SideChannel (SDCH) 10-Q 31 Oct 19 2019 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Jun. 30, 2019	Oct. 31, 2019
Document And Entity Information
Entity Registrant Name	CIPHERLOC Corp
Entity Central Index Key	0001022505
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		40,792,510
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019

Balance Sheets (Unaudited)

Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Current assets
Cash and cash equivalents	$ 9,654,737	$ 14,056,346
Prepaid expenses	38,510
Total current assets	9,693,247	14,056,346
Deposits	7,566	12,218
Fixed assets, net	50,817	20,050
Total assets	9,751,630	14,088,614
Current liabilities
Accounts payable and accrued liabilities	129,635	52,043
Deferred revenue	47,150
Accrued compensation	232,574	72,489
Total current liabilities	409,359	124,532
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value, 10,000,000 shares authorized; 1,000,000 issued and outstanding as of June 30, 2019 and September 30, 2018	10,000	10,000
Common stock, $0.01 par value, 650,000,000 shares authorized; 40,792,510 and 40,743,917 issued and outstanding as of June 30, 2019 and September 30, 2018, respectively	407,925	407,438
Additional paid-in capital	68,179,886	68,169,157
Accumulated deficit	(59,255,540)	(54,622,513)
Total stockholders' equity	9,342,271	13,964,082
Total liabilities and stockholders' equity	$ 9,751,630	$ 14,088,614

Balance Sheets (Unaudited) (Par

Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2019	Sep. 30, 2018
Statement of Financial Position [Abstract]
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	1,000,000
Series A convertible preferred stock, shares outstanding	1,000,000	1,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	650,000,000	650,000,000
Common stock, shares issued	40,792,510	40,743,917
Common stock, shares outstanding	40,792,510	40,743,917

Statements of Operations (Unaud

Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Revenues	$ 27,850	$ 87,477	$ 27,850	$ 316,248
Cost of revenues		13,424		89,230
Gross profit	27,850	74,053	27,850	227,018
Operating expenses
General and administrative	947,309	424,702	1,986,090	838,988
Selling and marketing	728,270	74,271	1,377,045	119,433
Research and development	478,108	210,126	1,303,680	576,114
Settlement expense				81,000
Total operating expenses	2,153,687	709,099	4,666,815	1,615,535
Operating loss	(2,125,837)	(635,046)	(4,638,965)	(1,388,517)
Other income (expense)
Loss on extinguishment of convertible note		(153,621)		(444,747)
Excess fair value of derivatives in convertible note				(486,745)
Change in fair value of embedded conversion features in convertible notes		(1,794)		118,943
Interest income (expense), net	2,610	(20,887)	5,938	(529,205)
Net loss	$ (2,123,227)	$ (811,348)	$ (4,633,027)	$ (2,730,271)
Net loss per common share - basic and diluted	$ (0.05)	$ (0.03)	$ (0.11)	$ (0.16)
Weighted average common shares outstanding - basic and diluted	40,792,510	26,112,624	40,792,510	16,858,489

Statements of Cash Flows (Unaud

Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (4,633,027)	$ (2,730,271)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation	6,292	3,836
Stock-based compensation	11,216	204,788
Stock issued for services	40,000	15,000
Legal settlement		81,000
Loss on extinguishment of convertible notes		444,747
Excess fair value of derivatives in convertible note		486,745
Change in fair value of derivatives		8,536
Debt discount amortization		491,132
Changes in operating assets and liabilities:
Prepaid expenses and other	(33,858)
Accounts payable and accrued liabilities	77,592	(65,588)
Accrued compensation	160,085
Deferred revenue	47,150	(316,248)
Net cash used in operating activities	(4,324,550)	(1,503,802)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets	(37,059)
Net cash used in investing activities	(37,059)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash		10,009,925
Common stock subscription deposit		2,262,000
Refund of over subscription	(40,000)
Repayment of convertible notes, net of proceeds		(482,400)
Deferred offering costs		(282,750)
Net cash provided by (used in) financing activities	(40,000)	11,506,775
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(4,401,609)	10,002,973
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	14,056,346	227,396
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 9,654,737	$ 10,230,369

