Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2018 | Dec. 14, 2018 | Mar. 31, 2018 | |
Document and Entity Information: | |||
Entity Registrant Name | TRACK GROUP, INC. | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2018 | ||
Amendment Flag | false | ||
Entity Central Index Key | 1,045,942 | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 3,100,000 | ||
Entity Common Stock, Shares Outstanding | 11,401,650 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Current assets: | ||
Cash | $ 5,446,557 | $ 2,027,321 |
Accounts receivable, net of allowance for doubtful accounts of $3,387,699 and $3,268,095, respectively | 5,978,896 | 5,673,297 |
Notes receivable, current portion | 0 | 0 |
Prepaid expenses and other | 1,270,043 | 854,122 |
Inventory, net of reserves of $26,934, respectively | 277,119 | 261,810 |
Total current assets | 12,972,615 | 8,816,550 |
Property and equipment, net of accumulated depreciation of $1,999,222 and $1,778,634, respectively | 745,475 | 903,100 |
Monitoring equipment, net of accumulated amortization of $5,325,654 and $4,906,925, respectively | 3,162,542 | 3,493,012 |
Intangible assets, net of accumulated amortization of $12,016,512 and $9,839,032, respectively | 23,253,054 | 24,718,655 |
Goodwill | 8,076,759 | 8,226,714 |
Other assets | 145,839 | 2,989,101 |
Total assets | 48,356,284 | 49,147,132 |
Current liabilities: | ||
Accounts payable | 2,518,030 | 2,769,835 |
Accrued liabilities | 10,333,103 | 6,650,291 |
Current portion of long-term debt, net of discount of $0 and $185,811, respectively | 30,437,810 | 30,270,531 |
Total current liabilities | 43,288,943 | 39,690,657 |
Long-term debt, net of current portion | 3,428,975 | 3,480,717 |
Total liabilities | 46,717,918 | 43,171,374 |
Stockholders' equity: | ||
Common stock, $0.0001 par value: 30,000,000 shares authorized; 11,401,650 and 10,480,984 shares outstanding, respectively | 1,140 | 1,048 |
Paid in capital | 302,102,866 | 300,717,861 |
Accumulated deficit | (299,495,370) | (294,067,329) |
Accumulated other comprehensive loss | (970,270) | (675,822) |
Total equity | 1,638,366 | 5,975,758 |
Total liabilities and stockholders' equity | $ 48,356,284 | $ 49,147,132 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts, accounts receivable | $ 3,152,966 | $ 3,033,362 |
Allowance for doubtful accounts, note receivable | 234,733 | |
Inventory reserve | 26,934 | 26,934 |
Property and equipment accumulated depreciation | 1,999,222 | 1,778,634 |
Monitoring equipment accumulated amortization | 5,325,654 | 4,906,925 |
Intangible assets accumulated amortization | 12,016,512 | 9,839,032 |
Current portion of long-term debt discount | $ 0 | $ 185,811 |
Common stock - par value | $ 0.0001 | $ 0.0001 |
Common stock - shares authorized | 30,000,000 | 30,000,000 |
Common stock - shares outstanding | 11,401,650 | 10,480,984 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||
Monitoring and other related services | $ 29,943,563 | $ 28,887,460 |
Other | 626,656 | 839,558 |
Total revenues | 30,570,219 | 29,727,018 |
Cost of revenues: | ||
Monitoring and other related service | 11,511,341 | 11,997,031 |
Depreciation and amortization included in cost of revenue | 1,856,734 | 2,128,668 |
Total cost of revenue | 13,368,075 | 14,125,699 |
Gross profit | 17,202,144 | 15,601,319 |
Operating expenses: | ||
General & administrative | 13,983,924 | 12,216,041 |
(Gain) / loss on sale of asset | (8,500) | 763,531 |
Restructuring costs | 0 | 558,833 |
Impairment of intangible assets | 0 | 506,413 |
Selling & marketing | 1,895,452 | 2,311,725 |
Research & development | 862,142 | 1,784,867 |
Depreciation & amortization | 2,120,746 | 2,332,217 |
Total operating expense | 18,853,764 | 20,473,627 |
Loss from operations | (1,651,620) | (4,872,308) |
Other income (expense): | ||
Interest income | 242,973 | 20,086 |
Interest expense | (3,004,983) | (2,820,924) |
Currency exchange rate gain (loss) | (445,426) | 223,475 |
Gain on settlement of milestone payments | 0 | 3,213,940 |
Other income/expense, net | 23,740 | 11,556 |
Total other income (expense) | (3,183,696) | 648,133 |
Net loss before income taxes | (4,835,316) | (4,224,175) |
Income tax expense | 592,725 | 501,651 |
Net loss attributable to common stockholders | (5,428,041) | (4,725,826) |
Foreign currency translation adjustments | (294,719) | 169,492 |
Comprehensive Loss | $ (5,722,760) | $ (4,556,334) |
Net loss per common share, basic and diluted | $ (0.51) | $ (0.45) |
Weighted average common shares outstanding, basic and diluted | 10,732,523 | 10,408,870 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
Beginning Balance, Shares at Sep. 30, 2016 | 10,333,516 | ||||
Beginning balance, Amount at Sep. 30, 2016 | $ 1,034 | $ 298,876,399 | $ (289,341,503) | $ (845,314) | $ 8,690,616 |
Modification of warrants | 790,313 | 790,313 | |||
Recognition of milestone achievement services, Shares | 10,602 | ||||
Recognition of milestone achievement services, Amount | $ 1 | 75,937 | 75,938 | ||
Common shares issued upon vesting of restricted stock, Shares | 42,026 | ||||
Common shares issued upon vesting of restricted stock, Amount | $ 4 | 167,281 | 167,285 | ||
Board of director fees, Shares | 94,840 | ||||
Board of director fees, Amount | $ 9 | 464,991 | 465,000 | ||
Issuance of common stock warrants for Board of Director fees | 75,000 | 75,000 | |||
Amortization of equity-based compensation granted to employees | 267,940 | 267,940 | |||
Foreign currency translation adjustments | 169,492 | 169,492 | |||
Net Loss | (4,725,826) | (4,725,826) | |||
Ending Balance, Shares at Sep. 30, 2017 | 10,480,984 | ||||
Ending Balance, Amount at Sep. 30, 2017 | $ 1,048 | 300,717,861 | (294,067,329) | (675,822) | 5,975,758 |
Modification of warrants | 162,418 | 162,418 | |||
Cancellation of Common Stock issued to Board Member | (18,551) | ||||
Cancellation of Common Stock issued to Board Member | $ (2) | 2 | |||
Services, Shares | 672,859 | ||||
Services, Amount | $ 67 | 638,848 | 638,915 | ||
Board of director fees, Shares | 266,358 | ||||
Board of director fees, Amount | $ 27 | 364,696 | 364,723 | ||
Issuance of common stock warrants for Board of Director fees | 75,000 | 75,000 | |||
Amortization of equity-based compensation granted to employees | 144,041 | 144,041 | |||
Foreign currency translation adjustments | (294,448) | (294,448) | |||
Net Loss | (5,428,041) | (5,428,041) | |||
Ending Balance, Shares at Sep. 30, 2018 | 11,401,650 | ||||
Ending Balance, Amount at Sep. 30, 2018 | $ 1,140 | $ 302,102,866 | $ (299,495,370) | $ (970,270) | $ 1,638,366 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (5,428,041) | $ (4,725,826) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 3,977,480 | 4,460,885 |
Impairment of intangible assets | 0 | 506,413 |
Bad debt expense | 182,045 | 1,048,737 |
Accretion of debt discount | 185,811 | 222,973 |
Stock based compensation | 1,719,844 | 1,140,520 |
(Gain) / loss on disposal of property and equipment | (8,500) | 763,531 |
Gain on settlement of milestone payments | 0 | (3,213,940) |
Loss on monitoring equipment included on cost of sales | 390,098 | 569,371 |
Change in assets and liabilities: | ||
Accounts receivable, net | (556,160) | 583,694 |
Inventories | 0 | 260,041 |
Prepaid expenses and other assets | 2,187,162 | (433,978) |
Accounts payable, accured expense and other | 3,380,853 | 2,965,365 |
Net cash provided by operating activities | 6,030,592 | 4,147,786 |
Cash flow from investing activities: | ||
Purchases of property and equipment | (154,373) | (84,749) |
Capitalized software | (1,083,745) | (2,416,804) |
Purchases of monitoring equipment and parts | (1,305,586) | (1,838,779) |
Proceeds from sale of assets | 8,500 | 512,500 |
Net cash used in investing activities | (2,535,204) | (3,827,832) |
Cash flow from financing activities: | ||
Principal payments on notes payable | (66,252) | (67,775) |
Net cash provided by (used in) financing activities | (66,252) | (67,775) |
Effect of exchange rate changes on cash | (9,900) | 5,221 |
Net increase in cash | 3,419,236 | 257,400 |
Cash, beginning of year | 2,027,321 | 1,769,921 |
Cash, end of year | 5,446,557 | 2,027,321 |
Cash paid for interest | $ 226,079 | $ 22,456 |
Supplemental schedule of non-cash investing and financing activities: | ||
Issuance of warrants for accrued Board of Director fees | 75,000 | 100,000 |
Issuance of common shares in recognition of certain milestone achievements | $ 0 | $ 75,937 |
Non-cash transfer of inventory to monitoring equipment | $ 305,481 | $ 487,544 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | General The Company’s business is based on the leasing of patented tracking and monitoring solutions to federal, state and local law enforcement agencies, both in the U.S. and abroad, for the electronic monitoring of offenders and offering unique data analytics services on a platform-as-a-service (PaaS) business model. Currently, the Company deploys offender based management services that combine patented GPS tracking technologies, full-time 24/7/365 global monitoring capabilities, case management, and proprietary data analytics. The Company offers customizable tracking solutions that leverage real-time tracking data, best-practices monitoring, and analytics capabilities to create complete, end-to-end tracking solutions. Business Condition. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Principles of Consolidation The consolidated financial statements include the accounts of Track Group, Inc. and its subsidiaries, Track Group Analytics Limited, Track Group Americas, Inc., Track Group International LTD., and Track Group - Chile SpA. All significant inter-company transactions have been eliminated in consolidation. Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the period presented. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, allowances for doubtful accounts, certain assumptions related to the recoverability of intangible and long-lived assets. Business Combinations Business combinations are accounted for under the provisions of ASC 805-10, Business Combinations Goodwill represents costs in excess of purchase price over the fair value of the assets of businesses acquired, including other identifiable intangible assets. Foreign Currency Translation The Chilean Peso, New Israeli Shekel and the Canadian Dollar are used as functional currencies of the operating subsidiaries: (i) Track Group Chile SpA; (ii) Track Group International Ltd.; and (iii) Track Group Analytics Limited, respectively. The balance sheets of all subsidiaries have been converted into United States Dollars (“ USD Other Intangible Assets Other intangible assets principally consist of patents, royalty purchase agreements, developed technology acquired, customer relationships, trade name, capitalized software development costs, and capitalized website development costs. The Company accounts for other intangible assets in accordance with generally accepted accounting principles and does not amortize intangible assets with indefinite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, which range from three to twenty years. Intangible assets are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate possible impairment. Fair Value of Financial Investments The carrying amounts reported in the accompanying consolidated financial statements for accounts receivable, accounts payable, accrued liabilities and debt obligations approximate fair values because of the immediate or short-term maturities of these financial instruments. The carrying amounts of our debt obligations approximate fair value as the interest rates approximate market interest rates. Concentration of Credit Risk In the normal course of business, the Company provides credit terms to its customers and requires no collateral. Accordingly, the Company performs credit evaluations of our customers' financial condition. The Company had sales to entities, two of which represented more than 10% of gross revenue, as follows for the years ended September 30, 2018 and 2017. 