801 | ||||||
Prepaid expenses and other | 1,783,805 | 1,760,579 | ||||||
Inventory, net of reserves of $148,043 and $192,000, respectively | 467,101 | 630,566 | ||||||
Current assets from discontinued operations | - | 989,905 | ||||||
Total current assets | 9,531,503 | 6,325,581 | ||||||
Property and equipment, net of accumulated depreciation of $2,092,222 and $1,879,540, respectively | 318,201 | 504,491 | ||||||
Monitoring equipment, net of accumulated amortization of $1,183,346 and $669,929, respectively | 1,236,696 | 3,171,947 | ||||||
Note receivable, net of current portion | 28,499 | 112,492 | ||||||
Intangible assets, net of accumulated amortization of $1,256,647 and $327,540, respectively | 15,413,920 | 15,494,598 | ||||||
Other assets | 170,172 | 65,597 | ||||||
Non-current assets from discontinued operations, net of accumulated depreciation of $0 and $2,837,498, respectively | - | 859,019 | ||||||
Total assets | $ | 26,698,991 | $ | 26,533,725 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | 348,074 | 1,830,075 | ||||||
Accrued liabilities | 2,180,791 | 2,439,451 | ||||||
Dividends payable | 9,427 | 630,528 | ||||||
Deferred revenue | 8,674 | 354,570 | ||||||
Current portion of long-term related-party debt | 60,000 | 12,654,701 | ||||||
Current portion of long-term debt | 88,095 | 339,151 | ||||||
Current liabilities from discontinued operations | - | 1,677,450 | ||||||
Total current liabilities | 2,695,061 | 19,925,926 | ||||||
Long-term related-party debt, net of current portion | - | 1,730,712 | ||||||
Long-term debt, net of current portion | 40,588 | 85,680 | ||||||
Long-term liabilities from discontinued operations | - | 364,270 | ||||||
Total liabilities | 2,735,649 | 22,106,588 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock: | ||||||||
Series D 8% dividend, convertible, voting, $0.0001 par value: 85,000 shares designated; 468 and 48,763 shares outstanding, respectively (aggregate liquidation preference of $467,507) | 1 | 5 | ||||||
Common stock, $0.0001 par value: 15,000,000 shares authorized; 9,805,503 and 3,096,641 shares outstanding, respectively | 980 | 310 | ||||||
Additional paid-in capital | 290,391,698 | 252,940,448 | ||||||
Accumulated deficit | (266,429,337 | ) | (248,513,626 | ) | ||||
Total equity | 23,963,342 | 4,427,137 | ||||||
Total liabilities and stockholders’ equity | $ | 26,698,991 | $ | 26,533,725 |
2010 | 2009 | |||||||
Revenues: | ||||||||
Products | $ | 371,214 | $ | 570,749 | ||||
Monitoring services | 12,079,757 | 12,055,159 | ||||||
Total revenues | 12,450,971 | 12,625,908 | ||||||
Cost of revenues: | ||||||||
Products | 45,131 | 275,688 | ||||||
Monitoring services | 6,933,843 | 9,862,925 | ||||||
Impairment of monitoring equipment and parts (Note 2) | 590,801 | 2,319,530 | ||||||
Total cost of revenues | 7,569,775 | 12,458,143 | ||||||
Gross profit | 4,881,196 | 167,765 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative (including $1,269,427 and $3,315,716, respectively, of compensation expense paid in stock, stock options / warrants or as a result of amortization of stock-based compensation) | 12,126,413 | 16,540,645 | ||||||
Research and development | 1,483,385 | 1,777,873 | ||||||
Settlement expense | 1,150,000 | - | ||||||
Impairment of goodwill (Note 2) | 204,735 | 2,804,580 | ||||||
Loss from operations | (10,083,337 | ) | (20,955,333 | ) | ||||
Other income (expense): | ||||||||
Loss on disposal of equipment | (41,597 | ) | - | |||||
Redemption of SecureAlert Monitoring Series A Preferred | (19,095 | ) | 95,816 | |||||
Interest income | 23,139 | 18,187 | ||||||
Interest expense (including $3,087,744 and $2,695,759, respectively, paid in stock, stock options / warrants, or as a result of amortization of debt discount) | (4,146,459 | ) | (5,012,803 | ) | ||||
Derivative valuation gain (Note 10) | 200,534 | 1,867,007 | ||||||
Other income (expense), net | 147,206 | 905,626 | ||||||
Net loss | (13,919,609 | ) | (23,081,500 | ) | ||||
Net loss attributable to non-controlling interest | 135,567 | 142,955 | ||||||
Net loss attributable to SecureAlert, Inc. | (13,784,042 | ) | (22,938,545 | ) | ||||
Dividends on Series A and D Preferred stock | (1,494,481 | ) | (175 | ) | ||||
Net loss attributable SecureAlert, Inc. to common stockholders | $ | (15,278,523 | ) | $ | (22,938,720 | ) | ||
Net loss per common, basic and diluted | $ | (0.07 | ) | $ | (0.13 | ) | ||
Weighted average common shares outstanding, basic and diluted | 227,321,000 | 182,188,000 |
2013 | 2012 | |||||||
Revenues: | ||||||||
Products | $ | 612,437 | $ | 1,595,252 | ||||
Monitoring and other related services | 15,028,625 | 11,519,727 | ||||||
Total revenues | 15,641,062 | 13,114,979 | ||||||
Cost of revenues: | ||||||||
Products | 262,022 | 1,353,953 | ||||||
Monitoring and other related services | 7,554,870 | 5,951,649 | ||||||
Impairment of monitoring equipment and parts | 213,276 | 1,648,762 | ||||||
Total cost of revenues | 8,030,168 | 8,954,364 | ||||||
Gross profit | 7,610,894 | 4,160,615 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative (including non-cash expenses of $430,618 and $3,576,194, respectively, of compensation expense paid in stock, stock options and warrants or as a result of amortization of stock-based compensation) | 7,679,124 | 12,623,114 | ||||||
Impairment of goodwill | - | 5,514,395 | ||||||
Settlement expense | 360,000 | 403,678 | ||||||
Research and development | 987,934 | 1,248,654 | ||||||
Loss from continuing operations | (1,416,164 | ) | (15,629,226 | ) | ||||
Other income (expense): | ||||||||
Currency exchange rate loss | (145,612 | ) | (28,358 | ) | ||||
Loss on disposal of equipment | (2,949 | ) | (5,374 | ) | ||||
Interest expense (including non-cash expenses of $15,954,355 and $963,233, respectively, paid in stock, stock options and warrants, or amortization of debt discount) | (17,048,519 | ) | (1,431,416 | ) | ||||
Other income (expense), net | 279,174 | (55,914 | ) | |||||
Net loss from continuing operations | (18,334,070 | ) | (17,150,288 | ) | ||||
Gain on disposal of discontinued operations | 424,819 | - | ||||||
Net loss from discontinued operations | (6,460 | ) | (307,819 | ) | ||||
Net loss | (17,915,711 | ) | (17,458,107 | ) | ||||
Dividends on Series D Preferred stock | (1,042,897 | ) | (2,480,298 | ) | ||||
Net loss attributable to SecureAlert, Inc. common stockholders | $ | (18,958,608 | ) | $ | (19,938,405 | ) | ||
Net loss per common share, basic and diluted from continuing operations | $ | (3.79 | ) | $ | (6.27 | ) | ||
Net loss per common share, basic and diluted from discontinued operations | $ | 0.09 | $ | (0.11 | ) | |||
Weighted average common shares outstanding, basic and diluted | 4,832,000 | 2,735,170 |
Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
Series D | Paid-in | Accumulated | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
Balance as of October 1, 2011 | 44,845 | $ | 5 | 2,518,117 | $ | 252 | $ | 244,670,570 | $ | (231,055,519 | ) | $ | 13,615,308 | |||||||||||||||
Issuance of common stock for: | ||||||||||||||||||||||||||||
Conversion of Series D Preferred stock | (90 | ) | - | 2,700 | - | - | - | - | ||||||||||||||||||||
Royalty payment | - | - | 71,969 | 7 | 819,965 | - | 819,972 | |||||||||||||||||||||