Statements of Stockholders' Equ

Statements of Stockholders' Equity (Unaudited) - 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		11,407,400
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 services		$ 500	80,500		81,000
Common stock issued for legal services, 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			93,345		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
Net loss				(2,730,271)	(2,730,271)
Balance at Jun. 30, 2018	$ 10,000	$ 321,995	60,371,474	(52,932,001)	7,771,468
Balance, shares at Jun. 30, 2018	1,000,000	32,199,607
Balance at Mar. 31, 2018	$ 10,000	$ 219,990	51,485,262	(52,120,653)	(405,401)
Balance, shares at Mar. 31, 2018	1,000,000	21,999,081
Common stock issued for cash		$ 100,944	8,731,656		8,832,600
Common stock issued for cash, shares		10,094,400
Common stock issued to officers and employees		$ 247	36,798		37,045
Common stock issued to officers and employees, shares		24,697
Common stock issued for services		$ 100	14,900		15,000
Common stock issued for services, shares		10,000
Settlement of convertible note		$ 714	102,858		103,572
Settlement of convertible note, shares		71,429
Net loss				(811,348)	(811,348)
Balance at Jun. 30, 2018	$ 10,000	$ 321,995	60,371,474	(52,932,001)	7,771,468
Balance, shares at Jun. 30, 2018	1,000,000	32,199,607
Balance at Sep. 30, 2018	$ 10,000	$ 407,438	68,169,157	(54,622,513)	13,964,082
Balance, shares at Sep. 30, 2018	1,000,000	40,743,917
Common stock issued for services		$ 200	39,800		40,000
Common stock issued for services, shares		20,000
Correction of shares outstanding		$ 193	(193)
Correction of shares outstanding, shares		19,247
Common stock issued to an employee		$ 94	11,122		11,216
Common stock issued to an employee, shares		9,346
Refund of oversubscription			(40,000)		(40,000)
Net loss				(4,633,027)	(4,633,027)
Balance at Jun. 30, 2019	$ 10,000	$ 407,925	68,179,886	(59,255,540)	9,342,271
Balance, shares at Jun. 30, 2019	1,000,000	40,792,510
Balance at Mar. 31, 2019	$ 10,000	$ 407,925	68,179,886	(57,132,313)	11,465,498
Balance, shares at Mar. 31, 2019	1,000,000	40,792,510
Common stock issued for services
Common stock issued for services, shares
Correction of shares outstanding
Correction of shares outstanding, shares
Common stock issued to an employee
Common stock issued to an employee, shares
Refund of oversubscription
Net loss				(2,123,227)	(2,123,227)
Balance at Jun. 30, 2019	$ 10,000	$ 407,925	$ 68,179,886	$ (59,255,540)	$ 9,342,271
Balance, shares at Jun. 30, 2019	1,000,000	40,792,510

The Company

The Company	9 Months Ended
	Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
The Company	NOTE 1 – THE COMPANY Cipherloc Corporation (the “Company” or “Cipherloc”) was incorporated in Texas on June 22, 1953 as American Mortgage Company. In March 2015, the Company changed its name to Cipherloc Corporation. The Company provides technology solutions focused on encryption of data so as to make it resistant to decryption using the most advanced methodologies, including the use of quantum computing.