2018 % 2017 % Customer A $ 9,201,502 30 % $ 8,747,338 29 % Customer B $ 3,772,540 12 % $ 3,743,508 13 % Customer C $ 2,468,472 8 % $ 2,326,318 8 % No other customer represented more than 10% of the Company’s total revenue for the fiscal years ended September 30, 2018 or 2017. Concentration of credit risk associated with the Company’s total and outstanding accounts receivable as of September 30, 2018 and 2017, respectively, are shown in the table below: 2018 % 2017 % Customer A $ 1,689,976 29 % $ 1,657,316 30 % Customer B $ 594,626 10 % $ 641,973 12 % Customer C $ 428,560 7 % $ 394,253 7 % Based upon the expected collectability of our accounts receivable, the Company maintains an allowance for doubtful accounts. Cash Equivalents Cash equivalents consist of investments with original maturities to the Company of three months or less. The Company has cash in bank accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company had $2,900,105 and $1,445,364 of cash deposits in excess of federally insured limits as of September 30, 2018 and 2017, respectively. Accounts Receivable Accounts receivable, which is made up of trade receivables for monitoring and other related services, are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. The allowance is estimated by management based on certain assumptions and variables, including the customer’s financial condition, age of the customer’s receivables and changes in payment histories. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when cash is received. A trade receivable is considered to be past due if any portion of the receivable balance has not been received by the Company within its normal terms. Interest income is not recorded on trade receivables that are past due, unless that interest is collected. Note Receivable Notes receivable are carried at the face amount of each note plus respective accrued interest receivable, less received payments. The Company does not typically carry notes receivable in the course of its regular business, but entered into an agreement with one of its customers during the fiscal year ended September 30, 2012. Payments under the note are recorded as they are received and are immediately offset against any outstanding accrued interest before they are applied against the outstanding principal balance on the respective note. The note requires monthly payments of $15,000, and matured in May 2014. The note is currently in default and accrues interest at a rate of 17% per annum. As of June 30, 2016, the Company no longer accrues interest on the note. As of September 30, 2018, the outstanding balance of the note was $120,824 of principal and $113,909 of accrued interest, which are both fully reserved. Prepaid expense and other The carrying amounts reported in the balance sheet for prepaid expense and other current assets approximate their fair market value based on the short-term maturity of these assets. Prepaid assets and other is comprised largely of performance bond deposits, tax deposits, vendor deposits and other prepaid supplier expenses. We generally expect deposits to be returned to the Company as cash within 12 months and prepaid expenses to be allocated over the commitment. Inventory Inventory is valued at the lower of the cost or net realizable value. Cost is determined using the standard costing method. Net realizable value is determined based on the item selling price. Inventory is periodically reviewed in order to identify obsolete or damaged items or impaired values. The Company did not record impairment of inventory during the fiscal years ended September 30, 2018 and 2017, respectively. Inventory consists of finished goods that are to be shipped to customers and parts used for minor repairs of ReliAlert™, Shadow, and other tracking devices. Completed and shipped ReliAlert™ and other tracking devices are reflected in Monitoring Equipment. As of September 30, 2018 and September 30, 2017, respectively, inventory consisted of the following: 2018 2017 Finished goods inventory $ 304,053 $ 288,744 Reserve for damaged or obsolete inventory (26,934 ) (26,934 ) Total inventory, net of reserves $ 277,119 $ 261,810 The Company uses a third-party fulfillment service provider. As a result of this service, the Company’s employees do not assemble, repair or process inventory or monitoring equipment being shipped directly from suppliers. Purchases of monitoring equipment are recognized directly. Management believes this process reduces maintenance and fulfillment costs associated with inventory and monitoring equipment. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are determined using the straight-line method over the estimated useful lives of the assets, typically three to seven years. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the term of the lease. Expenditures for maintenance and repairs are expensed while renewals and improvements are capitalized. Property and equipment consisted of the following as of September 30, 2018 and 2017, respectively: 2018 2017 Equipment, software and tooling $ 1,074,471 $ 1,028,081 Automobiles 6,153 52,230 Leasehold improvements 1,358,984 1,307,802 Furniture and fixtures 305,089 293,621 Total property and equipment before accumulated depreciation 2,744,697 2,681,734 Accumulated depreciation (1,999,222 ) (1,778,634 ) Property and equipment, net of accumulated depreciation $ 745,475 $ 903,100 Property and equipment to be disposed of is reported at the lower of the carrying amount or fair value, less the estimated costs to sell and any gains or losses are included in the results of operations. During the fiscal years ended September 30, 2018 and 2017, the Company recognized an $8,500 gain and $0 gain, respectively on the disposal of property and equipment. Internally developed software costs related to the Company’s monitoring platform are recorded as intangible assets on the Consolidated Balance Sheet. See Note 14. Depreciation expense recognized for property and equipment for the fiscal years ended September 30, 2018 and 2017 was $348,162 and $366,124, respectively. Monitoring Equipment The Company leases monitoring equipment to agencies for offender tracking under contractual service agreements. The monitoring equipment is depreciated using the straight-line method over an estimated useful life of between one and five years. Monitoring equipment as of September 30, 2018 and 2017 is as follows: 2018 2017 Monitoring equipment $ 8,488,196 $ 8,399,937 Less: accumulated amortization (5,325,654 ) (4,906,925 ) Monitoring equipment, net of accumulated depreciation $ 3,162,542 $ 3,493,012 Amortization expense for the fiscal years ended September 30, 2018 and 2017 was $1,360,753 and $1,678,668, respectively. This expense was classified as a cost of revenue. Monitoring equipment to be disposed of is reported at the lower of the carrying amount or fair value, less the estimated costs to sell. As part of the sale of assets described in Note 4, the Company disposed of $771,568 of monitoring equipment and $361,463 of related accumulated amortization in the year ended September 30, 2017. During the fiscal years ended September 30, 2018 and 2017, the Company disposed of leased monitoring equipment and parts of $390,098 and $569,371, respectively. Impairment of Long-Lived Assets and Goodwill The Company reviews long-lived assets for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable, and in the case of goodwill, at least annually. The Company evaluates whether events and circumstances have occurred which indicate possible impairment as of each balance sheet date. If the carrying amount of an asset exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there is an identifiable fair value that is independent of other groups of assets. See Note 14. Revenue Recognition Our revenue is predominantly derived from two sources: (i) monitoring services, and (ii) product sales. Monitoring Services Monitoring services include two components: (a) lease contracts pursuant to which the Company provides monitoring services and leases devices to distributors or end users and the Company retains ownership of the leased device; and (b) monitoring services purchased by distributors or end users who have previously purchased monitoring devices and opt to use the Company’s monitoring services. The Company typically leases devices under multi-year contracts with customers that opt to use our monitoring services. However, some of these contracts may be cancelled by either party at any time with 30 days’ notice. Under our standard leasing contract, the leased device becomes billable on the date of activation or seven to 21 days from the date the device is assigned to the lessee, and remains billable until the device is returned to the Company. The Company recognizes revenue on leased devices at the end of each month that monitoring services have been provided. In those circumstances in which the Company receives payment in advance, we record these payments as deferred revenue. Product Sales The Company may sell monitoring devices in certain situations to customers. In addition, the Company may sell equipment in connection with building out and setting up a monitoring center on behalf of customers. The Company recognizes product sales revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer and the customer cannot return the devices or equipment, prices are fixed or determinable (including sales not being made outside the normal payment terms) and collection is reasonably assured. When purchasing products (such as ReliAlert™ and Shadow™ devices) from the Company, customers may, but are not required to, enter into monitoring service contracts with us. The Company recognizes revenue on monitoring services for customers that have previously purchased devices at the end of each month that monitoring services have been provided. The Company sells and installs standalone tracking systems that do not require ongoing monitoring by us. We have experience in component installation costs and direct labor hours related to this type of sale and can typically reasonably estimate costs; therefore, the Company recognizes revenue over the period in which the installation services are performed using the percentage-of-completion method of accounting for material installations. The Company typically uses labor hours or costs incurred to date as a percentage of the total estimated labor hours or costs to fulfill the contract as the most reliable and meaningful measure that is available for determining a project’s progress toward completion. The Company evaluates its estimated labor hours and costs and determines the estimated gross profit or loss on each installation for each reporting period. If it is determined that total cost estimates are likely to exceed revenue, the Company accrues the estimated losses immediately. All amounts billed have been earned. Multiple Element Arrangements The majority of the Company’s revenue transactions do not have multiple elements. However, on occasion, the Company may enter into revenue transactions that have multiple elements. These may include different combinations of products or monitoring services that are included in a single billable rate. These products or monitoring services are delivered over time as the customer utilizes our services. For revenue arrangements that have multiple elements, we consider whether the delivered devices have standalone value to the customer, there is objective and reliable evidence of the fair value of the undelivered monitoring services, which is generally determined by surveying the price of competitors’ comparable monitoring services, and the customer does not have a general right of return. Based