Services | - | - | 4,315 | - | 40,000 | - | 40,000 | |||||||||||||||||||||
Debt | - | - | 8,449 | 1 | 118,279 | - | 118,280 | |||||||||||||||||||||
Dividends from Series D Preferred stock | - | - | 210,689 | 21 | 2,391,547 | - | 2,391,568 | |||||||||||||||||||||
Employee compensation | - | - | 121,700 | 12 | 732,622 | - | 732,634 | |||||||||||||||||||||
Board of director fees | - | - | 3,000 | - | 48,060 | - | 48,060 | |||||||||||||||||||||
Cash | - | - | 155,703 | 17 | 1,032,983 | - | 1,033,000 | |||||||||||||||||||||
Vesting and re-pricing of stock options | - | - | - | - | 1,405,500 | - | 1,405,500 | |||||||||||||||||||||
Acceleration of vesting and cancellation of stock warrants | - | - | - | - | 1,398,060 | - | 1,398,060 | |||||||||||||||||||||
Beneficial conversion feature recorded as interest expense | - | - | - | - | 1,475,000 | - | 1,475,000 | |||||||||||||||||||||
Series D Preferred dividends | - | - | - | - | (2,480,298 | ) | - | (2,480,298 | ) | |||||||||||||||||||
Issuance of common stock warrant to settle a lawsuit | - | - | - | - | 253,046 | - | 253,046 | |||||||||||||||||||||
Issuance of common stock warrants for Board of Director fees | - | - | - | - | 105,042 | - | 105,042 | |||||||||||||||||||||
Issuance of common stock warrants for consulting fees | - | - | - | - | 33,357 | - | 33,357 | |||||||||||||||||||||
Repricing of common stock warrants in connection with debt and accrued interest | - | - | - | - | 39,965 | - | 39,965 | |||||||||||||||||||||
Issuance of Series D Preferred stock for cash | 4,008 | - | - | - | 2,004,000 | - | 2,004,000 | |||||||||||||||||||||
Commission paid in connection with capital raise | - | - | - | - | (1,147,250 | ) | - | (1,147,250 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (17,458,107 | ) | (17,458,107 | ) | |||||||||||||||||||
Balance as of September 30, 2012 | 48,763 | $ | 5 | 3,096,641 | $ | 310 | $ | 252,940,448 | $ | (248,513,626 | ) | $ | 4,427,137 |
Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
Series D | Paid-in | Accumulated | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
Balance as of October 1, 2012 | 48,763 | $ | 5 | 3,096,641 | $ | 310 | $ | 252,940,448 | $ | (248,513,626 | ) | $ | 4,427,137 | |||||||||||||||
Issuance of common stock for: | ||||||||||||||||||||||||||||
Conversion of Series D Preferred stock | (48,295 | ) | (4 | ) | 1,894,283 | 189 | (185 | ) | - | - | ||||||||||||||||||
Services | - | - | 21,884 | 2 | 141,758 | - | 141,760 | |||||||||||||||||||||
Debt | - | - | 4,607,361 | 461 | 20,732,657 | - | 20,733,118 | |||||||||||||||||||||
Dividends from Series D Preferred stock | - | - | 181,832 | 18 | 1,663,979 | - | 1,663,997 | |||||||||||||||||||||
Accrued board of director fees | - | - | 3,661 | - | 47,500 | - | 47,500 | |||||||||||||||||||||
Cash | - | - | (159 | ) | - | (1,996 | ) | - | (1,996 | ) | ||||||||||||||||||
Vesting and re-pricing of stock options | - | - | - | - | 160,301 | - | 160,301 | |||||||||||||||||||||
Beneficial conversion feature recorded as interest expense | - | - | - | - | 15,349,074 | - | 15,349,074 | |||||||||||||||||||||
Series D Preferred stock dividends | - | - | - | - | (1,042,897 | ) | - | (1,042,897 | ) | |||||||||||||||||||
Issuance of common stock warrants for Board of Director fees | - | - | - | - | 401,059 | - | 401,059 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (17,915,711 | ) | (17,915,711 | ) | |||||||||||||||||||
Balance as of September 30, 2013 | 468 | $ | 1 | 9,805,503 | $ | 980 | $ | 290,391,698 | $ | (266,429,337 | ) | $ | 23,963,342 |
Preferred Stock | ||||||||||||||||||||||||
Series A | Series B | Series D | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Balance as of October 1, 2008 as previously stated | 19 | $ | 1 | 10,999 | $ | 1 | - | $ | - | |||||||||||||||
Cumulative effect of change in accounting principle | - | - | - | - | - | - | ||||||||||||||||||
Balance as of October 1, 2008 as adjusted | 19 | 1 | 10,999 | $ | 1 | - | - | |||||||||||||||||
Issuance of common stock for: | ||||||||||||||||||||||||
Conversion of Series A Preferred stock | (19 | ) | (1 | ) | - | - | - | - | ||||||||||||||||
Conversion of Series B Preferred stock | - | - | (10,999 | ) | (1 | ) | - | - | ||||||||||||||||
Settlement of lawsuits | - | - | - | - | - | - | ||||||||||||||||||
Related issuances of debt | - | - | - | - | - | - | ||||||||||||||||||
Services | - | - | - | - | - | - | ||||||||||||||||||
Cash | - | - | - | - | - | - | ||||||||||||||||||
Acquisition of subsidiaries | - | - | - | - | - | - | ||||||||||||||||||
Acquisition extension | - | - | - | - | - | - | ||||||||||||||||||
Issuance of warrants for: | ||||||||||||||||||||||||
Related issuances of debt | - | - | - | - | - | - | ||||||||||||||||||
Services | - | - | - | - | - | - | ||||||||||||||||||
Acquisition of subsidiary | - | - | - | - | - | - | ||||||||||||||||||
Amortization of deferred consulting: | - | - | - | - | - | - | ||||||||||||||||||
Amortization of financing costs | - | - | - | - | - | - | ||||||||||||||||||
Beneficial conversion feature recorded as interest expense | - | - | - | - | - | - | ||||||||||||||||||
Forgiveness of debt from related party | - | - | - | - | - | - | ||||||||||||||||||
Issuance of SecureAlert Series A Preferred stock for accrued dividends | - | - | - | - | - | - | ||||||||||||||||||
Net loss | - | - | - | - | - | - | ||||||||||||||||||
Balance as of September 30, 2009 | - | $ | - | - | $ | - | - | $ | - |
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net Loss | $ | (17,915,711 | ) | $ | (17,458,107 | ) | ||
Gain on sale of subsidiaries | (424,819 | ) | - | |||||
Loss from discontinued operations | 6,460 | 307,819 | ||||||
Loss from continuing operations | (18,334,070 | ) | (17,150,288 | ) | ||||
Adjustments to reconcile net loss to net cash used and provided by in operating activities: | ||||||||
Depreciation and amortization | 2,414,270 | 1,816,945 | ||||||
Vesting and re-pricing of stock options for services | 160,301 | 1,405,500 | ||||||
Issuance of common stock to employees for the cancellation of warrants | - | 2,130,694 | ||||||
Issuance of common stock for services | 141,760 | 40,000 | ||||||
Re-pricing of warrants in connection with debt with related parties | - | 39,965 | ||||||
Accretion of debt discount and beneficial conversion feature recorded as interest expense | 15,954,355 | 923,268 | ||||||
Issuance of warrants with related parties | 128,559 | - | ||||||
Impairment of monitoring equipment and parts | 213,276 | 1,648,763 | ||||||
Impairment of goodwill | - | 5,514,395 | ||||||
Factional shares of common stock paid in cash | (1,996 | ) | - | |||||
Loss on disposal of property and equipment | 4,740 | 5,374 | ||||||
Loss on disposal of monitoring equipment and parts | 84,805 | 188,901 | ||||||
Loss on forgiveness of note receivable | - | 22,750 | ||||||
Property and equipment disposed for services and compensation | - | 2,790 | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable, net | (652,749 | ) | 854,673 | |||||
Notes receivable | 63,978 | 88,061 | ||||||
Inventories | 186,913 | (437,421 | ) | |||||
Prepaid expenses and other assets | 107,576 | (908,673 | ) | |||||
Accounts payable | (1,473,530 | ) | 572,277 | |||||
Accrued expenses | 2,186,618 | 1,102,638 | ||||||
