As filed with the Securities and Exchange Commission on December 3, 2010March 26, 2015

FileRegistration No. 333-169324333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

SECUREALERT, INC.
(Exact name of registrant as specified in its charter)
Utah3600366987-0543981
(State or other jurisdiction of incorporation or organization)(Primary Standard Industrial(I.R.S. Employer
incorporation or organization)Classification Code Number)(I.R.S. Employer Identification Number)
150 West Civic Center Drive, Suite 400
John L. Hastings III
150 West Civic Center Drive, Suite 400
Sandy, Utah 84070Sandy, Utah 84070
801-451-6141 (Phone)801-451-6141 (Phone)
(Address, including zip code, and telephone number, including area code,(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)of agent for service)No.)

Copies to:
Kevin R. Pinegar, Esq.
Wayne D. Swan, Esq.
Durham Jones & Pinegar, P.C.
111 East Broadway,405 South Main Street, Suite 900700
Salt Lake City, UT 84111
801-415-3000 (Phone)Telephone: (801) 451-6141
801-415-3500 (Fax)(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Gordon Jesperson, Esq.
General Counsel
405 South Main Street, Suite 700
Salt Lake City, UT 84111
Telephone: (801) 451-6141
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of communications to:

Daniel W. Rumsey, Esq.
Jessica R. Sudweeks, Esq.
Disclosure Law Group
600 West Broadway, Suite 700
San Diego, CA 92101
Telephone: (619) 795-1134
Facsimile: (619) 330- 2101
Approximate date of commencement of proposed sale to the public: As soon as practicablepractical from time to time after the effective date of this registration statement.Registration Statement becomes effective.
 
 If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ
  
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.offering: o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.offering: o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.offering: o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company þx
          (Do(Do not check if a smaller reporting company)
 
CALCULATION OF REGISTRATION FEE
 
       Proposed Maximum  Proposed Maximum    
 Title of Each Class of Securities to be  Amount to be  Offering Price per  Aggregate  Amount of 
 Registered  Registered  Security(1)  Offering Price(1)  Registration Fee 
 Common Stock, par value $0.0001 per share  
47,100,000
shares(2)(4)
  $0.10 (3)  $4,710,000  $336 
 

Title of Each Class of
 Securities Being Registered
 
Amount to be
 Registered (1)
  
Proposed Maximum
Offering Price
 per Share (2)
  
Proposed
 Maximum
 Aggregate
Offering
 Price (2)
  
Amount of
 Registration Fee
            
Common Stock, $0.0001 par value  35,000(3) $10.70  $374,500  $43.52 
Common Stock, $0.0001 par value  115,000(4) $10.70  $1,230,500  $142.98 
Total
  150,000      $1,605,000  $186.50 
______________
(1)
Pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares of Common Stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions.
(2)
Estimated solely for the purpose of calculating the registration fee pursuant toin accordance with Rule 457457(c) under the Securities Act of 1933, as amended (the “Securities Act”).
(2)Represents shares of Common Stock issued or issuable upon conversion of 7,850 shares of Preferred Stock, which may be offered for resale by Selling Stockholders hereunder.
(3)Act. The price per share and aggregate offering price are based on the averageclosing sales price of the high and low sales prices of the registrant’sRegistrant’s Common Stock on November 29, 2010,March 20, 2015, as reported on the Over-the-Counter Bulletin Board.OTC Markets (OTCQB).
(3)Shares were issued upon closing of acquisition and are currently held in escrow. Subject to certain terms and conditions contained in the Purchase Agreement and Escrow Agreement (as defined in the accompanying prospectus), one-half of the shares will be issued to the selling shareholders identified herein on November 26, 2015, and the remaining one-half will be issued to the selling shareholders on November 26, 2016.
(4)InShares were issued upon closing of acquisition and are held in escrow. Subject to certain terms and conditions contained in the Purchase Agreement and Escrow Agreement, up to CAD$2.0 million worth of shares may be delivered to the Selling Shareholders if certain milestones set forth in the Purchase Agreement are achieved by November 26, 2016. The number of shares issuable upon achievement of those milestones will be determined in accordance with Rule 416 under the Securities Act, there shall be deemed to be registered hereunder such additional securities as may be issued to prevent dilution or as resulting from stock splits, stock dividends, recapitalizations and similar transactions.Purchase Agreement.

The Registrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statementregistration statement shall thereafterhereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statementregistration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 
 
 

 
The information in this preliminary prospectus is not complete and may be changed. The Selling StockholdersWe may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and iswe are not soliciting an offer to buy these securities.securities in any jurisdiction where the offer or sale is not permitted.
 
Subject to Completion, Dated DecemberSUBJECT TO COMPLETION, DATED _________ __, 20102015

PRELIMINARY PROSPECTUS


SECUREALERT, INC.

47,100,000150,000 Shares of Common Stock

This prospectus relates to the offer and resale, by the selling stockholdersshareholders identified on page 45 of this prospectus (the “Selling Stockholders”“Selling Shareholders”), including their donees, pledgees, transferees or other successors-in-interests, of up to 47,100,000150,000 shares (the “Shares”) of the common stock, par value $0.0001 (the “Common Stock”), of SecureAlert, Inc., dba TrackGroup, a Utah corporation (“SecureAlert”, “TrackGroup” or “we”), issued in connection with the acquisition by SecureAlert of G2 Research Limited, a company formed under the laws of the providence of Nova Scotia (“G2”), from the Selling Shareholders.  The Shares are currently held in escrow and will be delivered to Selling Shareholders upon satisfaction of certain conditions contained in the escrow agreement among SecureAlert, the Selling Shareholders and the escrow agent identified in such agreement (the “Escrow Agreement”) and the share purchase agreement (the “Purchase Agreement”) among SecureAlert and Selling Shareholders.  Closing of the acquisition of G2 (the “Transaction”) occurred on November 26, 2014.
We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale or other disposition of the Shares by the Selling Shareholders.  Please refer to the section of this prospectus entitled “The Transaction” for a description of the acquisition transaction pursuant to which the Shares were or will be issued to Selling Shareholders and to the section entitled “Selling Shareholders” for additional information regarding the Selling Shareholders.
The Selling Shareholders may, from time to time, sell, transfer or otherwise dispose of any or all of the Shares on any exchange, market or trading facility on which the Common Stock is traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at various prices determined at the time of sale or at negotiated prices. See “Plan of Distribution” for more information about how the Selling Shareholder may sell the Shares.
We will pay the expenses incurred in registering the Shares, including legal and accounting fees. The Selling Shareholder will pay any commissions and selling expenses he may incur in connection with the sale of the Shares. See “Plan of Distribution.”
Our Common Stock is currently quoted on the OTC Markets (OTCQB) under the symbol “SCRA.” On March 25, 2015, the last reported sale price of our Common Stock (the “Resale Shares”), issued or issuable upon conversion of 7,850 shares of our Series D Convertible Preferred Stock (the “Series D Preferred”).was $10.11 per share.
 
The Resale Shares originally were, or may be, issued to the Selling Stockholders upon conversion of 7,850 shares of Series D Preferred acquired by the Selling Stockholders by payment of cash in a private placement exempt from registration under the Securities Act of 1933, as amended.  It is anticipated that the Selling Stockholders will sell the Resale Shares from time to time in one or more transactions, in negotiated transactions or otherwise, at prevailing market prices or prices otherwise negotiated.

We will not receive any proceeds from the sale of any Resale Shares sold by the Selling Stockholders.

Our Common Stock trades on the Over-the-Counter Bulletin Board under the symbol “SCRA”.  On November 29, 2010, the closing price of the Common Stock was approximately $0.10 per share.

Investing in our securities involves a high degree of risk.  See “RISK FACTORS”"Risk factors" beginning on page 34 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined ifpassed upon the accuracy or adequacy of this prospectus is truthful or complete.prospectus.  Any representation to the contrary is a criminal offense.













The date of this prospectus is , 20__.____ __, 2015.
 
 
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TABLE OF CONTENTS
 
SUMMARYPage
 
PROSPECTUS SUMMARY1
CORPORATE INFORMATION1
THE OFFERING23
CAUTIONARY
RISK FACTORS4
   Risks Related to our Business, Operations and Industry4
   Risks Related to our Recent Acquisition8
   Risks Related to our Common Stock10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS212
RISK FACTORS 
3BUSINESS13
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS21
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS823
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 19
MANAGEMENT30
 19
EXECUTIVE COMPENSATION2237
TRANSACTIONS WITH RELATED PERSONS 
31SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT40
BUSINESS AND PROPERTIES 
33CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS42
CAPITALIZATION 
43THE TRANSACTION44
MARKET PRICE FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS 43
USE OF PROCEEDS44
 44
SELLING STOCKHOLDERSSHAREHOLDERS45
 
44DESCRIPTION OF SECURITIES46
PLAN OF DISTRIBUTION4647
DESCRIPTION OF SECURITIES 48
INDEMNIFICATION51
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES51
LEGAL MATTERS48
 55
EXPERTS48
 55
WHERE YOU CAN FIND MOREADDITIONAL INFORMATION5549
INDEX TO CONSOLIDATED
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY49
FINANCIAL STATEMENTSF-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
F-2PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUSII-1   
 EX-5.01
 EX-21.01SIGNATURES
 EX-23.02II-5
 
 
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You should rely only on the information contained in this prospectus. We have not, and the Selling Shareholders have not, authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell, nor is the Selling Shareholder seeking an offer to buy, securities in any state where the offer or solicitation is not permitted. The information contained in this prospectus is complete and accurate as of the date on the front cover of this prospectus, but information may have changed since that date. We are responsible for updating this prospectus to ensure that all material information is included and we will update this prospectus to the extent required by law.
This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data and we do not make any representation as to the accuracy of the information.

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SUMMARY
 
ThisPROSPECTUS SUMMARY
SecureAlert, Inc., a Utah corporation, is referred to as “SecureAlert,” “we,” “us,” “our,” or the “Company” throughout this prospectus. The items in the following summary highlights information containedare described in more detail later in this prospectus. Because it is abbreviated, thisThis summary does not contain all of the information that you should consider beforeconsider. Before investing in our Common Stock. Yousecurities, you should read the entire prospectus carefully, including the consolidated historical and pro forma financial data and the notes to those financial statements and data. You should read “RISK FACTORS”“Risk Factors” beginning on page 3 for more information about important risks that you should consider carefully before investing in our Common Stock.and the financial statements and related notes beginning on page 43. Our fiscal year ends on September 30.
 
Company
Overview
 
 Unless the context otherwise requires, all references in this prospectus to "registrant," "we," "us," "our," "SecureAlert" or the "Company" refer to SecureAlert, Inc.,
We are a Utah corporation that markets and its subsidiary corporations.
We market and deploydeploys offender management programs, combining patented GPS (Global Positioning System) tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services.  Our vision is to be the global market leader for delivering the most reliable offender management solutions, that integrate interactionwhich leverage superior intervention capabilities and integrated communication technologies.  We believe that we currently deliver the only offender management technology whichthat effectively integrates GPS, RF (Radio Frequency (“RF”) and an interactive 3-way voice communication system into a single piece device, deployable on offenders worldwide.  Through our patented electronic monitoring technologies and services, we empower law enforcement, corrections a ndand rehabilitation professionals with offender, defendant, probationer and parolee programs.  These programs, which grant convicted criminals and pre-trial suspects an accountable opportunity to be “free from prison,prison.”  while providingThis provides for greater public safety at a lower cost compared to incarceration or traditional resource-intensive alternatives.

TrackerPAL™ IIOur flagship product line, ReliAlert, Shadow, and TrackerPAL™ II(e) (“enhanced”)R.A.D.A.R., now manufactured in the USA – The TrackerPAL™ portfolioconsists of products, e-Arrest Beaconsdevices and monitoring services are designedcustomizable to create “Jails without Walls,” customizable byprovide secure reintegration solutions for various offender types, (e.g.,including domestic abusers, sexual predators, gang members, pre-trial defendants, alcohol abusers, or juvenile offenders, etc.).  Additionally, ouroffenders. Our proprietary software, and device firmware support the dynamic accommodation ofand processes accommodate agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions. TrackerPAL™ II(e) isOur devices are intelligent devices with integrated computer circuitry.  They are constructed from case-hardened materials and are designed for federal, state and local agencies to provide location trackingpromptly notify intervention monitoring centers of select individuals i n the criminal justice system.  The TrackerPAL™ II(e)attempts to breach applicable electronic supervision terms or to remove or otherwise tamper with device fastens to the offender'selements. They are securely attached around an offender’s ankle with a tamper resistant strap (steel cabling with optic fiber) that can only be adjusted.  We also have a unique patented, dual-steel banded SecureCuff for high risk or removed without detection by a supervising officer through services provided by our SecureAlert Monitoring Center (or otherhigh flight risk offenders who have qualified for electronic monitoring centers).  This monitoringsupervision, but who require an incremental level of security and intervention center acts as an important link between the offender and the supervising officer as intervention specialists persistently track and monitor the offender, initiating contact at the direction of the supervising agency and/or when the offender is in violation of any established restrictions or protocols.  An intelligent device with integrated computer circuitry and constructed from case-hardened plastics, the TrackerPAL™ II(e) unit promptly notifies the monitoring center if any attempt is made to breach protocols or to remove or otherwise tamper with the device or optical strap housing. supervision.
 
We were originally formed to manufacture and market medical diagnostic stains, solutions and related equipment. Through the acquisition of SecureAlert, Inc. (now known as “SecureAlert Monitoring, Inc.” or “SecureAlert Monitoring”) in July 2001, we expanded our product sales and monitoring services related to Personal Emergency Response Systems (“PERS”).  In 2006, we developed the GPS tracking technology and monitoring business currently conducted by our subsidiary, SecureAlert Monitoring. Our business now includes manufacturing, distributing, and monitoring mobile emergency and interactive GPS tracking products, worn on the body, that focus on the offender tracking, monitoring and intervention marketplace.Corporate Information
 
See page 33 of this prospectus, “BUSINESS AND PROPERTIES,” for a more complete description of our Company.
Our principal executive offices areplace of business is located at 150 West Civic Center Drive,405 South Main Street, Suite 400, Sandy,700, Salt Lake City, Utah, 84070.84111. Our telephone number is 801-451-6141.(801) 451-6141. We maintain a corporate website at www.trackgrp.com. No information found on our website is part of this prospectus. Also, this prospectus may include the names of various government agencies or the trade names of other companies. Unless specifically stated otherwise, the use or display by us of such other parties’ names and trade names in this prospectus is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, any of these other parties.

 
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Risk Factors
Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” and elsewhere in this prospectus, including without limitation, in conjunction with the forward-looking statements included in this prospectus.  All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.  Some of the factors that we believe could affect our results include:
·Risks related to our ability to generate sufficient cash to finance our operations, which may not be successful;
●
Risks related to general economic conditions; if recovery from the recent recession continues to be slow or prolonged, it could continue to adversely affect our government agency customers and our reliance on third-party manufacturers and suppliers increases our risk of obtaining adequate, timing, and cost-effective product supplies;
●
How well we manage our business;
●
Competition that could negatively impact our business;
●
Risks associated with adequately maintaining security and preventing unauthorized access to electronic and other confidential information and data breaches;
●
Risks related to our information systems, including, for example, security breaches or the effects of loss of power supply or other service disruptions at our monitoring centers;
●
Risks related to our acquisitions, including the acquisition of G2;
●
Our current lack of a Chief Executive Officer and our inability to identify, hire and subsequently integrate a new Chief Executive Officer;
●
Changes in regulations or enforcement that may adversely impact our business;
●
Risks relating to conducting business internationally, subjecting us to a variety of regulations, political interests and monetary fluctuations;
●
Disruptions in the capital markets could increase our costs of doing business; and
●
The possibility that the interests of our largest shareholder may conflict with the interests of other shareholders.
The foregoing factors are not exhaustive and new factors may emerge or changes to the foregoing factors may occur that could impact our business.  In addition, there may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results of operations to differ materially from the forward-looking statements.  We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.  You should review carefully the section captioned “Risk Factors” in this prospectus.
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THE OFFERING
 
On November 26, 2014 (the “Closing Date”), we entered into the Purchase Agreement to purchase all issued and outstanding shares and equity interests of G2 from the Selling Shareholders for an aggregate purchase price of up to CAD$4.6 million, of which CAD$2.0 million is payable in cash and CAD$2,600,000 is payable by the issuance of the Shares registered by this prospectus. 35,000 of the Shares are currently held in escrow by Cox & Palmer of Halifax, Nova Scotia, Canada (“Escrow Agent”), and will be released to the Selling Shareholders on conditions contained in the Purchase Agreement and Escrow Agreement.  The balance of the Shares will be released upon the achievement of certain milestones as set out in the Purchase Agreement.  See “The Transaction” for a more detailed description of the terms and conditions of our acquisition of G2.

Securities Offered
This offering involves a total of 150,000 shares of our Common Stock (the “Shares”), all of which are currently held in escrow by the Escrow Agent. The following summary assumes all Shares will be released from escrow in accordance with the terms and conditions of the Escrow Agreement and Purchase Agreement.
Shares Offered by Selling Stockholders47,100,000 shares of Common Stock (the “Resale Shares”)offered by the Selling Shareholder:150,000
Selling Stockholders
The Selling Stockholders were or are current holders of a total of 7,850 shares of our Series D Preferred and were granted registration rights in connection with their acquisition of the Series D Preferred.  To fulfill our obligations under the registration rights granted to these Selling Stockholders, we have filed a Registration Statement pursuant to which the Resale Shares are being registered. See “SELLING STOCKHOLDERS” identified elsewhere in this prospectus on page 44.
  
Common Stock Outstanding as of November 22, 2010outstanding prior to the offering:294,309,452 shares10,150,617
 
Common Stock outstanding after the offering:10,300,617
  
Use of Proceedsproceeds:
We will not receive noany proceeds from the sale of the Resale Shares by the Selling Stockholders.Shareholders in this offering.  See “Use of Proceeds.”
OTCBB Trading Symbol: Common StockSCRA.OB
  
Risk Factorsfactors:Investing
An investment in our Common Stockthe Shares involves a high degree of risk. YouSee “Risk Factors” for a discussion of factors you should readconsider carefully and consider the information set forth under the heading “RISK FACTORS” beginning on page 3 of this prospectus and all other information in this prospectus before investing in our Common Stock.making an investment decision.
OTC Markets (OTCQB) symbol:SCRA
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. The use of any statements containing the words “anticipate,” “intend,” “believe,” “estimate,” “project,” “expect,��� “plan,” “should” or similar expressions are intended to identify such statements. Forward-looking statements included in this prospectus relate to, among other things, expected future production, expenses and cash flows in 2010, the nature, timing and results of capital expenditure projects, amounts of future capital expenditures, our future debt levels and liquidity. Although we believe that the expectations reflected in such forward-looking statements are reasona ble, those expectations may prove to be incorrect. All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement. Factors that could cause actual results to differ materially from our expectations include, among others, those factors referenced in the “Risk Factors” section of this prospectus, and such things as:
·our future cash flow, liquidity and financial position;
·the amount, nature and timing of our capital expenditures, including future development costs;
·a lack of available capital and financing;
·volatility of stock prices generally and of the price of our Common Stock in particular;
·our operating costs and other expenses;
·risks related to our level of indebtedness;
·the success of strategic plans, expectations and objectives of our future operations;
·loss of senior management or technical personnel;
·acquisitions and other business opportunities (or the lack thereof) that may be presented to and pursued by us; and
·other factors, many of which are beyond our control.

 
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RISK FACTORS
 
An investmentInvesting in our securitiescommon stock involves a high degree of risk. You should carefully consider and evaluate all of the information contained in this prospectus before you decide to purchase our Common Stock. Any ofcarefully the risks and uncertainties set forthdescribed below, could materiallytogether with all of the other information in this prospectus, including our financial statements and adversely affectrelated notes, before deciding whether to purchase shares of our common stock. If any of the following risks are realized, our business, financial condition, results of operations and financial condition, which in turnprospects could be materially and adversely affectaffected. In that event, the trading price of our Common Stock. As a result,common stock could decline and you could lose allpart or partall of your investment.
 
Risks Related to Our Business, Operations and Industry
 
The risk factors set forth below are not the only
We face risks that mayrelated to our substantial indebtedness.  

As of December 31, 2014, we had approximately $30.34 million of indebtedness outstanding and additional liabilities of approximately $9.1 million at December 31, 2014. These liabilities could adversely affect our business. Our business could also be affected by additional risks not currently known to us or that we currently deem to be immaterial. If any of the following risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected.
The financial statements contained in this prospectus have been prepared on the basis that we will continue as a going concern, notwithstanding the fact that our financial performance and condition during the past few years raise substantial doubt as to our ability to do so. There is no assurance we will ever be profitable.  In the fiscal year ended September 30, 2009, we incurred a net loss of $23,081,500 and negative cash flows from operating activities of $8,521,326.  As of September 30, 2009, we had an accumulated deficit of $205,765,496.  During the nine months ended June 30, 2010, we incurred a net loss of $11,084,874 andraise additional capital to fund our accumulated deficitoperations, make interest payments as of June 30, 2010 was $216,075,643.  These factors rai se substantial doubt aboutthey come due, limit our ability to continue as a going concern. The financial statements included in this prospectus do not include any adjustments that might result from the outcome of this uncertainty.  Our plan with respectreact to this uncertainty is to focus on increasing the number of TrackerPAL™ deviceschanges in the marketplaceeconomy or our industry, and prevent us from which we will generate monitoring service revenue.  There can be no assurance that revenues will increase rapidly enoughmeeting our obligations under our outstanding debt instruments.  

Our high degree of leverage could have important consequences to offset operating losses and repay indebtedness.  If we are unable to increase cash flows from operating activities or obtain additional financing, we will be unable to continue the development of our products and will likely cease operations.us, including:
 
We have a history of losses, anticipate significant future losses, and may be unable to project our revenues and expenses accurately. We will incur significant expenses associated with the development and deployment of our products and promoting our brand. We intend to enter into additional arrangements through current and future strategic alliances that may require us to pay consideration in various forms and in amounts that may significantly exceed current estimates and expectations.  We may also be required to offer promotional packages of hardware and software to end-users at subsidized prices in order to promote our brand, products and services. These guaranteed payments, promotions and other arrangements will result in s ignificant expense. If we do achieve profitability, we cannot be certain that we will be able to sustain or increase profitability in the future.  In addition, because of our limited operating history in our newly targeted markets, we may be unable to project revenues or expenses with any degree of certainty. Management expects expenses to increase significantly in the future as we continue to incur significant sales and marketing, product development and administrative expenses.  We cannot guarantee that we will be able to generate sufficient revenues to offset operating expenses or the costs of the promotional packages or subsidies described above, or that we will be able to achieve or maintain profitability. If revenues fall short of projections, our business, financial condition and operating results would be materially adversely affected.
●
making it more difficult for us to make payments on our debt;
●
increasing our vulnerability to general economic and industry conditions;
●
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, and future business opportunities;
●
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
●
limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and
●
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less highly leveraged.
General economic conditions may affect our revenue and harm our business.  As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in recent months. Unfavorable changes in economic conditions, including declining consumer confidence, inflation, recession or other changes, may lead our customers to delay or reduce purchases of our products and services, adversely affecting our results of operations and financial condition. Challenging economic conditions also may impair the ability of our customers or distributors to pay for products or services they have purchased, and as a result, our reserves for doubtful account s and write-offs of accounts receivable could increase. Our cash flows may be adversely affected by delayed payments or underpayments by our customers. We are unable to predict the duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries.
As a result of our increased focus on a new business market, our business is subject to many of the risks of a new or start-up venture. The change in 2009 of our business goals and strategy subjects us to the risks and uncertainties usually associated with start-ups. Our business plan involves risks, uncertainties and difficulties frequently encountered by companies in their early stages of development.  If we are to be successful in this new business direction, we must accomplish the following, among other things:
 
3
·Develop and introduce functional and attractive products and services,
·Increase awareness of our brand and develop customer loyalty,
·Respond to competitive and technological developments,
·Increase gross profit margins,
·Build an operational structure to support our business, and
·Attract, retain and motivate qualified personnel.
Failure to achieve these goals would have a material adverse effect on our business, prospects, financial condition and operating results.  Because the market for our products and services is new and evolving, it is difficult to predict with any certainty the size of this market and its growth rate, if any.  There is no assurance that a market for these products or services will ever develop or that demand for our products and services will emerge or be sustainable. If the market fails to develop, develops more slowly than expected, or becomes saturated with competitors, our business, financial condition and operating results would be materially adversely affected.
Certain individuals or groups own or control a significant number of our outstanding shares.  Certain individuals and groups or persons associated with them, beneficially own a substantial number of shares of our outstanding Common Stock or securities convertible into shares of our Common Stock.  As a result, these persons have the ability, acting as a group, to effectively control our affairs and business, including the election of our directors and, subject to certain limitations, approval or disapproval of fundamental corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change of control or making other transactions more difficult or impossible without their suppo rt.  
There is no certainty that the market will accept our products and services.  

Our targeted markets may be slow to or may never accept our products or services.  Governmental organizations may not use our products unless they determine, based on experience, advertising or other factors, that those products are a preferable alternative to currentlyother available methods of offender monitoring and tracking.tracking or incarceration.  In addition, decisions to adopt new tracking devices can be influenced by government administrators, regulatory factors, and other factors largely outside our control.  No assurance can be given that key decision-makers will accept our new products, which could have a material adverse effect on our business, financial condition and resu ltsresults of operations.

We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.  We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
 
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If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness.

These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity difficulties and might be required to dispose of material assets or operations to meet our debt service and other obligations.  We may not be able to consummate those dispositions or the proceeds that we realize from them may not be adequate to meet any debt service obligations then due.
Budgetary issues faced by government agencies could adversely impact our future revenue. 

Our relationshiprevenues are primarily derived from contracts with certainstate, local and county government agencies in the United States and governments of Caribbean and Latin American nations.  Many of these government agencies are experiencing budget deficits and may continue to do so.  As a result, the amount spent by our current clients on equipment and services that we supply may be reduced or grow at rates slower than anticipated and it may be more difficult to attract additional government clients.  Furthermore, the industry has experienced a general decline in average daily lease rates for GPS tracking devices.  As a result of these factors, our ability to maintain or increase our revenues may be negatively affected. 
Certain individuals and groups own or control a significant number of our stockholders presents potential conflictsoutstanding shares.  

Certain groups or persons beneficially own a substantial number of shares of our outstanding Common Stock or securities and debt instruments.  As a result, these persons have the ability, acting as a group, to effectively control our affairs and business, including the election of our directors and, subject to certain limitations, approval or preclusion of fundamental corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change of control or making other transactions more difficult or impossible without their support. In addition, these equity holders may have an interest whichin pursuing acquisitions, divestitures, financing or other transactions that, in their judgment, could enhance their equity investments, even though such transactions may result in decisions that favor them overinvolve significant risk to us or our other shareholders.  OneAdditionally, they may make investments in businesses that directly or indirectly compete with us, or may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. 

We do not have a chief executive officer and we are dependent upon the services of our principal beneficial ownerssenior management team; the failure to attract and founders, David Derrick, provides management and/or financial services and assistance to us.  When his personal investment interests diverge from our interests, he and his affiliates may exercise their influence in their own best interests. Some decisions concerningretain such individuals could adversely affect our operations or finances may present conflicts.  

We are dependent on the services, abilities and experience of interest between usour executive officers. The permanent loss of the services of any of these senior executives and these stockholdersany change in the composition of our senior management team could have a negative impact on our ability to execute on our business and their affiliated entities. See “TRANSACTIONS WITH RELATED PERSONS,” at p age 31, below.operating strategies.  We do not currently have a chief executive officer.  In October 2012, the Board of Directors established an Executive Committee and transferred the executive function to this committee, currently comprised of Guy Dubois and David Boone.  Messrs. Dubois and Boone will continue to execute the responsibilities of the Company’s principal executive officer through the Executive Committee, until our appointment of a new chief executive officer.  
 
We rely on significant suppliers for key products and cellular access.  If we do not renew these agreements when they expire we may not continue to have access to these suppliers’ products or services at favorable prices or in volumes as we have in the past, which would reduce revenues and could adversely affect our results of operations or financial condition. 

We have entered into an agreement with atwo national cellular access companycompanies for cellular services. We also rely currently on a single manufacturersource for the manufacturemanufacturing of our TrackerPAL™ devices.products.  If any of ourthese significant suppliers were to cease providing productproducts or services to us, we would be required to seek alternative sources. There is no assurance t hatthat alternate sources could be located or that the delay or additional expense associated with locating alternative sources for these products or services would not materially and adversely affect our business and financial condition.


 
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Our business subjects our research, development and ultimate marketing activities are subject to current and possibly future government regulations. The cost of compliance or the failure to comply with these regulations could adversely affect our business, results of operations and financial condition. 

Our monitoring device products and services are not subject to specific approvals from any governmental agency, although our products using cellular and GPS technologies for use in the United States or internationally must be manufactured in compliance with applicable rules and regulations of the Federal Communications Commission (“FCC”).specific governmental agencies. There can also be no assurance that changes in the legal or regulatory framework or other subsequent developments will not result in limitation, suspension or re vocationrevocation of regulatory approvals granted to us. Any such events, were they to occur, could have a material adverse effect on our business, financial condition and results of operations.  We may be required to comply with FCC regulations for manufacturing practices, which mandate procedures for extensive control and documentation of product design, control and validation of the manufacturing process and overall product quality. Foreign regulatory agencies have similar manufacturing standards. Any third parties manufacturing our products or supplying materials or components for such products may also be subject to these manufacturing practices and mandatory procedures. If we, our management or our third-party manufacturers fail to comply with applicable regulations regarding these manufacturing practices, we could be subject to a number of sanctions, including fines, injunctions, civil penalties, delays, suspensions or withd rawalswithdrawals of market approval, seizures or recalls of product, operating restrictions and, in some cases, criminal prosecutions.  Our products and related manufacturing operations may also be subject to regulation, inspection and licensing by other governmental agencies, including the Occupational Health and Safety Administration. 
 
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We face intense competition, including competition from entities that are more established and may have greater financial resources than we do, which may make it difficult for us to establish and maintain a viable market presence.  

Our current and expected markets are rapidly changing. Existing products and services and emerging products and services will compete directly with the products we are seeking to develop and market.  Our technology will compete directly with other technology, and, althoughAlthough we believe our technology has or will have advantages over these competing systems, there can be no assurance that our technology will havethose advantages that are significant enough to cause users to adopt its use. 60; Competition is expected to increase.  Manysignificant; many of theseour competitors have products or techniques approved or in development and operate large, well-funded research and development programs in the field.  Moreover, these companies and institutionscompetitors may be in the process of developing technology that could be developed more quickly or be ultimately more effective than our planned products.  We face competition based on product efficacy, availability of supply, marketing and sales capability, price and patent position.  There can be no assurance that our competitors will not develop more effective or more affordable products, or achieve earlier patent protection or product commercialization.

We are dependent upon certain customers, the loss of which would adversely affect our results of operations and business condition.  

During year ended September 30, 2014 and the quarter ended December 31, 2014, two of our customers each accounted for more than 10% of total sales.  The loss of either of these customers would have a material adverse effect on our business.  
 
Our business plan is subject to the risks of technological uncertainty, which may result in our products failing to be competitive or readily accepted by our target markets.  We may not realize revenues from the sale of some of our new products or services for several years, if at all.  Some of the products we are currently evaluating likely will require further research and development efforts before they can be commercialized.

There can be no assurance that our research and development efforts will be successful or that we will be successful in developing any commercially successful products.successful.  In addition, the technology which we integrate or that we may expect to integrate with our productsproduct and servicesservice offerings is ra pidlyrapidly changing and developing.  We face risks associated with the possibility that our technology may not function as intended and the possible obsolescence of our technology and the risks of delay in the further development of our own technologies. Cellular coverage is not uniform throughout our current and targeted markets and GPS technology depends upon “line-of-sight” access to satellite signals used to locate the user.  This limits the effectiveness of GPS if the user is in the lower floors of a tall building, underground or otherwise located where the signals have difficulty penetrating.  Other difficulties and uncertainties normally associated with new industries or the application of new technologies in new or existing industries also threaten our business, including the possible lack of consumer acceptance, difficulty in obtaining financing for untested technologies, increasing competition from larger or smaller well-funded competitors, advances in competing or other technologies, and changes in laws and regulations affecting the development, marketing or use of our new products and related services. 

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Our business plan anticipatesWe face risks of litigation and regulatory investigation and actions in connection with our operations.

Lawsuits, including regulatory actions, may seek recovery of large, indeterminate amounts or otherwise limit our operations, and their existence and magnitude may remain unknown for substantial periods of time.  Relevant authorities in the markets in which we operate may investigate us in the future. These investigations may result in significant growth through monitoring revenuespenalties in multiple jurisdictions, and acquisitions. To manage the expected growth we will require capital and there is no assurance we will be successful in obtaining necessary additional funding.  Our actual capital requirements will depend on many factors, including but not limited to, the costs and timing of our ongoing development activities, the success of our development efforts, the cost and timing of establishing or expanding our revenues, marketing and manufacturing activities, the extent to which our products gain market acceptance, our ability to establish and maintain collaborative relationships, competing technological and market developments, the progress of our commercializa tion efforts and the commercialization efforts of our marketing alliances, the costsmay become involved in preparing, filing, prosecuting, maintaining and enforcing and defending patent claims and other intellectual property rights, developments related todisputes with private parties seeking compensation for damages resulting from the relevant violations. Such substantial legal liability or regulatory issues, and other factors, including many that are outside our control. To satisfy our capital requirements, we may seek to raise funds through public or private financings, collaborative relationships or other arrangements. Any arrangement that includes the issuance of equity securities or securities convertible into our equity securities may be dilutive to stockholders (including the purchasers of the Resale Shares), and debt financing, if available, may involve significant restrictive covenants that limit our ability to raise capital in other transactions. Collaborative arrangements, if necessary to raise additional funds, may require that we relinquish or encumber our rights to certain of our technologies, products or marketing territories.  Any inability or failure to raise capital when neededaction could also have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and credibility.  In addition, our business activities are subject to various governmental regulations in countries where we operate, which include investment approvals, export regulations, tariffs, antitrust, anti-bribery, intellectual property, consumer and business taxation, foreign trade and exchange controls, and environmental and recycling requirements. These regulations limit, and other new or amended regulations may further limit, our business activities or increase operating costs. In addition, the enforcement of such regulations, including the imposition of fines or surcharges for violation of such regulations, may adversely affect our results of operations. There can be no assurance that any such financing, if required, will be available on terms satisfactory to us, if at all.

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operations, financial condition, cash flows, reputation and credibility.
 
Our products are subject to the risks and uncertainties associated with the protection of intellectual property and related proprietary rights.  

We believe that our success depends in part on our ability to obtain and enforce patents, maintain trade secrets and operate without infringing on the proprietary rights of others, both in the United States and in other countries. Our inability to obtain or to maintain patents on our key products could adversely affect our business. We have received several patents.  We have also applied for several additionalcurrently own 16 patents and have filed and intend to file additional patent applications with the in the United States and in key foreign jurisdictions relating to our technologies, improvements to those applications are awaiting action by the U.S. Patent Office.technologies and for specific products we may develop.  There iscan be no assurance thosethat patents will issue on any of these applications or that, when they do issue theyif issued, any patents will include all of the claims currently included in the applications.  Even if they do issue, those new patents and our existing patents mustnot be protected against possible infringement.challenged, invalidated or circumvented. The enforcement of patent rights can be uncertain and involve complex legal and factual questions.  The scope and enforceability of patent claims are not systematically predictable with absolute accuracy.  The strength of our own patent rights depends, in part, upon the breadth and scope of protection provided by the patent and the validity of our patents, if any.  Our inability to obtain or to maintain patents on our key products could adversely affect our business.  We own five patents and have filed and intend to file additional patent applications in the United States and in key foreign jurisdictions relating to our technologies, improvements to those technologies and for specific products we may develop.  There can be no assurance that patents will issue on any of these applications or that, if issued, any patents will not be challenged, invalidated or circum vented.  The prosecution of patent applications and the enforcement of patent rights are expensive, and the expense may adversely affect our profitability and the results of our operations.  In addition, there can be no assurance that the rights afforded by any patents will guarantee proprietary protection or competitive advantage.  

Our success will also depend, in part, on our ability to avoid infringing the patent rights of others.  We must also avoid any material breach of technology licenses we may enter into with respect to our new products and services.  Existing patent and license rights may require us to alter the designs of our products or processes, obtain licenses or cease certain activities.  In addition, ifIf patents have been issued to others that contain competitive or conflicting claims and such claims are ultimately determined to be valid and superior to our own, we may be required to obtain licenses to those patents or to develop or obtain alternative technology.  If any licenses are required, there can beis no assurance given that we will be able to obtain any necessary licenses on commercially favorable terms, if at all.  Any breach of an existing license or failure to obtain a license to any technology that may be necessary in order to commercialize our products may have a material adverse impact on our business, results of operations and financial condition.  Litigation that could result in substantial costs may also be necessary to enforce patents licensed or issued to us or to determine the scope or validity of third-party proprietary rights.  If our competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may have to participate in proceedings before the U.S. Patent and Trademark Office to determine priority of invention, which could result in substantial costs, even if we eventually prevail.  An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties, or require that we cease using such technology. 
 
We also rely on trade secretsecrets laws to protect portions of our technology for which patent protection has not yet been pursued or is not believed to be appropriate or obtainable.  These laws may protect us against the unlawful or unpermitted disclosure of any information of a confidential and proprietary nature, including but not limited to our know-how, trade secrets, methods of operation, names and information relating to vendors or suppliers and customer names and addresses.  We intendseek to protect this unpatentable and unpatented proprietary technology and processes, in addition to other confidential and proprietary information in part, by entering into confidentiality agreements with employees, collaborative partners, consultants and certain contractors.  There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and other confidential and proprietary information will not otherwise become known or be independently discovered or reverse-engineered by competitors.
Risks Related to Our Common Stock
Offers or availability for resale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.  Sales by the Selling Stockholders under this prospectus, as well as sales of shares of Common Stock issuable upon the exercise of outstanding stock purchase warrants in substantial amounts in the public market, or the resale of substantial amounts of our Common Stock pursuant to a registration statement or upon the expiration of any statutory holding period under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), could create a circumstance commonly referred to as an “ overhang” and in anticipation of which the market price of our Common Stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could exert downward pressure on our stock price and make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. As of November 22, 2010, we had outstanding warrants for the purchase of Common Stock and Series D Preferred, equivalent in the aggregate to 51,740,451 shares of Common Stock.  We also had 34,124 shares of Series D Preferred outstanding, convertible into 204,744,000 shares of Common Stock, including the Resale Shares.  The exercise of these warrants and the conversion of the Series D Preferred will result in significant dilution to our stockholders, which could cause the market price of our Common Stock to decline.
 
 
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We conduct business internationally with a variety of sovereign governments.
Our business is subject to a variety of regulations and political interests that could affect the timing of payment for services and the duration of our contracts. We face the risk of systems interruptions and capacity constraints, possibly resulting in adverse publicity, revenue loss and erosion of customer trust. The satisfactory performance, reliability and availability of our network infrastructure are critical to our reputation and our ability to attract and retain customers and to maintain adequate customer service levels. In addition, because our customers in these foreign jurisdictions are sovereign governments or governmental departments or agencies, it may be difficult for us to enforce our agreements with them in the event of a breach of those agreements, including, for example, the failure to pay for our services or to complete projects that we have commenced.
We may experience temporary service interruptions for a variety of reasons, including telecommunications or power failures, fire, water damage, vandalism, computer bugs or viruses or hardware failures.  

Any service interruption that results in the unavailability of our system or reduces its capacity could result in real or perceived public safety issues that may affect customer confidence in our services.  Historically, we have experienced temporary interruptions of telecommunications or power outages which were promptly mitigated.  Such instances may result in loss of customer accounts or similar problems if they occur in the future.  We are not certain that we will be able to project the rate or timing of increases, if any, in the use of our services to permit us to upgrade and expand our systems effectively or to integrate smoothly and newly developed or purchased modules with our existing systems.
Risks Related to our Recent Acquisitions
The success of our business depends on achieving our strategic objectives, including through acquisitions, dispositions and restructurings.  

Our acquisitions, as well as potential restructuring actions, may not achieve expected returns and other benefits as a result of various factors, including integration and collaboration challenges, such as personnel and technology. In addition, we may not achieve anticipated cost savings from restructuring actions, which could result in lower margin rates. When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the accomplishment of our strategic objectives. After reaching an agreement with a buyer or seller for the acquisition or disposition of a business, we are subject to satisfaction of pre-closing conditions as well as to necessary regulatory and governmental approvals on acceptable terms, which may prevent us from completing the transaction.
We may not be able to grow successfully through the acquisitions or through future acquisitions, we may not successfully manage future growth, and we may not be able to effectively integrate businesses that we may acquire.

We plan to continue to grow through strategic acquisitions of other businesses.  In order to complete acquisitions, we would expect to require additional debt and/or equity financing, which could increase our interest expense, leverage, and increase the number of shares outstanding.  Businesses that we acquire may not perform as expected. Future revenues, profits and cash flows of an acquired business may not materialize due to the failure or inability to capture expected synergies, increased competition, regulatory issues, changes in market conditions, or other factors beyond our control. In addition, we may not be successful in integrating these acquisitions into our existing operations. Competition for acquisition opportunities may escalate, increasing our cost of making further acquisitions or causing us to refrain from making additional acquisitions.  Additional risks related to acquisitions include, but are not limited to:
●
the potential disruption of our existing business;
●
entering new markets or industries in which we have limited prior experience;
●
difficulties integrating and retaining key management, sales, research and development, production and other personnel or diversion of management attention from ongoing business concerns to integration matters;

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●
difficulties integrating or expanding information technology systems and other business processes or administrative infrastructures to accommodate the acquired businesses;
●
complexities associated with managing the combined businesses and consolidating multiple physical locations;
●
risks associated with integrating financial reporting and internal control systems; and
●
whether any necessary additional debt or equity financing will be available on terms acceptable to us, or at all, and the impact of such financing on our operating performance and results of operations.
We are exposed to fluctuations in currency exchange rates.

We are exposed to currency exchange fluctuations in other currencies.  Moreover, a portion of our expenses in Israel and Chile are paid in foreign currencies, which subjects us to the risks of foreign currency fluctuations.
The dollar cost of our operations internationally could increase to the extent of increases or decreases in the rate of inflation or devaluation in relation to the dollar, which may harm our results of operations.

The dollar cost of our international operations is expected to be influenced by any increase in inflation or is not offset by the devaluation of the local currency in relation to the dollar. As a result, we are exposed to the risk that foreign currencies will appreciate in relation to the dollar. We cannot predict whether the foreign currencies will appreciate or depreciate against the dollar in the future.
International political, economic and military instability may impede our ability to execute our plan of operations. 

Political, economic and military conditions internationally may affect our business, we cannot predict whether or in what manner these problems may occur. Acts of random terrorism periodically occur which could affect our operations or personnel.  Ongoing or revived hostilities or other factors could harm our operations and research and development process and could impede our ability to execute our plan of operations. Moreover, in order to effectively compete in certain foreign jurisdictions, it is frequently necessary or required to establish joint ventures, strategic alliances or marketing arrangements with local operators, partners or agents. Reliance on local operators, partners or agents could expose us to the risk of being unable to control the scope or quality of our overseas services or products.  In addition, our business insurance may not cover losses that may occur as a result of events associated with the security situation. Any losses or damages incurred by us could have a material adverse effect on our business and financial condition.
Our Israeli operations may be disrupted by the obligations of personnel to perform military service.

In connection with the GPS Global Tracking and Surveillance System Ltd., a company formed under the laws of and operating in the State of Israel (“GPS Global”), we now have eight full-time employees and three independent contractors based in Israel.  This number may increase in the future as we relocate additional research and development activity to our Israeli operations.  Our employees in Israel may be called upon to perform up to 36 days (and in some cases more) of annual military reserve duty until they reach the age of 45 (and in some cases, up to age 49), and in emergency circumstances, could be called to active duty. Our operations could be disrupted by the absence of a significant number of our employees related to military service or the absence for extended periods of one or more of our key employees for military service. Such disruption could materially adversely affect our operations, business and results of operations.

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Penny stock regulations may impose certain restrictions on marketability of our securities. The SEC has adopted regulations which generally define a “penny stock”Risks Related to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.  As a result, ourOur Common Stock is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with t heir spouse).  For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market.  The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.  Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  Conseque ntly, the “penny stock” rules may restrict the ability of broker-dealers to sell our securities and may affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities.  
Investors should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse.  Such patterns include:
·Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer,
·Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases,
·“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons,
·Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers, and
·Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 
Our managementlargest shareholder recently increased its beneficial ownership to over 50%, and is aware of the abuses that have occurred historically in the penny stock market.therefore able to exert control over us, which may limit your ability to influence corporate matters.
 
Sapinda Asia Limited and Mr. Lars Windhorst (collectively “Sapinda Asia”) recently increased its beneficial ownership to more than 50% of the outstanding voting securities of the Company.  As a result, Sapinda Asia will control the outcome of any shareholders’ meeting for the foreseeable future, including having the power to determine the composition of our board of directors and control the outcome of the voting on any significant corporate transactions or other matters submitted to our shareholders for approval. The interests of Sapinda Asia may not be aligned with or be in the best interests of our other shareholders. This concentration of voting power could also have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our shareholders.
Our Board of Directors may authorize the issuance of Preferred Stockpreferred stock and designate rights and preferences that will dilute the ownership and voting interests of existing stockholdersshareholders without their approval.

Our Articles of Incorporation authorize us to issue up to 20,000,000 shares of Preferred Stock,preferred stock, at par value $0.0001. The Board of Directors is authorized to designate, and to determine the rights and preferences of any series or class of Preferred Stock.preferred stock. The Board of Directors may, without stockholdershareholder approval, issue shares of Preferred Stockpreferred stock with dividend, liquidation, conversion, voting or other rights which are senior to the Common Stock or which could adversely affect the voting power or other rights of the existing holders of outstanding s haresshares of Preferred Stockpreferred stock or Common Stock. Additionally, the issuance of Preferred Stockpreferred stock may have the effect of decreasing the market price of the Common Stock and may adversely affect the voting power of holders of Common Stock and reduce the likelihood that Common Stockholderscommon shareholders will receive dividend payments and payments upon liquidation. The issuance of additional shares of Preferred Stockpreferred stock may also adversely affect an acquisition or change in control of the Company.  As of March 25, 2015, there were no outstanding shares of preferred stock.
 
In November 2009, the BoardSales by certain of Directors designated 50,000our shareholders of a substantial number of shares of Preferredour Common Stock asin the public market, including the sale of the Shares in this offering, could adversely affect the market price of our Series D Preferred.  Each shareCommon Stock.  

A large number of Series D Preferred is convertible into 6,000outstanding shares of our Common Stock.  Holders of the Series D Preferred may vote their shares on an as-converted basis on any issue presented for a vote of the stockholders, including the election of directors and the approval of certain transactions such as a merger or other business combination of the Company.  On an as-converted basis, the holdersStock are held by several of our Series D Preferred control approximately forty-one percent (41%)principal shareholders.  If any of these principal shareholders were to decide to sell large amounts of stock over a short period of time such sales could cause the total voting powermarket price of our issued and outstanding voting stock.  As of November 22, 2010, there were 34,124 shares of Series D Preferred outstanding, convertible into 204,744,000 shares of Common S tock.  The holders of 7,850 original shares of Series D Preferred with voting power equivalent to 47,100,000 shares of Common Stock (approximately 16% ofto decline.
A decline in the voting powerprice of our issuedCommon Stock could affect our ability to raise additional working capital and outstanding voting stock) areadversely impact our operations and would severely dilute existing or future investors if we were to raise funds at lower prices.  

A prolonged decline in the Selling Stockholders under this prospectus.price of our Common Stock could result in a reduction in our ability to raise capital. Because our operations have been financed in part through the sale of equity securities, a decline in the price of our Common Stock could be especially detrimental to our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations.  We believe the following factors could cause the market price of our Common Stock to continue to fluctuate widely and could cause our Common Stock to trade at a price below the price at which you purchase your Shares:
●
actual or anticipated variations in our interim or annual results;
●
announcements of new services, products, acquisitions or strategic relationships within the industry;
●
changes in accounting treatments or principles;

 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
●
changes in earnings estimates by securities analysts and in analyst recommendations; and
●
general political, economic, regulatory and market conditions.
 
Any failure to meet these expectations, even if minor, could materially adversely affect the market price of our Common Stock.
If we issue additional shares of Common Stock in the future, it will result in the dilution of our existing shareholders.
Our Articles of Incorporation authorize the issuance of 15,000,000 shares of Common Stock. Our Board of Directors has the authority to issue additional shares of Common Stock up to the authorized capital stated in The following Management’sArticles of Incorporation. The issuance of any such shares of Common Stock will result in a reduction in value of our outstanding Common Stock. If we do issue any such additional shares of Common Stock, such issuance also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change of control of our corporation.
Trading of our Common Stock may be volatile and sporadic, which could depress the market price of our Common Stock and make it difficult for our shareholders to resell their shares. 

There is currently a limited market for our Common Stock and the volume of our Common Stock traded on any day may vary significantly from one period to another. Our Common Stock is quoted on the OTCQB. Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with the issuer’s operations or business prospects. The availability of buyers and sellers represented by this volatility could lead to a market price for our Common Stock that is unrelated to operating performance. Moreover, the OTCQB is not a stock exchange, and trading of securities quoted on the OTCQB is often more sporadic than the trading of securities listed on a stock exchange like NASDAQ or NYSE:MKT.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations isOperations” and “Business” but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to helpidentify statements about the reader better understand the Company, our operationsfuture. These statements involve known and our present business environment.  This discussion is provided as a supplement to,unknown risks, uncertainties and should be read in conjunction with, our consolidated financial statements for the fiscal years ended September 30, 2009 and 2008 and the accompanying notes thereto.
We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primaryother factors that accounted for those changes, as well as how certain accounting principles affectmay cause our financialactual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.
 
The forward-looking statements contained in this prospectus involve a number of risks and uncertainties, many of which are outside of our control. Factors that could cause actual results to differ materially from projected results include, but are not limited to, those discussed in “Risk Factors” elsewhere in this prospectus. Readers are expressly advised to review and consider those Risk Factors. Although we believe that the assumptions underlying the forward-looking statements contained in this prospectus are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. Except as required by applicable laws including the securities laws of the United States, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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BUSINESS

Overview
SecureAlert and subsidiaries
We market and deploy offender management programs, combining patented GPS (Global Positioning System) tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services. Our visionAs further described below, our flagship product lines, ReliAlert, Shadow, and R.A.D.A.R., are used to monitor convicted offenders that are on probation or parole in the criminal justice system or pretrial defendants.  ReliAlert™ and Shadow devices utilize GPS, radio frequencies, and cellular technologies in conjunction with a monitoring center that is to be the market leader for delivering offender management solutions that integrate interaction technologies.staffed 24/7 and 365 days a year.  We believe that we currently deliver the only offender management technology which integrates GPS, RF (Radio Frequency) and an interactive 3-way voice communication system into a single device, deployable on offenders worldwide.  Through our patented electronic monitoring technologies and services we empowerbenefit law enforcement corrections and rehabilitation professionals with offender, defendant, probationer and parolee programs, which grant convicted criminals and pre-trial suspects an opportunityofficials by allowing them to be “free from prison,” while providing for greater public safety atrespond immediately to a lower cost to incarceration or traditional resource-intensive alternatives.problem involving the monitored offender.  
 
TrackerPAL™ IIOur Products and TrackerPAL™ II(e) (“enhanced”), nowServices
Our monitoring and intervention centers act as an important link between offenders and their supervising officers. Track Group intervention specialists initiate contact at the direction of the supervising agency or when an offender violates any established restriction or protocol. The monitoring that is enabled by our state-of-the-art devices, which give us the unique ability to conduct live, three-way voice communication with monitored individuals and officers, provides the situational context that is the basis for behavior management and modification. And, if necessary, it allows us to provide interaction details to law enforcement officers, giving them greater insights prior to intervention.
ReliAlert, Shadow and R.A.D.A.R.

Our ReliAlert, Shadow and R.A.D.A.R. devices are designed in the United States, Israel, and China. The devices are manufactured in the USA – The TrackerPAL™China and include a portfolio of products, e-Arrest Beacons and monitoring services are designed to create “Jails without Walls,” while re-socializing offender populations and providing alcohol monitoring.  The products and services are customizable by offender types (e.g., domestic abusers, sexual predators, alcohol abusers, gang members, pre-trial defendants, andor juvenile offenders). and offer practical solutions and options for the reintegration and effective re-socialization of select offenders safely back into society.  Additionally, our proprietary software and device firmware support the dynamic accommodation of agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions.  TrackerPAL™ and TrackerPAL™ II(e)Our technologies are designed for domestic or international, federal, state and local agencies to provide location tracking of selectdesignated individuals inwithin the criminal justice system.  The TrackerPAL™ II(e) device fastens tosystem and throughout a restricted geography.   
Our GPS tracking devices are securely attached around the offender'soffender’s ankle with a tamper resistant strap (steel cabling with optic fiber) that can only be adjusted or removed without detection only by a supervising officer, and which is activated through services provided by our SecureAlertTrack Group Monitoring Center (or other agency-based monitoring centers).  ThisDuring fiscal year 2011, we also deployed an upgraded, patented, dual-steel banded SecureCuff strap for “at-risk” offenders who have qualified for electronic monitoring supervision, but who require an incremental level of security and supervision, provided through both hardware and monitoring services.  Our monitoring and intervention center actscenters act as an important link between the offender and the supervising officer, as intervention specialists persistently track and monitor the offender, initiating contact at the direction of the supervising agency and/or when the offender is in violation of any established restrictions or protocols.  AnThe ReliAlert and Shadow units are intelligent devicedevices with integrated computer circuitry and constructed from case-hardened plastics designed to promptly notify the TrackerPAL™ II(e) unit promptly notifies the monitoring center ifintervention centers of any attempt is made to breach applicable protocols, or to remove or otherwise tamper with the device or optical strap housing.  ;

Our alcohol monitoring device (R.A.D.A.R.) is a comprehensive alcohol offender supervision and monitoring system with a fuel-cell based, breath-alcohol testing system that incorporates a number of safeguards to prevent tampering and provides accurate, actionable, and alcohol alerts. All breath-alcohol tests are time stamped and include a GPS fix. The web-enabled Track Group monitoring center assures testing compliance.

 
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Our Strategy
Our global growth strategy is to continue to expand offerings that empower professionals in security, law enforcement, corrections and rehabilitation organizations worldwide with single-sourced offender management solutions that integrate reliable intervention technologies to support re-socialization and monitoring initiatives.  To accomplish this objective, we are implementing a growing portfolio of proprietary and non-proprietary real-time monitoring and intervention products and services.  These include GPS, RF, predictive analytics, drug and alcohol testing for defendants and offenders as well other individuals and assets in the corrections, law enforcement and rehabilitation arena.
In addition, our product and service offerings will expand upon our exception-based reporting, analytical capabilities and behavioral-monitoring knowledge. These customizable solutions will be available through Web portals and mobile device platforms, in addition to traditional desktops, to leverage our real-time monitoring data, best-practice monitoring, interaction protocols and analytics capabilities. Customer insights will be increased further by aggregating real-time data from additional monitoring device types and technologies, regardless of manufacturer, as well as other critical data sources.
In summary, we are committed to delivering a superior proprietary and non-proprietary portfolio of reliable, intervention monitoring products and services for the global offender management marketplace. We will continue to work with agencies to increase public safety and officer productivity, mitigate budgetary constraints through cost-effective monitoring alternatives, increase early-release compliance and improve monitoring program success rates, all while offering defendants and offenders opportunities for accountable freedom and an alternative to incarceration.
Marketing
Our strategic purpose is to produce or acquire, and globally deploy leading edge tracking technology, monitoring and analytic services in the criminal justice and corrections arenas.  In addition to our recent acquisitions, we work to meet this objective by improved research and development activities and expanding our sales and marketing efforts both domestically and internationally.  Our ability to acquire new accounts continues to benefit from the lack of public funding for law enforcement and corrections agencies, the need to reduce jail operating and expansion expenses, and a desire for greater control of monitoring of high risk and high flight risk device wearers.  Also, the view continues to widen that society needs to look at alternative ways of sentencing offenders, as well as keeping track of certain types of offenders, such as those convicted of sexual, domestic violence, or alcohol offenses that have been released from custody.  Several countries, including the United States, began or continued the process of evaluating sentencing laws that would release sentenced felons to GPS monitoring after partially serving their incarceration sentences. We foresee that these views and the harsh economic and funding realities will continue to fuel wider implementation of electronic monitoring programs globally, increasing demand for our products and services. Our products’ unique and patented functionality make us a good match for these opportunities.  
Research and Development Program
During the three-months ended December 31, 2014 and during the fiscal year ended September 30, 2014, we expended $464,178 and $1,605,662 on research and development. These costs were incurred to improve efficiency in the software, firmware and hardware of our products and services, as well as supporting research and development of our newly acquired subsidiaries
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Competition
We encounter electronic offender monitoring competition from traditional competitors and certain new entrants into the United States market.  Following our evaluation of our competitors at the end of our 2014 fiscal year, traditional competition includes:
●BI Incorporated, Denver Colorado, subsidiary of GEO Care, Inc., Boca Raton, Florida –  This international company provides a wide variety of private correctional services from facilities operation and management to correctional health care services.  BI Incorporated, which was purchased by GEO Care, Inc. in 2011, has been providing intensive community supervision services and technologies for more than 20 years to criminal justice agencies throughout the United States.
●
Omnilink Systems, Inc., Alpharetta, Georgia – This company provides a one-piece device combined with GPS and Sprint cellular networks to electronically track an individual. In fiscal year 2013, Omnilink completed an agreement with Alcohol Monitoring Systems, Inc. (“AMS”) for AMS to distribute Omnilink GPS devices as “SCRAM One-Piece GPS™”, to extend AMS’ product line for those agencies looking for a one-stop shop for their monitoring needs.
●3M Electronic Monitoring, Odessa, Florida (purchased and consolidated Attenti Group, (ElmoTech and ProTech) in 2011) – This company has satellite tracking software technology that operates in conjunction with GPS and wireless communication networks.
●Satellite Tracking of People, LLC, Houston, Texas – This company provides a broad line of GPS tracking systems and services to government agencies. Satellite Tracking of People, LLC was purchased by Securus Technologies, Inc. in December of 2013.

●Sentinel Offender Services, LLC, Augusta, Georgia (purchased and consolidated G4S’ United States Offender Monitoring operation in 2012) – This company supplies monitoring and supervision solutions for the offender population. Through their acquisition and consolidation of G4S’ United States Offender Monitoring operation, they expanded their customer base to which they provide electronic monitoring of offenders, prison and detention center management and transitional support services. Through this acquisition, they also resell Omnilink’s active GPS device, in addition to their own.
The following companies entered the United States market in fiscal year 2014:
●Buddi, Ltd., Aylesbury, Binkghamshire, United Kingdom – This company was started in 2005 to provide consumer tracking for consumers such as the elderly or Alzheimer’s sufferers.    Their major launch into offender monitoring was via an award of a United Kingdom Ministry of Justice contract.  They also announced plans to enter the United States offender monitoring market by headquartering United States operations in Tampa, FL and hiring Steve Chapin, former Protech President and CEO.
●Corrisoft, LLC, Lexington, Kentucky – This company produces offerings for the monitoring of low and medium risk offenders, and distributes other companies’ products for higher risk offenders.  They have announced that they will be developing additional products for the monitoring of all offender types. Corrisoft, LLC acquired iSECUREtrac Corp in December 2013.
We also face competition from small and regional companies that provide electronic monitoring technology along with localized case management and/or monitoring services.  Some of these entities utilize less well-known technologies or are resellers of the above competitors’ products.  We do not believe there is reliable publicly available information to indicate our relative market share or that of our competitors.

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Dependence on Major Customers
We had sales to entities which represent more than ten percent of gross revenues as follows for the years ended September 30, which sales have continued during fiscal 2015. Except as indicated below, no other customer represented more than ten percent of total revenues for the fiscal years ended September 30, 2014 or 2013.  
  2014  %  2013  % 
             
Customer A $-   0% $5,252,960   33%
                 
Customer B $1,501,940   12% $1,622,327   10%
                 
Customer C $1,431,854   12% $1,514,581   9%
Concentration of credit risk associated with our total and outstanding accounts receivable as of September 30, 2014 and 2013, respectively, are shown in the table below:   
  2014  %  2013  % 
             
Customer A $892,897   17% $892,897   24%
                 
Customer B $499,040   10% $732,163   20%
                 
Customer C $419,523   8% $887,233   24%
Dependence on Major Suppliers

We have entered into an agreement with two national companies for cellular services. We also rely currently on a single source for the manufacturing of our products.  The cost to us for these services during the fiscal years ended September 30, 2014 and 2013 was approximately $897,386 and $964,354, respectively. The 7% decrease in cellular service expense in 2014 compared to 2013 resulted from utilizing different service providers who offered similar service with more favorable rates.

If any of these significant suppliers were to cease providing products or services to us, we would be required to seek alternative sources. Although we were able to lower the amounts paid for these services during the fiscal 2014 year, there is no assurance that alternate sources could be located or that the delay or additional expense associated with locating alternative sources for these products or services would not have a negative impact on our business or financial condition.

Intellectual Property

Trademarks.  We have developed and use trademarks in our business, particularly relating to our corporate and product names. We own six trademarks that are registered with the United States Patent and Trademark Office, plus one trademark registered in Mexico and one in Canada. We may file additional applications for the registration of our trademarks in foreign jurisdictions as our business expands under current and planned distribution arrangements.  Protection of registered trademarks in some jurisdictions may not be as extensive as the protection provided by registration in the United States.

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The following table summarizes our trademark registrations and applications:
Trademark
Application
Number
Registration Number
Status/
Next Action
Mobile911 Siren with 2-Way Voice Communication & Design®76/013,8862,595,328Registered
PAL Services®78/514,5143,100,192Registered
TrackerPAL®78/843,0353,345,878Registered
Mobile911®78/851,3843,212,937Registered
TrackerPAL®CA 1,315,487749,417Registered
TrackerPAL®MX 805,365960954Registered
Foresight®77/137/8223481509Registered
ReliAlert™85/238,0494200738Registered
HomeAware™85/238,0644111064Registered
SecureCuff™85/238,0584271621Registered
TrueDetect™85/237,2024365120Registered
SecureAlert™86/031,5504623370Registered
Patents. We have 15 patents issued and two patents pending in the United States.  At foreign patent office’s we have four patents issued and 11 patents pending.  We are also preparing patents that will be filed in other countries in the coming year.
The following tables summarize information regarding our patents and patent applications.  There is no assurance given that the pending applications will be granted or that they will, if granted, contain all of the claims currently included in the applications. 

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Domestic PatentsApplication# Date FiledPatent# IssuedStatus
Emergency Phone for Automatically Summoning Multiple Emergency Response Services09/17364516-Oct-9862265101-May-01Issued
Combination Emergency Phone and Personal Audio Device09/1851913-Nov-9862858674-Sep-01Issued
Panic Button Phone09/04449719-Mar-98604425728-Mar-00Issued
Interference Structure for Emergency Response System Wristwatch09/65152329-Aug-0063665382-Apr-02 Issued
Remote Tracking and Communication Device11/20242710-Aug-05733012212-Feb-08Issued
Remote Tracking System and Device With Variable Sampling and Sending Capabilities Based on Environmental Factors11/48699114-Jul-0675453189-Jun-09Issued
Alarm and Alarm Management System for Remote Tracking Devices11/48699214-Jul-06773784115-Jun-10Issued
Remote Tracking and Communication Device12/0280888-Feb-08780441228-Sep-10Issued
A Remote Tracking System with a Dedicated Monitoring Center11/48697614-Jul-0679362623-May-11Issued
Alarm and Alarm Management System for Remote Tracking Devices12/7925722-Jun-108013736 6-Sep-11Issued
Remote Tracking and Communication Device12/8759883-Sep-1080310774-Oct-11Issued
Tracking Device Incorporating Enhanced Security Mounting Strap12/818,45318-Jun-10851407020-Aug-13Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device12/3991516-Mar-09823287631-Jul-12Issued
Emergency Phone with Single-Button Activation11/17419130-Jun-05725147131-Jul-07Issued
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device and a Monitoring Center11/48698914-Jul-0687972105-Aug-14Issued
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device and a Monitoring Center14/323,83103-Jul-14----Pending
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device and a Monitoring Center14/307,26017-Jul-14----Pending

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International Patents Application#  Date Filed Patent#  Issued Status
            
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - EPO  9716860.3 6-Oct-10  2260482  1/9/2013 Issued
Remote Tracking and Communication Device - Mexico MX/a/2008/1932 4-Aug-06  278405  24-Aug-10 Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Mexico MX/a/2010/001932 2-Sep-10  306920  1/22/2013 Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Canada  2717866 3-Sep-10  -   -  Pending
Remote Tracking and Communication Device - EPO  6836098.1 4-Aug-06  -   -  Pending
Remote Tracking and Communication Device - Brazil PI0614742.9 4-Aug-06  -   -  Pending
Remote Tracking and Communication Device - Canada  2617923 4-Aug-06  -   -  Pending
A Remote Tracking System with a Dedicated Monitoring Center - EPO  7812596 3-Jul-07  -   -  Pending
A Remote Tracking System with a Dedicated Monitoring Center - Brazil PI0714367.2 3-Jul-07  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - EPO  10 009 091.9 1-Sep-10  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Brazil PI11001593 28-Feb-11  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Mexico MX/a/2011/002283 28-Feb-11  319057  14-Sep-14 Issued
Secure Strap Mounting System For an Offender Tracking Device - Canada  2732654 23-Feb-11  -   -  Pending
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Brazil PI0909172-6 1-Sep-10  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Mexico - DIV MX/a/2013/12524 25-Oct-13  -   -  Pending

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Trade Secrets.  We own certain intellectual property, including trade secrets that we seek to protect, in part, through confidentiality agreements with employees and other parties. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.
We intend to protect our legal rights concerning intellectual property by all appropriate legal action. Consequently, we may become involved from time to time in litigation to determine the enforceability, scope, and validity of any of the foregoing proprietary rights. Any patent litigation could result in substantial cost and divert the efforts of management and technical personnel.
Seasonality
Given the consistency in recurring domestic monitoring revenues by customer throughout our recently completed fiscal years, there no apparent seasonality in our business.  However, as in previous years, incremental domestic deployment opportunities slowdown in the months of July and August.  We believe that this is due to the unavailability of judicial and corrections officials, who observe a traditional vacation season during this period.
Employees
As of March 25, 2015, we had 180 full-time employees and 20 part-time employees.  None of the employees are represented by a labor union or subject to a collective bargaining agreement.  We have never experienced a work stoppage and management believes that relations with employees are good.
Properties
Our headquarters and monitoring facility are housed in approximately 8,600 square feet of commercial office space located at 405 South Main Street, Suite 700, Salt Lake City, Utah. Lease payments are approximately $13,200 per month. This lease expires on August 31, 2016.  In addition, we lease 6,152 square feet of warehousing and pallet shipping functions and capabilities in a facility located at 9716 South 500 West, Sandy, Utah 84070.  Monthly lease payments for this facility are approximately $6,500; the lease expired on August 31, 2014; however, we negotiated a lease extension through March 2015.
GPS Global’s operations are housed in approximately 420 square meters of commercial office space located at Atir Yeda Street, Kfar-Saba, Israel.  The monthly lease is approximately $600.  The lease began on August 1, 2014 and expires on July 31, 2018.

Emerge Monitoring’s main operations are housed in approximately 2,800 square feet of commercial office space located at 1213 & 1215 Lakeview Court, Romeoville, IL. A lease for this office space began on August 1, 2014 and expires on July 31, 2017. Monthly lease payments are approximately $3,000 per month. In addition, Emerge also leases approximately 2,000 square foot facility in Indianapolis, Indiana. This lease was executed on January 1, 2014 and expires on December 31, 2018. Monthly lease payments for this facility are approximately $3,200.
Track Group Analytics Limited's operations are located in approximately 1,700 square feet of office space in Dartmouth, Nova Scotia, Canada.  The lease for this office space expires on December 31, 2014. Monthly payments are approximately $2,300 per month. The Company plans to continue utilizing this facility on a month to month basis until a new lease is secured.
Legal Proceedings
We are party to the following legal proceedings:
Lazar Leybovich et al v. SecureAlert, Inc.  On March 29, 2012, Lazar Leybovich, Dovie Leybovich and Ben Leybovich filed a complaint in the 11th Circuit Court in and for Miami-Dade County, Florida alleging breach of contract with regard to certain Stock Redemption Agreements.  The complaint was subsequently withdrawn by the plaintiffs.  An amended complaint was filed by the plaintiffs on November 15, 2012.  We believe these allegations are inaccurate and intend to defend the case vigorously. We have not accrued any potential loss as the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.
Christopher P. Baker v. SecureAlert, Inc.  In February 2013, Mr. Baker filed suit against us in the Third Judicial District Court in and for Salt Lake County, State of Utah.  Mr. Baker asserts that we breached a 2006 consulting agreement with him and claims damages of not less than $210,000.  We dispute the plaintiff’s claims and will defend the case vigorously.  No accrual for a potential loss has been made as we believe the probability of incurring a material loss is remote.
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MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market Information
Our Common Stock is traded on the OTCQB under the symbol “SCRA.”  The following table sets forth the range of high and low sales prices of our Common Stock as reported on the OTC Bulletin Board for the periods indicated.  
 Fiscal Year Ended September 30, 2013 High  Low 
 First Quarter ended December 31, 2012 $14.60  $3.22 
 Second Quarter ended March 31, 2013 $14.60  $11.00 
 Third Quarter ended June 30, 2013 $14.70  $7.00 
 Fourth Quarter ended September 30, 2013 $20.90  $14.40 
         
 Fiscal Year Ended September 30, 2014      
 First Quarter ended December 31, 2013 $19.99  $17.29 
 Second Quarter ended March 31, 2014 $19.65  $17.51 
 Third Quarter ended June 30, 2014 $18.75  $14.60 
 Fourth Quarter ended September 30, 2014 $19.45  $10.77 
         
 Fiscal Year Ended September 30, 2015        
 First Quarter ended December 31, 2014 $17.50  $12.30 
Reverse Stock Split
On February 28, 2013, our shareholders approved a reduction in the authorized share capital of the Company to 15,000,000 shares of Common Stock, and authorized a reverse split to reduce the outstanding shares of the Company at a ratio of 200-for-1, which was implemented on March 25, 2013.  Share and per share information for the prior periods has been retroactively adjusted in this prospectus to reflect the effects of the reverse stock split.

Holders
As of March 25, 2015, we had approximately 1,049 holders of record of our Common Stock and 10,150,617 shares of Common Stock outstanding. We also have granted options and warrants for the purchase of 262,603 shares of Common Stock..
Dividends
Since incorporation, we have not declared any cash dividends on our Common Stock.  We do not anticipate declaring cash dividends on our Common Stock for the foreseeable future.  
Dilution
The Board of Directors determines when and under what conditions and at what prices to issue stock.  In addition, a significant number of shares of Common Stock are reserved for issuance upon exercise of purchase or conversion rights.
The issuance of any shares of Common Stock for any reason will result in dilution of the equity and voting interests of existing shareholders.


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Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, New York, 11219.
Securities Authorized for Issuance under Equity Compensation Plans
The 2012 SecureAlert, Inc. Stock Incentive Plan
The Board of Directors has adopted the SecureAlert, Inc. 2012 Equity Compensation Plan (the “2012 Plan”), approved by shareholders at the Annual Meeting of Shareholders held on December 21, 2011.  We believe that incentives and stock-based awards focus employees on the objective of creating shareholder value and promoting the success of the Company, and that incentive compensation plans like the 2012 Plan are an important attraction, retention and motivation tool for participants in the 2012 Plan.
Under the 2012 Plan, 90,000 options or shares of Common Stock may be awarded.  As of the date of this report, 35,332 shares of Common Stock and options for the purchase of 44,988 shares of Common Stock have been awarded under the 2012 Plan.
The following table includes information as of March 25, 2015 for our equity compensation plans:
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights  Weighted-average exercise price of outstanding options, warrants and rights  Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
  (a)  (b)  (c) 
Equity compensation plans approved by security holders    262,603  $   15.08     9,680 
Equity compensation plans not approved by security holders    -     -     
Total    262,603  $  15.08     9,680 

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended September 30, 2013 and the three months ended December 31, 2014, included elsewhere in this prospectus.
Overview
The Company markets and deploys offender management programs, combining patented GPS tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services.  Our vision is to be the global market leader for delivering the most reliable offender management solutions, which leverage superior intervention capabilities and integrated communication technologies.  We currently deliver the only offender management technology that effectively integrates GPS, Radio Frequency (“RF”) and an interactive 3-way voice communication system into a single piece device, deployable worldwide.  Through our patented electronic monitoring technologies and services, we empower law enforcement, corrections and rehabilitation professionals with offender, defendant, probationer and parolee programs, which grant convicted criminals and pre-trial suspects an accountable opportunity to be “free from prison”.  This provides for greater public safety at a lower cost compared to incarceration or traditional resource-intensive alternatives.

Our flagship product line, ReliAlert, Shadow, and R.A.D.A.R., consists of devices and services customizable to provide secure reintegration solutions for various offender types, including domestic abusers, sexual predators, gang members, pre-trial defendants, alcohol abusers, or juvenile offenders. Our proprietary software, device firmware and processes accommodate agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions. Our devices are intelligent devices with integrated computer circuitry.  They are constructed from case-hardened materials and are designed to promptly notify intervention monitoring centers of attempts to breach applicable electronic supervision terms or to remove or otherwise tamper with device elements. They are securely attached around an offender’s ankle with a tamper resistant strap (steel cabling with optic fiber).  We also have a unique patented, dual-steel banded SecureCuff for high risk or high flight risk offenders who have qualified for electronic monitoring supervision, but who require an incremental level of security and supervision.
Results of Operations
 
Continuing Operations - Fiscal Years Ended September 30, 2009 and 2008Year 2014 Compared to Fiscal Year 2013
 
Note: During the fiscal year ended September 30, 2008, we divested our subsidiary, ActiveCare, Inc.  As a result, we now operate in one segment.  Unless otherwise indicated, the results of operations for all periods in this prospectus have been adjusted to reflect continuing operations only.  See Note (2) – Discontinued Operations in our Consolidated Financial Statements.
RevenuesNet Revenue
 
During the fiscal year ended September 30, 2009,2014, we had net revenuesrevenue of $12,625,908$12,262,198 compared to net revenuesrevenue of $12,403,677$15,641,062 for the fiscal year ended September 30, 2008, an increase2013, a decrease of $222,231 (2%)$3,378,864, or approximately 22%.   RevenuesOf this revenue, $11,663,181 and $15,028,625 were from monitoring and other related services during the 2014 and 2013 period, respectively, a decrease of $3,365,444 (22%). This decrease resulted primarily from the completion of a contract with an international customer in fiscal 2013.  Product revenue decreased $13,420 (2%) from $612,437 for the fiscal year ended September 30, 2009 totaled $12,055,159, compared2013 to $9,826,077$599,017 for the same period ended 2008, resulting in an increase of $2,229,082 (23%). Revenues from product sales for the fiscal year ended September 30, 2009 were $570,749, compared to $2,577,600 for the same period ended 2008, resulting in a decrease of $2,006,851.  This decrease of $2,006,851 is primarily due to a shift in focus to leasing monitoring equipment instead of device sales.2014.
 
During the fiscal year ended September 30, 2009, our SecureAlert Monitoring subsidiary provided net revenues of $5,322,191, compared to net revenues of $7,333,659 during the fiscal year ended September 30, 2008, a decrease of $2,011,468 (27%).  Revenues from monitoring services for the fiscal year ended September 30, 2009 were $5,131,655, compared to $5,033,659 for the prior year, resulting in an increase of $97,996 (2%). Revenues from product sales for the fiscal year ended September 30, 2009 were $190,536, compared to $2,300,000 for the fiscal year 2008, resulting in a decrease of $2,109,464.  This decrease of $2,109,464 is primarily due to our focus on leasing monitoring equipment instead of device sales.
During the fiscal year ended September 30, 2009, our Midwest Monitoring subsidiary provided net revenues of $4,213,972 compared to net revenues of $2,799,914 during the fiscal year ended September 30, 2008, an increase of $1,414,058 (51%).  This increase is related to revenues in the amount of $514,744 that Midwest Monitoring recognized during the period from October 1, 2007 through November 30, 2007 that we were not required to consolidate.  The remaining increase of $899,314 is related to an increase of $86,288 in device sales and $813,026 of monitoring services.
During the fiscal year ended September 30, 2009, our Court Programs subsidiary provided net revenues of $3,086,335 compared to net revenues of $2,270,104 during the fiscal year ended September 30, 2008, an increase of $816,231 (36%).  This increase is related to revenues in the amount of $540,935 that Court Programs recognized during the period from October 1, 2007 through November 30, 2007 that we were not required to consolidate.  The remaining increase is related to an increase of $275,296 in monitoring services.
On January 14, 2009, we purchased Bishop Rock Software.  During the fiscal year ended September 30, 2009, Bishop Rock Software had $3,410 of revenue.
Cost of Revenues
During the fiscal year ended September 30, 2009, cost of revenues totaled $10,138,613, compared to cost of revenues during the fiscal year ended September 30, 2008 of $13,108,990, a decrease of $2,970,377 (23%).  The decrease in cost of revenues resulted primarily from reduced communication and direct labor cost initiatives, device cost of goods and software enhancements, offset by a minor increase in equipment amortization.
Communication costs, $2,422,541 for the fiscal year ended September 30, 2009, primarily refers to the costs associated with Subscriber Identity Modules (“SIM”).  Embedded in each TrackerPAL™ device is a SIM, which enables the device to transfer voice and data information to a monitoring center.  We incur a monthly charge for each SIM, regardless of whether or not the associated device generates revenue, because the SIM cards are ordered and inserted into devices before the devices are sold or leased.
Amortization, $1,300,783 for the fiscal year ended September 30, 2009, is based on a three-year useful life for TrackerPAL™ devices.  Devices that are leased or retained by us for future deployment or sale are amortized over three years.  We believe this three-year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence.  Management periodically assesses the useful life of the devices for appropriateness.
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We expect the cost of revenues as a percentage of revenues to decrease in the foreseeable future due to (a) further attempts to lower communication costs, and (b) further development of our proprietary software enabling each operator to monitor more devices resulting in lower monitoring center costs.
SecureAlert Monitoring’s cost of revenues totaled $5,583,841 (105% of SecureAlert Monitoring’s net revenue) for the fiscal year ended September 30, 2009, compared to $10,007,725 (136% of SecureAlert Monitoring’s net revenue) for the fiscal year ended September 30, 2008, a decrease of $4,423,884 (44%).  This is related to decreases of $1,626,018 in device costs, $521,716 in communication costs, $454,374 in monitoring center costs, and $1,538,129 in other TrackerPAL™ and miscellaneous costs.
Midwest Monitoring’s cost of revenues totaled $2,735,276 (65% of Midwest Monitoring’s revenue) for the fiscal year ended September 30, 2009 compared to $1,630,823 (58% of Midwest Monitoring’s revenue) for the fiscal year ended September 30, 2008, an increase of $1,104,453 (68%).  This increase is related to revenues in the amount of $330,504 that Midwest Monitoring recognized during the period from October 1, 2007 through November 30, 2007 that we were not required to consolidate.  The remaining increase of $773,949 is primarily related to the growth in revenues.
Court Program’s cost of revenues totaled $1,819,496 (59% of Court Program’s revenue) for the fiscal year ended September 30, 2009 compared to $1,470,442 (65% of Court Program’s revenue) for the fiscal year ended September 30, 2008, an increase of $349,054 (24%).  This increase is related to revenues in the amount of $311,868 that Court Programs recognized during the period from October 1, 2007 through November 30, 2007 that we were not required to consolidate.  The remaining increase of $37,186 is primarily related to the growth in revenues.
Gross Margin
During the fiscal year ended September 30, 2009, gross margin totaled $167,765, compared to negative margin during the fiscal year ended September 30, 2008 of $705,313, an improvement of $873,078.  Included in cost of revenues are costs attributable to impairment of inventory and monitoring equipment of $2,319,530 and $570,948 for the years ended September 30, 2009 and 2008, respectively.  These impairment costs from disposal of obsolete monitoring equipment were expenses not expected in future periods. Excluding impairment costs, adjusted gross margin for the fiscal year ended September 30, 2009 was $2,487,295, compared to a negative margin of $134,365 for the same period in 2008, an improvement of $2,621,660 while increasing revenues from monitoring services.
Research and Development Expenses
During the fiscal year ended September 30, 2009, we incurred research and development expenses of $1,777,873 compared to similar expenses recognized during fiscal year 2008 totaling $4,811,128. This decrease of $3,033,255 is due primarily to management’s decision to bring software enhancements and product design in-house as opposed to using third-party vendors.  We anticipate research and development expenses to continue to decrease in future periods.
Selling, General and Administrative Expenses
During the fiscal year ended September 30, 2009, our selling, general and administrative expenses totaled $16,540,645, compared to $36,466,678 for the fiscal year ended September 30, 2008. The improvement of $19,926,033 is the result of decreases in the following expenses: consulting ($19,362,378), travel ($1,297,363), advertising and marketing ($132,596), bad debt expense ($68,775), meals and entertainment ($64,677), postage ($43,636), office ($28,895), employee benefits ($25,519), outside services ($23,181), and other selling, general and administrative ($99,090).  These decreases in selling, general and administrative expense were offset by an increase in payroll and taxes ($457,921), legal ($441,611), amortization ($64,955), investment relations ($54,554), contract labor ($40,081), board of director fe es ($35,000), depreciation ($33,714), insurance ($26,625), and other selling, general and administrative expenses ($65,616).  Consulting expense for the fiscal year ended September 30, 2009 was $4,245,685 compared to $23,608,063 for the fiscal year ended September 30, 2008, a decrease of $19,362,378.  This decrease is primarily due to a significant reduction of non-cash compensation totaling $18,603,062 through options and warrants issued to Board of Directors, executive officers and employees.  Cash compensation also decreased by $759,316 since we settled fewer lawsuits related to consulting and brought a significant amount of consulting in-house.
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Other Income and Expense
For the fiscal year ended September 30, 2009, interest expense was $5,012,803, compared to $1,566,542 for the fiscal year ended September 30, 2008. This amount includes non-cash interest expense of approximately $2,595,933 related to amortization of deferred financing costs associated with warrants, debentures and shares of Common Stock issued for interest.
During the fiscal year ended September 30, 2008, we redeemed all outstanding shares of SecureAlert Monitoring Series A Preferred Stock in exchange for 7,434,249 shares of our Common Stock for a value of $8,372,566.
Net Loss
We had a net loss for the fiscal year ended September 30, 2009 totaling $23,081,500, compared to a net loss of $49,587,050 for the fiscal year ended September 30, 2008.  This decrease of $26,505,550 is due primarily to reductions in communication and device costs, bringing software enhancements and product design in-house as opposed to using high priced third-party vendors, and the reduced use of consulting services by bringing these services in-house.
Three months ended June 30, 2010, compared to three months ended June 30, 2009
For the three months ended June 30, 2010, the Company achieved net revenues of $3,079,226 of which $2,992,842 were attributable to monitoring services revenue.  This compares to net revenues of $3,208,969 and monitoring services revenue of $3,133,518 for the same period ended June 30, 2009. The decrease in monitoring services revenue of $140,676 can be attributed to the non-renewal of a monitoring contract with a single customer at Midwest Monitoring and Surveillance, a subsidiary of the Company. This discontinued customer accounted for $0 of revenues during the three months ended June 30, 2010 compared to $169,964 during the three months ended June 30, 2009. We do not expect the discontinued customer to return in the short-term.  As a partial offset against the reduction of $169,964 in monitorin g services revenue from the discontinued customer, the Company was able to close an additional $40,221 in new monitoring services revenue for the same time period.  Additionally, product revenues increased $10,933 from $75,451 for the three months ended June 30, 2009 to $86,384 for the three months ended June 30, 2010. For the three months ended June 30, 2010 and 2009, revenues from our activated tracking devices were $1,550,152 and $1,612,211, respectively.
Cost of Revenue
During the year ended September 30, 2014, cost of revenue totaled $5,499,093 compared to cost of revenue during the year ended September 30, 2013 of $8,030,168, a decrease of $2,531,075. This decrease resulted primarily from the completion of a contract with an international customer in fiscal 2013. We expect the cost of revenue as a percentage of revenue to decrease in the foreseeable future due to economies of scale, realized through lower cost devices, projected increases in revenue, further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs, and the use of more efficient supply channels.

