Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2017 | Aug. 14, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | VISUALANT INC | |
Entity Central Index Key | 1,074,828 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 3,910,486 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 22,856 | $ 188,309 |
Accounts receivable, net of allowance of $60,000 and $55,000, respectively | 423,363 | 808,955 |
Prepaid expenses | 36,391 | 20,483 |
Inventories, net | 283,861 | 295,218 |
Total current assets | 766,471 | 1,312,965 |
EQUIPMENT, NET | 257,124 | 285,415 |
OTHER ASSETS | ||
Intangible assets, net | 0 | 43,750 |
Goodwill | 0 | 983,645 |
Other assets | 5,070 | 5,070 |
TOTAL ASSETS | 1,028,665 | 2,630,845 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 2,060,388 | 1,984,326 |
Accounts payable - related parties | 33,416 | 41,365 |
Accrued expenses | 22,188 | 80,481 |
Accrued expenses - related parties | 1,185,565 | 1,109,046 |
Derivative liability | 410,524 | 145,282 |
Convertible notes payable | 210,000 | 909,500 |
Notes payable - current portion of long term debt | 1,013,212 | 1,170,339 |
Total current liabilities | 4,935,293 | 5,440,339 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock - 0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2017 and 9/30/2016, respectively | 0 | 0 |
Common stock - 0.001 par value, 100,000,000 shares authorized, 3,860,486 and 2,356,152 shares issued and outstanding at 6/30/2017 and 9/30/2016, respectively | 3,860 | 2,356 |
Additional paid in capital | 26,793,329 | 24,259,702 |
Accumulated deficit | (30,706,645) | (27,073,365) |
Total stockholders' deficit | (3,906,628) | (2,809,494) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 1,028,665 | 2,630,845 |
Series A Convertible Preferred stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock - 0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2017 and 9/30/2016, respectively | 23 | 23 |
Series C Convertible Preferred stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock - 0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2017 and 9/30/2016, respectively | 1,790 | 1,790 |
Series D Convertible Preferred stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock - 0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at 6/30/2017 and 9/30/2016, respectively | $ 1,015 | $ 0 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
CURRENT ASSETS: | ||
Allowance for Accounts receivable | $ 60,000 | $ 55,000 |
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 3,860,486 | 2,356,152 |
Common stock shares outstanding | 3,860,486 | 2,356,152 |
Series A Convertible Preferred stock [Member] | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 23,334 | 23,334 |
Preferred stock shares issued | 23,334 | 23,334 |
Preferred stock shares outstanding | 23,334 | 23,334 |
Series C Convertible Preferred stock [Member] | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 |
Series D Convertible Preferred stock [Member] | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 3,906,250 | 3,906,250 |
Preferred stock shares issued | 1,016,014 | 0 |
Preferred stock shares outstanding | 1,016,014 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement [Abstract] | ||||
REVENUE | $ 1,019,434 | $ 1,833,283 | $ 3,665,253 | $ 4,585,548 |
COST OF SALES | 844,739 | 1,495,568 | 2,995,655 | 3,834,521 |
GROSS PROFIT | 174,695 | 337,715 | 669,598 | 751,027 |
RESEARCH AND DEVELOPMENT EXPENSES | (9,240) | 69,387 | 38,243 | 243,114 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 651,113 | 743,016 | 2,469,239 | 2,297,001 |
IMPAIRMENT OF GOODWILL | 0 | 0 | 983,645 | 0 |
OPERATING LOSS | (467,178) | (474,688) | (2,821,529) | (1,789,088) |
OTHER INCOME (EXPENSE): | ||||
Interest expense | (11,237) | (118,486) | (79,567) | (254,557) |
Other income | 1,634 | (14,199) | 44,774 | (10,934) |
Gain (loss) on change - derivative liability | 1,004,727 | 2,835,362 | (217,828) | 1,965,856 |
(Loss) on conversion of debt | 0 | (506,599) | 0 | (506,599) |
Total other income | 995,124 | 2,196,078 | (252,621) | 1,193,766 |
INCOME (LOSS) BEFORE INCOME TAXES | 527,946 | 1,721,390 | (3,074,150) | (595,322) |
Income taxes - current provision | 0 | 0 | 0 | 0 |
NET INCOME (LOSS) | $ 527,946 | $ 1,721,390 | $ (3,074,150) | $ (595,322) |
Basic income (loss) per common share attributable to Visualant, Inc. and subsidiaries common shareholders- | ||||
Basic income (loss) per share | $ 0.14 | $ 1.29 | $ (0.88) | $ (0.48) |
Weighted average shares of common stock outstanding- basic | 3,844,840 | 1,339,484 | 3,605,904 | 1,236,721 |
Diluted income (loss) per common share attributable to Visualant, Inc. and subsidiaries common shareholders- | ||||
Diluted income (loss) per share | $ .13 | $ 0.97 | $ (.85) | $ (0.48) |
Weighted average shares of common stock outstanding- diluted | 3,970,322 | 1,779,650 | 3,605,904 | 1,236,721 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (3,074,150) | $ (595,322) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||
Depreciation and amortization | 72,041 | 136,129 |
Issuance of capital stock for services and expenses | 411,306 | 222,061 |
Conversion of interest | 68,043 | 0 |
Stock based compensation | 32,661 | 35,511 |
(Gain) on sale of assets | (1,234) | 22,367 |
Loss on change - derivative liability | 213,315 | (1,965,856) |
Amortization of debt discount | 10,500 | 0 |
Bad debt expense | 135,774 | 211 |
Impairment of goodwill | 983,645 | 0 |
Non-cash related to issuance of convertible notes payable | 0 | 148,790 |
Issuance of common stock related to convertible notes payable and Series B Redeemable Convertible Preferred stock | 0 | 577,478 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 259,662 | (483,183) |
Prepaid expenses | (15,908) | 8,032 |
Inventory | 11,357 | (88,705) |
Accounts payable - trade and accrued expenses | 86,339 | 131,063 |
Deferred revenue | 0 | (5,833) |
NET CASH (USED IN) OPERATING ACTIVITIES | (806,649) | (1,857,257) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Investment in BioMedx, Inc., net | (260,000) | 0 |
Repayment from investment in BioMedx, Inc., net | 260,000 | 0 |
Capital expenditures | 0 | (1,290) |
Proceeds from sale of equipment | 1,234 | 6,585 |
NET CASH PROVIDED BY INVESTING ACTIVITIES: | 1,234 | 5,295 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
(Repayments) proceeds from line of credit | (122,127) | 382,895 |
Proceeds from sale of preferred stock | 0 | 505,000 |
Proceeds from warrant exercises | 0 | 349,159 |
Proceeds from convertible notes payable | 330,000 | 924,500 |
Proceeds from issuance of common/preferred stock, net of costs | 557,089 | 0 |
Repayment of convertible notes | (125,000) | (114,979) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 639,962 | 2,046,575 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (165,453) | 194,613 |
CASH AND CASH EQUIVALENTS, beginning of period | 188,309 | 82,266 |
CASH AND CASH EQUIVALENTS, end of period | 22,856 | 276,879 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 53,000 | 33,646 |
Taxes paid | 0 | 0 |
Conversion of convertible debt | 695,000 | 0 |
Benificial conversion feature | 559,130 | 0 |
Conversion of conertible debt to preferred shares | $ 220,000 | $ 0 |
1. GOING CONCERN
1. GOING CONCERN | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
1. GOING CONCERN | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $3,074,150 and $1,746,495 and $2,631,037 for the nine months ended June 30, 2017 and the years ended September 30, 2016 and 2015, respectively. Net cash used in operating activities was $(806,649) and $(3,373,734) and $(239,877) for the nine months ended June 30, 2017 and for the years ended September 30, 2016 and 2015, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of June 30, 2017, the CompanyÂ’s accumulated deficit was $30,706,645. The Company has limited capital resources, and operations to date have been funded with the proceeds from private equity and debt financings and loans from Ronald P. Erickson, our Chief Executive Officer, or entities with which he is affiliated. These conditions raise substantial doubt about our ability to continue as a going concern. The audit report prepared by the CompanyÂ’s independent registered public accounting firm relating to our financial statements for the year ended September 30, 2016 includes an explanatory paragraph expressing the substantial doubt about the CompanyÂ’s ability to continue as a going concern. We believe that our cash on hand will be sufficient to fund our operations until August 31, 2017. We need additional financing to implement our business plan and to service our ongoing operations and pay our current debts. There can be no assurance that we will be able to secure any needed funding, or that if such funding is available, the terms or conditions would be acceptable to us. If we are unable to obtain additional financing when it is needed, we will need to restructure our operations, and divest all or a portion of our business. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to our then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back, eliminate the development of business opportunities or file for bankruptcy and our operations and financial condition may be materially adversely affected. |
2. ORGANIZATION
2. ORGANIZATION | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