on these criteria, the Company recognizes revenue from the sale of devices separately from the monitoring services provided to the customer as the products or monitoring services are delivered. Other Matters The Company considers an arrangement with payment terms longer than the Company’s normal terms not to be fixed or determinable, and revenue is recognized when the fee becomes due. Normal payment terms for the sale of monitoring services and products are due upon receipt to 30 days. The Company sells devices and services directly to end users and to distributors. Distributors do not have general rights of return. Also, distributors have no price protection or stock protection rights with respect to devices sold to them by us. Generally, title and risk of loss pass to the buyer upon delivery of the devices. The Company estimates product returns based on historical experience and maintains an allowance for estimated returns, which is recorded as a reduction to accounts receivable and revenue. Shipping and handling fees charged to customers are included as part of net revenue. The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenue. Research and Development Costs During the fiscal year ended September 30, 2018 and September 30, 2017, the Company incurred research and development expense of $862,142 and $1,784,867, respectively. Advertising Costs The Company expenses advertising costs as incurred. Advertising expense for the fiscal years ended September 30, 2018 and 2017 was $8,264 and $14,984, respectively. Stock-Based Compensation The Company recognizes compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of the award based on their grant date fair value. The fair value of stock options is estimated using a Black-Scholes option pricing model, which requires management to make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of stock and expected dividend yield of stock. Income Taxes The Company recognizes deferred income tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or income tax returns. Deferred income tax assets or liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized. Deferred income tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary. The tax effects from uncertain tax positions can be recognized in the financial statements, provided the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefits of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company applied the foregoing accounting standard to all of our tax positions for which the statute of limitations remained open as of the date of the accompanying consolidated financial statements. The Company's policy is to recognize interest and penalties related to income tax issues as components of other noninterest expense. As of September 30, 2018 and September 30, 2017, we did not record a liability for uncertain tax positions. Net Income (Loss) Per Common Share Basic net income (loss) per common share (“ Basic EPS Diluted net income (loss) per common share (“ Diluted EPS Common share equivalents consist of shares issuable upon the exercise of options and warrants to purchase shares of the Company’s Common Stock, par value $0.0001 per share (“ Common Stock 2018 2017 Exercise of outstanding Common Stock options and warrants (excludes 56,667 unvested options and warrants) 628,592 490,842 Total Common Stock equivalents 628,592 490,842 At September 30, 2018 and September 30, 2017, all stock option and warrant exercise prices were above the market price of $0.90 and $1.43, respectively, and thus have not been included in the basic earnings per share calculation. Recent Accounting Pronouncements Recently Adopted Accounting Standards In July 2015, the FASB issued ASU No. 2015-11, “ Inventory (Topic 330) - Simplifying the Measurement of Inventory ASU 2015-11 Recently Issued Accounting Standards In May 2017, the FASB issued Accounting Standards Update (“ ASU In January 2017, the FASB issued ASU 2017-04, “ Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment In August 2016, the FASB issued ASU 2016-15, “ Statement of Cash Flows (Topic 230) In February 2016, FASB issued ASU No. 2016-02, “ Leases (Topic 841) In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers Revenue Recognition (Topic 605) ASU 2014-09 |
Acquisitions
Acquisitions | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
ACQUISITIONS | Track Group Analytics Limited On November 26, 2014, the Company entered into a Share Purchase Agreement to purchase from the shareholders of Track Group Analytics Limited, formerly G2 Research Limited (“ TGA TGA Acquisition The fair value of patents, developed technology, customer contracts/relationship, tradename and trademarks were capitalized as of the acquisition date and will be subsequently amortized using a straight-line method to depreciation and amortization expense over their estimated useful lives. |
Disposition
Disposition | 12 Months Ended |
Sep. 30, 2018 | |
Disposition | |
Disposition | On March 8, 2017, the Company sold certain non-core assets for $510,000, net, after a payment to a third party for a royalty repurchase. We retained other assets acquired at the time of the original acquisition of these non-core assets, consisting of customers generating material revenue, as well as employees considered critical to the maintenance, development and growth of our business and operations. The Company incurred a loss of $766,031 on the sale, which consists of a sale price of $860,000, less a third-party royalty buyout payment of $350,000, $410,105 of equipment, net of accumulated depreciation, and $865,926 of intangible assets, net of accumulated amortization. |
Accrued Liabilities
Accrued Liabilities | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Accrued Liabilities | Accrued liabilities consisted of the following as of September 30, 2018 and 2017: 2018 2017 Accrued payroll, taxes and employee benefits $ 1,937,021 $ 943,066 Deferred revenue 150,604 43,333 Deposits payable 54,504 - Accrued taxes - foreign and domestic 351,469 529,926 Accrued settlement costs - 200,000 Accrued board of directors fees - 125,000 Accrued other expense 298,268 251,038 Accrued legal costs 473,777 116,824 Accrued costs of revenue 230,514 137,884 Accrued bond guarantee 157,199 - Accrued interest 6,679,747 4,303,220 Total accrued liabilities $ 10,333,103 $ 6,650,291 |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Certain Relationships and Related Transactions | The Company entered into certain transactions with related parties during the fiscal year ended September 30, 2018 and 2017. These transactions consist mainly of financing transactions and service agreements. Transactions with related parties are reviewed and approved by the independent and disinterested members of the Board of Directors. Related-Party Loan Agreement On September 25, 2015, the Company entered into the Sapinda Loan Agreement with Sapinda, a related party at that time, to provide the Company with a $5.0 million line of credit that accrued interest at a rate of 3% per annum for undrawn funds, and 8% per annum for borrowed funds. Pursuant to the terms and conditions of the Sapinda Loan Agreement, available funds could be drawn down at the Company’s request at any time prior to the maturity date of September 30, 2017 (the “ Maturity Date On March 13, 2017, the Company and Sapinda entered into Amendment Number One to the Sapinda Loan Agreement. Amendment Number One extended the maturity date of all loans made pursuant to the Sapinda Loan Agreement to September 30, 2020. In addition, Amendment Number One eliminated the requirement that the Company pay Sapinda the 3% interest, and forgave the 3% interest due to Sapinda for all undrawn funds under the Sapinda Loan Agreement through the Execution Date. Further, Amendment Number One provided that all Lender Penalties accrued under the Sapinda Loan Agreement through the Execution Date were forgiven. Per Amendment Number One, Lender Penalties began to accrue again because Sapinda failed to fund the amount of $1.5 million on or before March 31, 2017. The Company formally notified Sapinda of the breach by letter dated April 4, 2017. The Company is again accruing Lender Penalties, amounting to $548,000 at 2018, under Section 6.3 of the Sapinda Loan Agreement, as amended, and the Company intends to offset Lender Penalties against future payments due. Further advances under the Sapinda Loan Agreement are not currently expected to be forthcoming, and therefore no assurances can be given that the Company will obtain additional funds to which it is entitled under the Sapinda Loan Agreement, or that the penalties accruing will ever be paid. Stock Payable – Related Party In connection with the acquisition during fiscal year ended September 30, 2015 described under Note 3 above, the Company recognized a liability for stock payable to the Sellers of the entities acquired. In conjunction with the respective purchase agreements, shares of the Company’s stock are payable based on the achievement of certain milestones. Changes in the stock payable liability are shown below: September 30, 2018 September 30, 2017 Beginning balance $ - $ 3,289,879 Payment of shares for achieving performance milestones - (75,939 ) Adjustment to Track Group Analytics stock payable - (213,940 ) Adjustment to GPS Global stock payable - (3,000,000 ) Ending balance $ - $ - Additional Related-Party Transactions and Summary of All Related-Party Obligations 2018 2017 Related party loan with an interest rate of 8% per annum for borrowed funds. Principal and interest due September 30, 2020. $ 3,399,644 $ 3,399,644 Total related-party debt obligations $ 3,399,644 $ 3,399,644 Shares of Common Stock valued at up to $3,000,000, in the balance shown above, could have been earned by the former owner of GPS Global Tracking and Surveillance System, Ltd., now a wholly-owned subsidiary of the Company, subject to achieving certain milestones under the Share Purchase Agreement dated April 1, 2014. The measurement period of the milestones ended April 1, 2017. On March 30, 2017, the Company informed the seller that neither the Company nor the seller sold or leased the required number of GPS tracking devices, under a revenue generating contract, as defined in the Share Purchase Agreement and no contingent shares had been earned. Accordingly, the Company reversed the $3,000,000 contingent liability in the fiscal year ended September 30, 2017 in “Other Income, net” in the Consolidated Statements of Operations. In connection with the acquisition of TGA (see Note 3), the Company recognized a liability for Common Stock payable to the former owners of the entity acquired. In conjunction with the respective purchase agreements, shares of the Company’s Common Stock are payable based on the achievement of certain milestones on or before November 26, 2016. The final milestone payment of 10,602 shares of common stock related to the TGA acquisition was paid in the second fiscal quarter of 2017. Each of the foregoing related-party transactions was reviewed and approved by disinterested and independent members of the Company’s Board of Directors. |
Restructuring
Restructuring | 12 Months Ended |
Sep. 30, 2018 | |
Restructuring | |
Restructuring | In the first quarter of fiscal year 2017, the Company approved a plan to restructure our business (the “ Restructuring Plan |
Debt Obligations