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Impairment costs for equipment and parts for the fiscal years ended September 30, 2014 and 2013 were $373,951 and $213,276, respectively.  These costs resulted from the disposal of obsolete inventory, monitoring equipment and parts as we continue to make enhancements to the device.
Amortization for the fiscal years ended September 30, 2014 and 2013, totaled $1,313,697 and $1,230,293, respectively. Amortization costs are based on a three-year useful life for TrackerPAL and ReliAlert devices.  Devices that are leased or retained by us for future deployment or sale are amortized over three years. We believe this three-year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence.  Management periodically assesses the useful life of the devices for appropriateness.
We expect the cost of revenue, excluding impairment of equipment and parts, as a percentage of revenue to decrease in the foreseeable future due to (a) economies of scale realized through projected increases in revenue, and (b) further development of lower cost devices and gained efficiencies in our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs.
Gross Profit and Margin
During the fiscal year ended September 30, 2014, gross profit totaled $6,763,105, or 55% of net revenues, compared to $7,610,894, or 49% of net revenue during the fiscal year ended September 30, 2013, a decrease of $847,789.  Included in cost of revenue are costs attributable to impairment of inventory and monitoring equipment of $373,951 and $213,276 for fiscal years 2014 and 2013, respectively.  These impairment costs from disposal and reduction in value of obsolete monitoring equipment are expenses we expect to decrease in future periods.  Excluding impairment costs, adjusted gross profit for the fiscal year ended September 30, 2014 was $7,137,056 or 58% of net revenue, compared to $7,824,170 or 50% of net revenue, for the same period in 2013, a decrease of $687,114. Decreases in revenue from the completion of a large international project in fiscal 2013 led to the decrease in gross profit.
Research and Development Expense
During the fiscal year ended September 30, 2014, we incurred research and development expense of $1,605,662 compared to similar expense recognized during fiscal year 2013 totaling $987,934.  These increased research and development costs were incurred to improve efficiency in the software, firmware and hardware of our products and services including the development of new and more efficient electronic monitoring devices and other research and development costs incurred by a new subsidiary acquired during the year ended September 30, 2014.

Selling, General and Administrative Expense
During the fiscal year ended September 30, 2014, our selling, general and administrative expense totaled $12,891,151, compared to $7,679,124 for the fiscal year ended September 30, 2013.  The increase of $5,212,027 is primarily the result of increases in legal, consulting, travel and other outside services expense of $2,262,076, in connection with preliminary work and preparation for a large international contract and for purchase expense related to the acquisition of two new subsidiaries during the second half of fiscal 2014. The Company also incurred payroll and payroll related expense of $1,308,259 and other operating expense $1,855,614 related to the Company’s new Chilean, Israeli and U.S. subsidiaries which were not a part of the consolidated entity at September 30, 2013.
Other Income and Expense
For the fiscal year ended September 30, 2014, interest expense was $1,290,289, compared to $17,048,519 for the fiscal year ended September 30, 2013. This decrease in interest expense resulted primarily from a reduction in convertible debentures and the acceleration of certain debt conversion features into Common Stock during the 2014 period.   For the year ended September 30, 2014, other income was $624,001 compared to other expense of $279,174 for the year ended September 30, 2013.  This increase in other income resulted primarily from a settlement agreement.

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Net Loss
We had a net loss from for the fiscal year ended September 30, 2014 totaling $8,747,844 (approximately $0.88 per share), compared to a net loss of $17,915,711 (approximately $3.79 per share) for the fiscal year ended September 30, 2013.  This decrease in the net loss is a result of a large decrease in interest expense offset by increases in operating and research and development expenses.
Discontinued Operations - Fiscal Year 2014 compared to Fiscal Year 2013
Effective October 1, 2012, we sold all of the issued and outstanding capital stock of our subsidiaries, Midwest Monitoring & Surveillance, Inc. (“Midwest”) and Court Programs, Inc. (“Court Programs”) to each of the their former principals, effective October 2012 and January 2013, respectively. Since Midwest and Court Programs were a component of our consolidated entity, these sales require discontinued operations reporting treatment of the Midwest and Court Program operations.
A summary of the operating results of discontinued operations for the fiscal years ended September 30, 2014 and 2013 is as follows:

  2014  2013 
Revenues $-  $477,298 
Cost of revenues  -   (163,487)
Gross Profit  -   313,811 
Selling, general and administrative expense  -   (319,976)
Loss from operations  -   (6,165)
Other expense  -   (295)
Net loss from discontinued operations $-  $(6,460)

Continuing Operations - Three months ended December 31, 2014, compared to three months ended December 31, 2013.

Revenue

For the three months ended December 31, 2014, the Company recognized revenue from operations of $4,620,619, compared to $2,659,294 for the three months ended December 31, 2013, an increase of $1,961,325 (74%).  Of these revenues, $4,529,030 and $2,593,683, respectively, were from monitoring and other related services, an increase of $1,935,347 (75%).  The increase was principally the result of sales generated by subsidiaries which were acquired during the prior fiscal year (see note 9), which contributed approximately $1.3 million in revenue, or 28% of total revenue during the three months ended December 31, 2014. For the three months ended December 31, 2014, international revenue was $1,255,501, compared to $775,130 for the three months ended December 31, 2013, an increase of $480,771 (62%). The increase in total revenue was principally due to revenue generated by our Chilean subsidiary and, to a lesser extent, from our newly acquired Canadian subsidiary.  Our Chilean subsidiary had minimal activity during the period ended December 31, 2013.
Product revenue increased $25,978 (40%) from $65,611 for the three months ended December 31, 2013, to $91,589 for the three months ended December 31, 2014. The increase was largely the result of sales generated by subsidiaries which were acquired during the prior fiscal year (see note 9).
Due to the acquisitions made during the Company's fiscal year ended September 30, 2014, and in the most recently completed fiscal quarter, the Company anticipates that total revenue in subsequent periods will increase compared to the comparable periods in the prior fiscal year, and those increases will be material.

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Cost of Revenue

During the three months ended December 31, 2014, cost of revenue totaled $2,045,167 compared to cost of revenue during the three months ended December 31, 2013 of $1,398,829, an increase of $646,338.  The increase in cost of revenue was largely the result of costs incurred by subsidiaries which were acquired during the prior fiscal year (see note 9), including increased costs associated with heightened activity in our Chilean operations.
Although management expects the costs of revenue to increase in subsequent periods due to the costs assocated with our recently acquired operations, the Company expects the cost of revenue as a percentage of revenue to decrease in the foreseeable future due to economies of scale realized through projected increases in revenue, further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs, and the use of more efficient supply channels.

Depreciation for the three months ended December 31, 2014 and 2013 totaled $228,050 and $190,992, respectively. Depreciation costs are based on a three to five year useful life for TrackerPAL™ and ReliAlert™® devices.  Devices that are leased or retained by us for future deployment or sale are depreciated over three to five years.  The Company believes this three to five year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence.  Management periodically assesses the useful life of the devices for appropriateness.

Gross Profit and Margin

During the three months ended December 31, 2014, gross profit totaled $2,575,452, or 56% of net revenue compared to $1,260,465, or 47% of net revenue during the three months ended December 31, 2013.

Research and Development Expense

During the three months ended December 31, 2014, research and development expense totaled $464,178 compared to research and development expense for the three months ended December 31, 2013 totaling $319,570, an increase of $144,608.  These research and development costs were incurred to improve efficiency in the software, firmware and hardware of our products and services.

Selling, General and Administrative Expense

During the three months ended December 31, 2014, selling, general and administrative expense totaled $3,739,681 compared to $2,171,447 for the three months ended December 31, 2013.  The increase of $1,568,234 in selling general and administrative costs resulted from increases in payroll expense of $1,251,500, travel expense of $197,000, and operating expenses of the Company’s new Chilean, Israeli, Canadian and U.S. subsidiaries that were not a part of the consolidated entity at December 31, 2013.  Selling, general and administrative expense is anticipated to increase in subsequent periods due to the Company's acquisitions; however, such expense as a percentage of total revenue should decrease in subsequent periods as the Company integrates the operations associated with the newly acquired subsidiaries.

Other Income and Expense
 
For the three months ended June 30, 2010, cost of revenues declinedDecember 31, 2014, interest expense was $683,941 compared to $1,715,461 from $2,420,826 during the three months ended June 30, 2009, a decrease of $705,365 or 29%.  The decrease in cost of revenues resulted primarily from a reduction in communication cost of $318,330, amortization of devices of $169,915, monitoring center costs of $51,227, freight costs of $47,506, and device costs of $23,803. The reduction of communication costs have been realized due to entering into additional agreements with cellular companies with more favorable rates.  Additionally, monitoring center costs have decreased due to the development of software which more effectively automates alarms requiring fewer operators to manage the active devices in the field. While focusing on the reductions in cost of revenues , we have been able to increase gross profit from $788,143, or 24.6% of revenues$43,918 for the three months ended June 30, 2009 to $1,363,765, or 44.3%December 31, 2013. This increase in interest expense resulted primarily from interest on the Company’s notes payable and facility agreement, none of revenueswhich were outstanding during the same period in the prior year.   

Net Loss

The Company had a net loss from continuing operations for the three months ended June 30, 2010.
Research and Development Expenses
DuringDecember 31, 2014 totaling $2,215,215 compared to a net loss of $1,270,193 for the three months ended June 30, 2010 and 2009, research and development expense was $490,258 and $431,201, respectively, and consisted primarilyDecember 31, 2013, an increase of  expenses associated with$945,022.  This increase in the developmentnet loss is a result of increases in operating expenses of the TrackerPAL™ deviceCompany and related services.its subsidiaries acquired during the prior year.


 
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Selling, General and Administrative Expenses
During the three months ended June 30, 2010, selling, general and administrative expenses were $2,703,819, compared to $3,178,333 during the three months ended June 30, 2009.  The improvement of $474,514 is primarily due to decreases in consulting expense of $405,541, which resulted primarily from discontinuing the services of several consultants.
Interest Expense
During the three months ended June 30, 2010 and 2009, interest expense totaled $229,582 and $1,255,103, respectively. The decrease of $1,025,521 in interest expense resulted primarily from converting several debt instruments into Series D Preferred stock in January 2010.
Nine months ended June 30, 2010, compared to nine months ended June 30, 2009
Revenues
For the nine months ended June 30, 2010, we had net revenues from operations of $9,282,137, compared to $9,478,981 for the nine months ended June 30, 2009, a decrease of $196,844.  Although net revenues were relatively flat to slightly declining, revenues from monitoring services increased $71,371, or 0.8% from $8,985,386 for the nine months ended June 30, 2009, compared to $9,056,757 for the nine months ended June 30, 2010. Product revenues decreased $268,215 from $493,595 for the nine months ended June 30, 2009 to $225,380 for the nine months ended June 30, 2010.  This decrease resulted primarily from a one-time sale by Midwest Monitoring and Surveillance of $345,000 of merchandise made during the nine months ended June 30, 2009 that did not recur during the nine months ended June 30, 2010. 0; For the nine months ended June 30, 2010 and 2009, revenues from our activated GPS devices were $4,548,540 and $4,527,540, respectively.
Cost of Revenues
For the nine months ended June 30, 2010, cost of revenues declined to $5,375,588 from $8,295,540 during the nine months ended June 30, 2009, a decrease of $2,919,952.  The decrease in cost of revenues resulted primarily from the following reductions:  communication cost decrease of $955,074, device amortization decrease of $418,147, monitoring center costs decrease of $357,013, utilization rental fees decrease of $336,562, device costs decrease of $219,170 from product sales, freight costs decrease of $157,026, and commissions decrease of $82,549.  The reduction of communication costs have been realized due to entering into additional agreements with cellular companies with more favorable rates.  Additionally, monitoring center costs have decreased due to the development of so ftware which more effectively automates alarms requiring fewer operators to manage the active devices in the field. While focusing on the reductions in cost of revenues, we have been able to increase gross profit from $1,183,441, or 12.5% of revenues, for the nine months ended June 30, 2009, to $3,906,549, or 42.1% of revenues, for the nine months ended June 30, 2010.
Research and Development Expenses
During the nine months ended June 30, 2010 and 2009, research and development expense was $1,161,539 and $1,277,102, respectively, and consisted primarily of expenses associated with the development of the TrackerPAL™ device and related services.
Selling, General and Administrative Expenses
During the nine months ended June 30, 2010, selling, general and administrative expenses were $8,931,801, compared to $11,078,059 during the nine months ended June 30, 2009.  The improvement of $2,146,258 is primarily due to the following decreases:  consulting expense decrease of $790,108, legal and professional expense decrease of $504,735, depreciation expense decrease of $216,765, board of director fees decrease of $131,174, outside services decrease of $115,490, insurance expense decrease of $111,086, and travel expense decrease of $94,463.  The decrease in consulting expense resulted primarily from discontinuing the services of several consultants and the decrease in legal and professional fees is primari ly related to the settlement of two lawsuits.
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Interest Expense
During the nine months ended June 30, 2010 and 2009, interest expense related to operations totaled $3,840,232 and $2,790,006, respectively. The increase of $1,050,226 resulted primarily from a non-cash expense related to amortization of debt discount from the issuance of stock and warrants in connection with debt obligations.
Liquidity and Capital Resources

WeCurrently, we are currently  unable to finance our business solely from cash flows from operating activities. During the nine monthsyear ended JuneSeptember 30, 2010,2014, we supplemented cash flows to finance ourthe business from borrowings under a credit facility and from the sale and issuance of debt and equity securities, providing netsecurities. No such borrowings or sales occurred during the three months ended December 31, 2014. Together with the receipt of $4.7 million in January 2015, available cash proceeds from financing activities of $7,507,554.resources at December 31, 2014 are anticipated to meet our working capital requirements for the next twelve months.

As of June 30, 2010,December 31, 2014, we had unrestricted cash of $1,879,955$5,188,582 and a working capital deficitsurplus of $3,831,420,$6,162,170, and, as of September 30, 2014, we had unrestricted cash of $11,101,822, compared to unrestricted cash of $602,321 and a working capital deficit of $16,476,897$3,382,428 as of September 30, 2009.2013.  As of September 30, 2014, we had a working capital surplus of $11,323,107, compared to a working capital surplus of $6,836,442 as of September 30, 2013. The improvementincrease in working capital deficit is largely duein fiscal year 2014 primarily resulted from increases in cash on hand as a result of increases in inventory and proceeds from the Facility Agreement with Tetra House and subsequently assigned to the conversion of $16,910,753 in debt in exchange for shares of our Series D Preferred stock.  For the nine months ended June 30, 2010, our operating activities used cash of $4,484,573, compared to $6,705,204 of cash used in operating activities for the nine months ended June 30, 2009.Conrent Invest S.A.

We used cash of $1,745,347$2,777,233 for investing activities during the ninethree months ended June 30, 2010,December 31, 2014, compared to $1,454,508$4,158,893 of cash used in investing activities in the ninethree months ended June 30, 2009.December 31, 2013. During fiscal year 2014, we used $4,582,288 in cash from operating activities, compared to $838,910 of cash provided by operating activities during fiscal year 2013. The most significant change in cash from operations from 2013 to 2014 was the decrease in the certain non-cash accretion expense related to certain debt features which existed in 2013, but did not exist in 2014.  
 
FinancingWe used $598,251 of cash for financing activities during the three months ended December 31, 2014, compared to $2,623,664 in cash provided for the ninethree months ended June 30, 2010, provided cash of $7,507,554 compared to $6,968,926 for the nine months ended June 30, 2009. For the nine months ended June 30, 2010, we had net proceeds of $7,615,300 from the issuance of Series D Convertible Preferred stock, net advances from the line of credit of $747,400, proceeds of $500,000 from the issuance of related-party note and $3,217 from the issuance of notes payable.  Cash decreased by $595,393 in connection with payments on notes payable, $137,970 in net payments to a related-party line of credit, $600,000 in payments on related-party notes payable, and $25,000 in payments on a Series A 15% Debenture.December 31, 2013. Cash provided by financing activities was used to fundsupport operating activities and purchase monitoring equipment.during the three months ended December 31, 2013.
Going Concern

We incurredused $12,837,121 of cash by investing activities during the fiscal year ended September 30, 2014, compared to $560,425 of cash used during fiscal year 2013.  The increase in cash used by investing activities of $12,276,696 during fiscal year 2014 resulted primarily from cash payments related to the acquisition of subsidiaries during 2014, the payment of a net lossbond required for an international subsidiary, and cash paid for purchases of $11,084,874 for the nine months ended June 30, 2010property and a loss from operations of $7,541,526.  In addition, we had an accumulated deficit of $216,075,643 as of June 30, 2010.  These factors, as well as the risk factors set out elsewhere in this prospectus, raise substantial doubt about our ability to continue as a going concern. Our financial statements included in this prospectus do not include any adjustments that may result from the outcome of this uncertainty.  Our plans with respect to this uncertainty are to increase leases of the TrackerPAL™ productequipment and to increase monitoring services revenue.  There can be no assurance that revenues will increase rapidly enough to deliver profitable operating results and pay our debts as they come due.&# 160; Likewise, there can be no assurance that we will be successful in raising additional capital from the sale of equity or debt securities.  If we are unable to increase cash flows from operating activities or obtain additional financing, we will be unable to continue the development of our business and may have to cease operations.leasehold improvements.
  
Inflation
 
We do not believe that inflation has had a material impact on our historical operations or profitability.
 
Critical Accounting Policies
 
In Note (3)2, “Summary of Significant Accounting Policies” to the audited financial statements for the fiscal year ended September 30, 2009Consolidated Financial Statements included in this prospectus, we discuss those accounting policies that are considered to be significant in determining the results of operations and our financial position.
 
The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities.  The actual results may differ from these estimates under different assumptions or conditions.
  
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With respect to inventory reserves, revenue recognition, impairment of long-lived assets and allowance for doubtful accounts receivable, we apply the following critical accounting policies discussed below in the preparation of our financial statements:statements.

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Inventory Reserves
 
The nature of our business requires maintenance of sufficient inventory on hand at all times to meet the requirements of our customers. We record finished goods inventory at the lower of standard cost, which approximates actual cost (first-in, first-out method) or market.  Rawand raw materials are stated at the lower of cost, (first-in, first-out method), or market.market, which approximates actual cost. General inventory reserves are maintained for the possible impairment of the inventory. Impairment may be a result of slow moving or excess inventory, product obsolescence or changes in the valuation of the inventory. In determining the adequacy of reserves, management analyzes the following, among other things:
 
·●Current inventory quantities on hand;
·●Product acceptance in the marketplace;
●·Customer demand;
●Historical sales;
·●Forecast sales;
·●Product obsolescence; and
·●Technological innovations.
 
Any modifications to these estimates of reserves are reflected in cost of revenues within the statement of operations during the period in which such modifications are determined necessary by management.
 
Revenue Recognition
 
Our revenue has historically been from two sources: (i) monitoring services; (ii) monitoring device and other(ii) product sales.
 
Monitoring Services
 
Monitoring services include two components: (a)(i) lease contracts in which we provide monitoring services and lease devices to distributors or end users and we retain ownership of the leased device; and (b)(ii) monitoring services purchased by distributors or end users who have previously purchased monitoring devices and opt to use our monitoring services.
 
We typically lease our devices under one-year contracts with customers that opt to use our monitoring services.  However, these contracts may be cancelled by either party at anytimeany time with 30 daysdays’ notice.  Under our standard leasing contract, the leased device becomes billable on the date of activation or seven7 to 21 days from the date the device is assigned to the lessee, and remains billable until the device is returned to us.returned.  We recognize revenue on leased devices at the end of each month that monitoring services have been provided.  In those circumstances in which we receive payment in advance, we record these payments as deferred revenue.
 
14
Monitoring Device Product Sales
 
Although not the focus of our business model, weWe may sell our monitoring devices in certain situations.situations to our customers. In addition, we may sell home securityequipment in connection with the building out and Personal Emergency Response Systems (“PERS”) units.setting up a monitoring center on behalf of customers.  We recognize 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 TrackerPAL, ReliAlert, Shadow or R.A.D.A.R. devices) from us,, customers may, but are not required to, enter into one of our monitoring service contracts with us.contracts.  We recognize revenue on monitoring services for customers that have previously purchased devices at the end of each month that monitorin gmonitoring services have been provided.

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We sell and install standalone tracking systems that do not require our ongoing monitoring.  We have experience in component installation costs and direct labor hours related to this type of sale and can typically reasonably estimate costs, therefore we recognize revenue over the period in which the installation services are performed using the percentage-of-completion method of accounting for material installations.  We typically use 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.  We evaluate our estimated labor hours and costs and determine 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 revenues, we accrue the estimated losses immediately.
 
Multiple Element Arrangements
 
The majority of our revenue transactions do not have multiple elements. OnHowever, on occasion, we haveenter into revenue transactions that have multiple elements (suchelements.  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 product sales and monitoring services).the customer utilizes our services.  For revenue arrangements that have multiple elements, we consider whether: (i)whether the delivered devices have standalone value to the customer; (ii)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;services, and (iii) the customer does not have a general right of return.  Based on these criteria, we recognize revenue from the sale of devices separately from the monitoring services to be provided to the customer.  In accordance with FASB ASC Subsection 605-25 , ifcustomer as the fair value of the undelivered element exists, but the fair value does not exist for oneproducts or more delivered elements, then revenue is recognized using the residual method. Under the residual method as applied to these particular transactions, the fair value of the undelivered element (the monitoring services) is deferred and the remaining portion of the arrangement (the sale of the device) is recognized as revenue when the device is delivered and all other revenue recognition criteriaservices are met.delivered.
 
Other Matters
 
We consider an arrangement with payment terms longer than our normal terms not to be fixed or determinable, and we recognize 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, and normal payment terms for device sales are between 120 and 180 days.  We sell our 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 soldwe sell to them by us.them.  Generally, title and risk of loss pass to the buyer upon delivery of the devices.
 
We estimate our product returns based on historical experience and maintain 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 revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.
 
Impairment of Long-lived Assets
 
We review our long-lived assets such as goodwill and intangibles 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. We evaluate whether events and circumstances have occurred which indicate possible impairment as of each balance sheet date. We use an equity vs. fair market value method of the related asset or group of assets in measuring whether the assets are recoverable.  If the carrying amount of an asset exceeds its fair market 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 identifia bleidentifiable fair market value that is independent of other groups of assets.  As of September 30, 2009, we impaired goodwill from Midwest Monitoring & Surveillance, Inc. by $2,343,753 and from Bishop Rock Software by $460,827, Inc. for a total impairment expense of $2,804,580.
 
Allowance for Doubtful Accounts
 
We must make estimates of the collectability of accounts receivable. In doing so, we analyze accounts receivable and historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts.
 
Recent Accounting Pronouncements 
Effective for December 2008, new accounting guidance was added relating to business combinations. The objective of this Topic is to enhance the information that an entity provides in our financial reports about a business combination and its effects. The Topic mandates: (i) how the acquirer recognizes and measures the assets acquired, liabilities assumed and any non-controlling interest in the acquiree; (ii) what information to disclose in our financial reports and; (iii) recognition and measurement criteria for goodwill acquired. This Topic is effective for any acquisitions made on or after December 15, 2008. The adoption of this Topic is not expected to have a material impact on our financial statements and disclosures.

 
15-29-
 

Recent Accounting Pronouncements 
 
In May 2009, the FASB issued guidance which establishes general standards ofFrom time to time, new accounting and disclosure of events that occur after the balance sheet date but before financial statementspronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies, which are available to be issued. In particular, this Topic sets forth: (i)adopted by us as of the period afterspecified effective date. Unless otherwise discussed, we believe that the balance sheet date during which managementimpact of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in our financial statements, (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Topic should be applied to the accounting and disclosure of subsequen t events. This Topic does not apply to subsequent events or transactionsrecently issued standards that are within the scope of other applicable accounting standards that provide different guidance on the accounting treatment for subsequent events or transactions. This Topic wasnot yet effective for interim and annual periods ending after June 15, 2009, which was September 30, 2009 for us. The adoption of this Topic didwill not have a material impact on our financial statements and disclosures.
In June 2009, the FASB issued guidance which became the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Topic, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-SEC accounting literature not included in the Codification will become non-authoritative. This Topic identifies the sources of accounting principles and the framework for selecting the principles used in preparing the financial statements of nongovernmental entities that are presented in conformity with GAAP and arranged these sources of GAAP in a hierarchy for users to apply accord ingly. This Topic is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this Topic did not have a material impact on our disclosure of the financial statements.
In June 2009, the FASB issued additional guidance which improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in our financial statements about a transfer of financial assets; the effects of a transfer on our financial position financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This additional guidance requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. Enhanced disclosures are required to provide financial statement users with greater transparency about transfers of financial asset s and a transferor’s continuing involvement with transferred financial assets. This additional guidance must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This additional guidance must be applied to transfers occurring on or after the effective date. The adoption of this Topic is not expected to have a material impact on our financial statements and disclosures.
In September 2009, the FASB added implementation guidance on accounting for uncertainty in income taxes. For entities that are currently applying the standards for accounting for uncertainty in income taxes, the guidance and disclosure amendments are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this Update did not have a material impact on our financial statements and disclosures.
In September 2009, the FASB issued guidance that changes the existing multiple-element revenue arrangements guidance currently included under its Revenue Arrangements with Multiple Deliverables codification. The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. This will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beg inning of the year of adoption. We are currently assessing the future impact of this new accounting update to our financial statements.
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In October 2009, the FASB issued accounting guidance which changes the accounting model for revenue arrangements that include both tangible products and software elements. Under this guidance, tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality are excluded from the software revenue recognition guidance given prior to this new guidance. In addition, hardware components of a tangible product containing software components are always excluded from the software revenue guidance.  This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.  We are currently assessing the fut ure impact of this new accounting update to our financial statements.
In April 2008, the FASB issued an amendment for determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under authoritative accounting guidance for goodwill and other intangible assets. This guidance is intended to improve the consistency between the useful life of an intangible asset determined under the guidance for goodwill and other intangible assets and the period of expected cash flows used to measure the fair value of the asset under ASC 805 “Business Combinations” and other principles under GAAP. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods wi thin those fiscal years. Early adoption is prohibited. This guidance will be effective for us in fiscal year 2010. The adoption of this guidance is not expected to significantly impact our results of operations and financial position.upon adoption.
 
In September 2006, the FASB issued enhanced guidance for using fair value to measure assets and liabilities. This guidance also provides for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. ASC 820 applies whenever other guidance requires or permit assets or liabilities to be measured at fair value. ASC 820 does not expand the use of fair value in any new circumstances. In February 2008, the FASB issued additional guidance to exclude ASC 840 “Accounting for Leases” and delays the effective date of ASC 820 by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecu rring basis. In October 2008, the FASB issued additional guidance for determining the fair value of a financial asset when the market for that asset is not active to clarify the application of the provisions of the guidance for fair value measurements in an inactive market and how an entity would determine fair value in an inactive market. This additional guidance is effective immediately. We adopted ASC 820 for financial assets and financial liabilities at the beginning of fiscal year 2009. The adoption of this guidance for financial assets and financial liabilities did not impact our results of operations and financial position. The guidance is effective for nonfinancial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008, which is our fiscal year 2010. The adoption of this guidance for nonfinancial assets and nonfinancial liabilities is not expected to significantly impact our results of operations and financial position.
In June 2009, the FASB issued accounting guidance on the consolidation of variable interest entities (VIEs). This new guidance revises previous guidance by eliminating the exemption for qualifying special purpose entities, by establishing a new approach for determining who should consolidate a variable-interest entity and by changing when it is necessary to reassess who should consolidate a variable-interest entity.  This guidance will be effective at the beginning of the first fiscal year beginning after November 15, 2009. Early application is not permitted.  The adoption of this guidance is not expected to significantly impact our results of operations and financial position.
In September 2009, the FASB issued guidance updates and provided amendments to its Fair Value Measurements and Disclosure requirements which permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This guidance also requires new disclosures, by major category of investments, about the attributes of investments, such as the nature of any restriction on the ability to redeem an investment on the measurement date.  This guidance is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued.  The adoption of this guidance is not expected to significantly impact our r esults of operations and financial position.
In October 2009, the FASB issued guidance on share-lending arrangements entered into on an entity's own shares in contemplation of a convertible debt offering or other financing.  This guidance is effective for fiscal years beginning on or after December 15, 2009, and fiscal years within those fiscal years for arrangements outstanding as of the beginning of those years. Retrospective application is required for such arrangements. This guidance is effective for arrangements entered into on (not outstanding) or after the beginning of the first reporting period that begins on or after June 15, 2009. Certain transition disclosures are also required. Early application is not permitted.  The adoption of this guidance is not expected to significantly impact our results of operations and financial positi on.

17
Accounting for Stock-Based Compensation
 
For the fiscal years ended September 30, 2009 and 2008, we calculatedWe recognize compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of $67,406 and $214,251, respectively related to the vesting of stock options granted in prior years.
Theaward based on their grant date fair value of each stock option grant is estimated onvalue.  We estimate the date of grant using the Black-Scholes option-pricing model. We granted 1,517,714 and 1,725,000 stock options to employees during the fiscal years ended September 30, 2009 and 2008 valued at $274,650 and $359,946, respectively.  In addition, 390,000 stock options issued to employees in prior years vested during the fiscal year ended September 30, 2008.  The weighted average fair value of stock options at the date of grant during the fiscal year ended September 30, 2009 and 2008 was $0.18 and $1.34, respectively. Theusing a Black-Scholes option pricing model which requires us to make estimates for certain assumptions regarding risk-free interest rate, expected life of stock options, represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends. The expected volatility is based onof stock and expected dividend yield of stock.
Financial and Certain Pro Forma Information Regarding GPS Global
At the historical price volatil ity of Common Stock. The risk-free interest rate represents the U.S. Treasury bill rate for the expected lifetime of the related stock options.Transaction, GPS Global was a privately owned company established in 2007 in the State of Israel.  GPS Global provides tracking, monitoring and surveillance solutions of offenders, vehicles, facilities and human resources.  GPS Global specializes in developing innovative products using advanced technologies to provide a complete solution for its customers.  GPS Global has had limited operations.  Its business has involved primarily the research and development of solutions for offender tracking and monitoring, human resources and personnel locating, vehicle and asset tracking, locating and control, and facility monitoring.  It does not own any patents at this time.  The dividend yield representsfinancial and certain pro forma financial information regarding GPS Global specified in Rule 3-05(b) or Rule 8-04(b) of Regulation S-X under the Company’s anticipated cash dividends overExchange Act will be filed by amendment to this registration statement on Form S-1/A within the expected life of the stock options.71 days allowed.

The following are the weighted-average assumptions used for options granted during the fiscal years ended September 30, 2009 and 2008, respectively:
  
Fiscal years Ended
September 30,
 
  2009  2008 
Expected cash dividend yield  -   - 
Expected stock price volatility  121%  136%
Risk-free interest rate  1.16%  3.12%
Expected life of options 3.7 years  5 years 
A summary of stock option activity for the fiscal years ended September 30 2009 and 2008 is presented below:
 
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Outstanding as of September 30, 20073,295,000 $0.64      
     Granted1,725,000 $1.54      
     Exercised(1,375,000) $0.63      
     Forfeited(45,000) $0.86      
     Expired-  -      
Outstanding as of  September 30, 20083,600,000 $1.08 3.34 years $1,062,000 
Exercisable as of  September 30, 2008421,667 $1.35 3.30 years $37,000 

 
 
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
 
 
 
Outstanding as of September 30, 20083,600,000 $1.08      
     Granted1,517,714 $0.21      
     Expired(408,500) $1.45      
Outstanding as of  September 30, 20094,709,214 $0.76 2.05  years $12,854 
Exercisable as of  September 30, 20091,719,880 $0.32 2.97 years $12,854 
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our business is extending to several countries outside the United States, and we intend to continue to expand our foreign operations.  As a result, our revenues and results of operations are affected by fluctuations in currency exchange rates, interest rates, and other uncertainties inherent in doing business in more than one currency.  In addition, our operations are exposed to risks that are associated with changes in social, political, and economic conditions in the foreign countries in which we operate, including changes in the laws and policies that govern foreign investment, as well as, to a lesser extent, changes in United States laws and regulations relating to foreign trade and investment.
Foreign Currency Risks.  We had no revenues from sources outside the United States for the three and nine months ended June 30, 2010 and 2009.  Sales of monitoring equipment during the periods indicated were transacted in U.S. dollars and, therefore, we did not experience any effect from foreign currency exchange in connection with these international sales.  We occasionally purchase goods and services in foreign currencies which resulted in currency exchange rate losses of $8,756 and $0 for the nine months ended June 30, 2010 and 2009, respectively.  Changes in currency exchange rates affect the relative prices at which we sell our products and purchase goods and services.  Given the uncertainty of exchange rat e fluctuations, we cannot estimate the effect of these fluctuations on our future business, product pricing, results of operations, or financial condition.  We do not use foreign currency exchange contracts or derivative financial instruments for trading or speculative purposes.  To the extent foreign sales become a more significant part of our business in the future, we may seek to implement strategies which make use of these or other instruments in order to minimize the effects of foreign currency exchange on our business.
Interest Rate Risks.  As of June 30, 2010, we had $1,000,000 of borrowings outstanding on a line of credit with a bank with an interest rate of 3.28%.  The interest rate on this line of credit is subject to change from time to time based on changes in an independent index which is the Prime Rate as published in The Wall Street Journal.
MANAGEMENT
Director Independence
 
A majority of the members of our Board of Directors and all of the members of certain committees are composed of “independent directors,” as defined in the rules of the Nasdaq Stock Market. In general, an “independent director” is a person other than an officer or employee of the Company or any other individual who does not have a relationship, which, in the opinion of the Board of Directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Additional independence and qualification requirements apply to our directors serving on certain committees. Our Board has a separately-designated standing Audit Committee, Compensation Committee, and Nominating Committee. All members of the Audit Committee, Compensation Committe e, and Nominating Committee meet the definition of "independent," described above.
Board of DirectorsExecutive Officers
 
The following table sets forth information about the members of our Board of Directors as of September 30, 2010:March 25, 2015:  
 
Name
 Age Position
David S. Boone  
Edgar Bernardi5354 Director
Robert E. ChildersGuy Dubois 6456 Director
David G. Derrick57Director, Chief Executive Officer
David P. Hanlon64Director
John L. Hastings, III47President and Chief Operating Officer
Rene Klinkhammer 3034 Director
Larry G. SchafranWinfried Kunz49Director
Dan L. Mabey63Director
George F. Schmitt 71 Director

Dr. Edgar BernardiDavid S. Boone joinedbecame a director of our Company on December 21, 2011. He has served in executive roles with a variety of publicly traded and start-up organizations including Kraft General Foods, Sears, PepsiCo, Safeway and Belo Corporation, as well as serving as the CFO of Intira Corporation.  In addition, he has served as a consultant with the Boston Consulting Group.  Mr. Boone was CEO, President and Director of American CareSource Holdings from 2005 to 2011, a NASDAQ traded company.  He was the 2009 Ernst and Young Entrepreneur of the Year winner for Health Care in the Southwest Region. Mr. Boone serves on a number of private company boards and serves on the board in January 2010.  Heof the Texas Kidney Foundation. Mr. Boone graduated from the University of Wuppertal, Wuppertal, Germany,Illinois, cum laude, in 19761983 majoring in physics and mathematics.accounting.  Mr. Boone is a Certified Public Accountant.  He received his master’s degree in physicsbusiness administration from University Bonn, Physics Institute, Bonn, GermanyHarvard Business School in 1984, emphasizing elementary particle physics.  In 1988, he received1989. Mr. Boone serves on the Audit Committee and chairs the Finance Committee of our Board of Directors. The Nominating Committee considers Mr. Boone's financial experience and business experience to be an important qualification for his Ph.D. fromservice on the University Hamburg, Hamburg, Germany, specializing in elementary particle physics.  From 2001 through 2009, Dr. Bernardi served as CTO, COO, CSOBoard and CIO for euromicron AG, a holding company with buythe Audit and build strategy in the core business o f network and fiber optics technology in Germany.  From 1999 through 2001, he served as the general manager for Christian Schwaiger GmbH & Co., KG, an entity engaged in the production and trade of antenna, satellite and cable TV reception systems.  From 1998 through 1999, Dr. Bernardi was the director of network operator services for Alcatel Sel AG, a worldwide manufacturer of telecommunication network equipment.  From 1991 through 1998, he served in two capacities for Mannesmann Mobilfunk GmbH (Vodafone GmbH), which was the first private mobile network operator in Germany, of which he was the head of the department of network planning and optimization and head of the department of system aspects.  From 1988 through 1990, he was with Robert Bosch GmbH, a worldwide manufacturer of automotive and telecommunication equipment and served as the main adviser of the business unity public telecommunications and development center, and an adviser in the business unit for pu blic telecommunications development center.Finance Committees.

 
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Robert E. ChildersGuy Dubois joinedis our boardChairman since February 2013 and became a director in July 2001.  Since 1977, he has served as the Chief Executive OfficerDecember 2012. Mr. Dubois is a Director of Structures Resources Inc.Singapore-based Tetra House Pte. Ltd., a firm which he founded in 1972.  He has more than 30 yearsprovider of business experience in constructionconsulting and real estate development.  Mr. Childers has served or is currently serving as General Partner in 16 public limited partnerships in the Middle Atlantic States.  Partners include First Union Bankadvisory services worldwide; and Fannie Mae.  Structures Resources has successfully completed over 300 projects (offices, hotels, apartments, and shopping centers) from New York to North Carolina.  Recently Mr. Childers has founded a new company providing construction services to major companies developing gas wells in the Marcellus shale. He is a co-founder of Life Science Group, a boutique biotech investment-banking firm. Mr. Childers was the founding President of Associated Building Contractors for the State of West Virginia and served as a director of The Twentieth Street Bank until its merger with City Holding Bank.  HeRNTS Media NV, a Luxembourg listed digital content developer and mobile application advertising monetization platform provider. Mr. Dubois is a former naval officer servingdirector and CEO of Gategroup AG, and held various executive leadership roles at Gate Gourmet Holding LLC. Mr. Dubois has held executive management positions at Roche Vitamins Inc. in Atlantic fleet submarines.New Jersey, as well as regional management roles in that firm’s Asia Pacific operations. Mr. ChildersDubois also served the European Organization for Nuclear Research (CERN) team in Switzerland in various roles, including treasurer and chief accountant. Mr. Dubois also worked with IBM in Sweden as Product Support Specialist for Financial Applications. A Belgian citizen, Mr. Dubois holds a degree in financial science and accountancy from the Limburg Business School in Diepenbeek, Belgium. The Board believes that Mr. Dubois' extensive financial and operational experience is a tremendous asset to the Company as a member of the Compensation Committee and the Nominating Committee of our Board of Directors.
 
David G. Derrick has been our CEO and Chairman since February 2001.  Prior to joining us, Mr. Derrick occupied directorship and management positions in other companies.  From 1979 to 1982, Mr. Derrick was a faculty member at the University of Utah, College of Business.  Mr. Derrick graduated from the University of Utah with a Bachelor of Arts degree in Economics and a Masters in Business Administration degree with an emphasis in Finance.
David P. Hanlon has been a member of our Board of Directors since October 2006.  He served previously as Chief Executive Officer and President of Empire Resorts, Inc., a public company in the gaming industry, until May 2009.  Prior to starting his own gaming consulting business in 2000, in which he advised a number of Indian and international gaming ventures, Mr. Hanlon was President and Chief Operating Officer of Rio Suites Hotel & Casino from 1996-1999, a period in which the Rio Suites Hotel & Casino underwent a major expansion. From 1994-1995, Mr. Hanlon served as President and Chief Executive Officer of International Game Technology, the world's leading manufacturer of microprocessor gaming machines. From 1988 - -1993, Mr. Hanlon served as President and Chief Executive Officer of Merv Griffin's Resorts International, and prior to that, Mr. Hanlon served as President of Harrah's Atlantic City (Harrah's Marina and Trump Plaza). Mr. Hanlon's education includes a B.S. in Hotel Administration from Cornell University, an M.S. in Accounting, an M.B.A. in Finance from the Wharton School, University of Pennsylvania, and completion of the Advanced Management Program at the Harvard Business School. Mr. Hanlon is a member of the Audit Committee of our Board of Directors.
John L. Hastings, III became our President on June 19, 2008 and Chief Operating Officer on November 20, 2008.  Mr. Hastings has worked for Nestle/Stouffer’s, Kraft/General Foods, Nissan Motor Acceptance Corp., NCR/Teradata, Unisys Corp. and VNU/AC Nielsen.  He has also served on the boards of small entrepreneurial companies.  From 1998 through 2006, Mr. Hastings worked with VNU – AC Nielsen in several executive posts, last serving as its Senior Vice President and General Manager of Global Business Intelligence, reporting directly to VNU’s chief executive officer.  Upon acquisition and privatization of VNU in 2006, and until his appointment as our President, Mr. Hastings served as the interim President and CEO of Klever Marketing, Inc., a Utah-based retail marketing company.  Mr. Hastings received a BA from Cal State University, Fullerton CA (1985) and an MBA from Pepperdine University, Malibu CA (1987). 
Rene Klinkhammerbecame a director in January 2010.  He graduated from European Business School, Oestrich-Winkel, Germany, in 2004, with an MBA-equivalent degree in business administration.  His majors were Banking, Finance and International Management.  After graduating, Mr. Klinkhammer joined Deutsche Bank’s Investment Banking Division as an analyst in the Corporate Finance Advisory Group, specializing in mergers &and acquisitions, along with debt and equity financing transactions for larger German clients of the bank.  InFrom 2007 to June 2013, Mr. Klinkhammer joinedworked for Sapinda Group,Holding B.V. and its subsidiaries, a group of privately-owned investment companycompanies with offices in Amsterdam, Berlin, London and London.  Forother major cities around the past three years,world.  From July 2013 until September 2014, Mr. Klink hammerKlinkhammer worked for Anoa Capital S.A., a Luxembourg based provider of innovative financing solutions, as Head of Origination. Since then, Mr. Klinkhammer has worked with the Company as both an investor and advisor.

20
Larry G. Schafran has beenco-launched a member of our Board of Directors since October 2006.  He is associated with Providence Capital, Inc. (“PCI”) as a Managing Director.  PCI is a New York City-based investment and advisory firm.  Additionally, Mr. Schafran was Lead Director and Audit Committee Chairman and later a consultant to the Chairman of WorldSpace, Inc.  In addition, Mr. Schafran is also a director of the following publicly traded U. S. corporations: Sulphco, Inc., New Frontier Energy, Inc., DollarDays International, Inc., Subaye Corp. and National Patent Development Corporation.  In recent years, Mr. Schafran served in several capacities, including, as a director of PubliCard, Inc., Tarragon Corpora tion, and ElectroEnergy, and Trustee, Chairman/Interim-CEO/President and Co-Liquidating Trustee of Special Liquidating Trust of Banyan Strategic Realty Trust; Director and/or Chairman of the Executive Committees of Dart Group Corporation, Crown Books Corporation, TrakAuto Corporation, and Shoppers Food Warehouse, Inc. (Vice-Chairman); director and member of the Strategic Planning and Finance Committees of COMSAT Corporation, and Managing General Partner of L. G. Schafran & Partners, LP, afamily-owned venture, focusing on residential real estate investmentdevelopments and development firm.adjacent fields of business. Mr. SchafranKlinkhammer is Chairman of the Audit and Nominating Committees and a member of the Compensation Committee of our Board of Directors. The Nominating Committee considered Mr. Klinkhammer's finance background to be an important qualification for his service as a member of the Board.
 
Current Winfried Kunz became a director on December 21, 2011. He studied Business Administration and Economics from 1984 -1989 at the Universities in Munich and Cologne. In 1985 he started working as a system analyst and from 1987 – 1998 as a management consultant for German, British and American companies in the information technology business, where he served in executive positions. Mr. Kunz worked as an executive at Precision Software Ltd., Contact Software International Inc., and Symantec Corp. For more than 15 years, Mr. Kunz has worked as an independent consultant and managing partner of Asecon GmbH, a company he founded in 1997, developing and implementing investor innovative business models for residential properties with a focus in Munich for his own portfolio and for third parties. For more than 10 years he has been a consultant to JK Wohnbau GmbH, a Munich-based real estate developer, where he served as COO from 2009 until the company’s initial public offering in 2010. Previously, from 2009 to 2011, Mr. Kunz worked with us as an investor. Mr. Kunz brings extensive experience in the information technology industry and his international business expertise, as well as his finance and operational expertise to the Board of Directors.
Dan L. Mabey became a director on December 21, 2011.  Mr. Mabey has acted as the CEO of BigHorn Oil and Gas, an energy development company (Casper, Wyoming), and he has served in both public and private company leadership positions in the high-tech industry including President of 1-2-1 View digital signage company (Singapore), Chief Operating Officer and Director of In Media Corporation IPTV service company (California), President of Interactive Devices, Inc. a video compression company (Folsom, California) and Vice President of Broadcast International, a satellite broadcast company ( Salt Lake City, Utah).  From 1990 until 2002, Mr. Mabey was Director of the State of Utah Department of Economic Development International Business Development Office, growing Utah exports from $700 million to $3.6 billion a year. He helped recruit the 2002 Winter Olympics to Salt Lake City, Utah, and managed international business development for the games. Throughout his career, Mr. Mabey has been active in civic and community organizations and is the recipient of numerous service awards. He is also the co-inventor or lead inventor on six patents and the sole inventor of a seventh.  Mr. Mabey received a Masters of Public Administration (MPA) degree from Idaho State University in 1978 and a B.A. degree from Boise State University in 1974. Mr. Mabey is a member of the Nominating Committee. The Board of Directors considers Mr. Mabey's extensive international business experience to be an important qualification for his continuing service as a Board member.

George F. Schmitt became a director on December 21, 2011.  He is a director and CEO of MBTH Technology Holdings.  He has held this position since December, 2010.  Mr. Schmitt is also a director of XG Technology, Inc. a publicly traded company, Kentrox and Calient.  Mr. Schmitt previously served as a director of TeleAtlas, Objective Systems Integrators, Omnipoint and LHS Group.  Mr. Schmitt is a principal of Sierra Sunset II, LLC and serves as a Trustee of St. Mary’s College.  In addition, Mr. Schmitt has served as a director of many privately held companies including Voice Objects, Knowledge Adventure, Jungo and Cybergate, among others.  Mr. Schmitt has also served as Financial Vice President of Pacific Telesis and chaired the audit committee of Objective Systems Integrations and TeleATLAS.  Mr. Schmitt received an M.S. in Management from Stanford University, where he was a Sloan Fellow, and a B.A. in Political Science from Saint Mary’s College. The Nominating Committee recognizes the benefit to the Board of Directors and to the Company of Mr. Schmitt's service as a member of the boards of directors of various companies and his extensive experience in the telecommunications industry.


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Board of Directors
Election and Meetings
Directors hold office until the next annual meeting of the shareholders and until their successors have been elected or appointed and duly qualified.  Executive officers are appointed by the Board of Directors and hold office until their successors are appointed and duly qualified.  Vacancies on the Board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members of the Board, with such new director serving the remainder of the term or until his/her successor shall be elected and qualify.
The Board of Directors is elected by and is accountable to our shareholders.  The Board establishes policy and provides strategic direction, oversight, and control.  The Board met eight times during fiscal year 2014.  All directors attended at least 80% of the meetings of the Board and the committees of the Board of Directors, of which they are members.
Director Independence
The Board of Directors intends to comply with the director independence standards of the NASDAQ Stock Market, including Rule 4200(a)(15). The Board determined, based on the NASDAQ Stock Market Rules, that George F. Schmitt, Winfried Kunz, David S. Boone, Rene Klinkhammer, and Dan L. Mabey meet the NASDAQ standards to be considered independent. The Board has not appointed a lead independent director.
Specifically, none of these directors:
●has been at any time during the past three years employed by us or by any parent or subsidiary of the Company;
●has accepted or has a family member who accepted any compensation from us in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than compensation for board or board committee service;
●is a family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer;
●is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments for property or services in the current or any of the past three fiscal years that exceed 5 percent of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more;
●is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of our executive officers serve on the compensation committee of such other entity; or
●is, or has a family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.
Shareholder Communications with Directors
If we receive correspondence from our shareholders that is addressed to the Board of Directors, we forward it to every director or to the individual director to whom it is addressed. Shareholders who wish to communicate with the directors may do so by sending their correspondence to the directors c/o Track Group, 405 South Main Street, Suite 700, Salt Lake City, Utah 84111.

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Committees of the Board of Directors
The Board of Directors has three standing committees: the Audit Committee, Compensation Committee, and Nominating Committee.  These committees assist the Board of Directors to perform its responsibilities and make informed decisions.
Audit Committee
The primary duties of the Audit Committee are to oversee (i) management’s conduct of our financial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing our systems of internal accounting and financial controls, (ii) our independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company and (iii) the engagement and performance of our independent auditors.  The Audit Committee assists the Board in providing oversight of our financial and related activities, including capital market transactions. The Audit Committee has a charter, a copy of which is available on our website at www.trackgrp.com.
The Audit Committee meets with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our independent registered public accounting firm.  The Audit Committee met four times during fiscal year 2014 and all members of the Audit Committee attended at least 75% of the committee’s meetings.  

Members of the Audit Committee as of September 30, 2014, are Messrs. Boone, Schmitt and Kunz.  Each member of the Audit Committee satisfies, according to the full Board of Directors, the definition of independent director as established in the NASDAQ Stock Market Rules.  All of the members of the Audit Committee are financially literate.  In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board of Directors designated David S. Boone as the Audit Committee’s “Audit Committee Financial Expert” as defined by the applicable regulations promulgated by the SEC.  
The Audit Committee reviewed and discussed the matters required by United States auditing standards required by the Public Company Accounting Oversight Board (“PCAOB”) and our audited financial statements for the fiscal year ended September 30, 2014 with management and our independent registered public accounting firm.  The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by Independence Standards Board No. 1, and the Audit Committee has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence.  

Compensation Committee
Members of the Compensation Committee are Messrs. Mabey (Chairman), Boone, and Schmitt.  The Compensation Committee met two times during fiscal year 2014.  Members of the Compensation Committee are appointed by the Board of Directors.  Messrs. Mabey, Boone, and Schmitt are independent directors, as determined by the Board of Directors in accordance with the NASDAQ Stock Market Rules, including Rule 5605(d)(2)(A).  The Compensation Committee is governed by a charter approved by the Board of Directors, a copy of which is available on the Company’s website www.trackgrp.com.

The Compensation Committee has responsibility for developing and maintaining an executive compensation policy that creates a direct relationship between pay levels and corporate performance and returns to shareholders. The Committee monitors the results of such policy to assure that the compensation payable to our executive officers provides overall competitive pay levels, creates proper incentives to enhance shareholder value, rewards superior performance, and is justified by the returns available to shareholders.
The Compensation Committee also acts on behalf of the Board of Directors in administering compensation plans approved by the Board, in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the goals at the end of the plan year).  The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation of the Company’s directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of executive officers of the Company.

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Nominating and Corporate Governance Committee
Mr. Schmitt serves as the chair of the Nominating and Corporate Governance Committee.  Messrs. Kunz and Klinkhammer also currently serve as members of this committee.  The Nominating Committee has the responsibility for identifying and recommending candidates to fill vacant and newly created Board positions, setting corporate governance guidelines regarding director qualifications and responsibilities, and planning for senior management succession.
The Nominating and Corporate Governance Committee is required to review the qualifications and backgrounds of all directors and nominees (without regard to whether a nominee has been recommended by shareholders), as well as the overall composition of the Board of Directors, and recommend a slate of directors to be nominated for election at the annual meeting of shareholders, or, in the case of a vacancy on the Board of Directors, recommend a director to be elected by the Board to fill such vacancy.  The Nominating Committee held one meeting during fiscal 2014. The Nominating Committee’s charter is available on our website, www.trackgrp.com.
Code of Ethics
We have established a Code of Business Ethics that applies to our officers, directors and employees.  The Code of Business Ethics contains general guidelines for conducting our business consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.  We will post on our website, www.trackgrp.com, any amendments to or waivers from a provision of our Code of Business Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions and that relates to any element of the Code of Business Ethics.

Executive Officers
 
The following table sets forth certain information regarding our principal executive officer and principal financial and accounting officer as of September 30, 2010, regarding the current executive officers of the Company.March 25, 2015:
 
Name Age 
Position
     
David G. DerrickExecutive Committee of Board of Directors 57 ChiefPrincipal Executive Officer and Chairman
John L. Hastings, IIIR. Merrill 47President and Chief Operating Officer
Chad Olsen3945 Chief Financial Officer
Bernadette Suckel53Managing Director of Sales & Marketing
Bruce G. Derrick51Chief Technology Officer
 
David G. Derrick has been our CEO and Chairman since February 2001.  His work and education information is detailed with ourThe Executive Committee of the Board of Directors tablewas established to act temporarily in the principal executive officer function following the resignation of our Chief Executive Officer in October 2012. Current members of the Executive Committee are Guy Dubois and David S. Boone.  Biographies for Mr. Dubois and Boone appear under heading “Directors” above.
 
John L. Hastings, III became our President on June 19, 2008 and Chief Operating Officer on November 20, 2008.  His work and education information is detailed with our Board of Directors table above.
R. Merrill Chad Olsen became ourwas appointed to Chief Financial Officer in January 2010.April 2014. Mr. Merrill has held a variety of financial roles within public and private organizations including United Health Group, Clear Channel, IMG, and Sports Authority.  From 2013 to 2014, Mr. Merrill was the CFO of TenXNetworks and IPVidTech.com, a start-up network hardware and business intelligence provider.  From 2010 to 2013, Mr. Merrill worked as an advisor in the healthcare technology industry facilitating due diligence and integration of certain acquired companies.  Prior to that time, he served as our corporate controller since September 2001.  From 1992 to 1997,2010, Mr. Olsen worked inMerrill was the bankingCFO of Park City Group, Inc. (NASDAQ: PCYG) and investment industry where he assisted clientsPrescient Applied Intelligence, Inc. (OTCQB: PPID) software-as-a-service providers of supply chain solutions for both retailers and their suppliers.  He began his career with tax, investmentKPMG and banking services. From 1997 to 2001, Mr. Olsen worked with a certified public accounting firm performing tax, auditing, and business advisory services. Additionally, Mr. Olsen owned and operated his own accounting practice performing tax, accounting, and consulting services. Mr. Olsen received a Bachelor of Science Degree in Accounting from Brigham Young University.
Bernadette Suckel joined us on April 24, 2008.  Prior to joining us, Ms. Suckel served as the VP/Solution and Client Principal, for The Nielsen Company/ACNielsen from 2000 through April 2008.  From November 2006 through April 2008, she consulted on a part-time basis to Klever Marketing, Inc. to focus on cost reduction strategies.  Ms. Suckel also worked previously for Cogit.com and NCR/AT&T GIS/Teradata.  She received a BS in Business Administration, Marketing Option, from California State University, Fresno. 
Bruce G. Derrick has been our Chief Technology Officer since November 21, 2004.  He has extensive experience in management of custom solutions development and customer management in the wireless telecom marketplace.  From 2001 to 2004 Mr. Derrick was a senior product development manager for WatchMark Corporation.  WatchMark collects cellular network performance data for quality assurance and capacity planning. Prior to joining WatchMark, Mr. Derrick was responsible for forming and managing the Professional Services team for Marconi’s MSI division.  Mr. Derrick also worked in management positions at Boeing and Western Wireless, built and managed the Corporate Computer and Network Operations d epartment for Avaya’s Mosaix division.  He was a Senior Programmer in applied research at the University of Utah’s Department of Medical Informatics where he developed and implemented medical informatics and physiological monitoring services for ICU care and participated in development of IEEE standards for automated physiological monitoring for NASA’s Space Station program.  Mr. Derrick holds a Bachelor’s DegreeBachelors and a Master’s in Computer ScienceAccounting from the University of Utah.  Bruce Derrick isSouth Florida.
Compliance with Section 16(a) of the brotherExchange Act
Section 16(a) of David Derrick, our Chairman and CEO.  There are no other family relationships amongthe Exchange Act requires our officers, directors, and directors.persons who beneficially own more than 10 percent of our Common Stock to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater-than-ten-percent shareholders are also required by the SEC to furnish us with copies of all Section 16(a) forms that they file.

 
21-34-
 
 
Based solely upon a review of these forms that were furnished to us, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during fiscal year 2014 and that such filings were timely except the following:
●Mr. Klinkhammer, a director, filed one late Form 4 reporting one transaction
●Mr. Schmitt, a director, filed three late Form 4s reporting three transactions
●Mr. Dubois, a director, filed one late Form 4 reporting one transaction
●Mr. Boone, a director, filed one late Form 4 reporting one transaction
●Mr. Mabey, a director, filed two late Form 4s reporting two transactions
●Mr. Kunz, a director, filed two late Form 4s reporting two transactions
Compensation of Directors
The table below summarizes the compensation paid by us to our non-employee directors for the fiscal year ended September 30, 2014:

(a) (b)  (c)  (d)  (e) 
  Fees earned  Stock awards  Option awards  Total 
Name ($)*  ($)  ($)  ($) 
             
Winfried Kunz $15,000  $15,000  $15,000  $45,000 
George F. Schmitt $15,000  $22,500  $8,991  $46,491 
Rene Klinkhammer $15,000  $30,000  $-  $45,000 
David S. Boone $30,000  $30,000  $30,000  $90,000 
Dan L. Mabey $15,000  $29,833  $-  $44,833 
Guy Dubois $30,000  $-  $346,276  $376,276 
*Fees earned by our non-employee directors will be paid in Common Stock or options to purchase Common Stock at the option of the director.  A liability for these fees was included with accrued expenses at September 30, 2014.
From October 2013 through May 2014, we accrued $2,500 per month, which amount was increased to $5,000 per month in June 2014, for each director to be issued in shares of Common Stock valued on the last date of the quarter. Alternatively, any director may elect to receive warrants with an exercise price at the current market price at the date of grant in the amount of three times the amount had the director elected to take shares, valued at the date of grant using the Black-Scholes valuation method. Additionally, the Chairman and Chairman of the Audit Committee accrue $10,000 per month rather than $5,000.  Mr. Dubois became a director in December 2012 and our Chairman on February 28, 2013.
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Director Warrants

The following table lists the warrants to purchase shares of Common Stock held by each of our directors as of March 25, 2015:
 GrantExpiration Exercise  Number of  Compensation 
NameDateDate Price  Options  Expense 
            
Winfried Kunz3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
 10/1/139/30/17 $19.46   1,140  $8,991 
 1/2/1412/31/15 $19.29   1,172  $6,007 
               
George F. Schmitt3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
 10/1/139/30/17 $19.46   1,140  $8,991 
               
Guy Dubois3/22/133/21/17 $12.58   2,385  $11,682 
 4/16/134/15/17 $9.00   64,665  $324,932 
 7/1/136/30/17 $ 14.70   4,083  $23,640 
 10/1/139/30/17 $19.46   2,280  $17,982 
 1/2/1412/31/15 $19.29   2,344  $12,014 
 4/1/143/31/16 $18.75   2,432  $8,684 
 6/3/146/2/16 $17.45   51,576  $300,326 
 7/1/146/30/16 $15.45   2,647  $ 7,270 
 1/27/151/27/17 $12.01   14,988  $70,433 
               
David S. Boone3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   4,083  $23,640 
 10/1/139/30/17 $19.46   2,280  $17,982 
 1/2/1412/31/15 $19.29   2,344  $12,014 
               
Dan L. Mabey3/22/133/21/17 $12.58   8,943  $43,809 
               
Rene Klinkhammer3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
Reimbursement of Expenses
We reimburse reasonable travel expenses of members of the Board of Directors for their attendance at Board meetings.
Compensation Risks Assessment
As required by rules adopted by the SEC, management has made an assessment of our compensation policies and practices with respect to all employees to determine whether risks arising from those policies and practices are reasonably likely to have a material adverse effect on us. In doing so, management considered various features and elements of the compensation policies and practices that discourage excessive or unnecessary risk taking. As a result of the assessment, we have determined that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

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EXECUTIVE COMPENSATIONOur Strategy
Our global growth strategy is to continue to expand offerings that empower professionals in security, law enforcement, corrections and rehabilitation organizations worldwide with single-sourced offender management solutions that integrate reliable intervention technologies to support re-socialization and monitoring initiatives.  To accomplish this objective, we are implementing a growing portfolio of proprietary and non-proprietary real-time monitoring and intervention products and services.  These include GPS, RF, predictive analytics, drug and alcohol testing for defendants and offenders as well other individuals and assets in the corrections, law enforcement and rehabilitation arena.
In addition, our product and service offerings will expand upon our exception-based reporting, analytical capabilities and behavioral-monitoring knowledge. These customizable solutions will be available through Web portals and mobile device platforms, in addition to traditional desktops, to leverage our real-time monitoring data, best-practice monitoring, interaction protocols and analytics capabilities. Customer insights will be increased further by aggregating real-time data from additional monitoring device types and technologies, regardless of manufacturer, as well as other critical data sources.
 
Summary Compensation TableIn summary, we are committed to delivering a superior proprietary and non-proprietary portfolio of reliable, intervention monitoring products and services for the global offender management marketplace. We will continue to work with agencies to increase public safety and officer productivity, mitigate budgetary constraints through cost-effective monitoring alternatives, increase early-release compliance and improve monitoring program success rates, all while offering defendants and offenders opportunities for accountable freedom and an alternative to incarceration.
Marketing
 
The following table summarizes
Our strategic purpose is to produce or acquire, and globally deploy leading edge tracking technology, monitoring and analytic services in the total compensation paidcriminal justice and corrections arenas.  In addition to our recent acquisitions, we work to meet this objective by improved research and development activities and expanding our sales and marketing efforts both domestically and internationally.  Our ability to acquire new accounts continues to benefit from the lack of public funding for law enforcement and corrections agencies, the need to reduce jail operating and expansion expenses, and a desire for greater control of monitoring of high risk and high flight risk device wearers.  Also, the view continues to widen that society needs to look at alternative ways of sentencing offenders, as well as keeping track of certain types of offenders, such as those convicted of sexual, domestic violence, or earned byalcohol offenses that have been released from custody.  Several countries, including the United States, began or continued the process of evaluating sentencing laws that would release sentenced felons to GPS monitoring after partially serving their incarceration sentences. We foresee that these views and the harsh economic and funding realities will continue to fuel wider implementation of electronic monitoring programs globally, increasing demand for our principal executive officer, our principal financial officerproducts and two other most highly compensated executive officers (the “Named Executive Officers”) who served as executive officersservices. Our products’ unique and patented functionality make us a good match for these opportunities.  
Research and Development Program
During the three-months ended December 31, 2014 and during the last two fiscal yearsyear ended September 30, 2010.

(a)  (b)   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (j) 
                          Change in    
                          Pension Value    
                          and    
                          Nonqualified    
                      Non-Equity Deferred    
Name and             Stock Option Incentive Plan Compensation All Other  
Principal     Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
David G. Derrick (1)
Chief Executive Officer
  
2010
2009
  
$
$
240,000
240,000
  
$
$
-
300,000
  
$
$ 
            -
            -
  
$
$
83,991
185,571
  
$
$
 
-
-
 
$
$ 
 
-
-
 
$
$
74,197
5,929
  
$
$
398,188
731,500
 
                                     
John L. Hastings, III (2)
President Chief Operating Officer
  
2010
2009
  
$
$
325,000
302,885
  
$
$
-
94,330
  
$
$
            -
            -
  
$
$
131,326
46,393
  
$
$ 
 
-
-
 
$
$
 
-
-
 
$
$
174,853
18,868
  
$
$
631,179
462,476
 
                                     
Michael G. Acton (3)
Chief Financial Officer
  
2010
2009
  
$
$
3,076
81,538
  
$
$
-
-
  
$
$
-
-
  
$
$
-
-
  
$
$
 
-
-
 
$
$ 
 
-
-
 
$
$
-
9,806
  
$
$
3,076
91,344
 
                                     
Chad Olsen (4)
Chief Financial Officer
  2010  $165,000  $17,580  $-  $14,264  $ - $ - $25,845  $222,689 
                                     
Bernadette Suckel (5)
Managing Director of
Sales and Marketing
  
2010
2009
  
$
$
121,541
126,161
  
$
$
-
-
  
$
$
 
-
11,500
  
$
$
81,313
104,520
  
$
$
 
-
-
 
$
$
 
-
-
 
$ 
$
5,259
-
  
$
$
208,113
242,181
 

(1)
Column (c), Salary, includes $240,000 of compensation expense incurred by the Company in connection with Mr. Derrick’s base salary in each fiscal year.  During the fiscal year ended September 30, 2008, we issued 1,000,000 shares of restricted common stock valued at $1.52 per share to ADP Management under a management agreement as a prepayment for Mr. Derrick’s services as our CEO; the amount paid was to be allocated to Mr. Derrick’s base salary which was set at $240,000 per year and was in lieu of cash payments.  At September 30, 2009, ADP Management continued to hold those shares, which had a market value as of such date of $110,000.  For accounting and reporting purposes, we valued the shares paid as compensation at the date of grant and recorded the expense over the term of the agreement at a rate of $240,000 per year.  No portion of the amount in colu mn (c) was paid to Mr. Derrick in cash.  In each of the fiscal years 2010 and 2009, we recorded $240,000 as salary expense, $420,000 being attributable to amortization of the 1,000,000 shares of restricted Common Stock granted in 2008 and $60,000 being accrued, but not paid, as of September 30, 2010.  Effective July 2010, ADP Management returned the shares and they were cancelled by us.  Column (d) includes a $300,000 bonus payment to Mr. Derrick, which was accrued and ultimately paid by issuance of 300 shares of Series D Preferred rather than in cash.  Option awards (column (f)) include $83,991 and $185,571 of expense in connection with the issuance and re-pricing of Common Stock purchase warrants during the fiscal years ended September 30, 2010 and 2009, respectively.  Column (i) includes additional compensation for health, dental, life, and vision insurance we paid on Mr. Der rick’s behalf.  Amounts shown do not include consideration and fees paid to ADP Management, an affiliate of Mr. Derrick, in connection with a line of credit agreement unrelated to Mr. Derrick’s compensation for services rendered as our CEO.  See “TRANSACTIONS WITH RELATED PERSONS,” on page 31.    2014, we expended $464,178 and $1,605,662 on research and development. These costs were incurred to improve efficiency in the software, firmware and hardware of our products and services, as well as supporting research and development of our newly acquired subsidiaries
 
 
22-14-
Competition
We encounter electronic offender monitoring competition from traditional competitors and certain new entrants into the United States market.  Following our evaluation of our competitors at the end of our 2014 fiscal year, traditional competition includes:
●BI Incorporated, Denver Colorado, subsidiary of GEO Care, Inc., Boca Raton, Florida –  This international company provides a wide variety of private correctional services from facilities operation and management to correctional health care services.  BI Incorporated, which was purchased by GEO Care, Inc. in 2011, has been providing intensive community supervision services and technologies for more than 20 years to criminal justice agencies throughout the United States.
●
Omnilink Systems, Inc., Alpharetta, Georgia – This company provides a one-piece device combined with GPS and Sprint cellular networks to electronically track an individual. In fiscal year 2013, Omnilink completed an agreement with Alcohol Monitoring Systems, Inc. (“AMS”) for AMS to distribute Omnilink GPS devices as “SCRAM One-Piece GPS™”, to extend AMS’ product line for those agencies looking for a one-stop shop for their monitoring needs.
●3M Electronic Monitoring, Odessa, Florida (purchased and consolidated Attenti Group, (ElmoTech and ProTech) in 2011) – This company has satellite tracking software technology that operates in conjunction with GPS and wireless communication networks.
●Satellite Tracking of People, LLC, Houston, Texas – This company provides a broad line of GPS tracking systems and services to government agencies. Satellite Tracking of People, LLC was purchased by Securus Technologies, Inc. in December of 2013.

●Sentinel Offender Services, LLC, Augusta, Georgia (purchased and consolidated G4S’ United States Offender Monitoring operation in 2012) – This company supplies monitoring and supervision solutions for the offender population. Through their acquisition and consolidation of G4S’ United States Offender Monitoring operation, they expanded their customer base to which they provide electronic monitoring of offenders, prison and detention center management and transitional support services. Through this acquisition, they also resell Omnilink’s active GPS device, in addition to their own.
The following companies entered the United States market in fiscal year 2014:
●Buddi, Ltd., Aylesbury, Binkghamshire, United Kingdom – This company was started in 2005 to provide consumer tracking for consumers such as the elderly or Alzheimer’s sufferers.    Their major launch into offender monitoring was via an award of a United Kingdom Ministry of Justice contract.  They also announced plans to enter the United States offender monitoring market by headquartering United States operations in Tampa, FL and hiring Steve Chapin, former Protech President and CEO.
●Corrisoft, LLC, Lexington, Kentucky – This company produces offerings for the monitoring of low and medium risk offenders, and distributes other companies’ products for higher risk offenders.  They have announced that they will be developing additional products for the monitoring of all offender types. Corrisoft, LLC acquired iSECUREtrac Corp in December 2013.
We also face competition from small and regional companies that provide electronic monitoring technology along with localized case management and/or monitoring services.  Some of these entities utilize less well-known technologies or are resellers of the above competitors’ products.  We do not believe there is reliable publicly available information to indicate our relative market share or that of our competitors.

-15-
Dependence on Major Customers
We had sales to entities which represent more than ten percent of gross revenues as follows for the years ended September 30, which sales have continued during fiscal 2015. Except as indicated below, no other customer represented more than ten percent of total revenues for the fiscal years ended September 30, 2014 or 2013.  
  2014  %  2013  % 
             
Customer A $-   0% $5,252,960   33%
                 
Customer B $1,501,940   12% $1,622,327   10%
                 
Customer C $1,431,854   12% $1,514,581   9%
Concentration of credit risk associated with our total and outstanding accounts receivable as of September 30, 2014 and 2013, respectively, are shown in the table below:   
  2014  %  2013  % 
             
Customer A $892,897   17% $892,897   24%
                 
Customer B $499,040   10% $732,163   20%
                 
Customer C $419,523   8% $887,233   24%
Dependence on Major Suppliers

We have entered into an agreement with two national companies for cellular services. We also rely currently on a single source for the manufacturing of our products.  The cost to us for these services during the fiscal years ended September 30, 2014 and 2013 was approximately $897,386 and $964,354, respectively. The 7% decrease in cellular service expense in 2014 compared to 2013 resulted from utilizing different service providers who offered similar service with more favorable rates.

If any of these significant suppliers were to cease providing products or services to us, we would be required to seek alternative sources. Although we were able to lower the amounts paid for these services during the fiscal 2014 year, there is no assurance that alternate sources could be located or that the delay or additional expense associated with locating alternative sources for these products or services would not have a negative impact on our business or financial condition.

Intellectual Property

Trademarks.  We have developed and use trademarks in our business, particularly relating to our corporate and product names. We own six trademarks that are registered with the United States Patent and Trademark Office, plus one trademark registered in Mexico and one in Canada. We may file additional applications for the registration of our trademarks in foreign jurisdictions as our business expands under current and planned distribution arrangements.  Protection of registered trademarks in some jurisdictions may not be as extensive as the protection provided by registration in the United States.

-16-
The following table summarizes our trademark registrations and applications:
Trademark
Application
Number
Registration Number
Status/
Next Action
Mobile911 Siren with 2-Way Voice Communication & Design®76/013,8862,595,328Registered
PAL Services®78/514,5143,100,192Registered
TrackerPAL®78/843,0353,345,878Registered
Mobile911®78/851,3843,212,937Registered
TrackerPAL®CA 1,315,487749,417Registered
TrackerPAL®MX 805,365960954Registered
Foresight®77/137/8223481509Registered
ReliAlert™85/238,0494200738Registered
HomeAware™85/238,0644111064Registered
SecureCuff™85/238,0584271621Registered
TrueDetect™85/237,2024365120Registered
SecureAlert™86/031,5504623370Registered
Patents. We have 15 patents issued and two patents pending in the United States.  At foreign patent office’s we have four patents issued and 11 patents pending.  We are also preparing patents that will be filed in other countries in the coming year.
The following tables summarize information regarding our patents and patent applications.  There is no assurance given that the pending applications will be granted or that they will, if granted, contain all of the claims currently included in the applications. 

-17-
 
 
(2)Domestic PatentsMr. Hastings became our President in June 2008Application# Date FiledPatent# IssuedStatus
Emergency Phone for Automatically Summoning Multiple Emergency Response Services09/17364516-Oct-9862265101-May-01Issued
Combination Emergency Phone and Chief Operating Officer in November 2008. Column (f) includes $131,326Personal Audio Device09/1851913-Nov-9862858674-Sep-01Issued
Panic Button Phone09/04449719-Mar-98604425728-Mar-00Issued
Interference Structure for Emergency Response System Wristwatch09/65152329-Aug-0063665382-Apr-02 Issued
Remote Tracking and $46,393 of compensation expense incurred in connectionCommunication Device11/20242710-Aug-05733012212-Feb-08Issued
Remote Tracking System and Device With Variable Sampling and Sending Capabilities Based on Environmental Factors11/48699114-Jul-0675453189-Jun-09Issued
Alarm and Alarm Management System for Remote Tracking Devices11/48699214-Jul-06773784115-Jun-10Issued
Remote Tracking and Communication Device12/0280888-Feb-08780441228-Sep-10Issued
A Remote Tracking System with a Dedicated Monitoring Center11/48697614-Jul-0679362623-May-11Issued
Alarm and Alarm Management System for Remote Tracking Devices12/7925722-Jun-108013736 6-Sep-11Issued
Remote Tracking and Communication Device12/8759883-Sep-1080310774-Oct-11Issued
Tracking Device Incorporating Enhanced Security Mounting Strap12/818,45318-Jun-10851407020-Aug-13Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device12/3991516-Mar-09823287631-Jul-12Issued
Emergency Phone with Single-Button Activation11/17419130-Jun-05725147131-Jul-07Issued
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the vestingDevice and re-pricing of Common Stock purchase warrants previously granted to Mr. Hastings duringa Monitoring Center11/48698914-Jul-0687972105-Aug-14Issued
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the fiscal years ended September 30, 2010Device and 2009, respectively.  Column (i) includes $162,138 additional compensation paid by usa Monitoring Center14/323,83103-Jul-14----Pending
A Remote Tracking Device and a System and Method for servicesTwo-Way Voice Communication Between the Device and benefits on behalf of Mr. Hastings as part of his signing package, as well as payments for health, dental, and vision insurance.  a Monitoring Center14/307,26017-Jul-14----Pending
(3)Mr. Acton was our Chief Financial Officer from 2001 through June 19, 2008 and from November 20, 2008 to January 2010. Column (i) includes additional compensation for health, dental, life, and vision insurance paid by us on Mr. Acton’s behalf. 
(4)Mr. Olsen became our Chief Financial Officer in January 2010. Prior to his appointment as Chief Financial Officer, Mr. Olsen was our controller.  Column (f) includes $14,264 of compensation expense in connection with the vesting of options granted to Mr. Olsen during the fiscal year ended September 30, 2010.  Column (i) includes additional compensation for paid-time off, health, dental, life and vision insurance.
(5) Mrs. Suckel has served as Managing Director of Offender Management Solutions of the Company since June 2008. Column (f), option/warrant awards, includes $81,313 and $104,520 of compensation expense in connection with stock options that vested during the years ended September 30, 2010 and 2009, respectively.  For fiscal year ended September 30, 2009, column (e) includes the value of 50,000 restricted shares of Common Stock on the date of grant.  Column (i) includes additional compensation paid for health, dental, life and vision insurance.
Outstanding Equity Awards at Fiscal Year-End 2010
 
 Option awardsStock Awards
(a)(b)(c)(d) (e) (f)(g)(h)(i)(j)
Name
Number of
securities
underlying
unexercised
options (#)
exercisable
Number of
securities
underlying
unexercised
options (#)
unexercisable
Equity
incentive
plan awards:
Number of
securities
underlying
unexercised
unearned
options
(#)
 
Option
exercise
price
($)
 
Option
expiration
date
Number of
shares or
units of
stock that
have not
vested
(#)
Market
value of
shares or
units of
stock that
have not
vested
($)
Equity
incentive
plan awards:
Number of
unearned
shares,
units or
other rights
that have
not vested
(#)
Equity
incentive
plan awards:
Market or
payout
value of
unearned
shares,
units or
other rights
that have
not vested
($)(1)
 
David G. Derrick  2,000,000-- $0.13 8/28/2012-$            --$            -
John L. Hastings, III  1,500,000-- $0.13 Various (2)-$            --$            -
Chad D. Olsen     943,000-538,500 Various (3) Various (3)    
Bernadette Suckel1,000,000-525,000 Various (4) Various (4)-$            --$            -
(1)Market value is based on the fair market value of our Common Stock on September 30, 2010 in the amount of $0.11 per share based on market price.
(2)1,250,000 options granted June 26, 2008 exercisable at $0.13 per share expire on June 26, 2013 and 250,000 options granted on January 16, 2009 exercisable at $0.13 per share expire on January 15, 2014.
(3)200,000 options granted on January 16, 2009, exercisable at $0.30 per share expire on January 15, 2014 and 25,000 options granted on March 15, 2009 exercisable at $0.12 per share expire on March 14, 2014, and 718,000 options granted on September 30, 2010 vest over three years and are exercisable at a price of $0.15 per share, expiring September 29, 2015 (of which 179,500 have vested).
(4)100,000 options granted on June 9, 2008 are exercisable at $1.55 per share, expiring June 8, 2013.  Also, 200,000 options granted on January 16, 2009, exercisable at $0.30 per share expire on January 15, 2014 and 700,000 options granted September 30, 2010 vest over three years and are exercisable at $0.15 per share, expiring on September 29, 2015, of which 175,000 have vested.

