Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2018 | Aug. 10, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | CIPHERLOC Corp | |
Entity Central Index Key | 1,022,505 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 40,133,664 | |
Trading Symbol | CLOK | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Current Assets | ||
Cash | $ 10,230,369 | $ 227,396 |
Total Current Assets | 10,230,369 | 227,396 |
Other assets | 12,217 | 12,218 |
Deferred offering costs | 282,750 | |
Fixed assets, net | 7,334 | 11,170 |
Total Assets | 10,532,670 | 250,784 |
Current Liabilities | ||
Accounts payable and accrued liabilities | 50,188 | 59,763 |
Accrued compensation | 449,014 | 505,027 |
Convertible notes payable, net of discount of $303,322 | 26,678 | |
Deferred revenue-current | 308,412 | |
Total Current Liabilities | 499,202 | 899,880 |
Long-Term Liabilities | ||
Common stock subscription deposit | 2,262,000 | |
Deferred revenue, net of current portion | 7,836 | |
Total Long-Term Liabilities | 2,262,000 | 7,836 |
Total Liabilities | 2,761,202 | 907,716 |
Series A Convertible Preferred stock, $0.01 par value, 10,000,000 shares authorized; 1,000,000 and 10,000,000 issued and outstanding as of June 30, 2018 and September 30, 2017, respectively | 10,000 | 100,000 |
Common stock, $0.01 par value, 650,000,000 shares authorized; 32,199,607 and 6,635,127 issued and outstanding as of June 30, 2018 and September 30, 2017, respectively | 321,995 | 66,351 |
Additional paid-in capital | 60,371,474 | 49,378,447 |
Accumulated deficit | (52,932,001) | (50,201,730) |
Total Stockholders' Deficit | 7,771,468 | (656,932) |
Total Liabilities and Stockholders' Deficit | $ 10,532,670 | $ 250,784 |
Balance Sheets (Unaudited) (Par
Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Debt discount | $ 303,322 | $ 303,322 |
Series A Convertible Preferred Stock, par value | $ 0.01 | $ 0.01 |
Series A Convertible Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Series A Convertible Preferred Stock, shares issued | 1,000,000 | 10,000,000 |
Series A Convertible Preferred Stock, shares outstanding | 1,000,000 | 10,000,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 650,000,000 | 650,000,000 |
Common stock, shares issued | 32,199,607 | 6,635,127 |
Common stock, shares outstanding | 32,199,607 | 6,635,127 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenues | $ 87,477 | $ 114,386 | $ 316,248 | $ 351,633 |
Cost of revenues | 13,424 | 30,300 | 89,230 | 90,900 |
Gross Profit | 74,053 | 84,086 | 227,018 | 260,733 |
Operating Expenses | ||||
General and administrative (includes stock-based expense of $0 and $2,192,200 for the three and nine months ended June 30, 2017, respectively) | 424,702 | 247,688 | 838,988 | 2,956,596 |
Sales and marketing (includes stock-based expense of $31,250 and $93,748 for the three and nine months ended June 30, 2017, respectively) | 74,271 | 35,466 | 119,433 | 188,950 |
Research and development (includes stock-based expense of $37,046 and $204,789 for the three and nine months ended June 30, 2018, respectively, and $25,000 and $516,515 for the three and nine months ended June 30, 2017, respectively) | 210,126 | 198,004 | 576,114 | 954,499 |
Settlement expense | 81,000 | 106,250 | ||
Total Operating Expenses | 709,099 | 481,158 | 1,615,535 | 4,206,295 |
Operating Loss | (635,046) | (397,072) | (1,388,517) | (3,945,562) |
Other Expenses | ||||
Loss on extinguishment of convertible notes | (153,621) | (317,268) | ||
Excess fair value of derivatives in convertible note | (486,745) | |||
Change in fair value of derivatives | (1,794) | (8,536) | ||
Interest expense | (20,887) | (11,790) | (529,205) | (34,488) |
Net Loss | $ (811,348) | $ (408,862) | $ (2,730,371) | $ (3,980,050) |
Net Loss per Common Share - Basic and Diluted: | $ (0.03) | $ (0.06) | $ (0.16) | $ (0.66) |
Weighted Average Common Shares Outstanding - Basic and Diluted | 26,112,624 | 6,327,606 | 16,858,489 | 6,063,311 |
Statements of Operations (Unau5
Statements of Operations (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
General and Administrative [Member] | ||||
Stock-based expense | $ 0 | $ 2,192,200 | ||
Sales and Marketing [Member] | ||||
Stock-based expense | 31,250 | 93,748 | ||
Research and Development [Member] | ||||
Stock-based expense | $ 37,046 | $ 25,000 | $ 204,789 | $ 516,515 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (2,730,371) | $ (3,980,050) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Depreciation | 3,836 | 4,143 |
Stock-based compensation | 204,788 | 2,807,172 |
Stock issued for services | 15,000 | |