Debt Obligations | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Debt Obligations | Debt obligations as of September 30, 2018 and 2017 consisted of the following: 2018 2017 Unsecured facility agreement with Conrent S.A. whereby, as of June 30, 2015, the Company had borrowed $30.4 million, bearing interest at a rate of 8% per annum, payable in arrears semi-annually, with all principal and accrued and unpaid interest due on April 1, 2019. A $1.2 million origination fee was paid and recorded as a debt discount and is being amortized as interest expense over the term of the loan. As of September 30, 2018, the remaining debt discount was $0. The Company did not pay interest on this loan during the year ended September 30, 2018. $ 30,400,000 $ 30,214,189 Loan Agreement whereby the Company can borrow up to $5.0 million at 8% interest per annum on borrowed funds maturing on September 30, 2020. 3,399,644 3,399,644 Non-interest bearing notes payable to a Canadian governmental agency assumed in conjunction with the G2 acquisition. 67,141 123,393 Capital lease with effective interest rate of 12%. Contract concluded on September 7, 2018. - 14,022 Total debt obligations 33,866,785 33,751,248 Less current portion (30,437,810 ) (30,270,531 ) Long-term debt, net of current portion $ 3,428,975 $ 3,480,717 The following table summarizes our future maturities of debt obligations, net of the amortization of debt discounts as of September 30, 2018: Fiscal Year Total 2019 $ 30,437,810 2020 3,428,975 2021 & thereafter - Total $ 33,866,785 As of September 30, 2018, and 2017, the Company had total capital lease obligations of $0 and $14,022. |
Preferred Stock
Preferred Stock | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Preferred Stock | The Company’s Certificate of Incorporation authorizes it to issue up to 20,000,000 shares of preferred stock, $0.0001 par value per share, of which 1,200,000 shares have been designated as Series A Convertible Preferred Stock (“ Series A Preferred Series A Preferred Stock On October 12, 2017, the Company filed a Certificate of Designation of the Relative Rights and Preferences (“ Certificate of Designation Except with respect to transactions upon which holders of the Series A Preferred are entitled to vote separately as a class under the terms of the Certificate of Designation, the Series A Preferred has no voting rights. The Series A Preferred has no separate dividend rights; however, whenever the Board declares a dividend on the Company’s Common Stock, if ever, each holder of record of a share of Series A Preferred shall be entitled to receive an amount equal to such dividend declared on one share of common stock multiplied by the number of shares of common stock into which such share of Series A Preferred could be converted on the Record Date. Each share of Series A Preferred has a Liquidation Preference of $35.00 per share, and is convertible, at the holder’s option, into ten shares of the Company’s Common Stock, subject to adjustments as set forth in the Certificate of Designation, at any time beginning five hundred and forty days after the date of issuance. As of September 30, 2018, no shares of Series A Preferred were issued and outstanding. |
Common Stock
Common Stock | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Common Stock | Common Stock Issuances The Company is authorized to issue up to 30,000,000 shares of Common Stock, $0.0001 par value per share. On April 16, 2018, the Company issued 7,840 shares from the 2012 Equity Compensation Plan (the “ 2012 Plan In addition, the Company issued 30,797 warrants to a member of the Company’s Board of Directors in exchange for 18,551 shares of Common Stock the director previously received for services provided during the period of October 2016 to June 2017, which shares were therefore cancelled in the fiscal year ended September 30, 2018. During the fiscal year ended September 30, 2017, the Company issued 147,468 shares of Common Stock. Of these shares, 42,026 shares were issued for services rendered to the Company, valued at $167,285; 10,602 shares valued at $75,938 were issued in connection with the acquisition of a subsidiary and for achieving certain performance milestones; and 94,840 shares were issued to pay Board of Director fees of $565,000. |
Stock Options and Warrants
Stock Options and Warrants | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Stock Options and Warrants | Stock Incentive Plan The 2012 Plan was approved at the Annual Meeting of Shareholders on December 21, 2011, and at the Annual Meeting of Shareholders on May 19, 2015, the Company’s shareholders approved an amendment increasing the number of shares of Common Stock available for issuance under the 2012 Plan. The 2012 Plan provides for the grant of incentive stock options and nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards and performance-based awards to employees and certain non-employees who have important relationships with the Company. At our May 11, 2017 Board of Directors meeting, the Board of Directors approved a resolution extending the expiration date of 573,663 warrants held by five current Board members and three members of management that were granted during the fiscal year 2011 and fiscal years 2013 through 2017. These extensions were between one and five years, did not affect the exercise price of the warrants and resulted in incremental stock-based compensation of $801,584, of which $790,314 was expensed in the three months ended June 30, 2017. All future grants of warrants and options will have an expiration period of five years. The warrants for Board members vest immediately and warrants issued to employees vest annually over either a two or three year period after the grant date. A total of 803,262 shares are authorized for issuance pursuant to awards granted under the 2012 Plan. During the fiscal years ended September 30, 2018 and 2017, options to purchase 30,797 and 110,000 shares of Common Stock were granted under the 2012 Plan. During the year ended September 30, 2018, the Company cancelled 18,551 shares of Common Stock under the 2012 Plan. All the shares of Common Stock issued during 2018 were related to Board of Director fees, which were earned in fiscal year 2017. As of September 30, 2018, 27,218 shares of Common Stock were available for future grants under the 2012 Plan. All Options and Warrants On November 30, 2017, the Board of Directors unanimously approved the adjustment of the exercise price of 605,678 unexercised warrants, with original exercise prices ranging from $1.81 to $19.46, issued under the 2012 Plan to $1.24, resulting in incremental stock-based compensation of $149,088, which was expensed in the fiscal year ended September 30, 2018. On January 26, 2018, the Board of Directors unanimously approved the adjustment of the exercise price of 65,617 unexercised warrants held by a member of the Company’s Board of Directors whose unexercised warrants were not repriced along with those that were adjusted on November 30, 2017, with original exercise prices ranging from $1.43 to $7.20, issued under the 2012 Plan to $1.15, resulting in incremental stock-based compensation of $12,530, which was expensed in the fiscal year ended September 30, 2018. The Company issued 30,797 warrants to a member of the Company’s Board of Directors under the 2012 Plan in exchange for 18,551 shares of common stock the director previously received for services provided during the period of October 2016 to June 2017, which shares were therefore cancelled in the fiscal year ended September 30, 2018. In addition, the Company issued 54,792 restricted warrants outside of the 2012 Plan for Board of Director services rendered in the first six months of fiscal year 2018 valued at $50,000. The fair value of each stock option and warrant grant is estimated on the date of grant using the Black-Scholes option-pricing model. During the fiscal years ended September 30, 2018 and 2017, the Company granted 0 and 137,268 options and warrants to purchase shares of common stock under the 2012 Plan. The warrants for Board members vest immediately and expire five years from grant date and warrants or options issued to employees vest annually over either a two to three-year period and expire five years after the final vesting date of the grant. The Company recorded expense of $169,041 and $244,093 for the fiscal years ended September 30, 2018 and 2017, respectively, related to the issuance and vesting of outstanding stock options and warrants. As of September 30, 2018, no compensation expense associated with unvested stock options and warrants issued previously to members of the Board of Directors will be recognized over the next year. During the fiscal year ended September 30, 2017, the Company granted 27,268 warrants to members of the Company’s Board of Directors, valued at $75,000. The following are the weighted-average assumptions used for options granted during the fiscal years ended September 30, 2018 and 2017 using the Black-Scholes model, respectively: Fiscal Years Ended September 30, 2018 2017 Expected stock price volatility 102 % 120 % Risk-free interest rate 2.09 % 0.77 % Expected life of options/warrants 5 Years 5 Years The fair value of each stock option and warrant grant is estimated on the date of grant using the Black-Scholes option-pricing model. The expected life of stock options and warrants represents the period of time that the stock options or warrants are expected to be outstanding based on the simplified method allowed under GAAP. The expected volatility is based on the historical price volatility of the Company’s Common Stock. In fiscal year 2014, the Company changed from a daily to weekly volatility. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options and warrants. The dividend yield represents our anticipated cash dividends over the expected life of the stock option and warrants. A summary of the compensation-based options and warrants activity for the fiscal years ended September 30, 2018 and 2017 is presented below: Shares Under Option Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding as of September 30, 2016 504,991 $ 10.78 1.15 years $ 182,095 Granted 151,080 $ 3.77 Expired (55,229 ) $ 16.29 Exercised - - Outstanding as of September 30, 2017 600,842 $ 8.51 4.90 years - Granted 85,589 1.13 Expired (1,172 ) (19.29 ) Exercised - $ - Outstanding as of September 30, 2018 685,259 $ 1.56 3.90 years $ - Exercisable as of September 30, 2018 628,592 $ 1.59 3.95 years $ - The fiscal year end intrinsic values are based on a September 29, 2018 closing price of $0.90 per share. |
Income Taxes