No options held by executive officers or directors were exercised during the fiscal year ended September 30, 2010.

 
23-18-
International Patents Application#  Date Filed Patent#  Issued Status
            
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - EPO  9716860.3 6-Oct-10  2260482  1/9/2013 Issued
Remote Tracking and Communication Device - Mexico MX/a/2008/1932 4-Aug-06  278405  24-Aug-10 Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Mexico MX/a/2010/001932 2-Sep-10  306920  1/22/2013 Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Canada  2717866 3-Sep-10  -   -  Pending
Remote Tracking and Communication Device - EPO  6836098.1 4-Aug-06  -   -  Pending
Remote Tracking and Communication Device - Brazil PI0614742.9 4-Aug-06  -   -  Pending
Remote Tracking and Communication Device - Canada  2617923 4-Aug-06  -   -  Pending
A Remote Tracking System with a Dedicated Monitoring Center - EPO  7812596 3-Jul-07  -   -  Pending
A Remote Tracking System with a Dedicated Monitoring Center - Brazil PI0714367.2 3-Jul-07  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - EPO  10 009 091.9 1-Sep-10  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Brazil PI11001593 28-Feb-11  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Mexico MX/a/2011/002283 28-Feb-11  319057  14-Sep-14 Issued
Secure Strap Mounting System For an Offender Tracking Device - Canada  2732654 23-Feb-11  -   -  Pending
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Brazil PI0909172-6 1-Sep-10  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Mexico - DIV MX/a/2013/12524 25-Oct-13  -   -  Pending

-19-
 
 
Employment Agreements
Trade Secrets.  We own certain intellectual property, including trade secrets that we seek to protect, in part, through confidentiality agreements with employees and other parties. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.
 
We intend to protect our legal rights concerning intellectual property by all appropriate legal action. Consequently, we may become involved from time to time in litigation to determine the enforceability, scope, and validity of any of the foregoing proprietary rights. Any patent litigation could result in substantial cost and divert the efforts of management and technical personnel.
Seasonality
Given the consistency in recurring domestic monitoring revenues by customer throughout our recently completed fiscal years, there no apparent seasonality in our business.  However, as in previous years, incremental domestic deployment opportunities slowdown in the months of July and August.  We believe that this is due to the unavailability of judicial and corrections officials, who observe a traditional vacation season during this period.
Employees
As of March 25, 2015, we had 180 full-time employees and 20 part-time employees.  None of the employees are represented by a labor union or subject to a collective bargaining agreement.  We have no employment agreementsnever experienced a work stoppage and management believes that relations with any executive officers at this time.  By agreement, however, the salary of Mr. Derrick is paid by ADP Management Corporation from the proceeds of a management fee paid by us to ADP Management Corporation.employees are good.
 
Compensation Discussion and Analysis
The following is a discussion of our program for compensation of our Named Executive Officers. The Compensation Committee of our Board of Directors has responsibility for developing and maintaining an executive compensation policy that creates a direct relationship between pay levels and corporate performance and returns to stockholders. The Compensation Committee monitors the results of such policy to assure that the compensation payable to our executive officers provides overall competitive pay levels, creates proper incentives to enhance stockholder value, rewards superior performance, and is justified by the returns available to stockholders.
Compensation Program ObjectivesProperties
  
Our compensation program is designed to encompass several factorsheadquarters and monitoring facility are housed in determiningapproximately 8,600 square feet of commercial office space located at 405 South Main Street, Suite 700, Salt Lake City, Utah. Lease payments are approximately $13,200 per month. This lease expires on August 31, 2016.  In addition, we lease 6,152 square feet of warehousing and pallet shipping functions and capabilities in a facility located at 9716 South 500 West, Sandy, Utah 84070.  Monthly lease payments for this facility are approximately $6,500; the compensation of our Named Executive Officers.  The following are the main objectives of the compensation program for our Named Executive Officers:lease expired on August 31, 2014; however, we negotiated a lease extension through March 2015.
 
·Retain qualified officers.
GPS Global’s operations are housed in approximately 420 square meters of commercial office space located at Atir Yeda Street, Kfar-Saba, Israel.  The monthly lease is approximately $600.  The lease began on August 1, 2014 and expires on July 31, 2018.

Emerge Monitoring’s main operations are housed in approximately 2,800 square feet of commercial office space located at 1213 & 1215 Lakeview Court, Romeoville, IL. A lease for this office space began on August 1, 2014 and expires on July 31, 2017. Monthly lease payments are approximately $3,000 per month. In addition, Emerge also leases approximately 2,000 square foot facility in Indianapolis, Indiana. This lease was executed on January 1, 2014 and expires on December 31, 2018. Monthly lease payments for this facility are approximately $3,200.
Track Group Analytics Limited's operations are located in approximately 1,700 square feet of office space in Dartmouth, Nova Scotia, Canada.  The lease for this office space expires on December 31, 2014. Monthly payments are approximately $2,300 per month. The Company plans to continue utilizing this facility on a month to month basis until a new lease is secured.
Legal Proceedings
 
·Provide overall corporate direction for the officers and also to provide direction that is specific to the officer’s respective areas of authority.  The level of compensation amongst the officer group, in relation to one another, is also considered in order to maintain a high level of satisfaction within the leadership group. We consider the relationship that the officers maintain to be one of the most important elements of the leadership group.
We are party to the following legal proceedings:
 
·Provide a performance incentive for the officers.
Lazar Leybovich et al v. SecureAlert, Inc.  On March 29, 2012, Lazar Leybovich, Dovie Leybovich and Ben Leybovich filed a complaint in the 11th Circuit Court in and for Miami-Dade County, Florida alleging breach of contract with regard to certain Stock Redemption Agreements.  The complaint was subsequently withdrawn by the plaintiffs.  An amended complaint was filed by the plaintiffs on November 15, 2012.  We believe these allegations are inaccurate and intend to defend the case vigorously. We have not accrued any potential loss as the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.
 
·Our compensation program is designed to reward the officers in the following areas:
Christopher P. Baker v. SecureAlert, Inc.  In February 2013, Mr. Baker filed suit against us in the Third Judicial District Court in and for Salt Lake County, State of Utah.  Mr. Baker asserts that we breached a 2006 consulting agreement with him and claims damages of not less than $210,000.  We dispute the plaintiff’s claims and will defend the case vigorously.  No accrual for a potential loss has been made as we believe the probability of incurring a material loss is remote.
 
·achievement of specific goals;
·professional education and development;
·creativity in the form of innovative ideas and analysis for new programs and projects;
·new program implementation;
·attainment of company goals, budgets, and objectives;
·results oriented determination and organization;
·positive and supportive direction for company personnel; and
·community involvement.

 
24-20-
 
 
In fiscal years 2008 and 2009, there were four principal elements of Named Executive Officer compensation.  The Compensation Committee determines the portion of compensation allocated to each element for each individual Named Executive Officer.  The discussions of compensation practices and policies are of historical practices and policies.  Our Compensation Committee is expected to continue these policies and practices, but will reevaluate the practices and policies as it considers advisable.  The elements of the compensation program include the following:
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
 
·Base salary;
·Performance bonus and commissions;
·Stock options and stock awards;
·Employee benefits in the form of:
·health and dental insurance;
·life insurance;
·paid parking and auto reimbursement; and
·
Other de minimis benefits.
Base salary
Base salary is intended to provide competitive compensation for job performance and to attract and retain qualified executive officers.  The base salary level is determined by considering several factors inherent in the marketplace such as: the size of the company; the prevailing salary levels for the particular office or position; prevailing salary levels in a given geographic locale; and the qualifications and experience of the executive officer. Market Information
 
Our Chief Executive Officer, Mr. Derrick,Common Stock is paidtraded on the OTCQB under the symbol “SCRA.”  The following table sets forth the range of high and low sales prices of our Common Stock as reported on the OTC Bulletin Board for the periods indicated.  
 Fiscal Year Ended September 30, 2013 High  Low 
 First Quarter ended December 31, 2012 $14.60  $3.22 
 Second Quarter ended March 31, 2013 $14.60  $11.00 
 Third Quarter ended June 30, 2013 $14.70  $7.00 
 Fourth Quarter ended September 30, 2013 $20.90  $14.40 
         
 Fiscal Year Ended September 30, 2014      
 First Quarter ended December 31, 2013 $19.99  $17.29 
 Second Quarter ended March 31, 2014 $19.65  $17.51 
 Third Quarter ended June 30, 2014 $18.75  $14.60 
 Fourth Quarter ended September 30, 2014 $19.45  $10.77 
         
 Fiscal Year Ended September 30, 2015        
 First Quarter ended December 31, 2014 $17.50  $12.30 
Reverse Stock Split
On February 28, 2013, our shareholders approved a base salary of $240,000 per year.  The amountreduction in the authorized share capital of the base salary was determined after negotiations between Mr. Derrick and our Compensation Committee.  Factors considered in determining the base salary included Mr. Derrick’s status as one of our founders; his experience and length of service with us; his experience in the industries in which he operates; educational and work background; and reviews of sample salaries at companies of comparable size and industry.  The Compensation Committee also considered the fact that Mr. Derrick has provided and facilitated credit agreements and other financing for us.  The salary payableCompany to Mr. Derrick is paid by ADP Management Corporation from amounts paid to ADP Management Corporat ion for consulting and other services.  Of the total base salary expense related to Mr. Derrick’s compensation in the fiscal years ended September 30, 2010 and 2009, $420,000 was attributable to the amortization of restricted15,000,000 shares of Common Stock, and authorized a reverse split to reduce the outstanding shares of the Company at a ratio of 200-for-1, which were returnedwas implemented on March 25, 2013.  Share and cancelled, resultingper share information for the prior periods has been retroactively adjusted in no cash payment or personal benefitthis prospectus to Mr. Derrick and $60,000 was accrued for, but unpaid at September 30, 2010.reflect the effects of the reverse stock split.

Holders
 
Our PresidentAs of March 25, 2015, we had approximately 1,049 holders of record of our Common Stock and Chief Operating Officer, Mr. Hastings, is paid a base annual salary10,150,617 shares of $325,000. The amountCommon Stock outstanding. We also have granted options and warrants for the purchase of the base salary was determined after negotiations between Mr. Hastings and our Compensation Committee.  Factors considered in determining Mr. Hastings’ base salary included his background in the industries in which we operate; his educational and work background, and reviews262,603 shares of sample salaries at companies of comparable size and industry. Common Stock..
 
Performance bonus and commissionsDividends
 
Bonuses are in large part basedSince incorporation, we have not declared any cash dividends on our performance.  The most important determining factors used to calculate the performance bonusCommon Stock.  We do not anticipate declaring cash dividends on our Common Stock for the Chief Executive Officer, President and Chief Financial Officer are based upon the terms outlined below. Policy decisions to waive or modify performance goals have not been a significant factor to date in that there have not been contractual changes made other than the normal renewal or updating of contracts or compensation as would be expected as part of an annual review.foreseeable future.  
 
Stock options and stock awardsDilution
 
Stock ownership is provided to enable Named Executive Officers and directors to participate in our success.  The direct or potential ownership of stock will also provide the incentive to expand the involvement of the Named Executive Officer to include, and therefore be mindful of, the perspective of our stockholders.  Stock options and stock awards were approved by the Board of Directors determines when and the Compensation Committeeunder what conditions and at what prices to issue stock.  In addition, a significant number of shares of Common Stock are based, in part,reserved for issuance upon the placementexercise of activated TrackerPAL™ devices in the marketplace.  Bonuses may be issued in the form of stock optionspurchase or stock awards.conversion rights.
 
Employee benefits
SeveralThe issuance of any shares of Common Stock for any reason will result in dilution of the employee benefits for the Named Executive Officers are selected to provide security for the Named Executive Officers.  Most notably, insurance coverage for health, life,equity and liability are intended to provide a levelvoting interests of protection that will enable the Named Executive Officers to function without having the distraction of having to manage undue risk.  The health insurance also provides access to preventative medical care which will help the Named Executive Officers function at a high energy level and manage job related stress, and contribute to the overall well-being of the Named Executive Officers, all of which contribute to enhance job performance in the opinion of the Compensation Committee.existing shareholders.


 
25
Other de minimis benefits
Other de minimis employee benefits such as cell phones, parking, and auto usage reimbursements are directly related to job functions but contain a personal use element which is considered to be a goodwill gesture that contributes to enhanced job performance.
As discussed above, the Board of Directors determines the portion of compensation allocated to each element for each individual Named Executive Officer.  As a general rule, salary is competitively based while giving consideration to employee retention, qualifications, performance, and general market conditions.  Typically, stock options are based on the current market value of the option and how that will contribute to the overall compensation of the Named Executive Officer.  Consideration is also given to the fact that the option has the potential for an appreciated future value.  As such, the future value may be the most significant factor of the option, but it is also more difficult to quantify as a benefit to the Named Executive Officer.
Accordingly, in determining the compensation program for us, as well as setting the compensation for each Named Executive Officer, the Board of Directors attempts to attract the interest of the Named Executive Officer within the constraints of a compensation package that is fair and equitable to all parties involved.
Director Summary Compensation Table

The following table summarizes the compensation we paid to our non-employee directors in the fiscal year ended September 30, 2010 who were serving as directors as of such date.

(a)  (b)   (c)   (d)   (e)   (f)   (g)   (h) 
 
Name
  
Fees earned or
paid in cash
($)
   
Stock awards
($)
   
Option awards
($)
    
Non-equity
incentive
plan
compensation
($)  
   
Change in
pension
value and
nonqualified
compensation
earnings
($)
   
All other
compensation
($)
   
Total
($)
 
                             
David Hanlon $-  $-  $54,575(1) $-  $-  $-  $54,575 
Robert Childers $-  $-  $65,925(1) $-  $-  $-  $65,925 
Larry Schafran $ -  $-  $69,833(1) $-  $-  $-  $69,833 
Rene Klinkhammer $-  $-  $15,883(2) $-  $-  $-  $15,883 
Edgar Bernardi $-  $-  $15,883(2) $-  $-  $-  $15,883 
 (1)
At the commencement of the fiscal year ended September 30, 2010, we granted each member of the Board of Directors options for the purchase of 250,000 shares of Common Stock at an exercise price of $0.13 per share, which vested over the period of October 1, 2009 through December 31, 2010, for services valued at $21,177.  Additional compensation expense was recorded and included in column (d) in connection with the re-pricing of previously granted Common Stock purchase warrants to a price of $0.13 per share, as follows:
 
 
Name
Grant
Date
Expiration
Date
Exercise
Price
Number
of
Options
Compensation
Expense
David Hanlon  9/8/06  9/7/11$1.41  50,000$       3,107
 7/14/087/13/13$1.22459,000$       6,761
 8/29/078/28/12$2.15100,000$     23,530
      
Robert Childers10/5/0610/4/11$1.73  50,867$      3,336
 8/29/078/28/12$2.15150,000$    10,141
 7/14/087/13/13$1.22610,000$    31,271
      
Larry Schafran  9/8/06  9/7/11$1.41  53,900$      3,350
 8/29/078/28/12$2.15150,000$    10,141
 12/5/0712/4/12$4.05  50,000$      3,894
 7/14/087/13/13$1.22610,000$    31,271
26
The following table summarizes the re-pricing of previously granted Common Stock warrants to an exercise price of $0.13 per share, included in column (d) of the Director Compensation Table:
Name
Grant
Date
Expiration
Date
Exercise
Price
Number
of
Options
David Hanlon  9/8/06  9/7/11$1.41  50,000
 7/14/087/13/13$1.22459,000
 8/29/078/28/12$2.15100,000
     
Robert Childers10/5/0610/4/11$1.73  50,867
 8/29/078/28/12$2.15150,000
 7/14/087/13/13$1.22610,000
     
Larry Schafran  9/8/06  9/7/11$1.41  53,900
 8/29/078/28/12$2.15150,000
 12/5/0712/4/12$4.05  50,000
 7/14/087/13/13$1.22610,000
(2)After they joined the Board of Directors, we granted to each of these new directors options for the purchase of 200,000 shares of Common Stock at an exercise price of $0.13 per share, which vest from January 1, 2010 to December 31, 2010, in consideration for services valued at $15,883.
We also reimburse travel expenses of members for their attendance at board meetings.  Messrs. Derrick and Hastings are not included in these tables because as employees of the Company they receive no additional compensation for their services as directors.  See “Summary Compensation Table” on page 22.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has been an officer or employee of the Company. None of our executive officers serves as a member of the Board of Directors or the compensation committee of any entity that has one or more executive officers serving on the Company’s Board of Directors, or on our Compensation Committee.
Security Ownership of Certain Beneficial Owners and Management
The following table presents information regarding beneficial ownership as of November 22, 2010 of all classes of our voting securities by:
·Each stockholder known to us to be the beneficial owner of more than five percent of any class of our voting securities;
·Each of our Named Executive Officers;
·Each of our directors; and
·All of our executive officers and directors as a group.
Security ownership information for beneficial owners is taken from statements filed with the Securities and Exchange Commission pursuant to Sections 13(d), 13(g) and 16(a) and information made known to the Company. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Unless indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of Common Stock underlying convertible securities, options and warrants that are currently exercisable or exercisable within 60 days of the date of this prospectus are deemed to be outstanding and to be beneficially owned by the person holding such securities, options or warrants for the purpose o f computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.  Percentage of total voting power represents voting power with respect to all shares of our Common Stock and Series D Preferred Stock, as a single class. Holders of Common Stock are entitled to one vote per share and holders of Series D Preferred Stock are entitled to 6,000 votes per share.
27
  Shares Beneficially Owned   Shares Beneficially Owned 
  Prior to this Offering Shares of After this Offering 
  Series D % of Common Series D % of 
Name and Address of Common Stock  Preferred Stock Total Voting Being Common Stock Preferred Stock Total Voting 
Beneficial Owner (1) Shares %  
Shares
 % Power Offered Shares % Shares % Power 
                          
5% Stockholders:                         
Series D January 13 Purchasers (2)  139,704,000 47.5%  23,284 68.2% 28.0% 30,000,000 109,704,000 32.1% 19,186 73.0% 24.3% 
Winfried Kill (3)  53,361,305 18.1%  0 - 10.7% 0 53,361,305 15.6% 0 - 10.7% 
Advance Technology
Investors, LLC (4)
  34,690,665 11.8%  3,403 10.0% 7.0% 0 34,690,665 10.2% 3,403 13.0%  7.0% 
Kofler Ventures S.a.r.l (5)  24,456,161 8.3%  0 - 4.9% 0 24,456,161  7.2% 0 - 4.9% 
Radenko Milakovic (6)  24,726,562 8.4%  4,000 11.7% 5.0% 0 24,726,562  7.2% 4,000 15.2% 5.0% 
Laemi Real Estate, Inc. (7)  21,040,304 7.1%  3,330 9.8% 4.2% 19,980,000 1,060,304 * 0 - * 
Stephan Goetz  (8)  18,635,901 6.3%  3,000 8.8% 3.7% 0 18,635,901 5.5% 3,000 11.4% 3.7% 
Commerce Financial, LLC (9)  13,684,508 4.6%  2,149 6.3% 2.7% 0 13,684,508 4.0% 2,149 8.2% 2.7% 
Comediahill Business S.A. (10)  14,026,868 4.8%  2,220 6.5% 2.8% 13,320,0000 706,868 * 0 - * 
Tim Whyte (11)  12,349,010 4.2%  2,000 5.9% 2.5% 0 12,349,010 3.6% 2,000 7.6% 2.5% 
                          
Directors and Named Executive Officers:                      
David G. Derrick (12)  19,698,313 6.7%  2,233 6.5% 3.4% 0 19,698,313 5.8% 2,233 8.5% 3.9% 
Chad D. Olsen (13)  3,285,656 1.1%  172 * * 0 4,003,656 1.0% 172 * * 
John L. Hastings, III (14)  1,500,000 *  0 - * 0 1,500,000 * 0 - * 
Robert Childers (15)  2,374,975 *  50 * * 0 2,374,975 * 50 * * 
Larry Schafran (16)  1,933,500 *  110 * * 0 1,933,500 * 110 * * 
David Hanlon (17)  1,716,635 *  115 * * 0 1,716,635 * 115 * * 
Bernadette Suckel (18)  525,000 *  0 - * 0 531,250 * 0 - * 
Edgar Bernardi (19)  1,400,000 *  200 * * 0 1,400,000 * 0 - * 
Rene Klinkhammer (20)  200,000 *  0 - *   0 200,000 * 0 - * 
All directors and executive officers as a group (9 persons) (21)  32,634,079 11.1%   2,880 8.4% 6.5% 0 32,634,079 9.6% 2,880 11.0% 6.5% 
*Represents beneficial ownership of less than one percent of the outstanding shares of the class of voting securities indicated.
(1)Except as otherwise indicated, the business address for each of our beneficial owners is c/o the Company, 150 West Civic Center Drive, Suite 400, Sandy, Utah 84070.
(2)For purposes of this table, shares of Common Stock beneficially owned by individual members of this class or group are excluded from this entry. The purported members of this group disclaim any ownership interest of any kind in or to any other securities beneficially owned by any other purported member of the group.  This group includes all parties acquiring shares of the Series D Preferred who had acquired shares as of January 13, 2010 and in conjunction with such acquisition, had also given consent to an amendment to the Articles of Incorporation of the Company to increase the number of authorized shares of Common Stock of the Company. The “group” includes the following purchasers of the Series D Preferred (with the number of shares of Series D Preferred acquired on January 13, 2010) who continued to own such shares as of November 22, 2010:
28
Otter Capital, LLC406
Advance Technology Investors, LLC3,189
Steven C. Weidman107
Dina Weidman107
Mountain Land Cattle, LLC75
Taube Family Trust205
TFT Partners, LLC52
Laurence Blickman103
Robert Naify Living Trust103
Adrienne Baker90
Anasazi Partners III, LLC252
The Klapper Family Trust590
Clydesdale Partners II, LLC780
Stuart J. Kahn300
William B. Stevenson300
John C. Walsey300
Commerce Financial, LLC2,149
David Derrick §3,400
Robert Childers §50
James Dalton15
Larry Schafran §110
David Hanlon §115
Anasazi Partner III Offshore132
Christopher Baker285
Clydesdale Partners, LLC355
James and Beverly Carter88
Robert and Barbara Saragenti88
Charles Alberta44
Scott Carter44
JBD Management, LLC1,000
Comediahill Business S.A.*2,000
Mara Holdings Limited1,000
Kofler Ventures S.a.r.12,000
V. Mark Peterson Roth IRA, FBO Jeff Peterson200
Laemi Real Estates, Inc.*3,000
Chad Olsen §172
Ladd Olsen25
Veloy and Tamara Cook15
Jennifer Cooper13
Dylan and Jaryn McGrath10
Dorothy Darnell5
Joseph W. Darnell5
James K. Tracy5
     Total23,284
*Indicates a Selling Stockholder whose total beneficial ownership of our voting securities is included elsewhere in this table.
§Indicates one of our directors or executive officers whose total beneficial ownership of our voting securities is included elsewhere in this table.
(3)This disclosure is based on Schedule 13D/A filed with the SEC on December 16, 2008 by Dr. Winfried Kill, Parkstrasse 32A, Bergisch-Gladbach 2M, 51427 Germany.  Schedule 13D/A reported the following:  “On December 16, 2008, Dr. Kill and NORD/LB entered into the Third Supplement to the Purchase Agreement pursuant to which he purchased 22,337,305 shares of the Issuer’s Common Stock at a price of EUR 0.80583 per share (approximately $1.1129 per share) for a total purchase price amount of EUR 18,000,070 from NORD/LB pursuant to the Purchase Agreement as further described in Item 6 of this Statement.  Dr. Kill paid EUR 6,000,000 on December 15, 2008, and the remainder of the purchase price is due and payable no later than December 15, 2009.”
(4)
Address is 154 Rock Hill Road, Spring Valley, NY 10977.  Amount includes 12,438,663 shares of Common Stock and 1,670,000 shares issuable upon exercise of warrants.  Includes 132,001 shares of Common Stock owned of record by Dina Weidman and 32,001 shares of Common Stock owned of record by U/W Mark Weidman Trust.  Includes Common Stock underlying 3,189 shares of Series D Preferred (2,898 included in the Resale Shares and 291 shares of Series D Preferred issued upon debt conversions not included in the Resale Shares) owned of record by Advance Technology Investors, LLC. Additionally, includes Common Stock issuable upon conversion of 107 shares of Series D Preferred owned of record by Dina Weidman and 107 shares of Series D Preferred owned of record by Steven C. Weidman.
29-21-
 

Transfer Agent and Registrar
(5)Includes 12,456,161 shares of Common Stock and 12,000,000 shares issuable upon exercise of Series D Preferred warrants. Stockholder’s address is R.C.S. Luxembourg B-0090554, 412F, route d’Esch, L-2086 Luxembourg.
The transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, New York, 11219.
 
(6)Includes 24,000,000 shares of Common Stock issuable upon conversion of 4,000 shares of Series D Preferred and 726,562 shares of Common Stock. Stockholder’s address is Les Caravelles, 25 Boulevard Albert 1er, Bloc B. 13 etage, Monaco 98000.
Securities Authorized for Issuance under Equity Compensation Plans
 
 (7)
Includes 19,980,000 shares of Common Stock issuable upon conversion of 3,330 shares of Series D Preferred Stock and 1,060,304 shares of Common Stock.  Address is MMG Tower, 53rd E Street, Marbella, Panama City, Panama.
(8)Includes 18,000,000 shares of Common Stock issuable upon conversion of 3,000 shares of Series D Preferred and 635,901 shares of Common Stock. Stockholder’s address is Oberfohringer Str. 105, 81925 Munich, Germany.
(9)Includes 12,894,000 shares of Common Stock issuable upon conversion of 2,149 shares of Series D Preferred and 790,508 shares of Common Stock.  Stockholder’s address is 1050 Kapukalua Pl., Paia, HI 96779.
(10)Includes 13,320,000 shares of Common Stock issuable upon conversion of 2,220 shares of Series D Preferred and 706,868 shares of Common Stock.  Stockholder’s address is Postfach 373, Stadtle 1 Fl., Vaduz, Liechtenstein 09490.
(11)Includes 12,000,000 shares of Common Stock issuable upon conversion of 2,000 shares of Series D Preferred and 349,010 shares of Common Stock.  Stockholder’s address is 6 John Le Quesne Close, Rue De Maupertuis St. Clements, Jersey, Channel Islands.
(12)Mr. Derrick is our Chief Executive Officer and Chairman of the Board of Directors. Common Stock beneficially owned includes 1,655,250 shares owned of record by Mr. Derrick, 2,645,063 shares held in the name of ADP Management, and 2,000,000 vested stock purchase warrants. Also includes 13,398,000 shares of Common Stock issuable upon conversion of 2,233 shares of Series D Preferred.
(13)Mr. Olsen is our Chief Financial Officer.  Common Stock beneficially owned includes 331,156 shares owned of record by Mr. Olsen and 1,922,500 vested stock purchase warrants, as well as 1,032,000 shares of Common Stock issuable upon conversion of 172 shares of Series D Preferred.
(14)Mr. Hastings is our Chief Operating Officer and President.  Amount indicated includes 1,500,000 shares of Common Stock issuable upon the exercise of vested stock purchase warrants.
(15)Mr. Childers is a director.  Common Stock beneficially owned by Mr. Childers includes 352,407 shares owned of record by the Robert E. Childers Living Trust and 661,701 shares owned of record by Mr. Childers directly, as well as 1,060,867 shares issuable upon the exercise of Common Stock purchase warrants, as well as 300,000 shares of Common Stock issuable upon conversion of 50 shares of Series D Preferred owned of record by Mr. Childers.
(16)Mr. Schafran is a director.  Common Stock includes 159,600 shares owned of record by Mr. Schafran and 1,113,900 shares of Common Stock issuable upon exercise of stock purchase warrants, as well as 660,000 shares of Common Stock issuable upon conversion of 110 shares of Series D Preferred.
(17)Mr. Hanlon is a director.  Amount indicated includes 167,635 shares of Common Stock owned of record by David P. Hanlon Living Trust and 859,000 shares issuable upon exercise of warrants, as well as 690,000 shares of Common Stock issuable upon conversion of 115 shares of Series D Preferred.
30

(18)Mrs. Suckel is a Vice President of the Company, responsible for Sales and Marketing.  Common Stock beneficially owned includes 50,000 shares of Common Stock owned of record by Mrs. Suckel and 475,000 shares issuable upon the exercise of Common Stock purchase warrants.
(19)Dr. Bernardi is a director.  Includes 200,000 shares of Common Stock issuable upon exercise of stock purchase warrants and 1,200,000 shares of Common Stock issuable upon conversion of 200 shares of Series D Preferred Stock owned of record by Dr. Bernardi’s wife.
(20)Mr. Klinkhammer is a director.  Includes 200,000 shares of Common Stock issuable upon exercise of stock purchase warrants.
(21)Duplicate entries have been eliminated.
The 2012 SecureAlert, Inc. Stock Incentive Plan
 
TRANSACTIONS WITH RELATED PERSONS
Indemnification of Directors and Named Executive Officers
We have agreed to indemnify our directors and Named Executive Officers to the fullest extent permitted under the Utah Revised Uniform Business Corporations Act for expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or officer.
Review, Approval or Ratification of Transactions with Related Parties
Pursuant to our Code of Business Conduct and Ethics, the Board of Directors will review and approve all relationships and transactions in which it and its directors, director nominees and executive officers and their immediate family members, as well as holders of more than 5% of any class of its voting securities and their family members, have a direct or indirect material interest. In approving or rejecting such proposed relationships and transactions, the Board of Directors shall consider the relevant facts and circumstances available and deemed relevant to this determination.
Transactions with Related Persons
OurThe Board of Directors has adopted a policythe SecureAlert, Inc. 2012 Equity Compensation Plan (the “2012 Plan”), approved by shareholders at the Annual Meeting of Shareholders held on December 21, 2011.  We believe that our business affairs will be conducted in all respects by standards applicable to publicly held corporationsincentives and stock-based awards focus employees on the objective of creating shareholder value and promoting the success of the Company, and that we will not enter into any future transactions and/or loans between usincentive compensation plans like the 2012 Plan are an important attraction, retention and our officers, directors and 5% stockholders unlessmotivation tool for participants in the terms are no less favorable than could be obtained from independent, third parties and will be approved by a majority of our independent and disinterested directors. In our view, all of the transactions described below meet this standard.
Related-Party Line of Credit
As of June 30, 2010 and September 30, 2009, the Company owed $55,245 and $76,022, respectively, under a line-of-credit agreement with ADP Management (“ADP”), an entity owned and controlled by Mr. Derrick, the Company’s Chief Executive Officer.  Outstanding amounts on the line of credit accrue interest at 16% per annum and were due upon demand.  During the nine months ended June 30, 2010, the Company made payments on the line-of-credit which consisted of net cash payments of $137,970 offset, in part, by $117,193 of expenses owed to ADP that are reimbursable by the Company.
Related-Party Notes Payable
Note #1.  As of September 30, 2009, we owed $1,500,000 in principal plus $12,197 in accrued interest to Mr. Derrick on an unsecured note payable.  Total proceeds from the note were $1,500,000, which accrued interest at 15% and was due on February 26, 2010. On January 13, 2010, Mr. Derrick converted the note into 1,500 shares of Series D Preferred stock.2012 Plan.
 
Note #2.  Effective March 1, 2010, we purchasedUnder the remaining 49% ownership2012 Plan, 90,000 options or shares of Court Programs.  We paid $100,000 in cash and entered into an unsecured note payable of $200,000 due in four equal installments of $50,000 each on July 15, 2010, October 15, 2010, January 15, 2011, and April 15, 2011, together with interest on any unpaid amounts at 8% per annum.Common Stock may be awarded.  As of June 30, 2010, we owed $200,000 in principal plus $5,908 in accrued interestthe date of this report, 35,332 shares of Common Stock and options for the purchase of 44,988 shares of Common Stock have been awarded under this note, which is payable to an employeethe 2012 Plan.
The following table includes information as of the Company (the former principal and Selling Stockholder of Court Programs).March 25, 2015 for our equity compensation plans:
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights  Weighted-average exercise price of outstanding options, warrants and rights  Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
  (a)  (b)  (c) 
Equity compensation plans approved by security holders    262,603  $   15.08     9,680 
Equity compensation plans not approved by security holders    -     -     
Total    262,603  $  15.08     9,680 

 
31-22-
 

Note #3.  We entered into a promissory note on March 16, 2010 with Mr. Derrick for $500,000 accruing interest at a rate of 12% per annum or $5,000, whichever is greater, maturing on April 15, 2010. We also paid a one percent origination fee.  On April 1, 2010, we repaid the promissory note for $505,000 in outstanding principal and accrued interest, resulting in an effective interest rate of 21.5% per annum.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note #4.  On June 24, 2010, we entered into an agreement with ADP Management whereby ADP Management agreed to loan to or invest in the Company between $1,000,000 and $5,000,000 to finance the manufacturing of TrackerPAL II(e) devices and to provide us with additional working capital.  We agreed to pay a 10% origination fee to ADP Management for money loaned and/or invested (up to a maximum fee of $500,000) payable in shares of Series D Preferred stock (at a ratio of $600 per share, an effective conversion rate of $0.10 per share of Common Stock based on this conversion rate).  As of June 30, 2010, we accrued $192,725 in origination fees in connection with the agreement and had received $1,927,250 in proceeds in which ADP Managemen t facilitated the funding on behalf of the Company.
Note #5.  In September 2008, we borrowed $250,000 from Randy Olshen, the former President of our subsidiary SecureAlert Monitoring.  The unsecured note payable accrued interest at 11% and was due and payable on December 31, 2009 or upon demand whichever occurs first.  As of September 30, 2009, this note was paid in full.
Foreclosure Liability
In July 2009, we entered into a promissory note with an unrelated entity in the amount of $1,000,000 payable on December 31, 2010.  The note bore interest at a rate of 15% per annum paid quarterly.  As additional consideration for the loan, to settle a registration right dispute, and to induce the lender to loan the money, we granted the lender 8,000,000 shares of Common Stock.  Additionally, ADP Management collateralized this note with 5,000,000 shares of our Common Stock. In August 2009, we defaulted on the loan because we failed to register the 8,000,000 shares of Common Stock within 30 days of entering into the agreement, resulting in the lender foreclosing on the 5,000,000 shares of Common Stock pledged by ADP Management as collateral. As of September 30, 2009, we accrued $775,000 as a “foreclosure liability” to record our obligation to repay the 5,000,000 shares of Common Stock to ADP Management.  In January 2010, we agreed to issue 833 shares of Series D Preferred to ADP Management as payment of this liability.
Related-Party Series A 15% Debenture
On May 1, 2009, we issued a Series A 15% debenture due and payable on November 1, 2010 to an entity controlled by our Chief Financial Officer for $250,000 in cash. In addition to the rights and terms of the debenture, the entity received one-year warrants to purchase 2,200,000 shares of our Common Stock at an exercise price of $0.25 per share valued at $43,926. As of September 30, 2009, the outstanding balance owed on the debenture was $250,000 plus $9,452 in accrued interest. In March 2010 we issued 250 shares of Series D Preferred in exchange for cancellation of the debenture.
Consulting Arrangements
We agreed to pay consulting fees to ADP Management for assisting us to develop our new business direction and business plan and to provide introductions to strategic technical and financial partners.  Under the terms of this agreement, ADP Management was paid a consulting fee of $40,000 per month and we agreed to reimburse the expenses incurred by ADP Management (including the salaries of certain of our officers) in the course of performing services under the consulting arrangement. Effective April 1, 2008, ADP Management reduced the consulting fee from $40,000 to $20,000 per month to reflect the resignation of Mr. Dalton as our President.
 
The agreement also requires ADP Management to pay the salary of Mr. Derrick asfollowing discussion should be read in conjunction with our Chief Executive Officeraudited consolidated financial statements and Chairman of the Board of Directors.  The Board of Directors, which Mr. Derrick abstaining, approved both of these arrangements.
32

Duringnotes thereto for the fiscal year ended September 30, 2008, we agreed to prepay ADP Management for Mr. Derrick’s salary in non-cash instruments by issuing 1,000,000 shares of restricted Common Stock valued at $1.52 per share (as valued on July 2, 2008,2013 and the date of issuance).  We recorded $180,000 of expense associated with the issuance of these shares during each of the ninethree months ended June 30, 2010 and 2009, respectively.  As of June 30, 2010, the remaining deferred compensation of $1,040,000 will be amortized over future periods.December 31, 2014, included elsewhere in this prospectus.
 
Series D Preferred
In connection with the private placement of our Series D Preferred, members of the Board of Directors and certain of our Named Executive Officers acquired shares of the Series D Preferred.  See the discussion at pages 50 and 51 of this prospectus for a description of the factors considered by the Board of Directors in authorizing the issuance of the shares of Series D Preferred to related parties.Overview
 
BUSINESS AND PROPERTIES
SecureAlertThe Company markets and its subsidiaries market and deploydeploys offender management programs, combining patented GPS (Global Positioning System) tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services.  Our vision is to be the global market leader for delivering the most reliable offender management solutions, that integrate interactionwhich leverage superior intervention capabilities and integrated communication technologies.  We believe that we currently deliver the only offender management technology whichthat effectively integrates GPS, RF (Radio Frequency (“RF”) and an interactive 3-way voice communication system into a single piece device, deployable on offenders worldwide.  Through our patented electronic monitoring technologies and services, we empower law enforcement, corrections and rehabilitation professionals with offender, defendant, probationer and parolee programs, which grant convicted criminals and pre-trial suspects an accountable opportunity to be “free from prison,” while providingprison”.  This provides for greater public safety at a lower cost compared to incarceration or traditional resource-intensive alternatives.

TrackerPAL™ IIOur flagship product line, ReliAlert, Shadow, and TrackerPAL™ II(e) (“enhanced”)R.A.D.A.R., now manufactured in the USA – The TrackerPAL™ portfolioconsists of products, e-Arrest Beaconsdevices and monitoring services are designedcustomizable to create “Jails without Walls,” customizable byprovide secure reintegration solutions for various offender types, (e.g.,including domestic abusers, sexual predators, gang members, pre-trial defendants, alcohol abusers, or juvenile offenders, etc.).  Additionally, ouroffenders. Our proprietary software, and device firmware support the dynamic accommodation ofand processes accommodate agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions. TrackerPAL™ II(e) isOur devices are intelligent devices with integrated computer circuitry.  They are constructed from case-hardened materials and are designed for federal, state and local agencies to provide location trackingpromptly notify intervention monitoring centers of select individuals i n the criminal justice system.  The TrackerPAL™ II(e)attempts to breach applicable electronic supervision terms or to remove or otherwise tamper with device fastens to the offender'selements. They are securely attached around an offender’s ankle with a tamper resistant strap (steel cabling with optic fiber) that can only be adjusted.  We also have a unique patented, dual-steel banded SecureCuff for high risk or removed without detection by a supervising officer through services provided by our SecureAlert Monitoring Center (or otherhigh flight risk offenders who have qualified for electronic monitoring centers).  This monitoringsupervision, but who require an incremental level of security and intervention center acts as an important link between the offender and the supervising officer as intervention specialists persistently track and monitor the offender, initiating contact at the direction of the supervising agency and/or when the offender is in violation of any established restrictions or protocols.  An intelligent device with integrated computer circuitry and constructed from case-hardened plastics, the TrackerPAL™ II(e) unit promptly notifies the monitoring center if any attempt is made to breach protocols or to remove or otherwise tamper with the device or optical strap housing. supervision.
 
According to the BureauResults of Justice Statistics annual report March 2009 (available online at http://bjs.ojp.udsoj.gov), it is currently estimated that over 2.3 million inmates, or one in every 131 U.S. residents, were held in custody in state or federal prisons or in local jails. Nearly 5.1 million adults were under community supervision at year-end 2008—the equivalent of about 1 in every 45 adults in the United States.  Probationers (4,270,917) represented the majority (84%) of the community supervision population in 2008; parolees (828,169) accounted for a smaller share (16%).  Sadly, approximately 7.4 million people are now either incarcerated (State or Federal prisons or local jails) or on parole or probation.  The average cost of incarcerating an inmate ranges from $65 to $175 (plus) per day dependent upon facility type, security level, amenities and jurisdiction.  But this annualized “equivalency” number pales in comparison to actual populations. The Bureau of Justice Statistics also reports that over one-third of all inmates held in custody at midyear 2008 were in local jails.  More than half (52%) were housed in the 180 largest jail facilities, with average daily populations of 1,000 inmates or more.  Overall, an estimated 13.6 million inmates were admitted to local jails during the 12-month period ending June 30, 2008.  Statistics for 2009 have not been published, but we believe this number continues to grow and to push capacity and resource levels.Operations
 
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DueContinuing Operations - Fiscal Year 2014 Compared to ever-growing economic pressures, it is widely recognized that these costs are unsustainable with ongoing state and federal budget reductions, facility-specific overcrowding concerns, increased rehabilitation imperatives and politicized re-socialization agendas. Thus, electronic monitoring alternatives to incarceration for low and moderate risk offenders (adult and juveniles), early release for good behavior initiatives, work release programs, sentencing diversions and accelerated halfway house deployments are now strongly encouraged and seriously considered by legislative and judicial branches of government in many jurisdictions.  For between 10% to 15% of the traditional costs of incarceration, or for roughly (1/3) one-third the variable costs (inmate daily food, laundry, uniforms, medical, guard o vertime, etc.), our TrackerPAL™ monitoring and intervention center and patented TrackerPAL™ II(e) devices can monitor offenders continuously, providing real-time location tracking, interactive voice access and intervention-based contact, thus reducing the potential for subsequent or repeat offenses (recidivism).Fiscal Year 2013
 
The ongoing budget crisis and the “Great Recession” have forced many jurisdictions to embrace or reconsider embracing “offender pay”, “parent pay” and/or “partial pay” programs, and in doing so, shifting the burden of the tracking and monitoring costs in whole or part to the offender directly, defraying the cost to the public.  We estimate that approximately 30% of our gross revenues (up from 20% in 2008) come from offender payments directly under court order and threat of re-incarceration for non-payment.  The majority of these offenders remain in compliance because of the severe consequences of non-payment. This aspect of our business is growing significantly and we expect that it will outpace traditional taxpayer obligated payment programs.Net Revenue
 
Strategically, and in continued support of ever-growing rehabilitation and re-socialization efforts, we embrace a broader services charter, necessary to support and encourage many evolving rehabilitation initiatives.  Our “C.A.R.E.” programs support Corrections and Accountability objectives in concert with Rehabilitation and Empowerment agendas.  Specifically, our technology facilitates a stringent protocol enforcement capability, incorporating restricted movement provisions, coupled with enablement of positive reinforcement communications, all in support of social worker interactions, ongoing ministry options and proactive access by authorized counselors and/or sponsors.  We believe that our programs are uniquely positioned to allow for regular, frequent, and positive inter actions and daily affirmations with offenders, as they strive to again become responsible and contributing members of society, while living within the virtual “electronic fence” boundaries established through our proprietary technologies.  As it stands, according to the Bureau of Justice Statistics’ report on recidivism, 65% of offenders recommit a violation within three years of release and re-entry (recidivism), which we believe can be dramatically reduced through the utilization of monitoring services, intervention and interaction technologies.
We believe that it is important to focus on a reduction in recidivism and leverage our technologies and services to provide frameworks and foundations for stopping repeat and new offenses by those offenders on our programs.  For example, according to the Bureau of Justice Statistics’ report on recidivism, of the 272,111 persons released from prisons in 15 states in 1994, an estimated 67.5% were rearrested for a felony or serious misdemeanor within 3 years, 46.9% were reconvicted, and 25.4% resentenced to prison for a new crime. Incredibly, after 15 years, the 272,111 offenders discharged in 1994 accounted for nearly 4,877,000 arrest charges over their recorded careers.  Society simply cannot sustain these financial costs or the victimization or re-victimization of the public, which is why o ur programs are strategically and tactically positioned to impact this number measurably.
As identified, the offender marketplace today provides significant opportunity for growth, as local agencies, county governments and state legislators are confronted with ever-growing offender populations, pre-trial overcrowding, resource limitations and economic crises.  We are strategically positioned to capitalize on these public sector challenges. We offer offender service offerings and tools to provide enhanced effectiveness and coverage for agencies with reduced resources. This results in a force multiplier effect that allows smaller or understaffed agencies to grow while reducing the number of offenders using valuable resources. We are also attracting new customers to the industry, who historically have only leveraged now obsolete “home arrest” technologies, and are now seeking GPS track ing and fulltime monitoring alternatives.  Additionally, we are very encouraged by the interest and expansion of many rehabilitation initiatives, which will avail themselves of our program offerings in a mutual pursuit to reduce recidivism, encourage re-socialization and to facilitate the earlier release of qualified candidates.
During the fiscal year ended September 30, 2009, in response2014, we had net revenue of $12,262,198 compared to these evolving market factors, we restructurednet revenue of $15,641,062 for the fiscal year ended September 30, 2013, a decrease of $3,378,864, or approximately 22%.   Of this revenue, $11,663,181 and right-sized our direct sales force throughout$15,028,625 were from monitoring and other related services during the United States, while embracing an expanded2014 and growing distributorship model domestically and internationally.  We believe that this will help to ensure localized market knowledge, relationship leverage and enhanced ability to respond effectively to requests for sole-sourced and/or competitive proposals.2013 period, respectively, a decrease of $3,365,444 (22%). This model has also allowed us to better focus on expanded market sectors, judicial branch contacts and legislature interfaces in ongoing efforts to work from both the bottom up at agencies, as well asdecrease resulted primarily from the top downcompletion of a contract with an international customer in county and state governments, securing multi-l evel commitmentsfiscal 2013.  Product revenue decreased $13,420 (2%) from $612,437 for the year ended September 30, 2013 to embed our programs into ongoing probation, parole and policing efforts.$599,017 for the year ended September 30, 2014.
 
Cost of Revenue
During the year ended September 30, 2014, cost of revenue totaled $5,499,093 compared to cost of revenue during the year ended September 30, 2013 of $8,030,168, a decrease of $2,531,075. This decrease resulted primarily from the completion of a contract with an international customer in fiscal 2013. We expect the cost of revenue as a percentage of revenue to decrease in the foreseeable future due to economies of scale, realized through lower cost devices, projected increases in revenue, further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs, and the use of more efficient supply channels.

 
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In 2009,
Impairment costs for equipment and parts for the fiscal years ended September 30, 2014 and 2013 were $373,951 and $213,276, respectively.  These costs resulted from the disposal of obsolete inventory, monitoring equipment and parts as we acquired control of Midwest Monitoring & Surveillance, Inc. (“Midwest Monitoring’)continue to make enhancements to the device.
Amortization for the fiscal years ended September 30, 2014 and 2013, totaled $1,313,697 and $1,230,293, respectively. Amortization costs are based on a three-year useful life for TrackerPAL and ReliAlert devices.  Devices that are leased or retained by us for future deployment or sale are amortized over three years. We believe this three-year life is appropriate due to rapid changes in electronic monitoring technology and the Court Programs group of entities (“Court Programs”).  These acquisitions extended our reach into new markets and provided us with additional product and service offerings in existing markets. The assimilation of these acquired entities is subject to uncertainties and risks.  There can be no assurance that we will successfully integrate these companies into our operations without incurring significant unanticipated costs or experiencing unexpected operational problems.  Somecorresponding potential for obsolescence.  Management periodically assesses the useful life of the potential risks include:devices for appropriateness.
 
·Management of expanded inventory base
We expect the cost of revenue, excluding impairment of equipment and parts, as a percentage of revenue to decrease in the foreseeable future due to (a) economies of scale realized through projected increases in revenue, and (b) further development of lower cost devices and gained efficiencies in our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs.
 
·Control of operations that are more geographically diverse than our prior operations
Gross Profit and Margin
 
·Account collections of added customer accounts
·The need to secure additional operating and working capital
·The ability to reduce overhead costs and streamline operations
·Potential conflicts arising from the distribution of products or services from providers who are or may be our competitors
·Availability of trained support personnel
In summary,During the fiscal year ended September 30, 2014, gross profit totaled $6,763,105, or 55% of net revenues, compared to $7,610,894, or 49% of net revenue during the fiscal year ended September 30, 2009,2013, a decrease of $847,789.  Included in cost of revenue are costs attributable to impairment of inventory and monitoring equipment of $373,951 and $213,276 for fiscal years 2014 and 2013, respectively.  These impairment costs from disposal and reduction in value of obsolete monitoring equipment are expenses we expect to decrease in future periods.  Excluding impairment costs, adjusted gross profit for the fiscal year ended September 30, 2014 was $7,137,056 or 58% of net revenue, compared to $7,824,170 or 50% of net revenue, for the same period in 2013, a decrease of $687,114. Decreases in revenue from the completion of a large international project in fiscal 2013 led to the decrease in gross profit.
Research and Development Expense
During the fiscal year ended September 30, 2014, we incurred research and development expense of $1,605,662 compared to similar expense recognized during fiscal year 2013 totaling $987,934.  These increased research and development costs were case managing and/incurred to improve efficiency in the software, firmware and hardware of our products and services including the development of new and more efficient electronic monitoring devices and other research and development costs incurred by a new subsidiary acquired during the year ended September 30, 2014.

Selling, General and Administrative Expense
During the fiscal year ended September 30, 2014, our selling, general and administrative expense totaled $12,891,151, compared to $7,679,124 for the fiscal year ended September 30, 2013.  The increase of $5,212,027 is primarily the result of increases in legal, consulting, travel and other outside services expense of $2,262,076, in connection with preliminary work and preparation for a large international contract and for purchase expense related to the acquisition of two new subsidiaries during the second half of fiscal 2014. The Company also incurred payroll and payroll related expense of $1,308,259 and other operating expense $1,855,614 related to the Company’s new Chilean, Israeli and U.S. subsidiaries which were not a part of the consolidated entity at September 30, 2013.
Other Income and Expense
For the fiscal year ended September 30, 2014, interest expense was $1,290,289, compared to $17,048,519 for the fiscal year ended September 30, 2013. This decrease in interest expense resulted primarily from a reduction in convertible debentures and the acceleration of certain debt conversion features into Common Stock during the 2014 period.   For the year ended September 30, 2014, other income was $624,001 compared to other expense of $279,174 for the year ended September 30, 2013.  This increase in other income resulted primarily from a settlement agreement.

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Net Loss
We had a net loss from for the fiscal year ended September 30, 2014 totaling $8,747,844 (approximately $0.88 per share), compared to a net loss of $17,915,711 (approximately $3.79 per share) for the fiscal year ended September 30, 2013.  This decrease in the net loss is a result of a large decrease in interest expense offset by increases in operating and research and development expenses.
Discontinued Operations - Fiscal Year 2014 compared to Fiscal Year 2013
Effective October 1, 2012, we sold all of the issued and outstanding capital stock of our subsidiaries, Midwest Monitoring & Surveillance, Inc. (“Midwest”) and Court Programs, Inc. (“Court Programs”) to each of the their former principals, effective October 2012 and January 2013, respectively. Since Midwest and Court Programs were a component of our consolidated entity, these sales require discontinued operations reporting treatment of the Midwest and Court Program operations.
A summary of the operating results of discontinued operations for the fiscal years ended September 30, 2014 and 2013 is as follows:

  2014  2013 
Revenues $-  $477,298 
Cost of revenues  -   (163,487)
Gross Profit  -   313,811 
Selling, general and administrative expense  -   (319,976)
Loss from operations  -   (6,165)
Other expense  -   (295)
Net loss from discontinued operations $-  $(6,460)

Continuing Operations - Three months ended December 31, 2014, compared to three months ended December 31, 2013.

Revenue

For the three months ended December 31, 2014, the Company recognized revenue from operations of $4,620,619, compared to $2,659,294 for the three months ended December 31, 2013, an increase of $1,961,325 (74%).  Of these revenues, $4,529,030 and $2,593,683, respectively, were from monitoring and other related services, an increase of $1,935,347 (75%).  The increase was principally the result of sales generated by subsidiaries which were acquired during the prior fiscal year (see note 9), which contributed approximately $1.3 million in revenue, or electronically28% of total revenue during the three months ended December 31, 2014. For the three months ended December 31, 2014, international revenue was $1,255,501, compared to $775,130 for the three months ended December 31, 2013, an increase of $480,771 (62%). The increase in total revenue was principally due to revenue generated by our Chilean subsidiary and, to a lesser extent, from our newly acquired Canadian subsidiary.  Our Chilean subsidiary had minimal activity during the period ended December 31, 2013.
Product revenue increased $25,978 (40%) from $65,611 for the three months ended December 31, 2013, to $91,589 for the three months ended December 31, 2014. The increase was largely the result of sales generated by subsidiaries which were acquired during the prior fiscal year (see note 9).
Due to the acquisitions made during the Company's fiscal year ended September 30, 2014, and in the most recently completed fiscal quarter, the Company anticipates that total revenue in subsequent periods will increase compared to the comparable periods in the prior fiscal year, and those increases will be material.

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Cost of Revenue

During the three months ended December 31, 2014, cost of revenue totaled $2,045,167 compared to cost of revenue during the three months ended December 31, 2013 of $1,398,829, an increase of $646,338.  The increase in cost of revenue was largely the result of costs incurred by subsidiaries which were acquired during the prior fiscal year (see note 9), including increased costs associated with heightened activity in our Chilean operations.
Although management expects the costs of revenue to increase in subsequent periods due to the costs assocated with our recently acquired operations, the Company expects the cost of revenue as a percentage of revenue to decrease in the foreseeable future due to economies of scale realized through projected increases in revenue, further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring approximately 14,000 offenders domestically, while also expandingcenter costs, and the use of more efficient supply channels.

Depreciation for the three months ended December 31, 2014 and 2013 totaled $228,050 and $190,992, respectively. Depreciation costs are based on a three to five year useful life for TrackerPAL™ and ReliAlert™® devices.  Devices that are leased or retained by us for future deployment or sale are depreciated over three to five years.  The Company believes this three to five year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence.  Management periodically assesses the useful life of the devices for appropriateness.

Gross Profit and Margin

During the three months ended December 31, 2014, gross profit totaled $2,575,452, or 56% of net revenue compared to $1,260,465, or 47% of net revenue during the three months ended December 31, 2013.

Research and Development Expense

During the three months ended December 31, 2014, research and development expense totaled $464,178 compared to research and development expense for the three months ended December 31, 2013 totaling $319,570, an increase of $144,608.  These research and development costs were incurred to improve efficiency in the software, firmware and hardware of our products and services.

Selling, General and Administrative Expense

During the three months ended December 31, 2014, selling, general and administrative expense totaled $3,739,681 compared to $2,171,447 for the three months ended December 31, 2013.  The increase of $1,568,234 in selling general and administrative costs resulted from increases in payroll expense of $1,251,500, travel expense of $197,000, and operating expenses of the Company’s new Chilean, Israeli, Canadian and U.S. subsidiaries that were not a part of the consolidated entity at December 31, 2013.  Selling, general and administrative expense is anticipated to increase in subsequent periods due to the Company's acquisitions; however, such expense as a percentage of total revenue should decrease in subsequent periods as the Company integrates the operations associated with the newly acquired subsidiaries.

Other Income and Expense
For the three months ended December 31, 2014, interest expense was $683,941 compared to $43,918 for the three months ended December 31, 2013. This increase in interest expense resulted primarily from interest on the Company’s notes payable and facility agreement, none of which were outstanding during the same period in the prior year.   

Net Loss

The Company had a net loss from continuing operations for the three months ended December 31, 2014 totaling $2,215,215 compared to a net loss of $1,270,193 for the three months ended December 31, 2013, an increase of  $945,022.  This increase in the net loss is a result of increases in operating expenses of the Company and its subsidiaries acquired during the prior year.


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Liquidity and Capital Resources

Currently, we are  unable to finance our business solely from cash flows from operating activities. During the year ended September 30, 2014, we supplemented cash flows to finance the business from borrowings under a credit facility and from the sale and issuance of debt and equity securities. No such borrowings or sales capabilitiesoccurred during the three months ended December 31, 2014. Together with the receipt of $4.7 million in January 2015, available cash resources at December 31, 2014 are anticipated to meet our working capital requirements for the next twelve months.

As of December 31, 2014, we had unrestricted cash of $5,188,582 and initiatives internationally.a working capital surplus of $6,162,170, and, as of September 30, 2014, we had unrestricted cash of $11,101,822, compared to unrestricted cash of $3,382,428 as of September 30, 2013.  As of September 30, 2014, we had a working capital surplus of $11,323,107, compared to a working capital surplus of $6,836,442 as of September 30, 2013. The increase in working capital in fiscal year 2014 primarily resulted from increases in cash on hand as a result of increases in inventory and proceeds from the Facility Agreement with Tetra House and subsequently assigned to Conrent Invest S.A.

We used cash of $2,777,233 for investing activities during the three months ended December 31, 2014, compared to $4,158,893 of cash used in investing activities in the three months ended December 31, 2013. During fiscal year 2014, we used $4,582,288 in cash from operating activities, compared to $838,910 of cash provided by operating activities during fiscal year 2013. The most significant change in cash from operations from 2013 to 2014 was the decrease in the certain non-cash accretion expense related to certain debt features which existed in 2013, but did not exist in 2014.  
We used $598,251 of cash for financing activities during the three months ended December 31, 2014, compared to $2,623,664 in cash provided for the three months ended December 31, 2013. Cash provided by financing activities was used to support operating activities during the three months ended December 31, 2013.

We used $12,837,121 of cash by investing activities during the fiscal year ended September 30, 2014, compared to $560,425 of cash used during fiscal year 2013.  The increase in cash used by investing activities of $12,276,696 during fiscal year 2014 resulted primarily from cash payments related to the acquisition of subsidiaries during 2014, the payment of a bond required for an international subsidiary, and cash paid for purchases of property and equipment and leasehold improvements.
Inflation
We do not believe that inflation has had a material impact on our historical operations or profitability.
Critical Accounting Policies
In Note 2, “Summary of Significant Accounting Policies” to the audited Consolidated Financial Statements included in this prospectus, we discuss those accounting policies that are considered to be significant in determining the results of operations and our financial position.
The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities.  The actual results may differ from these estimates under different assumptions or conditions.
With respect to inventory reserves, revenue recognition, impairment of long-lived assets and allowance for doubtful accounts receivable, we apply critical accounting policies discussed below in the preparation of our financial statements.

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Inventory Reserves
The nature of our business requires maintenance of sufficient inventory on hand at all times to meet the requirements of our customers. We record inventory and raw materials at the lower of cost, or market, which approximates actual cost. General inventory reserves are maintained for the possible impairment of the inventory. Impairment may be a result of slow moving or excess inventory, product obsolescence or changes in the valuation of the inventory. In determining the adequacy of reserves, management analyzes the following, among other things:
●Current inventory quantities on hand;
●Product acceptance in the marketplace;
●Customer demand;
●Historical sales;
●Forecast sales;
●Product obsolescence; and
●Technological innovations.
Any modifications to these estimates of reserves are reflected in cost of revenues within the statement of operations during the period in which such modifications are determined necessary by management.
Revenue Recognition
Our revenue has historically been from two sources: (i) monitoring services; and (ii) product sales.
Monitoring Services
Monitoring services include two components: (i) lease contracts in which we provide monitoring services and lease devices to distributors or end users and we retain ownership of the leased device; and (ii) monitoring services purchased by distributors or end users who have previously purchased monitoring devices and opt to use our monitoring services.
We typically lease our devices under one-year contracts with customers that opt to use our monitoring services.  However, 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 7 to 21 days from the date the device is assigned to the lessee, and remains billable until the device is returned.  We recognize revenue on leased devices at the end of each month that monitoring services have been provided.  In those circumstances in which we receive payment in advance, we record these payments as deferred revenue.
Product Sales
We may sell monitoring devices in certain situations to our customers. In addition, we may sell equipment in connection with the building out and setting up a monitoring center on behalf of customers.  We recognize 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 TrackerPAL, ReliAlert, Shadow or R.A.D.A.R. devices), customers may, but are not required to, enter into one of our monitoring service contracts.  We recognize revenue on monitoring services for customers that have previously purchased devices at the end of each month that monitoring services have been provided.

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We sell and install standalone tracking systems that do not require our ongoing monitoring.  We have experience in component installation costs and direct labor hours related to this type of sale and can typically reasonably estimate costs, therefore we recognize revenue over the period in which the installation services are performed using the percentage-of-completion method of accounting for material installations.  We typically use 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.  We evaluate our estimated labor hours and costs and determine 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 revenues, we accrue the estimated losses immediately.
Multiple Element Arrangements
The majority of our revenue transactions do not have multiple elements. However, on occasion, we 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, we recognize 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
We consider an arrangement with payment terms longer than our normal terms not to be fixed or determinable, and we recognize revenue when the fee becomes due.  Normal payment terms for the sale of monitoring services and products are due upon receipt to 30 days.  We sell our 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 we sell to them.  Generally, title and risk of loss pass to the buyer upon delivery of the devices.
We estimate our product returns based on historical experience and maintain 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 revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.
Impairment of Long-lived Assets
We review our long-lived assets such as goodwill and intangibles 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. We evaluate whether events and circumstances have occurred which indicate possible impairment as of each balance sheet date. We use an equity method of the related asset or group of assets in measuring whether the assets are recoverable.  If the carrying amount of an asset exceeds its market 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 market value that is independent of other groups of assets.
Allowance for Doubtful Accounts
We must make estimates of the collectability of accounts receivable. In doing so, we analyze accounts receivable and historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts.

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Recent Accounting Pronouncements 
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies, which are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
Accounting for Stock-Based Compensation
We recognize 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.  We estimate the fair value of stock options using a Black-Scholes option pricing model which requires us 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.
Financial and Certain Pro Forma Information Regarding GPS Global
At the time of the Transaction, GPS Global was a privately owned company established in 2007 in the State of Israel.  GPS Global provides tracking, monitoring and surveillance solutions of offenders, vehicles, facilities and human resources.  GPS Global specializes in developing innovative products using advanced technologies to provide a complete solution for its customers.  GPS Global has had limited operations.  Its business has involved primarily the research and development of solutions for offender tracking and monitoring, human resources and personnel locating, vehicle and asset tracking, locating and control, and facility monitoring.  It does not own any patents at this time.  The financial and certain pro forma financial information regarding GPS Global specified in Rule 3-05(b) or Rule 8-04(b) of Regulation S-X under the Exchange Act will be filed by amendment to this registration statement on Form S-1/A within the 71 days allowed.

MANAGEMENT
Directors and Executive Officers
The following table sets forth information about the members of our Board of Directors as of March 25, 2015:  
NameAgePosition
David S. Boone54Director
Guy Dubois56Director
Rene Klinkhammer34Director
Winfried Kunz49Director
Dan L. Mabey63Director
George F. Schmitt71Director
David S. Boone became a director of our Company on December 21, 2011. He has served in executive roles with a variety of publicly traded and start-up organizations including Kraft General Foods, Sears, PepsiCo, Safeway and Belo Corporation, as well as serving as the CFO of Intira Corporation.  In addition, he has served as a consultant with the Boston Consulting Group.  Mr. Boone was CEO, President and Director of American CareSource Holdings from 2005 to 2011, a NASDAQ traded company.  He was the 2009 Ernst and Young Entrepreneur of the Year winner for Health Care in the Southwest Region. Mr. Boone serves on a number of private company boards and serves on the board of the Texas Kidney Foundation. Mr. Boone graduated from the University of Illinois, cum laude, in 1983 majoring in accounting.  Mr. Boone is a Certified Public Accountant.  He received his master’s degree in business administration from Harvard Business School in 1989. Mr. Boone serves on the Audit Committee and chairs the Finance Committee of our Board of Directors. The Nominating Committee considers Mr. Boone's financial experience and business experience to be an important qualification for his service on the Board and the Audit and Finance Committees.

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Guy Dubois is our Chairman since February 2013 and became a director in December 2012. Mr. Dubois is a Director of Singapore-based Tetra House Pte. Ltd., a provider of consulting and advisory services worldwide; and a director of RNTS Media NV, a Luxembourg listed digital content developer and mobile application advertising monetization platform provider. Mr. Dubois is a former director and CEO of Gategroup AG, and held various executive leadership roles at Gate Gourmet Holding LLC. Mr. Dubois has held executive management positions at Roche Vitamins Inc. in New Jersey, as well as regional management roles in that firm’s Asia Pacific operations. Mr. Dubois also served the European Organization for Nuclear Research (CERN) team in Switzerland in various roles, including treasurer and chief accountant. Mr. Dubois also worked with IBM in Sweden as Product Support Specialist for Financial Applications. A Belgian citizen, Mr. Dubois holds a degree in financial science and accountancy from the Limburg Business School in Diepenbeek, Belgium. The Board believes that Mr. Dubois' extensive financial and operational experience is a tremendous asset to buildthe Company as a member of the Board of Directors.
Rene Klinkhammer became a director in January 2010.  He graduated from European Business School, Oestrich-Winkel, Germany, in 2004, with an MBA-equivalent degree in business administration.  His majors were Banking, Finance and International Management.  After graduating, Mr. Klinkhammer joined Deutsche Bank’s Investment Banking Division as an analyst in the Corporate Finance Advisory Group, specializing in mergers and acquisitions, along with debt and equity financing transactions for larger German clients of the bank.  From 2007 to June 2013, Mr. Klinkhammer worked for Sapinda Holding B.V. and its subsidiaries, a group of privately-owned investment companies with offices in Amsterdam, Berlin, London and other major cities around the world.  From July 2013 until September 2014, Mr. Klinkhammer worked for Anoa Capital S.A., a Luxembourg based provider of innovative financing solutions, as Head of Origination. Since then, Mr. Klinkhammer has co-launched a family-owned venture, focusing on residential real estate developments and adjacent fields of business. Mr. Klinkhammer is a member of the Compensation Committee of our domesticBoard of Directors. The Nominating Committee considered Mr. Klinkhammer's finance background to be an important qualification for his service as a member of the Board.
Winfried Kunz became a director on December 21, 2011. He studied Business Administration and Economics from 1984 -1989 at the Universities in Munich and Cologne. In 1985 he started working as a system analyst and from 1987 – 1998 as a management consultant for German, British and American companies in the information technology business, where he served in executive positions. Mr. Kunz worked as an executive at Precision Software Ltd., Contact Software International Inc., and Symantec Corp. For more than 15 years, Mr. Kunz has worked as an independent consultant and managing partner of Asecon GmbH, a company he founded in 1997, developing and implementing investor innovative business models for residential properties with a focus in Munich for his own portfolio and for third parties. For more than 10 years he has been a consultant to JK Wohnbau GmbH, a Munich-based real estate developer, where he served as COO from 2009 until the company’s initial public offering in 2010. Previously, from 2009 to 2011, Mr. Kunz worked with us as an investor. Mr. Kunz brings extensive experience in the information technology industry and his international business expertise, as well as his finance and operational expertise to the Board of Directors.
Dan L. Mabey became a director on December 21, 2011.  Mr. Mabey has acted as the CEO of BigHorn Oil and Gas, an energy development company (Casper, Wyoming), and he has served in both public and private company leadership positions in the high-tech industry including President of 1-2-1 View digital signage company (Singapore), Chief Operating Officer and Director of In Media Corporation IPTV service company (California), President of Interactive Devices, Inc. a video compression company (Folsom, California) and Vice President of Broadcast International, a satellite broadcast company ( Salt Lake City, Utah).  From 1990 until 2002, Mr. Mabey was Director of the State of Utah Department of Economic Development International Business Development Office, growing Utah exports from $700 million to $3.6 billion a year. He helped recruit the 2002 Winter Olympics to Salt Lake City, Utah, and managed international business development for the games. Throughout his career, Mr. Mabey has been active in civic and community organizations and is the recipient of numerous service awards. He is also the co-inventor or lead inventor on six patents and the sole inventor of a seventh.  Mr. Mabey received a Masters of Public Administration (MPA) degree from Idaho State University in 1978 and a B.A. degree from Boise State University in 1974. Mr. Mabey is a member of the Nominating Committee. The Board of Directors considers Mr. Mabey's extensive international business experience to be an important qualification for his continuing service as a Board member.

George F. Schmitt became a director on December 21, 2011.  He is a director and CEO of MBTH Technology Holdings.  He has held this position since December, 2010.  Mr. Schmitt is also a director of XG Technology, Inc. a publicly traded company, Kentrox and Calient.  Mr. Schmitt previously served as a director of TeleAtlas, Objective Systems Integrators, Omnipoint and LHS Group.  Mr. Schmitt is a principal of Sierra Sunset II, LLC and serves as a Trustee of St. Mary’s College.  In addition, Mr. Schmitt has served as a director of many privately held companies including Voice Objects, Knowledge Adventure, Jungo and Cybergate, among others.  Mr. Schmitt has also served as Financial Vice President of Pacific Telesis and chaired the audit committee of Objective Systems Integrations and TeleATLAS.  Mr. Schmitt received an M.S. in Management from Stanford University, where he was a Sloan Fellow, and a B.A. in Political Science from Saint Mary’s College. The Nominating Committee recognizes the benefit to the Board of Directors and to the Company of Mr. Schmitt's service as a member of the boards of directors of various companies and his extensive experience in the telecommunications industry.


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Board of Directors
Election and Meetings
Directors hold office until the next annual meeting of the shareholders and until their successors have been elected or appointed and duly qualified.  Executive officers are appointed by the Board of Directors and hold office until their successors are appointed and duly qualified.  Vacancies on the Board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members of the Board, with such new director serving the remainder of the term or until his/her successor shall be elected and qualify.
The Board of Directors is elected by and is accountable to our shareholders.  The Board establishes policy and provides strategic direction, oversight, and control.  The Board met eight times during fiscal year 2014.  All directors attended at least 80% of the meetings of the Board and the committees of the Board of Directors, of which they are members.
Director Independence
The Board of Directors intends to comply with the director independence standards of the NASDAQ Stock Market, including Rule 4200(a)(15). The Board determined, based on the NASDAQ Stock Market Rules, that George F. Schmitt, Winfried Kunz, David S. Boone, Rene Klinkhammer, and Dan L. Mabey meet the NASDAQ standards to be considered independent. The Board has not appointed a lead independent director.
Specifically, none of these directors:
●has been at any time during the past three years employed by us or by any parent or subsidiary of the Company;
●has accepted or has a family member who accepted any compensation from us in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than compensation for board or board committee service;
●is a family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer;
●is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments for property or services in the current or any of the past three fiscal years that exceed 5 percent of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more;
●is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of our executive officers serve on the compensation committee of such other entity; or
●is, or has a family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.
Shareholder Communications with Directors
If we receive correspondence from our shareholders that is addressed to the Board of Directors, we forward it to every director or to the individual director to whom it is addressed. Shareholders who wish to communicate with the directors may do so by sending their correspondence to the directors c/o Track Group, 405 South Main Street, Suite 700, Salt Lake City, Utah 84111.

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Committees of the Board of Directors
The Board of Directors has three standing committees: the Audit Committee, Compensation Committee, and Nominating Committee.  These committees assist the Board of Directors to perform its responsibilities and make informed decisions.
Audit Committee
The primary duties of the Audit Committee are to oversee (i) management’s conduct of our financial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing our systems of internal accounting and financial controls, (ii) our independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company and (iii) the engagement and performance of our independent auditors.  The Audit Committee assists the Board in providing oversight of our financial and related activities, including capital market transactions. The Audit Committee has a charter, a copy of which is available on our website at www.trackgrp.com.
The Audit Committee meets with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our independent registered public accounting firm.  The Audit Committee met four times during fiscal year 2014 and all members of the Audit Committee attended at least 75% of the committee’s meetings.  

Members of the Audit Committee as of September 30, 2014, are Messrs. Boone, Schmitt and Kunz.  Each member of the Audit Committee satisfies, according to the full Board of Directors, the definition of independent director as established in the NASDAQ Stock Market Rules.  All of the members of the Audit Committee are financially literate.  In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board of Directors designated David S. Boone as the Audit Committee’s “Audit Committee Financial Expert” as defined by the applicable regulations promulgated by the SEC.  
The Audit Committee reviewed and discussed the matters required by United States auditing standards required by the Public Company Accounting Oversight Board (“PCAOB”) and our audited financial statements for the fiscal year ended September 30, 2014 with management and our independent registered public accounting firm.  The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by Independence Standards Board No. 1, and the Audit Committee has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence.  

Compensation Committee
Members of the Compensation Committee are Messrs. Mabey (Chairman), Boone, and Schmitt.  The Compensation Committee met two times during fiscal year 2014.  Members of the Compensation Committee are appointed by the Board of Directors.  Messrs. Mabey, Boone, and Schmitt are independent directors, as determined by the Board of Directors in accordance with the NASDAQ Stock Market Rules, including Rule 5605(d)(2)(A).  The Compensation Committee is governed by a charter approved by the Board of Directors, a copy of which is available on the Company’s website www.trackgrp.com.

The Compensation Committee has responsibility for developing and maintaining an executive compensation policy that creates a direct sales force, while solidifying distributorsrelationship between pay levels and local business partners opportunistically.  corporate performance and returns to shareholders. The Committee monitors the results of such policy to assure that the compensation payable to our executive officers provides overall competitive pay levels, creates proper incentives to enhance shareholder value, rewards superior performance, and is justified by the returns available to shareholders.
The Compensation Committee also acts on behalf of the Board of Directors in administering compensation plans approved by the Board, in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the goals at the end of the plan year).  The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation of the Company’s directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of executive officers of the Company.

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Nominating and Corporate Governance Committee
Mr. Schmitt serves as the chair of the Nominating and Corporate Governance Committee.  Messrs. Kunz and Klinkhammer also currently serve as members of this committee.  The Nominating Committee has the responsibility for identifying and recommending candidates to fill vacant and newly created Board positions, setting corporate governance guidelines regarding director qualifications and responsibilities, and planning for senior management succession.
The Nominating and Corporate Governance Committee is required to review the qualifications and backgrounds of all directors and nominees (without regard to whether a nominee has been recommended by shareholders), as well as the overall composition of the Board of Directors, and recommend a slate of directors to be nominated for election at the annual meeting of shareholders, or, in the case of a vacancy on the Board of Directors, recommend a director to be elected by the Board to fill such vacancy.  The Nominating Committee held one meeting during fiscal 2014. The Nominating Committee’s charter is available on our website, www.trackgrp.com.
Code of Ethics
We have entered into monitoring agreementsestablished a Code of Business Ethics that applies to our officers, directors and employees.  The Code of Business Ethics contains general guidelines for conducting our business consistent with approximately 450 law enforcement, judiciariesthe highest standards of business ethics, and bail bond agencies throughoutis intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.  We will post on our website, www.trackgrp.com, any amendments to or waivers from a provision of our Code of Business Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions and that relates to any element of the Code of Business Ethics.

Executive Officers
The following table sets forth certain information regarding our principal executive officer and principal financial and accounting officer as of March 25, 2015:
NameAgePosition
Executive Committee of Board of DirectorsPrincipal Executive Officer
John R. Merrill45Chief Financial Officer
The Executive Committee of the Board of Directors was established to act temporarily in the principal executive officer function following the resignation of our Chief Executive Officer in October 2012. Current members of the Executive Committee are Guy Dubois and David S. Boone.  Biographies for Mr. Dubois and Boone appear under heading “Directors” above.
John R. Merrill was appointed to Chief Financial Officer in April 2014. Mr. Merrill has held a variety of financial roles within public and private organizations including United States.  We continueHealth Group, Clear Channel, IMG, and Sports Authority.  From 2013 to hold either full or majority interest2014, Mr. Merrill was the CFO of TenXNetworks and IPVidTech.com, a start-up network hardware and business intelligence provider.  From 2010 to 2013, Mr. Merrill worked as an advisor in two related businessesthe healthcare technology industry facilitating due diligence and integration of certain acquired companies.  Prior to further2010, Mr. Merrill was the CFO of Park City Group, Inc. (NASDAQ: PCYG) and Prescient Applied Intelligence, Inc. (OTCQB: PPID) software-as-a-service providers of supply chain solutions for both retailers and their suppliers.  He began his career with KPMG and holds a Bachelors and a Master’s in Accounting from the University of South Florida.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our effortsofficers, directors, and persons who beneficially own more than 10 percent of our Common Stock to increasefile reports of ownership and changes in ownership with the SEC. Officers, directors, and greater-than-ten-percent shareholders are also required by the SEC to furnish us with copies of all Section 16(a) forms that they file.