Basis of Presentation of Interi

Basis of Presentation of Interim Financial Statements	9 Months Ended
	Jun. 30, 2019
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 the opinion of management, 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, 2019 are not necessarily indicative of the results that may be expected for the year ending September 30, 2019 or any future period. 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, 2018 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, 2018 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, 2019
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies are as follows: Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity at the time of purchase of three months or less to be cash equivalents. At June 30, 2019 and September 30, 2018, cash includes cash on hand and cash in the bank. The Company maintains its cash in accounts held by a large, globally recognized bank, and the balance of such accounts, 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, 2019, $9,404,737 of the Company’s cash balance was uninsured. Basic and Diluted Net Loss per Common Share Basic net loss per share is computed by dividing net loss for the period 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 net loss 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. As of June 30, 2019 and September 30, 2018, the Company had 1,000,000 shares of preferred stock outstanding, which are convertible into 1,500,000 shares of common stock. Diluted net loss per share is the same as basic net loss per share during periods where net losses are incurred because the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss. During the three and nine months ended June 30, 2019, 25,015,866 warrants and 1,500,000 as converted shares of convertible preferred stock were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. During the three and nine months ended June 30, 2018, 14,454,400 warrants to purchase common stock and 1,500,000 as converted shares of convertible preferred stock were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. Research and Development and Software Development Costs The Company expenses all research and development costs, including patent and software development costs. Revenue Recognition The Company recognizes revenues in accordance with the provisions of Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” and a series of amendments which together we identify as “ASC Topic 606”. This new accounting standard, which we adopted on October 1, 2018 using the permitted modified retrospective method, outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. The new standard supersedes most previous revenue recognition guidance, including industry-specific guidance. The effect of the adoption of ASC Topic 606 on retained earnings as of October 1, 2018 was not material. The differences between our reported operating results for the 9 months ended June 30, 2019, which reflect the application of the new standard on our contracts, and the results that would have been reported if the accounting was performed pursuant to the accounting standards previously in effect, also were not material. Central to the new revenue recognition guidance is a five-step revenue recognition model that requires reporting entities to: 1. Identify the contract, 2. Identify the performance obligations of the contract, 3. Determine the transaction price of the contract, 4. Allocate the transaction price to the performance obligations, and 5. Recognize revenue. The Company accounts for a promise to provide a customer with a right to access the Company’s intellectual property as a performance obligation satisfied over time because the customer will simultaneously receive and consume the benefit from the entity’s performance of providing access to its intellectual property as the performance occurs. SoundFi – Software License Agreement The Company entered into a one-year agreement renewable for up to 4 years for an annual $50,000 Shield license fee and $25,000 watermark base license fee with SoundFi LLC (“SoundFi”). Residual income to the Company is earned based on the number of audio files downloaded per year with residual earnings of $.012 per download exceeding 3,000,001 and scaling up to $.00075 per download exceeding 100,000,000. During the nine months ended June 30, 2019, the Company recognized $27,850 in licensing revenue. The Company has determined the best method for measuring licensing revenue to be the passage of time and more specifically on a monthly basis. The recognition of residual income occurs on an annual basis based on download volume provided by Soundfi. A download is defined as an audio file downloaded to a mobile device from the Soundfi servers. Ageos, LLC – Operating Agreement An operating agreement was entered into with Ageos, LLC and the Company on April 18, 2019. Ageos, LLC agreed to hire competent professionals, establish and maintain an approved government facility and guide engineers to customize the Company’s base products for governmental agency use. The Company agreed to advance Ageos, LLC $1,600,000 commiserate with the responsibilities and operating expense budget provided by Ageos, LLC on a periodic basis. The Company had advanced $828,596 through June 30, 2019 with an additional advance of $145,592 occurring on July 15, 2019. Under the operating agreement, Ageos, LLC was to reimburse the Company from the sale of the software by applying 50% of net revenues earned to repay the advanced operating expenses. The operating agreement was terminated on August 8, 2019. Recent Accounting Pronouncements The FASB issues ASUs 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. Other than those discussed below, 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. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic 842): Targeted Improvements In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	NOTE 4 – COMMITMENTS AND CONTINGENCIES Litigation The Company is currently not involved in any litigation that it believes could have a material adverse effect on its financial condition or results of operations. A disgruntled former consultant has brought an action in Texas state court against the Company and its former chief executive officer, alleging fraud and misrepresentation pertaining to stock and payments alleged to be owed to the consultant. The Company believes it has made all required payments and delivered the stock to the consultant. The consultant has also included a claim of partial ownership of certain of the Company’s patents, which management believes is without merit. The case is currently being defended by the Company and costs relating thereto have been submitted to the Company’s insurance carrier. In August 2019, the Company initiated litigation against its former Chief Executive Officer, Michael De La Garza (“De La Garza”) in order to stop him from misappropriating the company’s trade secrets, depleting its monies and other assets, damaging the value of the company in the marketplace, and holding himself out as the company’s CEO. On September 25, 2019, the Court entered a temporary injunction against De La Garza enjoining him from numerous acts including representing himself as CipherLoc’s CEO and from interfering with the current CEO’s running the company. This litigation is ongoing, and its resolution is unknown. In addition, the Company formed a special committee to investigate certain activities of the former CEO including the Ageos, LLC Operating Agreement, the QHCI/Noun note receivable, an advance/bonus, personal expenditures, and other items. No amounts have been recorded in these financial statements as expected recoveries. Leases In March 2019, the Company guaranteed a lease on behalf of Ageos, LLC in McLean, Virginia. The lease has a term of three years for 4,359 square feet of space in McClean, Virginia. The initial rent cost is $7,991 per month and the lease agreement provides for annual rent increases of approximately 4.0%. The amount of future payments guaranteed is $267,389. The agreement with Ageos was terminated in August 2019 and the Company has made an unwritten offer to assume the lease. No amounts have been accrued for this commitment as of June 30, 2019. In February 2019, the Company and the landlord for its leased office space in Buda, Texas entered into a new lease agreement, and the Company reduced its rented space from approximately 3,900 to 1,302 square feet. The new lease was effective February 1, 2019 and has a three-year term. The initial monthly rent is $2,566, and the lease agreement provides for annual rent increases of approximately 2.7%. The lease automatically renews for a three-year term, unless either party to the lease agreement notifies the other of the intent to terminate the lease in writing at least 180 days prior to the expiration of the current term. The amount of future payments guaranteed is $82,074. In October 2018, the Company leased approximately 3,900 square feet of office space on North Scottsdale Road in Scottsdale, Arizona. The lease for this facility began on October 4, 2018 and continues until October 31, 2021. Annual rent of $77,180 was prepaid for the first year from November 1, 2018 to October 31, 2019, and the lease agreement provides for annual rent increases of approximately 5.0%. The amount of future payments guaranteed is $165,936.