Settlement expense | 81,000 | |
Termination of software license | 106,250 | |
Loss on extinguishment | 317,268 | |
Debt discount amortization | 491,132 | |
Excess fair value of derivatives in convertible note | 486,745 | |
Change in fair value of derivatives | 8,536 | |
Changes in operating assets and liabilities: | ||
Prepaid officer compensation | 44,788 | |
Prepaid expenses and other assets | 2,501 | |
Deferred revenue | (316,248) | (351,633) |
Accounts payable and accrued liabilities | (65,588) | (39,847) |
Net cash used in operating activities | (1,503,802) | (1,406,676) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of fixed assets and software | (2,798) | |
Net cash used in investing activities | (2,798) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Common stock issued for cash | 10,009,925 | 1,186,720 |
Common stock subscription deposit | 2,262,000 | |
Deferred offering costs | (282,750) | |
Issuance of convertible note | 242,600 | |
Repayment of convertible notes | (725,000) | |
Net cash provided by financing activities | 9,527,525 | 1,186,720 |
DECREASE IN CASH | 10,002,973 | (222,754) |
CASH, BEGINNING OF PERIOD | 227,396 | 344,138 |
CASH, END OF PERIOD | $ 10,230,369 | $ 121,384 |
Statement of Stockholders' Defi
Statement of Stockholders' Deficit (Unaudited) - 9 months ended Jun. 30, 2018 - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Sep. 30, 2017 | $ 100,000 | $ 66,351 | $ 49,378,447 | $ (50,201,730) | $ (656,932) |
Balance, shares at Sep. 30, 2017 | 10,000,000 | 6,635,127 | |||
Common stock issued for cash | $ 114,074 | 9,895,851 | $ 10,009,925 | ||
Common stock issued for cash, shares | 11,407,000 | 11,407,400 | |||
Common stock issued to officers and employees | $ 1,131 | 203,657 | $ 204,788 | ||
Common stock issued to officers and employees, shares | 113,151 | ||||
Common stock issued for services | $ 100 | 14,900 | 15,000 | ||
Common stock issued for services, shares | 10,000 | ||||
Common stock issued for legal settlement | $ 500 | 80,500 | 81,000 | ||
Common stock issued for legal settlement, shares | 50,000 | ||||
Convertible notes - issuance of common stock | $ 3,625 | 498,875 | 502,500 | ||
Convertible notes - issuance of common stock, shares | 362,500 | ||||
Convertible note - issuance of warrants | 90,345 | 90,345 | |||
Convertible note - amendment of existing warrants | 74,041 | 74,041 | |||
Settlement of convertible note | $ 1,214 | 179,858 | 181,072 | ||
Settlement of convertible note, shares | 121,429 | ||||
Related party conversion of preferred stock | $ (90,000) | $ 135,000 | (45,000) | ||
Related party conversion of preferred stock, shares | (9,000,000) | 13,500,000 | 1,500,000 | ||
Net loss | (2,730,271) | $ (2,730,371) | |||
Balance at Jun. 30, 2018 | $ 100,000 | $ 321,995 | $ 60,371,474 | $ (52,932,001) | $ 7,771,468 |
Balance, shares at Jun. 30, 2018 | 10,000,000 | 32,199,607 |
Description of Business
Description of Business | 9 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | NOTE 1 - DESCRIPTION OF BUSINESS Cipherloc Corporation (the “Company”) was incorporated in Texas on June 22, 1953 as American Mortgage Company. On March 15, 2015, the Company changed its name to Cipherloc Corporation. The name change became effective by the Amended Certificate as of March 23, 2015. Cipherloc is a data security solutions company. Our highly innovative, polymorphic encryption technology is designed to enable an iron-clad layer of protection to be added to existing solutions. |
Basis of Presentation of Interi
Basis of Presentation of Interim Financial Statements | 9 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation of Interim Financial Statements | NOTE 2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended September 30, 2017 have been omitted; this report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended September 30, 2017 included within the Company’s Form 10-K as filed with the Securities and Exchange Commission. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows: Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2018 and September 30, 2017, cash and cash equivalents include cash on hand and cash in the bank. The Company maintains its cash in accounts held by large, globally recognized banks which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures these deposits up to $250,000. At June 30, 2018, $9,980,369 of the Company’s cash balance was uninsured, and at September 30, 2017, none of its cash balance was uninsured. The Company has not experienced any losses in such accounts. Risks and Uncertainties The Company’s continued existence is dependent upon sufficient capital to explore potential strategic relationships, complete development and marketing of the Company’s technologies, and operate the business. The Company raised $10,009,925 through the issuance of investment units, each consisting of one share of common stock and one warrant to purchase one additional share of common stock for $1.20 within five years (“Units”), during the nine months ended June 30, 2018, and it intends to continue raising money through a private placement memorandum. Management used $725,000 of the proceeds from this financing to repay its two convertible notes. The Company has yet to establish profitable operations and has an accumulated deficit at June 30, 2018 of $52,828,429. It also has negative operating cash flows. These adverse conditions could affect the Company’s financial condition and its results of operations if capital raised through equity and/or debt financing is not sufficient for the Company to achieve its objectives. Convertible Debt and Embedded Derivatives Convertible debt is accounted for under the guidelines established by Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options. ASC 470-20 governs the calculation of an embedded beneficial conversion, a derivative instrument, which is treated as an additional discount to the instruments where derivative accounting does not apply. This applies during the period for which embedded conversion features are either fixed, contingently convertible, or cash or net settlement is in control of the Company. When equity instruments, such as warrants, are issued with convertible debt, the net proceeds from the transaction are allocated to the convertible debt and equity instruments based on their relative fair values. The proceeds allocated to the equity instruments may reduce the carrying value of the convertible debt, and such discount is amortized to interest expense over the term of the debt. The amount of the warrants and beneficial conversion feature will reduce the carrying value of the debt instrument to zero, but no further. The discount relating to the initial recording of the original issue discounts, issue costs, warrants and beneficial conversion feature are accreted, together with the premium, over the estimated term of the debt. The excess of fair value of the embedded conversion feature, together with the original issue discounts, warrants, and issue costs over the face value of the debt, is recorded as an immediate charge in the accompanying statements of operations and cash flows. Each reporting period, the Company will compute the estimated fair value of derivatives and record changes to operations. Basic and Diluted Net Loss per Common Share Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest, resulting in the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss. Research and Development and Software Development Costs Capitalization of certain software development costs are recorded after the determination of technological feasibility. Based on our product development process, technological feasibility is determined upon the completion of a working model. To date, costs incurred by us from the completion of the working model to the point at which the product is ready for general release do not have technological feasibility. Accordingly, we have charged all such costs to research and development expense in the period incurred. Research and development costs were $210,126 and $576,114 for the three and nine months ended June 30, 2018, respectively, and $198,004 and $954,499 for the three and nine months ended June 30, 2017, respectively. Recent Accounting Announcements The Financial Accounting Standards Board (“FASB”) issues Accounting Standards Updates (“ASU”) to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of the ASC. The Company believes those updates issued-to-date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company, or (iv) are not expected to have a significant impact on the Company. |
Convertible Notes Payable