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Based solely upon a review of these forms that were furnished to us, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during fiscal year 2014 and that such filings were timely except the following:
●Mr. Klinkhammer, a director, filed one late Form 4 reporting one transaction
●Mr. Schmitt, a director, filed three late Form 4s reporting three transactions
●Mr. Dubois, a director, filed one late Form 4 reporting one transaction
●Mr. Boone, a director, filed one late Form 4 reporting one transaction
●Mr. Mabey, a director, filed two late Form 4s reporting two transactions
●Mr. Kunz, a director, filed two late Form 4s reporting two transactions
Compensation of Directors
The table below summarizes the compensation paid by us to our revenues and market development, and we now maintain 12 expanded distributorships. Although there can be no guarantee that wenon-employee directors for the fiscal year ended September 30, 2014:

(a) (b)  (c)  (d)  (e) 
  Fees earned  Stock awards  Option awards  Total 
Name ($)*  ($)  ($)  ($) 
             
Winfried Kunz $15,000  $15,000  $15,000  $45,000 
George F. Schmitt $15,000  $22,500  $8,991  $46,491 
Rene Klinkhammer $15,000  $30,000  $-  $45,000 
David S. Boone $30,000  $30,000  $30,000  $90,000 
Dan L. Mabey $15,000  $29,833  $-  $44,833 
Guy Dubois $30,000  $-  $346,276  $376,276 
*Fees earned by our non-employee directors will be ablepaid in Common Stock or options to continue these efforts or be able to implement our business plan as anticipated, management believes that we are in a good position to move forward and to continuepurchase Common Stock at the growthoption of the business anddirector.  A liability for these fees was included with accrued expenses at September 30, 2014.
From October 2013 through May 2014, we accrued $2,500 per month, which amount was increased to $5,000 per month in June 2014, for each director to be issued in shares of Common Stock valued on the last date of the quarter. Alternatively, any director may elect to receive warrants with an exercise price at the current market price at the date of grant in the amount of three times the amount had the director elected to take advantageshares, valued at the date of grant using the Black-Scholes valuation method. Additionally, the Chairman and Chairman of the market opportunities open to us.Audit Committee accrue $10,000 per month rather than $5,000.  Mr. Dubois became a director in December 2012 and our Chairman on February 28, 2013.
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Director Warrants

The following table lists the warrants to purchase shares of Common Stock held by each of our directors as of March 25, 2015:
 GrantExpiration Exercise  Number of  Compensation 
NameDateDate Price  Options  Expense 
            
Winfried Kunz3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
 10/1/139/30/17 $19.46   1,140  $8,991 
 1/2/1412/31/15 $19.29   1,172  $6,007 
               
George F. Schmitt3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
 10/1/139/30/17 $19.46   1,140  $8,991 
               
Guy Dubois3/22/133/21/17 $12.58   2,385  $11,682 
 4/16/134/15/17 $9.00   64,665  $324,932 
 7/1/136/30/17 $ 14.70   4,083  $23,640 
 10/1/139/30/17 $19.46   2,280  $17,982 
 1/2/1412/31/15 $19.29   2,344  $12,014 
 4/1/143/31/16 $18.75   2,432  $8,684 
 6/3/146/2/16 $17.45   51,576  $300,326 
 7/1/146/30/16 $15.45   2,647  $ 7,270 
 1/27/151/27/17 $12.01   14,988  $70,433 
               
David S. Boone3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   4,083  $23,640 
 10/1/139/30/17 $19.46   2,280  $17,982 
 1/2/1412/31/15 $19.29   2,344  $12,014 
               
Dan L. Mabey3/22/133/21/17 $12.58   8,943  $43,809 
               
Rene Klinkhammer3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
Reimbursement of Expenses
We reimburse reasonable travel expenses of members of the Board of Directors for their attendance at Board meetings.
Compensation Risks Assessment
As required by rules adopted by the SEC, management has made an assessment of our compensation policies and practices with respect to all employees to determine whether risks arising from those policies and practices are reasonably likely to have a material adverse effect on us. In doing so, management considered various features and elements of the compensation policies and practices that discourage excessive or unnecessary risk taking. As a result of the assessment, we have determined that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

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Our Strategy
 
Our global growth strategy is to continue to expand offerings that empower professionals in security, law enforcement, corrections and rehabilitation professionalsorganizations worldwide with sole-sourcedsingle-sourced offender management solutions that integrate reliable interactionintervention technologies into support of interventionre-socialization and re-socializationmonitoring initiatives.  We will grant offenders opportunity for accountable, monitored “freedom”, while providing for greater public safety atTo accomplish this objective, we are implementing a lower cost to incarceration or other service offerings.
We will accomplish our strategy through the “value-driven”, yet profitable deployment of agrowing portfolio of proprietary and non-proprietary GPS/RF and/or alcohol and/or drug tracking, real-time monitoring and intervention products and services toservices.  These include GPS, RF, predictive analytics, drug and alcohol testing for defendants and offenders as well other individuals and assets in the corrections, probation, law enforcement and rehabilitation personnel worldwide, allarena.
In addition, our product and service offerings will expand upon our exception-based reporting, analytical capabilities and behavioral-monitoring knowledge. These customizable solutions will be available through Web portals and mobile device platforms, in supportaddition to traditional desktops, to leverage our real-time monitoring data, best-practice monitoring, interaction protocols and analytics capabilities. Customer insights will be increased further by aggregating real-time data from additional monitoring device types and technologies, regardless of offender reformation and re-socialization initiatives.manufacturer, as well as other critical data sources.
 
Our exclusiveIn summary, we are committed to delivering a superior proprietary and non-proprietary portfolio of reliable, intervention monitoring products and services balancefor the need to dynamically track and monitor offenders with the opportunity to positively encourage and transform offenders, thus reducing recidivism rates through our proprietary C.A.R.E.™ (Correction, Accountability, Rehabilitation, Empowerment) programs and client-adapted initiatives.global offender management marketplace. We will continue to developwork with agencies to increase public safety and deploy adaptive,officer productivity, mitigate budgetary constraints through cost-effective monitoring alternatives, increase early-release compliance and interactive technology productsimprove monitoring program success rates, all while offering defendants and services, which meet the ever-changing needs of our clients, while providing value-drivenoffenders opportunities for accountable freedom and enhanced public safety.
While there are no ongoing warranties of our business model and no assurances of our capabilitiesan alternative to continue to raise necessary expansion capital, we will endeavor to ensure our ongoing viability through diligent, margin-centric imperatives and operational efficiency gains through prioritized management initiatives.
incarceration.
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Background
SecureAlert was originally formed to manufacture and market medical diagnostic stains, solutions and related equipment.  Through the acquisition of SecureAlert Monitoring, Inc. (“SecureAlert Monitoring”) in July 2001, we expanded our product sales and monitoring services related to Personal Emergency Response Systems (“PERS”).
In 2006, we developed the GPS tracking technology and monitoring business currently conducted by our subsidiary, SecureAlert Monitoring.  Our business now involves manufacturing, distributing, and monitoring mobile emergency and interactive GPS tracking products, worn on the body, that focus on the defendant and offender tracking, monitoring and intervention marketplace.
To complement our own offerings and to drive additional means of capturing a growth position in the offender management market, in December 2007 we acquired a majority interest in Court Programs, headquartered in Gulfport, Mississippi, and Midwest Monitoring, based in Fairmont, Minnesota.  We finalized the acquisition of Court Programs in March 2010.  We hold an option to acquire the remaining capital stock of Midwest Monitoring.  These acquisitions brought us solid business relationships with ongoing revenue streams, as well as the possibility of expanding our presence into the existing accounts of these acquired companies.  Furthermore, they brought business processes and practices in the area of case management, offender pay programs and attendant services that could be lev eraged and integrated into our existing operations.
 
Marketing
 
The
Our strategic purpose is to produce or acquire, and globally deploy leading edge tracking technology, monitoring and analytic services in the criminal justice and corrections arenas.  In addition to our recent acquisitions, we work to meet this objective by improved research and development activities and expanding our sales momentum which started withand marketing efforts both domestically and internationally.  Our ability to acquire new accounts continues to benefit from the releaselack of TrackerPAL™ and the e-Arrest Beacon in 2008 continued in 2009.  As anticipated, the number of agencies facing budget constraints, while at the same time being required to take on increased case loads, grew.  These conflicting demands fueled the need of many agencies to look at GPS monitoring as a solution.
A particularly strong sector was juvenile corrections, including juvenile probation departments and juvenile detention centers.  It is widely recognized that incarcerating juveniles can start a life-long pattern of recidivism.  This is created by first time and minor crime offenders’ affiliation with more seasoned offenders who have the means and contacts to encourage and enable repeat crimes.  Those in charge of juvenilepublic funding for law enforcement and corrections recognize that in many cases, keeping youth at homeagencies, the need to reduce jail operating and in school isexpansion expenses, and a better option.  However, with reduced staff and increased case loads, probation officers and other support staff find it harder, if not impossible, to be effective.  Many are recognizing that the visibility that GPSdesire for greater control of monitoring provides can be a powerful solution.  Moreover, TrackerPAL’s unique two and three way on-device calling feature takes that visibility to the next level by enabling supervisory staff to communicate with the user wearing the device, any place, any time.  For many offenders, this feature is the only phone communication available to them, not being able to afford either land or cell phones, and without the TrackerPAL™, officers would have far less contact with their offenders.  Also, the incarceration of juveniles costs considerably more than adult incarceration – exceeding $500 per day in some areas – so putting offenders on GPS monitoring instead of incarceration makes financial sense as well.  During the fiscal year ended September 30, 2009, we acquired several new juvenile corrections clients.
As critical as our Intervention Active Monitoring is for monitoring high risk and otherhigh flight risk device wearers.  Also, the view continues to widen that society needs to look at alternative ways of sentencing offenders, that require intensive monitoring, less intense monitoring levels may be more appropriate to address lower risk offenders and budget constraints.  To address this, we introduced two new service offerings.  These offerings, Passive Monitoring and Standard Active Monitoring, utilize the same TrackerPAL™ devices as the flagship Intervention Active Monitoring.  Intervention Monitoring utilizes our SecureAlert Monitoring Center to communicate with offenders and offi cers on a real-time basis when an offender has a violation such as entering an exclusion zone (a designated restricted area the offender is prohibited to enter under the terms of his sentence). Like most other active monitoring offerings, the Standard Active level still provides real-time communications to officers, but only through emails and texts.  No live operators call offenders or officers.  The Passive level captures locations and alarms on a real-time basis, and like other passive offerings, sends a report of them each night.  However, unlike competitors’ passive and basic active monitoring products which only post location traces every few hours, all of our monitoring options utilize the GPS technology in the TrackerPAL™ II device to continuously track offenders’ movements and post them real time for viewing anytime through the TrackerPAL™ II software.  The e-Arrest Beacon option is also available for all service levels.   ;In addition, unlike some competitive systems, no docking stations or landlines are required for any of the levels.  Conveniently, officers can transition offenders to different monitoring levels via the TrackerPAL™ software; no equipment change is required.  This is a significant advantage as it dramatically reduces the number of devices an agency has to keep on hand to be proficient.  Several existing as well as new customerskeeping track of certain types of offenders, such as those convicted of sexual, domestic violence, or alcohol offenses that have signed upbeen released from custody.  Several countries, including the United States, began or continued the process of evaluating sentencing laws that would release sentenced felons to GPS monitoring after partially serving their incarceration sentences. We foresee that these views and the harsh economic and funding realities will continue to fuel wider implementation of electronic monitoring programs globally, increasing demand for the new service offerings.
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our products and services. Our products’ unique and patented functionality make us a good match for these opportunities.  
 
Fiscal year 2009 also saw many enhancements to our production and distribution capabilities.  In January 2009, we moved our final assembly and distribution activities to a 6,152 foot warehouse and distribution center.  The new facility allowed us to bring all device refurbishment activities in-house, saving not only time, but money in processing devices that come back for stock rotation or refurbishment.  The facility also positions us for the growth we have planned over the next several years.
We also moved our manufacturing from Canada to contract manufacturer, Inovar Inc. (“Inovar”), in Logan, Utah.  Inovar is a provider of quality electronic manufacturing services for the electronics, medical, military and aerospace industries.  In addition to facilitating design and testing collaboration with us due to its proximity, Inovar provides other value added services from which we will benefit.  Inovar’s services include materials procurement, printed circuit assembly, test and system build. This complete offering of services will enable us to receive high quality at reduced costs.  Inovar’s location near the campus of Utah State University also provides significant benefits.  Inovar’s relationship with the University provides it with a steady stream of labor, as well as access to one of the most respected engineering schools in the world.  Inovar is ISO 9001:2000 and ISO 13485:2003 certified.  
Research and Development Program
 
GPS technology utilizes highly accurate clocks on 24 satellites orbitingDuring the earth ownedthree-months ended December 31, 2014 and operated by the U.S. Department of Defense.  These satellites are designed to transmit their identity, orbital parameters and the correct time to earthbound GPS receivers at all times.  Supporting the satellites are several radar-ranging stations maintaining exact orbital parameters for each satellite and transmitting that information to the satellites for rebroadcast at frequencies between 1500 and 1600 MHz.
A GPS receiver (or engine) scans the frequency range for GPS satellite transmissions. If the receiver can detect three satellite transmissions, algorithms within the engine deduce its location, usually in terms of longitude and latitude, on the surface of the earth as well as the correct time. If the receiver can detect four or more GPS satellite transmissions, it can also deduce its own elevation above sea level.  The effectiveness of GPS technology is limited by obstructions between the device and the satellites and, therefore, service can be interrupted or may not be available at all if the user is located in the lower floors of high-rise buildings or underground.
Duringduring the fiscal year ended September 30, 2009,2014, we spent $1,777,873expended $464,178 and $1,605,662 on research and development, compareddevelopment. These costs were incurred to improve efficiency in the software, firmware and hardware of our products and services, as well as supporting research and development expenditures of $4,811,128 in the fiscal year ended September 30, 2008.  These costs of $1,777,873 were to further develop our TrackerPAL™ portfolio of products.
Monitoring Center
As we developed prior product lines, we simultaneously worked to create the SecureAlert Monitoring Center. In contrast to a typical monitoring center, our Monitoring Center is equipped with hardware and software that pinpoints the location of the incoming caller by utilizing GPS technology.  This capability is referred to as telematic.  The operator’s computer screen can identify the caller as well as locate, in real time, the caller’s precise location on a detailed map.  We believe the monitoring center is the cornerstone of our business.  An operator goes through extensive training to insure professional service is provided to the supervising parole officer and individuals wearing the TrackerPAL™.
In order to prepare for an increase in the number of TrackerPAL™ devices to be monitored, we are continuing to build up the Monitoring Center to effectively manage these devices.  To increase the efficiencies in the Monitoring Center, we are developing software to further expand service automation in the processing of alarms and operational events resulting in increased operator efficiency and ability to manage more devices. The automation of alarms includes pre-recorded responses to inform the offender of the alarm and to resolve the issue.  If the issue is not timely resolved, an operator will become involved and take the additional necessary actions according to protocols set up by the customer.  We anticipate one operator will be able to manage over 230 active devices aft er the software is fully developed.newly acquired subsidiaries
 
 
37-14-
 

Strategic Relationships
 
We believe one of our strengths is the high quality of our strategic alliances.  Our two primary alliances are described below.
Inovar, Inc.
Inovar, located in Logan Utah, is a leading contract electronics manufacturer dedicated to providing flexible solutions to OEMs (original equipment manufacturers) in the fastest growing segments of the electronics, medical, and aerospace industries and the military.  Inovar is ISO 9001-:2000 and ISO 13485:2003 certified to provide the most comprehensive and value-added services to its customers. Inovar currently manufactures our TrackerPAL™ product.
euromicron AG
euromicron AG is an all-around solution provider for communications, data and security networks. Its network infrastructures integrate voice, video and data transport wirelessly, via copper cable and by means of fiber-optic technologies. euromicron AG builds its leading applications, such as e-health, security, control or surveillance systems, on the basis of these network infrastructures.  Founded on its expertise as a developer and producer of fiber-optic components, euromicron AG is a strongly growing, profitable group that is listed on the XETRA and Frankfurt, Germany (FRA) stock markets and focuses on operational growth, integration and further market penetration, internationalization and expansion.
Competition
 
In
We encounter electronic offender monitoring competition from traditional competitors and certain new entrants into the United States market.  Following our evaluation of our competitors at the end of our 2014 fiscal year, 2009, we encountered various levels of GPS, house arrest and case managementtraditional competition from the following traditional and evolving competitors:includes:
●·Pro Tech MonitoringBI Incorporated, Denver Colorado, subsidiary of GEO Care, Inc., Odessa, FLBoca Raton, Florida –  This company has satellite tracking software technology that operates in conjunction with GPS and wireless communication networks.
·iSECUREtrac Corp., Omaha, NE – This company supplies electronic monitoring equipment for tracking and monitoring persons on pretrial release, probation, parole, or work release.
·Sentinel Offender Services, LLC, Augusta GA – This company supplies monitoring and supervision solutions for the offender population.
·Omnilink Systems, Inc., Alpharetta, GA – Thisinternational company provides a one-piece device combined with GPSwide variety of private correctional services from facilities operation and Sprint cellular networksmanagement to electronically track an individual.
·correctional health care services.  BI Incorporated, Boulder, CO – This companywhich was purchased by GEO Care, Inc. in 2011, has been providing intensive community supervision services and technologies for more than 20 years to criminal justice agencies throughout the United States.
●·G4S plc – Crawley, Sussex, England
Omnilink Systems, Inc., Alpharetta, Georgia – This international company is the world’s leading international security solutions group.provides a one-piece device combined with GPS and Sprint cellular networks to electronically track an individual. In thefiscal year 2013, Omnilink completed an agreement with Alcohol Monitoring Systems, Inc. (“AMS”) for AMS to distribute Omnilink GPS devices as “SCRAM One-Piece GPS™”, to extend AMS’ product line for those agencies looking for a one-stop shop for their monitoring needs.
●3M Electronic Monitoring, Odessa, Florida (purchased and consolidated Attenti Group, (ElmoTech and ProTech) in 2011) – This company has satellite tracking software technology that operates in conjunction with GPS and wireless communication networks.
●Satellite Tracking of People, LLC, Houston, Texas – This company provides a broad line of GPS tracking systems and services to government agencies. Satellite Tracking of People, LLC was purchased by Securus Technologies, Inc. in December of 2013.

●Sentinel Offender Services, LLC, Augusta, Georgia (purchased and consolidated G4S’ United States Offender Monitoring operation in 2012) – This company supplies monitoring and supervision solutions for the offender population. Through their acquisition and consolidation of G4S’ United States Offender Monitoring operation, they expanded their customer base to which they provide electronic monitoring of offenders, prison and detention center management and transitional support services. Currently, G4S resellsThrough this acquisition, they also resell Omnilink’s active GPS device.device, in addition to their own.
The following companies entered the United States market in fiscal year 2014:
●·Satellite Tracking of People, LLC – Houston, TXBuddi, Ltd., Aylesbury, Binkghamshire, United Kingdom – This company provides GPSwas started in 2005 to provide consumer tracking systemsfor consumers such as the elderly or Alzheimer’s sufferers.    Their major launch into offender monitoring was via an award of a United Kingdom Ministry of Justice contract.  They also announced plans to enter the United States offender monitoring market by headquartering United States operations in Tampa, FL and services to government agencies.hiring Steve Chapin, former Protech President and CEO.
 
●Corrisoft, LLC, Lexington, Kentucky – This company produces offerings for the monitoring of low and medium risk offenders, and distributes other companies’ products for higher risk offenders.  They have announced that they will be developing additional products for the monitoring of all offender types. Corrisoft, LLC acquired iSECUREtrac Corp in December 2013.
We also face competition from small and regional companies that provide electronic monitoring technology along with localized case management and/or monitoring services.  Some of these entities utilize less well-known technologies or are resellers of the above competitors’ products.  We observed an increase in these types of businesses in 2009.  We do not believe there is reliable publicly available information to indicate our relative market share or that of our competitors.
 

 
38-15-
 

Dependence on Major Customers
 
No
We had sales to entities which represent more than ten percent of gross revenues as follows for the years ended September 30, which sales have continued during fiscal 2015. Except as indicated below, no other customer represented more than 10%ten percent of our total revenues for the fiscal yearyears ended September 30, 2009.  One non-repeat customer represented 16%2014 or 2013.  
  2014  %  2013  % 
             
Customer A $-   0% $5,252,960   33%
                 
Customer B $1,501,940   12% $1,622,327   10%
                 
Customer C $1,431,854   12% $1,514,581   9%
Concentration of credit risk associated with our total revenues for the fiscal year endedand outstanding accounts receivable as of September 30, 2008.2014 and 2013, respectively, are shown in the table below:   
  2014  %  2013  % 
             
Customer A $892,897   17% $892,897   24%
                 
Customer B $499,040   10% $732,163   20%
                 
Customer C $419,523   8% $887,233   24%
 
Dependence on Major Suppliers

We purchasehave entered into an agreement with two national companies for cellular services fromservices. We also rely currently on a varietysingle source for the manufacturing of providers.  our products.  The cost to us for these services during the fiscal years ended September 30, 20092014 and 20082013 was approximately $2,422,541$897,386 and $2,939,790,$964,354, respectively. We reducedThe 7% decrease in cellular costs by successfully negotiating newservice expense in 2014 compared to 2013 resulted from utilizing different service providers who offered similar service with more favorable rates.

If any of these significant suppliers were to cease providing products or existing provider contracts, while increasing revenues from monitoring services.
Duringservices to us, we would be required to seek alternative sources. Although we were able to lower the amounts paid for these services during the fiscal 2014 year, ended September 30, 2009, we switched manufacturing ofthere is no assurance that alternate sources could be located or that the TrackerPAL™ devices from Dynamic Source Manufacturing to Inovar.  The change in manufacturers was made to increase the reliability of the TrackerPAL™ and reducedelay or additional expense associated with locating alternative sources for these products or services would not have a negative impact on our cost per device.  Should the relationship with Inovar cease, we would need to find another vendor to manufacture the device, which could limit our ability to lease additional monitoring equipment.business or financial condition.

Product Returns
During the fiscal year ended September 30, 2009, we replaced the majority of TrackerPAL™ I devices with our next generation TrackerPAL™ II device to remedy problems incurred with the first generation product. These problems included:
·low battery and charger life and functionality,
·weak GPS signal strength,
·water ingression, and
·scratching and other aesthetic damage when the device was removed from an offender.
Subsequent to September 30, 2009, we began manufacturing an improved TrackerPAL™ device dubbed the “TrackerPAL™ II(e)” (for “enhanced”) to further improve the performance and functionality of the product.  We achieved significant improvement in GPS signal strength by incorporating the latest available GPS technology into the enhanced device.  Additionally, the battery life has improved, realizing over 30 hours of life on a single two hour daily charge.
Intellectual Property

Trademarks
.  We have developed and use registered trademarks in our business, particularly relating to our corporate and product names. We own eightsix trademarks that are registered with the United States Patent and Trademark Office, andplus one trademark registered in Mexico. Federal registration of a trademark in the United States enables the registered owner of the mark to bar the unauthorized use of the registered mark in connection with a similar product in the same channels of trade by any third-party anywhere in the United States, regardless of whether the registered owner has ever used the trademark in the area where the unauthorized use occurs. We have one application for registration pending approval in the state of CaliforniaMexico and one application in the United States that has been approved and is awaiting the filing of a stat ement of use.Canada. We may file additional applications for the registration of our trademarks in foreign jurisdictions as our business expands under current and planned distribution arrangements.  Protection of registered trademarks in some jurisdictions may not be as extensive as the protection provided by registration in the United States.

-16-
 
The following table summarizes our trademark registrations and applications:
 
39
 
MarkTrademark
Application
Number
Registration Number
Status/
Next Action
MOBILE911Mobile911 Siren with 2-Way Voice Communication & Design®75/615,1182,437,673Registered76/013,886
   
MOBILE911 SIREN WITH 2-WAY VOICE
COMMUNICATION & DESIGN
2,595,328		76/013,8862,595,328Registered
PAL Services®78/514,514   
WHEN EVERY SECOND MATTERS3,100,19276/319,7592,582,183Registered
TrackerPAL®78/843,035   
MOBILEPAL3,345,87878/514,0313,035,577Registered
Mobile911®78/851,384   
HOMEPAL3,212,93778/514,0933,041,055Registered
TrackerPAL®CA 1,315,487   
PAL SERVICES749,41778/514,5143,100,192Registered
TrackerPAL®MX 805,365   960954Registered
REMOTEMDXForesight®78/561,796pending77/137/822Allowed-Awaiting Statement of Use
   
TRACKERPAL™348150978/843,0353,345,878Registered
ReliAlert™85/238,049   
MOBILE911420073878/851,3843,212,937Registered
HomeAware™85/238,064   4111064Registered
TRACKERPAL™SecureCuff™CA 1,315,487pendingPending85/238,058
   4271621Registered
TRACKERPAL™TrueDetect™MX 805,36596095485/237,2024365120Registered
SecureAlert™86/031,5504623370Registered
Patents
 
Patents.We have five15 patents in the United Statesissued and one patent in China.  In addition, we have seventwo patents pending in the United StatesStates.  At foreign patent office’s we have four patents issued and ten pending internationally. 11 patents pending.  We are also preparing patents that will be filed in other countries in the coming year.
The following tables containsummarize information regarding our patents and patent applications.  There can beis no assurance given that the pending applications will be granted or that they will, if granted, contain all of the claims currently included. included in the applications. 

-17-
 
Domestic Patents:PatentsApplication#  Date Filed 
Patent TitlePatent#
Application/Patent
Number
Filing/Issue Dates IssuedStatus
Remote Tracking and Communication Device7,330,1222/12/08Issued
    
Remotely Controllable Thermostat6,260,7657/17/01Issued
    
Emergency Phone for Automatically Summoning Multiple Emergency Response Services09/17364516-Oct-9862265101-May-01Issued
Combination Emergency Phone and Personal Audio Device09/1851913-Nov-9862858674-Sep-01Issued
Panic Button Phone09/04449719-Mar-98604425728-Mar-00Issued
Interference Structure for Emergency Response System Wristwatch6,366,5384/2/02Issued09/651523
 29-Aug-00  
Multiple Emergency Response Services Combination Emergency Phone and Personal Audio Device63665386,285,8679/4/012-Apr-02 Issued
Remote Tracking and Communication Device  11/20242710-Aug-05733012212-Feb-08Issued
Remote Tracking System and Device withWith Variable Sampling11/486,9916/9/09Issued
and Sending Capabilities Based on Environmental Factors  11/48699114-Jul-0675453189-Jun-09Issued
Alarm and Alarm Management System for Remote Tracking Devices11/489,9927/14/06Pending11/486992
 14-Jul-06  773784115-Jun-10Issued
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between Device and a Monitoring Center
11/486,989
7/14/06Pending
  12/0280888-Feb-08780441228-Sep-10Issued
A Remote Tracking System with a Dedicated Monitoring Center11/486,9767/14/06Pending11/486976
 14-Jul-06  79362623-May-11Issued
MethodsAlarm and Alarm Management System for Establishing Emergency Communications Between a Communications Device and a Response Center11/830,3987/30/07Pending
Remote Tracking Devices  12/7925722-Jun-108013736 6-Sep-11Issued
Remote Tracking and CommunicationsCommunication Device12/028,0882/8/08Pending
  12/8759883-Sep-1080310774-Oct-11Issued
Tracking Device Incorporating Enhanced Security Mounting Strap12/818,45318-Jun-10851407020-Aug-13Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking DeviceUS 61/034,7203/7/08Pending12/399151
 6-Mar-09  
Beacon12/394.1519/2009Pending
40
International Patents:8232876 31-Jul-12 
Patent TitleApplication/Patent NumberFiling/Issue DatesStatusIssued
Emergency Phone with Single-Button ActivationZL 01807350.610/5/05Issued11/174191
 30-Jun-05  
Remote Tracking and Communication DeviceBrazil PI0614742.98/4/06Pending
7251471 
Remote Tracking and Communication DeviceCanada 26179238/4/06Pending
31-Jul-07 
Remote Tracking and Communication DeviceEurope 06836098.18/4/06Pending
Remote Tracking and Communication DeviceMexico a/2008/0019328/4/06Pending
Emergency Phone with Single-Button ActivationEP 01924386.43/28/01Pending
Emergency Phone with Single-Button ActivationJP 2001-5715683/28/01Pending
Alarm and Alarm Management System for Remote Tracking DevicesPCT/US2007/0727367/3/07Pending
Issued
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device and a Monitoring CenterPCT/US2007/0727407/3/07Pending11/486989
 14-Jul-06  87972105-Aug-14Issued
A Remote Tracking Device and a System withand Method for Two-Way Voice Communication Between the Device and a Dedicated Monitoring CenterPCT/US2007/0727437/3/07Pending
  14/323,83103-Jul-14----Pending
A Remote Tracking Device and a System and Method for Two-Way Voice Communication Between the Device with Variable Sampling and Sending Capabilities Based on Environmental Factorsa Monitoring CenterPCT/US2007/0727467/3/0714/307,26017-Jul-14----Pending

 
During the year ended September 30, 2008,
-18-
International Patents Application#  Date Filed Patent#  Issued Status
            
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - EPO  9716860.3 6-Oct-10  2260482  1/9/2013 Issued
Remote Tracking and Communication Device - Mexico MX/a/2008/1932 4-Aug-06  278405  24-Aug-10 Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Mexico MX/a/2010/001932 2-Sep-10  306920  1/22/2013 Issued
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Canada  2717866 3-Sep-10  -   -  Pending
Remote Tracking and Communication Device - EPO  6836098.1 4-Aug-06  -   -  Pending
Remote Tracking and Communication Device - Brazil PI0614742.9 4-Aug-06  -   -  Pending
Remote Tracking and Communication Device - Canada  2617923 4-Aug-06  -   -  Pending
A Remote Tracking System with a Dedicated Monitoring Center - EPO  7812596 3-Jul-07  -   -  Pending
A Remote Tracking System with a Dedicated Monitoring Center - Brazil PI0714367.2 3-Jul-07  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - EPO  10 009 091.9 1-Sep-10  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Brazil PI11001593 28-Feb-11  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Mexico MX/a/2011/002283 28-Feb-11  319057  14-Sep-14 Issued
Secure Strap Mounting System For an Offender Tracking Device - Canada  2732654 23-Feb-11  -   -  Pending
A System and Method for Monitoring Individuals Using a Beacon and Intelligent Remote Tracking Device  - Brazil PI0909172-6 1-Sep-10  -   -  Pending
Secure Strap Mounting System For an Offender Tracking Device - Mexico - DIV MX/a/2013/12524 25-Oct-13  -   -  Pending

-19-
Trade Secrets.  We own certain intellectual property, including trade secrets that we reacquired Patent Number 6,366,538 which was previously soldseek to protect, in exchangepart, through confidentiality agreements with employees and other parties. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for Patent Number 7,092,695 and Patent Number 7,251,471.  Patent Number 6,226,510 and Patent Number 6,044,257 were originally sold subjectany breach, or that our trade secrets will not otherwise become known to terminal disclaimers requiring common ownership with patents owned (Patent Number 7,092,695 and Patent Number 7,251,471)or independently developed by us but not assigned to purchaser.  A terminal disclaimer is used to link two patents filed by the same inventors and claiming the same invention.  In order to get the additional patent rights desired by the purchaser, the two patents are linked using a terminal disclaimer that specifies that they have the same term and must be commonly assigned.competitors.
 
We intend to protect our legal rights concerning intellectual property by all appropriate legal action. Consequently, we may become involved from time to time in litigation to determine the enforceability, scope, and validity of any of the foregoing proprietary rights. Any patent litigation could result in substantial cost and divert the efforts of management and technical personnel.
Trade Secrets.  We own certain intellectual property, including trade secrets that we seek to protect, in part, through confidentiality agreements with employees and other parties, although some employees who are involved in research and development activities have not entered into these agreements. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.
 
Seasonality
 
Given the continued and steady increaseconsistency in recurring domestic monitoring revenues by customer throughout 2010,our recently completed fiscal years, there no apparent seasonality if it existed, could be detected.in our business.  However, as in previous years, incremental domestic deployment opportunities were found to be slowerslowdown in the months of July and August.  This wasWe believe that this is due to the unavailability of many judges, probation directorsjudicial and other key parolecorrections officials, who observe a traditional vacation season.
Backlog
With the transformation of our supply chain operations and manufacturing capabilitiesseason during July through December 2009, the commercial availability of our newly modified and enhanced TrackerPAL™ II(e) devices created an intermittent backlog of units.  Monthly backlogs for organic growth and new account implementation have averaged 150 devices from July through December 2009 as we have implemented and improved our internal repair and refurbishment capabilities in conjunction with our new world-class manufacturing partner and production capabilities at Inovar.
this period.
41
We view backlogs as undesirable, as they impair deployments, which necessarily reduces revenue.  We continue to work on mitigating backlogs, maximizing demand fulfillment, and capitalizing on all available opportunities to secure recurring revenue streams.  In a significant development after September 30, 2009, we authorized the initial manufacture of our first 3,000 TrackerPAL™ II(e) units, which we began delivering in mid-December 2009 and expect to continue to deliver over the next few months. We will use these units to replace any remaining TrackerPAL™ I units, as well as to support growth in existing accounts and in support of new domestic and international opportunities.
Environment
We are not aware of any instance in which we have contravened federal, state, or local laws relating to protection of the environment or in which we otherwise may be subject to liability for environmental conditions that could materially affect operations.
 
Employees
 
As of September 30, 2010,March 25, 2015, we had 183180 full-time employees and 2220 part-time employees.  None of the employees are represented by a labor union or subject to a collective bargaining agreement.  We have never experienced a work stoppage and management believes that the relations with employees are good.
 
Properties
  
Our headquarters and monitoring facility are housed in 8,106approximately 8,600 square feet of commercial office space located at 150 West Civic Center Drive, Sandy,405 South Main Street, Suite 700, Salt Lake City, Utah. Monthly leaseLease payments are approximately $16,200.$13,200 per month. This lease expires on November 30, 2013.August 31, 2016.  In addition, we signed an additional lease to provide 6,152 square feet of warehousing and pallet shipping functions and capabilities in a facility located at 9716 South 500 West, Sandy, Utah 84070.  Monthly lease payments for this facility are approximately $5,300.  Management believes that these facilities are sufficient to meet our needs for$6,500; the foreseeable future.lease expired on August 31, 2014; however, we negotiated a lease extension through March 2015.
 
GPS Global’s operations are housed in approximately 420 square meters of commercial office space located at Atir Yeda Street, Kfar-Saba, Israel.  The monthly lease is approximately $600.  The lease began on August 1, 2014 and expires on July 31, 2018.

Emerge Monitoring’s main operations are housed in approximately 2,800 square feet of commercial office space located at 1213 & 1215 Lakeview Court, Romeoville, IL. A lease for this office space began on August 1, 2014 and expires on July 31, 2017. Monthly lease payments are approximately $3,000 per month. In addition, Emerge also leases approximately 2,000 square foot facility in Indianapolis, Indiana. This lease was executed on January 1, 2014 and expires on December 31, 2018. Monthly lease payments for this facility are approximately $3,200.
Track Group Analytics Limited's operations are located in approximately 1,700 square feet of office space in Dartmouth, Nova Scotia, Canada.  The lease for this office space expires on December 31, 2014. Monthly payments are approximately $2,300 per month. The Company plans to continue utilizing this facility on a month to month basis until a new lease is secured.
Legal Proceedings
 
We are party to the following legal proceedings:
RACO Wireless LLC vLazar Leybovich et al v. SecureAlert, IncInc..  On October 12, 2010, RACO WirelessMarch 29, 2012, Lazar Leybovich, Dovie Leybovich and Ben Leybovich filed a complaint alleging that the Company breached a contract by failing to place a sufficient number of RACO SIM chips in the SecureAlert monitoring devices.11th Circuit Court in and for Miami-Dade County, Florida alleging breach of contract with regard to certain Stock Redemption Agreements.  The Company deniescomplaint was subsequently withdrawn by the plaintiffs.  An amended complaint was filed by the plaintiffs on November 15, 2012.  We believe these allegations are inaccurate and intendsintend to vigorously defend against this complaint.the case vigorously. We have not accrued any potential loss as the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.
 
 SecureAlert, v. David Ezell, et al.  We have filed a claim against David Ezell and several related entities for breach of contract, unjust enrichment, conversion, and punitive damages, and seek approximately $290,810 in damages, penalties, attorneys fees, and other amounts to be proven at trial.  The defendant has defaulted in responding to our claims, and the court has entered judgment against Mr. Ezell and his entities in excess of $1,000,000.
Aculis, Inc.Christopher P. Baker v. SecureAlert, Inc.  Aculis, Inc.In February 2013, Mr. Baker filed a complaintsuit against us in the FourthThird Judicial District Court in and for UtahSalt Lake County, Utah, on June 7, 2010, alleging breachState of contract, unjust enrichment,Utah.  Mr. Baker asserts that we breached a 2006 consulting agreement with him and claims damages of not less than $210,000.  We dispute the plaintiff’s claims and will defend the case vigorously.  No accrual for a claim for $208,889 in unpaid products and services, incremental topotential loss has been made as we believe the $4,840,891 we have already paid to Aculis.  We filedprobability of incurring a Motion to Dismiss for Improper Venue or for Change of Venue and supporting memorandum on July 16, 2010.  Aculis filed its Memorandum in Opposition to the Motion to Dismiss on August 5, 2010.  Our reply memorandum was filed on August 16, 2010.  We intend to vigorously defend our interests and to pursue appropriate counterclaims against Aculis.material loss is remote.
 
 
42-20-
 

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2010.  You should read this table in conjunction with the “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and our consolidated financial statements and the related notes thereto:

 June 30, 
 2010 
Cash and cash equivalents$1,879,955 
    
Long-term debt:   
Total long-term debt$574,529 
    
Stockholders’ equity:   
Common Stock, $0.0001 par value: 600,000,000 shares authorized; 238,748,663 shares issued and outstanding 23,875 
Series D Preferred Stock, $0.0001 par value, 50,000 shares authorized; 37,851 shares issued and outstanding 4 
Additional paid-in capital 221,235,284 
Accumulated deficit (216,075,643)
Total stockholders’ equity 3,869,330 
Total capitalization$27,933,594 

MARKET PRICE FOR OUR COMMON STOCKEQUITY AND RELATED STOCKHOLDERSHAREHOLDER MATTERS
Market Information
 
Our Common Stock tradesis traded on the OTC Bulletin BoardOTCQB under the symbol “SCRA”.“SCRA.”  The following table sets forth the range of high and low bidsales prices of our Common Stock as reported on the OTC Bulletin Board for the periods indicated.  The sales information is available online at http://otcbb.com.
 Fiscal Year Ended September 30, 2013 High  Low 
 First Quarter ended December 31, 2012 $14.60  $3.22 
 Second Quarter ended March 31, 2013 $14.60  $11.00 
 Third Quarter ended June 30, 2013 $14.70  $7.00 
 Fourth Quarter ended September 30, 2013 $20.90  $14.40 
         
 Fiscal Year Ended September 30, 2014      
 First Quarter ended December 31, 2013 $19.99  $17.29 
 Second Quarter ended March 31, 2014 $19.65  $17.51 
 Third Quarter ended June 30, 2014 $18.75  $14.60 
 Fourth Quarter ended September 30, 2014 $19.45  $10.77 
         
 Fiscal Year Ended September 30, 2015        
 First Quarter ended December 31, 2014 $17.50  $12.30 
Reverse Stock Split
 
  High  Low 
Fiscal Year
Ended September 30, 2008
      
First Quarter $4.22  $2.72 
Second Quarter $4.09  $1.00 
Third Quarter $1.84  $1.47 
Fourth Quarter $1.52  $1.11 
         
         
Fiscal Year
Ended September 30, 2009
        
First Quarter $1.20  $0.18 
Second Quarter $0.27  $0.10 
Third Quarter $0.26  $0.14 
Fourth Quarter $0.20  $0.11 
On February 28, 2013, our shareholders approved a reduction in the authorized share capital of the Company to 15,000,000 shares of Common Stock, and authorized a reverse split to reduce the outstanding shares of the Company at a ratio of 200-for-1, which was implemented on March 25, 2013.  Share and per share information for the prior periods has been retroactively adjusted in this prospectus to reflect the effects of the reverse stock split.

Holders
 
As of September 30, 2010, there wereMarch 25, 2015, we had approximately 3,500 1,049 holders of record of our Common Stock and 280,023,25510,150,617 shares of Common Stock outstanding. We also have granted options and warrants for the purchase of 51,740,451 262,603 shares of Common Stock.  We have also issued 35,407 shares of Series D Preferred, which are convertible into 212,442,000 shares of Common Stock, including the Resale Shares, at a ratio of 6,000 shares of Common Stock for each share of Series D Preferred.Stock..
 
Dividends
 
Since incorporation, we have not declared any cash dividends on our Common Stock.  We do not anticipate declaring cash dividends on our Common Stock for the foreseeable future.  During the fiscal years ended September 30, 2009 and 2008, we recorded $175 and $345,356 in stock dividends, respectively, payable on outstanding shares of Preferred Stock.
 
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Dilution
 
The Board of Directors determines when and under what conditions and at what prices to issue stock.  In addition, a significant number of shares of Common Stock are reserved for issuance upon exercise of purchase or conversion rights.
 
The issuance of any shares of Common Stock for any reason will result in dilution of the equity and voting interests of existing stockholders.shareholders.


 
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Transfer Agent and Registrar
 
The transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company, 59 Maiden Lane, Plaza Level,6201 15th Avenue, Brooklyn, New York, NY 11219.
 
Securities Authorized for Issuance under Equity Compensation Plans
 
The following table sets forth information as of September 30, 2009, our most recently completed fiscal year, with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance.  No equity securities have been authorized for issuance under plans that were not previously approved by security holders.
Equity Compensation2012 SecureAlert, Inc. Stock Incentive Plan Information
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance
Equity compensation plans approved by security holders 10,000,000 $1.06 7,487,286

USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds from the sale of any Resale Shares sold by them pursuant to this prospectus. We will not receive any proceeds from these sales.
SELLING STOCKHOLDERS
The Selling Stockholders identified in this prospectus are offering up to 47,100,000 shares of our Common Stock in this prospectus (the Resale Shares).
The Resale Shares being offered by the Selling Stockholders in this prospectus are issued or issuable to the Selling Stockholders upon conversion of a total of 7,850 shares of our Series D Preferred acquired by the Selling Stockholders in a private placement.
The Selling Stockholders may offer the Resale Shares for resale from time to time pursuant to this prospectus. The Selling Stockholders may also sell, transfer or otherwise dispose of all or a portion of their Resale Shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those shares. We may from time to time include additional Selling Stockholders in amendments to this prospectus.
 
The following table sets forth information, asBoard of November 22, 2010, with respect toDirectors has adopted the Selling Stockholders,SecureAlert, Inc. 2012 Equity Compensation Plan (the “2012 Plan”), approved by shareholders at the Annual Meeting of Shareholders held on December 21, 2011.  We believe that incentives and stock-based awards focus employees on the objective of creating shareholder value and promoting the success of the Company, and that incentive compensation plans like the 2012 Plan are an important attraction, retention and motivation tool for participants in the 2012 Plan.
Under the 2012 Plan, 90,000 options or shares of Common Stock may be awarded.  As of the date of this report, 35,332 shares of Common Stock and Series D Preferred owned by each Selling Stockholder, andoptions for the numberpurchase of Resale Shares that may be offered pursuant to this prospectus. Unless otherwise indicated below, to our knowledge each Selling Stockholder named in the table has sole voting and investment power with respect to the44,988 shares of Common Stock beneficially owned by it. As used in this prospectus,have been awarded under the term “Selling Stockholders” has the meaning set forth in the “PLAN OF DISTRIBUTION” section of this prospectus beginning on page 46. The information is based on information provided by or on behalf of the Selling Sto ckholders.2012 Plan.
 
The following table includes information as of March 25, 2015 for our equity compensation plans:
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights  Weighted-average exercise price of outstanding options, warrants and rights  Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
  (a)  (b)  (c) 
Equity compensation plans approved by security holders    262,603  $   15.08     9,680 
Equity compensation plans not approved by security holders    -     -     
Total    262,603  $  15.08     9,680 

 
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended September 30, 2013 and the three months ended December 31, 2014, included elsewhere in this prospectus.
Overview
The Company markets and deploys offender management programs, combining patented GPS tracking technologies, fulltime 24/7/365 intervention-based monitoring capabilities and case management services.  Our vision is to be the global market leader for delivering the most reliable offender management solutions, which leverage superior intervention capabilities and integrated communication technologies.  We currently deliver the only offender management technology that effectively integrates GPS, Radio Frequency (“RF”) and an interactive 3-way voice communication system into a single piece device, deployable worldwide.  Through our patented electronic monitoring technologies and services, we empower law enforcement, corrections and rehabilitation professionals with offender, defendant, probationer and parolee programs, which grant convicted criminals and pre-trial suspects an accountable opportunity to be “free from prison”.  This provides for greater public safety at a lower cost compared to incarceration or traditional resource-intensive alternatives.

Our flagship product line, ReliAlert, Shadow, and R.A.D.A.R., consists of devices and services customizable to provide secure reintegration solutions for various offender types, including domestic abusers, sexual predators, gang members, pre-trial defendants, alcohol abusers, or juvenile offenders. Our proprietary software, device firmware and processes accommodate agency-established monitoring protocols, victim protection imperatives, geographic boundaries, work environments, school attendance, rehabilitation programs and sanctioned home restrictions. Our devices are intelligent devices with integrated computer circuitry.  They are constructed from case-hardened materials and are designed to promptly notify intervention monitoring centers of attempts to breach applicable electronic supervision terms or to remove or otherwise tamper with device elements. They are securely attached around an offender’s ankle with a tamper resistant strap (steel cabling with optic fiber).  We also have a unique patented, dual-steel banded SecureCuff for high risk or high flight risk offenders who have qualified for electronic monitoring supervision, but who require an incremental level of security and supervision.
Results of Operations
Continuing Operations - Fiscal Year 2014 Compared to Fiscal Year 2013
Net Revenue
During the fiscal year ended September 30, 2014, we had net revenue of $12,262,198 compared to net revenue of $15,641,062 for the fiscal year ended September 30, 2013, a decrease of $3,378,864, or approximately 22%.   Of this revenue, $11,663,181 and $15,028,625 were from monitoring and other related services during the 2014 and 2013 period, respectively, a decrease of $3,365,444 (22%). This decrease resulted primarily from the completion of a contract with an international customer in fiscal 2013.  Product revenue decreased $13,420 (2%) from $612,437 for the year ended September 30, 2013 to $599,017 for the year ended September 30, 2014.
Cost of Revenue
During the year ended September 30, 2014, cost of revenue totaled $5,499,093 compared to cost of revenue during the year ended September 30, 2013 of $8,030,168, a decrease of $2,531,075. This decrease resulted primarily from the completion of a contract with an international customer in fiscal 2013. We expect the cost of revenue as a percentage of revenue to decrease in the foreseeable future due to economies of scale, realized through lower cost devices, projected increases in revenue, further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs, and the use of more efficient supply channels.

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Impairment costs for equipment and parts for the fiscal years ended September 30, 2014 and 2013 were $373,951 and $213,276, respectively.  These costs resulted from the disposal of obsolete inventory, monitoring equipment and parts as we continue to make enhancements to the device.
Amortization for the fiscal years ended September 30, 2014 and 2013, totaled $1,313,697 and $1,230,293, respectively. Amortization costs are based on a three-year useful life for TrackerPAL and ReliAlert devices.  Devices that are leased or retained by us for future deployment or sale are amortized over three years. We believe this three-year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence.  Management periodically assesses the useful life of the devices for appropriateness.
We expect the cost of revenue, excluding impairment of equipment and parts, as a percentage of revenue to decrease in the foreseeable future due to (a) economies of scale realized through projected increases in revenue, and (b) further development of lower cost devices and gained efficiencies in our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs.
Gross Profit and Margin
During the fiscal year ended September 30, 2014, gross profit totaled $6,763,105, or 55% of net revenues, compared to $7,610,894, or 49% of net revenue during the fiscal year ended September 30, 2013, a decrease of $847,789.  Included in cost of revenue are costs attributable to impairment of inventory and monitoring equipment of $373,951 and $213,276 for fiscal years 2014 and 2013, respectively.  These impairment costs from disposal and reduction in value of obsolete monitoring equipment are expenses we expect to decrease in future periods.  Excluding impairment costs, adjusted gross profit for the fiscal year ended September 30, 2014 was $7,137,056 or 58% of net revenue, compared to $7,824,170 or 50% of net revenue, for the same period in 2013, a decrease of $687,114. Decreases in revenue from the completion of a large international project in fiscal 2013 led to the decrease in gross profit.
Research and Development Expense
During the fiscal year ended September 30, 2014, we incurred research and development expense of $1,605,662 compared to similar expense recognized during fiscal year 2013 totaling $987,934.  These increased research and development costs were incurred to improve efficiency in the software, firmware and hardware of our products and services including the development of new and more efficient electronic monitoring devices and other research and development costs incurred by a new subsidiary acquired during the year ended September 30, 2014.

Selling, General and Administrative Expense
During the fiscal year ended September 30, 2014, our selling, general and administrative expense totaled $12,891,151, compared to $7,679,124 for the fiscal year ended September 30, 2013.  The increase of $5,212,027 is primarily the result of increases in legal, consulting, travel and other outside services expense of $2,262,076, in connection with preliminary work and preparation for a large international contract and for purchase expense related to the acquisition of two new subsidiaries during the second half of fiscal 2014. The Company also incurred payroll and payroll related expense of $1,308,259 and other operating expense $1,855,614 related to the Company’s new Chilean, Israeli and U.S. subsidiaries which were not a part of the consolidated entity at September 30, 2013.
Other Income and Expense
For the fiscal year ended September 30, 2014, interest expense was $1,290,289, compared to $17,048,519 for the fiscal year ended September 30, 2013. This decrease in interest expense resulted primarily from a reduction in convertible debentures and the acceleration of certain debt conversion features into Common Stock during the 2014 period.   For the year ended September 30, 2014, other income was $624,001 compared to other expense of $279,174 for the year ended September 30, 2013.  This increase in other income resulted primarily from a settlement agreement.

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Net Loss
We had a net loss from for the fiscal year ended September 30, 2014 totaling $8,747,844 (approximately $0.88 per share), compared to a net loss of $17,915,711 (approximately $3.79 per share) for the fiscal year ended September 30, 2013.  This decrease in the net loss is a result of a large decrease in interest expense offset by increases in operating and research and development expenses.
Discontinued Operations - Fiscal Year 2014 compared to Fiscal Year 2013
Effective October 1, 2012, we sold all of the issued and outstanding capital stock of our subsidiaries, Midwest Monitoring & Surveillance, Inc. (“Midwest”) and Court Programs, Inc. (“Court Programs”) to each of the their former principals, effective October 2012 and January 2013, respectively. Since Midwest and Court Programs were a component of our consolidated entity, these sales require discontinued operations reporting treatment of the Midwest and Court Program operations.
A summary of the operating results of discontinued operations for the fiscal years ended September 30, 2014 and 2013 is as follows:

  2014  2013 
Revenues $-  $477,298 
Cost of revenues  -   (163,487)
Gross Profit  -   313,811 
Selling, general and administrative expense  -   (319,976)
Loss from operations  -   (6,165)
Other expense  -   (295)
Net loss from discontinued operations $-  $(6,460)

Continuing Operations - Three months ended December 31, 2014, compared to three months ended December 31, 2013.

Revenue

For the three months ended December 31, 2014, the Company recognized revenue from operations of $4,620,619, compared to $2,659,294 for the three months ended December 31, 2013, an increase of $1,961,325 (74%).  Of these revenues, $4,529,030 and $2,593,683, respectively, were from monitoring and other related services, an increase of $1,935,347 (75%).  The increase was principally the result of sales generated by subsidiaries which were acquired during the prior fiscal year (see note 9), which contributed approximately $1.3 million in revenue, or 28% of total revenue during the three months ended December 31, 2014. For the three months ended December 31, 2014, international revenue was $1,255,501, compared to $775,130 for the three months ended December 31, 2013, an increase of $480,771 (62%). The increase in total revenue was principally due to revenue generated by our Chilean subsidiary and, to a lesser extent, from our newly acquired Canadian subsidiary.  Our Chilean subsidiary had minimal activity during the period ended December 31, 2013.
Product revenue increased $25,978 (40%) from $65,611 for the three months ended December 31, 2013, to $91,589 for the three months ended December 31, 2014. The increase was largely the result of sales generated by subsidiaries which were acquired during the prior fiscal year (see note 9).
Due to the acquisitions made during the Company's fiscal year ended September 30, 2014, and in the most recently completed fiscal quarter, the Company anticipates that total revenue in subsequent periods will increase compared to the comparable periods in the prior fiscal year, and those increases will be material.

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Cost of Revenue

During the three months ended December 31, 2014, cost of revenue totaled $2,045,167 compared to cost of revenue during the three months ended December 31, 2013 of $1,398,829, an increase of $646,338.  The increase in cost of revenue was largely the result of costs incurred by subsidiaries which were acquired during the prior fiscal year (see note 9), including increased costs associated with heightened activity in our Chilean operations.
Although management expects the costs of revenue to increase in subsequent periods due to the costs assocated with our recently acquired operations, the Company expects the cost of revenue as a percentage of revenue to decrease in the foreseeable future due to economies of scale realized through projected increases in revenue, further development of our proprietary software, enabling each operator to monitor more devices resulting in lower monitoring center costs, and the use of more efficient supply channels.

Depreciation for the three months ended December 31, 2014 and 2013 totaled $228,050 and $190,992, respectively. Depreciation costs are based on a three to five year useful life for TrackerPAL™ and ReliAlert™® devices.  Devices that are leased or retained by us for future deployment or sale are depreciated over three to five years.  The Company believes this three to five year life is appropriate due to rapid changes in electronic monitoring technology and the corresponding potential for obsolescence.  Management periodically assesses the useful life of the devices for appropriateness.

Gross Profit and Margin

During the three months ended December 31, 2014, gross profit totaled $2,575,452, or 56% of net revenue compared to $1,260,465, or 47% of net revenue during the three months ended December 31, 2013.

Research and Development Expense

During the three months ended December 31, 2014, research and development expense totaled $464,178 compared to research and development expense for the three months ended December 31, 2013 totaling $319,570, an increase of $144,608.  These research and development costs were incurred to improve efficiency in the software, firmware and hardware of our products and services.

Selling, General and Administrative Expense

During the three months ended December 31, 2014, selling, general and administrative expense totaled $3,739,681 compared to $2,171,447 for the three months ended December 31, 2013.  The increase of $1,568,234 in selling general and administrative costs resulted from increases in payroll expense of $1,251,500, travel expense of $197,000, and operating expenses of the Company’s new Chilean, Israeli, Canadian and U.S. subsidiaries that were not a part of the consolidated entity at December 31, 2013.  Selling, general and administrative expense is anticipated to increase in subsequent periods due to the Company's acquisitions; however, such expense as a percentage of total revenue should decrease in subsequent periods as the Company integrates the operations associated with the newly acquired subsidiaries.

Other Income and Expense
For the three months ended December 31, 2014, interest expense was $683,941 compared to $43,918 for the three months ended December 31, 2013. This increase in interest expense resulted primarily from interest on the Company’s notes payable and facility agreement, none of which were outstanding during the same period in the prior year.   

Net Loss

The Company had a net loss from continuing operations for the three months ended December 31, 2014 totaling $2,215,215 compared to a net loss of $1,270,193 for the three months ended December 31, 2013, an increase of  $945,022.  This increase in the net loss is a result of increases in operating expenses of the Company and its subsidiaries acquired during the prior year.


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Liquidity and Capital Resources

Currently, we are  unable to finance our business solely from cash flows from operating activities. During the year ended September 30, 2014, we supplemented cash flows to finance the business from borrowings under a credit facility and from the sale and issuance of debt and equity securities. No such borrowings or sales occurred during the three months ended December 31, 2014. Together with the receipt of $4.7 million in January 2015, available cash resources at December 31, 2014 are anticipated to meet our working capital requirements for the next twelve months.

As of December 31, 2014, we had unrestricted cash of $5,188,582 and a working capital surplus of $6,162,170, and, as of September 30, 2014, we had unrestricted cash of $11,101,822, compared to unrestricted cash of $3,382,428 as of September 30, 2013.  As of September 30, 2014, we had a working capital surplus of $11,323,107, compared to a working capital surplus of $6,836,442 as of September 30, 2013. The increase in working capital in fiscal year 2014 primarily resulted from increases in cash on hand as a result of increases in inventory and proceeds from the Facility Agreement with Tetra House and subsequently assigned to Conrent Invest S.A.

We used cash of $2,777,233 for investing activities during the three months ended December 31, 2014, compared to $4,158,893 of cash used in investing activities in the three months ended December 31, 2013. During fiscal year 2014, we used $4,582,288 in cash from operating activities, compared to $838,910 of cash provided by operating activities during fiscal year 2013. The most significant change in cash from operations from 2013 to 2014 was the decrease in the certain non-cash accretion expense related to certain debt features which existed in 2013, but did not exist in 2014.  
We used $598,251 of cash for financing activities during the three months ended December 31, 2014, compared to $2,623,664 in cash provided for the three months ended December 31, 2013. Cash provided by financing activities was used to support operating activities during the three months ended December 31, 2013.

We used $12,837,121 of cash by investing activities during the fiscal year ended September 30, 2014, compared to $560,425 of cash used during fiscal year 2013.  The increase in cash used by investing activities of $12,276,696 during fiscal year 2014 resulted primarily from cash payments related to the acquisition of subsidiaries during 2014, the payment of a bond required for an international subsidiary, and cash paid for purchases of property and equipment and leasehold improvements.
Inflation
We do not know whenbelieve that inflation has had a material impact on our historical operations or in what amounts any Selling Stockholder may offer Resale Shares for sale. Because (i) the Selling Stockholders may offer all or someprofitability.
Critical Accounting Policies
In Note 2, “Summary of the Resale Shares pursuant to this offering, (ii) there are currently no agreements, arrangements or understandings with respectSignificant Accounting Policies” to the sale of any of the Resale Shares, and (iii) the Selling Stockholder may acquire additional shares from us oraudited Consolidated Financial Statements included in the open market in the future, no definitive estimate as to the number of shares that will be held by each Selling Stockholder after the offering can be provided. The column captioned “Shares Beneficially Owned After this Offering” in the following table has been prepared on the assumption that all Resale Shares offered under this prospectus, willwe discuss those accounting policies that are considered to be sold to parties unaffiliated withsignificant in determining the Sel ling Stockholders.results of operations and our financial position.
 
The Selling Stockholderspreparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities.  The actual results may differ from these estimates under different assumptions or conditions.
With respect to inventory reserves, revenue recognition, impairment of long-lived assets and allowance for doubtful accounts receivable, we apply critical accounting policies discussed below in the preparation of our financial statements.

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Inventory Reserves
The nature of our business requires maintenance of sufficient inventory on hand at all times to meet the requirements of our customers. We record inventory and raw materials at the lower of cost, or market, which approximates actual cost. General inventory reserves are maintained for the possible impairment of the inventory. Impairment may be a result of slow moving or excess inventory, product obsolescence or changes in the valuation of the inventory. In determining the adequacy of reserves, management analyzes the following, among other things:
●Current inventory quantities on hand;
●Product acceptance in the marketplace;
●Customer demand;
●Historical sales;
●Forecast sales;
●Product obsolescence; and
●Technological innovations.
Any modifications to these estimates of reserves are reflected in cost of revenues within the statement of operations during the period in which such modifications are determined necessary by management.
Revenue Recognition
Our revenue has historically been from two sources: (i) monitoring services; and (ii) product sales.
Monitoring Services
Monitoring services include two components: (i) lease contracts in which we provide monitoring services and lease devices to distributors or end users and we retain ownership of the leased device; and (ii) monitoring services purchased by distributors or end users who have previously purchased monitoring devices and opt to use our monitoring services.
We typically lease our devices under one-year contracts with customers that opt to use our monitoring services.  However, 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 7 to 21 days from the date the device is assigned to the lessee, and remains billable until the device is returned.  We recognize revenue on leased devices at the end of each month that monitoring services have been provided.  In those circumstances in which we receive payment in advance, we record these payments as deferred revenue.
Product Sales
We may sell monitoring devices in certain situations to our customers. In addition, we may sell equipment in connection with the building out and setting up a monitoring center on behalf of customers.  We recognize 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 hadbeing made outside the normal payment terms) and collection is reasonably assured. When purchasing products (such as TrackerPAL, ReliAlert, Shadow or R.A.D.A.R. devices), customers may, but are not required to, enter into one of our monitoring service contracts.  We recognize revenue on monitoring services for customers that have previously purchased devices at the end of each month that monitoring services have been provided.

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We sell and install standalone tracking systems that do not require our ongoing monitoring.  We have experience in component installation costs and direct labor hours related to this type of sale and can typically reasonably estimate costs, therefore we recognize revenue over the period in which the installation services are performed using the percentage-of-completion method of accounting for material installations.  We typically use 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.  We evaluate our estimated labor hours and costs and determine 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 revenues, we accrue the estimated losses immediately.
Multiple Element Arrangements
The majority of our revenue transactions do not have multiple elements. However, on occasion, we 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, we recognize 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
We consider an arrangement with payment terms longer than our normal terms not to be fixed or determinable, and we recognize revenue when the fee becomes due.  Normal payment terms for the sale of monitoring services and products are due upon receipt to 30 days.  We sell our 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 we sell to them.  Generally, title and risk of loss pass to the buyer upon delivery of the devices.
We estimate our product returns based on historical experience and maintain 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 revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.
Impairment of Long-lived Assets
We review our long-lived assets such as goodwill and intangibles 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. We evaluate whether events and circumstances have occurred which indicate possible impairment as of each balance sheet date. We use an equity method of the related asset or group of assets in measuring whether the assets are recoverable.  If the carrying amount of an asset exceeds its market 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 market value that is independent of other groups of assets.
Allowance for Doubtful Accounts
We must make estimates of the collectability of accounts receivable. In doing so, we analyze accounts receivable and historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts.

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Recent Accounting Pronouncements 
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies, which are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material relationshipimpact on our financial position or results of operations upon adoption.
Accounting for Stock-Based Compensation
We recognize 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.  We estimate the fair value of stock options using a Black-Scholes option pricing model which requires us 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.
Financial and Certain Pro Forma Information Regarding GPS Global
At the time of the Transaction, GPS Global was a privately owned company established in 2007 in the State of Israel.  GPS Global provides tracking, monitoring and surveillance solutions of offenders, vehicles, facilities and human resources.  GPS Global specializes in developing innovative products using advanced technologies to provide a complete solution for its customers.  GPS Global has had limited operations.  Its business has involved primarily the research and development of solutions for offender tracking and monitoring, human resources and personnel locating, vehicle and asset tracking, locating and control, and facility monitoring.  It does not own any patents at this time.  The financial and certain pro forma financial information regarding GPS Global specified in Rule 3-05(b) or Rule 8-04(b) of Regulation S-X under the Exchange Act will be filed by amendment to this registration statement on Form S-1/A within the 71 days allowed.

MANAGEMENT
Directors and Executive Officers
The following table sets forth information about the members of our Board of Directors as of March 25, 2015:  
NameAgePosition
David S. Boone54Director
Guy Dubois56Director
Rene Klinkhammer34Director
Winfried Kunz49Director
Dan L. Mabey63Director
George F. Schmitt71Director
David S. Boone became a director of our Company on December 21, 2011. He has served in executive roles with a variety of publicly traded and start-up organizations including Kraft General Foods, Sears, PepsiCo, Safeway and Belo Corporation, as well as serving as the CFO of Intira Corporation.  In addition, he has served as a consultant with the Boston Consulting Group.  Mr. Boone was CEO, President and Director of American CareSource Holdings from 2005 to 2011, a NASDAQ traded company.  He was the 2009 Ernst and Young Entrepreneur of the Year winner for Health Care in the Southwest Region. Mr. Boone serves on a number of private company boards and serves on the board of the Texas Kidney Foundation. Mr. Boone graduated from the University of Illinois, cum laude, in 1983 majoring in accounting.  Mr. Boone is a Certified Public Accountant.  He received his master’s degree in business administration from Harvard Business School in 1989. Mr. Boone serves on the Audit Committee and chairs the Finance Committee of our Board of Directors. The Nominating Committee considers Mr. Boone's financial experience and business experience to be an important qualification for his service on the Board and the Audit and Finance Committees.

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Guy Dubois is our Chairman since February 2013 and became a director in December 2012. Mr. Dubois is a Director of Singapore-based Tetra House Pte. Ltd., a provider of consulting and advisory services worldwide; and a director of RNTS Media NV, a Luxembourg listed digital content developer and mobile application advertising monetization platform provider. Mr. Dubois is a former director and CEO of Gategroup AG, and held various executive leadership roles at Gate Gourmet Holding LLC. Mr. Dubois has held executive management positions at Roche Vitamins Inc. in New Jersey, as well as regional management roles in that firm’s Asia Pacific operations. Mr. Dubois also served the European Organization for Nuclear Research (CERN) team in Switzerland in various roles, including treasurer and chief accountant. Mr. Dubois also worked with IBM in Sweden as Product Support Specialist for Financial Applications. A Belgian citizen, Mr. Dubois holds a degree in financial science and accountancy from the Limburg Business School in Diepenbeek, Belgium. The Board believes that Mr. Dubois' extensive financial and operational experience is a tremendous asset to the Company as a member of the Board of Directors.
Rene Klinkhammer became a director in January 2010.  He graduated from European Business School, Oestrich-Winkel, Germany, in 2004, with an MBA-equivalent degree in business administration.  His majors were Banking, Finance and International Management.  After graduating, Mr. Klinkhammer joined Deutsche Bank’s Investment Banking Division as an analyst in the Corporate Finance Advisory Group, specializing in mergers and acquisitions, along with debt and equity financing transactions for larger German clients of the bank.  From 2007 to June 2013, Mr. Klinkhammer worked for Sapinda Holding B.V. and its subsidiaries, a group of privately-owned investment companies with offices in Amsterdam, Berlin, London and other major cities around the world.  From July 2013 until September 2014, Mr. Klinkhammer worked for Anoa Capital S.A., a Luxembourg based provider of innovative financing solutions, as Head of Origination. Since then, Mr. Klinkhammer has co-launched a family-owned venture, focusing on residential real estate developments and adjacent fields of business. Mr. Klinkhammer is a member of the Compensation Committee of our Board of Directors. The Nominating Committee considered Mr. Klinkhammer's finance background to be an important qualification for his service as a member of the Board.
Winfried Kunz became a director on December 21, 2011. He studied Business Administration and Economics from 1984 -1989 at the Universities in Munich and Cologne. In 1985 he started working as a system analyst and from 1987 – 1998 as a management consultant for German, British and American companies in the information technology business, where he served in executive positions. Mr. Kunz worked as an executive at Precision Software Ltd., Contact Software International Inc., and Symantec Corp. For more than 15 years, Mr. Kunz has worked as an independent consultant and managing partner of Asecon GmbH, a company he founded in 1997, developing and implementing investor innovative business models for residential properties with a focus in Munich for his own portfolio and for third parties. For more than 10 years he has been a consultant to JK Wohnbau GmbH, a Munich-based real estate developer, where he served as COO from 2009 until the company’s initial public offering in 2010. Previously, from 2009 to 2011, Mr. Kunz worked with us withinas an investor. Mr. Kunz brings extensive experience in the information technology industry and his international business expertise, as well as his finance and operational expertise to the Board of Directors.
Dan L. Mabey became a director on December 21, 2011.  Mr. Mabey has acted as the CEO of BigHorn Oil and Gas, an energy development company (Casper, Wyoming), and he has served in both public and private company leadership positions in the high-tech industry including President of 1-2-1 View digital signage company (Singapore), Chief Operating Officer and Director of In Media Corporation IPTV service company (California), President of Interactive Devices, Inc. a video compression company (Folsom, California) and Vice President of Broadcast International, a satellite broadcast company ( Salt Lake City, Utah).  From 1990 until 2002, Mr. Mabey was Director of the State of Utah Department of Economic Development International Business Development Office, growing Utah exports from $700 million to $3.6 billion a year. He helped recruit the 2002 Winter Olympics to Salt Lake City, Utah, and managed international business development for the games. Throughout his career, Mr. Mabey has been active in civic and community organizations and is the recipient of numerous service awards. He is also the co-inventor or lead inventor on six patents and the sole inventor of a seventh.  Mr. Mabey received a Masters of Public Administration (MPA) degree from Idaho State University in 1978 and a B.A. degree from Boise State University in 1974. Mr. Mabey is a member of the Nominating Committee. The Board of Directors considers Mr. Mabey's extensive international business experience to be an important qualification for his continuing service as a Board member.

George F. Schmitt became a director on December 21, 2011.  He is a director and CEO of MBTH Technology Holdings.  He has held this position since December, 2010.  Mr. Schmitt is also a director of XG Technology, Inc. a publicly traded company, Kentrox and Calient.  Mr. Schmitt previously served as a director of TeleAtlas, Objective Systems Integrators, Omnipoint and LHS Group.  Mr. Schmitt is a principal of Sierra Sunset II, LLC and serves as a Trustee of St. Mary’s College.  In addition, Mr. Schmitt has served as a director of many privately held companies including Voice Objects, Knowledge Adventure, Jungo and Cybergate, among others.  Mr. Schmitt has also served as Financial Vice President of Pacific Telesis and chaired the audit committee of Objective Systems Integrations and TeleATLAS.  Mr. Schmitt received an M.S. in Management from Stanford University, where he was a Sloan Fellow, and a B.A. in Political Science from Saint Mary’s College. The Nominating Committee recognizes the benefit to the Board of Directors and to the Company of Mr. Schmitt's service as a member of the boards of directors of various companies and his extensive experience in the telecommunications industry.


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Board of Directors
Election and Meetings
Directors hold office until the next annual meeting of the shareholders and until their successors have been elected or appointed and duly qualified.  Executive officers are appointed by the Board of Directors and hold office until their successors are appointed and duly qualified.  Vacancies on the Board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members of the Board, with such new director serving the remainder of the term or until his/her successor shall be elected and qualify.
The Board of Directors is elected by and is accountable to our shareholders.  The Board establishes policy and provides strategic direction, oversight, and control.  The Board met eight times during fiscal year 2014.  All directors attended at least 80% of the meetings of the Board and the committees of the Board of Directors, of which they are members.
Director Independence
The Board of Directors intends to comply with the director independence standards of the NASDAQ Stock Market, including Rule 4200(a)(15). The Board determined, based on the NASDAQ Stock Market Rules, that George F. Schmitt, Winfried Kunz, David S. Boone, Rene Klinkhammer, and Dan L. Mabey meet the NASDAQ standards to be considered independent. The Board has not appointed a lead independent director.
Specifically, none of these directors:
●has been at any time during the past three years employed by us or by any parent or subsidiary of the Company;
●has accepted or has a family member who accepted any compensation from us in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than compensation for board or board committee service;
●is a family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer;
●is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments for property or services in the current or any of the past three fiscal years that exceed 5 percent of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more;
●is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of our executive officers serve on the compensation committee of such other entity; or
●is, or has a family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.
Shareholder Communications with Directors
If we receive correspondence from our shareholders that is addressed to the Board of Directors, we forward it to every director or to the individual director to whom it is addressed. Shareholders who wish to communicate with the directors may do so by sending their correspondence to the directors c/o Track Group, 405 South Main Street, Suite 700, Salt Lake City, Utah 84111.

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Committees of the Board of Directors
The Board of Directors has three years other than their ownershipstanding committees: the Audit Committee, Compensation Committee, and Nominating Committee.  These committees assist the Board of Directors to perform its responsibilities and make informed decisions.
Audit Committee
The primary duties of the Audit Committee are to oversee (i) management’s conduct of our securitiesfinancial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing our systems of internal accounting and financial controls, (ii) our independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company and (iii) the engagement and performance of our independent auditors.  The Audit Committee assists the Board in providing oversight of our financial and related activities, including capital market transactions. The Audit Committee has a charter, a copy of which is available on our website at www.trackgrp.com.
The Audit Committee meets with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our independent registered public accounting firm.  The Audit Committee met four times during fiscal year 2014 and all members of the Audit Committee attended at least 75% of the committee’s meetings.  

Members of the Audit Committee as otherwise describedof September 30, 2014, are Messrs. Boone, Schmitt and Kunz.  Each member of the Audit Committee satisfies, according to the full Board of Directors, the definition of independent director as established in the footnotesNASDAQ Stock Market Rules.  All of the members of the Audit Committee are financially literate.  In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board of Directors designated David S. Boone as the Audit Committee’s “Audit Committee Financial Expert” as defined by the applicable regulations promulgated by the SEC.  
The Audit Committee reviewed and discussed the matters required by United States auditing standards required by the Public Company Accounting Oversight Board (“PCAOB”) and our audited financial statements for the fiscal year ended September 30, 2014 with management and our independent registered public accounting firm.  The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by Independence Standards Board No. 1, and the Audit Committee has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence.  

Compensation Committee
Members of the Compensation Committee are Messrs. Mabey (Chairman), Boone, and Schmitt.  The Compensation Committee met two times during fiscal year 2014.  Members of the Compensation Committee are appointed by the Board of Directors.  Messrs. Mabey, Boone, and Schmitt are independent directors, as determined by the Board of Directors in accordance with the NASDAQ Stock Market Rules, including Rule 5605(d)(2)(A).  The Compensation Committee is governed by a charter approved by the Board of Directors, a copy of which is available on the Company’s website www.trackgrp.com.

The Compensation Committee has responsibility for developing and maintaining an executive compensation policy that creates a direct relationship between pay levels and corporate performance and returns to shareholders. The Committee monitors the results of such policy to assure that the compensation payable to our executive officers provides overall competitive pay levels, creates proper incentives to enhance shareholder value, rewards superior performance, and is justified by the returns available to shareholders.
The Compensation Committee also acts on behalf of the Board of Directors in administering compensation plans approved by the Board, in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the table belowgoals at the end of the plan year).  The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation of the Company’s directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of executive officers of the Company.

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Nominating and Corporate Governance Committee
Mr. Schmitt serves as the chair of the Nominating and Corporate Governance Committee.  Messrs. Kunz and Klinkhammer also currently serve as members of this committee.  The Nominating Committee has the responsibility for identifying and recommending candidates to fill vacant and newly created Board positions, setting corporate governance guidelines regarding director qualifications and responsibilities, and planning for senior management succession.
The Nominating and Corporate Governance Committee is required to review the qualifications and backgrounds of all directors and nominees (without regard to whether a nominee has been recommended by shareholders), as well as the overall composition of the Board of Directors, and recommend a slate of directors to be nominated for election at the annual meeting of shareholders, or, in the footnotescase of a vacancy on the Board of Directors, recommend a director to be elected by the Board to fill such vacancy.  The Nominating Committee held one meeting during fiscal 2014. The Nominating Committee’s charter is available on our website, www.trackgrp.com.
Code of Ethics
We have established a Code of Business Ethics that applies to our officers, directors and employees.  The Code of Business Ethics contains general guidelines for conducting our business consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.  We will post on our website, www.trackgrp.com, any amendments to or waivers from a provision of our Code of Business Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions and that relates to any element of the Code of Business Ethics.

Executive Officers
The following table sets forth certain information regarding our principal executive officer and principal financial and accounting officer as of March 25, 2015:
NameAgePosition
Executive Committee of Board of DirectorsPrincipal Executive Officer
John R. Merrill45Chief Financial Officer
The Executive Committee of the Board of Directors was established to act temporarily in the principal executive officer function following the resignation of our Chief Executive Officer in October 2012. Current members of the Executive Committee are Guy Dubois and David S. Boone.  Biographies for Mr. Dubois and Boone appear under heading “Directors” above.
John R. Merrill was appointed to Chief Financial Officer in April 2014. Mr. Merrill has held a variety of financial roles within public and private organizations including United Health Group, Clear Channel, IMG, and Sports Authority.  From 2013 to 2014, Mr. Merrill was the CFO of TenXNetworks and IPVidTech.com, a start-up network hardware and business intelligence provider.  From 2010 to 2013, Mr. Merrill worked as an advisor in the healthcare technology industry facilitating due diligence and integration of certain acquired companies.  Prior to 2010, Mr. Merrill was the CFO of Park City Group, Inc. (NASDAQ: PCYG) and Prescient Applied Intelligence, Inc. (OTCQB: PPID) software-as-a-service providers of supply chain solutions for both retailers and their suppliers.  He began his career with KPMG and holds a Bachelors and a Master’s in Accounting from the University of South Florida.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our officers, directors, and persons who beneficially own more than 10 percent of our Common Stock to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater-than-ten-percent shareholders are also required by the SEC to furnish us with copies of all Section 16(a) forms that they file.

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Based solely upon a review of these forms that were furnished to us, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during fiscal year 2014 and that such filings were timely except the following:
●Mr. Klinkhammer, a director, filed one late Form 4 reporting one transaction
●Mr. Schmitt, a director, filed three late Form 4s reporting three transactions
●Mr. Dubois, a director, filed one late Form 4 reporting one transaction
●Mr. Boone, a director, filed one late Form 4 reporting one transaction
●Mr. Mabey, a director, filed two late Form 4s reporting two transactions
●Mr. Kunz, a director, filed two late Form 4s reporting two transactions
Compensation of Directors
The table below summarizes the compensation paid by us to our non-employee directors for the fiscal year ended September 30, 2014:

(a) (b)  (c)  (d)  (e) 
  Fees earned  Stock awards  Option awards  Total 
Name ($)*  ($)  ($)  ($) 
             
Winfried Kunz $15,000  $15,000  $15,000  $45,000 
George F. Schmitt $15,000  $22,500  $8,991  $46,491 
Rene Klinkhammer $15,000  $30,000  $-  $45,000 
David S. Boone $30,000  $30,000  $30,000  $90,000 
Dan L. Mabey $15,000  $29,833  $-  $44,833 
Guy Dubois $30,000  $-  $346,276  $376,276 
*Fees earned by our non-employee directors will be paid in Common Stock or options to purchase Common Stock at the option of the director.  A liability for these fees was included with accrued expenses at September 30, 2014.
From October 2013 through May 2014, we accrued $2,500 per month, which amount was increased to $5,000 per month in June 2014, for each director to be issued in shares of Common Stock valued on the last date of the quarter. Alternatively, any director may elect to receive warrants with an exercise price at the current market price at the date of grant in the amount of three times the amount had the director elected to take shares, valued at the date of grant using the Black-Scholes valuation method. Additionally, the Chairman and Chairman of the Audit Committee accrue $10,000 per month rather than $5,000.  Mr. Dubois became a director in December 2012 and our Chairman on February 28, 2013.
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Director Warrants

The following table lists the warrants to purchase shares of Common Stock held by each of our directors as of March 25, 2015:
 GrantExpiration Exercise  Number of  Compensation 
NameDateDate Price  Options  Expense 
            
Winfried Kunz3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
 10/1/139/30/17 $19.46   1,140  $8,991 
 1/2/1412/31/15 $19.29   1,172  $6,007 
               
George F. Schmitt3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
 10/1/139/30/17 $19.46   1,140  $8,991 
               
Guy Dubois3/22/133/21/17 $12.58   2,385  $11,682 
 4/16/134/15/17 $9.00   64,665  $324,932 
 7/1/136/30/17 $ 14.70   4,083  $23,640 
 10/1/139/30/17 $19.46   2,280  $17,982 
 1/2/1412/31/15 $19.29   2,344  $12,014 
 4/1/143/31/16 $18.75   2,432  $8,684 
 6/3/146/2/16 $17.45   51,576  $300,326 
 7/1/146/30/16 $15.45   2,647  $ 7,270 
 1/27/151/27/17 $12.01   14,988  $70,433 
               
David S. Boone3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   4,083  $23,640 
 10/1/139/30/17 $19.46   2,280  $17,982 
 1/2/1412/31/15 $19.29   2,344  $12,014 
               
Dan L. Mabey3/22/133/21/17 $12.58   8,943  $43,809 
               
Rene Klinkhammer3/22/133/21/17 $12.58   8,943  $43,809 
 7/1/136/30/17 $14.70   2,040  $11,811 
Reimbursement of Expenses
We reimburse reasonable travel expenses of members of the Board of Directors for their attendance at Board meetings.
Compensation Risks Assessment
As required by rules adopted by the SEC, management has made an assessment of our compensation policies and practices with respect to all employees to determine whether risks arising from those policies and practices are reasonably likely to have a material adverse effect on us. In doing so, management considered various features and elements of the compensation policies and practices that discourage excessive or unnecessary risk taking. As a result of the assessment, we have determined that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

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EXECUTIVE COMPENSATION
Summary Compensation
Set out in the following summary compensation table are the particulars of compensation paid to the following persons for our fiscal years ended September 30, 2014 and 2013:
(a)our principal executive officer, consisting of the executive committee of the Board of Directors; and
 (b)
our most highly compensated executive officer who was serving as an executive officer at the end of the fiscal year ended September 30, 2014 who had total compensation exceeding $100,000 (together, with the principal executive officer, the “Named Executive Officers”); and
 (c)an additional individual for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as an executive officer at the end of the most recently completed financial year.
( a )( b ) ( c )  ( d )  ( e )  ( f )  ( g )  ( h ) 
Name and  Salary  Bonus  Stock Awards  Option Awards  All Other Compensation  Total 
Principal PositionYear ( $ )  ( $ )  ( $ )  ( $ )  ( $ )  ( $ ) 
                    
Guy Dubois (1)
2014 $-  $-  $-  $346,276  $-  $346,276 
Chairman and Acting Principal2013 $-  $-  $-  $335,687  $-  $335,687 
Executive Officer                         
                          
Chad D. Olsen (2)
2014 $325,056  $-  $-  $-  $32,515  $357,571 
Former Chief Financial Officer2013 $192,000  $-  $-  $-  $8,740  $200,740 
                          
John R. Merrill (3)
2014 $79,615  $-  $-  $-  $12,613  $92,228 
Chief Financial Officer                         
                          
Bernadette Suckel(4)
2014 $211,048  $-  $-  $-  $15,995  $227,043 
Former Managing Director Global2013 $168,000  $-  $-  $-  $8,061  $176,061 
Customer Service                         
(1)Mr. Dubois has been a member of the Executive Committee since October 2012 and currently serves as Chairman of the Board of Directors.

(2)Mr. Olsen served as our Chief Financial Officer from January 2010 through April 2014.  Column (g) includes additional compensation for paid-time off, health, dental, life and vision insurance.

(3)Mr. Merrill has served as our Chief Financial Officer since April 2014. Column (g) includes additional compensation for paid-time off, health, dental, life and vision insurance.