2. ORGANIZATION | Visualant, Incorporated (the “Company,” “Visualant, Inc.” or “Visualant”) was incorporated under the laws of the State of Nevada in 1998. The Company has authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share. Since 2007, the Company has been focused primarily on the development of a proprietary technology, which is capable of uniquely identifying and authenticating almost any substance using light at the “photon” level to detect the unique digital “signature” of the substance. The Company calls this its “ChromaID™” technology. In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to its business. TransTech is a distributor of products for employee and personnel identification. TransTech currently provides substantially all of the Company’s revenues. The Company is in the process of commercializing its ChromaID™ technology. To date, the Company has entered into License Agreements with Sumitomo Precision Products Co., Ltd. and Intellicheck, Inc. In addition, it has a technology license agreement with Xinova, formerly Invention Development Management Company, a subsidiary of Intellectual Ventures. The Company believes that its commercialization success is dependent upon its ability to significantly increase the number of customers that are purchasing and using its products. To date the Company has generated minimal revenue from sales of its ChromaID products. The Company is currently not profitable. Even if the Company succeeds in introducing the ChromaID technology and related products to its target markets, the Company may not be able to generate sufficient revenue to achieve or sustain profitability. ChromaID was invented by scientists from the University of Washington under contract with Visualant. The Company has pursued an intellectual property strategy and have been granted eleven patents. The Company also has 20 patents pending. The Company possess all right, title and interest to the issued patents. Ten of the pending patents are licensed exclusively to the Company in perpetuity by the Company’s strategic partner, Xinova |
3. SIGNIFICANT ACCOUNTING POLIC
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Allowance for Doubtful Accounts Inventories Equipment Goodwill Long-Lived Assets Fair Value Measurements and Financial Instruments Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of June 30, 2017 and 2016 based upon the short-term nature of the assets and liabilities. Derivative financial instruments - Revenue Recognition Stock Based Compensation Convertible Securities Net Loss per Share As of June 30, 2016, there were options outstanding for the purchase of 56,610 common shares, warrants for the purchase of 758,403 common shares, an unknown number of shares issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock and up to 41,538 shares of our common stock issuable upon the exercise of placement agent warrants, all of which could potentially dilute future earnings per share. Total outstanding common stock equivalents at June 30, 2016 were 772,833. Diluted common shares outstanding were calculated using the Treasury Stock Method for the three months ended June 30, 2017 and 2016 were as follows: June 30, 2017 June 30, 2016 Weighted average number of common shares used in basic net income per common share 3,844,840 1,339,484 Dilutive effects of outstanding stock options and warrants 125,482 440,166 Weighted average number of common shares used in diluted net income per common share 3,970,322 1,779,650 Dividend Policy Use of Estimates Recent Accounting Pronouncements A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements. |
4. ACCOUNTS RECEIVABLE_CUSTOMER
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | Accounts receivable were $423,363 and $808,955, net of allowance, as of June 30, 2017 and September 30, 2016, respectively. The Company had no customers in excess of 10% of the CompanyÂ’s consolidated revenues for the nine months ended June 30, 2017. The Company had two customers (17.6% and 10.8%) with accounts receivable in excess of 10% as of June 30, 2017. The Company has a total allowance for bad debt in the amount of $60,000 as of June 30, 2017. |
5. INVENTORIES
5. INVENTORIES | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
5. INVENTORIES | Inventories were $283,861 and $295,218 as of June 30, 2017 and September 30, 2016, respectively. Inventories consist primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale. There was a $30,000 and $25,000 reserve for impaired inventory as of June 30, 2017 and September 30, 2016, respectively. |
6. NOTES RECEIVABLE FROM BIOMED
6. NOTES RECEIVABLE FROM BIOMEDX, INC | 9 Months Ended |
Jun. 30, 2017 | |
Notes Receivable | |
6. NOTES RECEIVABLE | On November 1, 2016, the Company purchased an Original Issue Discount Convertible Promissory Note from BioMedx, Inc. The Company paid $260,000 for the Note with a principal amount of $286,000. The Note matured one year from issuance and bears interest at 5%. The principal and interest was convertible into BioMedx common stock at the option of the Company. The Company received 150,000 shares of BioMedx common stock as partial consideration for purchasing the Note. In addition, if BioMedx does not repay the Promissory Note, the Company would have the right to convert the Promissory Note into 51% of the ownership of BioMedx. In addition, the Company and BioMedx agreed to negotiate in good faith to enter into a joint development agreement and subsequent merger transaction prior to December 31, 2017. Due to the uncertainty involved with a start-up company, The CompanyÂ’s management determined that the value of the Promissory Note and BioMedx common stock was zero at December 31, 2016 and recorded an impairment reserve for the full value as of December 31, 2016. During the three months ended March 31, 2017, BioMedx paid the Company $290,608 in full satisfaction of the Note. The Company recorded the gain as a reduction in SG&A expense during the three months ended March 31, 2017. In addition, the Company has not valued the 150,000 shares of BioMedx common stock. |
7. FIXED ASSETS
7. FIXED ASSETS | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
7. FIXED ASSETS | Fixed assets, net of accumulated depreciation, was $257,127 and $285,415 as of June 30, 2017 and September 30, 2016, respectively. Accumulated depreciation was $823,835 and $796,481 as of June 30, 2017 and September 30, 2016, respectively. Total depreciation expense, was $28,788 and $55,100 for the nine months ended June 30, 2017 and 2016, respectively. All equipment is used for selling, general and administrative purposes and accordingly all depreciation is classified in selling, general and administrative expenses. Property and equipment as of June 30, 2017 was comprised of the following: Estimated June 30, 2017 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 251,699 $ 69,581 $ 321,280 Leasehold improvements 5-20 years 548,612 - 548,612 Furniture and fixtures 3-10 years 73,977 101,260 175,237 Software and websites 3- 7 years 35,830 - 35,830 Less: accumulated depreciation (652,994 ) (170,841 ) (823,835 ) $ 257,124 $ - $ 257,124 |
8. GOODWILL
8. GOODWILL | 9 Months Ended |
Jun. 30, 2017 | |
Goodwill Abstract | |
8. GOODWILL | The CompanyÂ’s TransTech business is very capital intensive. The Company reviewed TransTechÂ’s operations based on its overall financial constraints and determined the value has been impaired. The company recorded an impairment of goodwill associated with TransTech of $983,645 during the nine months ended June 30, 2017. |
9. DERIVATIVE INSTRUMENTS
9. DERIVATIVE INSTRUMENTS | 9 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
9. DERIVATIVE INSTRUMENTS | In April 2008, the FASB issued a pronouncement that provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in the pronouncement on accounting for derivatives. This pronouncement was effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of these requirements can affect the accounting for warrants and many convertible instruments with provisions that protect holders from a decline in the stock price (or “down-round” provisions). For example, warrants or conversion features with such provisions are no longer recorded in equity. Down-round provisions reduce the exercise price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise price of those instruments or issues new warrants or convertible instruments that have a lower exercise price. Derivative liability as of June 30, 2017 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 June 30, 2017 Liabilities: Derivative Instruments $ - $ 410,524 $ - $ 410,524 Total $ - $ 410,524 $ - $ 410,524 Derivative liability as of September 30, 2016 is as follows: Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 September 30, 2016 Liabilities: Derivative Instruments $ - $ 145,282 $ - $ 145,282 Total $ - $ 145,282 $ - $ 145,282 The risk-free rate of return reflects the interest rate for the United States Treasury Note with similar time-to-maturity to that of the warrants, historical volatility was 113.0% and the stock price was $0.25 as of June 30, 2017. Derivative Instruments – Warrants with the June 2013 Private Placement The Company issued warrants to purchase 697,370 shares of common stock in connection with our June 2013 private placement of 348,685 shares of common stock. The per share price is subject to adjustment. In August 2016, the exercise price was reset to $0.70 per share. These warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. These warrants were issued with a down-round provision whereby the exercise price would be adjusted downward in the event that additional shares of our common stock or securities exercisable, convertible or exchangeable for the Company’s common stock were issued at a price less than the exercise price. Therefore, the fair value of these warrants were recorded as a liability in the consolidated balance sheet and are marked to market each reporting period until they are exercised or expire or otherwise extinguished. The proceeds from the private placement were