Convertible Notes Payable | 9 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | NOTE 4 – CONVERTIBLE NOTES PAYABLE FirstFire Global Opportunities Fund, LLC On September 26, 2017, the Company issued a convertible note to FirstFire Global Opportunities Fund, LLC (“FirstFire”) with a principal amount of $330,000, which includes an original issue discount of $30,000. The Company incurred $8,500 in direct costs. The note accrued interest at 5% per annum and was to mature on March 26, 2018, six months following the issuance date. The note was convertible at $2.00 per share, subject to adjustment. The Company issued 50,000 shares of its common stock, as well as warrants to purchase an additional 165,000 shares of common stock at $4.50 per share with a term of two years. The note was amended on December 20, 2017, which reduced the conversion price of the note to $1.00 per share, subject to adjustment, reduced the exercise price of the warrants from $4.50 to $2.00, and required the Company to issue an additional 87,500 shares of common stock to FirstFire, which resulted in an extinguishment loss. The Company accounted for the amendment of the FirstFire note using derivative accounting and recognized a loss on extinguishment of $358,038 during the three months ended December 31, 2017. The Company also recognized a derivative liability of $320,312 as of the note’s amendment date. The Company valued the derivative liability with the Black-Scholes valuation model on the date of the amendment using an expected life of one (1) year, volatility of 150%, and risk-free rate of 1.87%. During the three and nine months ended June 30, 2018, the Company recognized a gain of $0 and $11,234, respectively, related to the change in fair value of the FirstFire derivative liability. The Company valued the derivative liability with the Black-Scholes valuation model as of March 21, 2018, immediately prior to the settlement of the note as described below, using an expected life of 0.78 years, volatility of 150%, and risk-free rate of 1.71%. Upon amendment of the FirstFire note, the Company recorded a debt discount of $330,000. The Company amortized $0 and $312,813 of the debt discount to interest expense during the three and nine months ended June 30, 2018, respectively. Total interest expense related to the FirstFire note, including the debt discount amortization prior to the amendment, was $0 and $453,700 for the three and nine months ended June 30, 2018, respectively. On March 21, 2018, the Company entered into a settlement agreement with FirstFire under which FirstFire converted $77,500 of the note payable into 50,000 shares of common stock, and the Company paid $350,000 to satisfy the derivative liability of $309,078 and the note payable in full. In connection with the settlement of the FirstFire note, the Company recognized a gain on extinguishment of $194,391. Peak One Opportunity Fund LP On December 14, 2017, the Company issued a convertible note to Peak One Opportunity Fund LP (“Peak One”) with a principal amount of $300,000, which includes an original issue discount of $30,000. The Company incurred $27,400 in direct costs. The note was to mature three years from the issuance date and provides the holder with the right to convert all or a portion of the outstanding principal balance to shares of the Company’s common stock at a conversion price of $1.00 per share, subject to certain adjustments to the conversion price under certain circumstances. Together with the convertible note, the Company also issued 275,000 shares of its common stock, as well as warrants to purchase an additional 75,000 shares of common stock at $2.00 per share with a term of five years. The Company accounted for the convertible note to Peak One using derivative accounting and recognized a derivative liability of $267,750 as of the note’s issuance date. The Company valued the derivative liability with the Black-Scholes valuation model on the date of issuance using an expected life of 1.25 years, volatility of 150%, and risk-free rate of 1.82%. The Company also recognized a loss of $486,745 resulting from the excess fair value of the derivative in the convertible note and of the equity instruments issued with the convertible note. During the three and nine months ended June 30, 2018, the Company recognized a loss of $1,794 and $19,770, respectively, related to the change in fair value of the Peak One derivative liability. The Company valued the derivative liability with the Black-Scholes valuation model as of April 30, 2018, immediately prior to the redemption of the note as described below, using an expected life of 1.17 years, volatility of 150%, and risk-free rate of 1.65%. The Company recorded a debt discount of $300,000 upon issuance of the Peak One note. The Company amortized $8,197 and $37,432 of the debt discount to interest expense during the three and nine months ended June 30, 2018, respectively. On April 30, 2018, the Company redeemed the Peak One note for $375,000 prior to the maturity date in accordance with the terms of the note. The Company recognized a loss on extinguishment of $50,049. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 5 - COMMITMENTS AND CONTINGENCIES Terminated Employment Agreement with Former Chief Financial Officer The Company previously had an employment agreement with its Chief Financial Officer (“CFO”), which terminated in 2015. There were amounts that were accrued and unpaid as of June 30, 2018 and September 30, 2017, totaling $376,512 and $338,437, respectively. According to the original agreement, the unpaid salaries were to accrue interest at 15%, which has been accrued at each reporting date. Related interest expense was $12,692 and $38,075 during the three and nine months ended June 30, 2018, respectively. Management believes that such amounts were previously satisfied through the issuance of common stock and does not intend to pay such amounts. Litigation We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. A disgruntled former contracted consultant has brought an action in the Texas State court against the CEO and the Company alleging fraud and misrepresentation pertaining to stock and payments, all of which have been paid, and all stock has been delivered to him. He has also included a claim of partial ownership of some of the Company’s patent which is without merit in that any interest he may have had has been assigned to the Company. The claim is frivolous and without merit. The case is being vigorously defended on our behalf by our insurance carrier. |
Stockholders' Deficit
Stockholders' Deficit | 9 Months Ended |
Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Deficit | NOTE 6 - STOCKHOLDERS’ DEFICIT As of June 30, 2018, the Company was authorized to issue 650,000,000 common shares and 10,000,000 preferred shares at a par value of $0.01. Common Stock Management determines the fair value of stock issuances using the closing stock price on the grant date. Under the Company’s active Private Placement Memorandum, the Company issues Units, each consisting of one share of common stock and one warrant to purchase one additional share of common stock for $1.20 within five years. Additionally, the Company pays a 12.5% commission to the Paulson Investment Company. During the three months ended June 30, 2018, there were 10,094,400 Units sold for $8,832,600, net of $1,261,800 in offering costs. During the nine months ended June 30, 2018, there were 11,407,400 Units sold for $10,009,925, net of $1,469,475 in offering costs. As of June 30, 2018, the Company had private placement deposits totaling $2,262,000, for which the related shares have not yet been authorized. As such, this amount was included in common stock subscription deposit as of June 30, 2018. The related offering costs of $282,750 were included in deferred offering costs as of June 30, 2018. During the three months ended June 30, 2018, the Company issued 24,697 shares of common stock with a fair value of $37,045 to its employees as part of their compensation. During the nine months ended June 30, 2018, the Company issued 113,151 shares of common stock with a fair value of $204,788 to its employees as part of their compensation. During the nine months ended June 30, 2018, the Company issued 50,000 shares of common stock with a fair value of $81,000 to settle a legal matter by two shareholders who claimed that they were entitled to 125,000 shares of common stock because of funds allegedly paid to the Company and promises allegedly made by the Company. The Company denied these allegations and settled the matter for 50,000 shares of common stock. During the three months ended June 30, 2018, the Company issued 10,000 shares of common stock with a fair value of $15,000 to Magnolia Investor Relations for services rendered. The Company also issued 71,429 shares of common stock to Peak One through the cashless exercise of its warrants. Preferred Stock The Company’s Series A Preferred Stock is convertible into the Company’s common stock at a rate of one (1) preferred share to 1.5 common shares. Each share of the Preferred Stock has 1.5 votes on all matters presented to be voted by the holders of common stock. The holders of the Series A Preferred Stock can only convert the shares if agreed to by the Board of Directors. As of June 30, 2018 and September 30, 2017, the Company had 1,000,000 and 10,000,000 shares, respectively, of preferred stock outstanding, which are convertible into common stock at a rate of 1 preferred share to 1.5 common shares. See Note 7 below. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 7 – RELATED PARTY TRANSACTIONS In February 2018, the Company’s Chief Executive Officer converted his 9,000,000 shares of preferred stock into 13,500,000 shares of common stock. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 8 – SUBSEQUENT EVENTS Subsequent to June 30, 2018, there were 5,924,600 Units sold for net proceeds of $5,466,775. In July 2018, the Company entered into a new lease agreement for office space in Scottsdale, Arizona. The lease has a term of three years and monthly lease payments ranging from $1,608 to $1,705. There have been no other reportable events that have occurred after June 30, 2018. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2018 and September 30, 2017, cash and cash equivalents include cash on hand and cash in the bank. The Company maintains its cash in accounts held by large, globally recognized banks which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures these deposits up to $250,000. At June 30, 2018, $9,980,369 of the Company’s cash balance was uninsured, and at September 30, 2017, none of its cash balance was uninsured. The Company has not experienced any losses in such accounts. |
Risks and Uncertainties | Risks and Uncertainties The Company’s continued existence is dependent upon sufficient capital to explore potential strategic relationships, complete development and marketing of the Company’s technologies, and operate the business. The Company raised $10,009,925 through the issuance of investment units, each consisting of one share of common stock and one warrant to purchase one additional share of common stock for $1.20 within five years (“Units”), during the nine months ended June 30, 2018, and it intends to continue raising money through a private placement memorandum. Management used $725,000 of the proceeds from this financing to repay its two convertible notes. The Company has yet to establish profitable operations and has an accumulated deficit at June 30, 2018 of $52,828,429. It also has negative operating cash flows. These adverse conditions could affect the Company’s financial condition and its results of operations if capital raised through equity and/or debt financing is not sufficient for the Company to achieve its objectives. |
Convertible Debt and Embedded Derivatives | Convertible Debt and Embedded Derivatives Convertible debt is accounted for under the guidelines established by Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options. ASC 470-20 governs the calculation of an embedded beneficial conversion, a derivative instrument, which is treated as an additional discount to the instruments where derivative accounting does not apply. This applies during the period for which embedded conversion features are either fixed, contingently convertible, or cash or net settlement is in control of the Company. When equity instruments, such as warrants, are issued with convertible debt, the net proceeds from the transaction are allocated to the convertible debt and equity instruments based on their relative fair values. The proceeds allocated to the equity instruments may reduce the carrying value of the convertible debt, and such discount is amortized to interest expense over the term of the debt. The amount of the warrants and beneficial conversion feature will reduce the carrying value of the debt instrument to zero, but no further. The discount relating to the initial recording of the original issue discounts, issue costs, warrants and beneficial conversion feature are accreted, together with the premium, over the estimated term of the debt. The excess of fair value of the embedded conversion feature, together with the original issue discounts, warrants, and issue costs over the face value of the debt, is recorded as an immediate charge in the accompanying statements of operations and cash flows. Each reporting period, the Company will compute the estimated fair value of derivatives and record changes to operations. |
Basic and Diluted Net Loss Per Common Share | Basic and Diluted Net Loss per Common Share Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest, resulting in the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss. |
Research and Development and Software Development Costs | Research and Development and Software Development Costs Capitalization of certain software development costs are recorded after the determination of technological feasibility. Based on our product development process, technological feasibility is determined upon the completion of a working model. To date, costs incurred by us from the completion of the working model to the point at which the product is ready for general release do not have technological feasibility. Accordingly, we have charged all such costs to research and development expense in the period incurred. Research and development costs were $210,126 and $576,114 for the three and nine months ended June 30, 2018, respectively, and $198,004 and $954,499 for the three and nine months ended June 30, 2017, respectively. |