(4)Mrs. Suckel served as Managing Director of Global Customer Service and Account Management of the Company from June 2008 through June 2014. Column (g) includes additional compensation for health, dental, life and vision insurance


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Narrative Disclosure to the Executive Compensation Table

Compensation Paid to the Members of the Executive Committee

Member of the Executive Committee and acting principal executive officer, Guy Dubois, was granted warrants equal to $300,326 for his additional work as a director and member of the Board’s Executive Committee during the year ended September 30, 2014 consisting of warrants to purchase 51,576 shares of Common Stock at an exercise price of $17.45 per share. These warrants vest in equal monthly increments over a period of one year or immediately upon the hiring of a new Chief Executive Officer.  These warrants were valued at the date of grant using the Black-Scholes model. The Board of Directors has not determined a timeline for the hiring of a new Chief Executive Officer.
Merrill Employment Agreement

On November 19, 2014, the Company entered into a two-year employment agreement with John Merrill, our Chief Financial Officer (the “Merrill Employment Agreement”).  Under the terms and conditions of the Merrill Employment Agreement, Mr. Merrill will receive an annual base salary of $180,000 and is eligible to participate in the Company’s Employee Bonus Plan and 2012 Equity Incentive Award Plan, wherein Mr. Merrill may earn a variable cash bonus and/or shares of the Company’s Common Stock based on individual performance and achieving specific Company milestones. Mr. Merrill is also entitled to participate in such life insurance, disability, medical, dental, retirement plans and other programs as may be made generally available from time to time by the Company for the benefit of similarly situated employees or its employees generally.

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Outstanding Equity Awards at Fiscal Year-End 2014

Name Number of securities underlying unexercised options (#) exercisable  Number of securities underlying unexercised options (#) unexercisable  Equity incentive plan awards: Number of underlying unexercised unearned options (#)  Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#)  Market value of shares or units of stock that have not vested ($)  Equity incentive plan awards: Number of Unearned shares, units or other rights that have not vested (#)  Equity incentive plan awards: Market or Payout value of unearned shares, units or other rights that have not vested ($) 
                          
Guy Dubois  2,385   -   -  $12.580 3/21/2015*  -   -   -   - 
   64,665   -   -  $9.000 4/15/2015*  -   -   -   - 
   4,083   -   -  $14.700 6/30/2015*  -   -   -   - 
   2,280   -   -  $19.460 9/30/2015*  -   -   -   - 
   2,344   -   -  $19.290 12/31/2015  -   -   -   - 
   2,432   -   -  $18.750 3/31/2016  -   -   -   - 
   51,576          $17.450 6/2/2016                
   2,647          $15.450 6/30/2016                
                                  
Chad D. Olsen  -   -   -   -    -   -   -   - 
                                  
John R. Merrill  -   -   -   -    -   -   -   - 
                                  
Bernadette Suckel  -   -   -   -    -   -   -   - 
* On February 27, 2015, the Board of Directors voted to extend the term of these options for an additional two years. The extended expiration dates have been reflected in the table under the heading “Securityin page 36 of this prospectus.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table presents information regarding beneficial ownership as of March 25, 2015 (the “Table Date”), of our Common Stock by (i) each shareholder known to us to be the beneficial owner of more than five percent of our Common Stock; (ii) each of our Named Executive Officers serving as of the Table Date; (iii) each of our directors serving as of the Table Date; and Management” on page 27. To(iv) all of our knowledge,executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the SEC.  Except as indicated by the footnotes below, we believe, based on the information providedfurnished to us, bythat the Selling Stockholders, nonepersons and entities named in the table below have sole voting and dispositive power with respect to all securities they beneficially own.  As of the Selling StockholdersTable Date, the applicable percentage ownership is a broker-dealer or an affiliatebased on 10,150,617 shares of Common Stock issued and outstanding.  Beneficial ownership representing less than one percent of the issued and outstanding shares of a broker-dealer. class is denoted with an asterisk (“*”).  Holders of Common Stock are entitled to one vote per share and holders of Series D Preferred are entitled to 30 votes per share and vote with the Common Stock shareholders on an as-converted basis.
 
  
 
Shares of
Series D Beneficially Owned Prior to this Offering
Shares of
Common Stock
Beneficially
Owned Prior
to this
Offering (1)
Percentage of Registered Shares
Shares  of Common Stock Beneficially
Owned After this Offering
Assuming the
Sale of All Registered
Resale Shares
Name Number PercentNumberPercentNumberPercent (2)
Laemi Real Estates, Inc. (3)3,330 9.8%21,040,3047.1%42.4%1,060,304*
Comediahill Business S.A. (4)2,220  6.5%14,026,8684.8%28.3%706,868*
Arfugo Holding Inc. (5)1,110  3.3%6,950,9982.4%  14.1%290,998*
Vulcan International Trading Limited (6)   500  1.5%3,046,7661.0%  6.4%46,766*
Soek Ki Kim (7)   320 *1,929,996*  4.1%9,996*
Eric John Watson (8)   300 *1,828,327*  3.8%28,327*
Damian Sadza (9)    50 *303,021**3,021*
Robert Unger (10)    20 *123,837**3,837*
 TOTALS7,850 23.0%49,250,11716.7% 100%2,150,117*
______________         
Name and Address of Common Stock 
Beneficial Owner (1)
 Shares  % 
       
5% Beneficial Owners:      
Sapinda Asia Limited (2)
  5,127,853   51%
Safety Invest S.A., Compartment Secure I (3)
  1,890,697   19%
         
Directors and Named Executive Officers:        
David S. Boone (4)
  24,339   * 
Guy Dubois (5)
  147,400   1%
Rene Klinkhammer (6)
  17,098   * 
Winfried Kunz (7)
  15,793   * 
Dan Mabey (8)
  16,436   * 
George F. Schmitt (9)
  24,641   * 
John R. Merrill   -   * 
         
All directors and executive officers as a group
(7 persons)
  243,209   2%
*(1)RepresentsExcept as otherwise indicated, the business address for these beneficial ownershipowners is c/o the Company, 405 South Main Street, Suite 700, Salt Lake City, Utah 84111.
(2)Address is Rooms 803-4, 8F, Hang Seng Bank Building, 200 Hennessy Road, Wanchai, Hong Kong.  Based on a Form 4 filed by Sapinda Asia Limited on November 5, 2013.
(3)
Secure I is a compartment of less thanSafety Invest S.A. (“Safety”), a company established under the Luxembourg Securitization Law and incorporated as a “société anonyme” under the laws of the Grand Duchy of Luxembourg whose principal business is to enter into one percentor more securitization transactions.

(4)Mr. Boone is a director and a member of outstandingthe Board of Directors’ executive committee.  Includes 6,689 shares of the classCommon Stock owned of voting securities.  As of November 22, 2010, there were 34,124record and 17,650 shares of Series D Preferred Stock issued and outstanding.

(1)Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock issuable upon conversionexercise of stock purchase warrants.

(5)Mr. Dubois is a director and Chairman of the Series D Preferred, or subject to options or warrants that are currently convertible/exercisable or convertible/exercisable within 60 daysBoard of Directors; he is also a member of the dateexecutive committee of the table, are deemed to be beneficially owned by the person holding those securities or rights. Beneficial ownership after the offering assumes that all Resale Shares offered under this prospectus will be sold to parties unaffiliated with the Selling Stockholders. Shares underlying conversion rights, options or warrants are deemed to be outstanding for the purposeBoard of computing the percentage ownership of the person holding those rights, options or warrants , but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Each share of Series D Preferred is convertible into 6,000Directors.  Includes 147,400 shares of Common Stock.Stock issuable upon exercise of stock purchase warrants.
(6)Mr. Klinkhammer is a director.  Includes 6,115 shares of Common Stock owned of record and 10,983 shares of Common Stock issuable upon exercise of stock purchase warrants.
(7)Mr. Kunz is a director.  Includes 2,498 shares of Common Stock owned of record and 13,295 shares of Common Stock issuable upon exercise of stock purchase warrants.
(8)Mr. Mabey is a director.  Includes 7,493 shares of Common Stock owned of record and 8,943 shares of Common Stock issuable upon exercise of stock purchase warrants.
(9)Mr. Schmitt is a director.  Includes 12,518 shares of Common Stock owned of record and 12,123 shares of Common Stock issuable upon exercise of stock purchase warrants.

-40-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Transactions
Royalty Agreement

On August 4, 2011, with an effective date of July 1, 2011, we entered into an agreement (the “Royalty Agreement”) with Borinquen Container Corp., a corporation organized under the laws of the Commonwealth of Puerto Rico (“Borinquen”) to purchase Borinquen’s wholly-owned subsidiary, International Surveillance Services Corporation, a Puerto Rico corporation (“ISS”) in consideration of 310,000 shares of our Common Stock, valued at the market price on the date of the Royalty Agreement at $16.40 per share, or $5,084,000.  We also agreed to pay to Borinquen quarterly royalty payments in an amount equal to 20% of our net revenues from the sale or lease of our monitoring devices and monitoring services within a territory comprised of South and Central America, the Caribbean, Spain and Portugal, for a term of 20 years.  On February 1, 2013, we redeemed and terminated this royalty obligation in February 2013 for a total cost of $13.0 million using the proceeds of a $16.7 million loan from a related party, Sapinda Asia Limited (“Sapinda Asia”). In addition to the $13.0 million used to terminate the Royalty Agreement, we used the remaining $3.7 million as operating capital during the 2013 fiscal year. On September 30, 2013, Sapinda Asia converted all outstanding principal and interest under the loan, totaling $17,576,627, into 3,905,917 shares of Common Stock at a rate of $4.50 per share.

Revolving Loan Agreement

On February 1, 2013, the Company entered into a revolving loan agreement with Sapinda Asia (the “Revolving Loan”).  Under this arrangement, the Company may borrow up to $1,200,000 at an interest rate of 3% per annum for unused funds and 10% per annum for borrowed funds. On October 24, 2013, the Company drew down the full $1,200,000 for use in a performance bond as required under a contract with an international customer. The loan initially matured in June 2014. However, the maturity date of the note was extended and now matures in December 2015.

Related-Party Promissory Note
On November 19, 2013, the Company borrowed $1,500,000 from Sapinda Asia.  The unsecured note bears interest at a rate of 8% per annum and initially matured on November 18, 2014. However, the maturity date of the note was extended to November 19, 2015. As of September 30, 2014, the Company owed $1,500,000 of principal and $43,726 of accrued interest on the note.

Related-Party Service Agreement

During the fiscal year ended September 30, 2013, the Company entered into an agreement with Paranet Solutions, LLC to provide the following primary services:  (i) procurement of hardware and software necessary to ensure that vital databases are available in the event of a disaster (backup and disaster recovery system); and (ii) providing the security of all data and the integrity of such data against all loss of data, misappropriation of data by Paranet, its employees and affiliates.  David S. Boone, a director and member of the Company’s Executive Committee, was the Chief Executive Officer of Paranet until August 2014.

As consideration for these services, the Company agreed to pay Paranet $4,500 per month, and during the year ended September 30, 2014 the Company paid $461,223 to Paranet. The arrangement can be terminated by either party for any reason upon ninety (90) days written notice to the other party.

-41-
Facility Agreement
On January 3, 2014, we entered into an unsecured Facility Agreement with Tetra House Pte. Ltd., a related-party entity, controlled by our Chairman, Guy Dubois.  Under this agreement, we may borrow up to $25,000,000 for working capital and acquisitions purposes. The loan bears interest at a rate of 8% per annum, payable in arrears semi-annually, with all principal and accrued and unpaid interest due on January 3, 2016. In addition, we agreed to pay Tetra House an arrangement fee equal to 3% of the aggregate maximum amount under the loan. On January 14, 2014 Tetra House assigned the Facility Agreement to Conrent Invest S.A.  Since January 3, 2014, we have borrowed $25,000,000 under the Facility Agreement. The borrowed funds have been used for acquisitions and for general corporate purposes. The Facility Agreement was reviewed and approved by disinterested and independent members of the Board of Directors, David S. Boone, Winfried Kunz, Dan L. Mabey and George F. Schmitt.

Additional Related-Party Transactions and Summary of All Related-Party Obligations
  
2014
  
2013
 
       
Loan from a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on December 30, 2015.
 
$
1,200,000
  
$
-
 
         
Promissory note with a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on November 19, 2015.
  
1,500,000
   
-
 
 
        
Convertible debenture of $16,700,000 from a significant shareholder with an interest rate of 8% per annum. On September 30, 2013, $16,640,000 plus accrued interest of $936,627 was converted into 3,905,917 shares of Common Stock and in October 2013, the Company paid $60,000 in cash to pay off the debenture.
  
-
   
60,000
 
         
Total related-party debt obligations
  
2,700,000
   
60,000
 
Less current portion
  
-
   
(60,000
)
Long-term debt, net of current portion
 
$
2,700,000
  
$
 -
 

-42-

THE TRANSACTION
On November 26, 2014 (the “Closing Date”), we entered into a the Purchase Agreement to purchase from the Selling Shareholders who, at the time, were the holders of all issued and outstanding shares and equity interests of G2 (the “G2 Shares”), the G2 Shares for an aggregate purchase price of up to CAD $4.6 million, of which CAD$2.0 million was paid in cash to the Selling Shareholders on the Closing Date, and the remaining purchase price is payable to the Selling Shareholders in shares of our common stock. The Shares registered herein, of which 35,000 are currently held by the Escrow Agent, are issuable as the remaining CAD$2.6 million purchase price in the Transaction, and are payable to Selling Shareholders as set forth below:

●
35,000 of the Shares, valued at CAD$600,000 on the Closing Date, will be released by the Escrow Agent to the Selling Shareholders as follows:
●
17,500 Shares will be released to the Selling Shareholders on the one-year anniversary of the Closing Date, or November 26, 2015; and
   
 (2)
●
Assumes17,500 Shares will be released to the conversion and sale of allSelling Shareholders on the two-year anniversary of the Registered Shares.
(3)19,980,000 shares issuable upon conversion of 3,330 shares of Series D Preferred and 1,060,304 shares of Common Stock previously issued as Series D Preferred stock dividends.

(4)13,320,000 shares issuable upon conversion of 2,220 shares of Series D Preferred and 706,868 shares of Common Stock issued previously as Series D Preferred stock dividends.
(5)6,660,000 shares issuable upon conversion of 1,110 shares of Series D Preferred and 290,998 shares of Common Stock issued previously as Series D Preferred stock dividends.
45
(6)3,000,000 shares issuable upon conversion of 500 shares of Series D Preferred and 46,766 shares of Common Stock issued previously as Series D Preferred stock dividends.Closing Date, or November 26, 2016.
  
●
(7)1,920,000 shares
The remaining 115,000 Shares are issuable to the Selling Shareholders within two-years from the Closing Date, or on or before November 26, 2016, upon the achievement of Common Stock issued previously upon conversioncertain performance-based milestones identified in the Purchase Agreement. Any milestone that is achieved in accordance with the provisions Purchase Agreement will immediately vest and be payable to the Selling Shareholder (a “Vested Payment”), and will be paid by the delivery of sharesthat number of Series D PreferredShares as determined by the formula A ÷ B, where A = the Vested Payment, and 9,996 shares issued previously asB = the average closing trading price for our common stock dividends.
(8)1,800,000 shares issuable upon conversion of 300 shares of Series D Preferred and 28,327 shares of Common Stock issued as Series D Preferred stock dividends.during the 15 consecutive trading days preceding the day that is four business days prior to the date the Vested Payment became vested, with each trading price converted to Canadian Dollars at the final currency exchange rate on such date.

(9)300,000 shares issuable upon conversion of 50 shares of Series D Preferred and 3,021 shares of Common Stock issued previously as Series D Preferred stock dividends.
(10)120,000 shares issuable upon conversionFollowing the closing of the Transaction, G2’s executive leadership and employees were integrated within the Company but continue to operate from G2’s existing offices in Halifax, Nova Scotia, Canada,. We also agreed to file the registration statement of which this prospectus is a part, for the purpose of 20 shares of Series D Preferred and 3,837 shares of Common Stock issued previously as Series D Preferred stock dividends.
PLAN OF DISTRIBUTION
We are registering the resaleShares issuable to Selling Shareholders as part of the Resale Shares by the Selling Stockholders.  The Resale Shares are issuable to the Selling Stockholders upon conversionpurchase price of the Transaction.  The shares of Series D Preferred heldcovered by them. As usedthis prospectus are referred to in this prospectus as the term “Selling Stockholders” includes donees, pledgees, transferees or other successors-in-interest selling shares received from a named Selling Stockholder as a gift, distribution, foreclosure on a pledge, or other non-sale related transfer after the date of this prospectus. The Selling Stockholders will act independently of us in making decisions regarding the timing, manner and size of each sale. Sales may be made on the OTC Bulletin Board or any other exchange or quotation service on which the securities may be listed or quoted at the time of sale, otherwise or in a combination of such methods of sale. Each Selling Stockholder reserves the right, together with its agents from time to time, to accept or reject, in whole or in part, any proposed purchase of the shares of Common Stock for any reason, including if they deem the purchase price to be unsatisfactory at any particular time. In addition, the Selling Stockholders may sell the Resale Shares from time to time by one or more of the following methods permitted pursuant to applicable law, without limitation:
·block trades (which may involve crosses) in which a broker or dealer will be engaged to attempt to sell the shares of Common Stock as agent but may position and resell a portion of the block as principal to facilitate the transaction;
·direct sales to purchasers;
·purchases by a broker or dealer as principal and resale by the broker or dealer for its own account;
·an over-the-counter distribution;
·ordinary brokerage transactions and transactions in which the broker solicits purchases;
·privately negotiated transactions;
·bidding or auction process;
·closing out of short sales;
·transactions in which the broker solicits purchasers;
·satisfying delivery obligations relating to the writing of options on the shares of Common Stock, whether or not the options are listed on an options exchange;
·one or more underwritten offerings on a firm commitment or best efforts basis;
·any combination of any of these methods; or
·any other method permitted pursuant to applicable law.
The Selling Stockholders may distribute the securities from time to time in one or more transactions at a fixed price or prices (which may be changed from time to time), at market prices prevailing at the times of sale, at prices related to these prevailing market prices or at negotiated prices. The Selling Stockholders may effect these transactions by selling the Resale Shares to market-makers acting as principals or through broker-dealers or agents, and these persons may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholders and/or the purchasers of the securities for whom such persons may act as agents or to whom they sell as principals, or both (which compensation as to a particular broke r-dealer might be in excess of customary commissions).  Market makers and block purchasers purchasing the Common Stock will do so for their own account and at their own risk.  It is possible that a Selling Stockholder will attempt to sell shares of Common Stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price.“Shares.”
 
46
The shares may be sold accordingPurchase Agreement also contains customary representations, warranties, covenants and conditions to any one or morethe performance of the methods described above. In addition, subject to compliance with applicable law and Company policy, the Selling Stockholder may enter into option, derivative or hedging transactions with respectparties to the shares, and any related offers or sales of shares may be made under this prospectus. In some circumstances, for example, the Selling Stockholder may write call options, put options or other derivative instruments (including exchange-traded options or privately negotiated options) with respect to the shares, or which it settles through deliveryPurchase Agreement.  A copy of the shares. These option, derivative and hedging transactions may require the delivery to a broker, dealer or other financial institution of shares offered under this prospectus, and that broker, dealer or other finan cial institution may resell those shares under this prospectus. A Selling Stockholder or his successors in interest may enter into hedging transactions with broker-dealers who may engage in short sales of Common Stock in the course of hedging the positions they assume with a Selling Stockholder. The Selling Stockholder may offer and sell the shares under any other method permitted by applicable law.
If a material arrangement with any broker-dealer or other agent is entered into for the sale of any shares of Common Stock through a block trade, special offering, exchange distribution, secondary distribution, or a purchase by a broker or dealer, a prospectus supplement will be filed, if necessary, disclosing the material terms and conditions of these arrangements.
The Selling Stockholders may from time to time deliver all or a portion of the shares offered hereby to cover a short sale or upon the exercise, settlement or closing of a call equivalent position or a put equivalent position.
The Securities and Exchange Commission may deem a Selling Stockholder and any broker-dealers or agents who participate in the distribution of Common Stock to be “underwriters” within the meaning of Section 2(11) of the Securities Act. As a result, the Securities and Exchange Commission may deem any discounts and commissions received by such broker-dealers or agents and any profit on the resale of the Common Stock by the Selling Stockholder to be underwriting discounts or commissions under the Securities Act. Because a Selling Stockholder may be deemed to be an “underwriter” within the meaning of Section 2(11) of the Securities Act, a Selling Stockholder will be subject to the prospectus delivery requirements of the Securities Act and also may be subject to liabilities under the secu rities laws, including Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. To our knowledge, there are currently no plans, arrangements or understandings between any Selling Stockholder and any broker-dealer, underwriter or agent regarding the sale of the Common Stock.
If required by the applicable securities laws of particular states, the Resale Shares will be sold in such jurisdictions only through registered or licensed brokers or dealers.
In addition, if required by the applicable securities laws of particular states, the Resale Shares may be sold only pursuant to registration or qualification of such Resale Shares in the applicable state or if an exemption from the registration or qualification requirement is available and is complied with.
Each Selling Stockholder and any person participating in the distribution of the Resale Shares registered under the registration statement that includes this prospectus will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and applicable SEC rules and regulations, including, among others, Regulation M, which may limit the timing of purchases and sales of any of our Common Stock by any such person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of our Common Stock to engage in market-making activities with respect to our Common Stock. We have informed the Selling Stockholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sale s in the market. These restrictions may affect the marketability of our Common StockPurchase Agreement and the ability of any person or entityEscrow Agreement are filed as exhibits to engage in market-making activities with respect to our Common Stock.
To the extent required, this prospectus will be amended or supplemented from time to time to describe a specific plan of distribution or to disclose additional information with respect to any sale or other distribution of the shares.

47

The Selling Stockholder may also sell its shares in accordance with Rule 144 under the Securities Act, to the extent available, or pursuant to other available exemptions from the registration requirements of the Securities Act, rather than pursuant to this prospectus.
We will pay for all costs of this registration, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; except that the selling holders will pay all brokerage commissions, underwriting discounts and selling expenses, if any.
We have agreed to indemnify the Selling Stockholders against particular liabilities, including liabilities under the Securities Act, incurred in connection with the offering of the Resale Shares. We and the Selling Stockholders may agree to indemnify any underwriter, broker, dealer or agent that participates in transactions involving sales of the Resale Shares against certain liabilities, including liabilities arising under the Securities Act.
Once sold under the registration statement of which this prospectus forms a part,part.  The foregoing description of the Transaction and summary of the terms of these agreements are qualified in their entirety by the terms of the agreements.


USE OF PROCEEDS
This prospectus relates to the Shares of our Common Stock that may be offered and sold from time to time by the Selling Shareholders. We will be freely tradable innot receive any proceeds upon the handssale of personsthe Shares by the Selling Shareholders.  

-43-
SELLING SHAREHOLDERS

This prospectus relates to the possible resale by Selling Shareholders of the Shares, which were issued to the Selling Shareholders pursuant to the Purchase Agreement.
The Selling Shareholders, may, from time to time, offer and sell pursuant to this prospectus any or all of the Shares. The Selling Shareholders may sell some, all or none of their Shares.  We do not know how long the Selling Shareholders will hold the Shares before selling them, and we currently have no agreements, arrangements or understandings with the Selling Shareholders regarding the resale of any of the Shares.
The following table presents information regarding the Selling Shareholders and the Shares they may offer and sell from time to time under this prospectus.  The table is prepared based on information supplied to us by the Selling Shareholders, and reflects their respective holdings of our equity securities as of March 25, 2015.  The Selling Shareholders have represented to us that neither the Selling Shareholders nor any of their affiliates have held a position or office, or had any other thanmaterial relationship, with us or any of our predecessors or affiliates.
 
As used in this prospectus, the term “Selling Shareholders” includes the persons listed below and any of their donees, pledgees, transferees or other successors in interest selling Shares received after the date of this prospectus from Selling Shareholders as a gift, pledge or other non-sale related transfer.  Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act.  The percentage of shares beneficially owned prior to the offering is based on 10,150,617 shares of our Common Stock actually outstanding as of March 25, 2015.

 Selling Shareholder
Shares Beneficially
 Owned Before
this Offering (1)
 
Percentage of
Outstanding Shares
 Beneficially Owned
 Before this Offering
 
Shares to be
 Sold in this
Offering (2)
 
Shares Beneficially
 Owned After
 this Offering (2)
 
Percentage of
Outstanding
 Shares Beneficially
 Owned After
 this Offering
  
            
Tom Gilgan  1,421  *  -  1,421   *
Bruce Annand  1,204   *  -  1,204   *
Ron Stewart  875   *  -  875   *
The Gilgan 2011 Family Trust (3)
  -  -  60,900  -  -
The Annand (2009) Family Trust (4)
  -  -  51,600  -  -
The Stewart 2011 Family Trust (5)
  -  -37,500-  -

*  Less than 1%.

Footnotes:
(1)Includes the Shares offered hereby.
(2)Assumes the sale of all of the Shares offered hereby.
(3)The Selling Shareholder, Tom Gilgan, trustee of The Gilgan 2011 Family Trust, has voting and/or dispositive power over these shares.
(4)The Selling Shareholder, Bruce Annand, trustee of The Annand (2009) Family Trust, has voting and/or dispositive power over these shares.
(5)The Selling Shareholder, Ron Stewart, trustee of The Stewart 2011 Family Trust, has voting and/or dispositive power over these shares.


-44-
DESCRIPTION OF SECURITIES
Common Stock
 
Authorized and Outstanding
 
We are authorized to issue up to 600,000,00015,000,000 shares of Common Stock, par value $0.0001 per share, of which 294,309,45210,150,617 shares are outstanding as of November 22, 2010.March 25, 2015.
 
Voting
 
Holders of our Common Stock each have one vote per share.  Our directors are elected by the vote of a plurality of the Common Stock represented in person or by proxy at such meeting and entitled to vote on the election of directors. A majority of the outstanding shares of Common Stock constitute a quorum. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.
 
Upon our dissolution, our stockholdersshareholders will be entitled to receive pro rata all assets remaining available for distribution to stockholdersshareholders after payment of all liabilities and provision for the liquidation of any shares of Preferred Stock with preferential liquidation rights, if any, at the time outstanding. Our Common Stockholderscommon shareholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the Common Stock.
 
Preferred Stock
 
Authorized and Outstanding
 
We are authorized to issue up to 20,000,000 shares of Preferred Stock, par value $0.0001 per share.  As of the date of this prospectus, we have the following shares of Preferred Stock outstanding.outstanding as described below.
 
Series D Preferred
 
During the first quarter of fiscal year 2010, ourOur Board of Directors reviewed the financial condition, including the financial obligations and capital requirements of the Company. The Board of Directors also took notice of the determination of the Company’s auditors that our recurring net losses and negative cash flows from operating activities “raise substantial doubt about the Company's ability to continue as a going concern.” The Board of Directors determined that in order for the Company to achieve successful operations, we must generate positive cash flows from operating activities and obtain additional funding to meet its projected capital investment requirements. To deal with this uncertainty, the Board of Directors deemed it necessary to reduce the debt load of the Company, both obliga tions to third party creditors, and obligations to officers and directors of the Company who held unsecured Company debt. The Board did not separately consider whether the debt owed to the officers and directors of the Company was secured or unsecured. The Board also deemed it necessary to raise additional capital from the issuancehas designated 85,000 shares of Preferred Stock while continuing to expand the market foras our TrackerPAL™ portfolio of products.
48
As part of this plan to deal with the uncertainty regarding the Company’s ability to continue to pursue its business objectives, and in order to lessen the Company’s cash burden and to raise additional capital, effective December 3, 2009, the Board of Directors acted to amend our Articles of Incorporation to authorize 50,000 shares of Series D Convertible Preferred Stock (the “Series D Preferred”), and establishestablished the designations, rights and preferences for the Series D Preferred.  The BoardAs of Directors instructed management to offer the new equity securities to the Company’s debt holders at the rate of one share of Series D Preferred for each $1,000 in debt exchanged. The Board of Directors also authorized the sale of the Series D Preferred for $500 per share to investors willing to pay cash for the securities. All offers were to be made only to accredited investors.  In order to give the new investors some assurance that the Company would be able to reserve a sufficient number of shares of Common Stock for conversion of the Series D Preferred and to provide some potential for liquidity to those investors, particularly the debt holders who were giving up their right to repayment of principal and interest, the Company also granted special voting rights and registration rights to the Series D Preferred, as described below. As originally adopted, the Certificate granted to the holders of the Series D Preferred the right to vote on an as-converted basis on matters for which a vote of the Common Stock may be required, as well as limited special voting rights equivalent to 60 percent (60%) of the issued and outstanding shares of Common Stock, notwithstanding the number of shares of Common Stock actually outstanding, solely for purposes of approving an increase in the authorized capital stock of the Company or a reduction in the number of shares of Common Stock outstanding, as described below (the “Special 60% Voting Rights”).
The decision and action to designate the Series D Preferred and to commit the Company to the issuance of the Series D Preferred and to the conversion of such stock into Common Stock of the Company were undertaken by the Board of Directors, acting without additional authorization or approval of the shareholders of the Company, in reliance upon the Articles of Incorporation of the Company which specifically reserve to the Board of Directors the authority to designate series of Preferred Stock and the rights and preferences thereof. Under the Certificate, the Company is required to reserve a number of shares of Common Stock of the Company in an amount at least equal to 110 percent (110%) of the number of shares necessary to effect the conversion of the Series D Preferred.  At the time that the Board of Direct ors took this actionMarch 25, 2015, there were not a sufficient number of authorized shares of Common Stock available under the Articles of Incorporation of the Company to reserve the full amount of shares of Common Stock issuable in the event all 50,000no outstanding shares of Series D Preferred were eventually issued and subsequently converted. The Articles of Incorporation were subsequently amended in July 2010 to increase the number of authorized shares of Common Stock to 600,000,000 shares, to provide a sufficient number of shares to enable us to reserve those shares required under the Certificate. This amendment to our Articles of Incorporation was adopted by the consent of a majority of the outstanding shares of Common Stock, voting as a class, as well as a majority of the outstanding shares of the Series D Preferred, also voting as a class, and of a majority of all voting shares (both Common Stock and Series D Preferred) voting on an as-if converted basis. The Board did not rely on the Special 60% Voting Rights in seeking approv al of the amendment.
Approval of the holders of the Common Stock of the Company for the designation of the Series D Preferred or the issuance thereof was not obtained by the Board of Directors, prior to the Board of Directors’ authorizing the Series D Preferred as a class and committing the Company to increase the total number of shares of Common Stock that would be necessary for full conversion of the Series D Preferred.  At the time, the Board of Directors was of the opinion that pursuant to the terms of the Company’s existing Articles of Incorporation, and its powers to create new classes of Preferred Stock and to designate the rights and preferences of any such new classes (including voting rights), the Board of Directors did not need the prior approval of the holders of the Common Stock as a class to effect an increase of the Common Stock.
According to the Certificate, as amended and restated, the holders of the Series D Preferred are entitled to the following preferences and other rights.
Rank. The Series D Preferred ranks senior as to liquidation rights to the Company’s Common Stock, and all other classes and series of equity securities of the Company which by their terms do not rank senior to the Series D Preferred (collectively with the Common Stock, “Junior Stock”). The Series D Preferred is subordinate and ranks junior to all indebtedness of the Company.stock.
 
Payment of Dividends. Dividends declared by the Company are payable on the Series D Preferred on a pro rata basis with the Common Stock and all other equity securities of the Company ranking pari passu with the Common Stock as to the payment of dividends, before certain distributions are paid on, or declared and set apart for Junior Stock, other than the Common Stock.  In addition, the Company is prohibited from declaring, paying or setting apart for payment any dividend or making any distribution on Junior Stock (other than dividends or distributions pay able in shares of the Junior Stock) unless, at the time of such dividend or distribution, the Company shall have paid all unpaid dividends on the outstanding shares of Series D Preferred. In addition, holders of the Series D Preferred are entitled to receive quarterly dividends accrued on March 31, June 30, September 30, and December 31 of each year, cumulative dividends on the Series D Preferred at the rate per share equal to eight percent (8%) per annum, payable in cash or shares of Common Stock at the sole discretion of the Company.  If a dividend is paid in shares of Common Stock of the Company, the number of shares to be issued will be based on the average per share market price of the Common Stock for the 14-day period immediately preceding the applicable accrual date (i.e., March 31, June 30, September 30, or December 31, as the case may be).  Dividends are paid quarterly, no later than the thirtieth (30th) day following the end of the accrual period.
49
Voting Rights. Except as otherwise required by Utah law and in the Certificate, the Series D Preferred will vote with the Common Stock on an as-converted basis. Each share of Series D Preferred entitles the holder thereof to 6,000 votes.  The Common Stock into which the shares of Series D Preferred are convertible shall, upon issuance, have all of the same voting rights as other issued and outstanding Common Stock of the Company.
Liquidation Preference. Holders of the Series D Preferred also are entitled to preferences upon liquidation, dissolution or winding up of the Company, voluntary or involuntary, before any payment is made or any assets distributed to holders of any Junior Stock.
Conversion. Each holder of Series D Preferred has the right to convert the Series D Preferred into shares of Common Stock of the Company under certain circumstances.  Each share of Series D Preferred is convertible into 6,000 shares of Common Stock, subject to adjustment as provided in the Certificate.
Optional Redemption. At any time on or after December 1, 2010, the Company has the right, exercisable at its option, to redeem from funds legally available therefore, all or any portion of the then-outstanding and unconverted shares of the Series D Preferred at a price and on the terms contained in the Certificate. Any redemption of less than all of the Series D Preferred shall be pro rata among the holders of the Series D Preferred based on the number of shares of Series D Preferred held by each holder of record at the time of such partial redemption.
Registration Rights
Although the Designation of Rights and Preferences of the Series D Preferred did not provide for registration rights under the Securities Act, the Company subsequently agreed to grant registration rights to three purchasers of Series D Preferred in connection with their collective investment of $3,330,000.  Pursuant to that agreement, the Company agreed to have a registration statement approved and effective with respect to the common shares underlying the Series D Preferred held by the three shareholders, no later than 90 days from April 13, 2010, the date of the investments.  If the registration statement is not effective within 90 days, then until such time as a registration statement is effective with respect to the shares, or such time as the resale restrictions on the underlying shares can be removed, the Company agreed to pay a 16% dividend on the Series D Preferred held by these particular shareholders, instead of the standard 8% dividend rate on the preferred.  If after one year and 15 days the resale restrictions on the underlying shares of common held by these holders are not removed, or a registration statement with respect to the shares is not then effective, as an additional penalty, the Company agreed to issue one additional share of Series D Preferred for each original share of Series D Preferred issued.
In connection with the purchase agreements by which all other cash investors of the Series D Preferred acquired their shares, the Company granted piggyback registration rights to such holders with respect to the shares of Common Stock underlying their Series D Preferred.
Transfer Agent
Our transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company.
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Undesignated Preferred Stock
 
The ability to authorize and issue undesignated Preferred Stock may enable our Board of Directors to render more difficult or discourage an attempt to change control of the Company by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover proposal is not in our best interest, the Board of Directors could cause shares of Preferred Stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group.
 

INDEMNIFICATION
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Our
Utah Anti-Takeover Law and Articles and Bylaws Provisions
Certain provisions of our Articles of Incorporation provideand Bylaws, and of applicable Utah State corporation law, have the effect of making more difficult an acquisition of control of the Company in a transaction not approved by the Board of Directors.  Specifically, Article VIII of the Articles of Incorporation provides that we shall indemnifythe affirmative vote of the holders of not less than two-thirds of the outstanding shares of our officers, directors,voting stock is required for approval of the following types of transactions:
●
Merger or consolidation with another entity if the other entity or its affiliates are directly or indirectly the beneficial owners of more than 10% of the total voting power of all of the outstanding shares of our voting stock (defined as a “Related Corporation”), or
●
The sale or exchange of all or substantially all of our assets to a Related Corporation, or
●
The issuance or delivery of our stock or other securities in exchange for payment for any properties or assets or the securities of a Related Corporation or the merger of any our affiliates with or into a Related Corporation or any of its affiliates.
Any amendment of Article VIII requires the affirmative vote of the holders of not less than two-thirds of the outstanding shares of our voting stock.
PLAN OF DISTRIBUTION
We are registering the Shares issued to the Selling Shareholders to permit the resale of these Shares by the Selling Shareholders from time to time after the date of this prospectus.  We will not receive any of the proceeds from the sale of the Shares.  We will pay all fees and expenses incident to our obligation to register the Shares.
The Shares offered by this prospectus are being offered by the Selling Shareholders.  The Shares may be sold or distributed from time to time by the Selling Shareholders directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents incorporatorsat market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the Shares offered by this prospectus could be effected in one or more of the following methods:
●
ordinary brokers’ transactions;
●
transactions involving cross or block trades;
●
through brokers, dealers, or underwriters who may act solely as agents;
●
“at the market” into an existing market for the Common Stock;
●
in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents;
●
in privately negotiated transactions; or
●
any combination of the foregoing.
In order to comply with the securities laws of certain states, if applicable, the Shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the Shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.

-46-
The Selling Shareholder and any broker-dealer participating in the distribution of the Shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the Shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of Shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other personsterms constituting compensation from the Selling Shareholder and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. The Selling Shareholder may indemnify any broker-dealer that participates in transactions involving the sale of the Shares against certain liabilities, incurred by them that result from their acts that are performed in furtheranceincluding liabilities arising under the Securities Act. We know of our businessno existing arrangements between the Selling Shareholder or any other shareholder, broker, dealer, underwriter or agent relating to the full extent permitted by the lawssale or distribution of the State of Utah. Our bylaws provide that,Shares offered by this prospectus. We will pay the expenses incident to the full extent permitted by law, we shall indemnifyregistration, offering, and sale of the Shares to the Selling Shareholders; provided, however, that the Selling Shareholders are solely responsible for the payment of any directorfee or officer or former director or officer of our company, orcommission payable to any person who may have served at our request as a director or officer of another corporation in which we own shares, or of which we are a creditor, against expenses actually and reasonably incurred by him or her,broker-dealer in connection with the defensesale of the Shares.
Brokers, dealers, underwriters or agents participating in the distribution of the Shares as agents may receive compensation in the form of commissions, discounts, or concessions from the Selling Shareholders and/or purchasers of the Shares for whom the broker-dealers may act as agent.  The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions.  Neither we nor the Selling Shareholders can presently estimate the amount of compensation that any agent will receive.
The Selling Shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any action, suit or proceeding, civil or criminal, in which he or she is made a partyof the Shares by reasonthe Selling Shareholders and any other participating person. Regulation M may also restrict the ability of being or having been such director or officer, except in relation to matters as to which he or she shall be adjudged in such action, suit or proceeding to be liable for negligence or misconductany person engaged in the performancedistribution of duty;the Shares to engage in market-making activities with respect to the Shares. All of the foregoing may affect the marketability of the Shares and the ability of any person or entity to make such other indemnification as shall be authorized by our shareholders.engage in market-making activities with respect to the Shares.
 
As a result ofThis offering will terminate on the indemnification provisions described above and contained indate that all Shares offered by this prospectus have been sold by the Utah Revised Business Corporations Act, subject to certain limitations in the Utah Revised Business Corporation Act, weSelling Shareholders or may be permitted or compelled to provide indemnification and advancement of expenses to our directors, officers, agents, and employees when they are made parties to an investigation or legal action in connection with services performed at our request, including when such persons are alleged to have violatedsold by the Selling Shareholders without restriction under Rule 144(b)(1)(i) under the Securities Act.  Insurance purchasedOur Common Stock is quoted on the OTCQB under the symbol “SCRA”.
LEGAL MATTERS
The validity of the securities being offered by this prospectus has been passed upon for us by Disclosure Law Group of San Diego, California.
EXPERTS
The consolidated financial statements for the years ended September 30, 2014 and 2013 included in this prospectus and elsewhere in the registration statement have been audited by Eide Bailly, LLP, an independent registered public accounting firm, as indicated in their report with respect thereto, and is included herein in reliance upon the authority of said firm as experts in auditing and accounting in giving said reports.


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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We filed with the SEC a registration statement under the Securities Act for the Shares in this offering.  This prospectus does not contain all of the information in the registration statement and the exhibits and schedules that were filed with the registration statement.  For further information with respect to such persons may also cover expensesus and our common stock, we refer you to the registration statement and the exhibits and schedules that were filed with the registration statement.  Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other liabilities associated withdocument filed as an allegation of violationsexhibit to the registration statement.  A copy of the Securities Act.registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the Public Reference Room maintained by the SEC at 100 F Street, N.E. Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from the SEC upon payment of the prescribed fee.  Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
We file periodic reports under the Exchange Act, including annual, quarterly and special reports, and other information with the SEC.  These periodic reports and other information are available for inspection and copying at the regional offices, public reference facilities and website of the SEC referred to above.
We make available free of charge on or through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY
 
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers andor persons controlling persons ofthe registrant pursuant to the foregoing provisions, or otherwise, we havethe registrant has been advisedinformed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of counsel the matter has been settled by controlling precedent, submi t to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The rights of indemnification described above are not exclusive of any other rights of indemnification to which the persons indemnified may be entitled under any bylaw, agreement, vote of stockholders or directors or otherwise. In addition to the foregoing, we maintain insurance through a commercial carrier against certain liabilities which may be incurred by our directors and officers.
The foregoing description is necessarily general and does not describe all details regarding the indemnification of our officers, directors or controlling persons.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. Federal income tax consequences to U.S. holders and non-U.S. holders (each defined below) regarding the acquisition, ownership and disposition of shares of our Common Stock.
For purposes of this discussion, a U.S. holder is a beneficial owner of shares of our Common Stock who is:
·an individual who is a citizen or resident of the United States;
·a corporation (or other entity taxed as a corporation for U.S. Federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
·an estate the income of which is subject to U.S. Federal income taxation regardless of its source; or
·a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) it has in effect a valid election to be treated as a U.S. person.

 
51-48-
 
For purposes of this discussion, a non-U.S. holder is a beneficial owner of shares of our Common Stock that is not a U.S. holder.
This section is based on current provisions of the Code, current and proposed Treasury regulations promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis.
Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. This summary is not binding on the IRS, and the IRS is not precluded from adopting a contrary position.
This section does not purport to be a comprehensive description of all of the tax considerations that may be relevant to each holder of shares of our Common Stock. This section does not address all aspects of U.S. Federal income taxation that may be relevant to any particular investor based on such investor’s individual circumstances. In particular, this section considers only U.S. holders and non-U.S. holders that hold shares of our Common Stock as capital assets and does not address the potential application of the alternative minimum tax or the U.S. Federal income tax consequences to investors that are subject to special treatment, including:
·broker-dealers;
·insurance companies;
·taxpayers who have elected mark-to-market accounting;
·tax-exempt organizations;
·regulated investment companies;
·real estate investment trusts;
·financial institutions or “financial services entities;”
·taxpayers who hold shares of our Common Stock as part of a straddle, hedge, conversion transaction or other integrated transaction;
·controlled foreign corporations;
·passive foreign investment companies;
·certain expatriates or former long-term residents of the United States; and
·U.S. holders whose functional currency is not the U.S. dollar.
The following does not address any aspect of U.S. Federal gift or estate tax laws, or state, local or non-U.S. tax laws. In addition, the section does not consider the tax treatment of entities taxable as partnerships for U.S. Federal income tax purposes or other pass-through entities or persons who hold shares of our Common Stock through such entities. Prospective investors are urged to consult their tax advisors regarding the specific tax consequences to them of the acquisition, ownership or disposition of shares of our Common Stock in light of their particular circumstances.
52

Tax Consequences of Owning Shares of Our Common Stock
U.S. Holders
Dividends and Other Distributions on Shares of Common Stock
Distributions on shares of our Common Stock will constitute dividends for U.S. Federal income tax purposes to the extent paid from the Company’s current or accumulated earnings and profits, as determined under U.S. Federal income tax principles. If a distribution exceeds the Company’s current or accumulated earnings and profits, the excess will be treated first as a tax-free return of capital and will reduce (but not below zero) the U.S. holder’s adjusted tax basis in the Common Stock, and any remaining excess will be treated as capital gain from a sale or exchange of the shares of Common Stock, subject to the tax treatment described below in “Disposition of Shares of Our Common Stock.”
Dividends received by a corporate U.S. holder generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions, and provided certain holding period requirements are met, dividends received by a non-corporate U.S. holder generally will constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to capital gains for tax years beginning on or before December 31, 2010, after which the rate applicable to dividends is currently scheduled to change to the tax rate generally then applicable to ordinary income.
Disposition of Shares of Our Common Stock
Upon the sale, exchange, redemption or other disposition of shares of our Common Stock, a U.S. holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale, exchange or other disposition of the shares of our Common Stock and the U.S. holder’s adjusted tax basis in such stock. Generally, such gain or loss will be capital gain or loss. Any such capital gain or loss will be long term capital gain or loss if the U.S. holder’s holding period for the shares exceeds one year, and will otherwise be short-term capital gain or loss.
Non-U.S. Holders
Dividends and Other Distributions on Shares of our Common Stock
In general, any distributions made to a non-U.S. holder of shares of our Common Stock, to the extent paid out of current or accumulated earnings and profits of the Company (as determined under U.S. Federal income tax principles), will constitute dividends for U.S. Federal income tax purposes. Provided such dividends are not effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States, such dividends generally will be subject to withholding of U.S. Federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
Any distribution not constituting a dividend will be treated first as a tax-free return of capital and will reduce (but not below zero) the non-U.S. holder’s adjusted tax basis in its shares of our Common Stock and any remaining excess will be treated as gain realized from the sale or other disposition of the Common Stock, as described under “Disposition of Common Stock” below.
Dividends paid to a non-U.S. holder that are effectively connected with such non-U.S. holder’s conduct of a trade or business within the United States generally will not be subject to U.S. withholding tax, provided such non-U.S. holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, such dividends generally will be subject to U.S. Federal income tax at the same graduated individual or corporate rates applicable to U.S. holders. If the non-U.S. holder is a corporation, dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.
A non-U.S. holder who wishes to claim the benefit of an applicable treaty rate for dividends will be required (a) to complete IRS Form W-8BEN (or other applicable form) and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if the Company Common Stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable U.S. Treasury regulations.

53
A non-U.S. holder eligible for a reduced rate of U.S. Federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.
Disposition of Common Stock
A non-U.S. holder generally will not be subject to U.S. Federal income or withholding tax in respect of gain recognized on a sale, exchange or other disposition of shares of our Common Stock unless:
·the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States;
·the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
·the Company is or has been a “United States real property holding corporation” for U.S. Federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held shares of our Common Stock and, in the case where shares of our Common Stock are regularly traded on an established securities market, the non-U.S. holder has owned, directly or indirectly, more than 5% of shares of our Common Stock at any time within the shorter of the five-year period
·preceding a disposition of shares of our Common Stock or such non-U.S. holder’s holding period for the shares of our Common Stock.
Unless an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable U.S. Federal income tax rates. Any gain described in the first bullet point above of a non-U.S. holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Gain described in the second bullet point above (which may be offset by U.S. source capital losses) will be subject to a flat 30% U.S. Federal income tax.
With respect to the third bullet point above, there can be no assurance that shares of our Common Stock will be treated as regularly traded on an established securities market. The Company believes that it will be a “United States real property holding corporation” for U.S. Federal income tax purposes.
Character of Income, Gain, and Loss
For non-corporate U.S. holders, items of ordinary income and loss are subject to different tax rates than items of capital gain or loss. Ordinary income for non-corporate U.S. holders is generally taxable, for tax years beginning on or before December 31, 2010, at rates of up to 35%. For tax years beginning after December 31, 2010, the maximum ordinary income rate for non-corporate U.S. holders is scheduled to increase to 39.6%. Ordinary losses are generally deductible against all income and gain. Long term capital gains of non-corporate U.S. holders are currently subject to a reduced maximum tax rate of 15% for tax years beginning on or before December 31, 2010. After December 31, 2010, the maximum capital gains rate is scheduled to increase to 20%. The deductibility of capital losses is subject to limitations.
Information Reporting and Back-up Withholding
A U.S. holder may be subject to information reporting requirements with respect to dividends paid on shares of our Common Stock, and on the proceeds from the sale, exchange or disposition of shares of our Common Stock. In addition, a U.S. holder may be subject to back-up withholding (currently at 28%) on dividends paid on common shares, and on the proceeds from the sale, exchange or other disposition of shares of our Common Stock unless the U.S. holder provides certain identifying information, such as a duly executed IRS Form W-9 certifying that he, she, or it is not subject to backup withholding or appropriate W-8, or otherwise establishes an exemption. Back-up withholding is not an additional tax and the amount of any back-up withholding will be allowable as a credit against a U.S. holder’s U.S. Federal inco me tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. In general, a non-U.S. holder will not be subject to information reporting and backup withholding. However, a non-U.S. holder may be required to establish an exemption from information reporting and backup withholding by certifying the non-U.S. holder’s non-U.S. status on Form W-8BEN. Holders are urged to consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.
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Surtax on Unearned Income
For tax years beginning after Dec. 31, 2012, a 3.8% surtax called the Unearned Income Medicare Contribution, would be placed on net investment income of a taxpayer earning over $200,000 ($250,000 for a joint return). Net investment income would be interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). Net investment income would be reduced by properly allocable deductions to such income.
LEGAL MATTERS
The validity of the shares of our Common Stock offered hereby will be passed upon for us by Durham Jones & Pinegar, P.C., Salt Lake City, Utah.
EXPERTS
The consolidated financial statements, the related financial statements included in this prospectus for the fiscal years ended September 30, 2009 and 2008 have been audited by Hansen Barnett & Maxwell, P.C., an independent registered public accounting firm, as stated in their report and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov.
These filings and other documents are available and may be accessed on our website at www.securealert.com. You may request a copy of these filings at no cost, by writing or calling SecureAlert, Inc., Attention: Secretary, 150 West Civic Center Drive, Suite 400, Sandy, Utah 84070.
We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference in this prospectus.

55
Financial Statements
 
Index to Consolidated Financial Statements
 

 Page
  
Report of Independent Registered Public Accounting FirmEide Bailly LLPF-2
  
Consolidated Balance Sheets as of September 30, 20092014 and 20082013F-3
  
Consolidated Statements of Operations for the fiscal years ended September 30, 20092014 and 20082013F-5F-4
  
Consolidated Statements of Stockholders’ Equity (Deficit) for the fiscal years ended September 30, 20082014 and 20092013F-6F-5
  
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 20092014 and 20082013F-12F-7
  
Notes to Consolidated Financial StatementsF-15F-9
Condensed Consolidated Balance Sheets as of December 31, 2014 (unaudited) and September 30, 2014F-31
Condensed Consolidated Statements of Operations for the three months ended December 31, 2014 and 2013 (unaudited)F-32
Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2014 and 2013 (unaudited)F-33
Notes to unaudited Condensed Consolidated Financial StatementsF-35






 
F-1
 
 
HANSEN, BARNETT & MAXWELL, P.C.
A Professional CorporationRegistered with the Public Company
CERTIFIED PUBLIC ACCOUNTANTSAccounting Oversight Board
5 Triad Center, Suite 750
Salt Lake City, UT 84180-1128
Phone: (801) 532-2200 (801) 532-2200
Fax: (801) 532-7944
www.hbmcpas.com
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and
StockholdersShareholders of SecureAlert, Inc.,
(Formerly known as RemoteMDx, Inc.)dba Track Group


We have audited the accompanying consolidated balance sheets of SecureAlert, Inc., formerly known as RemoteMDx, Inc., and subsidiariesSubsidiaries (collectively the Company) as of September 30, 20092014 and 2008,2013 and the related consolidated statements of operations and other comprehensive loss, stockholders’ equity, (deficit), and cash flows for each of the years in the two-year period ended September 30, 2009.then ended.  The Company’s management is responsible for these financial statements.  Our responsibility is to express an opinion on these financial statements based on our audits.audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatements.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidenceevidences supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provideprovides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SecureAlert, Inc. as of September 30, 20092014 and 2008,2013 and the consolidated results of its operations, and its cash flows for each of the years in the two-year periodthen ended September 30, 2009 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses and has an accumulated deficit.  These conditions raise substantial doubt about its ability to continue as a going concern.  Management’s plans regarding those matters are also described in Note 1.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



HANSEN, BARNETT & MAXWELL, P.C./s/ Eide Bailly LLP
Eide Bailly LLP
Salt Lake City, Utah
January 12, 2010December 17, 2014



SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCEBALANCE SHEETS
AS OF SEPTEMBER 30, 20092014 AND 2008


    
    
Assets 2009  2008 
Current assets:      
Cash $602,321  $2,782,953 
Deposit held in escrow  -   500,000 
Accounts receivable, net of allowance for doubtful accounts of  $266,000 and $312,000, respectively  1,441,648   1,441,853 
    Receivables from related-party  -   55,385 
Prepaid expenses and other  275,390   224,842 
Inventory, net of reserves of $83,092 and $0, respectively  603,329   - 
Total current assets  2,922,688   5,005,033 
Property and equipment, net of accumulated depreciation of $2,525,180 and $1,937,710, respectively  1,313,306   1,581,558 
Monitoring equipment, net of accumulated depreciation of $2,944,197 and $3,061,321, respectively  1,316,493   1,349,146 
Goodwill  2,468,081   4,811,834 
Intangible assets, net of amortization of $126,655 and $16,500, respectively  496,346   216,500 
Other assets  76,675   46,626 
Total assets $8,593,589  $13,010,697 
2013
 

Assets 2014  2013 
Current assets:      
Cash $11,101,822  $3,382,428 
Accounts receivable, net of allowance for doubtful accounts of $4,070,000 and $3,968,000, respectively  3,788,207   3,721,964 
Note receivable, current portion  273,964   176,205 
Prepaid expenses and other  1,226,054   1,783,805 
Inventory, net of reserves of $223,500 and $148,043, respectively  1,248,264   467,101 
Total current assets  17,638,311   9,531,503 
Property and equipment, net of accumulated depreciation of $2,292,521 and $2,092,221, respectively  1,860,247   318,201 
Monitoring equipment, net of accumulated amortization of $1,251,551 and $1,183,346, respectively  1,914,666   1,236,696 
Note receivable, net of current portion  -   28,499 
Intangible assets, net of accumulated amortization of $2,818,894 and $1,256,647, respectively  26,743,626   15,413,920 
Other assets  3,150,428   170,172 
Goodwill  6,577,609   - 
Total assets $57,884,887  $26,698,991 
         
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable  1,995,607   348,074 
Accrued liabilities  2,413,557   2,180,791 
Dividends payable  -   9,427 
Deferred revenue  -   8,674 
Current portion of long-term related-party debt  -   60,000 
Current portion of long-term debt, net of discount of $375,370 and zero, respectively  1,906,040   88,095 
Total current liabilities  6,315,204   2,695,061 
Stock payable - related party  3,000,000   - 
Long-term related-party debt, net of current portion  2,700,000   - 
Long-term debt, net of current portion and discount of $93,750 and zero, respectively  25,868,361   40,588 
Other long-term liabilities  85,275   - 
Total liabilities  37,968,840   2,735,649 
         
Stockholders’ equity:        
Preferred stock:        
Series D 8% dividend, convertible, voting, $0.0001 par value: 85,000 shares designated; 0 and 468 shares outstanding, respectively  -   1 
common stock, $0.0001 par value: 15,000,000 shares authorized; 10,093,130 and 9,805,503 shares outstanding, respectively  1,009   981 
Additional paid-in capital  295,364,173   290,391,697 
Accumulated deficit  (275,177,181)  (266,429,337)
Accumulated other comprehensive loss  (271,954)  - 
Total equity  19,916,047   23,963,342 
Total liabilities and stockholders’ equity $57,884,887  $26,698,991 
The
See accompanying notes are an integral part of theseto consolidated financial statements.

 
F-3

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS OF SEPTEMBER 30, 2009 AND 2008
    
Liabilities and Stockholders’ Equity   
  2009  2008 
Current liabilities:      
Bank line of credit $252,600  $3,462,285 
Accounts payable  2,339,786   2,059,188 
Accrued liabilities  3,506,680   1,781,267 
Deferred revenue  56,858   21,343 
Related-party note payable and line of credit  1,576,022   792,804 
SecureAlert Series A Preferred stock redemption obligation  3,148,943   3,244,758 
Derivative liability (Note 11)  1,219,426   - 
Promissory notes payable, net of debt discount of $41,556 and $0, respectively  2,008,444   - 
Senior secured note payable, net of debt discount of $529,109 and $0, respectively  2,890,522   - 
Current portion of Series A 15% debentures, net of debt discount of $1,272,189 and $0, respectively  2,127,811   - 
Current portion of long-term debt  272,493   465,664 
         Total current liabilities  19,399,585   11,827,309 
Series A 15% debentures net of current portion, net of debt discount of $549,531 and $0, respectively  557,219   - 
Long-term debt, net of current portion, net of debt discount of $525,665 and $0, respectively  1,009,606   1,147,382 
            Total liabilities  20,966,410   12,974,691 
         
Stockholders’ equity (deficit):        
Preferred stock:        
Series A 10% dividend, convertible, non-voting, $0.0001 par value: 40,000 shares designated; zero and 19 shares outstanding, respectively (aggregate liquidation preference of $0)    -     1 
Series B convertible, $0.0001 par value: 2,000,000 shares designated; zero and 10,999 shares outstanding, respectively (aggregate liquidation preference of $0)  -   1 
Common stock,  $0.0001 par value: 250,000,000 shares authorized; 210,365,988 and 155,881,260 shares outstanding, respectively  21,037   15,588 
Additional paid-in capital  194,659,044   186,203,084 
    Deferred compensation  (1,287,406)  (3,498,672)
    Accumulated deficit  (205,765,496)  (182,683,996)
         Total stockholders’ equity (deficit)  (12,372,821)  36,006 
            Total liabilities and stockholders’ equity $8,593,589  $13,010,697 

The accompanying notes are an integral part of these statements.

F-4

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 20092014 AND 20082013
  2014  2013 
Revenues:      
Products $599,017  $612,437 
Monitoring and other related services  11,663,181   15,028,625 
Total revenues  12,262,198   15,641,062 
         
Cost of revenues:        
Products  251,385   262,022 
Monitoring and other related services  4,873,757   7,554,870 
Impairment of monitoring equipment and parts (Note 2)  373,951   213,276 
Total cost of revenues  5,499,093   8,030,168 
         
Gross profit  6,763,105   7,610,894 
         
Operating expenses:        
         
Selling, general and administrative (including $801,820 and $430,618, respectively, of compensation expense paid in stock, stock options / warrants or as a result of amortization of stock-based compensation)
  12,891,151   7,679,124 
Research and development  1,605,662   987,934 
Settlement expense  14,291   360,000 
Loss from operations  (7,747,999)  (1,416,164)
         
Other income (expense):        
Loss on disposal of equipment  (36,533)  (2,949)
Interest income  368,434   - 
Interest expense  (1,290,289)  (17,048,519)
Currency exchange rate gain (loss)  (609,914)  (145,612)
Other income, net  624,001   279,174 
Net loss from continuing operations  (8,692,300)  (18,334,070)
Gain on disposal of discontinued operations  -   424,819 
Net loss from discontinued operations  -   (6,460)
Net loss before tax  (8,692,300)  (17,915,711)
Income tax  (55,544)  - 
Net loss Company  (8,747,844)  (17,915,711)
Dividends on preferred stock  (14,585)  (1,042,897)
Net loss attributable to common shareholders  (8,762,429)  (18,958,608)
Foreign currency translation adjustments  (271,954)  - 
Comprehensive loss $(9,034,383) $(18,958,608)
Net loss per common share, basic and diluted from continuing operations $(0.88) $(3.79)
Net income per common share, basic and diluted from discontinued operations $-  $0.09 
Weighted average common shares outstanding, basic and diluted  9,951,000   4,832,000 
 
 2009  2008 
Revenues:     
   Products$570,749  $2,577,600 
   Monitoring services 12,055,159   9,826,077 
      Total revenues 12,625,908   12,403,677 
Cost of revenues:       
   Products 275,688   1,675,212 
   Monitoring services 9,862,925   10,862,830 
   Impairment of monitoring equipment and parts (Note 3) 2,319,530   570,948 
       Total cost of revenues 12,458,143   13,108,990 
          Gross (negative) margin 167,765   (705,313)
Operating expenses:        
Selling, general and administrative (including $3,315,716 and $26,324,358, respectively, of compensation expense paid in stock or stock options / warrants) 16,540,645   36,466,678 
Research and development (including $0 and $1,045,285, respectively, paid in stock or stock options / warrants) 1,777,873   4,811,128 
Impairment of goodwill (Note 4) 2,804,580   - 
        Loss from operations (20,955,333)  (41,983,119)
Other income (expense):       
   Gain on sale of intellectual property -   2,400,000 
   Redemption of SecureAlert Monitoring Series A Preferred 95,816   (8,372,566)
   Interest income 18,187   35,230 
Interest expense (including $2,695,759 and $865,568, respectively, paid in stock or stock options / warrants) (5,012,803)  (1,566,542)
   Derivative valuation gain (Note 11) 1,867,007   - 
   Other income (expense), net 905,626   314,059 
        Net loss from continuing operations (23,081,500)  (49,172,938)
Discontinued operations -   (414,112)
        Net loss (23,081,500)  (49,587,050)
Dividends on Series A Preferred stock (175)  (345,356)
Net loss attributable to common stockholders$(23,081,675) $(49,932,406)
Net loss per common share from continuing operations, basic and diluted$(0.13) $(0.35)
Net loss per common share from discontinued operations, basic and diluted$0.00  $(0.01)
Net loss per common, basic and diluted$(0.13) $(0.36)
Weighted average common shares outstanding, basic and diluted 182,188,000   140,092,000 
See accompanying notes to consolidated financial statements.
 

The accompanying notes are an integral part of these statements.


SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 20082013 AND 2009
  Preferred Stock 
  
Series A
Shares
  
Series A
Amount
  
Series B
Shares
  
Series B
Amount
 
             
Balance as of October 1, 2007  19  $1   12,999  $1 
                 
Issuance of common stock for:                
Conversion of Series B Preferred stock  -   -   (2,000)  - 
    Settlement of lawsuit  -   -   -   - 
    Related provisions of debt  -   -   -   - 
Services  -   -   -   - 
    Cash  -   -   -   - 
    Acquisition of subsidiaries  -   -   -   - 
    Exercise of options and warrants  -   -   -   - 
                 
Issuance of warrants for:                
    Related provisions of debt  -   -   -   - 
    Services
  -   -   -   - 
                 
Amortization of deferred consulting  -   -   -   - 
                 
Amortization of financing costs  -   -   -   - 
                 
Issuance of SecureAlert Monitoring Series A Preferred stock  -   -   -   - 
                 
Issuance of Series A Preferred stock for accrued dividends  -   -   -   - 
                 
Subscription receivable  -   -   -   - 
                 
SecureAlert Monitoring Series A Preferred stock redemption  -   -   -   - 
                 
Deconsolidation of subsidiary  -   -   -   - 
                 
Net loss  -   -   -   - 
                 
Balance as of September 30, 2008  19  $1   10,999  $1 
2014

  Preferred Stock  Common Stock  Additional       
  Series D        Paid-in  Accumulated    
  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance as of October 1, 2012  48,763  $5   3,096,641  $310  $252,940,448  $(248,513,626) $4,427,137 
                             
Issuance of common stock for:                            
Conversion of Series D Preferred stock(48,295)  (4)  1,894,283   189   (185)  -   - 
Services  -   -   21,884   2   141,756   -   141,758 
Debt  -   -   4,607,361   462   20,732,657   -   20,733,119 
Dividends from Series D Preferred stock-   -   181,832   18   1,663,979   -   1,663,997 
Board of director fees-   -   3,661   -   47,500   -   47,500 
Cash  -   -   (159)  -   (1,995)  -   (1,995)
                             
Vesting and re-pricing of stock options  -   -   -   -   160,301   -   160,301 
                             
Beneficial conversion feature recorded as interest expense
  -   -   -   -   15,349,074   -   15,349,074 
                             
Series D Preferred dividends  -   -   -   -   (1,042,897)  -   (1,042,897)
                             
Issuance of common stock warrants for Board of Director fees
  -   -   -   -   401,059   -   401,059 
                             
Net loss  -   -   -   -   -   (17,915,711)  (17,915,711)
                             
Balance as of September 30, 2013  468  $1   9,805,503  $981  $290,391,697  $(266,429,337) $23,963,342 

The
See accompanying notes are an integral part of theseto consolidated financial statements.

 
F-6F-5

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 20082013 AND 2009
     Additional    
  Common Stock  Paid-In  Deferred 
  Shares  Amount  Capital  Compensation 
             
Balance as of October 1, 2007  127,340,085  $12,734  $142,238,576  $(7,468,998)
                 
Issuance of common stock for:                
Conversion of Series B Preferred stock  15,000   2   (2)  - 
    Settlement of lawsuit  325,000   33   571,967   - 
    Debt  360,000   36   403,164   (403,200)
Services  9,135,000   914   15,843,671   (1,520,000)
    Cash  6,177,219   618   5,187,296   - 
    Acquisition of subsidiaries  650,000   65   2,599,435   - 
    Exercise of options and warrants  3,618,814   361   2,509,520   - 
                 
Issuance of warrants for:                
    Debt  -   -   1,872,000   - 
    Services
  -   -   4,398,279   (134,812)
                 
Amortization of deferred consulting  -   -   -   5,162,770 
                 
Amortization of financing costs  -   -   -   865,568 
                 
Issuance of SecureAlert Monitoring Series A Preferred stock  825,893   82   825,810   - 
                 
Issuance of Series A Preferred stock for accrued dividends  -   -   (345,356)  - 
                 
Subscription receivable  -   -   -   - 
                 
SecureAlert Monitoring Series A Preferred stock redemption  7,434,249   743   8,548,643   - 
                 
Deconsolidation of subsidiary  -   -   1,550,081   - 
                 
Net loss  -   -   -   - 
                 
Balance as of September 30, 2008  155,881,260  $15,588  $186,203,084  $(3,498,672)
2014

  Preferred Stock  Common Stock  Additional     Accumulated Other    
  Series D        Paid-in  Accumulated  Comprehensive    
  Shares  Amount  Shares  Amount  Capital  Deficit  Loss  Total 
Balance as of October 1, 2013  468   1   9,805,503   981   290,391,697   (266,429,337)  -  $23,963,342 
                                 
Issuance of common stock for:                                
Conversion of Series D Preferred stock(207)  -   16,907   2   (2)  -       - 
Acquisitions of subsidiaries -   -   236,469   24   4,499,976           4,500,000 
Services  -   -   15,343   2   243,016   -       243,018 
Exercise of options and warrants-   -   10,646   1   7,999   -       8,000 
Dividends from Series D Preferred stock-   -   1,252   -   24,012   -       24,012 
Board of director fees  -   -   7,010   1   127,499   -       127,500 
                                 
Vesting of stock options  -   -   -   -   254,487   -       254,487 
                                 
Stock offering costs  -   -   -   -   (34,735)  -       (34,735)
                                 
Series D Preferred dividends  -   -   -   -   (14,585)  -       (14,585)
                                 
Cash paid for repurchase of Series D Preferred Stock  (261)  (1)  -   -   (312,008)          (312,009)
                                 
Issuance of common stock warrants for Board of                                
Director fees  -   -   -   -   176,816   -       176,816 
                                 
Foreign currency translation adjustments  -   -   -   -   -   -   (271,954)  (271,954)
                                 
Net loss  -   -   -   -   -   (8,747,844)      (8,747,844)
                                 
Balance as of September 30, 2014  -  $-   10,093,130  $1,009  $295,364,173  $(275,177,181) $(271,954) $19,916,047 

The
See accompanying notes are an integral part of theseto consolidated financial statements.

 
F-7F-6

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2008 AND 2009
  
Subscription
Receivable
  
Accumulated
Deficit
  Total 
          
Balance as of October 1, 2007 $(407,500) $(133,096,946) $1,277,868 
             
Issuance of common stock for:            
Conversion of Series B Preferred stock  -   -   - 
    Settlement of lawsuit  -   -   572,000 
    Debt  -   -   - 
Services  -   -   14,324,585 
    Cash  -   -   5,187,914 
    Acquisition of subsidiaries  -   -   2,599,500 
    Exercise of options and warrants  -   -   2,509,881 
             
Issuance of warrants for:            
    Debt  -   -   1,872,000 
    Services
  -   -   4,263,467 
             
Amortization of deferred consulting  -   -   5,162,770 
             
Amortization of financing costs  -   -   865,568 
             
Issuance of SecureAlert Monitoring Series A Preferred stock  -   -   825,892 
             
Issuance of Series A Preferred stock for accrued dividends  -   -   (345,356)
             
Subscription receivable  407,500   -   407,500 
             
SecureAlert Monitoring Series A Preferred stock redemption  -   -   8,549,386 
             
Deconsolidation of subsidiary  -   -   1,550,081 
             
Net loss  -   (49,587,050)  (49,587,050)
             
Balance as of September 30, 2008 $-  $(182,683,996) $36,006 

The accompanying notes are an integral partTable of these statements.

F-8

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2008 AND 2009
  Preferred Stock 
  
Series A
Shares
  
Series A
Amount
  
Series B
Shares
  
Series B
Amount
 
             
Balance as of October 1, 2008  19  $1   10,999  $1 
                 
Issuance of common stock for:                
Conversion of Series A Preferred stock  (19)  (1)  -   - 
Conversion of Series B Preferred stock  -   -   (10,999)  (1)
Settlement of lawsuit  -   -   -   - 
Related issuances of debt  -   -   -   - 
Services  -   -   -   - 
Cash  -   -   -   - 
Acquisition of subsidiaries  -   -   -   - 
Acquisition extension  -   -   -   - 
                 
Issuance of warrants for:                
Related issuances of debt  -   -   -   - 
Services  -   -   -   - 
Acquisition of subsidiary  -   -   -   - 
                 
Amortization of deferred consulting  -   -   -   - 
                 
Amortization of financing costs  -   -   -   - 
                 
Beneficial conversion feature recorded as interest expense on notes  -   -   -   - 
                 
Forgiveness of debt from related party  -   -   -   - 
                 
Issuance of SecureAlert Series A Preferred stock for accrued dividends  -   -   -   - 
                 
Net loss  -   -   -   - 
                 
Balance as of September 30, 2009  -  $-   -  $- 
The accompanying notes are an integral part of these statements.

F-9

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2008 AND 2009

  
Common Stock
  
Additional
Paid-In
  Deferred 
  Shares  Amount  Capital  Compensation 
             
Balance as of October 1, 2008  155,881,260  $15,588  $186,203,084  $(3,498,672)
                 
Issuance of common stock for:                
Conversion of Series A Preferred stock  9,306   1   -   - 
Conversion of Series B Preferred stock  10,999   1   -   - 
Settlement of lawsuits  5,400,000   540   1,029,460   - 
Related issuances of debt  25,953,016   2,595   1,767,955   (138,000)
Services  2,254,121   226   928,648   (200,000)
Cash  17,850,000   1,785   3,248,215   - 
Acquisition of subsidiaries  2,857,286   286   656,890   - 
Acquisition extension  150,000   15   19,485   - 
                 
Issuance of warrants for:                
Related issuances of debt  -   -   96,844   - 
Services  -   -   392,506   (46,667)
Acquisition of subsidiary  -   -   114,383   - 
                 
Amortization of deferred consulting  -   -   -   1,930,678 
                 
Amortization of financing costs  -   -   -   665,255 
                 
Beneficial conversion feature recorded as interest expense on notes  -   -   122,727   - 
                 
Forgiveness of debt from related party  -   -   79,022   - 
                 
Issuance of SecureAlert Series A Preferred stock for accrued dividends  -   -   (175)  - 
                 
Net loss  -   -   -   - 
                 
Balance as of September 30, 2009  210,365,988  $21,037  $194,659,044  $(1,287,406)

The accompanying notes are an integral part of these statements.Contents

F-10
SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2008 AND 2009

  
Accumulated
Deficit
  Total 
       
Balance as of October 1, 2008 $(182,683,996) $36,006 
         
Issuance of common stock for:        
Conversion of Series A Preferred stock  -   - 
Conversion of Series B Preferred stock  -   - 
Settlement of lawsuits  -   1,030,000 
Related issuances of debt  -   1,632,550 
Services  -   728,874 
Cash  -   3,250,000 
Acquisition of subsidiaries  -   657,176 
Acquisition of extension  -   19,500 
         
Issuance of warrants for:        
Related issuances of debt  -   96,844 
Services  -   345,839 
Acquisition of subsidiary  -   114,383 
         
Amortization of deferred consulting  -   1,930,678 
         
Amortization of financing costs  -   665,255 
         
Beneficial conversion feature recorded as interest expense on notes  -   122,727 
         
Forgiveness of debt from related party  -   79,022 
         
Issuance of SecureAlert Series A Preferred stock for accrued dividends  -   (175)
         
Net loss  (23,081,500)  (23,081,500)
         
Balance as of September 30, 2009 $(205,765,496) $(12,372,821)


The accompanying notes are an integral part of these statements.

F-11
 
SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 20092014 AND 20082013
  2014  2013 
Cash flows from operating activities:      
Net loss $(8,747,844) $(17,915,711)
Gain on sale of subsidiaries  -   (424,819)
Loss from discontinued operations  -   6,460 
Loss from continuing operations  (8,747,844)  (18,334,070)
Adjustments to reconcile net income to net cash used in operating activities:     
Depreciation and amortization  2,457,991   2,414,270 
Common stock issued for services  801,820   141,760 
Accretion of debt discount and benficial conversion feature  286,399   15,954,355 
Bad debt expense  125,961   - 
Vesting and re-pricing of stock options  -   160,301 
Fractional shares of common stock paid in cash  -   (1,996)
Impairment of monitoring equipment and parts  373,951   213,276 
Issuance of warrants to related parties  -   128,559 
Loss on disposal of property and equipment  3,710   4,740 
Loss on disposal of monitoring equipment and parts  -   84,805 
Change in assets and liabilities net of assets and liabilities acquired:        
Accounts receivable, net  (193,030)  (652,749)
Notes receivable  (25,244)  63,978 
Inventories  (1,727,400)  186,913 
Prepaid expenses and other assets  604,506   107,576 
Accounts payable  1,466,905   (1,473,530)
Accrued expenses  (1,339)  2,186,618 
Deferred revenue  (8,674)  (345,896)
Net cash (used in) provided by operating activities  (4,582,288)  838,910 
         
Cash flow from investing activities:        
Purchase of property and equipment  (544,126)  (50,682)
Purchase of monitoring equipment and parts  -   (509,743)
Leasehold improvements  (1,330,068)  - 
Payments for other assets  (3,163,802)  - 
Cash acquired through acquisition  195,058   - 
Payment related to acquisition  (8,050,167)  - 
Proceeds from notes receivable  55,984   - 
Net cash used in investing activities  (12,837,121)  (560,425)
         
Cash flow from financing activities:        
Borrowings on related-party notes payable  1,200,000   2,800,000 
Principal payments on related-party notes payable  (60,000)  - 
Proceeds from notes payable  25,750,000   - 
Principal payments on notes payable  (1,407,524)  (299,276)
Proceeds from issuance of common stock  8,000   - 
Repurchase of Series D Convertible Preferred stock  (312,008)  - 
Debt offering costs  (34,735)  - 
Net cash provided by financing activities  25,143,733   2,500,724 
         
Effect of exchange rate changes on cash  (4,930)  - 
         
Cash flow from discontinued operations:        
Net cash provided by operating activities  -   126,715 
Net cash provided by investing activities  -   - 
Net cash provided by financing activities  -   18,475 
Net cash provided by discontinued operations  -   145,190 
         
Net increase (decrease) in cash  7,719,394   2,924,399 
Cash, beginning of year  3,382,428   458,029 
Cash, end of year $11,101,822  $3,382,428 
       
  2009  2008 
Cash flows from operating activities:      
    Net loss $(23,081,500) $(49,587,050)
      Adjustments to reconcile net loss to net cash used in operating activities:        
             Depreciation and amortization  2,087,949   1,736,492 
             Common stock issued for services  728,876   13,620,584 
         Common stock issued to settle lawsuit  261,521   1,276,000 
             Amortization of debt discount  2,030,504   - 
             Amortization of deferred financing and consulting costs  2,595,933   5,968,338 
             Derivative liability valuation  (1,867,007)  - 
             Registration payment arrangement expense  -   130,000 
             Stock options and warrants issued during the period for services  345,838   4,263,467 
             Redemption of SecureAlert Monitoring Series A Preferred stock  (95,816)  8,205,922 
             Impairment of goodwill  2,804,580   - 
             Common stock issued for acquisition option extension cost  19,500   - 
             Increase in related-party line of credit for services  272,281   618,433 
             Impairment of monitoring equipment and parts  2,319,530   570,948 
             Loss from discontinued operations  -   414,112 
             Changes in operating assets and liabilities:        
                    Accounts receivable, net  (23,490)  3,293,050 
                    Interest receivable (payable)  -   (9,068)
                    Deposit held in escrow  500,000   (500,000)
                    Prepaid expenses and other assets  (25,212)  720,591 
                    Accounts payable  745,630   (1,373,491)
                    Accrued liabilities  1,824,042   999,310 
                    Deferred revenue  35,515   (20,382)
                           Net cash used in operating activities  (8,521,326)  (9,672,744)
         
Cash flows from investing activities:        
      Purchase of property and equipment  (380,647)  (334,226)
      Purchase of monitoring equipment and parts  (1,312,397)  (192,221)
      Proceeds from sale of equipment  16,577   - 
                           Net cash used in investing activities  (1,676,467)  (526,447)
         
Cash flows from financing activities:        
      Payments on related-party line of credit  (739,063)  (315,392)
      Net principal proceeds (reductions) in bank line of credit borrowings  388,593   (396,700)
      Payments on notes payable  (1,115,237)  (336,133)
      Borrowings on related-party notes payable  680,229   975,578 
      Principal payments on notes payable related to acquisitions  -   (2,176,821)
      Cash acquired through acquisitions  -   163,002 
      Proceeds from the issuance of Series A 15% debentures  4,496,750   - 
      Proceeds from sale of common stock  3,250,000   5,058,014 
      Proceeds from sale of warrants and subsidiary stock  -   2,400,000 
      Proceeds from issuance of notes payable  1,055,889   34,344 
      Proceeds from exercise of options and warrants  -   2,772,381 
                           Net cash provided by financing activities  8,017,161   8,178,273 
Net decrease in cash  (2,180,632)  (2,020,918)
Cash, beginning of year  2,782,953   4,803,871 
Cash, end of year $602,321  $2,782,953 

The accompanying notes are an integral part of these statements.

 
F-12
See accompanying notes to consolidated financial statements.
F-7

SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 20092014 AND 20082013

   2009  2008 
        
Cash paid for interest $1,963,200 $700,974 
        
Supplemental schedule of non-cash investing and financing activities:       
        
     Issuance of 9,306 and  zero common shares, respectively, in exchange for 19 and zero shares of Series A Preferred stock, respectively $1 $- 
        
     Issuance of  10,999 and 2,000 common shares, respectively, in exchange for 10,999 and 15,000 shares of Series B Preferred stock, respectively  1  2 
        
     Issuance of 2,000,000 and 360,000 common shares, respectively for deferred consulting services and financing services  384,667  403,200 
        
     Preferred Series A and C stock dividends  175  423 
        
     SecureAlert Monitoring Series A Preferred stock dividends accrued  -  480,537 
        
     Forgiveness of debt from related-party debt  79,022  - 
        
     Shares issued prepaid services  -  1,520,000 
        
     Fair value of assets acquired in purchase of Court Programs through the issuance of common stock  -  1,316,338 
        
      Fair value of liabilities assumed in purchase of Court Programs through the issuance of common stock   -  468,837 
        
     Issuance of common stock in acquisition of Court Programs, Inc  -  847,500 
        
     Settlement of SecureAlert Series A Preferred stock  -  3,590,000 
        
     Deconsolidation of ActiveCare  -  607,869 
        
     Fair value of assets acquired in purchase of Midwest Monitoring through the issuance of common stock  -  2,974,666 
        
     Fair value of liabilities assumed in purchase of Midwest Monitoring through the issuance of common stock  -  1,222,666 
        
     Issuance of common stock in acquisition of Midwest Monitoring  -  1,752,000 
        
     Issuance of common stock and stock options  to acquire the assets and liabilities of Bishop Rock Software  856,522  - 
          
     Stock issued in connection with debt (as discount)  1,739,393  - 
        
    Beneficial conversion feature recorded  122,727  - 
        
    Debt issued to settle line of credit  3,549,631  - 
  2014  2013 
Cash paid for interest $193,019  $238,080 
         
Supplemental schedule of non-cash investing and financing activities:     
Issuance of common stock in connection with Series D preferred stock dividends  24,012   1,663,997 
Series D Preferred stock dividends earned  14,585   1,042,897 
Issuance of warrants for accrued Board of Director fees  477,142   272,500 
Issuance of common shares for settlement of debt  -   20,733,118 
Issuance of common shares from the conversion of shares of Series D Preferred Stock  -   189 
Issuance of debt to repurchase royalty agreement  -   11,616,984 
Issuance of stock for the acquisition of a subsidiary  4,500,000   - 
Accretion of debt discount and beneficial conversion feature  -   15,954,355 
The accompanying notes are an integral part of these statements.
 