Deferred revenue | (345,896 | ) | 229,321 | |||||
Net cash provided by (used in) operating activities | 838,910 | (1,910,067 | ) | |||||
Cash flow from investing activities: | ||||||||
Purchase of property and equipment | (50,682 | ) | (101,875 | ) | ||||
Purchase of monitoring equipment and parts | (509,743 | ) | (2,745,399 | ) | ||||
Net cash used in investing activities | (560,425 | ) | (2,847,274 | ) | ||||
Cash flow from financing activities: | ||||||||
Borrowings on related-party notes payable | 2,800,000 | 2,980,000 | ||||||
Principal payments on related-party notes payable | - | (3,187,578 | ) | |||||
Proceeds from convertible debentures | - | 500,000 | ||||||
Proceeds from related-party convertible debentures | - | 2,900,000 | ||||||
Proceeds from notes payable | - | 1,745 | ||||||
Principal payments on notes payable | (299,276 | ) | (687,354 | ) | ||||
Net proceeds from issuance of common stock | - | 1,033,000 | ||||||
Net proceeds from issuance of Series D Convertible Preferred stock | - | 2,004,000 | ||||||
Commissions paid in connection with capital raise | - | (1,147,250 | ) | |||||
Net cash provided by financing activities | 2,500,724 | 4,396,563 | ||||||
Cash flow from discontinued operations: | ||||||||
Net cash provided by operating activities | 126,715 | 200,679 | ||||||
Net cash provided by investing activities | - | 126,330 | ||||||
Net cash provided by (used in) financing activities | 18,475 | (220,869 | ) | |||||
Net cash provided by discontinued operations | 145,190 | 106,140 | ||||||
Net increase in cash | 2,924,399 | (254,638 | ) | |||||
Cash, beginning of period | 458,029 | 712,667 | ||||||
Cash, end of period | $ | 3,382,428 | $ | 458,029 |
Common Stock | Additional | |||||||||||||||||||||||
Paid-in | Accumulated | Non-Controlling | ||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||
Balance as of October 1, 2008 as previously stated | 155,881,260 | $ | 15,588 | $ | 182,704,412 | $ | (182,683,996 | ) | $ | - | 36,006 | |||||||||||||
Cumulative effect of change in accounting principle | - | - | - | 241,638 | (241,638 | ) | - | |||||||||||||||||
Balance as of October 1, 2008 as adjusted | 155,881,260 | 15,588 | 182,704,412 | (182,442,358 | ) | (241,638 | ) | 36,006 | ||||||||||||||||
Issuance of common stock for: | ||||||||||||||||||||||||
Conversion of Series A Preferred stock | 9,306 | 1 | - | - | - | - | ||||||||||||||||||
Conversion of Series B Preferred stock | 10,999 | 1 | - | - | - | - | ||||||||||||||||||
Settlement of lawsuits | 5,400,000 | 540 | 1,029,460 | - | - | 1,030,000 | ||||||||||||||||||
Related issuances of debt | 25,953,016 | 2,595 | 1,629,955 | - | - | 1,632,550 | ||||||||||||||||||
Services | 2,254,121 | 226 | 728,648 | - | - | 728,874 | ||||||||||||||||||
Cash | 17,850,000 | 1,785 | 3,248,215 | - | - | 3,250,000 | ||||||||||||||||||
Acquisition of subsidiaries | 2,857,286 | 286 | 656,890 | - | - | 657,176 | ||||||||||||||||||
Acquisition extension | 150,000 | 15 | 19,485 | - | - | 19,500 | ||||||||||||||||||
Issuance of warrants for: | ||||||||||||||||||||||||
Related issuances of debt | - | - | 96,844 | - | - | 96,844 | ||||||||||||||||||
Services | - | - | 345,839 | - | - | 345,839 | ||||||||||||||||||
Acquisition of subsidiary | - | - | 114,383 | - | - | 114,383 | ||||||||||||||||||
Amortization of deferred consulting: | - | - | 1,930,678 | - | - | 1,930,678 | ||||||||||||||||||
Amortization of financing costs | - | - | 665,255 | - | - | 665,255 | ||||||||||||||||||
Beneficial conversion feature recorded as interest expense | - | - | 122,727 | - | - | 122,727 | ||||||||||||||||||
Forgiveness of debt from related party | - | - | 79,022 | - | - | 79,022 | ||||||||||||||||||
Issuance of SecureAlert Series A Preferred stock for accrued dividends | - | - | (175 | ) | - | - | (175 | ) | ||||||||||||||||
Net loss | - | - | - | (22,938,545 | ) | (142,955 | ) | (23,081,500 | ) | |||||||||||||||
Balance as of September 30, 2009 | 210,365,988 | $ | 21,037 | $ | 193,371,638 | $ | (205,380,903 | ) | $ | (384,593 | ) | $ | (12,372,821 | ) |
2013 | 2012 | |||||||
Cash paid for interest | $ | 238,080 | $ | 444,644 | ||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Issuance of stock warrants for settlement of debt | - | 253,046 | ||||||
Issuance of common stock in connection with Series D Preferred stock dividends | 1,663,997 | 2,391,568 | ||||||
Series D Preferred stock dividends earned | 1,042,897 | 2,480,298 | ||||||
Issuance of warrants for accrued Board of Director fees | 272,500 | 105,042 | ||||||
Issuance of common stock shares for accrued Board of Director fees | 47,500 | 48,060 | ||||||
Issuance of shares of common stock, respectively, for related-party royalty payable | - | 819,972 | ||||||
Issuance of common stock shares for settlement of debt | 20,733,118 | 118,280 | ||||||
Issuance of warrants to a consultant for services | - | 33,357 | ||||||
Issuance of common stock shares from the conversion of shares of Series D | ||||||||
Preferred stock | 189 | 54 | ||||||
Accretion of debt discount and beneficial conversion feature expense recorded with convertible debentures | 15,954,355 | 473,334 | ||||||
Issuance of debt to repurchase royalty agreement | 11,616,984 | - | ||||||
Note payable issued to acquire monitoring equipment and property and equipment | - | 69,000 | ||||||
Beneficial conversion feature recorded with related-party convertible debentures | - | 1,001,666 |
Preferred Stock | ||||||||||||||||||||||||
Series A | Series B | Series D | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Balance as of October 1, 2009 | - | $ | - | - | $ | - | - | $ | - | |||||||||||||||
Issuance of common stock for: | ||||||||||||||||||||||||
Conversion of Series D Preferred stock | - | - | - | - | (9,534 | ) | (1 | ) | ||||||||||||||||
Services | - | - | - | - | - | - | ||||||||||||||||||
Acquisition of subsidiaries | - | - | - | - | - | - | ||||||||||||||||||
Dividends from SMI Series A Preferred stock | - | - | - | - | - | - | ||||||||||||||||||
Dividends from Series D Preferred stock | - | - | - | - | - | - | ||||||||||||||||||
Cancellation of shares | - | - | - | - | - | - | ||||||||||||||||||
Issuance of warrants for services | - | - | - | - | - | - | ||||||||||||||||||
Amortization of deferred consulting: | - | - | - | - | - | - | ||||||||||||||||||
Beneficial conversion feature recorded as interest expense | - | - | - | - | - | - | ||||||||||||||||||
Series D Preferred dividends | - | - | - | - | - | - | ||||||||||||||||||
Conversion effect on derivative liability | - | - | - | - | - | - | ||||||||||||||||||
Issuance of Series D Preferred stock for conversion of debt, accrued liabilities and interest | - | - | - | - | 17,174 | 2 | ||||||||||||||||||
Issuance of Series D Preferred stock for cash | - | - | - | - | 27,767 | 3 | ||||||||||||||||||
Net loss | - | - | - | - | - | - | ||||||||||||||||||
Balance as of September 30, 2010 | - | $ | - | - | $ | - | 35,407 | $ | 4 |
Preferred | ||||||||||||||||||||||||||||
Common Stock | Additional | Stock | ||||||||||||||||||||||||||
Paid-in | Subscription | Accumulated | Non-Controlling | |||||||||||||||||||||||||
Shares | Amount | Capital | Receivable | Deficit | Interest | Total | ||||||||||||||||||||||