allocated between the shares of common stock and the warrants issued in connection with the private placement based upon their estimated fair values as of the closing date at June 14, 2013, resulting in the aggregate amount of $2,494,710 allocated to stockholders’ equity and $2,735,290 allocated to the warrant derivative. The Company recognized $1,448,710 of other expense resulting from the increase in the fair value of the warrant liability at September 30, 2013. During the year ended September 30, 2014, the Company recognized $2,092,000 of other income resulting from the decrease in the fair value of the warrant liability at September 30, 2014. During the year ended September 30, 2015, the Company recognized $104,716 of other expense resulting from the decrease in the fair value of the warrant liability at September 30, 2015. During the year ended September 30, 2016, the Company recognized $2,085,536 of other income resulting from the decrease in the fair value of the warrant liability at September 30, 2016. As of June 30, 2017, the Company had outstanding 524,559 warrants to purchase shares of common stock in connection with our June 2013 private placement that the Company determined had an embedded derivative liability due to the “reset” clause associated with the note’s conversion price. The Company valued the derivative liability of these notes at $22,556 using the Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions (i) dividend yield of 0%; (ii) expected volatility of 113.0%; (iii) risk free rate of .007%, (iv) stock price of $0.25, (v) per share conversion price of $0.70, and (vi) expected term of 1.0 year. During the nine months June 30, 2017, the Company recognized $88,624 of income resulting from the decrease in the fair value of the warrant liability as of June 30, 2017. Derivative Instruments – Warrant with the November 2013 Xinova Services and License Agreement The Company issued a warrant to purchase 97,169 shares of common stock in connection with the November 2013 Xinova Services and License Agreement. The warrant price of $30.00 per share expires November 10, 2018 and the per share price is subject to adjustment. In August 2016, the exercise price was reset to $0.70 per share. This warrant was not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. This warrant was issued with a down-round provision whereby the exercise price would be adjusted downward in the event that additional shares of our common stock or securities exercisable, convertible or exchangeable for our common stock were issued at a price less than the exercise price. Therefore, the fair value of these warrants was recorded as a liability in the consolidated balance sheet and are marked to market each reporting period until they are exercised or expire or otherwise extinguished. During the year ended September 30, 2014, the Company recognized $320,657 of other expense related to the Xinova warrant. During the year ended September 30, 2015, the Company recognized $14,574 of other income related to the Xinova warrant. During the year ended September 30, 2016, the Company recognized $286,260 of other income from the decrease in the fair value of the warrant liability at September 30, 2016. As of June 30, 2017, the Company had outstanding 97,169 warrants to purchase shares of common stock in connection with the November 2013 Xinova Services and License Agreement that the Company determined had an embedded derivative liability due to the “reset” clause associated with the note’s conversion price. The Company valued the derivative liability of these notes at $4,178 using the Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions (i) dividend yield of 0%; (ii) expected volatility of 113.0%; (iii) risk free rate of .007%, (iv) stock price of $0.25, (v) per share conversion price of $0.70, and (vi) expected term of 1.0 year. During the nine months June 30, 2017, the Company recognized $15,644 of income resulting from the decrease in the fair value of the warrant liability as of June 30, 2017. Derivative Instrument – Series A Convertible Preferred Stock The Company issued 11,667 shares of Series A Convertible Preferred Stock with attached warrants during the year ended September 30, 2015. The Company allocated $233,322 to stockholder’s equity and $116,678 to the derivative warrant liability. The warrants were issued with a down round provision. The warrants have a term of five years, 23,334 are exercisable at $30 per common share and 23,334 are exercisable at $45 per common share. On August 4, 2016, the exercise price was adjusted to $0.70 per share. During the year ended September 30, 2015, the Company recognized $30,338 of other expense related to the warrant liability. During the year ended September 30, 2016, the Company recognized $132,724 of other income resulting from the decrease in the fair value of the warrant liability at September 30, 2016. As of June 30, 2017, the Company had outstanding 11,667 shares of Series A Convertible Preferred Stock with attached warrants that the Company determined had an embedded derivative liability due to the “reset” clause associated with the note’s conversion price. The Company valued the derivative liability of these notes at $3,010 using the Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions (i) dividend yield of 0%; (ii) expected volatility of 113.0%; (iii) risk free rate of .007%, (iv) stock price of $0.25, (v) per share conversion price of $0.70, and (vi) expected term of 1.0 year. During the nine months June 30, 2017, the Company recognized $11,270 of income resulting from the increase in the fair value of the warrant liability as of June 30, 2017. Derivative Instrument – Series C Convertible Preferred Stock The Company issued 1,785,715 shares of Series C Convertible Preferred Stock with attached warrants during the year ended September 30, 2016. In February 2017, the Company modified the term of the warrants to provide a down round provision. As of June 30, 2017, the Company had outstanding 1,785,715 shares of Series C Convertible Preferred Stock with attached warrants that the Company determined had an embedded derivative liability due to the “reset” clause associated with the note’s conversion price. The Company valued the derivative liability of these notes at $266,071 using the Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions (i) dividend yield of 0%; (ii) expected volatility of 113.0%; (iii) risk free rate of .007%, (iv) stock price of $0.25, (v) per share conversion price of $0.70, and (vi) expected term of 4.0 years. During the nine months June 30, 2017, the Company recognized $266,071 of other expense resulting from the modification of the warrant, net of the decrease in the fair value of the warrant liability as of June 30, 2017. Derivative Instrument – Placement Agent Warrants During the nine months ended June 30, 2017, the Company revised five year placement agent warrants to purchase 312,500 shares of common stock. In February 2017, the Company reduced the price from $1.00 to $0.70 per share and the exercise price is now subject to adjustment. As of June 30, 2017, the Company had placement agent warrants to purchase 312,500 shares of common stock that the Company determined had an embedded derivative liability due to the “reset” clause associated with the note’s conversion price. The Company valued the derivative liability of these notes at $13,438 using the Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions (i) dividend yield of 0%; (ii) expected volatility of 113.0%; (iii) risk free rate of .007%, (iv) stock price of $0.25, (v) per share conversion price of $0.70, and (vi) expected term of 1.0 year. During the nine months June 30, 2017, the Company recognized $13,428 of other expense resulting from the modification of the warrant, net of the decrease in the fair value of the warrant liability as of June 30, 2017. Derivative Instrument – Series D Convertible Preferred Stock The Company issued 1,016,014 shares of Series C Convertible Preferred Stock with attached warrants during the nine months ended June 30, 2017. In February 2017, the Company modified the term of the warrants to provide a down round provision. As of June 30, 2017, the Company had outstanding 1,016,014 shares of Series D Convertible Preferred Stock with attached warrants that the Company determined had an embedded derivative liability due to the “reset” clause associated with the note’s conversion price. The Company valued the derivative liability of these notes at $101,271 using the Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions (i) dividend yield of 0%; (ii) expected volatility of 113.0%; (iii) risk free rate of .007%, (iv) stock price of $0.25, (v) per share conversion price of $0.70, and (vi) expected term of 4.35 years. During the nine months June 30, 2017, the Company recognized $101,171 of other expense resulting from the modification of the warrant, net of the decrease in the fair value of the warrant liability as of June 30, 2017. |
10. CONVERTIBLE NOTES PAYABLE
10. CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
Jun. 30, 2017 | |
Convertible Notes Payable | |