F-13
See accompanying notes to consolidated financial statements.
F-8
    Common stock cancelled 175  1 
       
    Acquisition of monitoring equipment through issuance of note payable 2,887,987  - 
       
    Stock issued to settle related-party note payable and accrued interest 218,479  - 
       
    Issuance of common stock to settle accounts payables 550,000  - 
       
    Acquisition of property and equipment through issuance of note payable 38,991  - 
       
    Reclassification of monitoring equipment to inventory from recovery of parts 1,450,803  - 


The accompanying notes are an integral partTable of these statements.


SECUREALERT, INC., FORMERLY KNOWN AS REMOTEMDX, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALFINANCIAL STATEMENTS

(1)Organization and Nature of Operations
 
General
 
SecureAlert, Inc., formerly known as RemoteMDx, Inc., and subsidiaries (DBA Track Group) (collectively, the “Company”“Company”) markets, monitors and leases TrackerPAL™ReliAlert™, Shadow and R.A.D.A.R. devices. The TrackerPAL™ isThese devices are used to monitor convicted offenders that are on probation or parole in the criminal justice system.  The TrackerPAL™ device utilizessystem or pretrial defendants. ReliAlert™ and Shadow devices utilize GPS, radio frequencies, and cellular technologies in conjunction with a monitoring center that is staffed 24/7 and 365 days a year. The Company believes that its technologies and services benefit law enforcement officials by allowing them to respond immediately to a problem involving the monitored offender. The TrackerPAL™ isReliAlert™ devices are targeted to meet the needs of this market domestically as well as internationally.
Going Concern
The Company has incurred recurring net losses and negative cash flows from operating activities for the fiscal years ended September 30, 2009 and 2008.  In addition, the Company has accumulated deficits of $205,765,496 and $182,683,996 as of September 30, 2009 and 2008, respectively. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In order for the Company to continue as a going concern, it must generate positive cash flows from operating activities and obtain the necessary funding to meet its projected capital investment requirements.  Management’s plans with respect to this uncertainty include raising additional capital from the issuance of preferred stock and expanding its market for its TrackerPAL™ portfolio of products.  There can be no assurance that revenues will increase rapidly enough to offset operating losses and repay debts.  If the Company is unable to increase cash flows from operating activities or obtain additional financing, it will be unable to continue the development of its products and may have to cease operations.

To lessen the Company’s cash burden and to raise additional capital, subsequent to September 30, 2009, the Company entered into agreements to issue 15,986 shares of Series D Convertible Preferred stock in exchange for conversion of $15,723,204 in debt, accrued liabilities and interest and issued an additional 12,200 shares from securities purchase agreements totaling $6,100,000 of which $4,600,000 has been received in cash as of the date of this Report, resulting in a total of 28,186 shares of Series D Preferred stock.
 
(2)Discontinued Operations

During the fiscal year ended September 30, 2008, the Company divested its majority ownership interest of the diagnostic stain business conducted by a former subsidiary ActiveCare, Inc., formerly known as Volu-Sol Reagents Corporation (“ActiveCare”).  The Company completed the divestiture by distributing its remaining interest (approximately 17% of the common stock) in ActiveCare during the fiscal year ended September 30, 2009.  This transaction was treated as a pro-rata nonreciprocal transfer to owners as required by the nonmonetary transactions topic of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC).  This resulted in $1,550,081 recorded as additional paid in capital to the Company.

The Company’s consolidated financial statements have been reclassified to segregate operating results of the discontinued operations for all periods presented.  Prior to reclassification, the discontinued operations were reported in the stain operating segment.  The summary of net sales and operating results from discontinued operations for the fiscal years ended September 30, 2009 and 2008, respectively, are as follows:

  2009  2008 
Net sales $-  $608,024 
Loss from discontinued operations $-  $(414,112)

F-15

(3)Summary of Significant Accounting Policies

Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of SecureAlert, Inc., formerly known as RemoteMDx, Inc. (DBA Track Group) and its subsidiaries, SecureAlert Monitoring Inc., formerly known as SecureAlert, Inc.,subsidiaries. Additionally, during the fiscal year ended September 30, 2013, the Company formed a Chilean subsidiary and sold Midwest Monitoring & Surveillance, Inc., Bishop Rock Software, Inc., and Court Programs, Inc., Court Programs of Florida, Inc., and Court Programs of Northern Florida, Inc. (collectively, During the “Company”)year ended September 30, 2014, the Company acquired two additional subsidiaries (see Note 3 “Acquisitions” below). All intercompany balances and transactions have been eliminated in consolidation.  As discussed in Note 2, the Company completely divested its ownership of ActiveCare during the year ended September 30, 2009.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities atas of the date of the financial statements and the reported amounts of revenuesrevenue and expenses during the reporting period.period presented. Actual results could differ from thesethose 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, and fair market values of certain assets and liabilities.

Business Combinations

Business combinations are accounted for under the provisions of ASC 805-10, Business Combinations (ASC 805-10), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the contingent consideration is recorded at its probable fair value at the acquisition date. Any changes in fair value after the acquisition date are accounted for as measurement-period adjustments if they pertain to additional information about facts and circumstances that existed at the acquisition date and that we obtained during the measurement period. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as performance measures, are recognized in earnings.

Foreign currency translation

The Chilean Peso and Israeli New Shekel are the functional currencies of Track Group – Chile and Track Group – Israel. Their respective balance sheets have been translated into USD at the exchange rate prevailing at the balance sheet date. Their respective statements of operations have been translated into USD using the average exchange rates prevailing during the periods of each statement. The corresponding translation adjustments are part of accumulated other comprehensive income and are shown as part of shareholders’ equity.
F-9
Goodwill
Goodwill represents costs in excess of purchase price over the fair value of the assets of businesses acquired, including other identifiable intangible assets.
Other Intangible Assets

Other intangible assets principally consist of patents, royalty purchase agreements, developed technology acquired, customer relationships, trade name 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. The Company’s intangible assets with finite useful lives are amortized over their respective estimated useful lives which range from two to ten years. The Company’s intangible assets are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate possible impairment.
Fair Value of Financial Statements
 
The carrying amounts reported in the accompanying consolidated financial statements for cash, accounts receivable, accounts payable, accrued liabilities and other debt obligations approximate fair values because of the immediate or short-term maturities of these financial instruments. The carrying amounts of the Company’s 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 its customers' financial condition.

The Company had sales to entities which represent more than 10 percent of total revenues as follows for the years ended September 30:
  2014  %  2013  % 
             
Customer A $-   0% $5,252,960   33%
                 
Customer B $1,501,940   12% $1,622,327   10%
                 
Customer C $1,431,854   12% $1,514,581   9%
No other customer represented more than 10 percent of the Company’s total revenues for the fiscal years ended September 30, 2014 or 2013.

Concentration of credit risk associated with the Company’s total and outstanding accounts receivable as of September 30, 2014 and 2013, respectively, are shown in the table below:
  2014  %  2013  % 
             
Customer A $892,897   17% $892,897   24%
                 
Customer B $499,040   10% $732,163   20%
                 
Customer C $419,523   8% $887,233   24%
Based upon the expected collectability of its accounts receivable, the Company maintains an allowance for doubtful accounts. Subsequent to the fiscal year ended September 30, 2014, the Company received $387,483 from Customer B and $518,137 from Customer C for a total of $905,620.

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.

In the normal course of business, the Company provides credit terms to its customers and requires no collateral. Accordingly, the Company performs ongoing credit evaluations of its customers' financial condition.

Based upon the expected collectability of its accounts receivable, the Company maintains an allowance for doubtful accounts receivable.

No customer represented more than 10% of the Company’s total revenues for the fiscal year ended September 30, 2009.  One non-repeat customer represented 16% of the Company’s total revenues for the fiscal year ended September 30, 2008.

No customer represented more than 10% of the Company’s total accounts receivable for the fiscal year ended September 30, 2009.  One customer accounted for $360,257 (25%) of the Company’s total accounts receivable for the fiscal year ended September 30, 2008.

Cash Equivalents

Cash equivalents consist of investments with original maturities to the Company of three months or less. The Company had $15,670$10,572,702 and $0$3,128,187 of cash deposits in excess of federally insured limits as of September 30, 20092014 and 2008,2013, respectively.

Accounts Receivable

Accounts receivable 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. Specific reserves areThe 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. Intere stInterest income is not recorded on trade receivables that are past due, unless that interest is collected.

F-16
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 had entered into an agreement with one of its customers during the fiscal year ended September 30, 2012. Payments are 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 matures in May 2014. The note is currently in default and accrues interest at a rate of 17% per annum. As of September 30, 2014, the outstanding balance of the note was $156,323 and $15,211 of accrued interest.

Inventory

Inventory is valued at the lower of the cost or market. Cost is determined using the first-in, first-out (“FIFO”FIFO”) method. Market is determined based on the estimated net realizable value, which generally is the item selling price. Inventory is periodically reviewed in order to identify obsolete or damaged items or impaired values. The Company impaired its inventory by $153,633 and $211,555 during the fiscal years ended September 30, 2014 and 2013, respectively.

Inventory consists of productsraw materials that are available for sale and raw materials used in the manufacturing of TrackerPAL™ReliAlert™, Shadow, and other tracking devices. Completed TrackerPAL™ReliAlert™ and other tracking devices are reflected in Monitoring Equipment. As of September 30, 20092014 and 2008,2013, respectively, inventory consisted of the following:

 2009  2008  2014  2013 
Raw materials $686,421  $- 
Raw materials, work-in-process and finished goods inventory $1,471,764  $615,144 
Reserve for damaged or obsolete inventory  (83,092)  -   (223,500)  (148,043)
Total inventory, net of reserves $603,329  $-  $1,248,264  $467,101 

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 liveslife of the asset or the term of the lease. Expenditures for maintenance and repairs are expensed while renewals and improvements are capitalized.  When property and equipment are disposed of, any gains or losses are included in the results of operations.

Property and equipment consisted of the following as of September 30, 20092014 and 2008,2013, respectively:

 2009  2008  2014  2013 
Equipment, software, tooling, and other fixed assets $2,742,537  $2,472,076 
Equipment, software and tooling $2,571,450  $2,002,576 
Automobiles  305,658   287,736   33,466   33,466 
Building and land  377,555   377,555 
Leasehold improvements  127,912   102,190   1,294,386   127,162 
Furniture and fixtures  284,824   279,711   253,466   247,218 
Total property and equipment  3,838,486   3,519,268 
Total property and equipment before accumulated depreciation  4,152,768   2,410,423 
Accumulated depreciation  (2,525,180)  (1,937,710)  (2,292,521)  (2,092,221)
Property and equipment, net of accumulated depreciation $1,313,306  $1,581,558  $1,860,247  $318,201 
 
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, 2014 and 2013, the Company disposed of net property and equipment of $3,710 and $4,740, respectively.

Depreciation expense for the fiscal years ended September 30, 20092014 and 20082013 was $677,016$276,355 and $638,138,$231,853, respectively.

Monitoring Equipment

Monitoring equipment as of September 30, 2009 and 2008 is as follows:

  2009  2008 
Monitoring equipment $4,260,690  $4,410,467 
Less accumulated depreciation  (2,944,197)  (3,061,321)
     Monitoring Equipment, net $1,316,493  $1,349,146 

The Company began leasing monitoring equipment to agencies for offender tracking in April 2006 under operating lease arrangements. The monitoring equipment is depreciated using the straight-line method over an estimated useful life of 3three years. Monitoring equipment as of September 30, 2014 and 2013 is as follows:

  2014  2013 
Monitoring equipment $3,166,217  $2,420,042 
Less: accumulated amortization  (1,251,551)  (1,183,346)
Monitoring equipment, net of accumulated depreciation $1,914,666  $1,236,696 
 
F-17

Amortization expense for the fiscal years ended September 30, 20092014 and 20082013 was $1,300,783$844,172 and $1,082,648,$1,230,293, respectively. These expenses were classified as a cost of revenues.

Assets Monitoring equipment to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs to sell. During the fiscal years ended September 30, 20092014 and 2008,2013, the Company disposed ofand impaired lease monitoring equipment and parts of $2,319,530$209,757 and $570,948,$296,526, respectively. In addition, the Company recognized $220,318 of impairment expense for future impairment of monitoring equipment during the year ended September 30, 2014. These impairment costs were included in cost of revenues.

Impairment of Long-Lived Assets and Goodwill

The Company reviews its 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. The Company uses an equity vs. fair market value method of the related asset or group of assets in measuring whether the assets are recoverable.  If the carrying amount of an asset exceeds its fair market 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 market value that is independent of other groups of assets.  As of September 30, 2009, the Company impaired goodwill from Midwest Monitoring & Surveillance, Inc. by $2,343,753 and from Bishop Rock Software by $460,827, Inc. for a total impairment expense of $2,804,580.

Revenue Recognition

The Company’s revenue has historically been from two sources: (i) monitoring services; (ii) monitoring device and other(ii) product sales.

Monitoring Services
Monitoring services include two components: (a) lease contracts in 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 its devices under one-year contracts with customers that opt to use the Company’s monitoring services. However, these contracts may be cancelled by either party at anytimeany time with 30 daysdays’ notice. Under the Company’s standard leasing contract, the leased device becomes billable on the date of activation or 7 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, the Company records these payments as deferred revenue.

Monitoring Device Product Sales
Although not the focus of the Company’s business model, the
The Company sellsmay sell its monitoring devices in certain situations.situations to its customers. In addition, the Company sells home securitymay sell equipment in connection with the building out and Personal Emergency Response Systems (“PERS”) units.setting up a monitoring center on behalf of its 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 TrackerPALTrackerPAL® and ReliAlert™ devices) from the Company, customers may, but are not required to, enter into monitoring service contracts with the Company. 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 the Company. The Company has 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 revenues, 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. OnHowever, on occasion, the Company hasenters into revenue transactions that have multiple elements (suchelements. 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 product sales and monitoring services).the customer utilizes the Company's services. For revenue arrangements that have multiple elements, the Company considers whether: (i)whether the delivered devices have standalone value to the customer; (ii)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;services, and (iii) 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 to be provided to the customer.  In accordance with FASB ASC subtopic addressing multiple deliverables, ifcustomer as the fair value of the undelivered element exists, but the fair value does not exist for oneproducts or more delivered elements, then revenue is recognized using the residual method. Under the residual method as applied to these particular transactions, the fair value of the undelivered element (the monitoring services) is deferred and the remaining portion of the arrangement (the sale of the device) is recognized as revenue when the device is delivered and all other revenue recognition criteriaservices are met.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, and normal payment terms for device sales are between 120 and 180 days. The Company sells its 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 the Company. Generally, title and risk of loss pass to the buyer upon delivery of the devices.

The Company estimates its 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 revenues. The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues.

Geographical Information

The Company recognized revenues from international sources from its products and monitoring services. Revenues are attributed to the geographic areas based on the location of the customers purchasing and leasing the products. The revenues recognized by geographic area for the fiscal years ended September 30, 2014 and 2013, are as follows:
  Fiscal Years Ended 
  September 30, 
  2014  2013 
United States of America $9,268,430  $7,179,043 
Latin American countries  -   5,252,960 
Caribbean countries and commonwealths  2,933,794   3,136,908 
Other foreign countries  59,974   72,151 
Total $12,262,198  $15,641,062 
The long-lived assets, net of accumulated depreciation and amortization, used in the generation of revenues by geographic area as of September 30, 2014 and 2013, were as follows:

  Net Property and Equipment  Net Monitoring Equipment 
  2014  2013  2014  2013 
United States of America $611,095  $318,201  $1,645,137  $878,823 
Latin American countries  1,168,406   -   237,667   - 
Caribbean countries and commonwealths  -   -   -   351,138 
Other foreign countries  80,746   -   31,862   6,735 
Total $1,860,247  $318,201  $1,914,666  $1,236,696 
Research and Development Costs

All expenditures for research and development are charged to expense as incurred. These expenditures in 20092014 and 20082013 were for theto further develop our TrackerPAL and ReliAlert portfolio of products and services, as well as other research and development of SecureAlert’s TrackerPAL™ device and associated services.costs incurred by a new subsidiary acquired during fiscal year 2014. For the fiscal years ended September 30, 20092014 and 2008,2013, research and development expenses were $1,777,873$1,605,662 and $4,811,128,$987,934, respectively.
Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense for the fiscal years ended September 30, 2009,2014 and 2008,2013 was $76,793$60,505 and $209,389,$30,782, respectively.

Stock-Based Compensation

For the fiscal years ended September 30, 2009 and 2008, theThe Company calculatedrecognizes compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of $67,406 and $214,251, respectively related to the vesting of stock options granted in prior years.

Theaward based on their grant date fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.value. The Company granted 1,517,714 and 1,725,000 stock options to employees duringestimates the fiscal years ended September 30, 2009 and 2008 valued $274,650 and $359,946, respectively.  In addition, 390,000 stock options issued to employees in prior years vested during the fiscal year ended September 30, 2008.  The weighted average fair value of stock options at the date of grant during the fiscal year ended September 30, 2009 and 2008 was $0.18 and $1.34, respectively. Theusing a Black-Scholes option pricing model which requires management to make estimates for certain assumptions regarding risk-free interest rate, expected life of stock options, represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends. The expected volatility is based on the historical price vo latility of common stock. The risk-free interest rate represents the U.S. Treasury bill rate for thestock and expected life of the related stock options. The dividend yield represents the Company’s anticipated cash dividends over the expected life of the stock options.
F-19
The following are the weighted-average assumptions used for options granted during the fiscal years ended September 30, 2009 and 2008, respectively:
  
Fiscal years Ended
September 30,
 
  2009  2008 
       
Expected cash dividend yield  -   - 
Expected stock price volatility  121%  136%
Risk-free interest rate  1.16%  3.12%
Expected life of options 3.7 years  5 years 
stock.

A summary of stock option activity for the fiscal years ended September 30, 2008 and 2009 is presented below:
  
Shares
Under
Option
  
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
 Aggregate
Intrinsic
Value
 
Outstanding as of September 30, 2007  3,295,000  $0.64     
     Granted  1,725,000  $1.54     
     Exercised  (1,375,000) $0.63     
     Forfeited  (45,000) $0.86     
     Expired  -   -     
Outstanding as of  September 30, 2008  3,600,000  $1.08 3.34 years $1,062,000 
Exercisable as of  September 30, 2008  421,667  $1.35 3.30 years $37,000 
  
Shares
Under
Option
  
Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
 
Outstanding as of September 30, 2008  3,600,000  $1.08     
     Granted  1,517,714  $0.21     
     Exercised  -  $-     
     Forfeited  -  $-     
     Expired  (408,500) $1.45     
Outstanding as of  September 30, 2009  4,709,214  $0.76 2.05  years $12,854 
Exercisable as of  September 30, 2009  1,719,880  $0.32 2.97 years $12,854 
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. The Company recognizes the financial statement benefit 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 its 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, 2014 and September 30, 2013, the Company did not record a liability for uncertain tax positions.

Net Loss Per Common Share

Basic net loss per common share ("("Basic EPS") is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted net loss per common share ("("Diluted EPS") is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number of common shares outstanding and the weighted-average dilutive common share equivalents outstanding. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.


Common share equivalents consist of shares issuable upon the exercise of common stock options and warrants,warrnats to purchase shares of the Company's Common Stock, par value $0.0001 per share (“Common Stock”), and shares issuable upon conversion of preferred stock. As of September 30, 20092014 and 2008,2013, there were 75,789,348347,251 and 21,846,412604,006 outstanding common share equivalents, respectively, that were not included in the computation of diluted net loss per common share as their effect would be anti-dilutive. The Common Stock equivalents outstanding as of September 30, 2014 and 2013 consisted of the following:

  2014  2013 
       
Conversion of Series D Preferred stock  -   14,040 
Exercise of outstanding Common Stock options and warrants  305,251   427,966 
Exercise and conversion of outstanding Series D Preferred stock warrants
  42,000   162,000 
Total Common Stock equivalents  347,251   604,006 
Recent Accounting Pronouncements

EffectiveIn July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which addresses the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This guidance requires the netting of unrecognized tax benefits against a deferred tax asset for December 2008, new accounting guidance was added relating to business combinations. The objectivea loss or other carryforward that would apply in settlement of this Topic is to enhance the information that an entity provides in our financial reports about a business combination and its effects. The Topic mandates: (i) how the acquirer recognizes and measures the assets acquired, liabilities assumed and any non-controlling interestuncertain tax positions. ASU 2013-11 will be effective for us beginning in the acquiree; (ii) what information to disclose in ourfirst quarter of fiscal 2014. Early adoption is permitted. Since ASU 2013-11 only impacts financial reports and; (iii) recognition and measurement criteriastatement disclosure requirements for goodwill acquired. This Topic is effective for any acquisitions made on or after December 15, 2008. Theunrecognized tax benefits, the Company does not expect the adoption of this Topic is not expectedthe guidance to have a material impact on our financial statements and disclosures.

In May 2009, the FASB issued guidance which establishes general standards of accounting and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Topic sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in our financial statements, (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Topic should be applied to the accounting and disclosure of subsequent events. This Topic does not apply to subsequent events or transactions that are within the scope of other applicable accounting standards that provide different guidance on the accounting treatment for subsequent events or transactions. This Topic was effective for interim and annual periods ending after June 15, 2009, which was September 30, 2009 for us. The adoption of this Topic did not have a material impact on our financial statements and disclosures.

In June 2009, the FASB issued guidance which became the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Topic, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-SEC accounting literature not included in the Codification will become non-authoritative. This Topic identifies the sources of accounting principles and the framework for selecting the principles used in preparing the financial statements of nongovernmental entities that are presented in conformity with GAAP and arranged these sources of GAAP in a hierarchy for users to apply accordi ngly. This Topic is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this Topic did not have a material impact on our disclosure of theCompany's consolidated financial statements.

In June 2009,May 2014, the Financial Accounting Standards Board (“FASB”) issued additionalASU 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which improvesan entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the relevance, representational faithfulness,revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and comparabilityinterim periods therein, using either of the information thatfollowing transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting entity provides inperiod with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our financial statements about a transferpending adoption of financial assets; the effects of a transferASU 2014-09 on our financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This additional guidance requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. Enhanced disclosures are required to provide financial statement users with greater transparency about transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. This additional guidance must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This additional guidance must be applied to transfers occurring on or after the effective date. The adoption of this Topic is not expected to have a material impact on ourconsolidated financial statements and disclosures.have not yet determined the method by which we will adopt the standard.

In September 2009, the FASB added implementation guidance on accounting for uncertainty in income taxes. For entities that are currently applying the standards for accounting for uncertainty in income taxes, the guidance and disclosure amendments are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this Update did not have a material impact on our financial statements and disclosures.

F-21

In September 2009,August 2014, the FASB issued guidance that changes the existing multiple-element revenue arrangements guidance currently included under its Revenue Arrangements with Multiple Deliverables codification. The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidenceASU No. 2014-15, Presentation of the fair value for the undelivered element in order for a delivered itemFinancial Statements-Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to be treatedContinue as a separate unit of accounting, and 2) eliminates the residual methodGoing Concern. This standard sets forth management’s responsibility to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. This will be effective for the first annualevaluate, each reporting period, beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidancewhether there is retroactively appliedsubstantial doubt about our ability to the begi nning of the year of adoption. We are currently assessing the future impact of this new accounting updatecontinue as a going concern, and if so, to our financial statements.

In October 2009, the FASB issued accounting guidance which changes the accounting model for revenue arrangements that include both tangible products and software elements. Under this guidance, tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality are excluded from the software revenue recognition guidance given prior to this new guidance. In addition, hardware components of a tangible product containing software components are always excluded from the software revenue guidance.  This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.  We are currently assessing the futu re impact of this new accounting update to our financial statements.

In April 2008, the FASB issued an amendment for determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under authoritative accounting guidance for goodwill and other intangible assets. This guidance is intended to improve the consistency between the useful life of an intangible asset determined under the guidance for goodwill and other intangible assets and the period of expected cash flows used to measure the fair value of the asset under ASC 805 “Business Combinations” and other principles under GAAP. This guidanceprovide related footnote disclosures. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods wit hin those fiscal years. Early adoption is prohibited. This guidance will be effective for us in fiscal year 2010. The adoption of this guidance is not expected to significantly impact our results of operations and financial position.

In September 2006, the FASB issued enhanced guidance for using fair value to measure assets and liabilities. This guidance also provides for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. ASC 820 applies whenever other guidance requires or permit assets or liabilities to be measured at fair value. ASC 820 does not expand the use of fair value in any new circumstances. In February 2008, the FASB issued additional guidance to exclude ASC 840 “Accounting for Leases” and delays the effective date of ASC 820 by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecur ring basis. In October 2008, the FASB issued additional guidance for determining the fair value of a financial asset when the market for that asset is not active to clarify the application of the provisions of the guidance for fair value measurements in an inactive market and how an entity would determine fair value in an inactive market. This additional guidance is effective immediately. We adopted ASC 820 for financial assets and financial liabilities at the beginning of fiscal year 2009. The adoption of this guidance for financial assets and financial liabilities did not impact our results of operations and financial position. The guidance is effective for nonfinancial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008, which is our fiscal year 2010. The adoption of this guidance for nonfinancial assets and nonfinancial liabilities is not expected to significantly impact our results of operations and financial position.

In June 2009, the FASB issued accounting guidance on the consolidation of variable interest entities (VIEs). This new guidance revises previous guidance by eliminating the exemption for qualifying special purpose entities, by establishing a new approach for determining who should consolidate a variable-interest entity and by changing when it is necessary to reassess who should consolidate a variable-interest entity.  This guidance will be effective at the beginning of the first fiscal year beginning after November 15, 2009. Early application is not permitted.  The adoption of this guidance is not expected to significantly impact our results of operations and financial position.

F-22

In September 2009, the FASB issued guidance updates and provided amendments to its Fair Value Measurements and Disclosure requirements which permit aannual reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This guidance also requires new disclosures, by major category of investments, about the attributes of investments, such as the nature of any restriction on the ability to redeem an investment on the measurement date.  This guidance is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier2016 and interim andperiods within annual periods that have not been issued.  The adoption of this guidance is not expected to significantly impact our re sults of operations and financial position.

In October 2009, the FASB issued guidance on share-lending arrangements entered into on an entity's own shares in contemplation of a convertible debt offering or other financing.  This guidance is effective for fiscal years beginning on or after December 15, 2009,2016. We are currently evaluating this new standard and fiscal years within those fiscal yearsafter adoption, we will incorporate this guidance in our assessment of going concern.

(3)Acquisitions

On March 12, 2014, the Company entered into a Share Purchase Agreement (the “SPA”) to purchase from Eli Sabag, an individual resident of the State of Israel (“Seller”), all of the issued and outstanding shares (“Shares”) of GPS Global Tracking and Surveillance System Ltd., a company formed under the laws of and operating in the State of Israel (“GPS Global”). The SPA contained customary representations and warranties and covenants, including provisions for arrangements outstandingindemnification, subject to the limitations described in the SPA. Subsequent to the closing, the Seller and certain key employees of GPS Global entered into employment agreements and continue to operate GPS Global. The SPA also granted the Seller the right for a three-year period following the closing, to nominate one director to serve on the Registrant’s board and on GPS Global’s board of directors. The closing of the transaction, which occurred on April 1, 2014, was subject to customary closing conditions.
The purchase price for the Shares was $7,811,404, payable in cash and shares of Registrant’s Common Stock as follows:
●Cash to Seller of $311,404 at the closing;
●Shares of Registrant’s Common Stock valued at $7,500,000, delivered to Seller as follows:
●Common Stock valued at $1,600,000 delivered to Seller at the closing.
●
Common Stock valued at $2,900,000, delivered to an escrow agent (“Bank”) to be released by Bank to Seller after six months from the closing, conditioned upon Registrant’s verification that GPS Global’s global positioning satellite (“GPS”) products (the “Devices”) meet expected operating specifications;
●Common Stock valued at $1,000,000, the number of shares to be determined by dividing $1,000,000 by the weighted average closing price of the Registrant’s Common Stock for the 60 consecutive trading days preceding the third business day prior to release of such shares, to be issued to Seller by Registrant within 30 days of certification that GPS Global has sold or leased a minimum of 1,500 of its Devices under revenue-generating contracts; and
●Common Stock valued at $2,000,000, the number of shares to be determined by dividing $2,000,000 by the weighted average closing price of the Registrant’s Common Stock for the 60 consecutive trading days preceding the third business day prior to release of such shares, to be issued to Seller by Registrant within 30 days of certification that GPS Global has sold or leased a minimum of 2,500 of its Devices under revenue-generating contracts, in addition to the 1,500 Devices previously mentioned (i.e., a minimum of 4,000 Devices sold or leased).

As described above, shares of Common Stock valued at $3,000,000 may be payable based on sales of the GPS devices sold or leased. Management determined that it was probable that sales of GPS devices would exceed the number of units specified in the SPA, and has therefore, recognized a Stock Payable liability for the entire $3,000,000 value of common shares payable.

The total purchase price for the GPS Global acquisition was allocated to the net tangible and intangible assets based upon their fair values as of March 31, 2014 as set forth below. The excess of the beginningpurchase price over the net assets was recorded as goodwill. Goodwill recognized from this acquisition is not tax deductible. This acquisition provided the Company with additional research and development capabilities and enhanced technology which are expected to benefit current and future products.


The following table summarizes the fair values of the assets and liabilities assumed at the acquisition date (in thousands).

  (000's) 
Purchase Price $7,811 
Current assets  217 
Inventory  17 
Property and equipment  47 
Monitoring equipment  48 
Other non-current assets  21 
Intangible assets  4,856 
Tradename  192 
Accounts payable and accrued expenses  (215)
Loan payable  (753)
Goodwill  3,381 
Total fair value of assets acquired $7,811 
On June 2, 2014, the Company entered into on (not outstanding) or after the beginninga Stock Purchase Agreement (the “Emerge SPA”) to purchase from BFC Surety Group, Inc. all of the first reporting periodissued and outstanding shares and equity interests of Emerge Monitoring, Inc., a Florida corporation (“Emerge”), which is the direct owner of all of the issued and outstanding equity interests of Emerge Monitoring II, LLC, a Florida limited liability company and wholly-owned subsidiary of Emerge (“Emerge LLC”), and a majority (65%) of the equity interest of Integrated Monitoring Systems, LLC, a Colorado limited liability company and subsidiary of Emerge LLC. The Emerge SPA contains customary representations and warranties and covenants, including provisions for indemnification, subject to the limitations described in the Emerge SPA. Certain key employees of the acquired entities continued to operate the acquired entities following the closing. During June 2014, the Company also committed to purchase the remaining 35% minority equity interest of Integrated Monitoring Systems, LLC. This purchase occurred during July 2014.

The purchase price for the Emerge acquisition was $7,739,167, all of which was paid in cash. The total purchase price for the Emerge acquisition was allocated to the net tangible and intangible assets based upon their fair values as of June 1, 2014 as set forth below. The excess of the purchase price over the net assets was recorded as goodwill. Goodwill recognized as a result of this acquisition is fully deductible for tax purposes. This acquisition provided the Company with significant customer relationships, an experienced sales and management team and additional alcohol monitoring product offerings.

The following table summarizes the fair values of the assets and liabilities assumed at the acquisition date (in thousands).
Inventory $451 
Property and equipment  227 
Other assets  109 
Developed technology  1,600 
Customer contracts/relationships  1,860 
Tradename/Trademarks  110 
Liabilities  30 
Goodwill  3,382 
Total fair value of assets acquired $7,739 


Subsequent to September 30, 2014, the Company entered into a share purchase agreement (“G2 Agreement”) with Track Group Analytics Limited, a company formed under the laws of the providence of Nova Scotia (“G2”), all issued and outstanding shares and equity interests of G2 for an aggregate purchase price of up to CAD$4.6 million, of which CAD$2.0 million was paid in cash to the Shareholders at closing. See Note 14, “Subsequent Events” below for a more detailed description of the G2 acquisition. As of the date that beginsthese consolidated financial statements were issued, the Company was in the process of determining the value of assets and liabilities acquired in connection to this acquisition.

Summary of Pro-forma Information (Unaudited)
The pro-forma information below for the year ended September 30, 2014 and 2013 gives effect to the acquisitions as if they had occurred on or after June 15, 2009. Certain transition disclosures are also required. Early applicationOctober 1, 2012. The pro-forma financial information is not permitted.  The adoptionnecessarily indicative of this guidance is not expected to significantly impact ourthe results of operations and financial positio n. if the acquisitions had been effective as of this date.
  For the Year Ended 
  September 30, 
  Unaudited 
  2014  2013 
       
Revenues  16,445,410   18,668,162 
Loss from operations  (8,617,692)  (2,388,277)
Net loss attributable to the Company  (8,924,681)  (19,413,822)
Basic income per share  (1.11)  (3.80)
Diluted income per share  (1.11)  (3.80)
Net loss attributable to common shareholders  (8,939,266)  (20,456,519)
Basic income per share  (0.88)  (4.00)
Diluted income per share  (0.88)  (4.00)

(4)Goodwill and Other Intangible Assets

As of September 30, 2009, the Company had recorded goodwill and intangible assets related to the acquisition of controlling interest of Midwest, Court Programs, and Bishop Rock Software as follows:
  Midwest Monitoring & Surveillance  Court Programs, Inc.  Bishop Rock Software  Total 
Goodwill $1,259,995  $1,208,086  $-  $2,468,081 
Other Intangible Assets                
Trade name  120,000   99,000   10,000   229,000 
Software  -   -   380,001   380,001 
Customer relationships  -   6,000   -   6,000 
Non-compete agreements  2,000   6,000   -   8,000 
Total Other Intangible Assets  122,000   111,000   390,001   623,001 
Accumulated other intangible asset amortization  (16,500)  (19,800)  (90,355)  (126,655)
Total goodwill and other intangible assets, net of amortization $1,365,495  $1,299,286  $299,646  $2,964,427 
Midwest Monitoring & Surveillance
Effective December 1, 2007, the Company purchased a 51% ownership interest, including a voting interest, of Midwest Monitoring & Surveillance (“Midwest”).  Like the Company’s operations prior to the acquisition of interest, Midwest provides electronic monitoring for individuals on parole.  The total consideration for the purchase of Midwest was $4,400,427 comprised of notes payable of $1,800,000, shares of common stock valued at $1,752,000 (438,000 shares valued at $4.00 per share), transaction costs of $31,497, and long-term liabilities assumed of $816,930.

The total consideration of $4,400,427 less the tangible assets acquired of $674,679 resulted in an excess over net book value of $3,725,748.  The Company recorded impairment of $2,343,753 for the fiscal year ended September 30, 2009, resulting in a net goodwill of $1,259,995, as noted in the table above.

The Company recorded $9,000 of amortization expense for Midwest intangible assets during the fiscal year ended September 30, 2009 resulting in a total accumulated amortization of $16,500 and net intangible assets of $105,500.

During March 2009, the parties extended the option period for the purchase of the remaining 49% ownership of Midwest to April 15, 2010.  The Company agreed to give the following consideration to Midwest minority owners to extend this option:

1)150,000 shares of RemoteMDx common stock valued at $0.13 per share for a total of $19,500.
2)$75,000 in cash upon execution of the agreement.
3)$105,000 in cash paid in ten equal payments of $10,500 beginning April 15, 2009 through January 15, 2010.
F-23

The expense totaling $199,500 was reported as an acquisition option extension cost under other income (expense) for the fiscal year ended September 30, 2009.

Court Programs
Effective December 1, 2007, the Company purchased a 51% ownership interest, including a voting interest, of Court Programs, Inc., a Mississippi corporation, Court Programs of Northern Florida, Inc., a Florida corporation, and Court Programs of Florida, Inc., a Florida corporation (collectively, “Court Programs”).  Similar to the Company’s operations prior to the acquisition of interest, Court Programs is a distributor of electronic monitoring devices to courts providing a solution to monitor individuals on parole.  The total consideration for the purchase of Court Programs was $1,527,743 comprised of a note payable of $300,000, shares of common stock valued at $847,500 (212,000 shares valued at approximately $4.00 per share), transaction costs of $45,324, and long-term liabilitie s assumed of $334,919.  The total consideration of $1,527,743 less the tangible assets acquired of $208,658 resulted in an excess over net book value of $1,319,086.  The excess over net book value was allocated as noted in the table above.

The Company recorded $10,800 of amortization expense on intangible assets for Court Programs during the fiscal year ended September 30, 2009 resulting in a total accumulated amortization of $19,800 and net intangible assets of $91,200.

Effective April, 1, 2009, the Company and Court Programs agreed to release Court Programs from an obligation to repay expenses paid on its behalf by the Company in the amount of $147,566 as consideration to extend the option period for the purchase of the remaining 49% ownership of Court Programs to April 15, 2010. The expense of $147,566 was reported as an acquisition option extension cost under other income (expense) for the fiscal year ended September 30, 2009.

Bishop Rock Software
Effective January 14, 2009, the Company purchased a 100% ownership interest, including a voting interest, of Bishop Rock Software, Inc., a California corporation, (“Bishop Rock”) for 2,857,286 shares of the Company’s common stock valued at $0.23 per share valued at $657,176, options to purchase 642,714 shares of the Company’s common stock with an exercise price of $0.09 per share for a value of $114,383 using the Black-Scholes calculation, and $79,268 in debt for a total purchase price of $850,827.  The total consideration of $850,827 less crime-scene correlation software recorded as an asset for $390,001 resulted in goodwill of $460,827.  During the fiscal year ended September 30, 2009, the Company recorded an impairment expense of $460,827, resulting in no more remaining goodwill.

The Company recorded $90,355 of amortization expense on intangible assets for Bishop Rock Software during the fiscal year ended September 30, 2009 resulting in a total accumulated amortization of $90,355 and net intangible assets of $299,646.

Supplemental Pro Forma Results of Operations
The following tables present the pro forma results of operations for the fiscal years ended September 30, 2009 and 2008, as though the Midwest, Court Programs, and Bishop Rock Software acquisitions had been completed as of the beginning of each period presented:
  
Fiscal years Ended
September 30,
 
  2009  2008 
Revenues:      
     Products $570,749  $2,593,925 
     Monitoring services  12,055,841   11,322,201 
          Total revenues  12,626,590   13,916,126 
Cost of revenues:        
     Products  (275,688)  (1,675,212)
     Monitoring services  (9,862,925)  (12,261,139)
     Impairment of monitoring equipment and parts  (2,319,530)  (570,948)
          Total cost of revenues  (12,458,143)  (14,507,299)
      Gross margin (deficit)  168,447   (591,173)
Operating expenses:        
       Selling, general and administrative  (16,701,374)  (36,777,665)
       Research and development  (1,777,873)  (4,811,128)
       Impairment of goodwill  (2,804,580)  - 
              Loss from operations  (21,115,380)  (42,179,966)
Other income (expense):        
       Gain on sale of intellectual property  -   2,400,000 
       Redemption of Monitoring SecureAlert Series A Preferred stock  -   (8,372,566)
       Interest income  18,187   35,230 
       Interest expense  (5,012,803)  (1,588,073)
       Derivative valuation gain  1,867,007   - 
       Change from estimate to actual on Series A  95,816   - 
       Other income (loss)  905,626   314,059 
Net loss from continuing operations  (23,241,547)  (49,391,316)
Discontinued operations  -   (414,112)
Net loss  (23,241,547)  (49,805,428)
Dividends on Series A and C Preferred stock  (175)  (345,356)
Net loss attributable to common stockholders $(23,241,722) $(50,150,784)
Net loss per common share – basic and diluted $(0.13) $(0.36)
Weighted average common shares outstanding – basic and diluted  182,188,000   140,092,000 
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(5)Bank Line of Credit

During the fiscal year ended September 30, 2008, the Company paid off a $4,000,000 line of credit and established a line of credit for $3,600,000 with the same bank.  As of September 30, 2008, the outstanding balance of the line of credit was $3,462,285 and it matured on March 1, 2009.  The line of credit was secured by letters of credit for a total of $3,600,000 and SecureAlert’s assets, excluding TrackerPAL™ products. The letters of credit were provided as collateral by six unrelated parties.  During the fiscal year ended September 30, 2009, the Company and the six unrelated parties mutually agreed to pay off the line of credit by calling upon the letters of credit and converting into a senior secured convertible note. (See Note 9)

Additionally, the Company established a new line of credit for $1,000,000 with a bank during the fiscal year ended September 30, 2009.  The interest rate is 3.28% and the line of credit matures on September 22, 2010.  The line of credit is secured by certificates of deposit pledged by the Company’s Chief Executive Officer, Mr. David Derrick. Interest on the line of credit is due monthly.  As of September 30, 2009, the Company owed $252,600.  Subsequent to September 30, 2009, the Company borrowed the remaining $747,400 available under the line of credit.

(6)Accrued Expenses

Accrued expenses consisted of the following as of September 30, 2009:

Accrued foreclosure liability (see Note 7) $775,000 
Accrued payroll, taxes and employee benefits  561,898 
Accrued officer compensation  492,280 
Accrued consulting  436,054 
Accrued interest  382,424 
Accrued board of directors fees  300,000 
Accrued warranty and manufacturing costs  246,622 
Accrued legal and settlement costs  80,208 
Accrued research and development costs  45,000 
Accrued acquisition extension costs  42,000 
Accrued outside services  38,132 
Accrued indigent fees  34,130 
Accrued cellular costs  27,144 
Accrued commissions and other costs  45,788 
     Total accrued expenses $3,506,680 

Subsequent to September 30, 2009, the Company entered into agreements to exchange approximately 2,099 shares of Series D Preferred stock for the conversion of $1,857,280 of existing accrued expenses shown above.2014 and 2013:
 
  2014  2013 
Accrued royalties $-  $714,400 
Accrued payroll, taxes and employee benefits  822,847   473,179 
Accrued consulting  267,300   317,300 
Accrued taxes - foreign and domestic  203,941   262,880 
Accrued settlement costs  52,000   76,000 
Accrued board of directors fees  120,000   68,090 
Accrued other expenses  374,298   65,903 
Accrued legal costs  6,454   57,001 
Accrued cellular costs  25,000   55,000 
Accrued outside services  23,562   33,022 
Accrued warranty and manufacturing costs  14,031   30,622 
Accrued interest  504,124   27,394 
Total accrued expenses $2,413,557  $2,180,791 
(7)(5)Certain Relationships and Related Party Transactions

The Company has entered into certain transactions with related parties.parties during the fiscal years ended September 30, 2014 and 2013. These transactions consist mainly of financing transactions and consulting arrangements.service agreements. Transactions with related parties are reviewed and approved by the independent and disinterested members of the Board of Directors.

Related-Party Line of CreditRoyalty Agreement

As
On August 4, 2011, with an effective date of September 30, 2009,July 1, 2011, we entered into an agreement (the “Royalty Agreement”) with Borinquen Container Corp., a corporation organized under the Company owed $76,022 underlaws of the Commonwealth of Puerto Rico (“Borinquen”) to purchase Borinquen’s wholly-owned subsidiary, International Surveillance Services Corporation, a line-of-credit agreement with ADP Management, an entity owned and controlled by Mr. Derrick,Puerto Rico corporation (“ISS”) in consideration of 310,000 shares of our Common Stock, valued at the Company’s Chief Executive Officer.  Outstanding amountsmarket price on the linedate of credit accrue interestthe Royalty Agreement at 11%$16.40 per annumshare, or $5,084,000. We also agreed to pay to Borinquen quarterly royalty payments in an amount equal to 20% of our net revenues from the sale or lease of our monitoring devices and are due upon demand.monitoring services within a territory comprised of South and Central America, the Caribbean, Spain and Portugal, for a term of 20 years. On February 1, 2013, we redeemed and terminated this royalty obligation in February 2013 for a total cost of $13.0 million using the proceeds of a $16.7 million loan from a related party, Sapinda Asia Limited (“Sapinda Asia”). In addition to the $13.0 million used to terminate the Royalty Agreement, we used the remaining $3.7 million as operating capital during the 2013 fiscal year. During the fiscal year ended September 30, 2009,2013, the net decrease under this lineCompany recorded a debt discount of credit$14,296,296 which was $466,782. This decrease consistedrecorded as interest expense to account for a beneficial conversion feature in connection with the Loan. Additionally, $605,281 of cash repaymentsinterest expense was recorded during the fiscal year ended 2013 to record accretion of $739,063 offset,debt discount. On September 30, 2013, Sapinda Asia converted all outstanding principal and interest in part, by $272,281connection with the Loan in the amount of expenses owed to ADP Management that are reimbursable by the Company.$17,576,627 into 3,905,917 shares of Common Stock at a rate of $4.50 per share.

Revolving Loan Agreement

As of September 30, 2008, the Company owed $542,804 to ADP Management under a line-of-credit agreement.  During the year ended September 30, 2008, the line of credit increased $1,318,433 due to a monthly management fee owed to ADP Management, including salaries for Mr. Derrick and Mr. Dalton, expenses incurred by ADP Management that are reimbursable by the Company of $618,433, and $700,000 in cash. The Company made cash repayments during the year of $975,641.

Related-Party Notes Payable

In November 2008, the Company borrowed $1,000,000 from Mr. Derrick, the Chief Executive Officer of the Company.  The unsecured note payable accrues interest at 15% and was due and payable upon the Company receiving cash proceeds of $1,000,000 or more from the sale of common stock or other additional financing activities orOn February 4, 2009, whichever comes first.  The Company paid to Mr. Derrick a loan origination fee of $50,000 in cash and 100,000 shares of restricted common stock.  In February 2009, Mr. Derrick loaned an additional $500,000 to the Company resulting in a total of $1,500,000 due to Mr. Derrick.  The Company and Mr. Derrick agreed to extend the due date of the full obligation to February 26, 2010.  As of September 30, 2009, the Company owed $1,500,000 plus $12,197 in accrued interest to Mr. Derrick. Subsequent to September 30, 2009, the Company and Mr. Derrick agreed to convert the note of $1,500,000 into 1,500 shares of Series D Preferred stock.

In September 2008, the Company borrowed $250,000 from Randy Olshen, the former President of SecureAlert.  The unsecured note payable accrued interest at 11%.  As of September 30, 2009, this note was paid in full.

Foreclosure Liability

In July 2009,1, 2013, the Company entered into a promissory noterevolving loan agreement with Sapinda Asia (the “Revolving Loan”). Under this arrangement, the Company may borrow up to $1,200,000 at an interest rate of 3% per annum for unused funds and 10% per annum for borrowed funds. As of September 30, 2013, no advances have been made under this loan and the Company had accrued $23,868 in interest liability on the Revolving Loan. On October 24, 2013, the Company drew down the full $1,200,000 for use in a performance bond as required under a contract with an unrelated entityinternational customer.The loan initially matured in June 2014; however, the amount of $1,000,000 payable onnote was extended and now matures in December 31, 2010.2015.
Related-Party Promissory Note
On November 19, 2013, the Company borrowed $1,500,000 from Sapinda Asia, a significant shareholder. The unsecured note bears interest at a rate of 15%8% per annum paid quarterly.  As additional consideration forand initially matured on November 18, 2014. The note initially matured in November 2014. However, the loan to settle a registration rights dispute, the Company granted the lender 8,000,000 shares of common.  Additionally, a related-party entity, ADP Management, collateralized this note with 5,000,000 sharesmaturity date of the Company’s common stock it owns. In August 2009, the Company defaulted on the loan because it failednote was subsequently extended to register the 8,000,000 shares of common stock within 30 days of entering into the agreement resulting in the lender foreclosing on the 5,000,000 shares of common stock held as collateral.November 2015. As of September 30, 2009,2014, the Company accr ued $775,000 asowed $1,500,000 of principal and $43,726 of accrued interest on the note.
Related-Party Service Agreement

During the fiscal year ended September 30, 2013, the Company entered into an agreement with Paranet Solutions, LLC to provide the following primary services: (i) procurement of hardware and software necessary to ensure that vital databases are available in the event of a “foreclosure liability” to recorddisaster (backup and disaster recovery system); and (ii) providing the security of all data and the integrity of such data against all loss of data, misappropriation of data by Paranet, its employees and affiliates. David S. Boone, a director and member of the Company’s obligation to repayExecutive Committee, was the 5,000,000 sharesChief Executive Officer of common stock to ADP Management.  Subsequent to September 30, 2009,Paranet until August 2014.

As consideration for these services, the Company agreed to issue 833 shares of Series D Preferred stockpay Paranet $4,500 per month. The arrangement can be terminated by either party for any reason upon ninety (90) days written notice to ADP Management as payment this liability.the other party. During the years ended September 30, 2014 and 2013, the Company paid Paranet $461,223 and $8,552, respectively.

Related-Party Series A 15% Debenture

On May 1, 2009, the Company issued a Series A 15% debenture due and payable on November 1, 2010 to an entity controlled by an employee of the Company for $250,000 in cash. In addition to the rights and terms of the debenture, the entity received one-year warrants to purchase 2,200,000 shares of the Company common stock at an exercise price of $0.25 per share valued at $43,926. As of September 30, 2009, the outstanding balance owed on the debenture was $250,000 plus $9,452 in accrued interest. Subsequent to September 30, 2009, the Company agreed to issue 250 shares of Series D Preferred stock in exchange for the debenture of $250,000.

F-26

Consulting Arrangements

The Company agreed to pay consulting fees to ADP Management for assisting the Company to develop its new business direction and business plan and to provide introductions to strategic technical and financial partners.  Under the terms of this agreement, ADP Management was paid a consulting fee of $40,000 per month and the Company agreed to reimburse the expenses incurred by ADP Management (including the salaries of certain of our officers) in the course of performing services under the consulting arrangement. Effective April 1, 2008, ADP Management reduced the consulting fee from $40,000 to $20,000 per month to reflect the resignation of Mr. Dalton as the Company’s President.

The ADP Management agreement also requires ADP Management to pay the salary of Mr. Derrick as Chief Executive Officer and Chairman of the Board of Directors of the Company.  The Board of Directors, which at the time did not include Mr. Derrick, approved both of these arrangements.Loan

During the fiscal year ended September 30, 2008,2012, the Company issued 1,000,000 shares of common stock valued at $1.52 per share to prepay consulting fees to ADP Management.  The Company recorded $240,000 and $60,000 of expense associated with the issuance of these shares duringborrowed $500,000 from a former officer. During the fiscal yearsyear ended September 30, 2009 and September 30, 2008, respectively.  As of September 30, 2009, the remaining deferred compensation was $1,220,000.

(8)Convertible Promissory Note

On January 15, 2009,2013, the Company entered into an unsecured convertible promissory noteestablished terms for $2,700,000 in orderthis loan which created a debt discount of $500,000 which was immediately recorded as interest expense to purchase TrackerPAL™ units.  The note, at the lender’s option, may convert into shares of the Company’s common stock at a conversion price of $0.22 per share.  The note bears interest at 8% per annum and matures on January 15, 2010. Interest is due monthly and the principal is due at maturity. The fair market value of the common stock was $0.23 per share on the date the Company entered into the agreement resulting inaccount for a beneficial conversion feature of $122,727.  This was recorded as a debt discount and will be expensed overto reflect an adjustment in the lifeconversion rate from $11.00 to $4.50 to equal the conversion rate of the note. As of September 30, 2009,Loan to redeem the outstanding balance dueroyalty. During fiscal year 2013, this debt was $2,050,000 with a remaining debt discount balance of $41 ,556. Subsequent to September 30, 2009, the holders of the convertible promissory note of $2,050,000 agreed to convert the note and the total outstanding accrued interest of $98,414converted into 2,149111,112 shares of Series D Preferred stock.Common Stock.

(9)Senior Secured Convertible Notes

During the year ended September 30, 2009, the Company issued senior secured convertible notes of $3,549,631 to unrelated parties. The proceeds were used to pay off the Company’s line of credit. The interest rate is 15% per annum and the notes mature on March 13, 2010.  Interest is due monthly and the principal is due at maturity.  These notes may convert into shares of the Company’s common stock at a conversion price of $0.20 per share or into shares at a reduced conversion rate should the Company issue any equity security at a price less than $0.20 per share, or into shares of the SecureAlert’s common stock at the fair market value of the stock at the conversion date.  The Company determined that the embedded conversion features of the notes were subject to derivative accounting treatment (see Note 11). This resulted in a debt discount valued at $853,166. Additionally, with the issuance of these notes, the Company issued 3,549,630 shares of common stock valued at $226,853 recorded as a debt discount. The value of $1,080,019 recorded as a debt discount will be expensed over the life of these notes.  As of September 30, 2009, the outstanding balance of the notes was $3,419,631 with a remaining debt discount balance of $529,109. Subsequent to September 30, 2009, the holders of $2,270,000 of this debt agreed to convert the debt into 2,270 shares of Series D Preferred stock and the remaining debt discount of $529,109 was expensed.

(10)Series A 15% Debentures
Related-Party Convertible Debenture #1

During the fiscal year ended September 30, 2009,2012, the Company received $4,400,000 in cashborrowed $500,000 from a director with an interest rate of 8% per annum. The debenture was to mature on December 17, 2012 and secured by the issuance of Series A 15% debentures. Additionally, the Company issued debentures to a consultant in the principal amount of $106,750 for services rendered to the Company.  As of September 30, 2009, the total outstanding balancedomestic patents of the debentures was $4,506,750.  The terms of these debentures are as follows: 1) 15% interest per annum.  Interest is due quarterly and principal is due at maturity, 2) 18-month maturity, 3) for every $1 invested into the debenture the holder received 1 share of the Company’s common stock, and 4) at the holder’s option, the debenture may be converted into shares of common stock at a conversion rate of $0.20 per share or into shares at a reduced conversi on rate should the Company issue any equity security at a price less than $0.20 per share. The Company determined that the embedded conversion features of the notes were subject to derivative accounting treatment (see Note 11).

F-27

This resulted in a debt discount valued at $3,130,423.  Additionally, with the issuance of these notes, the Company issued 4,506,750 shares of common stock valued at $265,982 and 2,200,000 warrants valued at $43,926 recorded as a debt discount. This discount will be expensed over the life of the debentures.

In September 2008, the Company sold 4,077,219 shares of common stock at $0.75 per share to an investor.  Shortly following the transaction, the market price of the Company’s common stock fell to approximately $0.20 per share. The Company agreed upon the investor’s investment of an additional $3,000,000 (included in the $4,506,750 discussed in the paragraph above) in the Series A 15% debenture that the Company would issue 9,796,636 additional shares of its common stock to the investor.  Furthermore, the Company agreed to re-price outstanding warrants held by the investor from $1.00 to $0.25 per share and extend the purchase period an additional two years. The issuance of these shares and re-pricing of the warrants attributed an additional $587,248 to the debt discount resulting in a tot al $3,130,423 in a debt discount to be amortized over the life of the debentures.Company. During the fiscal year ended September 30, 2009,2013, the debenture was convertible at $4.50 which created a beneficial conversion feature discount of $110,556 which was to be amortized over the term of the loan, but was accelerated upon the conversion of the debenture into 117,784 shares of Common Stock.

Related-Party Convertible Debenture #2

During the fiscal year ended 2012, the Company amortized $1,308,703borrowed $2,000,000 from a significant shareholder with an interest rate of this debt discount8 percent per annum. The debenture was to mature on December 17, 2012 and recorded it as interest expense.  Assecured by the domestic patents of September 30, 2009, the debt discount balance was $1,821,720.

Subsequent to September 30, 2009, the holders of $4,609,648 of debentures and accrued interest agreed to convert this debt into a total of 4,614 shares of Series D Preferred stock and the remaining debt discount of $1,821,720 was expensed.

(11)Derivative Liability

The Company does not hold or issue derivative instruments for trading purposes.  However, the Company has convertible notes that contain embedded derivative features that require separate valuation from the convertible notes payable.  The Company recognizes these derivatives as liabilities in its balance sheet, measures them at their estimated fair value, and recognizes changes in their estimated fair value in earnings (losses) in the period of change.  As of September 30, 2009, the derivative instruments had a fair value of $1,219,426 resulting in a derivative valuation gain of $1,867,007 for the period. The Company did not have any derivatives duringCompany. During the fiscal year ended September 30, 2008.2013, the debenture was convertible at $4.50 which created a beneficial conversion feature discount of $442,222, which was to be amortized over the term of the loan, but was accelerated upon the conversion of the debenture into 472,548 shares of Common Stock.

(12) Facility Agreement
On January 3, 2014, we entered into an unsecured Facility Agreement with Tetra House Pte. Ltd., a related-party entity, controlled by our Chairman, Guy Dubois. Under this agreement, we may borrow up to $25,000,000 for working capital and acquisitions purposes. The loan bears interest at a rate of 8% per annum, payable in arrears semi-annually, with all principal and accrued and unpaid interest due on January 3, 2016. In addition, we agreed to pay Tetra House an arrangement fee equal to 3% of the aggregate maximum amount under the loan. On January 14, 2014 Tetra House assigned the Facility Agreement to Conrent Invest S.A. Since January 3, 2014, we have borrowed $25,000,000 under the Facility Agreement. The borrowed funds have been used for acquisitions and for general corporate purposes. The Facility Agreement was reviewed and approved by disinterested and independent members of the Board of Directors, David S. Boone, Winfried Kunz, Dan L. Mabey and George F. Schmitt.

Additional Related-Party Transactions and Summary of All Related-Party Obligations
  2014  2013 
Loan from a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on December 30, 2015.
 $1,200,000  $- 
Promissory note with a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on November 19, 2015.
  1,500,000   - 
Convertible debenture of $16,700,000 from a significant shareholder with an interest rate of 8% per annum. On September 30, 2013, $16,640,000 plus accrued interest of $936,627 was converted into 3,905,917 shares of Common Stock and in October 2013, the Company paid $60,000 in cash to pay off the debenture.
  -   60,000 
         
Total related-party debt obligations  2,700,000   60,000 
Less current portion  -   (60,000)
Long-term debt, net of current portion $2,700,000  $- 

(6) Debt Obligations

Debt obligations as of September 30, 20092014 and 20082013, consisted of the following:

  September 30, 
  2009  2008 
SecureAlert Monitoring, Inc.      
Unsecured note payable to a former subsidiary bearing interest at 5%.  This note was paid in full during the fiscal year ended September 30, 2009. $-  $598,793 
         
Unsecured notes payable to former SecureAlert stockholders, with interest at 5%, payable in installments of $80,000 per month paid in full as of September 30, 2009.  -   169,676 
         
Note payable for testing equipment with an interest rate of 8%.  The note is secured by testing equipment. The note matures on June 9, 2011.  12,228   - 
         
Unsecured note payable with an interest rate of 12%. The note matures on February 1, 2010.  8,728   - 
         
SecureAlert, Inc.        
Unsecured promissory note with an entity bearing an interest rate of 15%.  The note matures on December 31, 2010.  Interest is paid quarterly and the principal due at maturity. Debt discount at year end was $525,665.    474,335     - 
         
Court Programs, Inc.        
Note payable due to the Small Business Administration (“SBA”).  Note bears interest at 6.04% and matures on April 6, 2037.  The note is secured by monitoring equipment.  225,000   229,100 
         
Unsecured revolving lines of credit with two banks, with interest rates between 6.60% and 13.49%.  16,500   48,499 
         
Automobile loan with a financial institution secured by the vehicle purchased.  Interest rate is 7.09% and is due in June 2014.  30,751   - 
         
Unsecured note payable with an interest rate of 8%.  1,492   16,028 
         
Capital leases with an effective interest rate 14.89% that matures in January 2011.  14,898   - 
  September 30,  September 30, 
  2014  2013 
Unsecured facility agreement with an entity whereby the Company may borrow up to $25 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 January 3, 2016. A $750,000 origination fee or 3% on the total amount under the agreement was paid and recorded as a debt discount and will be amortized as interest expense over the term of the loan. As of September 30, 2014, the remaining debt discount was $468,750.
 $24,531,250  $- 
The Company entered into an agreement whereby the Company was granted a non-exclusive, irrevocable, perpetual and royalty-free license to certain patents with an entity. The Company agreed to pay $4,500,000 over two years or $187,500 per month through February 2016.
  3,187,500   - 
Note issued in connection with the acquisition of a subsidiary and matures in December 2014.  9,630   64,111 
Capital leases with effective interest rates that range between 8.51% and 17.44%. Leases mature between June 2015 and November 2015. $154,410 was assumed through the sale of Midwest Monitoring & Surveillance, Inc. to its former owners.  46,021   59,266 
Automobile loan with a financial institution secured by the vehicle. Interest rate is 7.06%, due June 2014. This loan was paid off in February 2014
  -   5,306 
Related notes payable for $1.5 million and $1.2 million, due December 31, 2015 and November 19, 2015, respectively  2,700,000   - 
Total debt obligations  30,474,401   128,683 
Less current portion  (1,906,040)  (88,095)
Long-term portion of related party debt  (2,700,000)  - 
Long-term debt, net of current portion $25,868,361  $(40,588)

         
Midwest Monitoring & Surveillance, Inc.        
Unsecured revolving line of credit with a bank, with an interest rate of 6.60%  39,224   - 
         
Notes payable to a financial institution bearing interest at 6.37%.  Notes mature in July 2011 and July 2016.  The notes are secured by property.  185,274   247,675 
         
Notes payable for monitoring equipment.  Interest rates range between 7.8% to 18.5% and mature September 2008 through November 2011.  The notes are secured by monitoring equipment.  57,344   199,747 
The following table summarizes the Company’s future maturities of debt and related party obligations as of September 30, 2014:
Fiscal Year Total 
2015 $1,906,040 
2016  28,548,192 
2017  4,444 
2018  4,450 
2019 & thereafter  11,275 
     
Total $30,474,401 

The following table summarizes the Company’s capital lease obligations included in the schedules of debt and debt obligations above as of September 30, 2014:

Fiscal Year Total 
2015
 $21,409 
2016
  4,442 
2017
  4,444 
2018  4,450 
Thereafter  11,275 
Total minimum lease payments  46,020 
Less: amount representing interest  (10,351)
Present value of net minimum lease payments  35,669 
Less: current portion  (4,440)
Obligation under capital leases - long-term $31,229 
 
Automobile loans with several financial institutions secured by the vehicles.  Interest rates range between 6.9% and 8.5%, due between January 2010 and October 2011.  42,463   43,570 
         
Note payable to a stockholder of Midwest.  The note bears interest at 5% maturing in February 2013.  47,704   59,958 
         
Capital leases with effective interest rates that range between 12.9% and 14.7%.  Leases mature between June 2014 and September 2014.  126,158   - 
         
Total debt obligations  1,282,099   1,613,046 
Less current portion  (272,493)  (465,664)
Long-term debt, net of current portion $1,009,606  $1,147,382 
As of September 30, 2014 and 2013, the Company had total capital lease obligations of $35,669 and $59,266, the current portion being $4,440 and $31,576, respectively. At September 30, 2014 and 2013, accumulated amortization of assets under capital lease was $55,473 and $40,932, respectively.

(13) (7) Preferred Stock

The Company is authorized to issue up to 20,000,000 shares of preferred stock, $0.0001 par value per share. The Company's Board of Directors has the authority to amend the Company's Articles of Incorporation, without further stockholdershareholder approval, to designate and determine, in whole or in part, the preferences, limitations and relative rights of the preferred stock before any issuance of the preferred stock and to create one or more series of preferred stock.

Series A 10 %D Convertible Non-Voting Preferred Stock

The Company has designated 40,00085,000 shares of preferredits stock as Series A 10% Convertible Non-VotingD Preferred stock ("(“Series AD Preferred stock"”). During the year ended September 30, 2009, all 19 outstanding2014 and 2013, the Company did not issue any additional new shares of Series AD Preferred, Stock converted into 9,306however the Company exchanged 207 shares of Series D Preferred for 16,907 shares of Common Stock. Additionally, the Company’s common stock.  There were no conversionsCompany repurchased 261 shares of Series D Preferred for $312,008 during the year ended September 30, 2008.

Dividends
The Series A Preferred stock was entitled to dividends at the rate2014. As a result of 10% per year on the stated value of the Series A Preferred stock (or $200 per share), payable in cash, additional shares of Series A Preferred stock, or common shares of RemoteMDx at the discretion of the Board of Directors. Dividends were fully cumulative and accrued from the date of original issuance to the holders of record as recorded on the books of the Company at the record date or date of declaration if no record date is set.  During the fiscal years ended September 30, 2009 and 2008, the Company recorded $175 and $423 in dividends on Series A Preferred stock, respectively.

Series B Convertible Preferred Stock
The Company designated 2,000,000 shares of preferred stock as Series B Convertible Preferred stock ("Series B Preferred stock"). Each share of Series B Preferred stock was convertible into shares of common stock at an initial rate of $3.00 per share of common. The Company has issued shares of common stock or securities convertible into common stock for consideration per share less than $3.00 per share.  The conversion rate automatically adjusted to a price equal to the aggregate consideration received by the Company for that issuance divided by the number of shares of common stock issued. During the fiscal years ended September 30, 2009 and 2008, 10,999 and 2,000 shares of Series B Preferred stock converted into 10,999 and 15,000 shares of common stock, respectively. As of September 30, 2009,these transactions, there were no shares of Series BD Preferred stock outstanding.outstanding at September 30, 2014.


Series D Convertible Preferred Stock
In November 2009, the Company designated 50,000 shares of preferred stock as Series D Convertible Preferred stock, $0.0001 par value per share (“Series D Preferred stock”).  Subsequent to the fiscal year ended September 30, 2009, the Company agreed to issue a total of 15,986 shares of Series D Preferred stock in consideration for the conversion of $15,723,204 of debt, accrued liabilities and interest and issued an additional 12,200 shares from securities purchase agreements totaling $6,100,000 of which $4,600,000 has been received in cash as of the date of this Report, resulting in a total of 28,186 shares of Series D Preferred stock.

Dividends
The Series D Preferred stock is entitled to dividends at the rate equal to eight percent (8%)8% per annum calculated on the purchase amount actually paid for the shares or amount of debt converted. The dividend is payable in cash or shares of common stockCommon Stock at the sole discretion of the Board of Directors. If a dividend is paid in shares of common stockCommon Stock of the Company, the number of shares to be issued is based on the average per share market price of the common stockCommon Stock for the 14-day period immediately preceding the applicable accrual date (i.e., March 31, June 30, September 30, or December 31, as the case may be). Dividends are payable quarterly, no later than thirty30 days following the end of the accrual period.

During the year ended September 30, 2014 and 2013, the Company issued 1,249 and 181,832 shares of Common Stock to pay $24,012 and $1,663,997 of accrued dividends on the Series D Preferred earned during the nine months ended March 31, 2014 and 2013, respectively.

Convertibility
Each share of Series D Preferred stock may be converted into 6,000thirty (30) shares of common stockCommon Stock, commencing after ninety90 days fromafter the date of issue.

Voting Rights During the year ended September 30, 2014 and Liquidation Preference
The holders2013, 207 and 48,295 shares of the Series D Preferred stock may vote their shares on an as-converted basis on any issue presented for a vote of the stockholders, including the election of directorswere converted into 16,907 and the approval of certain transactions such as a merger or other business combination of the Company.  In addition, on the issues of an increase in the number of1,894,283 shares of common stock the Company is authorized to issue and on the proposalCommon Stock, respectively. As of a reduction in the numberSeptember 30, 2014, there were no shares of issued and outstanding shares (a reverse split) of the Company’s common stock, holders of the Series D Preferred stock may vote as a class holdingoutstanding.

Redemption
On January 16, 2014, the equivalent of 60 percentCompany sent out notices to Series D Preferred shareholders regarding the Company’s election under the Amended and Restated Designation of the issuedRights and outstanding shares of the common stock, regardless of the number of shares then outstanding.  As of the date of this report, there were 25,186Preferences to redeem 261 shares of Series D Preferred stock outstanding.  As a consequence of these voting rights, the holdersat 120% of the aggregate original investment of $260,007 through the payment of cash totaling $312,008. The redemption date was February 13, 2014.

Series D Preferred Stock Warrants
As of September 30, 2014, 42,000 warrants to purchase Series D Preferred stock mayat an exercise control over these issues regardlessprice of the interests of the remaining stockholders.  Additionally, the holders are entitled to a liquidation preference equal to their original investment amount.

In the event of the liquidation, dissolution or winding up of the affairs of the Company (including in connection with a permitted sale of all or substantially all of the Company’s assets), whether voluntary or involuntary, the holders of shares of Series D Preferred Stock then outstanding will be entitled to receive, out of the assets of the Company available for distribution to its stockholders, an amount$16.67 per share equal to original issue price, as adjusted to reflect any stock split, stock dividend, combination, recapitalizationwere issued and the like with respect to the Series D Preferred Stock.

(14)SecureAlert Preferred Stock

SecureAlert, Inc. Series A Preferred Shares
During the fiscal year ended September 30, 2007, and pursuant to Board of Directors approval, the Company amended the articles of incorporation of its subsidiary, SecureAlert Monitoring, Inc. to establish 3,590,000 shares of preferred stock designated as Series A Convertible Redeemable Non-Voting Preferred stock (“SecureAlert Monitoring Series A Preferred stock”).

Dividends
The holders of shares of SecureAlert Monitoring Series A Preferred stock were entitled to receive quarterly dividends out of any of SecureAlert Monitoring’s assets legally available therefore, prior and in preference to any declaration or payment of any dividend on the common stock of SecureAlert Monitoring, at the rate of $1.54 per day times the number of SecureAlert Monitoring’s parolee contracts calculated in days during the quarter.  For example, if there were an average of 10,000 parolee contracts outstanding during the quarter, the total dividend would be $1,386,000 ($1.54 x 90 days x 10,000 contracts) or $0.386 per share of SecureAlert Monitoring Series A Preferred stock.  In no case will a dividend be paid if the gross revenue per contract per day to SecureAlert Monitoring aver ages less than $4.50.  Dividends will be paid in cash to the holders of record of shares of SecureAlert Monitoring Series A Preferred stock as they appear on the books and records of SecureAlert Monitoring on such record dates not less than ten days nor more than sixty days preceding the payment dates thereof, as may be fixed by the Board of Directors of the Company.

F-30

outstanding. During the fiscal years ended September 30, 20092014 and 2008, the Company recorded $0 and $344,933 in dividends on SecureAlert Monitoring Series A Preferred stock.

Convertibility
As a group, all SecureAlert Monitoring Series A Preferred stock may be converted at the holder’s option at any time into an aggregate of 20% ownership of the common shares of SecureAlert, Inc.

On March 24, 2008, SecureAlert redeemed all outstanding shares of SecureAlert Monitoring Series A in exchange for 7,434,249 shares of SecureAlert common stock for a value of $8,549,386.  The former SecureAlert Monitoring Series A stockholders are entitled to receive quarterly contingency payments through March 23, 2011 based on a rate of $1.54 per day times the number of SecureAlert Monitoring’s parolee contracts calculated in days during the quarter.  This can be paid in either cash or common stock at the Company’s option. The Company will make quarterly adjustments as necessary to reflect the difference between the estimated and actual contingency payments to the former SecureAlert Monitoring Series A stockholders.  During the fiscal year ended September 30, 2008, SecureAle rt issued 825,893 shares of common stock as consideration for dividends due to the former SecureAlert Monitoring Series A stockholders, and recorded a net expense of $8,372,566 from the initial redemption and subsequent quarterly adjustments.  As of September 30, 2009, the Company estimated and accrued $3,148,943 for future and past contingency payments due to former SecureAlert Monitoring Series A stockholders. Subsequent to September 30, 2009, former holders of SecureAlert Monitoring Series A Preferred stock agreed to convert an aggregate of $2,261,142 of the future and past contingency payments otherwise payable with respect to the redemption of the SecureAlert Monitoring Series A Preferred stock for 2,2632013, no shares of Series D Preferred stock.or warrants were issued or exercised.

(15)(8)Common Stock

Authorized Shares

The Company isheld an Annual Shareholders meeting on February 28, 2013, at which time the shareholders approved a reverse stock split at a ratio of 200 for 1 and reduced the total authorized to issue up to 250,000,000 shares of common stock.Common Stock to 15,000,000 shares. The retroactive effect of the reverse stock split has been reflected throughout these financial statements.

Common Stock Issuances

During the fiscal year ended September 30, 2009,2014, the Company issued 54,484,728287,627 shares of common stock.Common Stock. Of these shares, 9,30616,907 shares were issued upon conversion of 19207 shares of Series A Preferred stock; 10,999 shares were issued upon conversion of 10,999 shares of Series B Preferred stock; 5,400,000 shares were issued to settle lawsuits and obligations; 25,953,016 shares were issued in connection with debt; 2,254,121D Preferred; 15,343 shares were issued for services rendered to the Company valued at $728,874; 3,007,286$243,018; 236,469 shares valued at $4,500,000 were issued in connection with the acquisition of a subsidiary; 10,646 shares valued at $8,000 were issued upon the exercise of options and warrants; 1,252 shares were issued to purchase Bishop Rockpay dividends from Series D Preferred of $24,012; and to extend an option to purchase the remaining percentage of ownership of Midwest; and 17,850,0007,010 shares were issued for net cash proceedsto pay Board of $3,250,000.Director fees of $127,500.

During the fiscal year ended September 30, 2008,2013, the Company issued 28,541,1756,709,021 shares of common stock.Common Stock. Of these shares, 15,0001,894,283 shares were issued upon conversion of 2,00048,295 shares of Series B Preferred stock; 325,000 shares were issued upon settlement of a lawsuit; 360,000 shares were issued for debt; 9,135,000D Preferred; 21,884 shares were issued for services inrendered to the amount of $14,324,585; 6,177,219 shares were issued for cash proceeds of $5,187,914; 650,000Company valued at $141,758; 4,607,361 shares were issued in connection with the acquisitiondebt and accrued interest of Midwest and Court Programs; 825,893 shares were issued for SecureAlert Series A Preferred stock dividends; 7,434,249$20,733,119; 181,832 shares were issued to redeem SecureAlertpay dividends from Series AD Preferred stock;of $1,663,997; and 3,618,8143,661 shares were issued from the exerciseto pay Board of options and warrants.Director fees of $47,500.

As of September 30, 2009, the Company was authorized to issue 250,000,000 shares of common stock and 210,365,988 were outstanding.

Subsequent to the fiscal year 2009, the holders of a majority of the issued and outstanding voting securities of the Company consented in writing to an increase of the authorized shares from 250,000,000 to 600,000,000.  The Company intends to file Amended Articles of Incorporation for the Company to the effect the increase in the number of authorized shares as soon as reasonably practical.


(16)(9)Stock Options and Warrants

Stock Incentive Plan

During
At the fiscal year ended September 30, 2006,annual meeting of shareholders on December 21, 2011, the stockholdersshareholders approved the 20062012 Equity Incentive AwardCompensation Plan (the “2006 Plan”“2012 Plan”)., which had previously been adopted by the Board of Directors of the Company. The 20062012 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. A total of 10,000,00090,000 shares are authorized for issuance pursuant to awards granted under the 20062012 Plan. During the fiscal years ended September 30, 2014 and 2013, there were no options were issued under this 2012 Plan. During the year ended September 30, 2009, the Company granted 4,931,214 options2014, we issued 8,787 shares of Common Stock under this plan as described below.
Number of
Options and
Warrants
Exercise
Price Per
Share
Outstanding as of September 30, 200718,887,896$0.54 to 3.00
    Granted6,752,8690.59 to 4.05
    Expired or cancelled(296,500)0.60 to 3.00
    Exercised(3,618,814)0.54 to 1.73
Outstanding as of September 30, 200821,725,4510.56 to 4.05
    Granted4,931,2140.09 to 0.30
    Expired or cancelled(1,408,500)0.60 to 2.15
    Exercised--
Outstanding as of September 30, 200925,248,165$0.09 to 4.05

The following table summarizes information about stock options and warrants outstanding as of September 30, 2009:
   Options and Warrants  Options and Warrants 
   Outstanding  Exercisable 
      Weighted          
      Average          
      Remaining  Weighted     Weighted 
Range of     Contractual  Average     Average 
Exercise  Number  Life  Exercise  Number  Exercise 
Prices  Outstanding  (Years)  Price  Exercisable  Price 
$0.00 - $0.60   10,566,849  2.36  $0.37   8,886,849  $0.33 
0.61 – 1.60     5,849,400  3.29   1.28   3,944,400   1.24 
1.61 – 4.05     8,831,916  0.67   2.03   8,827,582   2.03 
plan. As of September 30, 2009, 21,658,8312014, 44,657 shares of Common Stock were available for future grants under the 25,248,165 outstanding options2012 Plan.
All Options and warrants were vested.

During the fiscal year ended September 30, 2009, the Company issued 4,931,214 options and warrants to purchase common stock as follows:  2,200,000 in connection with the settlement of debt; 1,213,500 granted to consultants for services; 875,000 to employees; and 642,714 in connection with the purchase of Bishop Rock.  All the options and warrants issued during the year vested over the year or immediately. The exercise prices range from $0.09 to $0.30 per share.  The exercise price for the options granted during the fiscal year ended September 30, 2009 were based upon the quoted market price of the Company’s shares on the date of grant. No options or warrants were exercised during the fiscal year ended September 30, 2009.Warrants

During the fiscal year ended September 30, 2008,2014, the Company issued 6,752,869 commongranted 69,356 warrants to members of its Board of Directors, valued at $391,578. The Company also granted 15,000 warrants to an employee valued at $76,880. As of September 30, 2014, $200,218 of compensation expense associated with unvested stock options and warrants as follows: 1,670,000 in connection with the saleissued previously to members of common stock, 1,725,000 to employees (275,000 have vested and 1,450,000 are unvested), 1,169,869 to consultants, and  2,188,000 to the Board of Directors.  The exercise prices range from $0.59 to $4.05 per share.  The exercise price forDirectors will be recognized over the options granted duringnext year.

During the fiscal year ended September 30, 2008 were based upon2013, the quoted market priceCompany granted 143,937 warrants to members of its Board of Directors, valued at $701,062. As of September 30, 2013, $154,378 of compensation expense associated with unvested stock options and warrants issued previously to members of the Company’s sharesBoard of Directors will be recognized over the next year.

The following are the weighted-average assumptions used for options granted during the fiscal years ended September 30, 2014 and 2013 using the Black-Scholes model, respectively:
  Fiscal Years Ended 
  September 30, 
  2014  2013 
Expected cash dividend yield  -   - 
Expected stock price volatility  0%  108%
Risk-free interest rate  0.65%  0.18%
Expected life of options 1.05 Years 1.38 Years 
The fair value of each stock option and warrant grant is estimated on the date of grant.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 2013, 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 the Company’s anticipated cash dividends over the expected life of the stock option and warrants.


(17)Deferred Compensation
A summary of the compensation-based options and warrants activity for the fiscal years ended September 30, 2014 and 2013 is presented below:

As of
  Shares Under Option  Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value 
Outstanding as of September 30, 2012  336,782  $28.00      
Granted  143,937  $11.18      
Expired  (52,754) $76.97      
              
Outstanding as of September 30, 2013  427,965  $16.12      
Granted  84,356  $18.04      
Expired  (141,177) $17.50      
Exercised  (65,893) $18.04      
              
Outstanding as of September 30, 2014  305,251  $15.71 1.05 years $487,402 
Exercisable as of September 30, 2014  270,867  $15.49 0.97 years $487,402 
The fiscal year end intrinsic values are based on a September 30, 2008, deferred compensation in connection with common stock2014 closing price of $14.70 per share. The intrinsic value of options and warrants issued in prior years reflected $3,498,672 of expenses to be recorded in future periods. Of these expenses of $3,498,672, $2,211,266 was recorded as deferred compensation expenseexercised during the fiscal year ended September 30, 2009. Additionally, the Company recorded deferred compensation expense of $384,667 related to common stock and warrants issued and fully expensed throughout the fiscal year, resulting in a total of $2,595,933 of deferred compensation expense recorded during the fiscal year ended September 30, 2009.2014 was $191,916.