Balance as of October 1, 2009 | 210,365,988 | $ | 21,037 | $ | 193,371,638 | $ | - | $ | (205,380,903 | ) | $ | (384,593 | ) | $ | (12,372,821 | ) | ||||||||||||
Issuance of common stock for: | ||||||||||||||||||||||||||||
Conversion of Series D Preferred stock | 57,204,000 | 5,720 | (5,719 | ) | - | - | - | - | ||||||||||||||||||||
Services | 250,000 | 25 | 27,475 | - | - | - | 27,500 | |||||||||||||||||||||
Acquisition of subsidiaries | 150,000 | 15 | 17,985 | - | - | 335,087 | 353,087 | |||||||||||||||||||||
Dividends from SMI Series A Preferred stock | 5,434,143 | 543 | 642,023 | - | - | - | 642,566 | |||||||||||||||||||||
Dividends from Series D Preferred stock | 7,619,124 | 762 | 938,609 | - | - | - | 939,371 | |||||||||||||||||||||
Cancellation of shares | (1,000,000 | ) | (100 | ) | 100 | - | - | - | - | |||||||||||||||||||
Issuance of warrants for services | - | - | 505,429 | - | - | - | 505,429 | |||||||||||||||||||||
Amortization of deferred consulting: | - | - | 736,498 | - | - | - | 736,498 | |||||||||||||||||||||
Beneficial conversion feature recorded as interest expense | - | - | 144,184 | - | - | - | 144,184 | |||||||||||||||||||||
Series D Preferred dividends | - | - | (1,494,481 | ) | - | - | - | (1,494,481 | ) | |||||||||||||||||||
Conversion effect on derivative liability | - | - | 1,018,892 | - | - | - | 1,018,892 | |||||||||||||||||||||
Issuance of Series D Preferred stock for conversion of debt, accrued liabilities and interest | - | - | 16,910,382 | - | - | - | 16,910,384 | |||||||||||||||||||||
Issuance of Series D Preferred stock for cash | - | - | 9,688,848 | (50,000 | ) | - | - | 9,638,851 | ||||||||||||||||||||
Net loss | - | - | - | - | (13,784,042 | ) | (135,567 | ) | (13,919,609 | ) | ||||||||||||||||||
Balance as of September 30, 2010 | 280,023,255 | $ | 28,002 | $ | 222,501,863 | $ | (50,000 | ) | $ | (219,164,945 | ) | $ | (185,073 | ) | $ | 3,129,851 |
2010 | 2009 | |||||||
Cash flows from operating activities: | ||||||||
Net Loss | $ | (13,919,609 | ) | $ | (23,081,500 | ) | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization | 1,436,876 | 2,087,949 | ||||||
Amortization of debt discount | 2,918,050 | 2,030,504 | ||||||
Amortization of deferred consulting | 736,498 | 2,595,933 | ||||||
Beneficial conversion feature recorded as interest expense | 144,184 | - | ||||||
Common stock issued for services | 27,500 | 728,876 | ||||||
Common stock issued to settle lawsuit | - | 261,521 | ||||||
Common stock issued for acquisition option extension cost | - | 19,500 | ||||||
Common stock issued in connection with debt | 25,510 | - | ||||||
Derivative liability valuation | (200,534 | ) | (1,867,007 | ) | ||||
Impairment of goodwill | 204,735 | 2,804,580 | ||||||
Impairment of monitoring equipment and parts | 590,801 | 2,319,530 | ||||||
Increases in related-party line of credit for services | 652,987 | 272,281 | ||||||
Loss on disposal of equipment | 41,597 | - | ||||||
Redemption of SecureAlert Monitoring Series A Preferred stock | 19,095 | (95,816 | ) | |||||
Settlement expense | 1,150,000 | - | ||||||
Stock options and warrants issued and re-priced for services | 505,429 | 345,838 | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable, net | 102,135 | (23,490 | ) | |||||
Deposit held in escrow | - | 500,000 | ||||||
Inventories | 183,195 | - | ||||||
Prepaid expenses and other assets | (511,539 | ) | (25,212 | ) | ||||
Accounts payable | (279,890 | ) | 745,630 | |||||
Accrued expenses | 263,161 | 1,824,042 | ||||||
Deferred revenue | 24,032 | 35,515 | ||||||
Net cash used in operating activities | (5,885,787 | ) | (8,521,326 | ) | ||||
Cash flow from investing activities: | ||||||||
Purchase of property and equipment | (394,630 | ) | (380,647 | ) | ||||
Disposal of property and equipment | - | 16,577 | ||||||
Purchase of monitoring equipment and parts | (1,834,173 | ) | (1,312,397 | ) | ||||
Disposal of monitoring equipment | 105,803 | - | ||||||
Net cash used in investing activities | (2,123,000 | ) | (1,676,467 | ) | ||||
Cash flow from financing activities: | ||||||||
Payments on related-party line of credit | (729,009 | ) | (739,063 | ) | ||||
Borrowings on related-party notes payable | 500,000 | 680,229 | ||||||
Payments on related-party notes payable | (550,000 | ) | - | |||||
Proceeds in bank line of credit borrowings | 2,345,996 | 388,593 | ||||||
Payments on bank line of credit | (1,598,596 | ) | - | |||||
Proceeds from notes payable | 4,250 | 1,055,889 | ||||||
Payments on notes payable | (953,794 | ) | (1,115,237 | ) | ||||
Payments on notes payable related to acquisitions | (100,000 | ) | - | |||||
Proceeds from sale of common stock | - | 3,250,000 | ||||||
Proceeds from the issuance of Series A 15% debentures | - | 4,496,750 | ||||||
Payments on Series A 15% Debentures | (25,000 | ) | - | |||||
Net proceeds from issuance of Series D Convertible Preferred stock | 9,638,851 | - | ||||||
Net cash provided by financing activities | 8,532,698 | 8,017,161 | ||||||
Net increase (decrease) in cash | 523,911 | (2,180,632 | ) | |||||
Cash, beginning of year | 602,321 | 2,782,953 | ||||||
Cash, end of year | $ | 1,126,232 | $ | 602,321 | ||||
See accompanying notes to consolidated financial statements. |
2010 | 2009 | |||||
Cash paid for interest | $ | 911,997 | $ | 1,963,200 | ||
Supplemental schedule of non-cash investing and financing activities: | ||||||
Issuance of zero and 9,306 common shares, respectively, in exchange for zero and 19 shares of Series A Preferred stock, respectively | $ | - | $ | 1 | ||
Issuance of zero and 10,999 common shares, respectively, in exchange for zero and 10,999 shares of Series B Preferred stock, respectively | - | 1 | ||||
Issuance of 57,204,000 and zero common shares, respectively, in exchange for 9,534 and zero shares of Series D Convertible Preferred stock, respectively | 5,720 | - | ||||
Issuance of 5,434,143 and zero common shares, respectively for payment of SecureAlert Monitoring, Inc. Series A Preferred stock contingency payments | 642,566 | - | ||||
Issuance of 7,619,124 and zero common shares, respectively for Series D Convertible Preferred dividends | 939,371 | - | ||||
Issuance of 150,000 and zero shares of common stock to purchase an additional 2.145% ownership of Midwest Monitoring & Surveillance, Inc. | 18,000 | - | ||||
Issuance of zero and 2,000,000 common shares, respectively for deferred consulting services and financing services | - | 338,000 | ||||
Issuance of common stock and stock options to acquire the assets and liabilities of Bishop Rock Software | - | 856,522 | ||||
Issuance of common stock to settle accounts payables | - | 550,000 | ||||
Issuance of shares of Series D Convertible Preferred stock for conversion of debt, accrued liabilities and interest | 16,910,384 | - | ||||
Issuance of 3,775,000 and 213,500 stock options, respectively, for consulting services | 413,423 | 46,667 | ||||
Issuance of 7,487,286 and zero stock options, respectively, issued to employees for services | 594,990 | - | ||||
Series A and D Preferred stock dividends | 1,494,481 | 175 | ||||
Cancellation of 1,000,000 and 1,750,000 shares of common stock, respectively | 100 | 175 | ||||
Beneficial conversion feature recorded | - | 122,727 | ||||