Stockholders' Equity

Stockholders' Equity	9 Months Ended
	Jun. 30, 2019
Stockholders' Equity Note [Abstract]
Stockholders' Equity	NOTE 5 - STOCKHOLDERS’ EQUITY The Company is authorized to issue 650,000,000 common shares and 10,000,000 preferred shares at a par value of $0.01 per share. Common Stock Management determines the fair value of stock issuances using the closing stock price on the grant date. During the nine months ended June 30, 2019, the Company issued 20,000 shares of common stock with a fair value of $40,000 to Pycnocline, LLC for management consulting services, which was recorded in research and development expense. During the nine months ended June 30, 2019, the Company issued 9,346 shares of common stock with a fair value of $11,216 to an employee, which was recorded as stock-based compensation expenses in research and development expense in the statement of operations. During the nine months ended June 30, 2019, the Company refunded $40,000 for an oversubscription of common stock made by an investor related to the private placement of shares in fiscal year 2018. The refund was made in lieu of an issuance of shares. Preferred Stock Each outstanding share of preferred stock is convertible into the Company’s common stock at a rate of one preferred share to 1.5 common shares. Each share of preferred stock has 1.5 votes on all matters presented to be voted by the holders of common stock. The holders of preferred stock can only convert the shares upon approval of the Company’s board of directors. If declared by the board of directors, holders of preferred stock are entitled to receive dividends prior and in preference to any declaration or payment of any dividend on the common stock of the Company. In the event of liquidation or dissolution of the Company, holders of preferred stock shall be paid out of the assets of the Company prior and in preference to any payment or distribution to holders of common stock of the Company.

Related Party Transactions

Related Party Transactions	9 Months Ended
	Jun. 30, 2019
Related Party Transactions [Abstract]
Related Party Transactions	NOTE 6- RELATED PARTY TRANSACTIONS Skylar, Olivia and Robin De La Garza earned $52,278, $42,176 and $35,000, respectively, in compensation for the 9 months ended June 30, 2019. In August 2019, Robin and Skylar De La Garza were terminated as employees of the Company.

