Document and Entity Information
Document and Entity Information | 9 Months Ended |
Jun. 30, 2019 | |
Document And Entity Information | |
Entity Registrant Name | KNOW LABS, INC. |
Document Type | S-1/A |
Document Period End Date | Jun. 30, 2019 |
Amendment Flag | true |
Amendment Description | To update financials. |
Entity Central Index Key | 0001074828 |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
CURRENT ASSETS: | |||
Cash and cash equivalents | $ 2,688,707 | $ 934,407 | $ 103,181 |
Accounts receivable, net | 81,548 | 320,538 | 693,320 |
Prepaid expenses | 11,251 | 20,140 | 27,687 |
Inventories, net | 63,937 | 203,582 | 225,909 |
Total current assets | 2,845,443 | 1,478,667 | 1,050,097 |
EQUIPMENT, NET | 146,225 | 169,333 | 133,204 |
OTHER ASSETS | |||
Intangible assets, net | 317,779 | 447,778 | 0 |
Other assets | 13,767 | 7,170 | 5,070 |
TOTAL ASSETS | 3,323,214 | 2,102,948 | 1,188,371 |
CURRENT LIABILITIES: | |||
Accounts payable - trade | 833,586 | 1,512,617 | 2,156,646 |
Accounts payable - related parties | 2,546 | 12,019 | 2,905 |
Accrued expenses | 60,281 | 72,140 | 24,000 |
Accrued expenses - related parties | 721,391 | 657,551 | 1,166,049 |
Deferred revenue | 0 | 55,959 | 63,902 |
Convertible notes payable | 2,255,065 | 2,255,066 | 570,000 |
Notes payable - current portion of long term debt | 0 | 145,186 | 1,165,660 |
Total current liabilities | 3,872,869 | 4,710,538 | 5,149,162 |
COMMITMENTS AND CONTINGENCIES | |||
STOCKHOLDERS' DEFICIT | |||
Preferred stock | 0 | 0 | 0 |
Common stock | 22,568 | 17,532 | 4,655 |
Additional paid in capital | 37,515,550 | 32,163,386 | 27,565,453 |
Accumulated deficit | (38,090,578) | (34,791,324) | (31,533,727) |
Total stockholders' deficit | (549,655) | (2,607,590) | (3,960,791) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 3,323,214 | 2,102,948 | 1,188,371 |
Series A Convertible Preferred Stock | |||
STOCKHOLDERS' DEFICIT | |||
Preferred stock | 0 | 11 | 23 |
Series C Convertible Preferred Stock | |||
STOCKHOLDERS' DEFICIT | |||
Preferred stock | 1,790 | 1,790 | 1,790 |
Series D Convertible Preferred Stock | |||
STOCKHOLDERS' DEFICIT | |||
Preferred stock | $ 1,015 | $ 1,015 | $ 1,015 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
CURRENT ASSETS: | |||
Allowance for Accounts receivable | $ 60,000 | $ 60,000 | $ 60,000 |
EQUITY (DEFICIT) | |||
Preferred stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 | 5,000,000 |
Preferred stock shares issued | 0 | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock shares issued | 22,567,686 | 17,531,502 | 4,655,486 |
Common stock shares outstanding | 22,567,686 | 17,531,502 | 4,655,486 |
Series A Convertible Preferred Stock | |||
EQUITY (DEFICIT) | |||
Preferred stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 23,334 | 23,334 | 23,334 |
Preferred stock shares issued | 0 | 20,000 | 23,334 |
Preferred stock shares outstanding | 0 | 20,000 | 23,334 |
Series C Convertible Preferred Stock | |||
EQUITY (DEFICIT) | |||
Preferred stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 | 1,785,715 |
Series D Convertible Preferred Stock | |||
EQUITY (DEFICIT) | |||
Preferred stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,016,014 | 1,016,014 | 1,016,014 |
Preferred stock shares issued | 1,016,004 | 1,016,014 | 1,016,004 |
Preferred stock shares outstanding | 1,016,004 | 1,016,014 | 1,016,004 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||||
REVENUE | $ 381,270 | $ 1,107,216 | $ 1,577,191 | $ 3,432,301 | $ 4,303,296 | $ 4,874,359 |
COST OF SALES | 275,819 | 909,957 | 1,202,944 | 2,760,551 | 3,481,673 | 3,966,607 |
GROSS PROFIT | 105,451 | 197,259 | 374,247 | 671,750 | 821,623 | 907,752 |
RESEARCH AND DEVELOPMENT EXPENSES | 441,541 | 125,789 | 832,555 | 366,809 | 570,514 | 79,405 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 797,939 | 803,857 | 3,165,720 | 1,796,319 | 2,508,846 | 3,088,178 |
IMPAIRMENT OF GOODWILL | 0 | 983,645 | ||||
OPERATING LOSS | (1,134,029) | (732,387) | (3,624,028) | (1,491,378) | (2,257,737) | (3,243,476) |
OTHER INCOME (EXPENSE): | ||||||
Interest expense | (4,631) | (8,696) | (21,507) | (1,095,880) | (1,195,329) | (376,974) |
Other income (expense) | 8,227 | 436 | 21,281 | 19,192 | 25,160 | (62,954) |
(Loss) on change - derivative liability | 0 | (217,828) | ||||
Gain on debt settlements | 325,000 | 234,393 | 325,000 | 234,393 | 170,309 | 0 |
Total other income (expense) | 328,596 | 226,133 | 324,774 | (842,295) | (999,860) | (657,756) |
(LOSS) BEFORE INCOME TAXES | (805,433) | (506,254) | (3,299,254) | (2,333,673) | (3,257,597) | (3,901,232) |
Income taxes - current provision | 0 | 0 | 0 | 0 | 0 | 0 |
NET (LOSS) | $ (805,433) | $ (506,254) | $ (3,299,254) | $ (2,333,673) | $ (3,257,597) | $ (3,901,232) |
Basic and diluted loss per common share attributable to Know Labs,, Inc. and subsidiaries common shareholders | ||||||
Basic and diluted loss per share | $ (0.04) | $ (0.06) | $ (0.17) | $ (0.39) | $ (0.38) | $ (1.01) |
Weighted average shares of common stock outstanding- basic and diluted | 22,279,024 | 8,065,144 | 19,721,843 | 5,947,860 | 8,630,891 | 3,844,840 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY - USD ($) | Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Sep. 30, 2016 | $ 23 | $ 0 | $ 1,790 | $ 0 | $ 2,356 | $ 24,259,702 | $ (27,073,365) | $ (2,809,494) |
Beginning Balance, Shares at Sep. 30, 2016 | 23,334 | 0 | 1,785,715 | 0 | 2,356,152 | |||
Stock compensation expense - employee options | 37,848 | 37,848 | ||||||
Issuance of common stock for services, Amount | $ 1,353 | 545,103 | 546,456 | |||||
Issuance of common stock for services, Shares | 1,354,386 | |||||||
Issuance of Series D Convertible Preferred Stock, Amount | $ 1,015 | 998,132 | 999,147 | |||||
Issuance of Series D Convertible Preferred Stock, Shares | 1,016,004 | |||||||
Benefical conversion feature of Preferred Stock/dividend | 559,130 | (559,130) | 0 | |||||
Issuance of common stock for conversion of liabilities, Amount | $ 946 | 755,014 | 755,960 | |||||
Issuance of common stock for conversion of liabilities, Shares | 944,948 | |||||||
Stock based compensation- warrants | 5,000 | |||||||
Issuance of common stock for warrant exercise, Amount | 0 | |||||||
Conversion of Series A Convertible Preferred Stock, Amount | 220,000 | |||||||
Write-off of derivative liability to additional paid in capital | 410,524 | 410,524 | ||||||
Net loss | (3,901,232) | (3,901,232) | ||||||
Ending Balance, Amount at Sep. 30, 2017 | $ 23 | $ 0 | $ 1,790 | $ 1,015 | $ 4,655 | 27,565,453 | (31,533,727) | (3,960,791) |
Ending Balance, Shares at Sep. 30, 2017 | 23,334 | 0 | 1,785,715 | 1,016,004 | 4,655,486 | |||
Stock compensation expense - employee options | 50,899 | 50,899 | ||||||
Issuance of common stock for services, Amount | $ 1,280 | 439,039 | 440,319 | |||||
Issuance of common stock for services, Shares | 1,279,676 | |||||||
Issuance of Series D Convertible Preferred Stock, Amount | 817,802 | 817,802 | ||||||
Issuance of common stock for conversion of liabilities, Amount | $ 2,435 | 709,515 | 711,950 | |||||
Issuance of common stock for conversion of liabilities, Shares | 2,435,000 | |||||||
Issuance of common stock for cash, Amount | $ 7,000 | 1,743,000 | 1,750,000 | |||||
Issuance of common stock for cash, Shares | 7,000,000 | |||||||
Stock based compensation- warrants | 239,680 | 239,680 | ||||||
Acquisition of patent, Amount | $ 2,000 | 518,000 | 520,000 | |||||
Acquisition of patent, Shares | 2,000,000 | |||||||
Issuance of common stock for warrant exercise, Amount | $ 158 | 79,989 | (80,147) | |||||
Issuance of common stock for warrant exercise, Shares | 158,006 | |||||||
Conversion of Series A Convertible Preferred Stock, Amount | $ (12) | $ 3 | 9 | 0 | ||||
Conversion of Series A Convertible Preferred Stock, Shares | (3,334) | 3,334 | ||||||
Net loss | (3,257,597) | (3,257,597) | ||||||
Ending Balance, Amount at Sep. 30, 2018 | $ 11 | $ 0 | $ 1,790 | $ 1,015 | $ 17,532 | $ 32,163,386 | $ (34,791,324) | (2,607,590) |
Ending Balance, Shares at Sep. 30, 2018 | 20,000 | 0 | 1,785,715 | 1,016,004 | 17,531,502 | |||
Stock based compensation- warrants | 406,722 | |||||||
Net loss | (3,299,254) | |||||||
Ending Balance, Amount at Jun. 30, 2019 | $ (549,655) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | $ (3,299,254) | $ (2,333,673) | $ (3,257,597) | $ (3,901,232) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||||
Depreciation and amortization | 156,931 | 43,984 | 132,615 | 81,283 |
Issuance of capital stock for services and expenses | 348,900 | 348,881 | 440,319 | 547,838 |
Conversion of interest | 0 | 64,233 | 64,233 | 68,043 |
Stock based compensation- stock option grants | 359,053 | 7,337 | 50,899 | 37,848 |
(Loss) on sale of assets | 0 | 113,244 | ||