10. CONVERTIBLE NOTES PAYABLE | Convertible notes payable as of June 30, 2017 and September 30, 2016 consisted of the following: The Company entered into Convertible Promissory Notes totaling $710,000 with accredited investors during September 2015 to February 2016 to fund short-term working capital. The Notes accrue interest at a rate of 8% per annum and become due September 2016 to February 2017 and are convertible into common stock at the same price of our next financing. On November 31, 2016, holders of $695,000 of the Convertible Promissory Notes converted to 944,948 shares of common stock and five year warrants to purchase common stock at a price of $1.00 per share. The Company recorded accrued interest of $14,687 during the six months ended March 31, 2017. On February 15, 2017, the Company repaid the remaining $15,000 Promissory Note and accrued interest in cash. On September 30, 2016, the Company entered into a $210,000 Convertible Promissory Note with Clayton A. Struve, an accredited investor and affiliate of the Company, to fund short-term working capital. The Convertible Promissory Note accrues interest at a rate of 10% per annum and becomes due on March 30, 2017. The Note holder can convert to common stock at $0.70 per share. During the nine months ended June 30, 2017, the Company recorded interest of $ 15,707 related to the convertible note. The Company entered into two Convertible Promissory Notes totaling $330,000 with accredited investors during on November 1, 2016. The Notes accrue interest at a rate of 10% per annum and become due May 1, 2017 and are convertible into Preferred stock at a conversion price of $0.80 per share and a five-year warrant to purchase a share of common stock at $1.00 per share. The company first allocated the value received to the warrants based on the Black Scholes value assuming a 1 year life, 130% volatility and .7% risk free interest rate. The remaining value was below the fair market value on the date of issuance and as a result the company recorded and beneficial conversion dividend of $326,687 at the time issuance. The Company recorded interest of $10,633 as of February 24, 2017. On February 24, 2016, The Company paid $113,544 in full payment of an Original Issue Discount Convertible Promissory Note issued to an accredited investor on November 1, 2016. On February 24, 2017, the holder of an Original Issue Discount Convertible Promissory Note issued on November 1, 2016 converted the principal and outstanding interest of $227,088 into 283,861 shares of the CompanyÂ’s Series D Preferred Stock and a five-year warrant to purchase 283,861 shares of common stock. |
11. NOTES PAYABLE, CAPITALIZED
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | Notes payable, capitalized leases and long-term debt as of June 30, 2017 and September 30, 2016 consisted of the following: June 30, September 30, 2017 2016 Capital Source Business Finance Group $ 213,277 $ 370,404 Note payable to Umpqua Bank 199,935 199,935 Secured note payable to J3E2A2Z LP - related party 600,000 600,000 Total debt 1,013,212 1,170,339 Less current portion of long term debt (1,013,212 ) (1,170,339 ) Long term debt $ - $ - Capital Source Business Finance Group The Company finances its TransTech operations from operations and a Secured Credit Facility with Capital Source Note Payable to Umpqua Bank The Company has a $199,935 Business Loan Agreement with Umpqua Bank (the “Umpqua Loan”), which matures on December 31, 2017 and provides for interest at 3.25% per year. Related to this Umpqua Loan, the Company entered into a demand promissory note for $200,000 on January 10, 2014 with an entity affiliated with Ronald P. Erickson, our Chief Executive Officer. This demand promissory note will be effective in case of a default by the Company under the Umpqua Loan. The Company recorded accrued interest of $20,827 as of June 30, 2017. Note Payables to Ronald P. Erickson or J3E2A2Z LP The Company also has two other demand promissory notes payable to entities affiliated with Mr. Erickson, totaling $600,000. Each of these notes were issued between January and July 2014, provide for interest of 3% per year and now mature on September 30, 2017. The notes payable also provide for a second lien on our assets if not repaid by September 30, 2017 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. We recorded accrued interest of $53,630 as of June 30, 2017. |
12. EQUITY
12. EQUITY | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
12. EQUITY | Authorized Capital Stock Series C and D Preferred Stock and Warrants On August 5, 2016, the Company closed a Series C Preferred Stock and Warrant Purchase Agreement with Clayton A. Struve, an accredited investor for the purchase of $1,250,000 of preferred stock with a conversion price of $0.70 per share. The preferred stock has a yield of 8% and an ownership blocker of 4.99%. In addition, Mr. Struve received a five year warrant to acquire 1,785,714 shares of common stock at $0.70 per share. To determine the effective conversion price, a portion of the proceeds received by the Company upon issuance of the Series C Preferred Stock was first allocated to the freestanding warrants issued as part of this transaction. Given that the warrants will not subsequently be measured at fair value, the Company determined that the warrants should receive an allocation of the proceeds based on their relative fair value. This is based on the understanding that the FASB staff and the SEC staff believe that a freestanding instrument issued in a basket transaction should be initially measured at fair value if it is required to be subsequently measured at fair value pursuant to US generally accepted accounting principles (“GAAP”), with the residual proceeds from the transaction allocated to any remaining instruments based on their relative fair values. As such, the warrants were allocated a fair value of approximately $514,706 upon issuance, with the remaining $735,294 of proceeds allocated to the Series C Preferred Stock. Proportionately, this allocation resulted in approximately 59% of the face amount of the Series C Preferred Stock issuance remaining, which applied to the stated conversion price of $0.70 resulted in an effective conversion price of approximately $0.41. Having determined the effective conversion price, the Company then compared this to the fair value of the underlying Common Stock as of the commitment date, which was approximately $1.06 per share, and concluded that the conversion feature did have an intrinsic value of $0.65 per share. As such, the Company concluded that the Series C Preferred Stock did contain a beneficial conversion feature and an accounting entry and additional financial statement disclosure was required. Because our preferred stock is perpetual, with no stated maturity date, and the conversions may occur any time from inception, the dividend is recognized immediately when a beneficial conversion exists at issuance. During the year ending September 30, 2016, the Company. recognized preferred stock dividends of $1.16 million on Series C preferred stock related to the beneficial conversion feature arising from a common stock effective conversion rate of $0.41 versus a current market price of $1.06 per common share. On November 14, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to certain accredited investors for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated November 10, 2016. The warrants associated with the November 14, 2016 issuance were allocated a fair value of approximately $56,539 upon issuance, with the remaining $63,539 of net proceeds allocated to the Series D Preferred Stock. Proportionately, this allocation resulted in approximately 53% of the amount of the Series D Preferred Stock issuance remaining, which applied to the stated conversion price of $0.80 resulted in an effective conversion price of approximately $0.34. Having determined the effective conversion price, the Company then compared this to the fair value of the underlying Common Stock as of the commitment date, which was approximately $1.14 per share, and concluded that the conversion feature did have an intrinsic value of $0.80 per share. As such, the Company concluded that the Series D Preferred Stock did contain a beneficial conversion feature of $150,211 which was recorded as a beneficial conversion in stockholders’ equity. On December 19, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to an accredited investor for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated December 14, 2016. The warrants associated with the December 19, 2016 issuance were allocated a fair value of approximately $60,357 upon issuance, with the remaining $69,643 of net proceeds allocated to the Series D Preferred Stock. Proportionately, this allocation resulted in approximately 54% of the amount of the Series D Preferred Stock issuance remaining, which applied to the stated conversion price of $0.80 resulted in an effective conversion price of approximately $0.37. Having determined the effective conversion price, the Company then compared this to the fair value of the underlying Common Stock as of the commitment date, which was approximately $0.81 per share, and concluded that the conversion feature did have an intrinsic value of $0.44 per share. As such, the Company concluded that the Series C Preferred Stock did contain a beneficial conversion feature of $82,232 which was recorded as a beneficial conversion in stockholders’ equity. Because our preferred stock is perpetual, with no stated maturity date, and the conversions may occur any time from inception, the dividend is recognized immediately when a beneficial conversion exists at issuance. During the nine months ending June 30, 2017, the Company. recognized preferred stock dividends of $234,443 million on Series D preferred stock related to the beneficial conversion feature arising from a common stock effective conversion rate of $0.34 and $0.37 versus the original market price of $1.14 and $1.06 per common share, respectively. On May 1, 2017, the Company issued 357,143 shares of Series D Convertible Preferred Stock (the “Series D Shares”) and a warrant to purchase 357,143 shares of common stock in a private placement