Conversion effect on derivative liability | 1,018,892 | - | ||||
Patent acquired through accrued liability | 50,000 | - | ||||
Stock issued in connection with debt | - | 1,739,393 | ||||
Subscription receivable issued for Series D Preferred stock | 50,000 | - | ||||
Note payable issued to acquire remaining shares of Court Programs, Inc., Court Programs of Florida, Inc., Court Programs of Northern Florida, Inc., and Court Programs of Illinois, Inc. | 1,049,631 | - | ||||
See accompanying notes to consolidated financial statements. |
Non-controlling interest assumed through acquisition of Court Programs, Inc., Court Programs of Florida, Inc., Court Programs of Northern Florida, Inc., and Court Programs of Illinois, Inc. | 335,087 | - | ||||
Accrued liabilities issued for Midwest Monitoring & Surveillance ownership | 144,000 | - | ||||
Acquisition of property and equipment through issuance of note payable | 269,037 | 38,991 | ||||
Acquisition of monitoring equipment through issuance of note payable | 30,000 | 2,887,987 | ||||
Debt issued to settle line of credit | - | 3,549,631 | ||||
Forgiveness of debt from related-party debt | - | 79,022 | ||||
Stock issued to settle related-party note payable and accrued interest | - | 218,479 | ||||
Reclassification of monitoring equipment to inventory from recovery of parts | - | 1,450,803 |
(1) | Organization and Nature of Operations |
(2) | Summary of Significant Accounting Policies |
2013 | % | 2012 | % | |||||||||||||
Customer A | $ | 5,252,959 | 34 | % | $ | 2,450,984 | 16 | % | ||||||||
Customer B | $ | 1,622,326 | 10 | % | $ | 1,876,285 | 12 | % |
2013 | % | 2012 | % | |||||||||||||
Customer A | $ | 887,233 | 24 | % | $ | 681,781 | 24 | % | ||||||||
Customer B | $ | 732,163 | 20 | % | $ | 475,800 | 17 | % | ||||||||
Customer C | $ | 892,897 | 24 | % | $ | - | 0 | % |
2010 | 2009 | 2013 | 2012 | |||||||||||||
Raw materials | $ | 392,647 | $ | 686,421 | $ | 615,144 | $ | 822,566 | ||||||||
Reserve for damaged or obsolete inventory | (47,118 | ) | (83,092 | ) | (148,043 | ) | (192,000 | ) | ||||||||
Total inventory, net of reserves | $ | 345,529 | $ | 603,329 | $ | 467,101 | $ | 630,566 |
2010 | 2009 | 2013 | 2012 | |||||||||||||
Equipment, software, tooling, and other fixed assets | $ | 2,595,797 | $ | 2,742,537 | ||||||||||||
Equipment, software and tooling | $ | 2,002,577 | $ | 1,970,327 | ||||||||||||
Automobiles | 334,917 | 305,658 | 33,466 | 33,466 | ||||||||||||
Building | 377,555 | 377,555 | ||||||||||||||
Leasehold improvements | 127,912 | 127,912 | 127,162 | 127,287 | ||||||||||||
Furniture and fixtures | 284,824 | 284,824 | 247,218 | 252,951 | ||||||||||||
Total property and equipment | 3,721,005 | 3,838,486 | ||||||||||||||
Total property and equipment before accumulated depreciation | 2,410,423 | 2,384,031 | ||||||||||||||
Accumulated depreciation | (2,235,683 | ) | (2,525,180 | ) | (2,092,222 | ) | (1,879,540 | ) | ||||||||
Property and equipment, net of accumulated depreciation | $ | 1,485,322 | $ | 1,313,306 | $ | 318,201 | $ | 504,491 |
2010 | 2009 | |||||||
Monitoring equipment | $ | 4,471,665 | $ | 4,260,690 | ||||
Less accumulated depreciation | (2,788,309 | ) | (2,944,197 | ) | ||||
Monitoring Equipment, net | $ | 1,683,356 | $ | 1,316,493 |
2013 | 2012 | |||||||
Monitoring equipment | $ | 2,420,042 | $ | 3,841,876 | ||||
Less: accumulated amortization | (1,183,346 | ) | (669,929 | ) | ||||
Monitoring equipment, net of accumulated depreciation | $ | 1,236,696 | $ | 3,171,947 |
Court Programs, Inc. | Midest Monitoring & Surveillance, Inc. | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Gross carrying amount, beginning of period | $ | - | $ | 2,488,068 | $ | - | $ | 3,026,327 | ||||||||
Additions | - | - | - | - | ||||||||||||
Impairments | - | (2,488,068 | ) | - | (3,026,327 | ) | ||||||||||
Gross carrying amount, end of period | $ | - | $ | - | $ | - | $ | - |
2013 | 2012 | |||||||
United States of America | $ | 7,179,043 | $ | 7,398,627 | ||||
Latin American Countries | 5,252,960 | 2,450,984 | ||||||
Caribbean Countries and Commonwealths | 3,136,908 | 3,217,651 | ||||||
Other Foreign Countries | 72,151 | 47,717 | ||||||
Total | $ | 15,641,062 | $ | 13,114,979 |
Net Property and Equipment | Net Monitoring Equipment | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
United States of America | $ | 318,201 | $ | 504,491 | $ | 878,823 | $ | 2,174,976 | ||||||||
Latin American Countries | - | - | - | 719,171 | ||||||||||||
Caribbean Countries and Commonwealths | - | - | 351,138 | 263,782 | ||||||||||||
Other Foreign Countries | - | - | 6,735 | 14,018 | ||||||||||||
Total | $ | 318,201 | $ | 504,491 | $ | 1,236,696 | $ | 3,171,947 |
2013 | 2012 | |||||||
Conversion of debt and accrued interest and loan origination fees | - | 863,499 | ||||||
Conversion of Series D Preferred stock | 14,040 | 1,462,890 | ||||||
Exercise of outstanding common stock options and warrants | 427,966 | 336,782 | ||||||
Exercise and conversion of outstanding Series D Preferred stock warrants | 162,000 | 162,000 | ||||||
Total common stock equivalents | 604,006 | 2,825,171 |
(3) | Acquisitions |
Midwest Monitoring & Surveillance | Court Programs, Inc. | Total | ||||||||||
Balance as of September 30, 2008 | $ | 3,603,748 | $ | 1,208,086 | $ | 4,811,834 | ||||||
Impairment | (2,343,753 | ) | - | (2,343,753 | ) | |||||||
Balance as of September 30, 2009 | 1,259,995 | 1,208,086 | 2,468,081 | |||||||||
Purchase of remaining 49% ownership of Court Programs, Inc. | - | 1,484,717 | 1,484,717 | |||||||||
Purchase option extension for the remaining 46.855% ownership of Midwest Monitoring & Surveillance | 162,000 | - | 162,000 | |||||||||
Impairment | - | (204,735 | ) | (204,735 | ) | |||||||
Balance as of September 30, 2010 | $ | 1,421,995 | $ | 2,488,068 | $ | 3,910,063 |
Midwest Monitoring & Surveillance | Court Programs, Inc. | Bishop Rock Software | Patent | Total | ||||||||||||||||
Goodwill | $ | 1,421,995 | $ | 2,488,068 | $ | - | $ | - | $ | 3,910,063 | ||||||||||
Other Intangible Assets | ||||||||||||||||||||
Trade name | 120,000 | 99,000 | 10,000 | - | 229,000 | |||||||||||||||
Software | - | - | 380,001 | - | 380,001 | |||||||||||||||
Customer relationships | - | 6,000 | - | - | 6,000 | |||||||||||||||
Patent license agreement | - | - | - | 50,000 | 50,000 | |||||||||||||||
Non-compete agreements | 2,000 | 6,000 | - | - | 8,000 | |||||||||||||||
Total Other Intangible Assets | 122,000 | 111,000 | 390,001 | 50,000 | 673,001 | |||||||||||||||
Accumulated other intangible asset amortization | (24,667 | ) | (28,100 | ) | (217,688 | ) | (3,704 | ) | (274,159 | ) | ||||||||||
Total goodwill and other intangible assets, net of amortization | $ | 1,519,328 | $ | 2,570,968 | $ | 172,313 | $ | 46,296 | $ | 4,308,905 |
Fiscal Year | Midwest Monitoring & Surveillance | Court Programs, Inc. | Bishop Rock Software | Patent | Total | |||||||||||||||
2011 | $ | 8,000 | $ | 7,800 | $ | 127,334 | $ | 5,556 | $ | 148,690 | ||||||||||
2012 | 8,000 | 7,800 | 37,452 | 5,556 | 58,808 | |||||||||||||||
2013 | 8,000 | 6,800 | 667 | 5,556 | 21,023 | |||||||||||||||
2014 | 8,000 | 6,600 | 667 | 5,556 | 20,823 | |||||||||||||||
2015 | 8,000 | 6,600 | 667 | 5,556 | 20,823 | |||||||||||||||