Recent Accounting Announcements | Recent Accounting Announcements The Financial Accounting Standards Board (“FASB”) issues Accounting Standards Updates (“ASU”) to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of the ASC. The Company believes those updates issued-to-date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company, or (iv) are not expected to have a significant impact on the Company. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
FDIC insured cash | $ 250,000 | $ 250,000 | |||
Cash balance uninsured | $ 9,980,369 | 9,980,369 | |||
Proceeds from issuance of common stock | $ 10,009,925 | $ 1,186,720 | |||
Common stock, description | Each consisting of one share of common stock and one warrant to purchase one additional share of common stock for $1.20 within five years | ||||
Common stock per share | $ 1.20 | $ 1.20 | |||
Repayment of convertible notes | $ 725,000 | ||||
Accumulated deficit | $ 52,932,001 | 52,932,001 | $ 50,201,730 | ||
Research and development costs | $ 210,126 | $ 198,004 | $ 576,114 | $ 954,499 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details Narrative) - USD ($) | Apr. 30, 2018 | Mar. 21, 2018 | Dec. 20, 2017 | Dec. 14, 2017 | Sep. 26, 2017 | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 |
Gain (loss) on extinguishment | $ 153,621 | $ 317,268 | ||||||||
Amortized debt discount | 491,132 | |||||||||
Issue of common stock shares, value | 502,500 | |||||||||
Excess fair value of derivatives in convertible note | $ (486,745) | |||||||||
Common stock issued at fair value, shares | 10,094,400 | 11,407,400 | ||||||||
Common stock issued at fair value | $ 8,832,600 | $ 10,009,925 | ||||||||
Prior To The Amendment [Member] | ||||||||||
Amortized debt discount | 0 | 453,700 | ||||||||
FirstFire Note [Member] | ||||||||||
Debt instrument original issue discount | 330,000 | 330,000 | ||||||||
Change in fair value of derivative liability | 0 | 11,234 | ||||||||
Amortized debt discount | 0 | 312,813 | ||||||||
Peak One Note [Member] | ||||||||||
Debt instrument original issue discount | 300,000 | 300,000 | ||||||||
Gain (loss) on extinguishment | $ 153,621 | |||||||||
Amortized debt discount | 8,197 | 37,432 | ||||||||
Debt redemption amount | $ 375,000 | |||||||||
Common stock issued at fair value, shares | 71,429 | |||||||||
Common stock issued at fair value | $ 103,572 | |||||||||
Expected Term [Member] | FirstFire Note [Member] | ||||||||||
Fair value measurement, term | 9 months 11 days | |||||||||
Volatility [Member] | FirstFire Note [Member] | ||||||||||
Fair value measurement, precentage | 150.00% | |||||||||
Risk Free Interest Rate [Member] | FirstFire Note [Member] | ||||||||||
Fair value measurement, precentage | 1.71% | |||||||||
FirstFire Global Opportunities Fund, LLC [Member] | ||||||||||
Debt instrument principal amount | $ 330,000 | |||||||||
Debt instrument original issue discount | 30,000 | |||||||||
Direct cost | $ 8,500 | |||||||||
Debt interest rate | 5.00% | |||||||||
Debt instrument maturity date | Mar. 26, 2018 | |||||||||
Debt conversion price | $ 1 | $ 2 | ||||||||
Issue of common stock shares | 87,500 | 50,000 | ||||||||
Warrant purchase additional common stock | 165,000 | |||||||||
Warrant exercise price per share | $ 2 | $ 4.50 | ||||||||
Warrants term | 2 years | |||||||||
Gain (loss) on extinguishment | $ 358,038 | |||||||||
Derivative Liability | 320,312 | $ 320,312 | ||||||||
FirstFire Global Opportunities Fund, LLC [Member] | Settlement Agreement [Member] | ||||||||||
Issue of common stock shares | 50,000 | |||||||||
Gain (loss) on extinguishment | $ 194,391 | |||||||||
Derivative Liability | 309,078 | |||||||||
Issue of common stock shares, value | 77,500 | |||||||||
Payment of settlement note | $ 350,000 | |||||||||
FirstFire Global Opportunities Fund, LLC [Member] | Expected Term [Member] | ||||||||||
Fair value measurement, term | 1 year | |||||||||
FirstFire Global Opportunities Fund, LLC [Member] | Volatility [Member] | ||||||||||
Fair value measurement, precentage | 150.00% | |||||||||
FirstFire Global Opportunities Fund, LLC [Member] | Risk Free Interest Rate [Member] | ||||||||||
Fair value measurement, precentage | 1.87% | |||||||||
Peak One Opportunity Fund LP [Member] | ||||||||||