The issuance of common stock and warrants during the fiscal year ended September 30, 2009 valued at $384,667 is outlined as follows:

·1,000,000 shares of common stock issued to an entity for services valued at $200,000 or $0.20 per share.
·900,000 shares of common stock issued to three individuals for paying down the Company’s line of credit valued at $108,000, or $0.12 per share.
·100,000 shares of common stock issued to an officer of the Company in connection with debt (Note 7:  Related-Party Notes Payable) valued at $30,000, or $0.30 per share.
·213,500 unregistered warrants to an individual for rendering services to the Company valued at $46,667.

As of September 30, 2009, deferred compensation to be expensed in future periods was $1,287,406.

(18)(10) 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.

For the fiscal years ended September 30, 20092014 and 2008,2013, the Company incurred net losses of $22,761,102 and $49,339,637, respectively, for income tax purposes.purposes of $8,419,359 and $3,427,372, respectively. The amount and ultimate realization of the benefits from the net operating losses is dependent, in part, upon the tax laws in effect, the Company's 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, 2009,2014, the Company had net carryforwards available to offset future taxable income of approximately $158,807,000$203,000,000 which will begin to expire in 2017.2020. 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. For example, limitationsAs part of a debt conversion to Common Stock on September 30, 2013 the Company believes a Section 382 ownership change occurred. In general, a Section 382 ownership change occurs if there is a cumulative change in ownership by “5%” shareholders (as defined in the Internal Revenue Code of 1986, as amended) that exceeds 50 percentage points over a rolling three-year period. An ownership change generally affects the rate at which NOLs and potentially other deferred tax assets are imposedpermitted to offset future taxable income. Of our federal NOL amount as of September 30, 2014, approximately $66,000,000 is subject to an annual Section 382 limitation of approximately $6,200,000 per year due to the ownership change. Since the Company maintains a full valuation allowance on all of its U.S. and state deferred tax assets, the impact of the ownership change on the utilizationfuture realizability of net operating loss carryforwards if certain ownership changes have taken place or will take place.  The Company will performits U.S. and state deferred tax assets did not result in an analysisimpact to determine whether any such limitations have occurred as the net operating losses are utilized.

Deferredour provision for income taxes are determined basedfor the year ended September 30, 2014, or on the estimated future effectsCompany��s net deferred tax asset as of differences between the financial statement and income tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws and the tax rates expected to be in place.
September 30, 2014.

The deferred income tax assets (liabilities) were comprised of the following as of September 30:for the periods indicated:
 
  Fiscal Years Ended 
  September 30, 
  2014  2013 
Net loss carryforwards $50,933,000  $72,208,000 
Accruals and reserves  281,000   1,562,000 
Contributions  8,000   8,000 
Depreciation  79,000   42,000 
Stock-based compensation  5,980,000   5,880,000 
Valuation allowance  (57,282,000)  (79,700,000)
Customer advances  1,000   - 
Total $-  $- 
   
2009
   
2008
 
Net loss carryforwards $53,994,000  $45,367,000 
Accruals and reserves  101,000   (99,000)
Contributions  1,000   3,000 
Valuation allowance  (54,096,000)  (45,271,000)
  $-  $- 

Reconciliations between the benefit for income taxes at the federal statutory income tax rate and the Company's benefit for income taxes for the fiscal years ended September 30, 20092014 and 20082013 are as follows:

  2009  2008 
Federal income tax benefit at statutory rate $7,739,000  $16,755,000 
State income tax benefit, net of federal income tax effect  1,138,000   2,464,000 
Change in estimated tax rate and gain (loss) on non-deductible expenses  (52,000)  (91,000)
Change in valuation allowance  (8,825,000)  (19,128,000)
Benefit for income taxes $-  $- 
  Fiscal Years Ended 
  September 30, 
  2014  2013 
Federal income tax benefit at statutory rate $2,863,000  $6,091,000 
State income tax benefit, net of federal income tax effect
  278,000   591,000 
Change in estimated tax rate and gain (loss) on non-deductible expenses
  (5,000)  (5,556,000)
Loss of operating loss for IRC Sec 382 limitation  (24,738,000)  - 
Loss of operating loss for entities sold  -   778,000 
Change in valuation allowance  21,602,000   (348,000)
Benefit for income taxes $-  $- 
During the fiscal year ended September 30, 2013, the Company began recognizing revenues from international sources from its products and monitoring services. During the fiscal year ended September 30, 2013, the Company began recognizing a liability for value-added taxes which will be due upon collection. The liability for these value added taxes at September 30, 2014 was $74,184.

The deferred incomeCompany’s open tax assets (liabilities) and theyears for its federal and state income tax benefits reflects an adjustment in calculatingreturns are for the valuation allowance using a tax rate of 15% used in fiscal yearyears ended 2008 to 34% in fiscal year ended 2009.September 30, 2011 through September 30, 2014.

(19)Commitment(11) Commitments and Contingencies

Legal Matters

Satellite TrackingLazar Leybovich et al v. SecureAlert, Inc. On March 29, 2012, Lazar Leybovich, Dovie Leybovich and Ben Leybovich filed a complaint in the 11th Circuit Court in and for Miami-Dade County, Florida alleging breach of People, L.L.C. (a/k/a STOP, LLC) and Michelle Enterprises, LLC v. Pro Tech Monitoring, Inc., Omnilink Systems, Inc., and SecureAlert: A patent infringement suitcontract with regard to certain Stock Redemption Agreements. The complaint was subsequently withdrawn by the plaintiffs. An amended complaint was filed againstby the Company and other defendants in the United States District Court for the Eastern District of Texasplaintiffs on March 19, 2008.  Plaintiffs have alleged that the defendants infringe United States Patent No. RE39,909 ('909 Patent), Tracking System for Locational Tracking of Monitored Persons.  On May 14, 2008, the Company answered the complaint, denying Plaintiffs’ allegations and asserting various affirmative defenses.November 15, 2012. The Company also asserted a counterclaim for declaratory judgment that the Company has not infringed the '909 Patentbelieves these allegations are inaccurate and that the patent is invalid. On February 17, 2009 the United States Patent and Trademark Office ("USPTO") granted a request for reexamination of the '909 Patent.  The USPTO is now in the process of reexamining the claims of the '909 Patent. Briefs have been submitted on the issue of claim construction, andintend to defend the case is currently in discovery. The Markman hearing is setvigorously. No accrual for May of 2011, and trial is set for late 2011. We have not accrued anya potential loss has been made as management believes the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.remote.
 
RemoteMDx,Christopher P. Baker v. SecureAlert, Inc. v. Satellite Tracking In February 2013, Mr. Baker filed suit against the Company in the Third Judicial District Court in and for Salt Lake County, State of People, L.L.C. (a/k/Utah. Mr. Baker asserts that the Company breached a STOP, LLC):2006 consulting agreement with him and claims damages of not less than $210,000. The Company filed a patent infringement suit against STOP indisputes the United States District Court forplaintiff’s claims and will defend the Central District of California on May 2, 2008.  The Company has asserted that STOP infringes United States Patent No. 7,330,122case vigorously. No accrual for a remote tracking and communication device and method for processing data from the device ("'122 patent"), in which the Company holds all rights and interests.  STOP moved to dismiss the original complaint and also filed an answer and counterclaim.  The motion to dismiss was granted with leave to amend.  The Company filed an amended complaint on August 5, 2008.  The amended complaint seeks damages for infringement accor ding to proof, treble damages, injunctive relief enjoining the infringement, and costs and attorney's fees.  STOP's counterclaim is for declaratory relief, seeking a declaration that STOP has not infringed the '122 patent and that the '122 patent is invalid. The Company filed an answer to the counterclaim.  STOP subsequently filed a motion for summary judgment of non-infringement, which was denied.  STOP’s subsequent motion for reconsideration was also denied.  The parties are currently working on claim construction and discovery issues.  The Markman hearing is currently set for March of 2010.  No trial date has yet been set. The Company intends to vigorously prosecute its claims and defend against the counterclaim.

Frederico and Erica Castellanos, v. Volu-Sol, Inc.  On August 15, 2008, plaintiffs Frederico and Erica Castellanos filed a lawsuit in the Superior Court of the State of California, Los Angeles County.  The complaint names twenty four defendants and one hundred unnamed Doe Defendants.  The complaint asserts claims for negligence, strict liability - failure to warn, strict liability - design defect, fraudulent concealment, breach of implied warranties, and loss of consortium based on Mr. Castellanos' alleged exposure to certain chemicals during the course of his employment.  One of the original named defendants was identified as Logos Scien tific, Inc.  On September 4, 2008, Plaintiffs amended their complaint to substitute "Volu-Sol, Inc. as successor in interest to Logos Scientific, Inc." for the previously unnamed Doe 1.  Volu-Sol, Inc. was the original name of RemoteMDx, Inc.  The Company intends to vigorously defend itself against Castellanos’ claims.  The Company has not accrued any potential loss has been made as management believes the probability of incurring a material loss is deemed remote by management, after consultation with legal counsel.remote.


Informal Inquiry.SecureAlert, Inc. v. Derrick Brooks and STOP, LLC  In March 2008,. On February 21, 2014, the Company was advised by letter fromfiled a complaint in the U.S. Securities and Exchange Commission (“SEC”),Third Judicial District Court, Salt Lake District Office, that it has begunCounty, State of Utah, against Derrick Brooks and STOP, asserting claims for declaratory relief, breach of contract, tortious interference with prospective economic relations, tortious interference with contract, misappropriation of trade secrets, injurious falsehood/trade libel/business disparagement, defamation, respondeat superior, injunctive relief and punitive damages. On March 20, 2014, the Company entered into a settlement agreement with STOP and all of the claims between the Company and STOP in the litigation have been dismissed with prejudice. On April 9, 2014, Mr. Brooks filed an informal inquiry regarding the Company.  The inquiry, among other items, relates toanswer denying the Company’s revenue recognition policyclaims and documents, relationshipasserting counterclaims for constructive discharge, interference with stockholders,contract, interference with prospective economic relations and business.  The SEC has advised the Company in its correspondence that this informal inquiry should not be construed as an indication that any violation of law has occurred, nor should it be consideredblacklisting. On February 6, 2015 we entered into a reflection upon any person, entity, or security.  The Company voluntarily disclosed this inquiry in its Quarterly Report on Form 10-Q for the fiscal qua rter ended March 31, 2008.  There were no material developments in this matter during the fiscal year ended September 30, 2009.settlement agreement with Mr. Brooks and all claims between us and Mr. Brooks and all counterclaims by Mr. Brooks have been dismissed. 

Operating Lease Obligations

The following table summarizes the Company’s contractual obligations as of September 30, 2009:2014:

 
Fiscal Year
 Total  SecureAlert  
Midwest
Monitoring
  Court Programs 
             
2010 $418,151  $266,691  $35,555  $115,905 
2011  361,588   274,095   27,771   59,722 
2012  336,588   278,991   22,473   35,124 
2013  285,749   269,922   8,075   7,752 
2014  61,018   60,564   454   - 
Thereafter  -   -   -   - 
                 
Total $1,463,094  $1,150,263  $94,328  $218,503 

Fiscal Year Total 
    
2015 $299,121 
2016  269,149 
2017  109,069 
Thereafter  89,718 
     
Total $767,057 
The total contractualoperating lease obligations of $1,463,094$767,057 consist of the following: $1,324,432$721,037 from facilities operating leases and $138,662$46,020 from equipment leases. During the fiscal years ended September 30, 20092014 and 2008,2013, the Company paid approximately $487,000$381,156 and $536,000,$350,073, in lease payment obligations, respectively.

Indemnification AgreementsIntellectual Property Settlement

In November 2001,January 2010, the Company entered into an intellectual property settlement agreement with an entity whereby the Company agreed to begin paying the greater of a 6% royalty or $0.35 per activated device of monitoring revenues, subject to certain adjustments. The Company and other party disagree with the methodology used to calculate such royalty; litigation was filed by the Company in December 2013 to resolve the matter. During the year ended September 30, 2013, the Company negotiated a settlement of this litigation. Under the terms of the settlement, both parties restructured their relationship and provided reciprocal licenses for all patents listed in the settlement agreement effective January 29, 2010. In addition, each party provided the other with a reciprocal license for future patents awarded the respective party. The Company also agreed to pay the entity a total of $4,500,000 in 24 equal monthly installments of $187,500 in exchange for the granting of a non-exclusive, irrevocable, perpetual and royalty-free license to certain patents held by the entity.

Indemnification Agreements

The Company’s Bylaws require the Company to indemnify any individual who is made a party to a proceeding because the individual is or was a director or officer of the Company against any liability or expense incurred in connection with such proceeding to the extent allowed under the Utah Revised Business Corporation Act (the “UBCA”), if the Company has properly authorized indemnification under Section 16.10a-906 of the UBCA. Section 16-10a-906(2) of the UBCA requires that the Company determine, before granting indemnification, that: (i) the individual’s conduct was in good faith; (ii) the individual reasonably believed that the individual’s conduct was in, or not opposed to, the Company’s best interests; and (iii) in the case of any criminal proceeding, the individual had no reasonable cause to believe the individual’s conduct was unlawful. The foregoing description is necessarily general and does not describe all details regarding the indemnification of officers and directors of the Company against personal liability incurred by them in the conduct of their duties for the Company. In the event that any of the officers or directors of the Company are sued or claims or actions are brought against them in connection with the performance of their duties and the individual is required to pay an amount, the Company will immediately repay the obligation together with interest thereon at the greater of 10% per year or the interest rate of any funds borrowed by the individual to satisfy their liability.

Cellular Access AgreementInternational Importation Audit
During the fiscal year ended September 30, 2009,2013, the Company was notified that several international importation documents were selected to be audited by a taxing authority. The Company submitted documentation to comply with the country’s requirements; and the audit was finalized during the year ended September 30, 2014. The same international taxing authority selected additional importation documents to be audited for the year ended September 30, 2014 The Company has submitted documentation to comply with the country’s requirements. As of the date of this report, the audit results and potential penalties (if any) are uncertain.
(12) Discontinued Operations

SecureAlert entered into a Stock Purchase Agreement with certain of the former principals of its wholly-owned subsidiary, Midwest Monitoring & Surveillance, Inc. (“Midwest”) whereby they purchased from the Company all of the issued and outstanding capital stock of Midwest. The agreement was effective as of October 1, 2012. Additionally, the Company entered into several agreements with cellular organizationsa Stock Purchase Agreement to provide communication services. The costsell to a former principal all of the Company duringissued and outstanding stock of Court Programs Inc. (“Court Programs”), effective January 1, 2013. Midwest and Court Programs were components of the Company’s consolidated entity, and as a result of the sale of these entities, these financial statements include the applicable discontinued operations reporting treatment.

There were no assets and liabilities of Midwest and Court Programs reported as discontinued operations for the fiscal years ended September 30, 20092014 and 20082013, respectively.

The following is a summary of the operating results of discontinued operations for the fiscal years ended September 30, 2014 and 2013:
  2014  2013 
Revenues $-  $477,298 
Cost of revenues  -   (163,487)
Gross profit  -   313,811 
Selling, general and administrative expense  -   (319,976)
Loss from operations  -   (6,165)
Other expense  -   (295)
Net loss from discontinued operations $-  $(6,460)
(13) Intangible Assets

The following table summarizes the activity of intangible assets for the years ended September 30, 2014 and 2013, respectively:

2014 Weighted Average Useful Life (yrs) Gross Carrying Amount Accumulated Amortization Net Book Value 
Patent & royalty agreements  7.99  $21,170,565  $(2,405,668) $18,764,897 
Developed technology  8.97   6,190,083   (318,054)  5,872,029 
Customer relationships  7.7   1,860,000   (81,447)  1,778,553 
Trade name  9.64   291,486   (13,725)  277,761 
Website  3   50,386   -   50,386 
Total      29,562,520   (2,818,894)  26,743,626 
                 
2013 Weighted Average Useful Life (yrs) Gross Carrying Amount Accumulated Amortization Net Book Value 
Patent & royalty agreements  5.86  $16,670,567  $(1,256,647) $15,413,920 
Total      16,670,567   (1,256,647)  15,413,920 

The intangible assets summarized above were purchased on various dates from January 2010 through June 2014. The assets have useful lives ranging from six to ten years. Amortization expense for the years ended September 30, 2014 and 2013 was approximately $2,422,541$1,563,416 and $2,940,000,$929,108, respectively.
The following table summarizes the future maturities of amortization of intangible assets as of September 30, 2014:
Fiscal Year   
2015  2,352,735 
2016  2,352,735 
2017  2,352,735 
2018  2,388,505 
2019  2,332,236 
Thereafter  14,964,680 
Total  26,743,626 

Goodwill – During the year ended September 30, 2014, the Company recognized goodwill as a result of acquisitions discussed in the Acquisitions footnote. In accordance with accounting principles generally accepted in the United States of America the Company does not amortize goodwill. These amounts are includedprinciples require the Company to periodically perform tests for goodwill impairment, at least annually, or sooner if evidence of possible impairment arises. The Company evaluated the goodwill for impairment as of September 30, 2014. Based on the evaluation made, the Company concluded that no impairment of goodwill was necessary.
Goodwill, as of September 30 consisted of the following:
  September 30, 
  2014  2013 
Balance - beginning of year $-  $- 
Additions resulting from acquisitions:        
Acquisition of GPS Global Tracking & Surveillance, Ltd.  3,381,000   - 
Acquisition of Emerge Monitoring, Inc.  3,381,754   - 
Foreign currency translation adjustment  (185,145)    
Balance - end of year  6,577,609   - 
(14) Subsequent Events

The Company evaluated subsequent events through the date the accompanying consolidated financial statements were issued. Subsequent to September 30, 2014, the following events occurred:

On November 26, 2014 (the “Closing Date”), the Company entered into a Share Purchase Agreement (the “G2Agreement”) to purchase from the existing Shareholders of G2 all issued and outstanding shares and equity interests of G2 (collectively the “Shares”) for an aggregate purchase price of up to CAD$4.6 million (the “G2Acquisition”), of which CAD$2.0 million was paid in costcash to the Shareholders on the Closing Date. Pursuant to the terms and conditions of sales.the Agreement, the remainder of the purchase price will be paid as follows: (i) CAD$600,000 will be paid to the Shareholders in shares of Common Stock of which one-half of the shares will be issued on the one-year anniversary of the Closing Date and the remaining one-half will be issued on the two-year anniversary of the Closing Date; and (ii) the remaining CAD$2.0 million will be paid to the Shareholders in shares of Common Stock periodically, over the course the two-year period beginning on the Closing Date, upon the achievement of certain milestones set forth in the G2 Agreement. The G2 Agreement also provides for customary representations, warranties and covenants, including provisions for indemnification, and is subject to customary closing conditions. Following the G2 Acquisition, G2’s executive leadership and employees will be integrated with the Company but will operate from G2’s existing offices in Halifax, Nova Scotia, Canada. The Company issued 38,499 shares of Common Stock subsequent to September 30, 2014 in connection to this acquisition. As of the date that these consolidated financial statements were issued, the Company was in the process of determining the value of assets and liabilities acquired in connection to this acquisition.
 
 
F-35F-30
 
 
(20)Subsequent Events
SECUREALERT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Assets 
December 31,
2014(Unaudited)
  
September 30,
2014
 
Current assets:      
Cash
 
$
5,188,582
  
$
11,101,822
 
Accounts receivable, net of allowance for doubtful accounts of $4,070,000, respectively
  
5,202,473
   
3,788,207
 
Notes receivable, current portion
  
281,631
   
273,964
 
Prepaid expenses and other current assets
  
1,007,068
   
1,226,054
 
Inventory, net of reserves of $225,900 and $223,500, respectively
  
1,434,515
   
1,248,264
 
Total current assets
  
13,114,269
   
17,638,311
 
Property and equipment, net of accumulated depreciation of $2,486,779 and $2,292,521, respectively
  
1,881,028
   
1,860,247
 
Monitoring equipment, net of accumulated amortization of $1,449,671 and $1,251,551, respectively
  
2,057,078
   
1,914,666
 
Intangible assets, net of accumulated amortization of $3,389,500 and $2,818,894, respectively
  
25,934,994
   
26,743,626
 
Goodwill
  
10,455,453
   
6,577,609
 
Other assets
  
3,739,925
   
3,150,428
 
Total assets
 
$
57,182,747
  
$
57,884,887
 
         
Liabilities and Stockholders’ Equity
        
Current liabilities:
        
Accounts payable
 
$
1,370,524
  
$
1,995,607
 
Accrued liabilities
  
2,876,658
   
2,413,557
 
Current portion of long-term related-party debt
  
2,700,000
   
-
 
Current portion of long-term debt, net of discount of $9,529 and $375,370, respectively
  
4,917
   
1,906,040
 
Total current liabilities
  
6,952,099
   
6,315,204
 
Stock payable - acquisitions
  
4,771,000
   
3,000,000
 
Long-term portion of related party debt, net of current portion
  
-
   
2,700,000
 
Long-term portion of debt, net of current portion and discount of $375,000 and $93,750, respectively
  
27,640,886
   
25,868,361
 
Other long-term liabilities
  
88,840
   
85,275
 
Total liabilities
  
39,452,825
   
37,968,840
 
         
Stockholders’ equity:
        
Preferred stock:
  
-
   
-
 
Series D 8% dividend, convertible, voting, $0.0001 par value: 85,000 shares designated; 0 shares outstanding
        
Common stock, $0.0001 par value: 15,000,000 shares authorized; 10,131,629 and 10,093,130 shares outstanding, respectively
  
1,013
   
1,009
 
Additional paid-in capital
  
296,020,137
   
295,364,173
 
Accumulated other comprehensive loss
  
(898,832
)
  
(271,954
)
Accumulated deficit
  
(277,392,396
)
  
(275,177,181
)
Total equity
  
17,729,922
   
19,916,047
 
Total liabilities and stockholders’ equity
 
$
57,182,747
  
$
57,884,887
 

Subsequent to September 30, 2009, the following events occurred:
1)On October 30, 2009, the Company issued 1,400,000 shares of common stock to several former holders of SecureAlert Monitoring Series A Preferred to settle a dispute and an outstanding liability in connection with contingency payments due to the holders.
The accompanying notes are an integral part of these condensed consolidated statements.

2)On November 2, 2009, the Company’s Board of Directors designated 50,000 shares Series D Preferred stock.  The shares accrue dividends at a rate of 8% per annum and may be paid in cash or additional shares of Series D Preferred stock. See note 13. Subsequent to September 30, 2009, the Company agreed to issue a total of 15,986 shares of Series D Preferred stock in exchange for conversion of $15,723,204 in debt, accrued liabilities and interest and an additional 12,200 shares from securities purchase agreements totaling $6,100,000 of which $4,600,000 has been received in cash as of the date of this Report, resulting in a total of 28,186 shares of Series D Preferred stock.

Subsequent events have been evaluated through January 12, 2010, the date these financial statements were issued. No events, other than the events described above, required disclosure.

 
F-36
F-31

Financial StatementsTable of Contents
Index to Consolidated Financial Statements



Page
Condensed Consolidated Balance Sheets as of June 30, 2010 and September 30, 2009 (Unaudited)F-38
Condensed Consolidated Statements of Operations for the Three and Nine Months ended June 30, 2010 and 2009 (Unaudited)F-40
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009 (Unaudited)F-41
Notes to Condensed Consolidated Financial Statements (Unaudited)F-43



F-37
 
SECUREALERT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETSSTATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
 
  
June 30,
 2010
  
September 30,
2009
 
Assets      
Current assets:      
Cash $1,879,955  $602,321 
Accounts receivable, net of allowance for doubtful accounts of  $299,100 and $266,000, respectively  1,451,165   1,441,648 
    Inventory, net of reserve of $124,725 and $83,092, respectively  351,072   603,329 
Prepaid expenses and other  386,551   275,390 
Total current assets  4,068,743   2,922,688 
Property and equipment, net of accumulated depreciation of $2,208,208 and $2,525,180, respectively  1,343,915   1,313,306 
Monitoring equipment, net of accumulated depreciation of $3,200,324 and $2,944,197, respectively  2,231,961   1,316,493 
Goodwill  4,178,456   2,468,081 
Intangible assets, net of amortization of $234,672 and $126,655, respectively  438,329   496,346 
Other assets  82,618   76,675 
Total assets $12,344,022  $8,593,589 
   
Three Months Ended
December 31,
 
   2014  2013 
Revenues:        
Products
 $
91,589
  
$
65,611
 
Monitoring and other related services
  
4,529,030
   
2,593,683
 
Total revenues
  
4,620,619
   
2,659,294
 
         
Cost of revenues:
        
Products
  
21,357
   
62,721
 
Monitoring and other related services
  
1,968,730
   
1,261,108
 
Impairment of monitoring equipment and parts (Note 13)
  
55,080
   
75,000
 
Total cost of revenues
  
2,045,167
   
1,398,829
 
         
Gross profit
  
2,575,452
   
1,260,465
 
         
Operating expenses:
        
Selling, general and administrative expense
  
3,739,681
   
2,171,447
 
Research and development
  
464,178
   
319,570
 
         
Loss from continuing operations
  
(1,628,407
)  
(1,230,552
)
         
Other income (expense):
        
Currency exchange rate gain (loss)
  
80,562
   
(7,035
)
Interest income
  
11,450
   
11,223
 
Interest expense, net
  
(683,941
)  
(43,918
)
Other income, net
  
5,121
   
89
 
Net loss from continuing operations
  
(2,215,215
)  
(1,270,193
)
         
Dividends on Series D Preferred
  
-
   
(9,427
)
Net loss attributable to common stockholders
 $
(2,215,215
) 
$
(1,279,620
)
Foreign currency translation adjustments
  
(626,878
)  
-
 
Comprehensive Loss
 $
(2,842,093
) 
$
(1,279,620
)
Net loss per common share, basic and diluted from continuing operations
 $
(0.22
)
 
$
(0.13
)
         
Weighted average common shares outstanding, basic and diluted
  
10,108,000
   
9,808,000
 
 
 
The accompanying notes are an integral part of these condensed consolidated statements.


SECUREALERT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS – ContinuedSTATEMENTS OF CASH FLOWS
(Unaudited)

  
June 30,
 2010
  
September 30,
2009
 
Liabilities and Stockholders’ Equity (Deficit)      
Current liabilities:      
Bank line of credit $1,000,000  $252,600 
Accounts payable  2,431,785   2,339,786 
Accrued liabilities  1,497,126   3,506,680 
Dividends payable  579,892   - 
Deferred revenue  30,941   56,858 
Settlement liability  975,000   - 
SecureAlert Monitoring Series A Preferred stock redemption obligation  148,995   3,148,943 
Current portion of related-party line of credit and notes  200,000   1,576,022 
Promissory notes payable, net of debt discount of $0 and $41,556, respectively  -   2,008,444 
Senior secured note payable, net of debt discount of $0 and $529,109, respectively  150,000   2,890,522 
Current portion of Series A 15% debentures, net of debt discount of $0 and $1,272,189, respectively  -   2,127,811 
Derivative liability  -   1,219,426 
Current portion of long-term debt  886,424   272,493 
              Total current liabilities  7,900,163   19,399,585 
Series A 15% debentures, net of debt discount of $0 and $549,531, respectively, net of current portion  -   557,219 
Long-term related party line of credit and notes, net of current portion  55,245   - 
Long-term debt, net of current portion, net of debt discount of $0 and $525,665, respectively  519,284   1,009,606 
              Total liabilities  8,474,692   20,966,410 
         
Stockholders’ equity (deficit):        
SecureAlert, Inc. stockholders’ equity (deficit):        
   Preferred stock:        
      Series D 8% dividend, convertible, voting, $0.0001 par value: 50,000 shares designated; 37,851 and zero shares outstanding, respectively (aggregate liquidation preference of $28,857,253)    4     - 
   Common stock,  $0.0001 par value: 600,000,000 shares authorized; 238,748,663 and 210,365,988 shares outstanding, respectively  23,875   21,037 
   Additional paid-in capital  221,235,284   194,659,044 
   Subscription receivable  (50,000)  - 
   Deferred compensation  (1,092,943)  (1,287,406)
   Accumulated deficit  (216,075,643)  (205,765,496)
      Total SecureAlert, Inc. stockholders’ equity (deficit)  4,040,577   (12,372,821)
         Non-controlling interest  (171,247)  - 
      Total equity (deficit)  3,869,330   (12,372,821)
                  Total liabilities and stockholders’ equity (deficit) $12,344,022  $8,593,589 
  
Three Months Ended
December 31
 
  2014  2013 
Cash flows from operating activities:
      
Net Loss
 
$
(2,215,215
)
 
$
(1,270,193
)
Adjustments to reconcile net loss to net cash used and provided by in operating activities:
        
Depreciation and amortization
  
997,120
   
459,799
 
Vesting of stock options and warrants granted for services
  
75,082
   
71,250
 
Issuance of common stock for services
  
-
   
15,000
 
Amortization of debt discount
  
89,821
   
2,118
 
Issuance of warrants with related parties
  
-
   
53,946
 
Impairment of monitoring equipment and parts
  
55,080
   
75,000
 
Loss on disposal of monitoring equipment and parts
  
12,575
   
10,771
 
Change in assets and liabilities:
        
Accounts receivable, net
  
(2,041,899
)
  
158,508
 
Notes receivable
  
(7,667
)
  
37,403
 
Inventories
  
(403,794
)
  
(63,498
)
Prepaid expenses and other assets
  
(182,680
)
  
(446,379
)
Accounts payable
  
680,288
   
322,535
 
Accrued expenses
  
450,615
   
52,808
 
Deferred revenue
  
(10,792
)
  
11
 
Net cash used in operating activities
  
(2,501,466
)
  
(520,921
)
         
Cash flow from investing activities:
        
Purchase of property and equipment
  
(2,317
)
  
(62,082
)
Purchase of monitoring equipment and parts
  
(837,014
)
  
(750,189
)
Cash paid for purchase of subsidiary and other investments
  
(1,937,902
)
  
-
 
Cash deposit in escrow to secure international bond
  
-
   
(3,346,622
)
Net cash used in investing activities
  
(2,777,233
)
  
(4,158,893
)
         
Cash flow from financing activities:
        
Borrowings on related-party notes payable
  
-
   
2,700,000
 
Proceeds from exercise of options and warrants
  
-
   
8,000
 
Principal payments on related party notes payable
  
-
   
(60,000
)
Principal payments on notes payable
  
(598,251
)
  
(24,336
)
Net cash provided (used) by financing activities
  
(598,251
)
  
2,623,664
 
         
Foreign currency translation adjustments
  
(36,290
)
  
-
 
Net decrease in cash
  
(5,913,240
)
  
(2,056,150
)
Cash, beginning of period
  
11,101,822
   
3,382,428
 
Cash, end of period
 
$
5,188,582
  
$
1,326,278
 
The accompanying notes are an integral part of these statements.

 
F-39
F-33

SECUREALERT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

  
Three months ended
June 30,
  
Nine months ended
June 30,
 
  2010  2009  2010  2009 
Revenues:            
Products $86,384  $75,451  $225,380  $493,595 
Monitoring services  2,992,842   3,133,518   9,056,757   8,985,386 
Total revenues  3,079,226   3,208,969   9,282,137   9,478,981 
Cost of revenues:                
Products  5,088   28,891   27,140   246,310 
Monitoring services  1,710,373   2,391,935   5,348,448   8,049,230 
Total cost of revenues  1,715,461   2,420,826   5,375,588   8,295,540 
Gross profit  1,363,765   788,143   3,906,549   1,183,441 
Operating expenses:                 
Selling, general and administrative (including $120,174, $281,604, $1,068,352 and $2,355,600, respectively, of compensation expense paid in stock or stock options / warrants)  2,703,819   3,178,333   8,931,801   11,078,059 
Settlement expense  -   23,046   1,150,000   23,046 
Research and development  490,258   431,201   1,161,539   1,277,102 
Impairment of goodwill  -   -   204,735   - 
Loss from operations  (1,830,312)  (2,844,437)  (7,541,526)  (11,194,766)
Other income (expense):                
Currency exchange rate loss  (672)  -   (8,756)  - 
Loss on disposal of equipment  -   -   (8,713)  - 
Redemption of SecureAlert Monitoring Series A Preferred  4,431   24,060   (21,263)  20,449 
Interest income  86   8,215   13,227   11,658 
Interest expense (including $88,247, $1,099,707, $3,006,297, $1,929,306, respectively, of interest expense paid in stock)  (229,582)  (1,255,103)  (3,840,232)  (2,790,006)
Acquisition option extension cost  -   (147,566)  -   (347,066)
Derivative valuation gain (loss)  -   (1,014,045)  200,534   (1,014,045)
Other income, net  1,811   196,568   121,855   1,276,319 
Net loss  (2,054,238)  (5,032,308)  (11,084,874)  (14,037,457)
   Net loss attributable to non-controlling
       interest
  12,645   -   121,741   - 
Net loss attributable to SecureAlert, Inc.  (2,041,593)  (5,032,308)  (10,963,133)  (14,037,457)
Dividends on Series A and D Preferred stock  (579,892)  -   (939,371)  (175)
Net loss attributable to SecureAlert, Inc. common stockholders $(2,621,485) $(5,032,308) $(11,902,504) $(14,037,632)
Net loss per common share, basic and diluted $(0.01) $(0.03) $(0.06) $(0.08)
Weighted average common shares outstanding, basic and diluted  222,468,000   191,962,000   215,230,000   173,137,000 
 
The accompanying notes are an integral part of these statements.

F-40

SECUREALERT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  
Nine Months Ended
June 30,
 
  2010  2009 
Cash flows from operating activities:      
    Net loss $(11,084,874) $(14,037,457)
    Adjustments to reconcile net loss to net cash used in operating activities:        
             Depreciation and amortization  1,061,652   1,676,541 
             Common stock issued for services  27,500   668,874 
             Amortization of deferred financing and consulting costs  541,860   1,497,936 
             Non-cash compensation related to re-pricing of stock options  498,992   345,838 
             Common stock issued for acquisition option extension cost  -   19,500 
             Amortization of debt discount  2,918,050   1,067,037 
             Settlement expense  1,150,000   - 
             Non-cash interest expense related to a beneficial conversion feature  62,737   - 
             Common stock issued in connection with debt  25,510   - 
             Common stock issued to settle lawsuit  -   292,207 
             Redemption of SecureAlert Monitoring Series A Preferred stock  21,263   (20,448)
             Increase in related-party line of credit for services  117,193   218,684 
             Impairment of goodwill  204,735   - 
             Derivative liability valuation (gain) loss  (200,534)  1,014,045 
             Changes in operating assets and liabilities:        
                    Accounts receivable, net  (9,517)  269,388 
                    Deposit released from escrow  -   500,000 
                    Inventories  252,257   (177,253)
                    Prepaid expenses and other assets  (81,004)  (139,184)
                    Receivables  (99)  55,385 
                    Accounts payable  91,999   14,929 
                    Accrued liabilities  (56,376)  10,202 
                    Deferred revenue  (25,917)  18,572 
                           Net cash used in operating activities  (4,484,573)  (6,705,204)
         
Cash flows from investing activities:        
      Purchase of property and equipment  (241,491)  (240,984)
      Purchase of monitoring equipment  (1,588,093)  (1,047,043)
      Purchase of securities  -   (200,000)
      Disposal of property and equipment  24,221   - 
      Disposal of monitoring equipment  60,016   33,519 
                           Net cash used in investing activities  (1,745,347)  (1,454,508)
         
Cash flows from financing activities:        
      Net payments on related-party line of credit  (137,970)  (713,868)
      Proceeds from related-party note payable  500,000   1,500,000 
      Payment on related-party notes payable  (500,000)  (603,280)
      Principal payments on notes payable  (595,393)  (453,766)
      Proceeds from notes payable  3,217   55,744 
      Net borrowings on bank line of credit  747,400   87,346 
      Principal payments on notes payable related to acquisitions  (100,000)  - 
      Proceeds from Series A 15% debenture, net of commissions  -   3,846,750 
      Payments on Series A 15% debenture  (25,000)  - 
      Proceeds from issuance of common stock, net of commissions  -   3,250,000 
      Net proceeds from issuance of Series D Convertible Preferred stock  7,615,300   - 
                           Net cash provided by financing activities  7,507,554   6,968,926 
Net increase (decrease) in cash  1,277,634   (1,190,786)
Cash, beginning of period  602,321   2,782,953 
Cash, end of period $1,879,955  $1,592,167 
The accompanying notes are an integral part of these statements.

F-41

ECUREALERT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

  
Three Months Ended
December 31,
 
  2014  2013 
Cash paid for interest
 
$
3,086
  
$
7,519
 
         
Supplemental schedule of non-cash investing and financing activities:
 
Issuance of common stock in connection with Series D Preferred stock dividends
  
-
   
9,427
 
Series D Preferred stock dividends earned
  
-
   
9,427
 
Issuance of common stock in connection with the acquisition of a subsidiary
  
580,886
   
-
 
   
Nine Months Ended
June 30,
 
   2010   2009 
Cash paid for interest $1,088,120  $1,121,715 
         
Supplemental schedule of non-cash investing and financing activities:        
     Issuance of shares of common stock in exchange for shares of Series B Preferred stock $-  $2 
     Issuance of shares of common stock and warrants in exchange for deferred consulting services and financing costs  -   384,667 
     Accrual of Series A Preferred stock dividends  -   175 
     Issuance of shares of common stock for subscription receivable  -   250,000 
     Issuance of shares of common stock for accounts payable  -   550,000 
     Discount from issuance of convertible debt  -   4,114,052 
Cancellation of common stock issued  -   175 
     Acquisition of monitoring equipment through issuance of debt  -   2,770,000 
     Stock and options issued in connection with acquisition of Bishop Rock Software, Inc.  -   856,522 
     Issuance of common stock to settle notes payable and accrued interest  -   187,793 
Line of credit paid through the issuance of Senior convertible notes  -   3,549,630 
     Acquisition of property and equipment through issuance of debt  -   38,991 
     Issuance of 5,160,858, and 0 shares of common stock for payment of SecureAlert Monitoring, Inc. Series A Preferred stock contingency payments  609,772   - 
     Note payable issued to acquire monitoring equipment and property and equipment  190,487   - 
     Issuance of 3,150,000 and 0 stock options, respectively, for deferred consulting  347,397   - 
     Issuance of shares of Series D Convertible Preferred stock for conversion of debt, accrued liabilities and interest  16,884,874   - 
     Issuance of dividends payable on Series D Convertible Preferred stock  939,371   - 
     Note payable issued to acquire remaining shares of Court Programs, Inc., Court Programs of Florida, Inc., Court Programs of Northern Florida, Inc., and Court Programs of Illinois, Inc.  1,049,631   - 
     Liabilities forgiven as part of acquisition of Court Programs, Inc., Court Programs of Florida, Inc., Court Programs of Northern Florida, Inc., and Court Programs of Illinois, Inc.  330,262   - 
     Non-controlling interest assumed through acquisition of Court Programs, Inc., Court Programs of Florida, Inc., Court Programs of Northern Florida, Inc., and Court Programs of Illinois, Inc.  335,086   - 
     Conversion effect on derivative liability  1,018,892   - 
     Issuance of 150,000 shares of common stock to purchase an additional 2.145% ownership of Midwest Monitoring & Surveillance, Inc.  18,000   - 
     Issuance of 19,896,000 of common stock from the conversion of 3,316 shares of Series D Preferred stock  1,990   - 
     Issuance of 2,925,817 shares of common stock in connection with Series D Preferred stock dividends
  
359,479
   - 
     Accrued liabilities issued for Midwest Monitoring & Surveillance ownership
  
144,000
   - 
     Subscription receivable issued for Series D Preferred stock
  
50,000
   - 
     Patent acquired through accrued liability
  
50,000
   - 

The accompanying notes are an integral part of these condensed consolidated statements.


SECUREALERT, INC. AND SUBSIDIARIESSUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1)(1) BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial information of SecureAlert, Inc. (formerly RemoteMDx, Inc.), dba TrackGroup, and subsidiaries (collectively, the “Company”“Company”, “SecureAlert”, or “SecureAlert”“Track Group”) has been prepared in accordance with the Instructions to Form 10-Q and Article 108 of Regulation S-X promulgated by the Securities and Exchange Commission.Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying interim consolidated financial information contains all adjustments, consisting only of normal recurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2010,December 31, 2014, and results of its operations for the three and nine months ended June 30, 2010December 31, 2014 and 2009.2013. These financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2009.2014. The results of operations for the three and nine months ended June 30, 2010December 31, 2014 may not be indicative of the results for the fiscal year ending September 30, 2010.2015.

(2)GOING CONCERN
The Company has incurred recurring net losses and negative cash flows from operating activities. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  In order for the Company to achieve successful operations, the Company must generate positive cash flows from operating activities and obtain the necessary funding to meet its projected capital investment requirements.

Management’s plans with respect to this uncertainty include raising additional capital from the issuance of preferred stock and expanding its market for its TrackerPAL™ portfolio of products.  There can be no assurance that revenues will increase rapidly enough to offset operating losses and repay debts.  If the Company is unable to increase cash flows from operating activities or obtain additional financing, it will be unable to continue the development of its products and may have to cease operations.

(3) PRINCIPLES OF CONSOLIDATION
 
The condensed consolidated financial statements include the accounts of SecureAlert and its subsidiaries. All significant inter-company transactions have been eliminated in consolidation.

(4)(3) RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2009,From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB issued additional guidance”) or other standard setting bodies, which improvesare adopted by the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in the Company’s financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This additional guidance requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. Enhanced disclosures are required to provide financial statement users with greater transparency about transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. This additional guidance must be appliedCompany as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This additional guidance must be applied to transfers occurring on or after thespecified effective date. The adoption of this guidance is not expected to have a material impact onUnless otherwise discussed, the Company’s financial statements and disclosures.

In September 2009, the FASB issued guidance that changes the existing multiple-element revenue arrangements guidance currently included under its Revenue Arrangements with Multiple Deliverables codification. The revised guidance primarily provides two significant changes: 1) it eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) it eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. This will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoptio n permitted providedCompany believes that the revised guidance is retroactively applied to the beginningimpact of the year of adoption. This guidance hasrecently issued standards that are not yet been adopted and the Company does not expect a significant impact to its results of operations and financial position.

F-43

In October 2009, the FASB issued accounting guidance which changes the accounting model for revenue arrangements that include both tangible products and software elements. Under this guidance, tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality are excluded from the software revenue recognition guidance given prior to this new guidance. In addition, hardware components of a tangible product containing software components are always excluded from the software revenue guidance.  This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.  The Company adopted this guidance a s of April 1, 2010 which did not significantly impact its results of operations and financial position as of June 30, 2010.

In April 2008, the FASB issued an amendment for determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under authoritative accounting guidance for goodwill and other intangible assets. This guidance is intended to improve the consistency between the useful life of an intangible asset determined under the guidance for goodwill and other intangible assets and the period of expected cash flows used to measure the fair value of the asset under ASC 805 “Business Combinations” and other principles under GAAP. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods wit hin those fiscal years.  The Company adopted this guidance as of October 1, 2009 which did not significantly impact its results of operations and financial position as of June 30, 2010.

In September 2006, the FASB issued enhanced guidance for using fair value to measure assets and liabilities. This guidance also provides for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. This new guidance applies whenever other guidance requires or permits assets or liabilities to be measured at fair value. This does not expand the use of fair value in any new circumstances. In February 2008, the FASB issued additional guidance to exclude previous guidance on  “Accounting for Leases” and delays the effective date of the this new guidance by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair v alue in the financial statements on a nonrecurring basis. In October 2008, the FASB issued additional guidance for determining the fair value of a financial asset when the market for that asset is not active to clarify the application of the provisions of the guidance for fair value measurements in an inactive market and how an entity would determine fair value in an inactive market. This additional guidance is effective immediately. The Company adopted this for financial assets and financial liabilities at the beginning of fiscal year 2009. The adoption of this guidance for financial assets and financial liabilities did not impact our results of operations and financial position. The guidance is effective for nonfinancial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008. The adoption of this guidance for nonfinancial assets and nonfinancial liabilities did not significantly impact the Company’s results of operations and financial position.

In June 2009, the FASB issued accounting guidance on the consolidation of variable interest entities (VIEs). This new guidance revises previous guidance by eliminating the exemption for qualifying special purpose entities, by establishing a new approach for determining who should consolidate a variable-interest entity and by changing when it is necessary to reassess who should consolidate a variable-interest entity.  This guidance will be effective at the beginning of the first fiscal year beginning after November 15, 2009. Early application is not permitted.  The adoption of this guidance is not expected to significantly impact the Company’s results of operations and financial position.

In September 2009, the FASB issued guidance updates and provided amendments to its Fair Value Measurements and Disclosure requirements which permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This guidance also requires new disclosures, by major category of investments, about the attributes of investments, such as the nature of any restriction on the ability to redeem an investment on the measurement date.  This guidance is effective for interim and annual periods ending after December 15, 2009. Early application was permitted in financial statements for earlier interim and annual periods that have not been issued.  0;The Company adopted this guidance for the nine months ended June 30, 2010 which did not significantly impact the Company’s results of operations and financial position.

F-44

In October 2009, the FASB issued guidance on share-lending arrangements entered into on an entity's own shares in contemplation of a convertible debt offering or other financing.  This new guidance is effective for fiscal years beginning on or after December 15, 2009, and fiscal years within those fiscal years for arrangements outstanding as of the beginning of those years. Retrospective application is required for such arrangements and early application is not permitted.  The adoption of this guidance is not expected to significantly impact the Company’s results of operations and financial position.

In February 2010, the FASB revised the guidance to include additional disclosure requirements related to fair value measurements. The guidance adds the requirement to disclose transfers in and out of Level 1 and 2 measurements and the reasons for the transfers and a gross presentation of activity within the Level 3 roll forward. The guidance also includes clarifications to existing disclosure requirements on the level of disaggregation and disclosures regarding inputs and valuation techniques. The guidance applies to all entities required to make disclosures about recurring and nonrecurring fair value measurements. The Company adopted this guidance for the nine months ended June 30, 2010 which did not significantly impact the Company’s results of operations and financial position.

In February 2010, the FASB issued an accounting standard that amended certain recognition and disclosure requirement related to subsequent events. The accounting standard requires an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement that a SEC filer disclose the date through which subsequent events have been evaluated. This guidance was effective upon issuance. The adoption of this standard did not have a material impact on the Company’s condensed consolidatedits financial position or results of operations.operations upon adoption.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU includes a five-step process by which entities will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which an entity expects to be entitled to in exchange for those goods or services. The Company evaluated subsequent events throughstandard also will require enhanced disclosures to enable users of financial statements to understand the datenature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for annual and interim reporting periods beginning after December 15, 2016, with early adoption prohibited. We are currently evaluating the accompanying condensedimpact this ASU will have on our consolidated financial statements were issued.statements.

(5)In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This standard sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about our ability to continue as a going concern, and if so, to provide related footnote disclosures. The standard is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. We are currently evaluating this new standard and after adoption, we will incorporate this guidance in our assessment of going concern.

(4) IMPAIRMENT OF LONG-LIVED ASSETS
 
The Company reviews its 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. The Company uses an equity verses a fair market value method of the related asset or group of assets in measuring whether the assets are recoverable.  If the carrying amount of an asset exceeds its fair market 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 market value th atthat is independent of other groups of assets. DuringThe Company recorded $55,080 and $75,000 of impairment expenses related to monitoring equipment for the ninethree months ended June 30, 2010December 31, 2014 and 2009, the Company impaired goodwill from the purchase2013, respectively.

(6)           REVENUE RECOGNITION(5) BUSINESS COMBINATIONS

The Company’s revenue has historically been from two sources: (i) monitoring services; (ii) monitoring deviceCompany accounts for its business acquisitions under the acquisition method of accounting as indicated in ASC 805, Business Combinations, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and other product sales.

Monitoring Services
Monitoring services include two components: (a) lease contractsany non-controlling interest in whichthe acquiree; and establishes the acquisition date as the fair value measurement point. Accordingly, the Company provides monitoring servicesrecognizes assets acquired and leases devices to distributors or end usersliabilities assumed in business combinations, including contingent assets and liabilities and non-controlling interest in the Company retains ownershipacquiree, based on fair value estimates as 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 its devices under one-year contracts with customers that opt to use the Company’s monitoring services.  However, these contracts may be cancelled by either party at anytime with 30 days notice.  Under the Company’s standard leasing contract, the leased device becomes billable on the date of activation or up to 7 days fromacquisition. In accordance with ASC 805, 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, the Company records these paymentsand measures goodwill as d eferred revenue.

F-45

Monitoring Device Product Sales
Although not the focus of the Company’s business model,acquisition date, as the Company sells its monitoring devices in certain situations. In addition, the Company sells home security and Personal Emergency Response Systems (“PERS”) units.  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, 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 TrackerPAL™ devices) from the Company, customers may, but are not required to, enter into monitoring service contracts with the Company.  The Company recognizes revenue on monitoring services for customer s that have previously purchased devices at the end of each month that monitoring services have been provided.

Multiple Element Arrangements
The majority of the Company’s revenue transactions do not have multiple elements. On occasion, the Company has revenue transactions that have multiple elements (such as product sales and monitoring services).  For revenue arrangements that have multiple elements, the Company considers whether: (i) the delivered devices have stand alone value to the customer; (ii) there is objective and reliable evidenceexcess of the fair value of the undelivered monitoring services, which is generally determined by surveying the price of competitors’ comparable monitoring services; and (iii) 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 to be provided to the customer.  I n accordance with FASB ASC subtopic addressing multiple deliverables, ifconsideration paid over the fair value of the undelivered element exists,identified net assets acquired.

Acquired Assets and Assumed Liabilities

Pursuant to ASC No. 805-10-25, if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, but during the allowed measurement period not to exceed one year from the acquisition date, the Company retrospectively adjusts the provisional amounts recognized at the acquisition date, by means of adjusting the amount recognized for goodwill.

Contingent Consideration

In certain acquisitions, the Company agrees to pay additional amounts to sellers contingent upon achievement by the acquired businesses of certain negotiated future goals, such as targeted earnings levels. The Company records contingent consideration based on its estimated fair value does not exist for one or more delivered elements, then revenueas of the date of the acquisition. The Company evaluates and adjusts the value of contingent consideration, if necessary, at each reporting period based on the progress toward and likely achievement of certain targets on which issuance of the contingent consideration is recognized usingbased. Any differences between the residual method. Underacquisition-date fair value and the residual method as applied to these particular transactions, thechanges in fair value of the undelivered element (the monitoring services) is deferred andcontingent consideration subsequent to the remaining portion ofacquisition date are recognized in current period earnings until the arrangement (the sale of the device) is recognized as revenue when the device is delivered and all other revenue recognition criteria are met.settled.

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 are 30 days, and normal payment terms for device sales are between 120 and 180 days.  The Company sells its 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 the Company.  Generally, title and risk of loss pass to the buyer upon delivery of the devices.(6) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The Company estimates its product returns based on historical experienceChilean Peso, New Israeli Shekel and maintains an allowance for estimated returns, which isthe 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) at the exchange rate prevailing at December 31, 2014. Comprehensive loss includes net loss as currently reported under U.S. GAAP and other comprehensive loss. Other comprehensive loss considers the effects of additional economic events, such as foreign currency translation adjustments, that are not required to be recorded in determining net loss, but rather are reported as a reduction to accounts receivable and revenue.

Shipping and handling fees are included as part of net revenues.  The related freight costs and supplies directly associated with shipping products to customers are included as aseparate component of cost of revenues.stockholders’ equity.

(7) GEOGRAPHIC INFORMATION

During the three months ended December 31, 2014, the Company recognized revenues from international sources from its products and monitoring services. Revenues are attributed to the geographic areas based on the location of the customers purchasing and leasing the products and services. The revenues recognized by geographic area for the three months ended December 31, 2014 and 2013, are as follows:

  
Three Months Ended
December 31,
 
  2014  2013 
United States of America
 
$
3,364,318
  
$
1,884,164
 
Latin American countries
  
432,929
   
-
 
Caribbean countries and commonwealths
  
763,736
   
756,678
 
Other foreign countries
  
59,236
   
18,452
 
Total
 
$
4,620,219
  
$
2,659,294
 

The long-lived assets, net of accumulated depreciation, used in the generation of revenues by geographic area as of December 31, 2014 and September 30, 2014, were as follows:

  Net Property and Equipment  Net Monitoring Equipment 
  December 31, 2014  September 30, 2014  December 31, 2014  September 30, 2014 
United States of America
 
$
568,127
  
$
611,095
  
$
1,406,581
  
$
1,645,137
 
Latin American countries
  
1,200,687
   
1,168,406
   
626,628
   
237,667
 
Caribbean countries and commonwealths
  
-
   
-
   
-
   
-
 
Other foreign countries
  
112,214
   
80,746
   
23,869
   
31,862
 
Total
 
$
1,881,028
  
$
1,860,247
  
$
2,057,078
  
$
1,914,666
 
(8) NET LOSS PER COMMON SHARE

Basic net loss per common share ("Basic EPS"EPS") is computed by dividing net loss attributableavailable to common stockholdersshareholders by the weighted average number of common shares outstanding during the period.

Diluted net loss per common share ("Diluted EPS"EPS") is computed by dividing net loss attributable to common stockholdersshareholders by the sum of the weighted averageweighted-average number of common shares outstanding and the weighted averageweighted-average dilutive common share equivalents then outstanding. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Common stockshare equivalents consist of shares issuable upon the exercise of common stockCommon Stock options and warrants, shares issuable upon conversion of debt, and shares issuable upon the conversion of preferred stock. As of June 30, 2010December 31, 2014 and 2009,2013, there were 274,113,290323,251 and 76,128,791466,094 outstanding common stockshare equivalents, respectively, that were not included in the computation of diluted net loss per common shareDiluted EPS as their effect would be anti-dilutive. No reconciliation for discontinued operations was provided since the impact was immaterial. The common stockCommon Stock equivalents outstanding as of June 30, 2010,December 31, 2014 and 2013 consisted of 227,106,000the following:

  
December 31,
2014
  
December 31,
2013
 
Conversion of Series D Preferred  -   24,503 
Exercise of outstanding common stock options and warrants  281,251   399,591 
Exercise and conversion of outstanding Series D Preferred warrants  42,000   42,000 
Total common stock equivalents  323,251   466,094 
(9) ACQUISITIONS

GPS Global

On March 12, 2014, the Company entered into a Share Purchase Agreement (the “GPS Global SPA”) to purchase from Eli Sabag, an individual resident of the State of Israel, all of the issued and outstanding shares of common stock fromGPS Global Tracking and Surveillance System Ltd., a company formed under the potential conversionlaws of 37,851and operating in the State of Israel (“GPS Global”). The GPS Global SPA contained customary representations and warranties and covenants, including provisions for indemnification, subject to the limitations described in the agreement. Subsequent to the closing, the Mr. Sabag and certain key employees of GPS Global entered into employment agreements and continue to operate GPS Global. The GPS Global SPA also granted Mr. Sabag the right for a three-year period following the closing to nominate one director to serve on the Company’s board and on GPS Global’s board of directors. The closing of the transaction, which occurred on April 1, 2014, was subject to customary closing conditions. Subsequently, the Company changed the name of GPS Global to Track Group International Ltd.

The purchase price for the issued and outstanding shares of outstanding Series D Convertible Preferred Stock, 3,329,125 shares of common stock from the potential conversion of $417,855 of debtGPS Global is $7,811,404, payable in cash and accrue d interest, and 19,678,165 shares underlying options and warrants.  Of the 19,678,165 shares underlying options and warrants, 18,455,498 shares underlie options and warrants which have vested and 1,222,667 shares underlie options and warrants which have not yet vested.  The remaining common stock equivalents consist of 4,000 Series D Preferred stock options that when converted would result in the issuance of 24,000,000 shares of the Company’s common stock.Company's Common Stock as follows:

●
Cash to Mr. Sabag of $311,404 at the closing;
●
Shares of the Company's Common Stock valued at $7,500,000, delivered to Mr. Sabag as follows:
●
Common stock valued at $1,600,000 delivered to Mr. Sabag at the closing;
●
Common stock valued at $2,900,000, delivered to an escrow agent to be released by Bank to Mr. Sabag after six months from the closing, conditioned upon the Company's verification that GPS Global’s global positioning satellite (“GPS”) products (the “Devices”) meet expected operating specifications;
●Common stock valued at $1,000,000, the number of shares to be determined by dividing $1,000,000 by the weighted average closing price of the Company’s Common Stock for the 60 consecutive trading days preceding the third business day prior to release of such shares, to be issued to Mr. Sabag within 30 days of certification that GPS Global has sold or leased a minimum of 1,500 of its Devices under revenue-generating contracts; and
●Common stock valued at $2,000,000, the number of shares to be determined by dividing $2,000,000 by the weighted average closing price of the Company’s Common Stock for the 60 consecutive trading days preceding the third business day prior to release of such shares, to be issued to Mr. Sabag within 30 days of certification that GPS Global has sold or leased a minimum of 2,500 of its Devices under revenue-generating contracts, in addition to the 1,500 Devices previously mentioned (i.e., a minimum of 4,000 Devices sold or leased).

(8)           STOCK-BASED COMPENSATIONAs described above, shares of Common Stock valued at $3,000,000 may be payable based on sales of the GPS Global devices sold or leased. Management determined that it was probable that sales of GPS Global devices would exceed the number of units specified in the SPA, and has therefore, recognized a Stock Payable liability for the entire $3,000,000 value of common shares payable.
The total purchase price for the GPS Global acquisition was allocated to the net tangible and intangible assets based upon their fair values as of March 31, 2014 as set forth below. The excess of the purchase price over the net assets was recorded as goodwill. This acquisition provided the Company with additional research and development capabilities and enhanced technology which are expected to benefit current and future products.

ForThe following table summarizes the nine months endedfair values of the assets and liabilities assumed at the acquisition date of GPS Global (in thousands).
Current assets
 
$
217
 
Inventory
  
17
 
Property and equipment
  
47
 
Monitoring equipment
  
48
 
Other non-current assets
  
21
 
Intangible assets
  
4,856
 
Tradename
  
192
 
Accounts payable and accrued expenses
  
(215
)
Loan payable
  
(753
)
Goodwill
  
3,381
 
Total fair value of assets acquired
 
$
7,811
 
Emerge

On June 30, 2010 and 2009,2, 2014, the Company calculated compensation expenseentered into a Stock Purchase Agreement (the “ Emerge SPA”) to purchase from BFC Surety Group, Inc. all of $67,406the issued and $67,406 respectively relatedoutstanding shares and equity interests of Emerge Monitoring, Inc., a Florida corporation (“Emerge”), which is the direct owner of all of the issued and outstanding equity interests of Emerge Monitoring II, LLC, a Florida limited liability company and wholly-owned subsidiary of Emerge (“Emerge LLC”), and a majority (65%) of the equity interest of Integrated Monitoring Systems, LLC, a Colorado limited liability company and subsidiary of Emerge LLC (the “Emerge Acquisition”). The Emerge SPA contains customary representations and warranties and covenants, including provisions for indemnification, subject to the vestinglimitations described in the agreement. Certain key employees of stock options granted in prior years.the acquired entities continued to operate the acquired entities following the closing. During June 2014, the Company also committed to purchase the remaining 35% minority equity interest of Integrated Monitoring Systems, LLC, which was completed during the fiscal year ended September 30, 2014.

The purchase price for the Emerge Acquisition was $7,739,167, all of which was paid in cash during the year ended September 30, 2014. The total purchase price for the Emerge Acquisition was allocated to the net tangible and intangible assets based upon their fair valuevalues as of each stock option grant is estimatedJune 1, 2014 as set forth below. The excess of the purchase price over the net assets was recorded as goodwill. The Emerge Acquisition provided the Company with significant customer relationships, an experienced sales and management team and additional alcohol monitoring product offerings.
The following table summarizes the fair values of the assets and liabilities assumed at the Emerge Acquisition date (in thousands).
Inventory
 
$
451
 
Property and equipment
  
227
 
Other assets
  
109
 
Developed technology
  
1,600
 
Customer contracts/relationships
  
1,860
 
Tradename /trademarks
  
110
 
Goodwill
  
3,382
 
Total fair value of assets acquired
 
$
7,739
 
Track Group Analytics Limited

On November 26, 2014 (the “Closing Date”), the Company entered into a Share Purchase Agreement (the “TGA Purchase Agreement”) to purchase from the existing shareholders of Track Group Analytics Limited, formerly G2 Research Limited (“TGA”), all issued and outstanding shares and equity interests of TGA for an aggregate purchase price of up to CAD$4.6 million (the “TGAAcquisition”), of which CAD$2.0 million was paid in cash to the TGA shareholders on the Closing Date. Pursuant to the terms and conditions of the TGA Purchase Agreement, the remainder of the purchase price will be paid as follows: (i) CAD$600,000 will be paid to the former TGA shareholders in shares of Common Stock of which one-half of the shares will be issued on the one-year anniversary of the Closing Date and the remaining one-half will be issued on the two-year anniversary of the Closing Date; and (ii) the remaining CAD$2.0 million will be paid to the former TGA shareholders in shares of Common Stock periodically, over the course the two-year period beginning on the Closing Date, upon the achievement of certain milestones set forth in the TGA Purchase Agreement. The TGA Purchase Agreement also provides for customary representations, warranties and covenants, including provisions for indemnification, and is subject to customary closing conditions. As of December 31, 2014, the Company had issued 38,499 shares of Common Stock in connection to this acquisition.

The following table summarizes the fair values of the assets and liabilities assumed at the acquisition date (in thousands).
Current assets
 
$
477
 
Property and equipment
  
5
 
Accounts payable and accrued expenses
  
(65
)
Loan payable
  
(381
)
Goodwill
  
4,050
 
Total fair value of assets acquired
 
$
4,086
 

Summary of grant usingUnaudited Pro-Forma Information

The unaudited pro-forma information below for the Black-Scholes option-pricing model. The Company granted no stock options to employees during the ninethree months ended June 30, 2010December 31, 2014 and 1,517,714 during2013 gives effect to each of the nine months ended June 30, 2009, valued at $274,650.acquisitions described herein as, if the acquisitions had occurred on October 1, 2012. The expected lifepro-forma financial information is not necessarily indicative of stock options represents the periodresults of time thatoperations if the stock options granted are expected to be outstanding based on historical exercise trends. acquisitions had been effective as of this date.
  
Three Months Ended
December 31,
 
  2014  2013 
Revenues
 $
4,976,416
  $
4,289,544
 
Loss from operations
  
(1,513,379
)
  
(4,961,452
)
Net loss attributable to the Company
  
(1,944,824
)
  
(4,368,889
)
Basic income per share
  
(0.19
)
  
(0.43
)
Diluted income per share
  
(0.19
)
  
(0.43
)
Net loss attributable to common shareholders
  
(1,924,388
)
  
(4,378,316
)
Basic income per share
  
(0.19
)
  
(0.43
)
Diluted income per share
  
(0.19
)
  
(0.43
)
(10) PREPAID AND OTHER EXPENSES
The expected volatility iscarrying amounts reported in the balance sheets for prepaid expenses and other current assets approximate their fair market value based on the historical price volatilityshort-term maturity of common stock.these instruments. As of December 31, 2014 and September 30, 2014, the outstanding balance of prepaid and other expenses was $1,007,068 and $1,226,054, respectively. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life$1,007,068 as of the related stock options. The dividend yield represents the Company’s anticipated cash dividends over the expected lifeDecember 31, 2014 is comprised primarily of the stock options.

A summary of stock option activity for the nine months ended June 30, 2010 is presented below:prepayments toward inventory purchases, deposits and other prepaid expenses.
 
 
  
 
 
Shares
Under
Option
 
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
Outstanding as of September 30, 2009 4,709,214 $0.76      
     Granted - $-      
     Exercised - $-      
     Forfeited - $-      
     Expired / Cancelled (1,570,000) $0.60      
Outstanding as of June 30, 2010 3,139,214 $0.27 2.49 years $17,353 
Exercisable as of June 30, 2010 3,016,547 $0.25 2.55 years $17,353 
(9)(11) INVENTORY
 
Inventory is valued at the lower of the cost or market. Cost is determined using the first-in, first-out (“FIFO”FIFO”) method. Market is determined based on the estimated net realizable value, which generally is the itemitem’s selling price. Inventory is periodically reviewed in order to identify obsolete, or damaged items or impaired values.items.

Inventory consists of productsraw materials that are available for sale and raw materials used in the manufacturing of TrackerPAL™ReliAlert™, Shadow, and other tracking devices, completed ReliAlert™, R.A.D.A.R. and other tracking devices. Completed TrackerPAL™Tracking devices deployed are reflected in Monitoring Equipment. As of June 30, 2010December 31, 2014 and September 30, 2009,2014, respectively, inventory consisted of the following:
 
  
June 30,
2010
  
September 30,
2009
 
Raw materials $475,797  $686,421 
Reserve for damaged or obsolete inventory  (124,725)  (83,092)
Total inventory, net of reserves $351,072  $603,329 

  December 31,  September 30, 
  2014  2014 
Raw materials, work-in-process, and finished goods
 
$
1,660,415
  
$
1,471,764
 
Reserve for damaged or obsolete inventory
  
(225,900
)  
(223,500
)
Total inventory, net of reserves
 
$
1,434,515
  
$
1,248,264
 

(10)(12) PROPERTY AND EQUIPMENT

Property and equipment as of June 30, 2010December 31, 2014 and September 30, 2009,2014, were as follows:
 December 31, September 30, 
 
June 30,
2010
  
September 30,
2009
  2014 2014 
Equipment, software and tooling $2,453,221  $2,742,537  
$
2,751,312
 
$
2,571,450
 
Automobiles  308,611   305,658  
33,466
 
33,466
 
Building and land  377,555   377,555 
Leasehold improvements  127,912   127,912  
1,316,120
 
1,294,386
 
Furniture and fixtures  284,824   284,824   
266,909
  
253,466
 
Property and equipment, before accumulated depreciation  3,552,123   3,838,486 
Total property and equipment before accumulated depreciation
 
4,367,807
 
4,152,768
 
Accumulated depreciation  (2,208,208)  (2,525,180)  
(2,486,779
)
  
(2,292,521
)
        
Property and equipment, net of accumulated depreciation $1,343,915  $1,313,306  
$
1,881,028
 
$
1,860,247
 
 
Depreciation expense for the ninethree months ended June 30, 2010December 31, 2014 and 20092013 was $311,150$170,907 and $527,917,$47,175, respectively.

AssetsProperty and equipment to be disposed of areis reported at the lower of the carrying amount or fair value, less the estimated costs to sell.sell the property. Any gains or losses are recognized in the results of operations. During the ninethree months ended June 30, 2010 and 2009,December 31, 2014 the Company disposeddid not dispose of property and equipment with a net book value of $24,221 and $0, respectively.equipment.

(11)
(13) MONITORING EQUIPMENT

Monitoring equipment as of June 30, 2010December 31, 2014 and September 30, 2009,2014, was as follows:

 
June 30,
2010
  
September 30,
2009
Monitoring equipment $5,432,285  $4,260,690 
Less: accumulated depreciation  (3,200,324)  (2,944,197)
Total $2,231,961  $1,316,493 

  December 31,  September 30, 
  2014  2014 
Monitoring equipment
 
$
3,506,749
  
$
3,166,217
 
Less: accumulated depreciation
  
(1,449,671
)
  
(1,251,551
)
Monitoring equipment, net of accumulated depreciation
 
$
2,057,078
  
$
1,914,666
 
The Company leasesbegan leasing monitoring equipment to agencies for offender tracking in April 2006 under operating lease arrangements. The monitoring equipment is depreciatedamortized using the straight-line method over an estimated useful life of 3three to five years.

Depreciation expense related to monitoring equipment for the ninethree months ended June 30, 2010December 31, 2014 and 20092013 was $642,609$228,050 and $1,106,380,$190,992, respectively. Additionally, the Company reserved $275,398 for future monitoring equipment impairment, of which $55,080 was recognized as impairment expense during the three months ended December 31, 2014. These expenses were classified as ahave been recognized in cost of revenues.

Assets to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs to sell.sell the assets. During the ninethree months ended June 30, 2010December 31, 2014 and 2009,2013, the Company disposedrecorded in cost of revenues disposal of lease monitoring equipment and parts with a net book value of $60,016$12,575 and $33,519,$10,771, respectively.

(14) INTANGIBLE ASSETS

The following table summarizes the activity of intangible assets for the first fiscal quarter ended December 31, 2014:
  
December 31,
2014
  
September 30,
2014
 
Other intangible assets:      
Patent license agreement
 
$
4,550,000
  
$
4,550,000
 
Royalty agreements
  
16,620,565
   
16,620,565
 
Technology
  
5,961,110
   
6,190,083
 
Customer relationships
  
1,860,000
   
1,860,000
 
Trade name
  
282,433
   
291,486
 
Other
  
50,386
   
50,386
 
Total intangible assets
  
29,324,494
   
29,562,520
 
Accumulated amortization
  
(3,389,500
)
  
(2,818,894
)
Intangible assets, net of accumulated amortization
 
$
25,934,994
  
$
26,743,626
 
The intangible assets summarized above were purchased on various dates from January 2010 through December 2014. The assets have useful lives ranging from three to ten years. Amortization expense for the three months ended December 31, 2014 and 2013 was $470,993 and $221,632, respectively.
 
(12)(15) GOODWILL AND

The following table summarizes the activity of goodwill at December 31 and September 30, 2014, respectively:

  December 31,  September 30, 
  2014  2014 
Beginning balance $6,577,609  $- 
Additions resulting from acquisitions:        
Acquisition of GPS Global Tracking & Surveillance, Ltd.  -   3,381,000 
Acquisition of Emerge Monitoring, Inc.  -   3,381,754 
Acquisition of Track Group Analytics Limited  4,037,267   - 
Foreign currency translation adjustment  (159,423)  (185,145)
Ending balance $10,455,453  $6,577,609 

Goodwill was recognized in connection to acquisition transactions in accordance with ASC 805. The Company performs an impairment test for goodwill annually or more frequently if indicators of potential impairment exist. No impairment of goodwill had been recognized through December 31, 2014.

(16) OTHER INTANGIBLE ASSETS

As of June 30, 2010,December 31, 2014 and 2013, the Company had recorded goodwilloutstanding balance of other assets was $3,739,925 and intangible$3,150,428, respectively. The $3,739,925 balance of other assets related to the acquisitionis comprised largely of controlling interest of Midwest, Court Programs, and Bishop Rock Software and patent purchases as follows:

  
Midwest
Monitoring &
Surveillance
  
Court
Programs,
Inc.
  
Bishop Rock
Software
  Patent  Total 
Goodwill $1,421,995  $2,756,461  $-  $-  $4,178,456 
Other intangible assets                    
     Trade name  120,000   99,000   10,000   -   229,000 
     Software  -   -   380,001   -   380,001 
     Customer relationships  -   6,000   -   -   6,000 
     Patent license agreement  -   -   -   50,000   50,000 
     Non-compete agreements  2,000   6,000   -   -   8,000 
Total other intangible assets  122,000   111,000   390,001   50,000   673,001 
     Accumulated amortization  (22,667)  (26,150)  (185,855)  -   (234,672)
Other intangible assets, net of accumulated amortization  99,333   84,850   204,146   50,000   438,329 
Total goodwill and other intangible assets, net of amortization $1,521,328  $2,841,311  $204,146  $50,000  $4,616,785 
Midwest Monitoring & Surveillance
Effective December 1, 2007, the Company purchased a 51% ownership interest, including a voting interest, in Midwest Monitoring & Surveillance (“Midwest”).  Like the Company’s operations prior to the acquisition of interest, Midwest provides electronic monitoring for individuals on parole.  The total consideration for the purchase of Midwest was $4,400,427 comprised of notes payable of $1,800,000, shares of common stock valued at $1,752,000 (438,000 shares valued at $4.00 per share), transaction costs of $31,497, and long-term liabilities assumed of $816,930.

Effective April 1, 2010, the Company and the Midwest minority owners executed an agreement to extend the option period for the purchase of the remaining minority ownership interest of Midwest. As consideration for the extension of the option period$3.1 million performance bond for an additional 12 months, theinternational customer. The Company paid a fee (toanticipates this restricted cash will be credited against the purchase price for the remaining shares of Midwest) by issuing 150,000 restricted shares of the Company’s common stock valued at $18,000 ($0.12 per share)unrestricted and waived the payment of $10,000 owedavailable to the Company by Midwest.  In addition, the Company agreed to make cash payments to the sellers totaling $144,000 in equal installments over a 12-month period.  In consideration of the payments of cash and stock, the Company was issued additional shares of Midwest’s commo n stock increasing the Company’s total ownership interest in Midwest from 51% to 53.145%.

The total consideration of $4,562,427 less the tangible assets acquired of $674,679 resulted in an excess over net book value of $3,887,748.  The Company recorded impairment of $2,343,753 for the fiscal year endedon September 30, 2009, resulting in a net goodwill of $1,421,995 and $122,000 of other intangible assets, as noted in the table above.

The Company recorded $6,167 of amortization expense for Midwest intangible assets during the nine months ended June 30, 2010 resulting in a total accumulated amortization of $22,667 and net intangible assets of $99,333.

Court Programs
Effective December 1, 2007, the Company purchased a 51% ownership interest, including a voting interest, in Court Programs, Inc., a Mississippi corporation, Court Programs of Northern Florida, Inc., a Florida corporation, and Court Programs of Florida, Inc., a Florida corporation (collectively, “Court Programs”).  Similar to the Company’s operations prior to the acquisition of interest, Court Programs is a distributor of electronic monitoring devices to courts providing a solution to monitor individuals on parole.  Consideration for the purchase of 51% of Court Programs was $1,527,743, it comprised of a note payable of $300,000, shares of common stock valued at $847,500 (212,000 shares valued at approxim ately $4.00 per share), transaction costs of $45,324, and long-term liabilities assumed of $334,919.

F-49

Effective March 1, 2010, the Company purchased the remaining 49% ownership of Court Programs. Consideration for the remaining ownership of Court Programs consisted of the following: $100,000 in cash, a note payable of $200,000, a note payable for $849,631 which was subsequently exchanged into 621 shares of the Company’s Series D Preferred stock (see Note 16), $330,262 of debt forgiveness, and $335,086 of assumption of non-controlling interest. In connection with the acquisition, the Company paid 229 shares of Series D Preferred stock and $30,000 in cash to an entity to facilitate the acquisition.

The total consideration of $3,342,722 less the tangible assets acquired of $270,526 resulted in an excess over net book value of $3,072,196.  The Company recorded $204,735 of impairment of goodwill resulting in a net goodwill of $2,756,461 and $111,000 of other intangible assets, as noted in the table above. The Company recorded $6,350 of amortization expense on intangible assets for Court Programs during the nine months ended June 30, 2010 resulting in a total accumulated amortization of $26,150 and net intangible assets of $84,850.

Bishop Rock Software
Effective January 14, 2009, the Company purchased a 100% ownership interest, including a voting interest, in Bishop Rock Software, Inc., a California corporation, (“Bishop Rock”) for 2,857,286 shares of the Company’s common stock valued at $0.23 per share ($657,176), options to purchase 642,714 shares of the Company’s common stock with an exercise price of $0.09 per share for a value of $114,383 using the Black-Scholes calculation, and $79,268 in debt for a total purchase price of $850,827.  The total consideration of $850,827, less crime-scene correlation software recorded as an asset for $390,001, resulted in goodwill of $460,827.  During the fiscal year ended September 30, 2009, the Company recorded an impairment expense of $460,827, resulting in no more remaining goodwi ll.

The Company recorded $95,500 of amortization expense on intangible assets for Bishop Rock Software during the nine months ended June 30, 2010, resulting in a total accumulated amortization of $185,855 and net intangible assets of $204,146.

Patent
On January 29, 2010, the Company and Satellite Tracking of People, LLC (“STOP”) entered into a license agreement whereby STOP granted to Company a non-exclusive license under U.S. Patent No. 6,405,213 and any and all patents issuing from continuation, continuation-in-part, divisional, reexamination and reissues thereof and along with all foreign counterparts, to make, have made, use, sell, offer to sell and import covered products in SecureAlert’s present and future business.  The license granted shall continue for so long as any of the licensed patents have enforceable rights.  The license granted is not assignable or transferable except for sublicenses within the scope of its license to the Company’s subsidiaries.

The Company agreed to pay $50,000 as consideration for the use of this patent.  Of the $50,000, $25,000 was paid during the three months ended June 30, 2010 and the balance is due by January 29, 2011. Since the Company has not yet begun utilizing this patent and is in the process of determining its useful life, no amortization was recorded in connection with the license for the nine months ended June 30, 2010.

Supplemental Pro Forma Results of Operations
The following tables present the pro forma results of operations for the three and nine months ended June 30, 2010 and 2009, as though the Bishop Rock Software acquisition and the remaining ownership of Court Programs had been completed as of the beginning of each period presented:

F-50

  
Three months ended
June 30,
 
  2010  2009 
Revenues:      
Products $86,384  $75,451 
Monitoring services  2,992,842   3,133,518 
Total revenues  3,079,226   3,208,969 
Cost of revenues:        
Products  5,088   28,891 
Monitoring services  1,710,373   2,391,935 
Total cost of revenues  1,715,461   2,420,826 
Gross profit  1,363,765   788,143 
Operating expenses:         
Selling, general and administrative (including $120,174 and $281,604, respectively, of compensation expense paid in stock or stock options / warrants)  2,703,819   3,178,333 
Settlement expense  -   23,046 
Research and development  490,258   431,201 
Loss from operations  (1,830,312)  (2,844,437)
Other income (expense):        
Currency exchange rate loss  (672)   - 
Redemption of SecureAlert Monitoring Series A Preferred  4,431   24,060 
Interest income  86   8,215 
Interest expense (including $88,247 and $1,099,707, respectively, of interest expense paid in stock)  (229,582)   (1,255,103) 
Acquisition option extension cost  -   (147,566) 
Derivative valuation loss  -   (1,014,045) 
Other income (expense), net  1,811   196,568 
Net loss  (2,054,238)   (5,032,308) 
      Net loss attributable to non-controlling interest  12,645   - 
Net loss attributable to SecureAlert, Inc.  (2,041,593)   (5,032,308) 
Dividends on Series A and D Preferred stock  (579,892)   - 
Net loss attributable to SecureAlert, Inc. common stockholders $(2,621,485)  $(5,032,308) 
Net loss per common share, basic and diluted $(0.01)  $(0.03) 
Weighted average common shares outstanding, basic and diluted  222,468,000   191,962,000 

F-51

  
Nine months ended
June 30,
 
  2010  2009 
Revenues:      
Products $225,380  $493,595 
Monitoring services  9,056,757   8,986,068 
Total revenues  9,282,137   9,479,663 
Cost of revenues:        
Products  27,140   246,310 
Monitoring services  5,348,448   8,049,230 
Total cost of revenues  5,375,588   8,295,540 
Gross profit  3,906,549   1,184,123 
Operating expenses:         
Selling, general and administrative (including $1,068,352 and $2,355,600, respectively, of compensation expense paid in stock or stock options / warrants)  8,931,801   11,238,788 
Settlement expense  1,150,000   23,046 
Research and development  1,161,539   1,277,102 
Impairment of goodwill  204,735   - 
Loss from operations  (7,541,526)  (11,354,813) 
Other income (expense):        
Currency exchange rate loss  (8,756)   - 
Loss on disposal of equipment  (8,713)   - 
Redemption of SecureAlert Monitoring Series A Preferred  (21,263)   20,449 
Interest income  13,227   11,658 
Interest expense (including $3,006,297 and $1,929,306, respectively, of interest expense paid in stock)  (3,840,232)   (2,790,006) 
Acquisition option extension cost  -   (347,066) 
Derivative valuation gain (loss)  200,534   (1,014,045) 
Other income (expense), net  121,855   1,276,319 
Net loss  (11,084,874)   (14,197,504) 
      Net loss attributable to non-controlling interest  121,741   - 
Net loss attributable to SecureAlert, Inc. $(10,963,133)  $(14,197,504) 
Dividends on Series A and D Preferred stock  (939,371)   (175) 
Net loss attributable to SecureAlert, Inc. common stockholders $(11,902,504)  $(14,197,679) 
Net loss per common share, basic and diluted $(0.06)  $(0.08) 
Weighted average common shares outstanding, basic and diluted  215,230,000   173,137,000 
5, 2018.
 
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(13)           BANK LINE OF CREDIT

As of September 30, 2009, the Company owed $252,600 against an available line of credit of $1,000,000 bearing interest at a rate of 3.28% and maturing on September 22, 2010. The line of credit is secured by certificates of deposit pledged by the Company’s Chief Executive Officer, Mr. Derrick.  Interest on the line of credit is due monthly with the principal due at maturity.  During the nine months ended, the Company borrowed $1,747,400 and made payments of $1,000,000 resulting in an outstanding balance of $1,000,000 as of June 30, 2010.