Thereafter | 57,333 | 47,300 | 5,526 | 18,516 | 128,675 | |||||||||||||||
Total | $ | 97,333 | $ | 82,900 | $ | 172,313 | $ | 46,296 | $ | 398,842 |
Borinquen Container Corporation | International Surveillance Services Corp. | Patent | Total | |||||||||||||
Intangible assets: | ||||||||||||||||
Patent license agreement | $ | - | $ | - | $ | - | $ | - | ||||||||
Royalty agreement | 11,616,984 | 5,003,583 | 50,000 | 16,670,567 | ||||||||||||
Total intangible assets | 11,616,984 | 5,003,583 | 50,000 | 16,670,567 | ||||||||||||
Accumulated amortization | (673,374 | ) | (562,903 | ) | (20,370 | ) | (1,256,647 | ) | ||||||||
Intangile assets, net of accumulated amortization | $ | 10,943,610 | $ | 4,440,680 | $ | 29,630 | $ | 15,413,920 |
Borinquen Container Corporation | International Surveillance Services Corp. | Patent | Total | |||||||||||||
Intangible assets: | ||||||||||||||||
Patent license agreement | $ | - | $ | - | $ | - | $ | - | ||||||||
Royalty agreement | 10,768,555 | 5,003,583 | 50,000 | 15,822,138 | ||||||||||||
Total intangible assets | 10,768,555 | 5,003,583 | 50,000 | 15,822,138 | ||||||||||||
Accumulated amortization | - | (312,724 | ) | (14,816 | ) | (327,540 | ) | |||||||||
Intangile assets, net of accumulated amortization | $ | 10,768,555 | $ | 4,690,859 | $ | 35,184 | $ | 15,494,598 |
Fiscal Year | Borinquen Container Corporation | International Surveillance Services Corp. | Patent | Total | ||||||||||||
2014 | $ | 630,792 | $ | 250,179 | $ | 5,556 | $ | 886,527 | ||||||||
2015 | 630,792 | 250,179 | 5,556 | 886,527 | ||||||||||||
2016 | 630,792 | 250,179 | 5,556 | 886,527 | ||||||||||||
2017 | 630,792 | 250,179 | 5,556 | 886,527 | ||||||||||||
2018 | 630,792 | 250,179 | 5,556 | 886,527 | ||||||||||||
Thereafter | 7,789,650 | 3,189,785 | 1,850 | 10,981,285 | ||||||||||||
Total | $ | 10,943,610 | $ | 4,440,680 | $ | 29,630 | $ | 15,413,920 |
Years Ended September 30, | |||||
2010 | 2009 | ||||
Revenues: | |||||
Products | $ 371,214 | $ 570,749 | |||
Monitoring services | 12,079,757 | 12,055,841 | |||
Total revenues | 12,450,971 | 12,626,590 | |||
Cost of revenues: | |||||
Products | (45,131) | ) | (275,688) | ) | |
Monitoring services | (6,933,843) | ) | (9,862,925) | ) | |
Impairment of monitoring equipment and parts | (590,801 | ) | (2,319,530 | ) | |
Total cost of revenues | (7,569,775) | ) | (12,458,143) | ) | |
Gross margin (deficit) | 4,881,196 | 168,447 | |||
Operating expenses: | |||||
Selling, general and administrative | (12,126,413) | ) | (16,701,374) | ) | |
Settlement expense | (1,150,000) | ) | - | ||
Research and development | (1,483,385 | ) | (1,777,873 | ) | |
Impairment of goodwill | (204,735 | ) | (2,804,580 | ) | |
Loss from operations | (10,083,337) | ) | (21,115,380) | ) | |
Other income (expense): | |||||
Loss on disposal of equipment | (41,597 | ) | - | ||
Redemption of SecureAlert Monitoring Series A Preferred stock | (19,095 | ) | 95,816 | ||
Interest income | 23,139 | 18,187 | |||
Interest expense | (4,146,459) | ) | (5,012,803) | ) | |
Derivative valuation gain | 200,534 | 1,867,007 | |||
Other income (loss) | 147,206 | 905,626 | |||
Net loss | (13,919,609) | ) | (23,241,547) | ) | |
Net Loss attributable to non-controlling interest | 60,050 | 88,617 | |||
Net loss | (13,859,559) | ) | (23,152,930) | ) | |
Dividends on Preferred stock | (1,494,481 | ) | (175) | ) | |
Net loss attributable to common stockholders | $ (15,354,040) | ) | $ (23,153,105) | ) | |
Net loss per common share – basic and diluted | $ (0.07) | ) | $ (0.13) | ) | |
Weighted average common shares outstanding – basic and diluted | 227,246,000 | 182,063,000 | |||
Accrued Expenses |
2013 | 2012 | |||||||
Accrued royalties | $ | 714,400 | $ | 641,446 | ||||
Accrued payroll, taxes and employee benefits | 473,179 | 540,931 | ||||||
Accrued consulting | 317,300 | 352,072 | ||||||
Accrued taxes - foreign and domestic | 262,880 | 262,440 | ||||||
Accrued settlement costs | 76,000 | 50,000 | ||||||
Accrued board of directors fees | 68,090 | 265,000 | ||||||
Accrued other expenses | 65,903 | 183,722 | ||||||
Accrued legal costs | 57,001 | 14,628 | ||||||
Accrued cellular costs | 55,000 | 27,662 | ||||||
Accrued outside services | 33,022 | 38,630 | ||||||
Accrued warranty and manufacturing costs | 30,622 | 30,622 | ||||||
Accrued interest | 27,394 | 27,831 | ||||||
Accrued cost of revenues | - | 4,467 | ||||||
Total accrued expenses | $ | 2,180,791 | $ | 2,439,451 |
(5) | Certain Relationships and Related Transactions |
2010 | 2009 | |||||||
Accrued payroll, taxes and employee benefits | $ | 536,501 | $ | 561,898 | ||||
Accrued related-party origination fees | 344,370 | - | ||||||
Accrued consulting | 304,025 | 436,054 | ||||||
Accrued interest | 219,791 | 382,424 | ||||||
Accrued warranty and manufacturing costs | 138,622 | 246,622 | ||||||
Accrued outside services | 68,730 | 38,132 | ||||||
Accrued acquisition extension costs | 48,000 | 42,000 | ||||||
Accrued indigent fees | 45,434 | 34,130 | ||||||
Accrued legal and settlement costs | 38,111 | 80,208 | ||||||
Accrued patent liability (see Note 3) | 32,550 | - | ||||||
Accrued administration fees | 25,000 | - | ||||||
Accrued board of directors fees | 25,000 | 300,000 | ||||||
Accrued cellular costs | 6,366 | 27,144 | ||||||
Accrued research and development costs | 2,993 | 45,000 | ||||||
Accrued foreclosure liability (see Note 6) | - | 775,000 | ||||||
Accrued officer compensation | - | 492,280 | ||||||
Accrued commissions and other costs | 68,802 | 45,788 | ||||||
Total accrued expenses | $ | 1,904,295 | $ | 3,506,680 |
2013 | 2012 | |||||||
Note payable in connection with the redemption of a royalty agreement for $10,768,555. The note required installment payments and was paid off by the proceeds of the Loan. | $ | - | $ | 10,050,027 | ||||
Note payable in connection with the purchase of the remaining ownership of Court Programs, Inc., interest at 12% per annum, with monthly payments of $10,000. This note was assumed through the sale of Court Programs, Inc. | - | 46,693 | ||||||
Note payable from a shareholder and former officer. This was converted into 111,112 shares of common stock. | - | 500,000 | ||||||
Convertible debenture from a director with an interest rate of 8% per annum. The debenture matured December 17, 2012 and was secured by the domestic patents. The debenture and accrued interest was converted into 117,784 shares of common stock. | - | 500,000 | ||||||
Convertible debenture with a significant shareholder with an interest rate of 8% per annum. The debenture matured December 17, 2012 and was secured by the domestic patents. The debenture and accrued interest was converted into 472,548 shares of common stock. | - | 2,000,000 | ||||||
Convertible debenture of $16,700,000 from a shareholder with an interest rate of 8% per annum. The debenture matured on August 14, 2014. On September 30, 2013, $16,640,000 plus accrued interest of $936,627 was converted into 3,905,917 shares of common stock. A debt discount of $14,296,296 and $605,281, respectively, was recorded to reflect a beneficial conversion feature. As of September 30, reflect a beneficial conversion feature. As of September 30, 2013, the remaining debt discount was $0. The remaining balance of $60,000 plus accured interest of $3,143 was paid in cash on October 3, 2013. | 60,000 | 1,288,693 | ||||||