Loss on change - derivative liability | 0 | (145,282) | ||
Reclassification of derivative liability | 0 | 410,324 | ||
Amortization of debt discount | 0 | 475,174 | 475,174 | 158,941 |
Conversion of accrued liabilites- related parties to convertible notes payable | 0 | 491,802 | 491,802 | 0 |
Provision on loss on accounts receivable | 67,792 | 0 | 10,747 | 0 |
Loss on sale of assets | 32,777 | 0 | ||
Issuance of warrant for debt conversion | 0 | 232,255 | ||
Stock based compensation- warrants | 406,722 | 0 | 239,680 | 5,000 |
Issuance of common stock for conversion of liabilities | 0 | 247,950 | 199,935 | 0 |
Non-cash gain on accounts payable | (320,000) | (234,393) | (170,309) | 0 |
Impairment of goodwill | 0 | 983,645 | ||
Bad debt expense | 0 | 136,217 | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable | 170,861 | 262,860 | 362,035 | (20,582) |
Prepaid expenses | 8,889 | 17,788 | 7,547 | (7,204) |
Inventory | 139,645 | 55,175 | 22,327 | 69,309 |
Other assets | (6,597) | (2,100) | (2,100) | 0 |
Accounts payable - trade and accrued expenses | (316,536) | (459,954) | (176,495) | 134,382 |
Deferred revenue | (55,946) | (59,692) | (7,943) | 63,902 |
NET CASH (USED IN) OPERATING ACTIVITIES | (2,306,763) | (842,373) | (1,117,131) | (1,264,324) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Investment in BioMedx, Inc., net | 0 | (260,000) | ||
Proceeds from investment in BioMedx, Inc, | 0 | 290,000 | ||
Investment in research and development equipment | (79,934) | (25,319) | (97,251) | 2,441 |
Proceeds from sale of equipment | 0 | 1,434 | ||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES: | (79,934) | (25,319) | (97,251) | 33,875 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Issuance of common stock for cash | 4,242,515 | 0 | ||
(Repayments) proceeds from line of credit | (101,518) | (170,990) | (220,539) | 30,321 |
Proceeds from convertible notes payable | 0 | 530,000 | 636,000 | 690,000 |
Proceeds from issuance of common/preferred stock, net of costs | 0 | 1,710,000 | 1,750,000 | 550,000 |
Issuance of common stock for warrant exercise | 80,147 | 0 | ||
Repayment of convertible notes | 0 | (125,000) | ||
Repayment of note payable | (200,000) | 0 | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 4,140,997 | 2,069,010 | 2,045,608 | 1,145,321 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,754,300 | 1,201,318 | 831,226 | (85,128) |
CASH AND CASH EQUIVALENTS, beginning of period | 934,407 | 103,181 | 103,181 | 188,309 |
CASH AND CASH EQUIVALENTS, end of period | 2,688,707 | 1,304,499 | 934,407 | 103,181 |
Supplemental disclosures of cash flow information: | ||||
Interest paid | 21,999 | 8,841 | 64,228 | 47,789 |
Taxes paid | $ 0 | $ 0 | 0 | 0 |
Non-cash investing and financing activities: | ||||
Beneficial conversion feature | 348,096 | 0 | ||
Conversion of convertible debt | 0 | 695,000 | ||
Beneficial conversion feature | 0 | 559,130 | ||
Conversion of convertible debt to preferred shares | 0 | 220,000 | ||
Related party accounts converted to notes | 1,184,066 | 0 | ||
Acquisition of patents | 520,000 | 0 | ||
Penalty on notes payable | $ 75,000 | $ 0 |
1. ORGANIZATION
1. ORGANIZATION | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
ORGANIZATION | Know Labs, Inc. (the “Company”) 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. The Company is focused on the development, marketing and sales of a proprietary technologies which are capable of uniquely authenticating or diagnosing almost any substance or material using electromagnetic energy to create, record and detect the unique “signature” of the substance. The Company’s call these our “ChromaID™” and “Bio-RFID™” technologies. Historically, the Company focused on the development of our proprietary ChromaID technology. Using light from low-cost LEDs (light emitting diodes) the Company’s map the color of substances, fluids and materials and with our proprietary processes we can authenticate, identify and diagnose based upon the color that is present. The color is both visible to us as humans but also outside of the humanly visible color spectrum in the near infra-red and near ultra-violet and beyond. The Company’s ChromaID scanner sees what we like to call “Nature’s Color Fingerprint.” Everything in nature has a unique color identifier and with ChromaID the Company can see it, and identify, authenticate and diagnose based upon the color that is present. The Company’s ChromaID scanner is capable of uniquely identifying and authenticating almost any substance or liquid using light to create, record and detect its unique color signature. More recently, the Company has focused upon extensions and new inventions that are derived from and extend beyond our ChromaID technology. The Company’s call this technology Bio-RFID. The rapid advances made with our Bio-RFID technology in our laboratory have caused us to move quickly into the commercialization phase of our Company as we work to create revenue generating products for the marketplace. Today, the sole focus of the Company is on its Bio-RFID technology and its commercialization. The Company may continue to develop and enhance its ChromaID technology and extend its capacity as time and resources permit. The Company will also, as resources permit, pursue licensing opportunities with third parties who have ready applications for our ChromaID and Bio-RFID technologies. In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to our business. TransTech is a distributor of products for employee and personnel identification and authentication. TransTech has historically provided substantially all of the Company’s revenues. The financial results from our TransTech subsidiary have been diminishing as vendors of their products increasingly move to the Internet and direct sales to their customers. While it does provide the Company’s current revenues it is not central to our current focus as a Company. Moreover, the Company written down any goodwill associated with its historic acquisition. The Company continues to closely monitor this subsidiary and expects to wind down completely prior to the end of the Company’s current fiscal year. The Company is in the process of commercializing its Bio-RFID technology. The Company plans its first commercial applications to be a wearable non-invasive Continuous Glucose Monitor. This product will require approval from the United States Food and Drug Administration prior to introduction to the market. In addition, it has a technology license agreement with Allied Inventors, formerly Xinova and 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 products derived from its ChromaID and Bio-RFID technology. The Company is currently not profitable. Even if the Company succeeds in introducing its technology and related products to its target markets, the Company may not be able to generate sufficient revenue to achieve or sustain profitability. Regulatory requirements may also inhibit the speed with which the Company’s products can enter the marketplace. ChromaID was invented by scientists under contract with the Company. Bio-RFID was invented by individuals working for the Company. The Company actively pursues a robust intellectual property strategy and has been granted thirteen patents. The Company also has several patents pending. The Company possesses all right, title and interest to the issued patents. Nine additional issued and pending patents are licensed exclusively to the Company in perpetuity by the Company’s strategic partner, Allied Inventors. | Know Labs, Inc. (the “Company”) 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. The Company is focused on the development, marketing and sales of a proprietary technologies which are capable of uniquely authenticating or diagnosing almost any substance or material using electromagnetic energy to create, record and detect the unique “signature” of the substance. The Company’s call these our “ChromaID™” and “Bio-RFID™” technologies. Overview Historically, the Company focused on the development of our proprietary ChromaID technology. Using light from low-cost LEDs (light emitting diodes) the Company’s map the color of substances, fluids and materials and with our proprietary processes we can authenticate, identify and diagnose based upon the color that is present. The color is both visible to us as humans but also outside of the humanly visible color spectrum in the near infra-red and near ultra-violet and beyond. The Company’s ChromaID scanner sees what we like to call “Nature’s Color Fingerprint.” Everything in nature has a unique color identifier and with ChromaID the Company can see it, and identify, authenticate and diagnose based upon the color that is present. The Company’s ChromaID scanner is capable of uniquely identifying and authenticating almost any substance or liquid using light to create, record and detect its unique color signature. The Company will continue to develop and enhance its ChromaID technology and extend its capacity. More recently, the Company has focused upon extensions and new inventions that are derived from and extend beyond our ChromaID technology. The Company’s call this technology Bio-RFID. The rapid advances made with our Bio-RFID technology in our laboratory have caused us to move quickly in to the commercialization phase of our Company as we work to create revenue generating products for the marketplace. The Company will also, as resources permit, pursue licensing opportunities with third parties who have ready applications for our technologies. 