to an accredited investor for gross proceeds of $250,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated May 1, 2016. The initial conversion price of the Series D Shares is $0.70 per share, subject to certain adjustments. The initial exercise price of the warrant is $0.70 per share, also subject to certain adjustments. The Company also amended and restated the Certificate of Designation for the Series D Shares, resulting in an adjustment to the conversion price of all currently outstanding Series D Shares to $0.70 per share. Having determined the effective conversion price, the Company then compared this to the fair value of the underlying Common Stock as of the commitment date, which was approximately $0.48 per share, and concluded that the conversion feature did not have an intrinsic value. As such, the Company concluded that the Series D Preferred Stock did not contain a beneficial conversion feature and an accounting entry and additional financial statement disclosure was not required Common Stock All of the offerings and sales described below were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities, the offerings and sales were made to a limited number of persons, all of whom were accredited investors and transfer was restricted by the company in accordance with the requirements of Regulation D and the Securities Act. All issuances to accredited and non-accredited investors were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D, including limiting the number of non-accredited investors to no more than 35 investors who have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of an investment in our securities. The following equity issuances occurred during the nine months ended June 30, 2017: On October 21, 2015, the Company entered into a Public Relations Agreement with Financial Genetics LLC for public relation services. On October 18, 2016, the Company entered into an Amendment to Public Relations Agreement with Financial Genetics LLC. Under the Agreements, Financial Genetics was issued 359,386 shares of our common stock during the nine months ended June 30, 2017. The Company expensed $271,309 during the nine months ended June 30, 2017. On October 6, 2016, the Company entered into a Services Agreement with Redwood Investment Group LLC for financial services. Under the Agreement, Redwood was issued 200,000 shares of our common stock. The Company expensed $140,000 during the nine months ended June 30, 2017. The Company entered into Convertible Promissory Notes totaling $710,000 with accredited investors during September 2015 to February 2016 to fund short-term working capital. The Notes accrued interest at a rate of 8% per annum and became due September 2016 to February 2017 and were convertible into common stock as part of our next financing. On November 30, 2016, the Company converted $695,000 of the /Convertible Promissory Notes and interest of $54,078 into 936,348 shares of comment stock. The Company also issued warrants to purchase 936,348 shares of the Company’s common stock. The five-year warrants are exercisable at $1.00 per share, subject to adjustment. On December 22, 2016, a supplier converted accounts payable totaling $6,880 into 8,600 shares of common stock. Warrants to Purchase Common Stock The following warrants were issued during the nine months ended June 30, 2017: The Company entered into Convertible Promissory Notes totaling $710,000 with accredited investors during September 2015 to February 2016 to fund short-term working capital. The Notes accrued interest at a rate of 8% per annum and became due September 2016 to February 2017 and were convertible into common stock as part of our next financing. On November 30, 2016, the Company converted $695,000 of the /Convertible Promissory Notes and interest of $54,078 into 936,348 shares of comment stock. The Company also issued warrants to purchase 936,348 shares of the Company’s common stock. The five-year warrants are exercisable at $1.00 per share, subject to adjustment. On November 14, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to certain accredited investors for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated November 10, 2016. The warrant was valued at $131,250. On December 19, 2016, the Company issued 187,500 shares of Series D Convertible Preferred Stock and a warrant to purchase 187,500 shares of common stock in a private placement to an accredited investor for gross proceeds of $150,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated December 14, 2016. The warrant was valued at $131,250. On February 24, 2017, the Company issued 283,861 shares of Series D Convertible Preferred Stock and a warrant to purchase 283,861 shares of common stock in a private placement to an accredited investor for conversion of a $220,000 Promissory Note and accrued interest of $7,089 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated February 28, 2017. The warrant was valued at $198,703. During the nine months ended June 30, 2017, the Company revised five year placement agent warrants to purchase 312,500 shares of common stock. The price was reduced from $1.00 to $0.70 per share and the exercise price is now subject to adjustment. The Company recorded 250,000 shares during the year ended September 30, 2016 the fair value of these warrants is $218,751 as of June 30, 2017. On May 1, 2017, the Company issued 357,143 shares of Series D Convertible Preferred Stock and a warrant to purchase 357,143 shares of common stock in a private placement to an accredited investor for gross proceeds of $250,000 pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated May 1, 2017. The warrant was valued at $5,357. The conversion price of the Series D Shares and related warrants is currently $0.70 per share, subject to certain adjustments. A summary of the warrants outstanding as of June 30, 2017 were as follows: June 30, 2017 Weighted Average Exercise Shares Price Outstanding at beginning of period 3,453,171 $ 0.840 Issued 2,014,854 0.802 Exercised - - Forfeited - - Expired (7,669 ) (30.000 ) Outstanding at end of period 5,460,356 $ 0.787 Exerciseable at end of period 5,460,356 A summary of the status of the warrants outstanding as of June 30, 2017 is presented below: June 30, 2017 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 4,517,341 3.76 $ 0.700 4,517,341 $ 0.700 936,348 4.42 1.000 936,348 1.000 6,667 1.75 30.000 6,667 30.000 5,460,356 3.81 $ 0.787 5,460,356 $ 0.787 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the period ended June 30, 2017 were as follows: Assumptions Dividend yield 0% Expected life .25-3 Expected volatility 130% Risk free interest rate .01-.07% There were vested warrants of 5,460,356 as of June 30, 2017 with an aggregate intrinsic value of $0. |
13. STOCK OPTIONS
13. STOCK OPTIONS | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
13. STOCK OPTIONS | Description of Stock Option Plan On March 21, 2013, an amendment to the Stock Option Plan was approved by the stockholders of the Company, increasing the number of shares reserved for issuance under the Plan to 93,333 shares. Determining Fair Value under ASC 505 The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed. Stock Option Activity The Company had no stock option transactions during the nine months ended June 30, 2017. There are currently 50,908 options to purchase common stock at an average exercise price of $18.05 per share outstanding as of June 30, 2017 under the 2011 Stock Incentive Plan. The Company recorded $32,661 and $35,511 of compensation expense, net of related tax effects, relative to stock options for the nine months ended June 30, 2017 and 2016 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00) and ($0.03) per share, respectively. As of June 30, 2017, there is approximately $80,502 of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately 2.42 years. Stock option activity for the nine months ended June 30, 2017 and the years ended September 30, 2016 and 2015 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2014 87,333 $ 18.804 1,642,200 Granted 11,335 15.000 170,025 Exercised - - - Forfeitures (41,261 ) (18.286 ) (754,500 ) Outstanding as of September 30, 2015 57,407 18.425 1,057,725 Granted - - - Exercised - - - Forfeitures (6,499 ) (21.403 ) (139,098 ) Outstanding as of September 30, 2016 50,908 18.045 918,627 Granted - - - Exercised - - - Forfeitures - - - Outstanding as of June 30, 2017 50,908 $ 18.045 $ 918,627 The following table summarizes information about stock options outstanding and exercisable as of June 30, 2017: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exerciseable Exerciseable Exerciseable 13.500 3,334 1.50 $ 13.500 3,334 $ 13.50 15.000 20,906 2.08 15.000 9,570 15.00 19.500 13,334 2.33 19.500 13,334 19.50 22.500 13,334 2.88 22.500 13,334 22.50 50,908 2.42 $ 18.045 39,572 $ 18.92 There were exercisable options of 39,572 as of June 30, 20 |
14. OTHER SIGNIFICANT TRANSACTI