Total related-party debt obligations | 60,000 | 14,385,413 | ||||||
Less current portion | (60,000 | ) | (12,654,701 | ) | ||||
Long-term debt, net of current portion | $ | - | $ | 1,730,712 |
September 30, | ||||||||
2010 | 2009 | |||||||
SecureAlert Monitoring, Inc. | ||||||||
Notes payable for testing equipment with an interest rate of 8%. The notes are secured by testing equipment. The notes mature in June 2011 and December 2011. | $ | 17,609 | $ | 12,228 | ||||
Capital leases with effective interest rates that range between 9.58% and 17.44% that mature from December 2012 to September 2013. | 114,388 | - | ||||||
Unsecured note payable with an interest rate of 12%. The note was paid off during fiscal year ended 2010. | - | 8,728 | ||||||
SecureAlert, Inc. | ||||||||
Unsecured promissory note with an entity bearing an interest rate of 15%. During the fiscal year 2010, the note was exchanged into Series D Preferred stock. | - | 474,335 | ||||||
Secured promissory note with an individual with an interest rate of 12%. The note matures on July 13, 2011. | 499,631 | - | ||||||
Settlement liability from patent infringement suit and countersuit settled in February 2010. The liability will be paid quarterly through September 2012. | 887,500 | - | ||||||
Court Programs, Inc. | ||||||||
Note payable due to the Small Business Administration (“SBA”). Note bears interest at 6.04% and matures April 2037. The note is secured by monitoring equipment. | 220,156 | 225,000 | ||||||
Unsecured revolving line of credit with a bank with an effective interest rate of 9.24%. As of September 30, 2010, $45,652 was available for withdrawal under the line of credit. | 12,348 | 16,500 | ||||||
Automobile loan with a financial institution secured by the vehicle. Interest rate is 7.09% and is due in June 2014. | 24,994 | 30,751 | ||||||
Unsecured note payable with an interest rate of 8%. | - | 1,492 | ||||||
Capital leases with effective interest rates that range between 14.12% and 14.89% that mature in January 2011 through November 2011. | 26,629 | 14,898 | ||||||
Midwest Monitoring & Surveillance, Inc. | ||||||||
Unsecured revolving line of credit with a bank, with an interest rate of 9.25%. As of September 30, 2010, $10,257 was available for withdrawal under the line of credit. | 39,743 | 39,224 | ||||||
Notes payable to a financial institution bearing interest at 4.51%. Notes mature in July 2011 through July 2016. The notes are secured by property. | 116,328 | 185,274 | ||||||
Notes payable for monitoring equipment. Interest rates range between 7.8% to 18.5% and mature September 2008 through November 2011. The notes are secured by monitoring equipment. | 5,174 | 57,344 |
Automobile loans with several financial institutions secured by the vehicles. Interest rates range between 6.9% and 8.5%, due between January 2010 and July 2015. | 126,905 | 42,463 | ||||||||||||||
2013 | 2012 | |||||||||||||||
Note payable to a stockholder of Midwest. During the fiscal year ended 2010, the note was paid off. | - | 47,704 | ||||||||||||||
Capital leases with effective interest rates that range between 12.9% and 14.7%. Leases mature between June 2014 and September 2014. | 102,982 | 126,158 | ||||||||||||||
Settlement liability from patent infringement suit and countersuit settled in February 2010. The liability was paid in March 2013. | $ | - | $ | 200,000 | ||||||||||||
Note issued in connection with the acquisition of a subsidiary and matures in December 2014. | 64,111 | 94,459 | ||||||||||||||
Capital leases with effective interest rates that range between 8.51% and 17.44%. Leases mature between August 2013 and November 2015. $154,410 was assumed through the sale of Midwest Monitoring & Surveillance, Inc. to its former owners. | 59,266 | 118,098 | ||||||||||||||
Automobile loan with a financial institution secured by the vehicle. Interest rate is 7.06%, due June 2014. $125,614 was assumed through the sale of Midwest Monitoring & Surveillance, Inc. to its former owners. | 5,306 | 12,274 | ||||||||||||||
Total debt obligations | 2,194,387 | 1,282,099 | 128,683 | 424,831 | ||||||||||||
Less current portion | (1,133,969 | ) | (272,493 | ) | (88,095 | ) | (339,151 | ) | ||||||||
Long-term debt, net of current portion | $ | 1,060,418 | $ | 1,009,606 | $ | 40,588 | $ | 85,680 |
Fiscal Year | Total | |||
2014 | $ | 88,095 | ||
2015 | 38,945 | |||
2016 | 1,643 | |||
Thereafter | - | |||
Total | $ | 128,683 |
Fiscal Year | Total | SecureAlert | SecureAlert Monitoring | Midwest Monitoring | Court Programs | |||||||||||||||
2011 | $ | 1,133,969 | $ | 899,631 | $ | 52,540 | $ | 146,321 | $ | 35,477 | ||||||||||
2012 | 494,517 | 350,000 | 46,318 | 75,255 | 22,944 | |||||||||||||||
2013 | 264,878 | 137,500 | 33,138 | 80,524 | 13,716 | |||||||||||||||
2014 | 73,165 | - | - | 62,623 | 10,542 | |||||||||||||||
2015 | 31,630 | - | - | 26,411 | 5,219 | |||||||||||||||
Thereafter | 196,228 | - | - | - | 196,228 | |||||||||||||||
Total | $ | 2,194,387 | $ | 1,387,131 | $ | 131,996 | $ | 391,134 | $ | 284,126 |
Fiscal Year | Total | SecureAlert Monitoring | Midwest Monitoring | Court Programs | ||||||||||||
September 30, | ||||||||||||||||
2011 | $ | 105,153 | $ | 50,488 | $ | 38,354 | $ | 16,311 | ||||||||
2012 | 101,024 | 50,488 | 38,354 | 12,182 | ||||||||||||
2013 | 75,527 | 35,143 | 38,354 | 2,030 | ||||||||||||
2014 | 15,548 | - | 15,548 | - | ||||||||||||
Thereafter | - | - | - | - | ||||||||||||
Total minimum lease payments | 297,252 | 136,119 | 130,610 | 30,523 | ||||||||||||
Less: amount representing interest | (53,255 | ) | (21,731 | ) | (27,629 | ) | (3,895 | ) | ||||||||
Present value of net minimum lease payments | 243,997 | 114,388 | 102,981 | 26,628 | ||||||||||||
Less: Current portion | (77,571 | ) | (38,168 | ) | (25,804 | ) | (13,599 | ) | ||||||||
Obligation under capital leases – long-term | $ | 166,426 | $ | 76,220 | $ | 77,177 | $ | 13,029 |
Fiscal Year | Total | |||
2014 | $ | 36,419 | ||
2015 | 27,721 | |||
2016 | 1,722 | |||
2017 | - | |||
Thereafter | - | |||
Total minimum lease payments | 65,862 | |||
Less: amount representing interest | (6,596 | ) | ||
Present value of net minimum lease payments | 59,266 | |||
Less: current portion | (31,576 | ) | ||
Obligation under capital leases - long-term | $ | 27,690 |
Common Stock |
Stock Options and Warrants |
Fiscal Years Ended | ||||||||
September 30, | ||||||||
2013 | 2012 | |||||||
Expected cash dividend yield | - | - | ||||||
Expected stock price volatility | 108 | % | 95 | % | ||||
Risk-free interest rate | 0.18 | % | 0.36 | % | ||||
Expected life of options | 1.38 Years | 2 Years |
Fiscal years Ended September 30, | ||||
2010 | 2009 | |||
Expected cash dividend yield | - | - | ||
Expected stock price volatility | 119 % | 124 % | ||
Risk-free interest rate | 1.65 % | 0.98 % | ||
Expected life of options | 5 years | 5 years |
Shares Under Option | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | ||||||
Outstanding as of September 30, 2008 | 21,725,451 | $ | 1.48 | ||||||
Granted | 4,931,214 | $ | 0.25 | ||||||
Expired | (1,408,500 | ) | $ | 1.95 | |||||
Outstanding as of September 30, 2009 | 25,248,165 | $ | 1.16 | ||||||