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™ and Bio-RFID™ technology. To date, the Company has entered into License Agreements with Sumitomo Precision Products Co., Ltd. In addition, it has a technology license agreement with Allied Inventors, formerly Xinova and 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 and Bio-RFID products. The Company is currently not profitable. Even if the Company succeeds in introducing the ChromaID and Bio-RFID 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 under contract with the Company. Bio-RFID was invented by individuals working for the Company. The Company actively pursues a robust intellectual property strategy and has been granted twelve patents. The Company also has 20 patents pending. The Company possesses 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, Allied Inventors. Merger with RAAI Lighting, Inc. On April 10, 2018, the Company entered into an Agreement and Plan of Merger with 500 Union Corporation, a Delaware corporation and a wholly owned subsidiary of the Company, and RAAI Lighting, Inc., a Delaware corporation. Pursuant to the Merger Agreement, we have acquired all the outstanding shares of RAAI’s capital stock through a merger of Merger Sub with and into RAAI (the “Merger”), with RAAI surviving the Merger as a wholly owned subsidiary of the Company. Under the terms of the Merger Agreement, each share of RAAI common stock issued and outstanding immediately before the Merger (1,000 shares) were cancelled and we issued 2,000,000 shares of our common stock. As a result, we issued 2,000,000 shares of its common stock to Phillip A. Bosua, formerly the sole stockholder of RAAI. The consideration for the Merger was determined through arms-length bargaining by the Company and RAAI. The Merger was structured to qualify as a tax-free reorganization for U.S. federal income tax purposes. As a result of the Merger, the Company received certain intellectual property, related to RAAI. Appointment of Director On April 10, 2018, the Board increased the size of the Board from three to four members and Phillip A. Bosua was appointed as a member of the Board. Mr. Bosua’s term of office expires at the next annual meeting of our stockholders. On May 24, 2018, the Board of Directors increased the size of the Board from four to five members and appointed (Ret.) Admiral William Owens as a member of the Board. Admiral Owen’s term of office expires at the next annual meeting of our stockholders. Appointment of Officer On April 10, 2018, the Company appointed Mr. Bosua as Chief Executive Officer of the Company, replacing Ronald P. Erickson, who remains Chairman of the Company. Previously, Mr. Bosua served as the Company’s Chief Product Officer since August 2017. The Company entered into a Consulting Agreement with Mr. Bosua’s company, Blaze Clinical on July 7, 2017. On April 10, 2018, the Company entered into an Employment Agreement with Mr. Bosua reflecting Mr. Bosua’s appointment as Chief Executive Officer. The Employment Agreement is for an initial term of 12 months (subject to earlier termination) and will be automatically extended for additional 12-month terms unless either party notifies the other party of its intention to terminate the Employment Agreement. Mr. Bosua will be paid a base salary of $225,000 per year, received 500,000 shares of common stock valued at $0.33 per share and may be entitled to bonuses and equity awards at the discretion of the Board or a committee of the Board. The Employment Agreement provides for severance pay equal to 12 months of base salary if Mr. Bosua is terminated without “cause” or voluntarily terminates his employment for “good reason.” On April 10, 2018, the Company entered into an Amended Employment Agreement for Ronald P. Erickson which amends the Employment Agreement dated July 1, 2017. The Agreement expires March 21, 2019. Merger with Know Labs, Inc. On May 1, 2018, Know Labs, Inc., a Nevada corporation incorporated on April 3, 2018, and our wholly-owned subsidiary, merged with and into the Company pursuant to an Agreement and Plan of Merger dated May 1, 2018. In connection with the merger, our Articles of Incorporation were effectively amended to change our name to Know Labs, Inc. by and through the filing of Articles of Merger. This parent-subsidiary merger was approved by us, the parent, in accordance with Nevada Revised Statutes Section 92A.180. Stockholder approval was not required. This amendment was filed with the Nevada Secretary of State and became effective on May 1, 2018. Corporate Name Change and Symbol Change On May 24, 2018, the Financial Industry Regulatory Authority (“FINRA”) announced the effectiveness of a change in our name from Visualant Incorporated to Know Labs, Inc. and a change in our ticker symbol from VSUL to the new trading symbol KNWN which became effective on the opening of trading as of May 25, 2018. In addition, in connection with the name change and symbol change, we were assigned the CUSIP number of 499238103. Closing of Financing on June 25, 2018 On June 25, 2018, the Company closed a private placement and received gross proceeds of $1,750,000 in exchange for issuing 7,000,000 shares of common stock and warrants to purchase 3,500,000 shares of common stock in a private placement to accredited investors pursuant to a series of substantially identical subscription agreements. The initial exercise price of the warrants described above is $0.25 per share, subject to certain adjustments, and the warrants expire five years after their issuance. The shares and the warrants described above were issued in transactions that were not registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. |
2. GOING CONCERN
2. GOING CONCERN | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
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 $3,299,254, $3,257,597 and $3,901,232 for the nine months ended June 30, 2019 and the years ended September 30, 2018 and 2017, respectively. Net cash used in operating activities was $2,306,763, $1,117,131 and $1,264,324 for the nine months ended June 30, 2019 and for the years ended September 30, 2018 and 2017, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of June 30, 2019, the Company’s accumulated deficit was $38,090,578. 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, the Company’s 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 Company’s independent registered public accounting firm relating to our financial statements for the year ended September 30, 2018 includes an explanatory paragraph expressing the substantial doubt about the Company’s ability to continue as a going concern. The Company believe that its cash on hand will be sufficient to fund our operations until December 31, 2019. 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 the Company’s 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, the Company 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. | 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 $3,257,597 and $3,901,232 for the years ended September 30, 2018 and 2017, respectively. Net cash used in operating activities was $1,117,131 and $1,264,324 for the years ended September 30, 2018 and 2017, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of September 30, 2018, the Company’s accumulated deficit was $34,791,324. 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, the Company’s 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 Company’s independent registered public accounting firm relating to our financial statements for the year ended September 30, 2018 includes an explanatory paragraph expressing the substantial doubt about the Company’s ability to continue as a going concern. The Company believe that its cash on hand will be sufficient to fund our operations until March 31, 2019. 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 the Company’s 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, the Company 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. |