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson See Note 10 for Notes Payable to Ronald P. Erickson, our Chief Executive Officer Chief and/or entities in which Mr. Erickson has a beneficial interest. Note Payable to Umpqua Bank The Company has a $199,935 Business Loan Agreement with Umpqua Bank (the “Umpqua Loan”), which matures on December 31, 2017 and provides for interest at 3.25% per year. Related to this Umpqua Loan, the Company entered into a demand promissory note for $200,000 on January 10, 2014 with an entity affiliated with Ronald P. Erickson, our Chief Executive Officer. This demand promissory note will be effective in case of a default by the Company under the Umpqua Loan. The Company recorded accrued interest of $20,827 as of June 30, 2017. Note Payables to Ronald P. Erickson or J3E2A2Z LP The Company also has two other demand promissory notes payable to entities affiliated with Mr. Erickson, totaling $600,000. Each of these notes were issued between January and July 2014, provide for interest of 3% per year and now mature on September 30, 2017. The notes payable also provide for a second lien on our assets if not repaid by September 30, 2017 or converted into convertible debentures or equity on terms acceptable to the Mr. Erickson. We recorded accrued interest of $ 53,630 as of June 30, 2017. Other Amounts Due to Mr. Erickson Mr. Erickson and/or entities with which he is affiliated also have advanced $522,332 and have unreimbursed expenses and compensation of approximately $380,000. In total, the Company owes Mr. Erickson, or entities with which he is affiliated, $1,576,790 as of June 30, 2017. |
15. COMMITMENTS, CONTINGENCIES
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | Legal Proceedings The Company may from time to time become a party to various legal proceedings arising in the ordinary course of our business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to our business. Properties and Operating Leases The Company is obligated under the following non-cancelable operating leases for its various facilities and certain equipment. Years Ended June 30, 2017 Total 2018 $ 39,474 2019 67,896 2020 71,670 2021 - 2022 - Beyond - Total $ 179,040 Corporate Offices On April 13, 2017, the Company leased its executive office located at 500 Union Street, Suite 810, Seattle, Washington, USA, 98101. The Company leases 943 square feet and the net monthly payment is $2,672. The monthly payment increases approximately 3% each year and the lease expires May 31, 2022. TransTech Facilities TransTech is located at 12142 NE Sky Lane, Suite 130, Aurora, OR 97002. TransTech leases a total of approximately 9,750 square feet of office and warehouse space for its administrative offices, product inventory and shipping operations. The Company leases this office on a month to month basis at $6,942 per month. |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 9 Months Ended |
Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
16. SUBSEQUENT EVENTS | The Company evaluates subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements are available. Subsequent to June 30, 2017, there were the following material transactions that require disclosure: Consulting Agreement with Phil Bosua On July 7, 2017, the Company entered into a Consulting Agreement with Phil Bosua whereby Mr. Bosua can earn up to 200,000 shares of the Company’s company stock based on achieving certain product development and funding milestones. Amended Notes Payable with Ronald P. Erickson, Chief Executive Officer On July 14, 2017, the Company entered into amendments to two demand promissory notes, totaling $600,000, and a note payable for $200,000 related to the Umpqua Bank Business Loan Agreement with Mr. Erickson, our Chief Executive Officer and/or entities in which Mr. Erickson has a beneficial interest. The amendments extend the due date from March 31, 2017 to September 30, 2017 and continue to provide for interest of 3% per annum and a second lien on company assets if not repaid by September 30, 2017 or converted into convertible debentures or equity on terms acceptable to the Holder. Resignation of Jeffrey Wilson as Chief Financial Officer and Secretary On July 31, 2017, Jeffrey Wilson resigned as Chief Financial Officer and Secretary of the Company. Entry into Employment Agreement with Ronald P. Erickson, Chief Executive Officer On August 4, 2017, the Board of Directors approved an Employment Agreement with Ronald P. Erickson pursuant to which the Company engaged Mr. Erickson as the Company’s Chief Executive Officer through June 30, 2018. Mr. Erickson’s annual compensation is $180,000. Mr. Erickson is also entitled to receive an annual bonus and equity awards compensation as approved by the Board. The bonus should be paid no later than 30 days following earning of the bonus. Mr. Erickson will be entitled to participate in all group employment benefits that are offered by the Company to the Company’s senior executives and management employees from time to time, subject to the terms and conditions of such benefit plans, including any eligibility requirements. If the Company terminates Mr. Erickson’s employment at any time prior to the expiration of the Term without Cause, as defined in the Employment Agreement, or if Mr. Erickson terminates his employment at any time for “Good Reason” or due to a “Disability”, Mr. Erickson will be entitled to receive (i) his Base Salary amount for one year; and (ii) medical benefits for eighteen months. |
3. SIGNIFICANT ACCOUNTING POL22
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Basis of Presentation | The accompanying unaudited consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. The preparation of these unaudited condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). |
Principles of Consolidation | The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries, TransTech Systems, Inc. Inter-Company items and transactions have been eliminated in consolidation. |
Cash and Cash Equivalents | The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable consist primarily of amounts due to the Company from normal business activities. The Company maintains an allowance for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific risks identified within the portfolio. If the financial condition of the customers were to deteriorate resulting in an impairment of their ability to make payments, or if payments from customers are significantly delayed, additional allowances might be required. |
Inventories | Inventories consist primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale and are stated at the lower of cost or market on the first-in, first-out (“FIFO”) method. Inventories are considered available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received by TransTech at a warehouse location. The Company records a provision for excess and obsolete inventory whenever an impairment has been identified. There is a $30,000 and $25,000 reserve for impaired inventory as of June 30, 2017 and September 30, 2016, respectively. |
Equipment | Equipment consists of machinery, leasehold improvements, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 2-10 years, except for leasehold improvements which are depreciated over 5-20 years. |
Goodwill | Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. With the adoption of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but are combined when reporting units within the same segment have similar economic characteristics. Under the criteria set forth by ASC 350, the Company has one reporting unit based on the current structure. An impairment loss generally would be recognized when the carrying amount of the reporting unitÂ’s net assets exceeds the estimated fair value of the reporting unit. The Company determined that its goodwill related to the 2010 acquisition of TransTech Systems was impaired and recorded an impairment of $983,645 as selling, general and administrative expenses during the nine months ended June 30, 2016. |
Long-Lived Assets | The Company reviews its long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results. |
Fair Value Measurements and Financial Instruments | ASC Topic 820, Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of June 30, 2017 and 2016 based upon the short-term nature of the assets and liabilities. |
Derivative financial instruments | The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. |
Revenue Recognition | Visualant and TransTech revenue are derived from products and services. Revenue is considered realized when the products or services have been provided to the customer, the work has been accepted by the customer and collectability is reasonably assured. Furthermore, if an actual measurement of revenue cannot be determined, the Company defers all revenue recognition until such time that an actual measurement can be determined. If during the course of a contract management determines that losses are expected to be incurred, such costs are charged to operations in the period such losses are determined. Revenues are deferred when cash has been received from the customer but the revenue has not been earned. |
Stock Based Compensation | The Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock options and stock to non-employees and other parties are accounted for in accordance with the ASC 505. |
Convertible Securities | Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities issued subsequent to September 30, 2015. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first. |
Net Loss per Share | Under the provisions of ASC 260, “Earnings Per Share,” basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The common stock equivalents have not been included as they are anti-dilutive. As of June 30, 2017, there were options outstanding for the purchase of 50,908 common shares, warrants for the purchase of 5,127,416 common shares, 2,825,053 shares of our common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock and up to 332,940 shares of our common stock issuable upon the exercise of placement agent warrants, all of which could potentially dilute future earnings per share. Total outstanding common stock equivalents at June 30, 2017 were 6,527,268. As of June 30, 2016, there were options outstanding for the purchase of 56,610 common shares, warrants for the purchase of 758,403 common shares, an unknown number of shares issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock and up to 41,538 shares of our common stock issuable upon the exercise of placement agent warrants, all of which could potentially dilute future earnings per share. Total outstanding common stock equivalents at June 30, 2016 were 772,833. Diluted common shares outstanding were calculated using the Treasury Stock Method for the three months ended June 30, 2017 and 2016 were as follows: June 30, 2017 June 30, 2016 Weighted average number of common shares used in basic net income per common share 3,844,840 1,339,484 Dilutive effects of outstanding stock options and warrants 125,482 440,166 Weighted average number of common shares used in diluted net income per common share 3,970,322 1,779,650 |