Debt instrument principal amount | $ 300,000 | |||||||||
Debt instrument original issue discount | 30,000 | |||||||||
Direct cost | $ 27,400 | |||||||||
Debt conversion price | $ 1 | |||||||||
Issue of common stock shares | 275,000 | |||||||||
Warrant purchase additional common stock | 75,000 | |||||||||
Warrant exercise price per share | $ 2 | |||||||||
Warrants term | 5 years | |||||||||
Derivative Liability | $ 267,750 | |||||||||
Change in fair value of derivative liability | $ 1,794 | $ 19,770 | ||||||||
Excess fair value of derivatives in convertible note | $ 486,745 | |||||||||
Peak One Opportunity Fund LP [Member] | Expected Term [Member] | ||||||||||
Fair value measurement, term | 1 year 2 months 1 day | |||||||||
Peak One Opportunity Fund LP [Member] | Expected Term [Member] | Depository Trust [Member] | ||||||||||
Fair value measurement, term | 1 year 2 months 30 days | |||||||||
Peak One Opportunity Fund LP [Member] | Volatility [Member] | ||||||||||
Fair value measurement, precentage | 150.00% | |||||||||
Peak One Opportunity Fund LP [Member] | Volatility [Member] | Depository Trust [Member] | ||||||||||
Fair value measurement, precentage | 150.00% | |||||||||
Peak One Opportunity Fund LP [Member] | Risk Free Interest Rate [Member] | ||||||||||
Fair value measurement, precentage | 1.63% | |||||||||
Peak One Opportunity Fund LP [Member] | Risk Free Interest Rate [Member] | Depository Trust [Member] | ||||||||||
Fair value measurement, precentage | 1.82% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | |
Accrued and unpaid salaries | $ 376,512 | $ 376,512 | $ 338,437 |
Interest expense | $ 12,692 | $ 38,075 | |
Original Agreement [Member] | |||
Percentage for accrued interest | 15.00% |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Apr. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 |
Common stock, description | Each consisting of one share of common stock and one warrant to purchase one additional share of common stock for $1.20 within five years | |||
Common stock per share | $ 1.20 | $ 1.20 | ||
Common stock, shares authorized | 650,000,000 | 650,000,000 | 650,000,000 | |
Series A preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | |
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | |
Preferred stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | |
Stock issued during period of offering cost, shares | 10,094,400 | 11,407,400 | ||
Stock issued during net of offering cost | $ 8,832,600 | $ 10,009,925 | ||
Offering cost | 1,261,800 | 1,469,475 | ||
Deferred offering cost | $ 282,750 | 282,750 | ||
Common stock issued | $ 204,788 | |||
Stcok conversion description | Convertible into common stock at a rate of 1 preferred share to 1.5 common shares | |||
Preferred stock, voting rights | Each share of the Preferred Stock has 1.5 votes on all matters presented to be voted by the holders of common stock. | |||
Series A preferred stock, shares outstanding | 1,000,000 | 1,000,000 | 10,000,000 | |
Series A Preferred Stock [Member] | ||||
Stcok conversion description | Convertible into common stock at a rate of 1 preferred share to 1.5 common shar | |||
Peak One Note [Member] | ||||
Stock issued during period of offering cost, shares | 71,429 | |||
Stock issued during net of offering cost | $ 103,572 | |||
Employees [Member] | ||||
Common stock issued, shares | 24,697 | 113,151 | ||
Common stock issued | $ 37,045 | $ 204,788 | ||
Two Shareholders [Member] | ||||
Common stock issued, shares | 50,000 | |||
Common stock issued | $ 81,000 | |||
Entitled common stock shares | 125,000 | |||
Allegations settelmentb of common stock, shares | 50,000 | |||
Magnolia Investor Relations [Member] | ||||
Common stock issued, shares | 10,000 | |||
Common stock issued | $ 15,000 | |||
Private Placement [Member] | ||||
Deposits | $ 2,262,000 | $ 2,262,000 | ||
Paulson Investment Company [Member] | ||||
Commission , percentage | 12.50% | 12.50% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - Chief Executive Officer [Member] | 1 Months Ended |
Feb. 28, 2018shares | |
Preferred Stock [Member] | |
Conversion of convertible shares | 9,000,000 |
Common Stock [Member] | |
Conversion of convertible shares | 13,500,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended |
Jul. 31, 2018 | Jun. 30, 2018 | |
Number of units sold | 5,924,600 | |
Number of units sold, value | $ 5,466,775 | |
Subsequent Event [Member] | ||
Lease term | 3 years | |
Subsequent Event [Member] | Minimum [Member] | ||
Monthly lease payments | $ 1,608 | |
Subsequent Event [Member] | Maximum [Member] | ||
Monthly lease payments | $ 1,705 |