3. SIGNIFICANT ACCOUNTING POLIC
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
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 Long-Lived Assets Intangible Assets Research, Development and Engineering Expenses The Company’s research and development efforts are primarily focused improving the core foundational ChromaID technology and developing new and unique applications for the technology. As part of this effort, the Company typically conduct testing to ensure that ChromaID application methods are compatible with the customer’s requirements, and that they can be implemented in a cost effective manner. The Company is also actively involved in identifying new application methods. Know Lab’s team has considerable experience working with the application of light-based technologies and their application to various industries. The Company believes that its continued development of new and enhanced technologies relating to our core business is essential to its future success. The Company spent $832,555, $570,514 and $79,405 during the nine months ended June 30, 2019 and the years ended September 30, 2018 and 2017, respectively, on research and development activities. 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, 2019 and September 30, 2018 are 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, 2018, there were options outstanding for the purchase of 534,736 common shares, warrants for the purchase of 15,586,424 common shares, 4,914,405 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock. In addition, the Company has an unknown number of shares issuable upon conversion of convertible debentures of $2,390,066. All of which could potentially dilute future earnings per share. 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. | Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Allowance for Doubtful Accounts Inventories Equipment Long-Lived Assets Intangible Assets Research, Development and Engineering Expenses The Company’s research and development efforts are primarily focused improving the core foundational ChromaID technology and developing new and unique applications for the technology. As part of this effort, the Company typically conduct testing to ensure that ChromaID application methods are compatible with the customer’s requirements, and that they can be implemented in a cost effective manner. The Company is also actively involved in identifying new application methods. Know Lab’s team has considerable experience working with the application of light-based technologies and their application to various industries. The Company believes that its continued development of new and enhanced technologies relating to our core business is essential to its future success. The Company spent $570,514 and $79,405 during the years ended September 30, 2018 and 2017, respectively, on research and development activities. 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 September 30, 2018 and 2017 are 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 September 30, 2017, there were options outstanding for the purchase of 15,404 common shares, warrants for the purchase of 6,900,356 common shares, 2,825,053 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock and up to 332,940 shares of the Company’s common stock issuable upon the exercise of placement agent warrants. In addition, the Company has an unknown number of shares are issuable upon conversion of convertible debentures of $570,000. All of which could potentially dilute future earnings per share. Dividend Policy Use of Estimates Recent Accounting Pronouncements In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-11, “Simplifying the Measurement of Inventory,” Topic 330, “Inventory” (ASU 2015-11). The amendments in ASU 2015-11, which apply to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, require that entities measure inventory at the lower of cost and net realizable value. The amendments in ASU 2015-11 should be applied on a prospective basis. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The Company adopted the amendments of ASU 2015-11 effective October 1, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements for the year ended September 30, 2018. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” Topic 718, “Compensation-Stock Compensation” (ASU 2016-09). ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the Company’s financial statements, including income tax consequences, forfeitures and classification on the statement of cash flows. Under previous guidance, excess tax benefits and deficiencies from share-based compensation arrangements were recorded in equity when the awards vested or were settled. ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies in income tax expense, rather than paid-in-capital. The Company adopted the amendments of ASU 2016-09 effective October 1, 2017.The adoption of this standard did not have a material impact on the Company’s consolidated statements of income for the year ended September 30, 2018. In addition, under ASU 2016-09, excess tax income tax benefits from share-based compensation arrangements are classified as cash flow from operations, rather than as cash flow from financing activities. For the year ended September 30, 2018, there were no excess income tax benefits. The Company has elected to continue to estimate the number of share-based awards expected to vest, as permitted by ASU 2016-09, rather than electing to account for forfeitures as they occur. ASU 2016-09 requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the calculation of diluted shares, resulting in an immaterial decrease in diluted weighted average shares outstanding for the year ended September 30, 2018. In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” Topic 350, “Intangibles – Goodwill and Other” (ASU 2017-04). The amendments in ASU 2017-04 simplify the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments should be applied on a prospective basis. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017, and the ASU is effective for the Company’s first quarter of the fiscal year ending September 30, 2020. The Company is currently evaluating the impact that the adoption of these provisions will have on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases,” Topic 842, “Leases” (ASU 2016-02). ASU No. 2016-02 requires lessees to recognize a right-of-use asset and corresponding lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. ASU 2016-02 also requires certain quantitative and qualitative disclosures. The provisions of ASU 2016-02 are effective for the Company’s first quarter of the fiscal year ending September 30, 2020, with early adoption permitted. The Company will apply the transition provisions of ASU 2016-02 at its adoption date, rather than the earliest comparative period presented in the financial statements, as permitted by ASU 2018-11, “Leases,” Topic 842, “Targeted Improvements,” released in July 2018. The adoption of ASU 2016-02 may result in a material increase to the Company’s consolidated balance sheets for lease liabilities and right-of-use assets. The Company is also performing a comprehensive review of its current processes to determine and implement changes required to support the adoption of this standard. The Company is currently evaluating the other effects the adoption of ASU 2016-02 will have on its consolidated financial statements. In January 2018, the FASB issued ASU 2018-01, “Leases,” Topic 842, “Land Easement Practical Expedient for Transition to Topic 842” (ASU 2018-01). ASU 2018-01 permits an entity to elect a transition practical expedient to not assess, under Accounting Standards Codification (ASC) 842, land easements that exist or expired before the standard’s effective date that were not previously accounted for as leases under ASC 840. The Company plans to elect this practical expedient in implementing ASU 2016-02. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” Topic 606, “Revenue from Contracts with Customers” (ASU 2014-09). ASU 2014-09 provides guidance for revenue recognition and will replace most existing revenue recognition guidance in GAAP when it becomes effective. ASU 2014-09’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled for the transfer of those goods or services. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. Additionally, the amendments in this ASU provide a practical expedient for entities to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less, The Company plans to elect this practical expedient upon adoption. In July 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers – Deferral of the Effective Date.” The FASB approved the deferral of ASU 2014-09, by extending the new revenue recognition standard’s mandatory effective date by one year and permitting public companies to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. The guidance in ASU 2014-09 will be effective for the Company in the first quarter of the fiscal year ending September 30, 2019. Further to ASU 2014-09 and ASU 2015-14, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers,” Topic 606, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (ASU 2016-08) in March 2016, ASU 2016-12, “Revenue from Contracts with Customers,” Topic 606, “Narrow-Scope Improvements and Practical Expedients” (ASU 2016-12) in May 2016 and ASU 2016-20, “Revenue from Contracts with Customers,” Topic 606, “Technical Corrections and Improvements” (ASU 2016-20) in December 2016. The amendments in ASU 2016-08 clarify the implementation guidance on principal versus agent considerations, including indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU 2016-12 addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The Company plans to make such election. The Company also plans to elect the practical expedient in ASU 2016-20 that provides entities do not need to disclose the transaction price allocated to performance obligations when the related contracts have a duration of one year or less. This includes loyalty rewards, which can be redeemed in the month subsequent to the quarter earned, and marketing promotions that cross accounting periods. Both of these classes of transactions are currently immaterial to the Company. The effective date and transition requirements for ASU 2016-08, ASU 2016-12 and ASU 2016-20 are the same as for ASU 2014-09. The Company does not plan to early adopt the new revenue recognition guidance; adoption will be on the modified retrospective basis beginning in fiscal year 2019. The Company has substantially concluded its assessment of the impact of the adoption of this standard on its consolidated financial statements. Most of the Company’s revenue is expected to continue to be generated from point-of-sale transactions, which ASU 2014-09 treats generally consistent with current accounting standards. The Company does not expect this standard will have a material impact on the accounting for point-of-sale transactions or related areas including the right of return and customer incentives. Although the impact on the consolidated financial statements is not expected to be material, additional disclosures will be required. In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation,” Topic 718, “Improvements to Nonemployee Share-Based Payment Accounting” (ASU 2018-07) as part of its Simplification Initiative to reduce complexity when accounting for share-based payments to non-employees. ASU 2018-07 expands the scope of Topic 718 to more closely align share-based payment transactions for acquiring goods and services from non-employees with the accounting for share-based payments to employees, with certain exceptions. The provisions of ASU 2018-07 are effective for the Company’s first quarter of the fiscal year ending September 30, 2020, with early adoption permitted. |
4. ACCOUNTS RECEIVABLE_CUSTOMER
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | Accounts receivable were $81,548 and $320,538, net of allowance, as of June 30, 2019 and September 30, 2018, respectively. The Company had one customer in excess of 10% (15.0%) of the Company’s consolidated revenues for the nine months ended June 30, 2019. The Company had five customers in excess of 10% (32.8%, 29.4%, 17.4%, 13.0% and 12.6%) with accounts receivable in excess of 10% as of June 30, 2019. The Company has a total allowance for bad debt in the amount of $60,000 as of June 30, 2019 and September 30, 2019. The decrease in accounts receivable related to lower sales and purchases at TransTech. | Accounts receivable were $320,538 and $693,320, net of allowance, as of September 30, 2018 and 2017, respectively. The Company had one customer in excess of 10% (25.4%) of the Company’s consolidated revenues for the year ended September 30, 2018. The Company had four customers in excess of 10% (13.9%, 12.9%, 12.5% and 11.2%) with accounts receivable in excess of 10% as of September 30, 2018. The Company has a total allowance for bad debt in the amount of $60,000 as of September 30, 2018. |
5. INVENTORIES
5. INVENTORIES | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
INVENTORIES | Inventories were and $63,937 and $203,582 as of June 30, 2019 and September 30, 2018, 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 $35,000 reserve for impaired inventory as of June 30, 2019 and September 30, 2018, respectively. The decrease in inventory related to lower sales at TransTech. | Inventories were $203,582 and $225,909 as of September 30, 2018 and 2017, 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 $35,000 reserve for impaired inventory as of September 30, 2018 and 2017, respectively. |
6. NOTES RECEIVABLE FROM BIOMED
6. NOTES RECEIVABLE FROM BIOMEDX, INC | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTES RECEIVABLE FROM BIOMEDX, INC | 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 Company’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 | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
FIXED ASSETS | Fixed assets, net of accumulated depreciation, was $146,225 and $169,333 as of June 30, 2019 and September 30, 2018, respectively. Accumulated depreciation was $501,209 and $670,666 as of June 30, 2019 and September 30, 2018, respectively. Total depreciation expense was $70,265 and $43,982 for the nine months ended June 30, 2019 and 2018, 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, 2019 was comprised of the following: Estimated June 30, 2019 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 412,240 $ 42,681 $ 454,921 Leasehold improvements 2-3 years 3,612 - 3,612 Furniture and fixtures 2-3 years 58,051 95,020 153,071 Software and websites 3- 7 years 35,830 - 35,830 Less: accumulated depreciation (363,508 ) (137,701 ) (501,209 ) $ 146,225 $ - $ 146,225 | Fixed assets, net of accumulated depreciation, was $169,333 and $133,204 as of September 30, 2018 and 2017, respectively. Accumulated depreciation was $670,666 and $662,855 as of September 30, 2018 and 2017, respectively. Total depreciation expense was $60,393 and 38,031 for the years ended September 30, 2018 and 2017, 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 September 30, 2018 was comprised of the following: Estimated September 30, 2018 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 332,305 $ 42,681 $ 374,986 Leasehold improvements 2-3 years 276,112 - 276,112 Furniture and fixtures 2-3 years 58,051 95,020 153,071 Software and websites 3- 7 years 35,830 - 35,830 Less: accumulated depreciation (532,966 ) (137,700 ) (670,666 ) $ 169,332 $ 1 $ 169,333 |
8. INTANGIBLE ASSETS
8. INTANGIBLE ASSETS | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Intangible Assets | ||
INTANGIBLE ASSETS | Intangible assets as of June 30, 2019 and September 30, 2018 consisted of the following: Estimated June 30, September 30, Useful Lives 2019 2018 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (202,221 ) (72,222 ) Intangible assets, net $ 317,779 $ 447,778 Total amortization expense was $129,999 and $0 for the nine months ended June 30, 2019 and 2018, respectively. Merger with RAAI Lighting, Inc. On April 10, 2018, the Company entered into an Agreement and Plan of Merger with 500 Union Corporation, a Delaware corporation and a wholly owned subsidiary of the Company, and RAAI Lighting, Inc., a Delaware corporation. Pursuant to the Merger Agreement, we have acquired all the outstanding shares of RAAI’s capital stock through a merger of Merger Sub with and into RAAI (the “Merger”), with RAAI surviving the Merger as a wholly owned subsidiary of the Company. Under the terms of the Merger Agreement, each share of RAAI common stock issued and outstanding immediately before the Merger (1,000 shares) were cancelled and converted into the right to receive 2,000 shares of the Company’s common stock. As a result, the Company issued 2,000,000 shares of its common stock to Phillip A. Bosua, formerly the sole stockholder of RAAI. The consideration for the Merger was determined through arms-length bargaining by the Company and RAAI. The Merger was structured to qualify as a tax-free reorganization for U.S. federal income tax purposes. As a result of the Merger, the Company received certain intellectual property, related to RAAI. Merger with Know Labs, Inc. On May 1, 2018, Know Labs, Inc., a