Dividend Policy | The Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities. |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to the CompanyÂ’s consolidated financial statements. |
3. SIGNIFICANT ACCOUNTING POL23
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Significant Accounting Policies Adoption Of Accounting Standards Tables | |
Anti dilutive shares | June 30, 2017 June 30, 2016 Weighted average number of common shares used in basic net income per common share 3,844,840 1,339,484 Dilutive effects of outstanding stock options and warrants 125,482 440,166 Weighted average number of common shares used in diluted net income per common share 3,970,322 1,779,650 |
7. FIXED ASSETS (Tables)
7. FIXED ASSETS (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Schedule of Property and equipment | Estimated June 30, 2017 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 251,699 $ 69,581 $ 321,280 Leasehold improvements 5-20 years 548,612 - 548,612 Furniture and fixtures 3-10 years 73,977 101,260 175,237 Software and websites 3- 7 years 35,830 - 35,830 Less: accumulated depreciation (652,994 ) (170,841 ) (823,835 ) $ 257,124 $ - $ 257,124 |
9. DERIVATIVE INSTRUMENTS (Tabl
9. DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative liability | Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 June 30, 2017 Liabilities: Derivative Instruments $ - $ 410,524 $ - $ 410,524 Total $ - $ 410,524 $ - $ 410,524 Carrying Fair Value Measurements Using Inputs Amount at Financial Instruments Level 1 Level 2 Level 3 September 30, 2016 Liabilities: Derivative Instruments $ - $ 145,282 $ - $ 145,282 Total $ - $ 145,282 $ - $ 145,282 |
11. NOTES PAYABLE, CAPITALIZE26
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Notes payable, capitalized leases and long term debt | June 30, September 30, 2017 2016 Capital Source Business Finance Group $ 213,277 $ 370,404 Note payable to Umpqua Bank 199,935 199,935 Secured note payable to J3E2A2Z LP - related party 600,000 600,000 Total debt 1,013,212 1,170,339 Less current portion of long term debt (1,013,212 ) (1,170,339 ) Long term debt $ - $ - |
12. EQUITY (Tables)
12. EQUITY (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Summary of the warrants issued | June 30, 2017 Weighted Average Exercise Shares Price Outstanding at beginning of period 3,453,171 $ 0.840 Issued 2,014,854 0.802 Exercised - - Forfeited - - Expired (7,669 ) (30.000 ) Outstanding at end of period 5,460,356 $ 0.787 Exerciseable at end of period 5,460,356 |
Summary of the status of the warrants outstanding | June 30, 2017 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 4,517,341 3.76 $ 0.700 4,517,341 $ 0.700 936,348 4.42 1.000 936,348 1.000 6,667 1.75 30.000 6,667 30.000 5,460,356 3.81 $ 0.787 5,460,356 $ 0.787 |
Weighted average assumptions relating to the valuation of the Companys warrants | Dividend yield 0% Expected life .25-3 Expected volatility 130% Risk free interest rate .01-.07% |
13. STOCK OPTIONS (Tables)
13. STOCK OPTIONS (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Stock option activity | Weighted Average Options Exercise Price $ Outstanding as of September 30, 2014 87,333 $ 18.804 1,642,200 Granted 11,335 15.000 170,025 Exercised - - - Forfeitures (41,261 ) (18.286 ) (754,500 ) Outstanding as of September 30, 2015 57,407 18.425 1,057,725 Granted - - - Exercised - - - Forfeitures (6,499 ) (21.403 ) (139,098 ) Outstanding as of September 30, 2016 50,908 18.045 918,627 Granted - - - Exercised - - - Forfeitures - - - Outstanding as of June 30, 2017 50,908 $ 18.045 $ 918,627 |
Stock options outstanding and exercisable | Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exerciseable Exerciseable Exerciseable 13.500 3,334 1.50 $ 13.500 3,334 $ 13.50 15.000 20,906 2.08 15.000 9,570 15.00 19.500 13,334 2.33 19.500 13,334 19.50 22.500 13,334 2.88 22.500 13,334 22.50 50,908 2.42 $ 18.045 39,572 $ 18.92 |
15. COMMITMENTS, CONTINGENCIE29
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Commitments Contingencies And Legal Proceedings Tables | |
Properties and Operating Leases | Years Ended June 30, 2017 Total 2018 $ 39,474 2019 67,896 2020 71,670 2021 - 2022 - Beyond - Total $ 179,040 |
1. GOING CONCERN (Details Narra
1. GOING CONCERN (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Notes to Financial Statements | ||||
Net loss | $ 3,074,150 | $ 1,746,495 | $ 2,631,037 | |
Net cash used in operating activities | (806,649) | $ (1,857,257) | (3,373,734) | $ (239,877) |
Accumulated Deficit | $ 30,706,645 | $ 27,073,365 |
3. SIGNIFICANT ACCOUNTING POL31
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Significant Accounting Policies Adoption Of Accounting Standards Details | ||||
Weighted average number of common shares used in basic net income per common share | 3,844,840 | 1,339,484 | 3,605,904 | 1,236,721 |
Dilutive effects of outstanding stock options and warrants | 125,482 | 440,166 | ||
Weighted average number of common shares used in diluted net income per common share | 3,970,322 | 1,779,650 | 3,605,904 | 1,236,721 |
3. SIGNIFICANT ACCOUNTING POL32
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Sep. 30, 2016 | |
Reserve for impaired inventory | $ 30,000 | $ 30,000 | $ 25,000 | ||
Goodwill impairment | $ 0 | $ 0 | $ 983,645 | $ 0 | |
Minimum [Member] | |||||
Estimated useful lives of assets | 2 years | ||||
Maximum [Member] | |||||
Estimated useful lives of assets | 10 years | ||||
Leasehold Improvements [Member] | Minimum [Member] | |||||
Estimated useful lives of assets | 5 years | ||||
Leasehold Improvements [Member] | Maximum [Member] | |||||
Estimated useful lives of assets | 20 years |
4. ACCOUNTS RECEIVABLE_CUSTOM33
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION (Details Narrative) - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
Notes to Financial Statements | ||
Accounts receivable, net of allowance | $ 423,363 | $ 808,955 |
5. INVENTORIES (Details Narrati
5. INVENTORIES (Details Narrative) - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
Notes to Financial Statements | ||
Inventories | $ 283,861 | $ 295,218 |
Reserve for impaired inventory | $ 30,000 | $ 25,000 |
7. FIXED ASSETS (Details)
7. FIXED ASSETS (Details) - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
Machinery and equipment (2-10 years) | $ 321,280 | |
Leasehold improvements (5-20 years) | 548,612 | |
Furniture and fixtures (3-10 years) | 175,237 | |
Software and websites (3- 7 years) | 35,830 | |
Less: accumulated depreciation | (823,835) | $ (796,481) |
Property and equipment, net | 257,124 | $ 285,415 |
Purchased [Member] | ||
Machinery and equipment (2-10 years) | 251,699 | |
Leasehold improvements (5-20 years) | 548,612 | |
Furniture and fixtures (3-10 years) | 73,977 | |
Software and websites (3- 7 years) | 35,830 | |
Less: accumulated depreciation | (652,994) | |
Property and equipment, net | 257,124 | |
Capital Leases [Member] | ||
Machinery and equipment (2-10 years) | 69,581 | |
Leasehold improvements (5-20 years) | 0 | |
Furniture and fixtures (3-10 years) | 101,260 | |
Software and websites (3- 7 years) | 0 | |
Less: accumulated depreciation | (170,841) | |
Property and equipment, net | $ 0 |
7. FIXED ASSETS (Details Narrat
7. FIXED ASSETS (Details Narrative) - USD ($) | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | |||
Property and equipment, net | $ 257,124 | $ 285,415 | |
Property and equipment, accumulated depreciation | 823,835 | $ 796,481 | |
Depreciation expense | $ 28,788 | $ 55,100 |
8. Goodwill (Details Narrative)
8. Goodwill (Details Narrative) | 9 Months Ended |
Jun. 30, 2017USD ($) | |
Goodwill Details Narrative | |
Impairment of goodwill | $ 983,645 |
9. DERIVATIVE INSTRUMENTS (Deta
9. DERIVATIVE INSTRUMENTS (Details) - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
Fair Value Measurements Level 1 [Member] | ||
Liabilities: | ||
Derivative Instruments | $ 0 | $ 0 |
Total | 0 | 0 |
Fair Value Measurements Level 2 [Member] | ||
Liabilities: | ||
Derivative Instruments | 410,524 | 145,282 |
Total | 410,524 | 145,282 |
Fair Value Measurements Level 3 [Member] | ||
Liabilities: | ||
Derivative Instruments | 0 | 0 |
Total | 0 | 0 |
Carrying Amount [Member] | ||
Liabilities: | ||
Derivative Instruments | 410,524 | 145,282 |
Total | $ 410,524 | $ 145,282 |
9. DERIVATIVE INSTRUMENTS (De39
9. DERIVATIVE INSTRUMENTS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Warrants June 2013 Private Placement [Member] | ||||
Fair value of the warrant liability | $ 67,170 | $ 2,085,536 | $ 104,716 | $ 2,092,000 |
Exercise price | $ 0.25 | |||
Expected term (years) | 1 year | |||
Dividend yield | 0.00% | |||
Expected volatility | 113.00% | |||
Risk-free interest rate | 0.007% | |||
Warrant November 2013 IDMC Services and License Agreement [Member] | ||||
Fair value of the warrant liability | $ 286,260 | 320,657 | 14,574 | |
Exercise price | $ 0.25 | |||
Expected term (years) | 1 year | |||
Dividend yield | 0.00% | |||
Expected volatility | 113.00% | |||
Risk-free interest rate | 0.007% | |||