Subsequent Events

Subsequent Events	9 Months Ended
	Jun. 30, 2019
Subsequent Events [Abstract]
Subsequent Events	NOTE 7- SUBSEQUENT EVENTS On July 26, 2019, the Board of Directors accepted the resignation of Michael De La Garza as Chief Executive Officer and appointed Tom Wilkinson as Interim Chief Executive Officer. Mr. De La Garza was subsequently terminated as an employee on August 11, 2019. On August 14, 2019, the Board of Directors formed an Executive Committee, as allowed by the Bylaws, consisting of Mr. Wilkinson, Mr. Ambrose, Dr. Carlson and Dr. Davis. In accordance with the bylaws, the Executive Committee is empowered to execute all business on behalf of the Board of Directors to the fullest extent permitted under Texas law. On August 8, 2019, the operating agreement with Ageos was terminated. In August 2019, it was determined that the previously disclosed note receivable from Quality Healthcare International, Inc. (“QHI”) would not be collectible. While the note receivable had been presented to the board for approval, the vast majority of the funds had been paid to Noun Energy, rather than to QHI. Noun Energy is a company doing business in the United Arab Emirates that is believed to be controlled by Mr. De La Garza’s brother. This agreement and the funding are part of an ongoing investigation related to the litigation against Mr. De La Garza discussed in Note 4. The note receivable has been written off as a loss for the quarter ended June 30, 2019 and is included in general and administrative expenses on the statements of operations. In August 2019, the Board of Directors formed a special committee of independent directors (“Special Committee”) to investigate certain activities of Michael De La Garza. The Special Committee has retained legal counsel, and is authorized to retain forensic accountants, to assist the investigation.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Jun. 30, 2019
Accounting Policies [Abstract]
Cash and Cash Equivalents	Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity at the time of purchase of three months or less to be cash equivalents. At June 30, 2019 and September 30, 2018, cash includes cash on hand and cash in the bank. The Company maintains its cash in accounts held by a large, globally recognized bank, and the balance of such accounts, 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, 2019, $9,404,737 of the Company’s cash balance was uninsured.
Basic and Diluted Net Loss Per Common Share	Basic and Diluted Net Loss per Common Share Basic net loss per share is computed by dividing net loss for the period 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 net loss 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. As of June 30, 2019 and September 30, 2018, the Company had 1,000,000 shares of preferred stock outstanding, which are convertible into 1,500,000 shares of common stock. Diluted net loss per share is the same as basic net loss per share during periods where net losses are incurred because the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss. During the three and nine months ended June 30, 2019, 25,015,866 warrants and 1,500,000 as converted shares of convertible preferred stock were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. During the three and nine months ended June 30, 2018, 14,454,400 warrants to purchase common stock and 1,500,000 as converted shares of convertible preferred stock were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.
Research and Development and Software Development Costs	Research and Development and Software Development Costs The Company expenses all research and development costs, including patent and software development costs.
Revenue Recognition	Revenue Recognition The Company recognizes revenues in accordance with the provisions of Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” and a series of amendments which together we identify as “ASC Topic 606”. This new accounting standard, which we adopted on October 1, 2018 using the permitted modified retrospective method, outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. The new standard supersedes most previous revenue recognition guidance, including industry-specific guidance. The effect of the adoption of ASC Topic 606 on retained earnings as of October 1, 2018 was not material. The differences between our reported operating results for the 9 months ended June 30, 2019, which reflect the application of the new standard on our contracts, and the results that would have been reported if the accounting was performed pursuant to the accounting standards previously in effect, also were not material. Central to the new revenue recognition guidance is a five-step revenue recognition model that requires reporting entities to: 1. Identify the contract, 2. Identify the performance obligations of the contract, 3. Determine the transaction price of the contract, 4. Allocate the transaction price to the performance obligations, and 5. Recognize revenue. The Company accounts for a promise to provide a customer with a right to access the Company’s intellectual property as a performance obligation satisfied over time because the customer will simultaneously receive and consume the benefit from the entity’s performance of providing access to its intellectual property as the performance occurs. SoundFi – Software License Agreement The Company entered into a one-year agreement renewable for up to 4 years for an annual $50,000 Shield license fee and $25,000 watermark base license fee with SoundFi LLC (“SoundFi”). Residual income to the Company is earned based on the number of audio files downloaded per year with residual earnings of $.012 per download exceeding 3,000,001 and scaling up to $.00075 per download exceeding 100,000,000. During the nine months ended June 30, 2019, the Company recognized $27,850 in licensing revenue. The Company has determined the best method for measuring licensing revenue to be the passage of time and more specifically on a monthly basis. The recognition of residual income occurs on an annual basis based on download volume provided by Soundfi. A download is defined as an audio file downloaded to a mobile device from the Soundfi servers. Ageos, LLC – Operating Agreement An operating agreement was entered into with Ageos, LLC and the Company on April 18, 2019. Ageos, LLC agreed to hire competent professionals, establish and maintain an approved government facility and guide engineers to customize the Company’s base products for governmental agency use. The Company agreed to advance Ageos, LLC $1,600,000 commiserate with the responsibilities and operating expense budget provided by Ageos, LLC on a periodic basis. The Company had advanced $828,596 through June 30, 2019 with an additional advance of $145,592 occurring on July 15, 2019. Under the operating agreement, Ageos, LLC was to reimburse the Company from the sale of the software by applying 50% of net revenues earned to repay the advanced operating expenses. The operating agreement was terminated on August 8, 2019.
Recent Accounting Announcements	Recent Accounting Pronouncements The FASB issues ASUs 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. Other than those discussed below, 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. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic 842): Targeted Improvements In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	Jul. 15, 2019	Jun. 30, 2019	Apr. 18, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
FDIC insured cash		$ 250,000		$ 250,000		$ 250,000
Cash balance uninsured		$ 9,404,737		$ 9,404,737		$ 9,404,737
Preferred stock, shares outstanding		1,000,000		1,000,000		1,000,000		1,000,000
Number of shares issued for conversion						1,500,000
License revenue				$ 27,850	$ 87,477	$ 27,850	$ 316,248
SoundFi - Software License Agreement [Member]
Agreement term description							The Company entered into a one-year agreement renewable for up to 4 years
Agreement description							Residual income to the Company is earned based on the number of audio files downloaded per year with residual earnings of $.012 per download exceeding 3,000,001 and scaling up to $.00075 per download exceeding 100,000,000.
License revenue							$ 27,850
Operating Agreement [Member] | Ageos, LLC [Member]
Advance to affiliate		$ 828,596	$ 1,600,000
Operating Agreement [Member] | Ageos, LLC [Member] | Subsequent Event [Member]
Advance to affiliate	$ 145,592
Shield License Fee [Member] | Software License Agreement [Member] | SoundFi LLC [Member]
License fee							50,000
Watermark License Fee [Member] | Software License Agreement [Member] | SoundFi LLC [Member]
License fee							$ 25,000
Warrants [Member]
Anti-dilutive common stock equivalents				25,015,866	14,454,400	25,015,866	14,454,400
Convertible Preferred Stock [Member]
Anti-dilutive common stock equivalents				1,500,000	1,500,000	1,500,000	1,500,000