Income Taxes | 12 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company recognizes deferred income tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or income tax returns. Deferred income tax assets or liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized. Deferred income tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary. Interest and penalties related to income tax liabilities, when incurred, are classified in interest expense and income tax provision, respectively. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted and implements comprehensive tax legislation which, among other changes, reduces the federal statutory corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves to a territorial system. Additionally, in December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. The measurement period, as defined in SAB 118, ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. During the measurement period, provisional amounts may also be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017, by U.S. regulatory and standard-setting bodies. Based on the provisions of the Tax Act, the Company re-measured its U.S. deferred tax assets and liabilities and adjusted its deferred tax balances to reflect the lower U.S. corporate income tax rate at December 31, 2017. The re-measurement of the Company's U.S. deferred tax assets and liabilities at the lower enacted U.S. corporate tax rate resulted in an income tax expense of $23,668,000 which is included in the provision. For the fiscal years ended September 30, 2018 and 2017, the Company incurred net losses for income tax purposes of $5,428,041 and $4,725,826, respectively. The amount and ultimate realization of the benefits from the net operating losses is dependent, in part, upon the tax laws in effect, our future earnings, and other future events, the effects of which cannot be determined. The Company has established a valuation allowance for all deferred income tax assets not offset by deferred income tax liabilities due to the uncertainty of their realization. Accordingly, there is no benefit for income taxes in the accompanying statements of operations. At September 30, 2018, the Company had net carryforwards available to offset future taxable income of approximately $206,000,000 of which less than $200,000 will expire in 2018. The utilization of the net loss carryforwards is dependent upon the tax laws in effect at the time the net operating loss carryforwards can be utilized. The Internal Revenue Code contains provisions that likely could reduce or limit the availability and utilization of these net operating loss carryforwards. An ownership change generally affects the rate at which NOLs and potentially other deferred tax assets are permitted to offset future taxable income. Since the Company maintains a full valuation allowance on all U.S. and state deferred tax assets, the impact of prior year ownership changes on the future realizability of U.S. and state deferred tax assets did not result in an impact to the provision for income taxes for the year ended September 30, 2018, or on net deferred tax asset as of September 30, 2018. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The tax provision for the year ended September 30, 2018 was due primarily to taxes on the income of a foreign-based subsidiary and U.S. state and local income taxes. The deferred income tax assets (liabilities) were comprised of the following for the periods indicated: Fiscal Years Ended September 30, 2018 2017 Net loss carryforwards $ 51,296,000 $ 58,134,000 Accruals and reserves 913,000 1,319,000 Contributions 16,000 24,000 Depreciation 53,000 (113,000 ) Stock-based compensation 1,018,000 594,000 Valuation allowance (53,296,000 ) (59,958,000 ) Total $ - $ - Reconciliations between the benefit for income taxes at the federal statutory income tax rate and the Company's benefit for income taxes for the years ended September 30, 2018 and 2017 are as follows: Fiscal Years Ended September 30, 2018 2017 Federal income tax benefit at statutory rate $ (1,700,000 ) $ 2,382,000 State income tax benefit, net of federal income tax effect (265,000 ) 231,000 Effect of foreign income taxes 593,000 502,000 Non-deductible expenses (554,000 ) (516,000 ) Rate change due to Tax Cuts and Jobs Act 24,222,000 - Deferred only adjustment (15,791,000 ) - Change in valuation allowance (5,912,000 ) (2,097,000 ) Provision for income taxes $ 593,000 $ 502,000 During the fiscal year ended September 30, 2014, the Company began recognizing revenue from international sources from our products and monitoring services. During the fiscal year ended September 30, 2014, the Company began recognizing a liability for value-added taxes, which will be due upon collection. At September 30, 2018, the Company had a net receivable related to payments on VAT tax of $400. During the year ended September 30, 2018, the Company recorded income tax expense of $592,725 related to a foreign jurisdiction, which is included in income tax expense on the Consolidated Statements of Operations. The Company’s open tax years for federal and state income tax returns are for the tax years ended September 30, 2015 through September 30, 2018. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Commitments and Contingencies | Legal Matters The Company is, from time to time, involved in various legal proceedings incidental to the conduct of our business. Historically, the outcome of all such legal proceedings has not, in the aggregate, had a material adverse effect on our business, financial condition, results of operations or liquidity. Other than as set forth below, there are no additional pending or threatened legal proceedings at this time. Lazar Leybovich et al. v. SecureAlert, Inc. Boggs et al. v. Judicial Electronic Monitoring, SecureAlert, Inc. et al. Track Group, Inc. v. I.C.S. of the Bahamas Co. Ltd. ICS John Merrill v. Track Group, Inc. and Guy Dubois. Michael Anthony Johnson v. Community Corrections of Marion County and Track Group, Inc. pro se SecureAlert, Inc. v. Federal Government of Mexico (Department of the Interior). Pablo Gonzalez-Cruz, et al. v. Track Group-Puerto Rico, et al. Eli Sabag v. Track Group, Inc., Sapinda Asia Limited and Lars Windhorst . SPA” Erick Cerda v. Track Group, Inc. Operating Lease Obligations The following table summarizes our contractual obligations as of September 30, 2018: Fiscal Year Total 2019 $ 329,941 2020 255,646 2021 183,131 2022 167,345 2023 3,612 Thereafter - Total $ 939,675 The total operating lease obligations of $939,675 is largely related to facilities operating leases. During the years ended September 30, 2018 and 2017, the Company paid $476,152 and $545,228, in lease payment obligations, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Intangible Assets | The following table summarizes the activity of intangible assets for the years ended September 30, 2018 and 2017, respectively: 2018 Weighted Average Useful Life (yrs) Gross Carrying Amount Accumulated Amortization Net Book Value Patent & royalty agreements 7.99 $ 21,170,565 $ (7,751,751 ) $ 13,418,814 Developed technology 7.60 11,835,293 (2,885,092 ) 8,950,201 Customer relationships 7.70 1,860,000 (1,050,733 ) 809,267 Trade name 9.57 325,507 (250,735 ) 74,772 Website 3.00 78,201 (78,201 ) - Total $ 35,269,566 $ (12,016,512 ) $ 23,253,054 2017 Weighted Average Useful Life (yrs) Gross Carrying Amount Accumulated Amortization Impairment Net Book Value Patent & royalty agreements 7.99 $ 21,170,565 $ (6,415,229 ) $ - $ 14,755,336 Developed technology 8.22 11,116,738 (2,301,259 ) - 8,815,479 Customer relationships 7.70 2,590,683 (1,039,336 ) (499,759 ) 1,051,588 Trade name 9.57 332,183 (240,941 ) - 91,242 Website 3.00 78,201 (73,191 ) - 5,010 Total $ 35,288,370 $ (10,069,956 ) $ (499,759 ) $ 24,718,655 The intangible assets summarized above were purchased or developed on various dates from January 2010 through September 30, 2018. The assets have useful lives ranging from three to twenty years. Amortization expense for the years ended September 30, 2018 and 2017 was $2,268,846 and $2,416,092, respectively. The Company disposed of $1,600,000 of intangible assets and $734,074 of accumulated amortization related to the sale of assets during the year ended September 30, 2017. See Note 4. In connection with the Company’s annual impairment testing performed by an independent valuation firm, a non-cash impairment charge of $506,413, based on the monthly average exchange rate, was recorded during the year ended September 30, 2017 related to a legacy non-core facet of the business. This charge is included in Impairment of intangible assets on the Consolidated Statements of Operations. There was no impairment indicated for the year ended September 30, 2018. The following table summarizes the future maturities of amortization of intangible assets as of September 30, 2018: Fiscal Year Amortization Patent STOP Royalty 2019 $ 2,507,840 $ 1,852 $ 450,000 2020 2,449,940 - 450,000 2021 2,408,800 - 450,000 2022 2,232,132 - 450,000 2023 2,119,313 - 450,000 Thereafter 9,095,677 - 187,500 Total $ 20,813,702 $ 1,852 $ 2,437,500 Goodwill Goodwill, as of September 30 consisted of the following: September 30, 2018 2017 Balance - beginning of year $ 8,226,714 $ 7,955,876 Effect of foreign currency translation on goodwill (149,955 ) 270,838 Balance - end of year $ 8,076,759 $ 8,226,714 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Subsequent Events | On November 14, 2018, the Company requested that Conrent extend the maturity of the Amended Facility Agreement from April 1, 2019 to April 1, 2020. On December 3, 2018, Conrent agreed to convene meetings of the investors who purchased the securities from Conrent to finance the debt (the “ Noteholders |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | The consolidated financial statements include the accounts of Track Group, Inc. and its subsidiaries, Track Group Analytics Limited, Track Group Americas, Inc., Track Group International LTD., and Track Group - Chile SpA. All significant inter-company transactions have been eliminated in consolidation. |
Use of Estimates in the Preparation of Financial Statements | The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the period presented. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, allowances for doubtful accounts, certain assumptions related to the recoverability of intangible and long-lived assets. |
Business Combinations | Business combinations are accounted for under the provisions of ASC 805-10, Business Combinations Goodwill represents costs in excess of purchase price over the fair value of the assets of businesses acquired, including other identifiable intangible assets. |
Foreign Currency Translation | The Chilean Peso, New Israeli Shekel and the Canadian Dollar are used as functional currencies of the operating subsidiaries: (i) Track Group Chile SpA; (ii) Track Group International Ltd.; and (iii) Track Group Analytics Limited, respectively. The balance sheets of all subsidiaries have been converted into United States Dollars (“ USD |
Other Intangible Assets | Other intangible assets principally consist of patents, royalty purchase agreements, developed technology acquired, customer relationships, trade name, capitalized software development costs, and capitalized website development costs. The Company accounts for other intangible assets in accordance with generally accepted accounting principles and does not amortize intangible assets with indefinite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, which range from three to twenty years. Intangible assets are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate possible impairment. |
Fair Value of Financial Investments | The carrying amounts reported in the accompanying consolidated financial statements for accounts receivable, accounts payable, accrued liabilities and debt obligations approximate fair values because of the immediate or short-term maturities of these financial instruments. The carrying amounts of our debt obligations approximate fair value as the interest rates approximate market interest rates. |
Concentration of Credit Risk | In the normal course of business, the Company provides credit terms to its customers and requires no collateral. Accordingly, the Company performs credit evaluations of our customers' financial condition. The Company had sales to entities, two of which represented more than 10% of gross revenue, as follows for the years ended September 30, 2018 and 2017. 2018 % 2017 % Customer A $ 9,201,502 30 % $ 8,747,338 29 % Customer B $ 3,772,540 12 % $ 3,743,508 13 % Customer C $ 2,468,472 8 % $ 2,326,318 8 % No other customer represented more than 10% of the Company’s total revenue for the fiscal years ended September 30, 2018 or 2017. Concentration of credit risk associated with the Company’s total and outstanding accounts receivable as of September 30, 2018 and 2017, respectively, are shown in the table below: 2018 % 2017 % Customer A $ 1,689,976 29 % $ 1,657,316 30 % Customer B $ 594,626 10 % $ 641,973 12 % Customer C $ 428,560 7 % $ 394,253 7 % Based upon the expected collectability of our accounts receivable, the Company maintains an allowance for doubtful accounts. |
Cash Equivalents | Cash equivalents consist of investments with original maturities to the Company of three months or less. The Company has cash in bank accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company had $2,900,105 and $1,445,364 of cash deposits in excess of federally insured limits as of September 30, 2018 and 2017, respectively. |