Series A Convertible Preferred Stock [Member] | ||||
Fair value of the warrant liability | 116,678 | |||
Other expense | $ 9,520 | $ 30,338 | ||
Other income | $ 132,724 | |||
Exercise price | $ 0.70 | |||
Expected term (years) | 1 year | |||
Dividend yield | 0.00% | |||
Expected volatility | 113.00% | |||
Risk-free interest rate | 0.007% |
10. CONVERTIBLE NOTES PAYABLE (
10. CONVERTIBLE NOTES PAYABLE (Details Narrative) | Jun. 30, 2017USD ($) |
Vis Vires Group, Inc [Member] | |
Accrued interest | $ 14,687 |
11. NOTES PAYABLE, CAPITALIZE41
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Details) - USD ($) | Jun. 30, 2017 | Sep. 30, 2016 |
Notes Payable Capitalized Leases And Long Term Debt Details | ||
Capital Source Business Finance Group | $ 213,277 | $ 370,404 |
Note payable to Umpqua Bank | 199,935 | 199,935 |
Secured note payable to J3E2A2Z LP - related party | 600,000 | 600,000 |
Total debt | 1,013,212 | 1,170,339 |
Less current portion of long term debt | (1,013,212) | (1,170,339) |
Long term debt | $ 0 | $ 0 |
12. EQUITY (Details)
12. EQUITY (Details) | 9 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Shares | |
Outstanding at beginning of period | 3,453,171 |
Issued | 2,014,854 |
Exercised | 0 |
Forfeited | 0 |
Expired | (7,669) |
Outstanding at end of period | 5,460,356 |
Exercisable at end of period | 39,572 |
Weighted Average Exercise Price: | |
Outstanding at beginning of period | $ / shares | $ 0.840 |
Issued | $ / shares | 0.802 |
Exercised | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Expired | $ / shares | (30) |
Outstanding at end of period | $ / shares | $ 0.787 |
12. EQUITY (Details 1)
12. EQUITY (Details 1) | 9 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Number of Warrants | 5,460,356 |
Weighted Average Remaining Life (years) | 3 years 9 months 22 days |
Weighted Average Exercise Price, outstanding | $ / shares | $ 0.787 |
Shares Exercisable | 5,460,356 |
Weighted Average Exercise Price, exerciseable | $ / shares | $ 0.787 |
Exercise Price 13.500 | |
Number of Warrants | 3,334 |
Weighted Average Remaining Life (years) | 1 year 6 months |
Weighted Average Exercise Price, outstanding | $ / shares | $ 13.5 |
Shares Exercisable | 3,334 |
Exercise Price 15.000 | |
Number of Warrants | 20,906 |
Weighted Average Remaining Life (years) | 2 years 29 days |
Weighted Average Exercise Price, outstanding | $ / shares | $ 15 |
Shares Exercisable | 9,570 |
Exercise Price 19.500 | |
Number of Warrants | 13,334 |
Weighted Average Remaining Life (years) | 2 years 3 months 29 days |
Weighted Average Exercise Price, outstanding | $ / shares | $ 19.5 |
Shares Exercisable | 13,334 |
Exercise Price 22.500 | |
Number of Warrants | 13,334 |
Weighted Average Remaining Life (years) | 2 years 10 months 17 days |
Weighted Average Exercise Price, outstanding | $ / shares | $ 22.5 |
Shares Exercisable | 13,334 |
Warrant One [Member] | |
Number of Warrants | 4,517,341 |
Weighted Average Remaining Life (years) | 3 years 9 months 4 days |
Weighted Average Exercise Price, outstanding | $ / shares | $ 0.7 |
Shares Exercisable | 4,517,341 |
Weighted Average Exercise Price, exerciseable | $ / shares | $ 0.7 |
Warrant Two [Member] | |
Number of Warrants | 936,348 |
Weighted Average Remaining Life (years) | 4 years 5 months 1 day |
Weighted Average Exercise Price, outstanding | $ / shares | $ 1 |
Shares Exercisable | 936,348 |
Weighted Average Exercise Price, exerciseable | $ / shares | $ 1 |
Warrant Three [Member] | |
Number of Warrants | 6,667 |
Weighted Average Remaining Life (years) | 1 year 9 months |
Weighted Average Exercise Price, outstanding | $ / shares | $ 30 |
Shares Exercisable | 6,667 |
Weighted Average Exercise Price, exerciseable | $ / shares | $ 30 |
Exercise Price Total | |
Number of Warrants | 50,908 |
Weighted Average Exercise Price, outstanding | $ / shares | $ 18.04 |
Shares Exercisable | 39,516 |
12. EQUITY (Details 2)
12. EQUITY (Details 2) | 9 Months Ended |
Jun. 30, 2017 | |
Dividend yield | 0.00% |
Expected volatility | 130.00% |
Minimum [Member] | |
Expected life | 3 months |
Risk free interest rate | 0.01% |
Maximum [Member] | |
Expected life | 3 years |
Risk free interest rate | 0.07% |
12. EQUITY (Details Narrative)
12. EQUITY (Details Narrative) | Jun. 30, 2017USD ($)shares |
Notes to Financial Statements | |
Intrinsic value | $ | $ 0 |
Warrants Vested | shares | 4,827,020 |
13. STOCK OPTIONS (Details)
13. STOCK OPTIONS (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | |
Shares: | |||
Outstanding at beginning of period | 3,453,171 | ||
Shares granted | 2,014,854 | ||
Shares exercised | 0 | ||
Shares forfeitures | 0 | ||
Outstanding at end of period | 5,460,356 | 3,453,171 | |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $ 0.840 | ||
Shares granted | 0.802 | ||
Shares exercised | 0 | ||
Shares forfeitures | 0 | ||
Outstanding at end of period | $ 0.787 | $ 0.840 | |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, End | $ 0 | ||
Stock Options | |||
Shares: | |||
Outstanding at beginning of period | 50,908 | 57,407 | 87,333 |
Shares granted | 0 | 0 | 11,335 |
Shares exercised | 0 | 0 | 0 |
Shares forfeitures | 0 | (6,499) | (41,261) |
Outstanding at end of period | 50,908 | 50,908 | 57,407 |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $ 18.045 | $ 18.425 | $ 18.804 |
Shares granted | 0 | 0 | 15 |
Shares exercised | 0 | 0 | 0 |
Shares forfeitures | 0 | (21.403) | (18.286) |
Outstanding at end of period | $ 18.045 | $ 18.045 | $ 18.425 |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, Beginning | $ 918,627 | $ 1,057,725 | $ 1,642,200 |
Aggregate Intrinsic Value Outstanding, Granted | $ 0 | $ 0 | $ 170,025 |
Aggregate Intrinsic Value Outstanding, Exercised | $ 0 | $ 0 | $ 0 |
Aggregate Intrinsic Value Outstanding, Forefeitures | $ 0 | $ (139,098) | $ (754,500) |
Aggregate Intrinsic Value Outstanding, End | $ 918,627 | $ 918,627 | $ 1,057,725 |
13. STOCK OPTIONS (Details 1)
13. STOCK OPTIONS (Details 1) | 9 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Number of Outstanding Stock Options | 5,460,356 |
Weighted Average Remaining Life (years) | 3 years 9 months 22 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 0.787 |
Number Exercisable | 5,460,356 |
Exercise Price 13.500 | |
Number of Outstanding Stock Options | 3,334 |
Weighted Average Remaining Life (years) | 1 year 6 months |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 13.5 |
Number Exercisable | 3,334 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 13.5 |
Exercise Price 15.000 | |
Number of Outstanding Stock Options | 20,906 |
Weighted Average Remaining Life (years) | 2 years 29 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 15 |
Number Exercisable | 9,570 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 15 |
Exercise Price 19.500 | |
Number of Outstanding Stock Options | 13,334 |
Weighted Average Remaining Life (years) | 2 years 3 months 29 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 19.5 |
Number Exercisable | 13,334 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 19.5 |
Exercise Price 22.500 | |
Number of Outstanding Stock Options | 13,334 |
Weighted Average Remaining Life (years) | 2 years 10 months 17 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 22.5 |
Number Exercisable | 13,334 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 22.5 |
Warrant One [Member] | |
Number of Outstanding Stock Options | 4,517,341 |
Weighted Average Remaining Life (years) | 3 years 9 months 4 days |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 0.7 |
Number Exercisable | 4,517,341 |
Warrant Two [Member] | |
Number of Outstanding Stock Options | 936,348 |
Weighted Average Remaining Life (years) | 4 years 5 months 1 day |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 1 |
Number Exercisable | 936,348 |
Warrant Three [Member] | |
Number of Outstanding Stock Options | 6,667 |
Weighted Average Remaining Life (years) | 1 year 9 months |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 30 |
Number Exercisable | 6,667 |
Exercise Price Total | |
Number of Outstanding Stock Options | 50,908 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 18.04 |
Number Exercisable | 39,516 |
Weighted Average Exercise Price Exerciseable | $ / shares | $ 18.92 |
2011 Stock Incentive Plan | |
Number of Outstanding Stock Options | 50,908 |
13. STOCK OPTIONS (Details Narr
13. STOCK OPTIONS (Details Narrative) - USD ($) | 9 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Compensation expense | $ 32,661 | $ 35,511 |
Unrecognized compensation costs | $ 80,502 | |
Period for recognition | 2 years 5 months 1 day | |
Options to purchase common stock under 2011 Stock Incentive Plan | 5,460,356 | |
Average exercise price under 2011 Stock Incentive Plan | $ 0.787 | |
Exercisable at end of period | 39,572 | |
Aggregate intrinsic value | $ 0 | |
2011 Stock Incentive Plan | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 50,908 | |
Average exercise price under 2011 Stock Incentive Plan | $ 18.05 |
14. OTHER SIGNIFICANT TRANSAC49
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details narrative) | 9 Months Ended |
Jun. 30, 2017USD ($) | |
Accrued liabilities related parties from advances | $ 53,630 |
Business loan | $ 199,935 |
Business loan maturity date | Dec. 31, 2017 |
Business loan rate of interest | 3.25% |
Chief Executive Officer | |
Accrued liabilities related parties from advances | $ 1,576,790 |
15. COMMITMENTS, CONTINGENCIE50
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Details) | Jun. 30, 2017USD ($) |
Commitments Contingencies And Legal Proceedings Details | |
2,018 | $ 39,474 |
2,019 | 67,896 |
2,020 | 71,670 |
2,021 | 0 |
2,022 | 0 |
Beyond | 0 |
Total | $ 179,040 |