(14)(17) ACCRUED EXPENSES

Accrued expenses consisted of the following as of June 30, 2010December 31, 2014 and September 30, 2009:2014:
  December 31,  September 30, 
  2014  2014 
Accrued royalties
 
$
7,077
  
$
-
 
Accrued taxes - foreign and domestic
  
108,247
   
203,941
 
Accrued interest
  
1,076,010
   
504,124
 
Accrued payroll, taxes and employee benefits
  
552,268
   
822,847
 
Accrued consulting
  
133,650
   
267,300
 
Accrued outside services
  
11,458
   
23,562
 
Accrued travel costs
  
35,000
   
96,922
 
Accrued settlement costs
  
50,000
   
52,000
 
Accrued board of directors fees
  
240,000
   
120,000
 
Accrued cellular costs
  
48,150
   
25,000
 
Accrued legal costs
  
100,000
   
6,454
 
Accrued warranty and manufacturing costs
  
17,092
   
14,031
 
Accrued other expenses
  
497,706
   
277,376
 
         
Total accrued expenses
 
$
2,876,658
  
$
2,413,557
 
(18) DEBT OBLIGATIONS

  
June 30,
 2010
  
September 30,
2009
 
Accrued payroll, taxes and employee benefits $649,745  $561,898 
Accrued related-party origination fees  192,725   - 
Accrued warranty and manufacturing costs  156,622   246,622 
Accrued commissions and other costs  154,128   45,788 
Accrued interest  128,238   382,424 
Accrued acquisition extension costs  72,000   42,000 
Accrued indigent fees  47,686   34,130 
Accrued board of directors fees  25,000   300,000 
Accrued legal and settlement costs  21,307   80,208 
Accrued consulting  18,000   436,054 
Accrued research and development costs  14,132   45,000 
Accrued outside services  11,458   38,132 
Accrued cellular costs  6,085   27,144 
Accrued foreclosure liability  -   775,000 
Accrued officer compensation  -   492,280 
     Total accrued expenses $1,497,126  $3,506,680 
Debt obligations as of December 31, 2014 and September 30, 2014, respectively, are comprised of the following:
  December 31  September 30, 
  2014  2014 
Unsecured facility agreement with an entity whereby the Company may borrow up to $25 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 January 3, 2016. A $750,000 origination fee or 3% on the total amount under the agreement was paid and recorded as a debt discount and will be amortized as interest expense over the term of the loan. As of December 31, 2014, the remaining debt discount was $375,000.
 
$
24,625,000
  
$
24,531,250
 
The Company entered into an agreement whereby the Company was granted a non-exclusive, irrevocable, perpetual and royalty-free license to certain patents with an entity. The Company agreed to pay $4,500,000 over two years or $187,500 per month through February 2016.
  
2,625,000
   
3,187,500
 
Note issued in connection with the acquisition of a subsidiary and matured in December 2014.
  
-
   
9,630
 
Capital leases with effective interest rates that range between 8.51% and 17.44%. Leases mature between June 2015 and November 2015.
  
38,693
   
46,021
 
Related notes payable for $1.5 million and $1.2 million, due December 31, 2015 and November 19, 2015, respectively (See note 9 below).
  
2,700,000
   
2,700,000
 
Notes payable assumed in conjunction with the G2 acquisition, net of $9,529 discount.
  
4,917
   
-
 
Non-interest bearing notes payable to a governmental agency assumed in conjunction with the G2 acquisition.
  
352,193
   
-
 
Total debt obligations
  
30,345,803
   
30,474,401
 
Less current portion
  
(2,704,917
)
  
(1,906,040
)
Long-term portion of related party debt
  
-
   
(2,700,000
)
Long-term debt, net of current portion
 
$
27,640,886
  
$
25,868,361
 

(15)CONVERTIBLE PROMISSORY NOTE
The following table summarizes the Company’s future maturities of debt obligations as of December 31, 2014:
Fiscal Year Total 
2015
 
$
4,700,884
 
2016
  
25,460,444
 
2017
  
77,192
 
2018
  
54,560
 
Thereafter
  
52,723
 
Total
 
$
30,345,803
 
In connection to the G2 acquisition (See note 9), the Company assumed three notes payable to the Atlantic Canada Opportunities Agency (ACOA). These notes are non-interest bearing notes and are payable in monthly increments ranging from $3,125 to $4,125, as specified in each of the notes.
(19) RELATED-PARTY TRANSACTIONS

Royalty Agreement

On January 15, 2009,August 4, 2011, with an effective date of July 1, 2011, we entered into an agreement (the “Royalty Agreement”) with Borinquen Container Corp., a corporation organized under the laws of the Commonwealth of Puerto Rico (“Borinquen”), to purchase Borinquen’s wholly-owned subsidiary, International Surveillance Services Corporation, a Puerto Rico corporation (“ISS”), in consideration of 310,000 shares of our Common Stock, valued at the market price on the date of the Royalty Agreement at $16.40 per share, or $5,084,000. We also agreed to pay to Borinquen quarterly royalty payments in an amount equal to 20% of our net revenues from the sale or lease of our monitoring devices and monitoring services within a territory comprised of South and Central America, the Caribbean, Spain and Portugal, for a term of 20 years. On February 1, 2013, we redeemed and terminated this royalty obligation for a total cost of $13.0 million using the proceeds of a $16.7 million loan from a related party, Sapinda Asia Limited (“Sapinda Asia”). Sapinda Asia owned approximately 44.8% of our issued and outstanding shares of Common Stock at December 31, 2014. In addition to the $13.0 million used to terminate the Royalty Agreement, we used the remaining $3.7 million as operating capital during the 2013 fiscal year. On September 30, 2013, Sapinda Asia converted all outstanding principal and interest under the loan, totaling $17,576,627, into 3,905,917 shares of Common Stock at a rate of $4.50 per share.

Revolving Loan Agreement

On February 1, 2013, the Company entered into a revolving loan agreement with Sapinda Asia (the “Revolving Loan”). Under this arrangement, the Company may borrow up to $1,200,000 at an unsecured convertible promissory noteinterest rate of 3% per annum for $2,700,000unused funds and 10% per annum for borrowed funds. On October 24, 2013, the Company drew down the full $1,200,000 for use in order to purchase TrackerPAL™ units.a performance bond as required under a contract with an international customer. The note, atloan initially matured in June 2014. However, the lender’s option, may convert into sharesmaturity date of the Company’s common stock at a conversion pricenote was extended and now matures in December 2015. As of $0.22 per share.  The note bearsDecember 31, 2014, the Company owed $1,200,000 of principal and $158,514 of accrued interest at 8% per annum and matures on January 15, 2010. Interest is due monthly and the principal is due at maturity. The fair market value of the common stock was $0.23 per share on the datenote.

Related-Party Promissory Note
On November 19, 2013, the Company entered into the agreement resulting in a beneficial conversion feature of $122,727.  This was recorded as a debt discount and was expensed over the life of the note.  As of June 30, 2010 and September 30, 2009, the outstanding balance due was $0 and $2,050,000 with a remain ing debt discount balance of $0 and, $41,556 respectively.  On January 13, 2010 the holder of the convertible promissoryborrowed $1,500,000 from Sapinda Asia Ltd. The unsecured note converted the note, including the principal and accrued interest of $2,148,414 into 2,149 shares of Series D Preferred stock.
(16)SENIOR SECURED CONVERTIBLE NOTES

During the fiscal year ended September 30, 2009, the Company issued senior secured convertible notes of $3,549,631 to unrelated parties. The proceeds were used to pay off the Company’s line of credit. The interest rate is 15% per annum and the notes matured on March 13, 2010.  Interest was due monthly and the principal was due at maturity.  These notes were convertible into shares of the Company’s common stock at a conversion price of $0.20 per share or into shares of common stock of a subsidiary of the Company at the fair market value of the stock at the conversion date.  The Company determined that the embedded conversion features of the notes were subject to derivative accounting treatment (see No te 18). This resulted in a debt discount valued at $853,166. Additionally, with the issuance of these notes, the Company issued 3,549,630 shares of common stock valued at $226,853 recorded as a debt discount. The value of $1,080,019 recorded as a debt discount is expensed over the life of these notes.  On January 13, 2010 the holders of $2,270,000 of this debt converted the notes into 2,270 shares of Series D Preferred stock.  On March 12, 2010, a holder exchanged $849,631 of the notes into a promissory note of $849,631 which was converted into 850 shares of Series D Convertible Preferred stock as part of the acquisition of the remaining ownership of Court Programs (see Note 12).  The promissory note requires monthly principal payments of $50,000 plusbears interest at a rate of 12%8% per annum maturingand initially matured on July 13, 2011 (see Note 20). DuringNovember 18, 2014. However, the nine months ended June 30, 2010maturity date of the note was extended to November 19, 2015. As of December 31, 2014, the Company owed $1,500,000 of principal and the Senior Secured Convertible Note holder$133,808 of $150,000 mutually agreed to extend the maturity d ate from March 13, 2010 to May 31, 2010. As of June 30, 2010 and September 30, 2009, the outstanding balance of the Senior Secured Convertible Notes was $150,000 and $3,419,631 with a remaining debt discount balance of $0 and $529,109, respectively.  Subsequent to June 30, 2010 the Company paid off the outstanding balance of $150,000 and accrued interest of $20,891 for total cash payments of $170,891.

F-53
on the note.
 
Related-Party Service Agreement

(17)SERIES A 15% DEBENTURES

During the fiscal year ended September 30, 2009,2013, the Company received $4,400,000entered into an agreement with Paranet Solutions, LLC to provide the following primary services: (i) procurement of hardware and software necessary to ensure that vital databases are available in cash from the issuanceevent of Series A 15% debentures. Additionally,a disaster (backup and disaster recovery system); and (ii) providing the security of all data and the integrity of such data against all loss of data, misappropriation of data by Paranet, its employees and affiliates. David S. Boone, a director and member of the Company’s Executive Committee, was the Chief Executive Officer of Paranet until August 2014.

As consideration for these services, the Company issued debenturesagreed to a consultant inpay Paranet $4,500 per month, and during the principal amount of $106,750three months ended December 31, 2014 the Company paid $60,612 to Paranet. The arrangement can be terminated by either party for services renderedany reason upon ninety (90) days written notice to the Company.  As of June 30, 2010other party.

Facility Agreement
On January 3, 2014, we entered into an unsecured Facility Agreement with Tetra House Pte. Ltd., a related-party entity, controlled by our Chairman, Guy Dubois. Under this agreement, we may borrow up to $25,000,000 for working capital and September 30, 2009, the total outstanding balance of the debentures was $0 and $4,506,750, respectively.acquisitions purposes. The debentures earnedloan bears interest at a rate of 15% interest8% per annum, payable in arrears semi-annually, with interest due quarterly and principal due at maturity 18 months after issuance.  In addition, for every $1 invested in the debenture the holder received one share of the Company’s common stock.  At the holder’s option, the debenture may be converted into shares of common stock at a conversion rate of $0 .20 per share or into shares at a reduced conversion rate should the Company issue any equity security at a price less than $0.20 per share. The Company determined that the embedded conversion features of the debentures were subject to derivative accounting treatment (see Note 18). This resulted in a debt discount valued at $3,130,423.  Additionally, with the issuance of these debentures, the Company issued 4,506,750 shares of common stock valued at $265,982 and 2,200,000 warrants valued at $43,926 recorded as a debt discount. This discount was expensed over the life of the debentures.

In September 2008, the Company sold 4,077,219 shares of common stock at $0.75 per share to an investor.  Shortly following the transaction, the market price of the Company’s common stock fell to approximately $0.20 per share. The Company agreed upon the investor’s investment of an additional $3,000,000 (included in the $4,506,750 discussed in the paragraph above) in the Series A 15% debenture that the Company would issue 9,796,636 additional shares of its common stock to the investor.  Furthermore, the Company agreed to re-price outstanding warrants held by the investor from $1.00 to $0.25 per share and extend the purchase period an additional two years. The issuance of these shares and re-pricing of the warrants attributed an additional $587,248 to the debt discount resulting in a tot al $3,130,423 in a debt discount to be amortized over the life of the debentures.  During the nine months ended June 30, 2010, the Company amortized $1,821,720 of this debt discount and recorded it as interest expense.  On January 13, 2010 the holders of debentures of $4,718,197 inall principal and accrued and unpaid interest converted this debt into a totaldue on January 3, 2016. In addition, we agreed to pay Tetra House an arrangement fee equal to 3% of 4,723 shares of Series D Preferred stock.  As of June 30, 2010the aggregate maximum amount under the loan. On January 14, 2014 Tetra House assigned the Facility Agreement to Conrent Invest S.A. Since January 3, 2014, we have borrowed $25,000,000 under the Facility Agreement. The borrowed funds have been used for acquisitions and September 30, 2009, the debt discount balance was $0 and $1,821,720, respectively.for general corporate purposes.

(18)           DERIVATIVES

The Company does not hold or issue derivative instruments for trading purposes.  However, the Company had convertible notes and debentures that contained embedded derivative features that required separate valuation from the convertible instruments during the nine months ended June 30, 2010.  The Company recognized these derivatives as liabilities on its balance sheet, and measured them at their estimated fair value, and recognized changes in their estimated fair value in earnings (losses) in the period of change.  As of June 30, 2010 and September 30, 2009, the derivative liabilities had a fair value of $0 and $1,219,426, respectively, resulting in a derivative valuation gain of $200,534 for the nine months ended June 30, 2010.

The Company did not have any derivatives as of June 30, 2009.

 
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F-43

(19)           DEBT OBLIGATIONS

Debt obligations as of June 30, 2010 and September 30, 2009, consisted of the following:
 
  
June 30,
2010
  
September 30,
2009
 
 
SecureAlert Monitoring, Inc.
      
Note payable for testing equipment with an interest rate of 8%.  The note is secured by testing equipment. The note matures on June 9, 2011. $7,803  $12,228 
         
Note payable for testing equipment with an interest rate of 8%.  The note is secured by testing equipment. The note matures on December 31, 2011.  14,241   - 
         
Unsecured note payable with an interest rate of 12%. The note matured on February 1, 2010.  -   8,728 
         
Note payable for computer equipment with an interest rate of 10%.  The note is secured by computer equipment.  The note matures on December 18, 2012.    16,806     - 
         
Note payable for computer equipment with an interest rate of 12.364%.  The note is secured by computer equipment.  The note matures on June 28, 2013.    85,342     - 
 
SecureAlert, Inc.
        
Unsecured promissory note with an entity bearing an interest rate of 15%.  The note matures on December 31, 2010.  Interest was paid quarterly and the principal due at maturity.  Note was converted to Series D Preferred Stock on January 13, 2010 (see Note 21).      -       474,335 
         
Secured promissory note with an individual with an interest rate of 12%.  The note matures on July 13, 2011.  649,631   - 

Court Programs, Inc.      
Unsecured revolving line of credit with a bank with an interest rate of 9.24%.  12,500   16,500 
         
Note payable due to the Small Business Administration (“SBA”). Note bears interest at 4% and matures on April 6, 2037. The note is secured by monitoring equipment.  221,260   225,000 
         
Automobile loan with a financial institution secured by the vehicle purchased. Interest rate is 7.09% and is due in June 2014.  26,397   30,751 
         
Unsecured note payable with an interest rate of 8%.  -   1,492 
         
Capital lease with an effective interest rate 14.89% that matures in January 2011.  6,878   14,898 
         
Capital lease with an interest rate of 14.12% that matures on November 15, 2012.  24,820   - 
Additional Related-Party Transactions and Summary of All Related-Party Obligations
 
 
F-55
  
December 31,
2014
  
Sept. 30,
2014
 
       
Loan from a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on December 30, 2015. $1,200,000  $1,200,000 
Promissory note with a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on November 19, 2015.  1,500,000   1,500,000 
Total related-party debt obligations  2,700,000   2,700,000 
Less current portion  (2,700,000)  - 
Long-term debt, net of current portion $-  $2,700,000 
 
Each of the foregoing related-party transactions was reviewed and approved by disinterested and independent members of the Company's Board of Directors.
 
Midwest        
Unsecured revolving line of credit with a bank, with an interest rate of 9.25%.  39,522   39,224 
         
Notes payable to a financial institution bearing interest at 6.37%. Notes mature in July 2011 and July 2016. The notes are secured by property.  133,865   185,274 
         
Notes payable for monitoring equipment. Interest rates range between 7.8% to 18.5% and mature September 2008 through November 2011. The notes are secured by monitoring equipment.  9,010   57,344 
         
Automobile loans with several financial institutions secured by the vehicles. Interest rates range between 6.9% and 8.5%, due between January 2010 and October 2011.  48,741   42,463 
         
Note payable to a stockholder of Midwest. The note bears interest at 5% maturing in February 2013.  -   47,704 
Capital leases with effective interest rates that range between 12.9% and 14.7%. Leases mature between June 2014 and September 2014.  108,892   126,158 
Total debt obligations $1,405,708  $1,282,099 
Less current portion  (886,424)  (272,493)
Long-term debt, net of current portion $519,284  $1,009,606 
(20)RELATED-PARTY TRANSACTIONS
The Company has entered into certain transactions with related parties. These transactions consist mainly of financing transactions and consulting arrangements.

Related-Party Line of Credit

As of June 30, 2010 and September 30, 2009, the Company owed $55,245 and $76,022, respectively, under a line-of-credit agreement with ADP Management (“ADP”), an entity owned and controlled by Mr. Derrick, the Company’s Chief Executive Officer.  Outstanding amounts on the line of credit accrue interest at 16% per annum and were due upon demand.  During the nine months ended June 30, 2010, the Company made payments on the line-of-credit which consisted of net cash payments of $137,970 offset, in part, by $117,193 of expenses owed to ADP that are reimbursable by the Company.
Related-Party Notes Payable

Note #1
As of June 30, 2010 and September 30, 2009, the Company owed $0 and $1,500,000 in principal plus $0 and $12,197, respectively, in accrued interest to Mr. Derrick on an unsecured note payable.  Total proceeds from the note were $1,500,000, which accrued interest at 15% and was due on February 26, 2010. On January 13, 2010, Mr. Derrick converted the note into 1,500 shares of Series D Preferred stock.

Note #2
Effective March 1, 2010, the Company purchased the remaining 49% ownership of Court Programs. The Company paid $100,000 in cash and entered into an unsecured note payable of $200,000 due in four equal installments of $50,000 each on July 15, 2010, October 15, 2010, January 15, 2011, and April 15, 2011, together with interest on any unpaid amounts at 8% per annum.  As of June 30, 2010 and September 30, 2009, the Company owed $200,000 and $0 in principal plus $5,908 and $0, respectively, in accrued interest under this note, which is payable to an employee of the Company (the former principal of Court Programs, Inc.).

F-56

Note #3
The Company entered into a promissory note on March 16, 2010 with Mr. Derrick for $500,000 accruing interest at a rate of 12% per annum or $5,000, a 1% origination fee, whichever is greater, maturing on April 15, 2010. On April 1, 2010, the Company paid off the promissory note for $505,000 in outstanding principal and accrued interest resulting in an effective interest rate of 21.5% per annum.

Note #4
On June 24, 2010, the Company and ADP entered into an agreement whereby ADP agreed to loan and/or invest between $1,000,000 and $5,000,000 to finance the manufacturing of TrackerPAL II(e) devices and to provide additional working capital to the Company.  The Company agreed to pay a 10% origination fee to ADP for money loaned and/or invested (for a maximum of $500,000) payable in shares of Series D Preferred stock ($600 to 1 share rate, effective conversion rate of $0.10 per share of common stock).  As of June 30, 2010, the Company accrued $192,725 in origination fees in connection with the agreement.

All amounts loaned pursuant to this agreement shall bear interest at a rate of 16% per annum.  Interest shall be payable quarterly to ADP in shares of Series D Preferred stock ($600 to 1 share rate, effective conversion rate of $0.10 per share of common stock). The loan matures on July 1, 2011.  Additionally, ADP has the option to convert the outstanding balance and any unpaid interest into shares of Series D Preferred stock ($600 to 1 share rate, effective conversion rate of $0.10 per share of common stock).  During the three months ended June 30, 2010, the Company recorded $62,736 as interest expense to account for a beneficial conversion feature in connection with the agreement.

Related-Party Series A 15% Debenture

On May 1, 2009, the Company issued a Series A 15% debenture due and payable on November 1, 2010 to an entity controlled by an officer of the Company for $250,000 in cash. In addition to the rights and terms of the debenture, the entity received one-year warrants to purchase 2,200,000 shares of the Company’s common stock at an exercise price of $0.25 per share, valued at $43,926. On January 13, 2010, the entity converted the $250,000 debenture into 250 shares of Series D Preferred stock.  As of June 30, 2010 and September 30, 2009, the Company owed $0 and $250,000 in principal plus $1,334 and $9,452 in accrued interest, respectively.

Consulting Arrangement

During the fiscal year ended September 30, 2008, the Compensation Committee approved a consulting agreement between ADP and the Company whereby the agreement compensates Mr. Derrick for serving as the Company’s Chief Executive Officer and Chairman of the Board of Directors.  After considering Mr. Derrick’s status as one of the Company’s founders; his experience and length of service; his experience in the industries in which he operates; educational and work background; and reviews of sample salaries at companies of comparable size and industry, the Compensation Committee and Mr. Derrick agreed to a salary of $240,000 per year. During the fiscal year ended September 30, 2008, the Company and Mr. Derrick agreed to prepay his salary in non-cash instruments by issuing 1,000,000 shares of rest ricted common stock valued at $1.52 per share (as valued on July 2, 2008, the date of issuance).  The Company recorded $180,000 of expense associated with the issuance of these shares during each of the nine months ended June 30, 2010 and 2009, respectively.  As of June 30, 2010, the remaining deferred compensation of $1,040,000 will be amortized over future periods.

(21) PREFERRED STOCK

The Company is authorized to issue up to 20,000,000 shares of preferred stock, $0.0001 par value per share. The Company's boardBoard of directorsDirectors has the authority to amend the Company's Articles of Incorporation, without further stockholdershareholder approval, to designate and determine, in whole or in part, the preferences, limitations and relative rights of the preferred stock before any issuance of the preferred stock and to create one or more series of preferred stock.

Series D Convertible Preferred Stock

In November 2009, theThe Company has designated 50,00085,000 shares of preferredits stock as Series D Convertible Preferred stock $0.0001 par value per share (“Series D Preferred stock””). During the ninethree months ended JuneDecember 31, 2014 and 2013, the Company did not issue any additional new shares of Series D Preferred. During the fiscal year ended September 30, 2010,2014, the Company issuedexchanged 207 shares of Series D Preferred for 16,907 shares of Common Stock. Additionally, the Company repurchased 261 shares of Series D Preferred for $312,008 during the fiscal year ended September 30, 2014. As a totalresult of 17,174these transactions, there were no shares of Series D Preferred stock in consideration for the conversion of $16,910,753 of debt, accrued liabilities and interest and issued 23,993 shares under securities purchase agreements for $11,996,500 in cash, of which $50,000 has not yet been received and has been recorded as a subscription receivable. In connection with the raise of capital, the Company paid $4,331,200 of fees and reimbursable expenses resulting in net proceeds of $7,615,300 to the Company. As of June 30, 2010, there were 37,851 Series D Preferred shares outstanding.outstanding at December 31, 2014.

F-57

Dividends
The Series D Preferred stock is entitled to dividends at athe rate equal to eight percent (8%)8% per annum calculated on the purchase amount actually paid for the shares or amount of debt converted. The dividend is payable in cash or shares of common stockCommon Stock at the sole discretion of the boardBoard of directors.Directors. If a dividend is paid in shares of common stockCommon Stock of the Company, the number of shares to be issued is based on the average per share market price of the common stockCommon Stock for the 14-day period immediately preceding the applicable accrual date (i.e., March 31, June 30, September 30, or December 31, as the case may be). Dividends are payable quarterly, no later than thirty30 days following the end of the accrual period.  On April 29, 2010

During the three months ended December 31, 2013, the Company issued 2,925,817483 shares of the Company’s co mmon stockCommon Stock to pay $359,479 of accrued dividends. Subsequent to June 30, 2010, the Company issued 4,693,307 shares of common stock to pay $578,048$9,427 of accrued dividends on the Series D Preferred earned during the three months ended June 30, 2013. As there were no shares of Series D Preferred outstanding at December 31, 2014, the Company did not issue any shares for the third fiscal quarter.payment of dividend during that period.

Convertibility
Each share of Series D Preferred stock may be converted into 6,000thirty (30) shares of common stockCommon Stock, commencing after ninety90 days fromafter the date of issue. During the ninethree months ended June 30, 2010, 3,316December 31, 2014 and 2013, no shares of Series D Preferred stock were converted into 19,896,000 shares of common stock.  SubsequentCommon Stock. During fiscal year 2013, the Company entered into an employment agreement with an officer. In addition, the officer and the Company mutually agreed that the conversion of the Series D Preferred held by the officer will convert into Common Stock at a rate of 155% of each share’s original investment; provided that the officer must convert all of his Series D Preferred before the next annual shareholder meeting of the Company. As of December 31, 2014, there were no Series D Preferred outstanding.

Redemption
On January 16, 2014, the Company sent out notices to June 30, 2010, 3,218Series D Preferred shareholders regarding the Company’s election under the Amended and Restated Designation of the Rights and Preferences to redeem 261 shares of Series D Preferred stock were converted into 19,308,000 shares of common stock.

As of June 30, 2010, 132at 120% of the 37,851 shares of Series D Preferred stock outstanding were able to be converted into common stock due to the terms outlined in the Certificate of Designation of Series D Convertible Preferred Stock and certain forbearance agreements obtained by the Company whereby the holders agreed not to convert until the sooner of July 15, 2010 or the effective date of an amendment to the Company’s Articles of Incorporation increasing the authorized number of shares of common stock of the Company. The amendment was filed on June 30, 2010 and became effective on July 3, 2010.

Voting Rights and Liquidation Preference
The holders of the Series D Preferred stock may vote their shares on an as-converted basis on any issue presented for a vote of the stockholders, including the election of directors and the approval of certain transactions such as a merger or other business combination of the Company.  In addition, on the issues of an increase in the number of shares of common stock the Company is authorized to issue and on the proposal of a reduction in the number of issued and outstanding shares (a reverse split) of the Company’s common stock, holders of the Series D Preferred stock may vote as a class holding the equivalent of 60 percent of the issued and outstanding shares of the common stock, regardless of the number of shares then outstanding.  As of the date of this report, there were 34,633 shares of Series D Preferred stock outstanding.  As a consequence of these voting rights, the holders of the Series D Preferred stock may exercise control over these issues regardless of the interests of the remaining stockholders.  Additionally, the holders are entitled to a liquidation preference equal to theiraggregate original investment amount. There are presently no plans to seek approval on either of these issues.

In$260,007 through the eventpayment of the liquidation, dissolution or winding up of the affairs of the Company (including in connection with a permitted sale of all or substantially all of the Company’s assets), whether voluntary or involuntary, the holders of shares of Series D Preferred Stock then outstanding will be entitled to receive, out of the assets of the Company available for distribution to its stockholders, an amount per share equal to original issue price, as adjusted to reflect any stock split, stock dividend, combination, recapitalization and the like with respect to the Series D Preferred Stock.cash totaling $312,007. The redemption date was February 13, 2014.

Series D Preferred Stock Warrants
During the nine months ended June 30, 2010, the Company issued and vested
As of December 31, 2014, 42,000 warrants to purchase a total of 4,000 Series D Preferred stock at an exercise price of $500.00$500 per share.share were issued and outstanding. During the three months ended December 31, 2014, no Series D Preferred warrants were issued or exercised. Subsequent to December 31, 2014, the Company purchased all 42,000 warrants to purchase Series D Preferred (see note 25).
(21) COMMON STOCK

Common Stock Issuances

During the three months ended December 31, 2014, the Company issued the following shares of Common Stock:

On November 25, 2014, and in connection to the G2 acquisition (See note 9), 38,599 shares of Common Stock were issued.

(22) STOCK OPTIONS AND WARRANTS

Stock Incentive Plan

At the annual meeting of shareholders on December 21, 2011, the shareholders approved the 2012 Equity Compensation Plan (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. A total of 90,000 shares are authorized for issuance pursuant to awards granted under the 2012 Plan. During the three months ended December 31, 2014 and 2013, respectively, no options were issued under this 2012 Plan. As of December 31, 2014, 44,657 shares of Common Stock were available for future grants under the 2012 Plan.
All Options and Warrants

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 Company did not grant options or warrants to purchase common or preferred stock during the three months ended December 31, 2014. During the three months ended December 31, 2013, the Company granted 6,840 shares of Common Stock. These warrants vested immediately and expire two years from grant date. The Company recorded $75,082 and $53,947 of expense for the three months ended December 31, 2014 and 2013, respectively, related to the issuance and vesting of all stock options and warrants.

The option and warrant grants for three months ended December 31, 2013 were valued using the Black-Scholes option-pricing model as if the shares were converted into common stock.  The related expense associated with these four-year warrants was $2,700,447 based upon the following inputs:  volatility of 110.71%, risk free rate of 1.67%, exercise price of $0.08, and market price on grant date of $0.14. The warrants were issued in connection with a financial advisory service agreement to restructure debt and raise additional capital.weighted-average assumptions:

 
F-58
 

As of June 30, 2010, the holders of the 4,000 warrants agreed not to convert until the sooner of July 15, 2010 or the effective date of an amendment to the Company’s Articles of Incorporation increasing the authorized number of shares of common stock of the Company, which was July 3, 2010.

SecureAlert Monitoring, Inc. (formerly SecureAlert, Inc.) Series A Preferred Shares
During the fiscal year ended September 30, 2007, and pursuant to board of directors approval, the Company amended the articles of incorporation of its subsidiary, SecureAlert Monitoring, Inc. (“SMI”) to designate 3,590,000 shares of preferred stock as Series A Convertible Redeemable Non-Voting Preferred stock (“SMI Series A Preferred stock”).

On March 24, 2008, SMI redeemed all outstanding shares of SMI Series A Preferred stock in exchange for 7,434,249 shares of the Company’s common stock valued at $8,549,386.  The former SMI Series A stockholders were entitled to receive quarterly contingency payments through March 23, 2011, based on a rate of $1.54 per day times the number parolee contracts calculated in days during the quarter, payable in either cash or common stock at the Company’s option. The Company is to make quarterly adjustments as necessary to reflect the difference between the estimated and actual contingency payments to the former SMI Series A stockholders.

During the nine months ended June 30, 2010, certain former holders of SMI Series A Preferred stock agreed to convert an aggregate of $2,490,142 of the future and past contingency payments otherwise payable with respect to the redemption of the SMI Series A Preferred stock in exchange for 2,492 shares of Series D Preferred stock.  As of June 30, 2010 and September 30, 2009, the Company accrued $148,995 and $3,148,943, respectively, for future and past contingency payments due to former SMI Series A stockholders.

During the nine months ended June 30, 2010 and 2009, the Company recorded an expense (income) of $21,263 and ($20,449), respectively, to reflect the change between the estimated and actual contingency payments.  During the nine months ended June 30, 2010, the Company issued 5,160,858 shares of common stock to satisfy $609,772 in contingency payments on SMI Series A Preferred stock and issued 229 shares of Series D Preferred stock to convert future contingency payments for two individuals, valued at $229,000.

(22)           COMMON STOCK

On June 30, 2010, the Company filed an amendment to its Articles of Incorporation with the Utah Department of Commerce, Division of Corporations and Commercial Code.  The Amendment increases the number of shares of common stock the Company is authorized to issue from 250,000,000 to 600,000,000 shares.   Under applicable Utah law, the Amendment was effective July 3, 2010. This increase of authorized shares has been reflected in the condensed consolidated balance sheets as of June 30, 2010 and September 30, 2009.

During the nine months ended June 30, 2010, the Company issued 28,382,675 shares of common stock as follows:
  
Three Months Ended
December 31
 
  2014  2013 
Expected cash dividend yield
  
N/A(1)
   
-
 
Expected stock price volatility
  
N/A(1)
   
103
%
Risk-free interest rate
  
N/A(1)
   
0.10
%
Expected life of options/warrants
    
1 Year
 

 ·5,160,858 shares of common stock, valued at $609,772,
(1) This information was deemed not applicable (N/A) since no options or warrants to former SMI Series A Preferred stockholders as payment for past contingency payments in connection withpurchase Common Stock were granted during the redemption of the stockholders’ SMI Series A Preferred stock.three months ended December 31, 2014.

·250,000 shares of common stock, valued at $27,500 for services rendered.
The expected life of stock options (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. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options (warrants). The dividend yield represents the Company’s anticipated cash dividends over the expected life of the stock options (warrants).

·19,896,000 shares of common stock for the conversion of Series D Convertible Preferred stock

·2,925,817 shares of common stock, valued at $359,479, for Series D Convertible Preferred stock dividends

·150,000 shares of common stock, valued at $18,000, to acquire the additional ownership of Court Programs, Inc. (see Note 12)
A summary of stock option activity for the three months ended December 31, 2014 is presented below:
 
  Shares Under Option/ Warrant  Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value 
Outstanding as of September 30, 2014
  
305,251
  
$
15.71
 
1.05 years
 
487,402
 
Granted
  
-
  
$
      
Expired / Cancelled
  
(24,000
)
 
$
17.50
     
Exercised
  
-
  
$
      
Outstanding as of December 31, 2014
  
281,251
  
$
15.63
 
0.85 years
 
$
526,550
 
Exercisable as of December 31, 2014
  
255,463
  
$
15.44
 
0.79 years
 
$
526,550
 
The intrinsic value of options outstanding and exercisable is based on the Company’s share price of $14.99 at December 31, 2014.

 
Common Stock Options and Warrants
As of June 30, 2010, 18,455,498 of the 19,678,165 outstanding options and warrants were vested with a weighted average exercise price of $0.34 per share.

During the nine months ended June 30, 2010, the Company issued and vested warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.15 per share in connection with a third party consulting service agreement.

During the nine months ended June 30, 2010, the Company granted to each previously serving non-executive member of the board of directors warrants to purchase 250,000 shares of common stock at an exercise price of $0.13 per share for past and future services from October 1, 2009 to December 31, 2010, totaling 750,000 warrants.  Additionally, the Company granted to each new non-executive member of the board of directors warrants to purchase 200,000 shares of common stock at an exercise price of $0.13 per share for future services from January 1, 2010 to December 31, 2010, totaling 400,000 warrants.  Of the 1,150,000 warrants issued, 650,000 vested during the nine months ended June 30, 2010. The Company recorded $68,825 of expense associated with these warrants during the nine months ended June 30, 2010 resulting in a balance of $52,943 to be expensed over the remaining life of the warrants.

As of June 30, 2010, only 5,892,430 of the 19,678,165 options and warrants outstanding were able to convert into common stock due to certain forbearance agreements obtained by the Company whereby the holders agreed not to convert until the sooner of July 15, 2010 or the effective date of an amendment to the Company’s Articles of Incorporation increasing the authorized number of shares of common stock of the Company. The amendment was filed on June 30, 2010 and did not become effective until July 3, 2010.

(23)           COMMITMENTS AND CONTINGENCIES
Legal Matters
During the nine months ended June 30, 2010, the Company settled two lawsuits, Satellite Tracking of People, L.L.C. (a/k/a STOP, LLC) and Michelle Enterprises, LLC v. Pro Tech Monitoring, Inc., Omnilink Systems, Inc., and RemoteMDx, Inc. and RemoteMDx, Inc. v. Satellite Tracking of People, L.L.C. (a/k/a STOP, LLC). Under the terms of the settlement agreement, these cases were dismissed and the Company agreed to pay STOP over three years $1,150,000, of which $975,000 is outstanding as of June 30, 2010. The settlement agreement also included cross-licensing provisi ons pursuant to which the Company licensed STOP to utilize certain of its patents and STOP licensed the Company to use certain of its patents that were the subject matter of these two lawsuits.

Aculis, Inc. filed a Complaint against the Company in the Fourth District Court in and for Utah County, Utah, on June 7, 2010, alleging breach of contract, unjust enrichment, and a claim for $208,889 in unpaid products and services, incremental to the $4,840,891 the Company has already paid to Aculis. The Company filed a Motion to Dismiss for Improper Venue or for Change of Venue and supporting memorandum on July 16, 2010.  Aculis filed its Memorandum in Opposition to the Motion to Dismiss on August 5, 2010.  The Company's reply memorandum is due to be filed on August 16, 2010.  The Company intends to vigorously defend its interests and to pursue appropriate counterclaims against Aculis.

Indemnification Agreements
In November 2001, the Company agreed to indemnify officers and directors of the Company against personal liability incurred by them in the conduct of their duties for the Company. In the event that any of the officers or directors of the Company are sued or claims or actions are brought against them in connection with the performance of their duties and the individual is required to pay an amount, the Company will immediately repay the obligation together with interest thereon at the greater of 10% per year or the interest rate of any funds borrowed by the individual to satisfy their liability.

Cellular Access Agreement
During the fiscal year ended September 30, 2009, the Company entered into several agreements with cellular organizations to provide communication services. The cost to the Company under these agreements during the nine months ended June 30, 2010 and 2009, was approximately $980,450 and $1,935,524, respectively.  These amounts are included in cost of sales.
F-60
(24)SUBSEQUENT EVENTS
Subsequent to June 30, 2010, the following events occurred:

1)19,308,000 shares of common stock were issued upon the conversion of 3,218 shares of Series D Preferred stock.

2)4,693,307 shares of common stock were issued for Series D Preferred stock dividends for the third fiscal quarter ended June 30, 2010.

3)The Company paid off a Senior Secured Convertible Note of $150,000 and accrued interest of $20,891 for cash payments of $170,891.

4)On June 30, 2010, the Company filed an amendment to its Articles of Incorporation with the Utah Department of Commerce, Division of Corporations and Commercial Code.  The Amendment increases the number of shares of common stock the Company is authorized to issue from 250,000,000 to 600,000,000 shares. Under applicable Utah law, the Amendment was effective July 3, 2010.

(25) CHANGES IN EQUITY (DEFICIT)

A summary of the composition of Equity (Deficit)equity of the Company at June 30, 2010 and 2009,as of December 31, 2014, and the changes during the ninethree months then ended is presented in the following table:
 
  
Total SecureAlert, Inc.
stockholders' equity
(deficit)
  
Noncontrolling
interest
  
Total equity
(deficit)
 
Balance at September 30, 2009 $(11,988,229) $(384,592) $(12,372,821)
Issuance of common stock  1,014,751   -   1,014,751 
Issuance of common stock options  498,992   -   498,992 
Amortization of deferred compensation  541,860   -   541,860 
Series D preferred stock dividends  (939,371)  -   (939,371)
Issuance of series D preferred stock  25,817,795   -   25,817,795 
Beneficial conversion feature  62,736   -   62,736 
Acquisition of subsidiary  (4,824)  335,086   330,262 
Net loss  (10,963,133)  (121,741)  (11,084,874)
Balance at June 30, 2010 $4,040,577  $(171,247) $3,869,330 
  Total Equity 
Balance at September 30, 2014
 
$
19,916,047
 
Issuance of common stock for acquisition
  
580,886
 
Other comprehensive income
  
(626,878
)
Vesting of stock options and warrants
  
75,082
 
Net loss
  
(2,215,215
)
Balance at December 31, 2014
 
$
17,729,922
 
 
 
(24) COMMITMENTS AND CONTINGENCIES

Legal Matters

Lazar Leybovich et al v. SecureAlert, Inc. On March 29, 2012, Lazar Leybovich, Dovie Leybovich and Ben Leybovich filed a complaint in the 11th Circuit Court in and for Miami-Dade County, Florida alleging breach of contract with regard to certain Stock Redemption Agreements. The complaint was subsequently withdrawn by the plaintiffs. An amended complaint was filed by the plaintiffs on November 15, 2012. The plaintiffs claim in excess of $460,000 in damages. The Company believes these allegations are inaccurate and intend to defend the case vigorously. No accrual for a potential loss has been made as management believes the probability of incurring a material loss is remote.
Christopher P. Baker v. SecureAlert, Inc. In February 2013, Mr. Baker filed suit against the Company in the Third Judicial District Court in and for Salt Lake County, State of Utah. Mr. Baker asserts that the Company breached a 2006 consulting agreement with him and claims damages of not less than $210,000. The Company disputes the plaintiff’s claims and will defend the case vigorously. No accrual for a potential loss has been made as management believes the probability of incurring a material loss is remote.
SecureAlert, Inc. v. Derrick Brooks and STOP, LLC. On February 21, 2014, we filed a complaint in the Third Judicial District Court, Salt Lake County, State of Utah, against Derrick Brooks and STOP, asserting claims for declaratory relief, breach of contract, tortious interference with prospective economic relations, tortious interference with contract misappropriation of trade secrets, injurious falsehood/trade libel/business disparagement, defamation, respondeat superior, injunctive relief and punitive damages. On March 20, 2014, we entered into a settlement agreement with STOP and all of the claims between us and STOP in the Litigation have been dismissed with prejudice. On April 9, 2014, Mr. Brooks filed an answer denying our claims and asserting counterclaims for constructive discharge, interference with contract/interference with prospective economic relations and blacklisting. On February 6, 2015 we entered into a settlement agreement with Mr. Brooks and all claims between us and Mr. Brooks and all counterclaims by Mr. Brooks have been dismissed.
(25) SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date the accompanying consolidated financial statements were issued. Subsequent to December 31, 2014, the following events occurred:

During January 2015, the Company purchased 42,000 warrants to purchase Series D Preferred. This represented all outstanding warrants to purchase Series D Preferred.
During January 2015, the Company received notice from a shareholder of the Company stating that the shareholder was returning realized profits from their trades of the Company’s Common Stock during the year ended September 30, 2014. The shareholder also indicated that during this time, the shareholder was subject to Section 16 of the United States Security Exchange Act of 1934 (the “Exchange Act”) because they owned more than 10% of the shares of Company Common Stock. As such, the shareholder complied with Section 16(b) of the Exchange Act by returning the realized profits to the Company in the amount of $4.7 million. The Company received these funds during January 2015.

 
F-61F-46
 
  
Total SecureAlert, Inc.
stockholders' equity
 (deficit)
  
Noncontrolling
interest
  
Total equity
(deficit)
 
Balance at September 30, 2008 $362,584  $(326,578) $36,006 
Issuance of common stock  4,559,877   -   4,559,877 
Issuance of common stock options  719,464   -   719,464 
Amortization of deferred compensation  1,497,936   -   1,497,936 
Beneficial conversion feature  1,756,990   -   1,756,990 
Series A preferred dividend  (175)  -   (175)
Net loss  (13,925,108)  (112,349)  (14,037,457)
Balance at June 30, 2009 $(5,028,432) $(438,927) $(5,467,359)


SECUREALERT, INC.
 
F-62
150,000 Shares of Common Stock
PROSPECTUS
 

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.
Other Expenses of Issuance and DistributionDistribution.
 
EstimatedThe following table sets forth all costs and expenses, payable by us in connection with the offering described in thissale of the Common Stock being registered. All amounts shown are estimates except for the SEC registration statement are as follows:fee.
  Amount to 
  be Paid 
Legal fees and expenses $20,000.00 
Accounting fees and expenses $5,000.00 
Filing and other fees $186.50 
Miscellaneous expenses $10,000.00 
     
Total $35,186.50 
II-1
 
SEC registration fee $336 
Accounting fees and expenses*  15,000 
Legal fees and expenses*  40,000 
Printing expenses*  5,000 
Transfer agent fees and expenses*  1,000 
Miscellaneous fees and expenses*  1,000 
Total* $ 62,336 
_____________     
*Estimated
    

Item 14.
Indemnification of Directors and OfficersOfficers.
 
We are a Utah corporation. Section 16-10a-90216-10a-841 of the Utah Revised Business Corporation Act (the "Revised Act"“UBCA”) allows a Utah corporation to provide, in its articles of incorporation, bylaws or by shareholder resolution, for the elimination or limitation of personal liability of a director to the corporation or to its shareholders for monetary damages for any action or omission, as a director, except (i) liability for a financial benefit received by a director to which he was not entitled, (ii) intentional infliction of harm on the corporation or the shareholders, (iii) an unlawful distribution to shareholders in violation of the UBCA, and (iv) intentional violation of criminal law.
Section 16-10a-902 of the UBCA provides that a Utah corporation may indemnify any individual who was, is, or is threatened to be made a named defendant or respondent (a "Party") in any threatened, pending or completed action, suit orparty to a proceeding whether civil, criminal, administrative or investigative and whether formal or informal (a "Proceeding"), because he or she is or was a director, of the corporation or, while a director of the corporation, is or was serving at its request as a director, officer, partner, trustee, employee, fiduciary or agent of another corporation or other person or of an employee benefit plan (an "Indemnifiable Director"), against any obligation incurred with respect to a Proceeding, including any judgment, settl ement, penalty, fine or reasonable expenses (including attorneys' fees),liability incurred in the Proceeding, if his or herproceeding, if: (a) the director’s conduct was in good faith, he or she(b) the director reasonably believed that his or her conduct was in, or not opposed to, the corporation’s best interests of the corporation,interests; and (c) in the case of any criminal Proceeding,proceeding, the director had no reasonable cause to believe such conduct was unlawful; provided, however, that pursuant to Subsections 902(4)-(5): (i) indemnificationa corporation may not indemnify a director under Section 90216-10a-902 if the director was adjudged liable to the corporation in connection with a Proceedingproceeding by or in the right of the corporation is limited to payment of reasonable expenses (including attorneys' fees) incurred in connection with the Proceeding and (ii) the corporation may not indemnify an Indemnifiable Director in connection with a Proceeding by or in the right of the corporation in which the Indemnifiable Director was adjudged liable to the corporation, or in connection with any other Proceeding charging that the Indemnifiable Director derived an improper personal benefit, whether or not inv olving action in his or her official capacity, in which Proceeding he or she was adjudged liable on the basis that he or she derivedfor deriving an improper personal benefit.  All indemnification is limited to reasonable expenses only.
 
Section 16-10a-903 of the Revised ActUBCA provides that, unless limited by its articles of incorporation, a Utah corporation shall indemnify an Indemnifiable Directora director who was successful, on the merits or otherwise, in the defense of any Proceeding,proceeding, or in the defense of any claim, issue or matter in the Proceeding,proceeding, to which he or shethe director was a Partyparty because he or she is or was an Indemnifiable Directora director of the corporation, against reasonable expenses (including attorneys' fees) incurred in connection with the Proceedingproceeding or claim with respect to which he or shethe director has been successful.
 
In addition to the indemnification provided by Sections 902 and 903, Section 16-10a-9056-10a-905 of the Revised ActUBCA provides that, unless otherwise limited by a corporation'scorporation’s articles of incorporation, an Indemnifiable Directora director may apply for indemnification to the court conducting the Proceedingproceeding or to another court of competent jurisdiction.
 
Under Section 16-10a-904 of the Revised Act provides thatUBCA, a Utah corporation may pay for or reimburse the reasonable expenses (including attorneys' fees) incurred by an Indemnifiable Director who is a Party to a Proceedingdirector in advance of the final disposition of the Proceeding uponproceeding if the satisfactiondirector furnishes the corporation a written affirmation of certain conditions.his or her good faith belief that the director has met the applicable standard of conduct, provides a written undertaking personally binding the director to pay the advance if it is ultimately determined that he or she did not meet the standard of conduct, and a determination is made that the facts then known to those making a determination would not preclude indemnification.  The director’s undertaking need not be secured and may be accepted without reference to financial ability to make repayment.  Section 16-10a-906 prohibits a corporation from making any discretionary indemnification, payment or reimbursement of expenses unless a determination has been made that the director has met the applicable standard of conduct.

II-1
The determination required under Sections 16-10a-904 and 16-10a-906 of the UBCA must be made as follows: (1) by a majority vote of a quorum of the board of directors who are not parties to the proceeding; (2) if a quorum cannot be obtained as contemplated by (1), above, by a majority vote of a committee of two or more members of the board of directors who are not parties to the proceeding and are designated by the board of directors; (3) by special legal counsel selected by a quorum of the board of directors or its committee composed of persons determined in the manner prescribed in (1) or (2), above, or if a disinterested quorum of the board of directors or committee is not possible, then selected by a majority vote of the full board of directors, or (4) by a majority of the shareholders entitled to vote by person or proxy at a meeting.
  
Section 16-10a-907 of the Revised ActUBCA provides that, unless a corporation'scorporation’s articles of incorporation provide otherwise, (i) an officer of the corporation is entitled to mandatory indemnification under Section 903 and is entitled to apply for court-ordered indemnification under Section 905, in each case to the same extent as an Indemnifiable Director,a director, (ii) thea corporation may indemnify and advance expenses to an officer, employee, fiduciary or agent of the corporation to the same extent as an Indemnifiable Director,a director, and (iii) a corporation may also indemnify and advance expenses to an officer, employee, fiduciary or agent who is not an Indemnifiable Directora director to a greater extent, than the right of indemnification granted to an Indemnifiable Director, if not inconsistent with public policy, , and if provided for by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract.
 

 
II-2
Section 16-10a-908 of the Revised ActUBCA provides that a corporation may purchase and maintain liability insurance on behalf of a person who is or was a director, officer, employee, fiduciary, or agent of the corporation or who, while serving as a director, officer, employee, fiduciary, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary, or agent of another foreign or domestic corporation or other person, or of an employee benefit plan against liability asserted against or incurred by the individual in that capacity or arising from his or her status as such, whether or not the corporation would have the power to indemnify him or her against the same liability under Section 0;Sections 902, 903 or 907 of the Revised Act.UBCA.
 
Section 16-10a-909 of the Revised ActUBCA provides that a provision treating a corporation'scorporation’s indemnification of or advance for expenses to, Indemnifiable Directorsdirectors that is contained in its articles of incorporation or bylaws, in a resolution of its stockholders or board of directors or in a contract, except(except an insurance policy,policy), or otherwise, is valid only if and to the extent the provision is not inconsistent with Sections 901 through 909 of the Revised Act.  If the articles of incorporation limit indemnification or advancement of expenses, indemnification and advancement of expenses are valid only to the extent not inconsistent with the articles.
 
        Our articlesThe Company’s Amended and Restated Articles of incorporationIncorporation provide that, we shall indemnify any person who is or was a director, officer, employee or agent of our company, or who was serving at our request as a director, officer, employee of agent of another entity, trust or plan to the fullest extent permitted by the Revised Act. Our bylawsAct or any other applicable law, a director of the Company will not be personally liable to the Company or its shareholders for monetary damages for any action taken or failure to take any action as a director, except liability for (a) the amount of a financial benefit received by a director to which he is not entitled, (b) an intentional infliction of harm on the Company or its shareholders, (c) a violation of Section 16-10a-842 of the Revised Act (regarding unlawful distributions) or (d) an intentional violation of criminal law.
The Amended and Restated Articles of Incorporation also include mandatory indemnificationprovide that, to the fullest extent permitted by the Revised Act or other applicable law, (a) the Company will indemnify a person made or threatened to be made a party to any action for all liabilities and expenses incurred by such person in connection with such action because such person is or was a director or officer of the Company or served at the request of the Company as a director, officer, partner, trustee, employee, fiduciary or agent of another entity and (b) the Company will advance expenses to such person in advance of a final disposition of such action.
The Amended and Restated Articles of Incorporation further provide that neither an amendment nor repeal of the such provisions of the Company’s Amended and Restated Articles of Incorporation, nor the adoption of a provision of the Company’s Amended and Restated Articles of Incorporation that is inconsistent with respectsuch provisions, will eliminate or reduce the effect of our officers and directors and discretionary indemnificationsuch provisions with respect to employeesany matter that occurs or action or proceeding that accrues or arises prior to such amendment or repeal of such provisions or the adoption of a provision that is inconsistent with such provisions.
The Company’s Bylaws require the Company to indemnify any individual who is made a party to a proceeding because the individual is or was a director or officer of the Company against any liability or expenses incurred in connection with such proceeding to the maximum extent allowed under Utah law, and agents,to advance expenses to any such individual.
The Company has also entered into Indemnification Agreements with each subjectof its directors and executive officers.  In such agreements, the Company agrees to limitations generally reflectinghold harmless and indemnify, including with respect to expenses, the limitations on indemnification set forthrespective officer or director to the fullest extent authorized or permitted by the Revised Act, the Company’s Amended and Restated Articles of Incorporation or the Company’s Bylaws.  The Company also agrees to pay the entire amount of liabilities and expenses, without requiring the contribution of the respective officer or director, in any action in which the Company is held jointly liable with such officer or director.  The Indemnification Agreements further require the Company to advance expenses to such officer or director to the maximum extent as may be permitted under the Revised Act.
 
        Our bylaws provide that we may purchase and maintain insurance on behalf of any person who is or was one of our directors, officers, employees or agents, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her or incurred by him or her in such capacity or arising out of his or her status in such capacity, whether or not we would have the power to indemnify him or her against such liability under the indemnification provisions of the bylaws or the laws of the State of Utah, as the same are amended or modified. We maintain insurance from commercial carriers against certain liabilities that may be incurred by our directors an d officers.
        Indemnification may be granted pursuant to any other agreement, bylaw or vote of stockholders or directors. The foregoing description is necessarily general and does not describe all details regarding the indemnification of our officers, directors or controlling persons.persons of the Company.

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Item 15.
Recent Sales of Unregistered SecuritiesSecurities.
 
Since October 1, 2007,
During the last three years,  we issuedsold the following securities described below without registration under the Securities Act of 1933, as amended (the “Securities Act”“Securities Act”). in reliance upon exemptions from registration available under Section 4(a)(2) of the Securities Act and rules and regulations promulgated under the Securities Act, including Regulation D and Regulation S.
Common Stock
 
Fiscal Year 2008
Shares Issued Pursuant to Acquisitions
650,000We issued 14,988 shares of Common Stock for the payment of board of director fees, valued at $2,599,500$180,000.
In the transaction listed above, the securities were issued in December 2007 pursuantprivate transactions, solely to acquisitions.  The recipients of these shares represented in the original acquisition agreements that they were accredited investors as defined in Rule 501without general solicitation and without registration under the Securities Act.  TheseAct in reliance on Section 4(a)(2) of the Securities Act and the rules and regulations promulgated under the Securities Act, as indicated above.
In each of the transactions listed above, the shares of Common Stock were issued without registration under the Securities Act in reliance on exemptions from registration provided by Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder, including Regulation D and Rule 506.  There were no non-accredited investors involved in this transaction.
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Shares Issued in Connection with Line of Credit Agreement
360,000 shares were issued in March 2008 to certain entities that provided letters of credit in connection with our line of credit with Citizen National Bank. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2)4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder. The entities and their respective owners, officers and directors were accredited investors. There were no non-accredited investors involved in this issuance of shares.
Shares Issued to Employees, Consultants and Vendors for Products and Services
6,710,000 shares valued at $10,552,300 were approved for issuance to certain of our employees and officers for services rendered during fiscal year 2008.  Additionally, 1,000,000 shares of restricted Common Stock valued at $1,520,000, or $1.52 per share, were issued to an officer for deferred compensation.  These shares of Common Stock were issued without registration under the Securities Act inCompany’s reliance on Section 4(2)4(a)(2) of the Securities Act andwas based upon the rules and regulations promulgated thereunder.  The recipients of these shares were officers or employees at the time of the issuance and each was an accredited investor.
400,000 shares valued at $704,000 were issued in May 2008 to an independent consultant for consulting services.  These consulting services consisted of aiding in the settlement of a vendor dispute.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.
1,025,000 shares valued at $3,068,285 were issued during fiscal year 2008 to seven unaffiliated entities for product design services.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.
Shares Issued in Settlement
325,000 shares valued at $572,000 were issued in May 2008 to Onyx Consulting Group (“Onyx”) to settle amounts owed due to a public relations contract. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  These shares were issued pursuant to a privately negotiated transaction in settlement of amounts owed or that may be owed as royalty payments, and there was no public offering of securities.  Onyx is an accredited investor.  No general solicitation or general advertising was made or done in connection withfollowing factors: (a) the issuance of the shares.securities was an isolated private transaction which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale or issuance of the securities took place directly between the offerees and the Company.
 
Shares Issued Upon the ConversionPurchases of Preferred StockEquity Securities
15,000 shares of Common Stock were issued upon conversion of our Series B Preferred Stock in October 2007.  Each share of Series B Preferred Stock was convertible at any time into shares of Common Stock.  The number of shares of Common Stock into which each share of Series B Preferred Stock was converted was determined by dividing the original purchase price paid per share of Series B Preferred Stock, namely $3.00, by the conversion price.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Sections 3(a)(9) and 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  The recipients of the shares were accredited investors and were already security holders.  The common shares were issued pursua nt to the terms of the rights and preferences of the preferred class of securities that were converted, and there was no public offering of securities.  Additionally, no general solicitation or general advertising was made or done in connection with the issuances, and no cash consideration was paid in connection with the conversion of the Preferred Stock.
Shares Issued Upon the Conversion of SecureAlert Monitoring Series A Preferred Stock
7,434,249 shares of Common Stock were issued upon redemption of SecureAlert Monitoring Series A Preferred Stock in March 2008. In addition, 825,893 shares of Common Stock were issued for SecureAlert Monitoring Series A Preferred Stock dividends.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Sections 3(a)(9) and 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  The shares of Common Stock were issued to individuals who were already security holders and were issued pursuant to the terms of the rights and preferences of the preferred class of securities being converted.  These shares were issued pursuant to a privately negotiated transaction.  There was no public offering of securities, and no general solicitation or general advertising was made or done in connection with the issuances.  No cash consideration was paid in connection with the conversion of the Preferred Stock.
 
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Shares Issued on Revalue Rights
100,000 shares of Common Stock were issued as a penalty to Borinquen Container Corp. (“Borinquen”) for our failure to register shares Borinquen purchased in a private placement. These shares of Common Stock were issued without registration underNeither the Securities Act in reliance on Section 3(a)(9) and 4(2) of the Securities Act and the rules and regulations promulgated thereunder. Borinquen represented that it was an accredited investor; in addition, Borinquen already owned shares of our Common Stock at the time of this transaction.
Shares Issued in Private Placements
In March and September 2008, 6,077,219 shares were issued to Futuristic, Advance Technology Investors, LLC, and Borinquen for gross proceeds of $5,057,914 in cash in a private placement of Common Stock. The initial issuance of the shares of Common Stock, together with certain warrants, was effected without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  Each investor signed a purchase agreement in which the investor made representations that included being an accredited investor and purchasing for the investor’s own account and not with a view to distribute the shares.  There was no public offering of securities.  No general solicitation or general advertising was made or done in connect ion with the issuance, and the shares and warrants were issued in paper certificate form, with appropriate restrictive legends prominently affixed on the certificates.
Shares Issued Upon Exercise of Warrants
3,618,814 shares were issued upon the exercise of options and warrants between October 2007 and September 2008.  The exercise prices ranged from $0.54 to $1.73 per share.  The warrants had been granted in connection with services rendered.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. 
Fiscal Year 2009
Shares Issued Pursuant to Acquisitions
2,857,286 shares valued at $657,176 were issued in January 2009 pursuant to an acquisition of Bishop Rock Software.  The recipients of these shares represented in the original acquisition agreements that they were accredited investorsCompany nor any affiliated purchaser as defined in Rule 501 under10b-18(3) of the Securities Act.  TheseExchange Act made any purchases of shares of the Company’s Common Stock were issued without registration underduring the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder, including Regulation D and Rule 506.  There were no non-accredited investors involved in this issuance.year ended September 30, 2014.

150,000 shares valued at $19,500 were issued in March 2009 pursuant to an agreement to extend an option to purchase the remaining 49% ownership of Midwest Monitoring.
Shares Issued in Connection with Debt
100,000 shares were issued in November 2008 to a related-party for entering into a promissory note with us. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The entities and their respective owners, officers and directors were accredited investors. There were no non-accredited investors involved in this issuance of shares.
 
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4,506,750 shares were issued during the fiscal year ended September 30, 2009 to 13 entities in connection with the issuance of Series A 15% debentures for cash proceeds of $4,496,750. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The entities and their respective owners, officers and directors were accredited investors. There were no non-accredited investors involved in this issuance of shares.
3,549,630 shares were issued in March 2009 to six entities in connection with the issuance of Senior Secured Convertible notes. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The entities and their respective owners, officers and directors were accredited investors. There were no non-accredited investors involved in this issuance of shares.
8,000,000 shares were issued in July 2009 for additional consideration to enter into a promissory note and to resolve prior investments. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The entities and their respective owners, officers and directors were accredited investors. There were no non-accredited investors involved in this issuance of shares.
9,796,636 shares were issued in January 2009 for additional consideration to enter into a debenture and to resolve prior investments. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The entities and their respective owners, officers and directors were accredited investors. There were no non-accredited investors involved in this issuance of shares.
Shares Issued to Employees, Directors, and Consultants
737,500 shares valued at $169,625 were issued to our employees and officers as consideration for services rendered to us during fiscal year 2009.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.
400,000 shares valued at $120,000 were issued in March and August 2009 to directors from the conversion of fees for services provided to us.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.
2,875,000 shares valued at $639,250 were issued throughout the fiscal year to four unaffiliated entities for legal and consulting services.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.
Shares Issued to Settle Lawsuits and Obligations
1,200,000 shares valued at $240,000 were issued in February 2009 to Strategic Growth International (“SGI”) to settle amounts owed due to a public relations contract. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  These shares were issued pursuant to a privately negotiated transaction in settlement of amounts owed or that may be owed as royalty payments, and there was no public offering of securities.  SGI is an accredited investor.  No general solicitation or general advertising was made or done in connection with the issuance of the shares.
2,000,000 shares valued at $240,000 were issued in March 2009 to Thomas Natale, Edward Boling, and Boling Enterprises, LP (“Boling”) to settle amounts owed due to an unresolved disputed debt. Natale and Boling were former officers of SecureAlert.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  These shares were issued pursuant to a privately negotiated transaction in settlement of amounts owed or that may be owed as royalty payments, and there was no public offering of securities.  Boling is an accredited investor.  No general solicitation or general advertising was made or done in connection with the issuance of the share s.
 
Item 16.
Exhibits and Financial Statement Schedules.
(a) Exhibits
 
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2,200,000 shares valued at $550,000 were issued in May 2009 to Fulbright and Jaworski, LLP (“Fulbright”) to settle amounts owed for legal services. These shares of Common Stock were issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  These shares were issued pursuant to a privately negotiated transaction in settlement of amounts owed or that may be owed as royalty payments, and there was no public offering of securities.  Fulbright is an accredited investor.  No general solicitation or general advertising was made or done in connection with the issuance of the shares. 
Shares Issued Upon the Conversion of Preferred Stock
 10,999 shares of Common Stock were issued upon conversion of our Series B Preferred Stock in February 2009.  Each share of Series B Preferred Stock was convertible at any time into shares of Common Stock.  The number of shares of Common Stock into which each share of Series B Preferred Stock was converted was determined by dividing the original purchase price paid per share of Series B Preferred Stock, namely $3.00, by the conversion price.  These shares of Common Stock were issued without registration under the Securities Act in reliance on Sections 3(a)(9) and 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  The recipients of the common shares were accredited investors and were already security holders of the Company.  The com mon shares were issued pursuant to the terms of the rights and preferences of the preferred class of securities that were converted, and there was no public offering of securities.  Additionally, no general solicitation or general advertising was made or done in connection with the issuances, and no cash consideration was paid in connection with the conversion of the Preferred Stock.
9,306 shares of Common Stock were issued upon conversion of 19 shares of our Series A Preferred Stock in February 2009.  Each share of Series A Preferred Stock was convertible at any time into shares of Common Stock.  One share of Series A Preferred Stock was convertible into 370 shares of Common Stock. These shares of Common Stock were issued without registration under the Securities Act in reliance on Sections 3(a)(9) and 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  The recipients of the common shares were accredited investors and were already security holders of the Company.  The common shares were issued pursuant to the terms of the rights and preferences of the preferred class of securities that were converted, and there was no public offering of securities.  Additionally, no general solicitation or general advertising was made or done in connection with the issuances, and no cash consideration was paid in connection with the conversion of the Preferred Stock.
Shares Issued in Private Placements
 In December 2008, March 2009, and May 2009, 17,850,000 shares were issued to Solomon Tennenhaus, Kofler Ventures, and euromicron AG investors for $3,250,000 in cash in a private placement of Common Stock. The initial issuance of the shares of Common Stock, together with certain warrants, was effected without registration under the Securities Act in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.  Each investor signed a purchase agreement in which the investor made representations to us that included being an accredited investor, and purchasing for the investor’s own account and not with a view to distribute the shares.  There was no public offering of securities.  No general solicitation or general advertising was made or done in connection with the issuance, and the shares and warrants were issued in paper certificate form, with appropriate restrictive legends prominently affixed on the certificates.
During the fiscal year ended September 30, 2009, we also cancelled 1,758,379 shares of Common Stock previously issued in prior years.

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Year Ended September 30, 2010
Common Stock
During the year ended September 30, 2010, we issued 5,434,143 shares of Common Stock, valued at $642,566, to former holders of our subsidiary corporation SecureAlert Monitoring, Inc.’s (“SecureAlert Monitoring”) Series A Preferred Stock, as payment for past contingency payments in connection with the redemption of the stockholder’s SecureAlert Series A Preferred Stock.  The shares of Common Stock were issued to six holders of SecureAlert Monitoring Series A Preferred Stock in private transactions.
We also issued 250,000 shares of Common Stock for services rendered to the Company valued at $27,500.  The shares of Common Stock were issued in connection with a private transaction pursuant to an agreement dated February 4, 2010.
Additionally, we entered into an agreement with four minority owners of Midwest Monitoring and Surveillance (“Midwest Monitoring”) to extend the option period for the purchase of the remaining minority ownership interest of Midwest Monitoring. As consideration for the extension of the option period for an additional 12 months, we paid a fee (to be credited against the purchase price for the remaining shares of Midwest Monitoring) by issuing 150,000 restricted shares of Common Stock valued at $18,000 ($0.12 per share) and waived the payment of $10,000 owed to the Company by Midwest Monitoring.  In addition, we agreed to make cash payments to the sellers totaling $144,000 in equal installments over a 12-month period.  In consideration of the payments of cash and stock, we received share s of Midwest Monitoring’s Common Stock, increasing our total ownership interest in Midwest Monitoring from 51% to 53.145%.  These shares of Common Stock were issued to the Midwest Monitoring minority owners in private transactions.
In April 2010, the Board of Directors approved the issuance of 2,925,817 shares of Common Stock to pay $359,479 of accrued Series D Preferred dividends.  The shares were issued to pay the accrued and unpaid 8% dividends on the Series D Preferred as of March 31, 2010.
In July 2010, the Board of Directors approved the issuance of 4,693,307 shares of Common Stock to pay $579,892 of accrued Series D Preferred dividends.  The shares were issued to pay the accrued and unpaid 8% dividends on the Series D Preferred as of June 30, 2010.
During the year ended September 30, 2010, we issued 57,204,000 shares of Common Stock upon conversion of 9,534 shares of Series D Preferred.
During the year ended September 30, 2010, ADP Management returned and cancelled 1,000,000 shares of Common Stock previously issued to prepay Mr. Derrick’s base salary.
Series D Preferred
During the year ended September 30, 2010, we issued 44,941 shares of Series D Preferred.  We issued the Series D Preferred in exchange for an aggregate of $16,910,753 of outstanding debt obligations of the Company and net cash proceeds of $9,638,851.  The shares of Series D Preferred were issued in private placement transactions, without registration of the offer and sale of the securities.  We issued the shares of Series D Preferred to a total of 63 accredited investors and debt holders in these private transactions.
In each of the transactions listed above, the shares of Common Stock and Preferred Stock were issued without registration under the 1933 Act in reliance on Section 4(2) of the 1933 Act and the rules and regulations promulgated thereunder.
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Item 16.                      Exhibit Index

Exhibit Number
Title of Document
  
3(i)(1)Articles of Incorporation (incorporated by reference to our Registration Statement and Amendments thereto on Form 10-SB, effective December 1, 1997).
  
3(i)(2)Amendment to Articles of Incorporation for Change of Name (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2001).
  
3(i)(3)Amendment to Articles of Incorporation Amending Rights and Preferences of Series A Preferred Stock (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2001).
  
3(i)(4)Amendment to Articles of Incorporation Adopting Designation of Rights and Preferences of Series B Preferred Stock (previously filed as Exhibit on Form 10-QSB10- QSB for the six months ended March 31, 2002).
  
3(i)(5)Certificate of Amendment to the Designation of Rights and Preferences Related to Series A 10% Cumulative Convertible Preferred Stock of SecureAlert, Inc. (incorporated by reference to our annual report on Form 10-KSB for the fiscal year ended September 30, 2001).
  
3(i)(6)Certificate of Amendment to the Designation of Rights and Preferences Related to Series C 8% Convertible Preferred Stock of SecureAlert, Inc. (incorporated by reference to our Current Report on Form 8-K, filed with the Commission on March 24, 2006).
3(i)(7)Articles of Amendment to Articles of Incorporation filed July 12, 2006 (previously filed as exhibits to our current report on Form 8-K filed July 18, 2006, and incorporated herein by reference).
  
3(i)(8)Articles of Amendment to the Fourth Amended and Restated Designation of Right and Preferences of Series A 10% Convertible Non-Voting Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form  10-QSB for the nine months ended June 30, 2007, filed in August 2007).
  
3(i)(9)Articles of Amendment to the Designation of Right and Preferences of Series A Convertible Redeemable Non-Voting Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-QSB for the nine months ended June 30, 2007, filed in August 2007).
  
3(i)(10)Articles of Amendment to the Articles of Incorporation and Certificate of Amendment to the Designation of Rights and Preferences Related to Series D 8% Convertible Preferred Stock of SecureAlert, Inc. (previously filed as Exhibit on Form 10-Q for the three months ended March 31, 2010,10-K filed in MayJanuary 2010).
  
3(i)(11)Articles of Amendment to the Articles of Incorporation of RemoteMDx, Inc. to increase the total authorized shares of common stock to 250,000,000, filed on March 5, 200928, 2011 (previously filed as Exhibit on Form 10-Q for the nine months ended June 30, 2010,8-K filed in August 2010)April 4, 2011).
  
3(i)(12)Articles of Amendment to the Articles of Incorporation to Change Name from RemoteMDx, Inc. to SecureAlert, Inc., dated February 1, 2010 (previously filed as Exhibit on Form 10-Q for the three months ended December 31, 2009, filed in February 2010).
3(i)(13)Articles of Amendment to the Articles of Incorporation to Change Name from SecureAlert, Inc. to SecureAlert Monitoring, Inc., dated February 1, 2010 (previously filed as Exhibit on Form 10-Q for the three months ended December 31, 2009, filed in February 2010).
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3.(i)(14)Articles of Correction to the Certificate of Designation of Series D Convertible Preferred Stock, filed with the State of Utah on May 4, 2010, effective December 3, 2009 (previously filed as Exhibit on Form 10-Q for the three months ended March 31, 2010, filed in May 2010).
3.(i)(15)Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc. to increase the total authorized shares of common stock to 600,000,000,, filed on June 30, 2010August 1, 2011 (previously filed as Exhibit on Form 10-Q for the nine months ended June 30, 2010, filed in August 2010)15, 2011).
  
3(i)(13)Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed December 28, 2011 (previously filed as Exhibit to Definitive Proxy Statement, filed October 25, 2011)
 
3(i)(14)Articles of Amendment to the Articles of Incorporation of SecureAlert, Inc., filed April 11, 2013 (previously filed as Exhibit on Form 10-Q filed May 15, 2013).

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3(ii)Bylaws (incorporated by reference to our Registration Statement on Form 10-SB, effective December 1, 1997).
  
3(iii)Amended and Restated Bylaws (previously filed in February 2011 as an Exhibit to the Form 10-Q for the three months ended December 31, 2010).
 
4.012006 Equity Incentive Award Plan (previously filed in August 2006 as an Exhibit to the Form 10-QSB10- QSB for the nine months ended June 30, 2006).
  
4.025.012012 Equity Incentive Award Plan (previously filed as Exhibit to Definitive Proxy Statement, filed October 25, 2011).
5.1Opinion regarding legality,of Disclosure Law Group (to be filed herewith.by amendment)
  
10.0110.1Loan and Security Agreement (as amended) dated June 2001 between ADP ManagementSapinda Asia Limited and the Company (incorporated by reference to our annual reportSecureAlert, effective December 3, 2012 (previously filed on Form 10-KSB for the fiscal year ended September 30, 2001)8-K in December 2012).
  
10.210.02Loan Agreement (as amendedSettlement and extended) dated March 5, 2002 between ADP ManagementRoyalty and the Company,Share Buy Back among Borinquen Container Corporation, Sapinda Asia Limited, and SecureAlert, effective December 31, 2001 (filed as an exhibit to our quarterly reportFebruary 4, 2013 (previously filed on Form 10-QSB for the three months ended December 31, 2001)8-K in February 2013).
  
10.310.03Stock PurchaseFacility Agreement between the CompanyTetra House Pte. Ltd. and Midwest Monitoring & Surveillance,SecureAlert, Inc., dated effective December 1, 2007January 3, 2014 (previously filed as Exhibit on Form 10-KSB for the fiscal year ended September 30, 2007, filed8-K in January 2008)2014).
  
10.410.04Stock Purchase Agreement between the Company and Court Programs, Inc., Court ProgramsNotice of Florida Inc., and Court Programs of Northern Florida, Inc.,Conversion from Sapinda Asia Limited, dated effective December 1, 2007 (previously filed asSeptember 24, 2013 (incorporated by reference from Exhibit 10.14 to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2007,10-K filed in January 2008)14, 2014).
  
10.510.05Distribution and License Agreement between euromicron AG, a German corporation, and the Company, dated May 28, 2009 (previously filed as an Exhibit on Form 10-Q for the nine months ended June 30, 2009, filed in August 2009).
10.06Settlement Agreement between Satellite Tracking of People, L.L.C. and the Company, dated January 29, 2010.  Portions of this exhibit were redacted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission (previously filed as Exhibit on Form 10-QSB for the three months ended December 31, 2009, filed in February 2010).
10.07Agreement between the Company and Sapinda Group, Ltd., dated November 25, 2009 (previously filed as Exhibit on Form 10-QSB for the three months ended December 31, 2009, filed in February 2010).
10.08Amended StockShare Purchase Agreement between Court Programsdated as of April 1, 2014, by and the Company, effective March 31, 2010 (previously filed as Exhibit to Current Report on Form 8-K/A, filed by the Company on May 14, 2010).
10.09Second Extension of Purchase Agreement amongbetween SecureAlert, Inc., Midwest Monitoring & Surveillance, Inc., Gary Shelton, Gary Bengtson, Larry Gardner and Sue Gardner, dated effective April 1, 2010 (previously filed asEli Sabag (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed by the Company on May 7, 2010)March 18, 2014).
  
10.621.01Subsidiaries of the Company, filed herewith.
23.01Consent of Durham, Jones & Pinegar, P.C.Executive Employment Agreement by and between SecureAlert, Inc. and John R. Merrill, dated November 20, 2014 (incorporated by reference from Exhibit 10.1 to Exhibit 5.01 included herewith)our Current Report on Form 8-K filed November 25, 2014).
  
10.7Stock Purchase Agreement by and between SecureAlert, Inc. and BFC Surety Group, Inc., dated June 2, 2014 (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed June 4, 2014).
 23.02
10.8
Share Purchase Agreement dated as of November 26, 2014, by and between SecureAlert, Inc., dba TrackGroup, and the shareholders of G2 Research Limited (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed December 2, 2014).
14.1Code of Ethics (previously filed on Form 10-K in January 2014).
23.1*
Consent of Eide Bailly, LLP 
23.3Consent of Hansen, Barnett & Maxwell, P.C.,Disclosure Law Group (included in Exhibit 5.1) (to be filed herewith.by Amendment)
24.1Power of Attorney (included in signature page to registration statement)
99.1Insider Trading Policy Adopted (previously filed on Form 10-K in January 2014).

 
II-9II-6
 
101.INS*XBRL INSTANCE DOCUMENT
101.SCH*XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
* Filed herewith
(b) Financial Statement Schedules
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or the notes thereto.
 
Item 17. Undertakings
 
     (A) Undertakings.
The undersigned registrant hereby undertakes:

1.To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i)To include any Prospectus required by section 10(a)(3) of the Securities Act; 

(ii)
To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and
(iii)To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;
2.
That, for the purpose of determining liability under the Securities Act, each post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
3.
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and

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     (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
4.That, for the purpose of determining our liability under the Securities Act to any purchaser, each Prospectus filed pursuant to Rule 424(b) as part of a Registration Statement relating to an offering, other than Registration Statements relying on Rule 430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the Registration Statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a Registration Statement or Prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or Prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the Registration Statement or Prospectus that was part of the Registration Statement or made in any such document immediately prior to such date of first use.
 
     (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
     (ii) To reflect in the prospectus any facts or eventsInsofar as indemnification for liabilities arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offeri ng price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
     (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
     (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shallmay be deemedpermitted to be a new registration statement relatingour directors, officers and controlling persons pursuant to the securities offered therein,foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

In the offeringevent that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our directors, officers or control persons in the successful defense of any action, suit or proceeding) is asserted by such securities at that time shall be deemed to be the initial bona fide offering thereof.
     (3) To remove from registration by means of a post-effective amendment any ofdirector, officer or control person in connection with the securities being registered, which remain unsold atwe will, unless in the terminationopinion of our counsel the offering.
     (4) Formatter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the purpose of determining liability underquestion whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectussuch issue.
Each Prospectus filed pursuant to Rule 424(b) as part of a registration statementRegistration Statement relating to an offering, other than registration statementsRegistration Statements relying on Rule 430B or other than prospectusesProspectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statementRegistration Statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statementRegistration Statement or prospectusProspectus that is part of the registration statementRegistration Statement or made in a document incorporated or deemed incorporated by reference into the registration statementRegistration Statement or prospectusProspectus that is part of the registration statementRegistration Statement will, , as to thea purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statementRegistration Statement or prospectusProspectus that was part of the registration statementRegistration Statement or made in any such document immediately prior to such date of first use.
     (B) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the secur ities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Act, the registrantRegistrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salt Lake City, State of Utah, on December 3, 2010.the 26th day of March, 2015.
 
 SECUREALERT, INC.
By:
/s/  Guy Dubois
  Guy Dubois, member, Executive Committee
   
 By:SECUREALERT, INC./s/ John R. Merrill
  
By:/s/  David G. Derrick
Name:       David G. Derrick
Title:
John R. Merrill, Chief ExecutiveFinancial Officer
(Principal Financial Officer)

POWERS OF ATTORNEY
Each person whose signature appears below appoints Guy Dubois and Gordon Jesperson, and each of them, any of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and any Registration Statement (including any amendment thereto) for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them of their or his substitute and substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statementregistration statement has been signed by the following persons in the capacities and on the dates indicated.
 
Signature Title Date
     
/s/  David G. Derrick
David G. Derrick
Guy Dubois		 ChiefDirector, Member Executive Officer (Principal Executive Officer) and DirectorCommittee December 3, 2010March 26, 2015
Guy Dubois(Acting Principal Executive Officer)
     
/s/ Chad D. Olsen                                           David S. Boone
Chad D. Olsen
DirectorMarch 26, 2015
David S. Boone
/s/John R. Merrill Chief Financial Officer Controller and Corporate Secretary (Principal FinancialMarch 26, 2015
John R. MerrillOfficer and Principal Accounting Officer) December 3, 2010
     
/s/ John L. Hastings, III*                              Rene Klinkhammer
John L. Hastings, III
 President, Chief Operating Officer, and Director December 3, 2010March 26, 2015
Rene Klinkhammer
     
/s/ Larry G. Schafran*                                    Winfried Kunz
Larry G. Schafran
 Director December 3, 2010March 26, 2015
Winfried Kunz
     
/s/ Edgar Bernardi*                                        Dan L. Mabey
Edgar Bernardi
 Director December 3, 2010March 26, 2015
Dan L. Mabey
     
/s/ Robert E. Childers*                                  George F. Schmitt
Robert E. Childers
 Director December 3, 2010March 26, 2015
George F. Schmitt    
/s/  David P. Hanlon*                                     
David P. Hanlon
Director December 3, 2010
/s/  Rene Klinkhammer*                                  
Rene Klinkhammer
Director
December 3, 2010
 
*By:II-9
 
/s/  David G. Derrick                                                     
As Attorney-in-Fact

 

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