Granted | 11,262,286 | $ | 0.14 | ||||||
Expired | (8,770,000 | ) | $ | 1.73 | |||||
Outstanding as of September 30, 2010 | 27,740,451 | $ | 0.36 | 1.94 years | $ | 28,991 | |||
Exercisable as of September 30, 2010 | 21,177,320 | $ | 0.40 | 1.98 years | $ | 28,991 | |||
Shares Under Option | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | ||||||||||
Outstanding as of September 30, 2011 | 495,891 | $ | 26.00 | ||||||||||
Granted | 54,500 | $ | 18.00 | ||||||||||
Expired | (213,609 | ) | $ | 22.00 | |||||||||
Outstanding as of September 30, 2012 | 336,782 | $ | 28.00 | ||||||||||
Granted | 143,937 | $ | 11.18 | ||||||||||
Expired / Cancelled | (52,754 | ) | $ | 76.97 | |||||||||
Outstanding as of September 30, 2013 | 427,965 | $ | 16.12 | 1.38 years | $ | 1,802,008.18 | |||||||
Exercisable as of September 30, 2013 | 392,939 | $ | 16.75 | 1.36 years | $ | 1,435,627.07 |
(10) Income Taxes |
Fiscal Years Ended | ||||||||
September 30, | ||||||||
2013 | 2012 | |||||||
Net loss carryforwards | $ | 72,700,000 | $ | 72,200,000 | ||||
Accruals and reserves | 247,000 | 529,000 | ||||||
Contributions | 8,000 | 6,000 | ||||||
Depreciation | 42,000 | 26,000 | ||||||
Stock-based compensation | 5,880,000 | 5,768,000 | ||||||
Valuation allowance | (78,877,000 | ) | (78,529,000 | ) | ||||
Total | $ | - | $ | - |
2010 | 2009 | |||||||
Net loss carryforwards | $ | 64,582,000 | $ | 59,401,000 | ||||
Accruals and reserves | 63,000 | 111,000 | ||||||
Contributions | 6,000 | 1,000 | ||||||
Stock-based compensation | 339,000 | 265,000 | ||||||
Valuation allowance | (64,990,000 | ) | (59,778,000 | ) | ||||
Total deferred income tax assets (liabilities) | $ | - | $ | - |
2010 | 2009 | |||||||
Federal income tax benefit at statutory rate | $ | 4,687,000 | $ | 7,799,000 | ||||
State income tax benefit, net of federal income tax effect | 455,000 | 757,000 | ||||||
Change in estimated tax rate and gain (loss) on non-deductible expenses | 70,000 | 644,000 | ||||||
Change in valuation allowance | (5,212,000 | ) | (9,200,000 | ) | ||||
Benefit for income taxes | $ | - | $ | - |
Fiscal Years Ended | ||||||||
September 30, | ||||||||
2013 | 2012 | |||||||
Federal income tax benefit at statutory rate | $ | 6,091,000 | $ | 5,936,000 | ||||
State income tax benefit, net of federal income tax effect | 591,000 | 576,000 | ||||||
Change in estimated tax rate and gain (loss) on non-deductible expenses | (5,556,000 | ) | (2,068,000 | ) | ||||
Loss of operating losses for entities sold | (778,000 | ) | - | |||||
Change in valuation allowance | (348,000 | ) | (4,444,000 | ) | ||||
Benefit for income taxes | $ | - | $ | - |
Fiscal Year | Total | |||
2014 | $ | 237,580 | ||
2015 | 34,721 | |||
Thereafter | - | |||
Total | $ | 272,301 |
Fiscal Year | Total | SecureAlert | Midwest Monitoring | Court Programs | ||||||||||||
2011 | $ | 416,753 | $ | 274,095 | $ | 27,771 | $ | 114,887 | ||||||||
2012 | 378,986 | 278,991 | 22,473 | 77,522 | ||||||||||||
2013 | 303,853 | 269,922 | 8,075 | 25,856 | ||||||||||||
2014 | 76,618 | 60,564 | 454 | 15,600 | ||||||||||||
2015 | 15,600 | - | - | 15,600 | ||||||||||||
Thereafter | - | - | - | - | ||||||||||||
Total | $ | 1,191,810 | $ | 883,572 | $ | 58,773 | $ | 249,465 |
The following is a summary of the operating results of discontinued operations for the fiscal years ended September 30, 2013 and 2012:
(13) Subsequent Events |
1) | The Company issued to directors for services rendered during the fourth fiscal quarter ended September 30, 2013, warrants to purchase 6,840 shares of Common Stock with an exercise price of $19.46 per share, valued at the date of grant at $53,091 using the Black-Scholes model. |
2) |
3) | The Company issued 760 shares of common stock to several directors for services rendered, valued at $15,000. |
4) | The Company issued 500 shares of common stock to a consultant from the exercise of warrants with an exercise price of $16.00 per share which provided cash proceeds to the Company of $8,000. |
5) | The Company issued 4,700 shares of common stock to an officer upon the cashless exercise of warrants with exercise prices ranging from $15.00 to $16.66 per share. |
6) | The Company entered into an Employment Agreement with its Chief Financial Officer. The term of this agreement commenced on November 14, 2013 and continues until the earlier of (i) 30 days following the closing of an acquisition of or by the Company; or (ii) November 13, 2014. Thereafter, the agreement will be reviewed and renewed upon the mutual agreement by the parties. If Mr. Olsen’s employment terminates as a result of an involuntary termination other than for cause or at the end of the term of the agreement, he will be entitled to receive separation benefits which include payment of salary of $192,000 paid over a 120-day period and other benefits as outlined in the agreement. In addition, Mr. Olsen and the Company agreed that he may convert his Series D Preferred shares into common stock at a rate of 155% of each share’s original investment; provided that Mr. Olsen must convert all of his Series D Preferred shares before the next annual shareholder meeting of the Company. |
7) | On November 15, 2013, the Company entered into a 41-month agreement with the Gendarmeria de Chile (the Republic of Chile’s uniformed prison service) to provide electronic (GPS and residential) monitoring of offenders and other services to the Chilean government. The agreement calls for the Company to put into service up to 9,400 electronic monitoring (GPS) devices over the contract. The Company was required under the agreement, to post a performance bond in the amount of $3,382,082 U.S. Dollars. In addition, the Company will design and construct a real-time monitoring and data center to be staffed by Chilean government employees. Training from the monitoring center personnel will also be provided by the Company. The maximum sum to be paid for the services provided by the Company is approximately $70,000,000 U.S. Dollars, at current exchange rates, over the term of the agreement. |
8) | The Company drew down an advance of $1,200,000 from a line-of-credit to be used with other available cash on hand to issue a bond for an international customer in the amount of $3,382,082. |
9) | The Company borrowed $1,500,000 from a shareholder for working capital. The unsecured loan bears interest at a rate of 8% per annum and matures on November 18, 2014. |
10) | On December 17, 2013, the Company filed a claim in the United States District Court, District of Utah, Central Division against STOP, LLC seeking declaratory relief and other claims related to a Settlement Agreement entered into by and between the Company and STOP, effective January 29, 2010. The complaint was filed under seal and is not publicly available. The Company believes the relief sought in the case is warranted based on the language and intent of the parties and we will pursue the matter vigorously. |
11) |
12) | On January 3, 2014, the Company entered into an unsecured Facility Agreement with Tetra House Pte. Ltd., a related-party entity, controlled by the Company’s Chairman, Guy Dubois. Under this agreement, the Company may borrow up to $25,000,000 for working capital and acquisitions purposes. The loan bears interest at a rate of |