Nevada corporation incorporated on April 3, 2018, and our wholly-owned subsidiary, merged with and into the Company pursuant to an Agreement and Plan of Merger dated May 1, 2018. In connection with the merger, our Articles of Incorporation were effectively amended to change our name to Know Labs, Inc. by and through the filing of Articles of Merger. This parent-subsidiary merger was approved by us, the parent, in accordance with Nevada Revised Statutes Section 92A.180. Stockholder approval was not required. This amendment was filed with the Nevada Secretary of State and became effective on May 1, 2018. RAAI had no outstanding indebtedness or assets at the closing of the Merger. The 2,000,000 shares of the Company’s common stock issued for RAAI’s shares were recorded at the fair value at the date of the merger at $520,000 and the value assigned to the patent acquired with RAAI. The fair value of the intellectual property associated with the assets acquired was $520,000 estimated by using a discounted cash flow approach based on future economic benefits. In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the forecasted results. | Intangible assets as of September 30, 2018 and September 30, 2017 consisted of the following: Estimated September 30, September 30, Useful Lives 2018 2017 Technology 3 years $ 520,000 $ - Less: accumulated amortization (72,222 ) - Intangible assets, net $ 447,778 $ - Total amortization expense was $72,222 and $0 for the years ended September 30, 2018 and 2017, respectively. Merger with RAAI Lighting, Inc. On April 10, 2018, the Company entered into an Agreement and Plan of Merger with 500 Union Corporation, a Delaware corporation and a wholly owned subsidiary of the Company, and RAAI Lighting, Inc., a Delaware corporation. Pursuant to the Merger Agreement, we have acquired all the outstanding shares of RAAI’s capital stock through a merger of Merger Sub with and into RAAI (the “Merger”), with RAAI surviving the Merger as a wholly owned subsidiary of the Company. Under the terms of the Merger Agreement, each share of RAAI common stock issued and outstanding immediately before the Merger (1,000 shares) were cancelled and we issued 2,000,000 shares of our common stock. As a result, we issued 2,000,000 shares of its common stock to Phillip A. Bosua, formerly the sole stockholder of RAAI. The consideration for the Merger was determined through arms-length bargaining by the Company and RAAI. The Merger was structured to qualify as a tax-free reorganization for U.S. federal income tax purposes. As a result of the Merger, the Company received certain intellectual property, related to RAAI. Merger with Know Labs, Inc. On May 1, 2018, Know Labs, Inc., a Nevada corporation incorporated on April 3, 2018, and our wholly-owned subsidiary, merged with and into the Company pursuant to an Agreement and Plan of Merger dated May 1, 2018. In connection with the merger, our Articles of Incorporation were effectively amended to change our name to Know Labs, Inc. by and through the filing of Articles of Merger. This parent-subsidiary merger was approved by us, the parent, in accordance with Nevada Revised Statutes Section 92A.180. Stockholder approval was not required. This amendment was filed with the Nevada Secretary of State and became effective on May 1, 2018. RAAI had no outstanding indebtedness or assets at the closing of the Merger. The 2,000,000 shares of the Company’s common stock issued for RAAI’s shares were recorded at the fair value at the date of the merger at $520,000 and the value assigned to the patent acquired with RAAI. The fair value of the intellectual property associated with the assets acquired was $520,000 estimated by using a discounted cash flow approach based on future economic benefits. In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the forecasted results. |
9. GOODWILL
9. GOODWILL | 12 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
GOODWILL | The Company’s TransTech business is very capital intensive. The Company reviewed TransTech’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 year ended September 30, 2017. |
10. ACCOUNTS PAYABLE
10. ACCOUNTS PAYABLE | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
ACCOUNTS PAYABLE | Accounts payable were $833,586 and $1,517,617 as of June 30, 2019 and September 30, 2018, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases and technology development, external audit, legal and other expenses incurred by the Company. The Company had two vendors (14.1% and 10.4%) with accounts payable in excess of 10% of its accounts payable as of June 30, 2019. The Company does expect to have vendors with accounts payable balances of 10% of total accounts payable in the foreseeable future. | Accounts payable were $1,512,618 and $2,154,646 as of September 30, 2018 and 2017, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases and technology development, external audit, legal and other expenses incurred by the Company. The Company had two vendors (13.2% and 10.2%) with accounts payable in excess of 10% of its accounts payable as of September 30, 2018. The Company does expect to have vendors with accounts payable balances of 10% of total accounts payable in the foreseeable future. |
11. DERIVATIVE INSTRUMENTS
11. DERIVATIVE INSTRUMENTS | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
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. There was no derivative liability as of June 30, 2019 and September 30, 2018. | 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. There was no derivative liability as of September 30, 2018 and 2017. For the year ended September 30, 2017, the Company recorded non-cash loss of $217,828 related to the “change in fair value of derivative” expense related to its derivative instruments. The Company early adopted ASU 2017-11 and has reclassified its financial instrument with down round features to equity in the amount of $410,524. |
12. CONVERTIBLE NOTES PAYABLE
12. CONVERTIBLE NOTES PAYABLE | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
CONVERTIBLE NOTES PAYABLE | Convertible notes payable as of June 30, 2019 and September 30, 2018 consisted of the following: Convertible Promissory Notes with Clayton A. Struve As of June 30, 2019, the Company owes Clayton A. Struve $1,071,000 under convertible promissory or OID notes. The Company recorded accrued interest of $60,281 as of June 30, 2019. On May 8, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to September 30, 2019. Convertible Redeemable Promissory Notes with Ronald P. Erickson and J3E2A2Z On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants were valued at $110,545. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. The Company recorded accrued interest of $56,261 as of June 30, 2019. On May 8, 2019, the Company signed Amendment 1 to the convertible redeemable promissory notes, extending the due dates to September 30, 2019 and increasing the interest rate to 6%. | Convertible notes payable as of September 30, 2018 and September 30, 2017 consisted of the following: Convertible Promissory Note dated September 30, 2016 On September 30, 2016, the Company entered into a $210,000 Convertible Promissory Note with Clayton A. Struve, an accredited investor of the Company, to fund short-term working capital. The Convertible Promissory Note accrued interest at a rate of 10% per annum and was due on March 30, 2017. The Note holder can convert the Note into common stock at $0.70 per share. During the year ended September 30, 2017, the Company recorded interest of $21,000 related to the convertible note. This note was extended in the Securities Purchase Agreement, General Security Agreement and Subordination Agreement dated August 14, 2017 with a maturity date of August 13, 2018. Also, the conversion price of the Debenture was adjusted to $0.25 per share, subject to certain adjustments. The balance was increased $75,000 during the year ended September 30, 2018. On November 16, 2018, we signed Amendment 1 to Senior Secured Convertible Redeemable Notes dated September 30, 2016extending the due dates of the Note to February 27, 2019. On September 24, 2018, Mr. Struve converted $200,000 of the Note into 800,000 shares of our common stock. The Company recorded accrued interest of $54,671 as of September 30, 2018. Securities Purchase Agreement dated August 14, 2017 On August 14, 2017, the Company issued a senior convertible exchangeable debenture with a principal amount of $360,000 and a common stock purchase warrant to purchase 1,440,000 shares of common stock in a private placement to Clayton Struve for gross proceeds of $300,000 pursuant to a Securities Purchase Agreement dated August 14, 2017. The debenture accrues interest at 20% per annum and matures August 13, 2018. The convertible debenture contains a beneficial conversion valued at $110,629. The warrants were valued at $111,429. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. On the same date, the Company entered into a General Security Agreement with the Mr. Struve, pursuant to which the Company has agreed to grant a security interest to the investor in substantially all of our assets, effective upon the filing of a UCC-3 termination statement to terminate the security interest held by Capital Source Business Finance Group in the assets of the Company. In addition, an entity affiliated with Ronald P. Erickson, out then Chief Executive Officer, entered into a Subordination Agreement with the investor pursuant to which all debt owed by us to such entity is subordinated to amounts owed by us to Mr. Struve under the Debenture (including amounts that become owing under any Debentures issued to the investor in the future). The initial conversion price of the Debenture is $0.25 per share, subject to certain adjustments. The initial exercise price of the Warrant is $0.25 per share, also subject to certain adjustments. As part of the Purchase Agreement, the Company granted the investor “piggyback” registration rights to register the shares of common stock issuable upon the conversion of the Debenture and the exercise of the Warrant with the Securities and Exchange Commission for resale or other disposition. The Debenture and the Warrant were issued in a transaction that was not registered under the Securities Act of 1933, as amended in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and Rule 506 of SEC Regulation D under the Act. Under the terms of the Purchase Agreement, Mr. Struve may purchase up to an aggregate of $1,000,000 principal amount of Debentures (before a 20% original issue discount) (and Warrants to purchase up to an aggregate of 250,000 shares of common stock). These securities are being offered on a “best efforts” basis by the placement agent. During the year ended September 30, 2017, $156,941 was recorded as interest expense related to debt discounts, beneficial conversions and warrants associated with Convertible Promissory Notes. On December 12, 2017, the Company closed an additional $250,000 and issued a senior convertible exchangeable debenture with a principal amount of $300,000 and a common stock purchase warrant to purchase 1,200,000 shares of common stock in a private placement dated December 12, 2017 with Mr. Struve pursuant to a Securities Purchase Agreement dated August 14, 2017. The convertible debenture contains a beneficial conversion valued at $93,174. The warrants were valued at $123,600. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. On March 2, 2018, the Company received gross proceeds of $280,000 in exchange for issuing a senior convertible redeemable debenture with a principal amount of $336,000 and a warrant to purchase 1,344,000 shares of common stock in a private placement dated February 28, 2018 with Mr. Struve pursuant to a Securities Purchase Agreement dated August 14, 2017. The convertible debenture contains a beneficial conversion valued at $252,932. The warrants were valued at $348,096. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. In connection with the February 28, 2018 private placement, the placement agent for the debenture and the warrant received a cash fee of $28,000 and the Company issued warrants to purchase shares of the Company’s common stock to the placement agent or its affiliates based on 10% of proceeds. On November 16, 2018, the Company signed Amendment 1 to Senior Secured Convertible Redeemable Notes dated August 14, 2017 and December 12, 2017, extending the due dates of the Notes to February 27, 2019. Convertible Redeemable Promissory Notes with Ronald P. Erickson and J3E2A2Z On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants were valued at $110,545. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. The Company recorded accrued interest of $23,649 as of September 30, 2018. |
13. NOTES PAYABLE, CAPITALIZED
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | Notes payable, capitalized leases and long-term debt as of June 30, 2019 and September 30, 2018 consisted of the following: June 30, September 30, 2019 2018 Capital Source Business Finance Group $ - $ 145,186 Total debt - 145,186 Less current portion of long term debt - (145,186 ) Long term debt $ - $ - Capital Source Business Finance Group On March 12, 2019, Capital Source cancelled the Loan and Security Agreement and Capital Source Credit Facility with TransTech. TransTech repaid the remaining $15,165 due on the Secured Credit Facility. On March 27, 2019, the Company received notice that the UCC Financing Statement filed by Capital Source to secure a parent Company guarantee was terminated and cancelled by the State of Nevada. | Notes payable, capitalized leases and long-term debt as of September 30, 2018 and 2017 consisted of the following: September 30, September 30, 2018 2017 Capital Source Business Finance Group $ 145,186 $ 365,725 Note payable to Umpqua Bank 0 199,935 Secured note payable to J3E2A2Z LP - related party - 600,000 Total debt 145,186 1,165,660 Less current portion of long term debt (145,186 ) (1,165,660 ) Long term debt $ - $ - Capital Source Business Finance Group Know Labs, Inc. (the “Company”) finances its TransTech operations from operations and a Secured Credit Facility with Capital Source Business Finance Group. On June 15, 2018, TransTech entered into a Fifth Modification to the Loan and Security Agreement related to the $500,000 secured credit facility with Capital Source to fund its operations. The Modification extended the maturity to December 12, 2018. The secured credit facility provides for a prime rate interest floor for prime interest of 4.5% plus 2.5%. The eligible borrowing is based on 80% of eligible trade accounts receivable, not to exceed $500,000. The secured credit facility is collateralized by the assets of TransTech, with a guarantee by Know Labs, including a security interest in all assets of Know Labs. The remaining balance on the accounts receivable must be repaid by the time the secured credit facility expires on December 12, 2018, unless we renew by automatic extension for the next successive term. TransTech has $24,000 available as of September 30, 2018. On December 6, 2018, Capital Source notified TransTech that the Loan and Security Agreement and Capital Source Credit Facility would be cancelled as of March 12, 2019. Effective December 12, 2018, TransTech entered into the Sixth Modification to the Loan and Security Agreement which reduced the secured credit facility to $200,000. Note Payable to Umpqua Bank On July 9, 2018, the Company repaid a $199,935 Business Loan Agreement with Umpqua Bank from funds previously provided by an entity affiliated with Ronald P. Erickson, our Chairman of the Board. The Company paid $27,041 and issued 800,000 shares of common stock in exchange for the conversion of this debt. Mr. Erickson is an accredited investor. These shares were issued in transactions that were not registered under the Act in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. Note Payables to Ronald P. Erickson or J3E2A2Z LP On January 25, 2018, the Company entered into amendments to two demand promissory notes, totaling $600,000 with Mr. Erickson, the Company’s Chief Executive Officer and/or entities in which Mr. Erickson has a beneficial interest. On March 16, 2018, the demand promissory notes and accrued interest were converted into convertible notes payable. See Note 11 for additional details. |
14. EQUITY
14. EQUITY | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