Accounts Receivable | Accounts receivable, which is made up of trade receivables for monitoring and other related services, are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. The allowance is estimated by management based on certain assumptions and variables, including the customer’s financial condition, age of the customer’s receivables and changes in payment histories. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when cash is received. A trade receivable is considered to be past due if any portion of the receivable balance has not been received by the Company within its normal terms. Interest income is not recorded on trade receivables that are past due, unless that interest is collected. |
Note Receivable | Notes receivable are carried at the face amount of each note plus respective accrued interest receivable, less received payments. The Company does not typically carry notes receivable in the course of its regular business, but entered into an agreement with one of its customers during the fiscal year ended September 30, 2012. Payments under the note are recorded as they are received and are immediately offset against any outstanding accrued interest before they are applied against the outstanding principal balance on the respective note. The note requires monthly payments of $15,000, and matured in May 2014. The note is currently in default and accrues interest at a rate of 17% per annum. As of June 30, 2016, the Company no longer accrues interest on the note. As of September 30, 2018, the outstanding balance of the note was $120,824 of principal and $113,909 of accrued interest, which are both fully reserved. |
Prepaid expense and other | The carrying amounts reported in the balance sheet for prepaid expense and other current assets approximate their fair market value based on the short-term maturity of these assets. Prepaid assets and other is comprised largely of performance bond deposits, tax deposits, vendor deposits and other prepaid supplier expenses. We generally expect deposits to be returned to the Company as cash within 12 months and prepaid expenses to be allocated over the commitment. |
Inventory | Inventory is valued at the lower of the cost or net realizable value. Cost is determined using the standard costing method. Net realizable value is determined based on the item selling price. Inventory is periodically reviewed in order to identify obsolete or damaged items or impaired values. The Company did not record impairment of inventory during the fiscal years ended September 30, 2018 and 2017, respectively. Inventory consists of finished goods that are to be shipped to customers and parts used for minor repairs of ReliAlert™, Shadow, and other tracking devices. Completed and shipped ReliAlert™ and other tracking devices are reflected in Monitoring Equipment. As of September 30, 2018 and September 30, 2017, respectively, inventory consisted of the following: 2018 2017 Finished goods inventory $ 304,053 $ 288,744 Reserve for damaged or obsolete inventory (26,934 ) (26,934 ) Total inventory, net of reserves $ 277,119 $ 261,810 The Company uses a third-party fulfillment service provider. As a result of this service, the Company’s employees do not assemble, repair or process inventory or monitoring equipment being shipped directly from suppliers. Purchases of monitoring equipment are recognized directly. Management believes this process reduces maintenance and fulfillment costs associated with inventory and monitoring equipment. |
Property and Equipment | Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are determined using the straight-line method over the estimated useful lives of the assets, typically three to seven years. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the term of the lease. Expenditures for maintenance and repairs are expensed while renewals and improvements are capitalized. Property and equipment consisted of the following as of September 30, 2018 and 2017, respectively: 2018 2017 Equipment, software and tooling $ 1,074,471 $ 1,028,081 Automobiles 6,153 52,230 Leasehold improvements 1,358,984 1,307,802 Furniture and fixtures 305,089 293,621 Total property and equipment before accumulated depreciation 2,744,697 2,681,734 Accumulated depreciation (1,999,222 ) (1,778,634 ) Property and equipment, net of accumulated depreciation $ 745,475 $ 903,100 Property and equipment to be disposed of is reported at the lower of the carrying amount or fair value, less the estimated costs to sell and any gains or losses are included in the results of operations. During the fiscal years ended September 30, 2018 and 2017, the Company recognized an $8,500 gain and $0 gain, respectively on the disposal of property and equipment. Internally developed software costs related to the Company’s monitoring platform are recorded as intangible assets on the Consolidated Balance Sheet. See Note 14. Depreciation expense recognized for property and equipment for the fiscal years ended September 30, 2018 and 2017 was $348,162 and $366,124, respectively. |
Monitoring Equipment | The Company leases monitoring equipment to agencies for offender tracking under contractual service agreements. The monitoring equipment is depreciated using the straight-line method over an estimated useful life of between one and five years. Monitoring equipment as of September 30, 2018 and 2017 is as follows: 2018 2017 Monitoring equipment $ 8,488,196 $ 8,399,937 Less: accumulated amortization (5,325,654 ) (4,906,925 ) Monitoring equipment, net of accumulated depreciation $ 3,162,542 $ 3,493,012 Amortization expense for the fiscal years ended September 30, 2018 and 2017 was $1,360,753 and $1,678,668, respectively. This expense was classified as a cost of revenue. Monitoring equipment to be disposed of is reported at the lower of the carrying amount or fair value, less the estimated costs to sell. As part of the sale of assets described in Note 4, the Company disposed of $771,568 of monitoring equipment and $361,463 of related accumulated amortization in the year ended September 30, 2017. During the fiscal years ended September 30, 2018 and 2017, the Company disposed of leased monitoring equipment and parts of $390,098 and $569,371, respectively. |
Impairment of Long-Lived Assets and Goodwill | The Company reviews long-lived assets for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable, and in the case of goodwill, at least annually. The Company evaluates whether events and circumstances have occurred which indicate possible impairment as of each balance sheet date. If the carrying amount of an asset exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there is an identifiable fair value that is independent of other groups of assets. See Note 14. |
Revenue Recognition | Our revenue is predominantly derived from two sources: (i) monitoring services, and (ii) product sales. Monitoring Services Monitoring services include two components: (a) lease contracts pursuant to which the Company provides monitoring services and leases devices to distributors or end users and the Company retains ownership of the leased device; and (b) monitoring services purchased by distributors or end users who have previously purchased monitoring devices and opt to use the Company’s monitoring services. The Company typically leases devices under multi-year contracts with customers that opt to use our monitoring services. However, some of these contracts may be cancelled by either party at any time with 30 days’ notice. Under our standard leasing contract, the leased device becomes billable on the date of activation or seven to 21 days from the date the device is assigned to the lessee, and remains billable until the device is returned to the Company. The Company recognizes revenue on leased devices at the end of each month that monitoring services have been provided. In those circumstances in which the Company receives payment in advance, we record these payments as deferred revenue. Product Sales The Company may sell monitoring devices in certain situations to customers. In addition, the Company may sell equipment in connection with building out and setting up a monitoring center on behalf of customers. The Company recognizes product sales revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer and the customer cannot return the devices or equipment, prices are fixed or determinable (including sales not being made outside the normal payment terms) and collection is reasonably assured. When purchasing products (such as ReliAlert™ and Shadow™ devices) from the Company, customers may, but are not required to, enter into monitoring service contracts with us. The Company recognizes revenue on monitoring services for customers that have previously purchased devices at the end of each month that monitoring services have been provided. The Company sells and installs standalone tracking systems that do not require ongoing monitoring by us. We have experience in component installation costs and direct labor hours related to this type of sale and can typically reasonably estimate costs; therefore, the Company recognizes revenue over the period in which the installation services are performed using the percentage-of-completion method of accounting for material installations. The Company typically uses labor hours or costs incurred to date as a percentage of the total estimated labor hours or costs to fulfill the contract as the most reliable and meaningful measure that is available for determining a project’s progress toward completion. The Company evaluates its estimated labor hours and costs and determines the estimated gross profit or loss on each installation for each reporting period. If it is determined that total cost estimates are likely to exceed revenue, the Company accrues the estimated losses immediately. All amounts billed have been earned. Multiple Element Arrangements The majority of the Company’s revenue transactions do not have multiple elements. However, on occasion, the Company may enter into revenue transactions that have multiple elements. These may include different combinations of products or monitoring services that are included in a single billable rate. These products or monitoring services are delivered over time as the customer utilizes our services. For revenue arrangements that have multiple elements, we consider whether the delivered devices have standalone value to the customer, there is objective and reliable evidence of the fair value of the undelivered monitoring services, which is generally determined by surveying the price of competitors’ comparable monitoring services, and the customer does not have a general right of return. Based on these criteria, the Company recognizes revenue from the sale of devices separately from the monitoring services provided to the customer as the products or monitoring services are delivered. Other Matters The Company considers an arrangement with payment terms longer than the Company’s normal terms not to be fixed or determinable, and revenue is recognized when the fee becomes due. Normal payment terms for the sale of monitoring services and products are due upon receipt to 30 days. The Company sells devices and services directly to end users and to distributors. Distributors do not have general rights of return. Also, distributors have no price protection or stock protection rights with respect to devices sold to them by us. Generally, title and risk of loss pass to the buyer upon delivery of the devices. The Company estimates product returns based on historical experience and maintains an allowance for estimated returns, which is recorded as a reduction to accounts receivable and revenue. Shipping and handling fees charged to customers are included as part of net revenue. The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenue. |