Commitments and Contingencies (

Commitments and Contingencies (Details Narrative)	1 Months Ended
	Mar. 31, 2019USD ($)ft²	Feb. 28, 2019USD ($)ft²	Oct. 31, 2018USD ($)ft²
Arizona [Member]
Area of lease | ft²			3,900
Annual rent increase percentage			5.00%
Future payments of operating lease			$ 165,936
Lease description			The lease for this facility began on October 4, 2018 and continues until October 31, 2021.
Arizona [Member] | November 1, 2018 to October 31, 2019 [Member]
Rental cost			$ 77,180
New Lease Agreement [Member]
Area of lease | ft²		3,900
Rental cost		$ 2,566
Annual rent increase percentage		2.70%
Future payments of operating lease		$ 82,074
Reduction in lease area | ft²		1,302
Lease description		The lease automatically renews for a three-year term, unless either party to the lease agreement notifies the other of the intent to terminate the lease in writing at least 180 days prior to the expiration of the current term.
Ageos, LLC [Member]
Lease term	3 years
Area of lease | ft²	4,359
Rental cost	$ 7,991
Annual rent increase percentage	4.00%
Future payments of operating lease	$ 267,389

Stockholders' Equity (Details N

Stockholders' Equity (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Common stock, shares authorized	650,000,000		650,000,000		650,000,000
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
Number of shares issued for services, value		$ 15,000	$ 40,000	$ 15,000
Common stock issued to employees		$ 37,045		$ 204,788
Refund of oversubscription			$ 40,000
Stock conversion description			Each outstanding share of preferred stock is convertible into the Company's common stock at a rate of one preferred share to 1.5 common shares.
Preferred stock, voting rights			Each share of preferred stock has 1.5 votes on all matters presented to be voted by the holders of common stock.
Research and Development Expense [Member]
Common stock issued to employees, shares			9,346
Common stock issued to employees			$ 11,216
Pycnocline, LLC for Management Consulting Services [Member]
Number of shares issued for services			20,000
Number of shares issued for services, value			$ 40,000

Related Party Transactions (Det

Related Party Transactions (Details Narrative)	Jun. 30, 2019USD ($)
Skylar [Member]
Due to related party	$ 52,278
Olivia [Member]
Due to related party	42,176
Robin De La Garza [Member]
Due to related party	$ 35,000