Research and Development Costs | During the fiscal year ended September 30, 2018 and September 30, 2017, the Company incurred research and development expense of $862,142 and $1,784,867, respectively. |
Advertising Costs | The Company expenses advertising costs as incurred. Advertising expense for the fiscal years ended September 30, 2018 and 2017 was $8,264 and $14,984, respectively. |
Stock-Based Compensation | The Company recognizes compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of the award based on their grant date fair value. The fair value of stock options is estimated using a Black-Scholes option pricing model, which requires management to make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of stock and expected dividend yield of stock. |
Income Taxes | The Company recognizes deferred income tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or income tax returns. Deferred income tax assets or liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized. Deferred income tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary. The tax effects from uncertain tax positions can be recognized in the financial statements, provided the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefits of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company applied the foregoing accounting standard to all of our tax positions for which the statute of limitations remained open as of the date of the accompanying consolidated financial statements. The Company's policy is to recognize interest and penalties related to income tax issues as components of other noninterest expense. As of September 30, 2018 and September 30, 2017, we did not record a liability for uncertain tax positions. |
Net Income (Loss) Per Common Share | Basic net income (loss) per common share (“ Basic EPS Diluted net income (loss) per common share (“ Diluted EPS Common share equivalents consist of shares issuable upon the exercise of options and warrants to purchase shares of the Company’s Common Stock, par value $0.0001 per share (“ Common Stock 2018 2017 Exercise of outstanding Common Stock options and warrants (excludes 56,667 unvested options and warrants) 628,592 490,842 Total Common Stock equivalents 628,592 490,842 At September 30, 2018 and September 30, 2017, all stock option and warrant exercise prices were above the market price of $0.90 and $1.43, respectively, and thus have not been included in the basic earnings per share calculation. |
Recent Accounting Pronouncements | Recently Adopted Accounting Standards In July 2015, the FASB issued ASU No. 2015-11, “ Inventory (Topic 330) - Simplifying the Measurement of Inventory ASU 2015-11 Recently Issued Accounting Standards In May 2017, the FASB issued Accounting Standards Update (“ ASU In January 2017, the FASB issued ASU 2017-04, “ Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment In August 2016, the FASB issued ASU 2016-15, “ Statement of Cash Flows (Topic 230) In February 2016, FASB issued ASU No. 2016-02, “ Leases (Topic 841) In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers Revenue Recognition (Topic 605) ASU 2014-09 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Concentration of Credit Risk | 2018 % 2017 % Customer A $ 9,201,502 30 % $ 8,747,338 29 % Customer B $ 3,772,540 12 % $ 3,743,508 13 % Customer C $ 2,468,472 8 % $ 2,326,318 8 % 2018 % 2017 % Customer A $ 1,689,976 29 % $ 1,657,316 30 % Customer B $ 594,626 10 % $ 641,973 12 % Customer C $ 428,560 7 % $ 394,253 7 % |
Schedule of Inventory | 2018 2017 Finished goods inventory $ 304,053 $ 288,744 Reserve for damaged or obsolete inventory (26,934 ) (26,934 ) Total inventory, net of reserves $ 277,119 $ 261,810 |
Property, Plant and Equipment | 2018 2017 Equipment, software and tooling $ 1,074,471 $ 1,028,081 Automobiles 6,153 52,230 Leasehold improvements 1,358,984 1,307,802 Furniture and fixtures 305,089 293,621 Total property and equipment before accumulated depreciation 2,744,697 2,681,734 Accumulated depreciation (1,999,222 ) (1,778,634 ) Property and equipment, net of accumulated depreciation $ 745,475 $ 903,100 |
Schedule of Monitoring Equipment | 2018 2017 Monitoring equipment $ 8,488,196 $ 8,399,937 Less: accumulated amortization (5,325,654 ) (4,906,925 ) Monitoring equipment, net of accumulated depreciation $ 3,162,542 $ 3,493,012 |
Anti Dilutive Shares Excluded from Computation of Earning per Share | 2018 2017 Exercise of outstanding Common Stock options and warrants (excludes 56,667 unvested options and warrants) 628,592 490,842 Total Common Stock equivalents 628,592 490,842 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Accrued Liabilities Tables | |
Schedule Of Accrued Liabilities | 2018 2017 Accrued payroll, taxes and employee benefits $ 1,937,021 $ 943,066 Deferred revenue 150,604 43,333 Deposits payable 54,504 - Accrued taxes - foreign and domestic 351,469 529,926 Accrued settlement costs - 200,000 Accrued board of directors fees - 125,000 Accrued other expense 298,268 251,038 Accrued legal costs 473,777 116,824 Accrued costs of revenue 230,514 137,884 Accrued bond guarantee 157,199 - Accrued interest 6,679,747 4,303,220 Total accrued liabilities $ 10,333,103 $ 6,650,291 |
Certain Relationships and Rel_2
Certain Relationships and Related Transactions (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Certain Relationships And Related Transactions Tables | |
Stock Payable - Related Party | September 30, 2018 September 30, 2017 Beginning balance $ - $ 3,289,879 Payment of shares for achieving performance milestones - (75,939 ) Adjustment to Track Group Analytics stock payable - (213,940 ) Adjustment to GPS Global stock payable - (3,000,000 ) Ending balance $ - $ - |
Schedule of Related Party Transactions | 2018 2017 Related party loan with an interest rate of 8% per annum for borrowed funds. Principal and interest due September 30, 2020. $ 3,399,644 $ 3,399,644 Total related-party debt obligations $ 3,399,644 $ 3,399,644 |
Debt Obligations (Tables)
Debt Obligations (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Debt Obligations Tables | |
Schedule of Debt | 2018 2017 Unsecured facility agreement with Conrent S.A. whereby, as of June 30, 2015, the Company had borrowed $30.4 million, bearing interest at a rate of 8% per annum, payable in arrears semi-annually, with all principal and accrued and unpaid interest due on April 1, 2019. A $1.2 million origination fee was paid and recorded as a debt discount and is being amortized as interest expense over the term of the loan. As of September 30, 2018, the remaining debt discount was $0. The Company did not pay interest on this loan during the year ended September 30, 2018. $ 30,400,000 $ 30,214,189 Loan Agreement whereby the Company can borrow up to $5.0 million at 8% interest per annum on borrowed funds maturing on September 30, 2020. 3,399,644 3,399,644 Non-interest bearing notes payable to a Canadian governmental agency assumed in conjunction with the G2 acquisition. 67,141 123,393 Capital lease with effective interest rate of 12%. Contract concluded on September 7, 2018. - 14,022 Total debt obligations 33,866,785 33,751,248 Less current portion (30,437,810 ) (30,270,531 ) Long-term debt, net of current portion $ 3,428,975 $ 3,480,717 |
Schedule of Maturities of Long-term Debt | Fiscal Year Total 2019 $ 30,437,810 2020 3,428,975 2021 & thereafter - Total $ 33,866,785 |
Stock Options and Warrants (Tab
Stock Options and Warrants (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Stock Options And Warrants Tables | |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Fiscal Years Ended September 30, 2018 2017 Expected stock price volatility 102 % 120 % Risk-free interest rate 2.09 % 0.77 % Expected life of options/warrants 5 Years 5 Years |
Schedule of Stock Options Roll Forward | Shares Under Option Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding as of September 30, 2016 504,991 $ 10.78 1.15 years $ 182,095 Granted 151,080 $ 3.77 Expired (55,229 ) $ 16.29 Exercised - - Outstanding as of September 30, 2017 600,842 $ 8.51 4.90 years - Granted 85,589 1.13 Expired (1,172 ) (19.29 ) Exercised - $ - Outstanding as of September 30, 2018 685,259 $ 1.56 3.90 years $ - Exercisable as of September 30, 2018 628,592 $ 1.59 3.95 years $ - |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Deferred Income Tax Assets (Liabilities) | Fiscal Years Ended September 30, 2018 2017 Net loss carryforwards $ 51,296,000 $ 58,134,000 Accruals and reserves 913,000 1,319,000 Contributions 16,000 24,000 Depreciation 53,000 (113,000 ) Stock-based compensation 1,018,000 594,000 Valuation allowance (53,296,000 ) (59,958,000 ) Total $ - $ - |
Income Tax Benefit Reconciliation | Fiscal Years Ended September 30, 2018 2017 Federal income tax benefit at statutory rate $ (1,700,000 ) $ 2,382,000 State income tax benefit, net of federal income tax effect (265,000 ) 231,000 Effect of foreign income taxes 593,000 502,000 Non-deductible expenses (554,000 ) (516,000 ) Rate change due to Tax Cuts and Jobs Act 24,222,000 - Deferred only adjustment (15,791,000 ) - Change in valuation allowance (5,912,000 ) (2,097,000 ) Provision for income taxes $ 593,000 $ 502,000 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Commitments And Contingencies Tables | |
Operating Lease Obligations | Fiscal Year Total 2019 $ 329,941 2020 255,646 2021 183,131 2022 167,345 2023 3,612 Thereafter - Total $ 939,675 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Intangible Assets Tables | |
Intangible Assets | 2018 Weighted Average Useful Life (yrs) Gross Carrying Amount Accumulated Amortization Net Book Value Patent & royalty agreements 7.99 $ 21,170,565 $ (7,751,751 ) $ 13,418,814 Developed technology 7.60 11,835,293 (2,885,092 ) 8,950,201 Customer relationships 7.70 1,860,000 (1,050,733 ) 809,267 Trade name 9.57 325,507 (250,735 ) 74,772 Website 3.00 78,201 (78,201 ) - Total $ 35,269,566 $ (12,016,512 ) $ 23,253,054 2017 Weighted Average Useful Life (yrs) Gross Carrying Amount Accumulated Amortization Impairment Net Book Value Patent & royalty agreements 7.99 $ 21,170,565 $ (6,415,229 ) $ - $ 14,755,336 Developed technology 8.22 11,116,738 (2,301,259 ) - 8,815,479 Customer relationships 7.70 2,590,683 (1,039,336 ) (499,759 ) 1,051,588 Trade name 9.57 332,183 (240,941 ) - 91,242 Website 3.00 78,201 (73,191 ) - 5,010 Total $ 35,288,370 $ (10,069,956 ) $ (499,759 ) $ 24,718,655 |
Future Amortization | Fiscal Year Amortization Patent STOP Royalty 2019 $ 2,507,840 $ 1,852 $ 450,000 2020 2,449,940 - 450,000 2021 2,408,800 - 450,000 2022 2,232,132 - 450,000 2023 2,119,313 - 450,000 Thereafter 9,095,677 - 187,500 Total $ 20,813,702 $ 1,852 $ 2,437,500 |
Goodwill | September 30, 2018 2017 Balance - beginning of year $ 8,226,714 $ 7,955,876 Effect of foreign currency translation on goodwill (149,955 ) 270,838 Balance - end of year $ 8,076,759 $ 8,226,714 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Customer revenue amount | $ 30,570,219 | $ 29,727,018 |
Revenue [Member] | Customer A [Member] | ||
Customer revenue amount | $ 9,201,502 | $ 8,747,338 |
Customer concentration risk percentage | 30.00% | 29.00% |
Revenue [Member] | Customer B [Member] | ||
Customer revenue amount | $ 3,772,540 | $ 3,743,508 |
Customer concentration risk percentage | 12.00% | 13.00% |
Revenue [Member] | Customer C [Member] | ||
Customer revenue amount | $ 2,468,472 | $ 2,326,318 |
Customer concentration risk percentage | 8.00% | 8.00% |
Accounts Receivable [Member] | Customer A [Member] | ||
Customer concentration risk percentage | 29.00% | 30.00% |
Customer account receivable amount | $ 1,689,976 | $ 1,657,316 |
Accounts Receivable [Member] | Customer B [Member] | ||
Customer concentration risk percentage | 7.00% | 12.00% |
Customer account receivable amount | $ 594,626 | $ 641,973 |
Accounts Receivable [Member] | Customer C [Member] | ||
Customer concentration risk percentage | 10.00% | 7.00% |
Customer account receivable amount | $ 428,560 | $ 394,253 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Summary Of Significant Accounting Policies - Inventory Details | ||
Finished goods inventory | $ 304,053 | $ 288,744 |
Reserve for damaged or obsolete inventory | (26,934) | (26,934) |
Total inventory, net of reserves | $ 277,119 | $ 261,810 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Summary Of Significant Accounting Policies - Property And Equipment Details | ||
Equipment, software and tooling | $ 1,074,471 | $ 1,028,081 |
Automobiles | 6,153 | 52,230 |
Leasehold Improvements | 1,358,984 | 1,307,802 |
Furniture And Fixtures | 305,089 | 293,621 |
Total property and equipment before accumulated depreciation | 2,744,697 | 2,681,734 |
Accumulated Depreciation | (1,999,222) | (1,778,634) |
Property and equipment, net of accumulated depreciation | $ 745,475 | $ 903,100 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details 3) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Summary Of Significant Accounting Policies - Monitoring Equipment Details | ||
Monitoring equipment | $ 8,488,196 | $ 8,399,937 |
Less: accumulated depreciation | (5,325,654) | (4,906,925) |
Monitoring equipment, net of accumulated amortization | $ 3,162,542 | $ 3,493,012 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies (Details 4) - shares | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Common stock equivalents | 628,592 | 490,842 |
Stock Option and Warrants [Member] | ||
Common stock equivalents | 628,592 | 490,842 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Summary Of Significant Accounting Policies Details Narrative | ||
Cash deposits in excess of FDIC limit | $ 2,900,105 | $ 1,445,364 |
Depreciation Expense | 348,162 | 366,124 |
Amortization expense | 1,360,753 | 1,678,668 |
Disposal of lease monitoring equipment | 390,098 | 569,371 |
Research and development expenses | 862,142 | 1,784,867 |
Advertising costs | $ 8,264 | $ 14,984 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 628,592 | 490,842 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Accrued Expenses Details | ||
Accrued payroll, taxes and employee benefits | $ 1,937,021 | $ 943,066 |
Deferred revenue | 150,604 | 43,333 |
Deposits payable | 54,504 | 0 |
Accrued taxes - foreign and domestic | 351,469 | 529,926 |
Accrued settlement costs | 0 | 200,000 |
Accrued board of directors fees | 0 | 125,000 |
Accrued other expense | 298,268 | 251,038 |
Accrued legal costs | 473,777 | 116,824 |
Accrued costs of revenue | 230,514 | 137,884 |
Accrued bond guarantee | 157,199 | 0 |
Accrued interest | 6,679,747 | 4,303,220 |
Total accrued liabilities | $ 10,333,103 | $ 6,650,291 |
Certain Relationships and Rel_3
Certain Relationships and Related Transactions (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Certain Relationships And Related Transactions Details | ||
Stock payable, beginning balance | $ 0 | $ 3,289,879 |
Payment of shares for achieving performance milestones | 0 | (75,939) |
Adjustment to Track Group Analytics stock payable | $ 0 | $ (213,940) |
Adjustment to GPS Global stock payable | 0 | (3,000,000) |
Stock payable, ending balance | $ 0 | $ 0 |
Certain Relationships and Rel_4
Certain Relationships and Related Transactions (Details 1) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Total related-party debt obligations | $ 3,399,644 | $ 3,399,644 |
Related Party Loan | ||
Total related-party debt obligations | $ 3,399,644 | $ 3,399,644 |
Certain Relationships and Rel_5
Certain Relationships and Related Transactions (Details Narrative) | Sep. 30, 2018USD ($) |
Certain Relationships And Related Transactions Details Narrative | |
Undrawn balance of line of credit | $ 1,600,356 |
Restructuring (Details Narrativ
Restructuring (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Restructuring Details Narrative | ||
Restructuring costs | $ 0 | $ 558,833 |
Debt Obligations (Details)
Debt Obligations (Details) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Total debt obligations | $ 33,866,785 | $ 33,751,248 |
Less current portion | (30,437,810) | (30,270,531) |
Long-term debt, net of current portion | 3,428,975 | 3,480,717 |
Debt Obligation 1 | ||
Total debt obligations | 30,400,000 | 30,214,189 |
Debt Obligation 2 | ||
Total debt obligations | 3,399,644 | 3,399,644 |
Debt Obligation 3 | ||
Total debt obligations | 67,141 | 123,393 |
Debt Obligation 4 | ||
Total debt obligations | $ 0 | $ 14,022 |
Debt Obligations (Details 1)
Debt Obligations (Details 1) | Sep. 30, 2018USD ($) |
Debt Obligations Details 1 | |
2,019 | $ 30,437,810 |
2,020 | 3,428,975 |
2021 & thereafter | 0 |
Total | $ 33,866,785 |
Preferred Stock (Details Narrat
Preferred Stock (Details Narrative) | Sep. 30, 2018$ / sharesshares |
Preferred Stock Details Narrative | |
Preferred stock, par value | $ / shares | $ 0.0001 |
Preferred stock, authorized | 20,000,000 |
Preferred stock, issued | 0 |
Preferred stock, outstanding | 0 |
Common Stock (Details Narrative
Common Stock (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Common Stock Details Narrative | ||
Common stock - par value | $ 0.0001 | $ 0.0001 |
Common stock - shares authorized | 30,000,000 | 30,000,000 |
Common shares issued upon vesting of restricted stock, Amount | $ 167,285 | |
Shares issued for services, Amount | $ 638,915 | |
Shares issued for recognition of milestone achievement services, Amount | 75,938 | |
Shares issued for board of director fees, Amount | $ 364,723 | $ 465,000 |
Stock Options and Warrants (Det
Stock Options and Warrants (Details) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Stock Options And Warrants Details | ||
Expected stock price volatility | 102.00% | 120.00% |
Risk free interest rate | 2.09% | 0.77% |
Expected life of options/warrants | 5 years | 5 years |
Stock Options and Warrants (D_2
Stock Options and Warrants (Details 1) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Stock Options And Warrants Details 1 | ||
Shares Under Option/ Warrant outstanding, Beginning Balance | 600,842 | 504,991 |
Shares Under Option/ Warrant Granted | 85,589 | 151,080 |
Shares Under Option/ Warrant Expired | (1,172) | (55,229) |
Shares Under Option/ Warrant Exercised | 0 | 0 |
Shares Under Option/ Warrant Outstanding, Ending Balance | 685,259 | 600,842 |
Shares Under Option/ Warrant Exercisable, Ending Balance | 628,592 | |
Weighted Average Exercise Price Outstanding, Beginging Balance | $ 8.51 | $ 10.78 |
Weighted Average Exercise Price Granted | 1.13 | 3.77 |
Weighted Average Exercise Price Expired | 19.29 | 16.29 |
Weighted Average Exercise Price Exercised | 0 | 0 |
Weighted Average Exercise Price Outstanding, Ending Balance | 1.56 | $ 8.51 |
Weighted Average Exercise Price Exercisable, Ending Balance | $ 1.59 | |
Weighted Average Remaining Contractual Life Outstanding | 3 years 10 months 24 days | 1 year 1 month 24 days |
Weighted Average Remaining Contractual Life Exercisable | 3 years 11 months 12 days | 4 years 10 months 24 days |
Aggregate Intrinsic Value Outstanding | $ 0 | $ 182,095 |
Aggregate Intrinsic Value Exercisable | $ 0 | $ 0 |
Stock Options and Warrants (D_3
Stock Options and Warrants (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
2012 Plan | ||
Shares authorized for issuance | 30,797 | 110,000 |
Shares available under Plan | 27,218 | |
Warrants granted for services, shares | 54,792 | |
Warrants granted for services, value | $ 50,000 | |
Board of Directors [Member] | ||
Warrants granted for services, shares | 27,268 | |
Warrants granted for services, value | $ 75,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Income Tax Disclosure [Abstract] | ||
Net loss carryforwards | $ 51,296,000 | $ 58,134,000 |
Accruals and reserves | 913,000 | 1,319,000 |
Contributions | 16,000 | 24,000 |
Depreciation | 53,000 | (113,000) |
Stock-based compensation | 1,018,000 | 594,000 |
Valuation allowance | (53,296,000) | (59,958,000) |
Total | $ 0 | $ 0 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax benefit at statutory rate | $ (1,700,000) | $ 2,382,000 |
State income tax benefit, net of federal income tax effect | (265,000) | 231,000 |
Effect of foreign income taxes | 593,000 | 502,000 |
Non-deductible expenses | (554,000) | (516,000) |
Rate change due to Tax Cuts and Jobs Act | 24,222,000 | 0 |
Deferred only adjustment | (15,791,000) | 0 |
Change in valuation allowance | (5,912,000) | (2,097,000) |
Benefit for income taxes | $ 593,000 | $ 502,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Income loss for tax purposes | $ 5,428,041 | $ 725,826 |
Net carryforwards | $ 206,000,000 | |
Carryforward expirations | Sep. 30, 2018 | |
Net receivable related to payments on VAT | $ 400 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Sep. 30, 2018USD ($) |
Commitments And Contingencies Details | |
2,019 | $ 329,941 |
2,020 | 255,646 |
2,021 | 183,131 |
2,022 | 167,345 |
2,023 | 3,612 |
Thereafter | 0 |
Total | $ 939,675 |
Commitments and Contingencies_3
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Commitments And Contingencies Details | ||
Operating lease obligations | $ 939,675 | |
Lease payment obligations | $ 476,152 | $ 545,228 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Gross Carrying Amount | $ 35,269,566 | $ 35,288,370 |
Accumulated amortization | (12,016,512) | (9,839,032) |
Impairment | (499,759) | |
Net Book Value | 23,253,054 | 24,718,655 |
Patent [Member] | ||
Gross Carrying Amount | 21,170,565 | 21,170,565 |
Accumulated amortization | (7,751,751) | (6,415,229) |
Impairment | 0 | |
Net Book Value | $ 13,418,814 | $ 14,755,336 |
Weighted Average useful life | 7 years 11 months 26 days | 7 years 11 months 26 days |
Developed technology [Member] | ||
Gross Carrying Amount | $ 11,835,293 | $ 11,116,738 |
Accumulated amortization | (2,885,092) | (2,301,259) |
Impairment | 0 | |
Net Book Value | $ 8,950,201 | $ 8,815,479 |
Weighted Average useful life | 7 years 7 months 6 days | 8 years 2 months 19 days |
Customer Relationships [Member] | ||
Gross Carrying Amount | $ 1,860,000 | $ 2,590,683 |
Accumulated amortization | (1,050,733) | (1,039,336) |
Impairment | (499,759) | |
Net Book Value | $ 809,267 | $ 1,051,588 |
Weighted Average useful life | 7 years 8 months 12 days | 7 years 8 months 12 days |
Trade Name [Member] | ||
Gross Carrying Amount | $ 325,507 | $ 332,183 |
Accumulated amortization | (250,735) | (240,941) |
Impairment | 0 | |
Net Book Value | $ 74,772 | $ 91,242 |
Weighted Average useful life | 9 years 6 months 25 days | 9 years 6 months 25 days |
Website [Member] | ||
Gross Carrying Amount | $ 78,201 | $ 78,201 |
Accumulated amortization | (78,201) | (73,191) |
Impairment | 0 | |
Net Book Value | $ 0 | $ 5,010 |
Weighted Average useful life | 3 years | 3 years |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Total | $ 23,253,054 | $ 24,718,655 |
Amortization [Member] | ||
2,019 | 2,507,840 | |
2,020 | 2,449,940 | |
2,021 | 2,408,800 | |
2,022 | 2,232,132 | |
2,023 | 2,119,313 | |
Thereafter | 9,095,677 | |
Total | 20,813,702 | |
Patent [Member] | ||
2,019 | 1,852 | |
2,020 | 0 | |
2,021 | 0 | |
2,022 | 0 | |
2,023 | 0 | |
Thereafter | 0 | |
Total | 1,852 | |
Royalty Agreements [Member] | ||
2,019 | 450,000 | |
2,020 | 450,000 | |
2,021 | 450,000 | |
2,022 | 450,000 | |
2,023 | 450,000 | |
Thereafter | 187,500 | |
Total | $ 2,437,500 |
Intangible Assets (Details 2)
Intangible Assets (Details 2) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Intangible Assets Details 2 | ||
Goodwill - beginning of period | $ 8,226,714 | $ 7,955,876 |
Effect of foreign currency translation on goodwill | (149,955) | 270,838 |
Goodwill - end of period | $ 8,076,759 | $ 8,226,714 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Intangible Assets Details Narrative | ||
Amortization of Intangible Assets | $ 2,268,846 | $ 2,416,092 |