EQUITY | Authorized Capital Stock The Company 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. As of June 30, 2019, the Company had 22,567,686 shares of common stock issued and outstanding, held by 115 stockholders of record. The number of stockholders, including beneficial owners holding shares through nominee names, is approximately 2,300. Each share of common stock entitles its holder to one vote on each matter submitted to the stockholders for a vote, and no cumulative voting for directors is permitted. Stockholders do not have any preemptive rights to acquire additional securities issued by us. As of June 30, 2019, there were options outstanding for the purchase of 2,437,668 common shares (excluding unearned stock option grants), warrants for the purchase of 17,797,090 common shares, and 4,894,071 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company has an unknown number of shares (9,020,264 common shares at the current price of $0.25 per share) are issuable upon conversion of convertible debentures of $2,255,065. All of which could potentially dilute future earnings per share. Voting Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001. Series A Preferred Stock On January 29, 2019, a holder of Series A Preferred Stock converted 20,000 shares into 80,000 shares of common stock. There are no Series A Preferred Stock outstanding as of June 30, 2019. 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. On August 14, 2017, the price of the Series C Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. As of June 30, 2019, the Company has 3,108,356 of Series D Preferred Stock outstanding with Clayton A. Struve, an accredited investor, outstanding. On August 14, 2017, the price of the Series D Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. Series F Preferred Stock On August 1, 2018, the Company filed with the State of Nevada a Certificate of Designation establishing the Designations, Preferences, Limitations and Relative Rights of Series F Preferred Stock. The Designation authorized 500 shares of Series F Preferred Stock. The Series F Preferred Stock shall only be issued to the current Board of Directors on the date of the Designation’s filing and is not convertible into common stock. As set forth in the Designation, the Series F Preferred Stock has no rights to dividends or liquidation preference and carries rights to vote 100,000 shares of common stock per share of Series F upon a Trigger Event, as defined in the Designation. A Trigger Event includes certain unsolicited bids, tender offers, proxy contests, and significant share purchases, all as described in the Designation. Unless and until a Trigger Event, the Series F shall have no right to vote. The Series F Preferred Stock shall remain issued and outstanding until the date which is 731 days after the issuance of Series F Preferred Stock (“Explosion Date”), unless a Trigger Event occurs, in which case the Explosion Date shall be extended by 183 days. Securities Subject to Price Adjustments In the future, if we sell our common stock at a price below $0.25 per share, the exercise price of 1,785,715 outstanding shares of Series C Preferred Stock, 1,016,004 outstanding shares Series D Preferred Stock that adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of a Convertible Note Payable of $2,255,066 (9,020,264 common shares at the current price of $0.25 per share) and the exercise price of additional outstanding warrants to purchase 16,125,645 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. 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, 2019: During the nine months ended June 30, 2019, the Company issued 468,659 shares of common stock and cancelled warrants to purchase 73,240 shares of common stock at $0.25 per share to three consultants and two investors related to the cashless exercise of warrants. During the nine months ended June 30, 2019, the Company issued 145,000 shares of common stock for services provided by two consultants. The shares were valued at $246,900 or $1.703 per share. On January 2, 2019, the Company issued 100,000 shares of common stock for services provided to Ronald P. Erickson. The shares were valued at $102,000 or $1.02 per share. On January 29, 2019, a holder of Series A Preferred Stock converted 20,000 shares into 80,000 shares of common stock. Private Placements On May 28, 2019, the Company closed additional rounds of a private placement and received gross proceeds of $4,242,515 in exchange for issuing Subordinated Convertible Notes (the “Convertible Notes”) and Warrants (the “Warrants”) in a private placement to 54 accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The Convertible Notes have a principal amount of $4,242,515 and bear annual interest of 8%. Both the principal amount of and the interest are payable on a payment-in-kind basis in shares of Common Stock of the Company (the “Common Stock”). They are due and payable (in Common Stock) on the earlier of (a) mandatory and automatic conversion of the Convertible Notes into a financing that yields gross proceeds of at least $10,000,000 (a “Qualified Financing”) or (b) on the one-year anniversary of the Convertible Notes (the “Maturity Date”). Investors will be required to convert their Convertible Notes into Common Stock in any Qualified Financing at a conversion price per share equal to the lower of (i) $1.00 per share or (ii) a 25% discount to the price per share paid by investors in the Qualified Financing. If the Convertible Notes have not been paid or converted prior to the Maturity Date, the outstanding principal amount of the Convertible Notes will be automatically converted into shares of Common Stock at the lesser of (a) $1.00 per share or (b) any adjusted price resulting from the application of a “most favored nations” provision, which requires the issuance of additional shares of Common Stock to investors if the Company issues certain securities at less than the then-current conversion price. The Warrants were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion. The Convertible Notes are initially convertible into 4,242,515 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 2,121,258 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. In connection with the private placement, the placement agent for the Convertible Notes and the Warrants received a cash fee of $361,401 and warrants to purchase 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. The placement agent has also received a $25,000 advisory fee. As part of the Purchase Agreement, the Company entered into a Registration Rights Agreement, which grants the investors “demand” and “piggyback” registration rights to register the shares of Common Stock issuable upon the conversion of the Convertible Notes and the exercise of the Warrants with the Securities and Exchange Commission for resale or other disposition. In addition, the Convertible Notes are subordinated to certain senior debt of the Company pursuant to a Subordination Agreement executed by the investors. The Convertible Notes and Warrants were issued in transactions that were not registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. The Company may continue offering additional Convertible Notes and Warrants on substantially the same terms until June 30, 2019 (unless extended at the discretion of the Company) or until the Company has raised a maximum of $7 million in gross proceeds (or such other amount determined by the Company in its discretion). Warrants to Purchase Common Stock The following warrants were issued during the nine months ended June 30, 2019: The Company issued 468,649 shares of common stock and cancelled warrants to purchase 61,018 shares of common stock at $0.25 per share to two consultants and two investors related to the cashless exercise of warrants. The Company issued warrants to purchase 70,000 shares of common stock at $1.61 to $2.72 per share to three consultants. The warrants were valued at $30,325 or $1.989 per share. The warrants expire during the first quarter of 2024. The Company increased warrants by 120,000 shares at $0.25 per shares related to the June 28, 2019 exercise of warrants by a holder of Series A Preferred Stock. Private Placements The Warrants issued for the private placements discussed above were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion. Warrants are initially exercisable for 2,121,258 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. In connection with the private placement, the placement agent for the Convertible Notes and the Warrants received warrants to 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. A summary of the warrants outstanding as of June 30, 2019 were as follows: June 30, 2019 Weighted Average Exercise Shares Price Outstanding at beginning of period 15,473,398 $ 0.326 Issued 2,853,359 1.179 Exercised (468,649 ) (0.250 ) Forfeited - - Expired (61,018 ) (3.501 ) Outstanding at end of period 17,797,090 $ 0.454 Exercisable at end of period 17,797,090 A summary of the status of the warrants outstanding as of June 30, 2019 is presented below: June 30, 2019 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 13,467,286 3.27 $ 0.250 13,467,286 $ 0.250 714,286 2.08 0.700 714,286 0.700 882,159 2.37 1.000 882,159 1.000 2,713,359 4.74 1.20-1.50 2,713,359 1.20-1.50 20,000 2.99 2.34-4.08 20,000 2.34-4.08 - - - - - 17,797,090 3.69 $ 0.454 17,797,090 $ 0.454 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the nine months ended June 30, 2019 were as follows: Assumptions Dividend yield 0% Expected life 1 yr Expected volatility 125% Risk free interest rate 2.0% There were vested warrants of 16,573,772 as of June 30, 2019 with an aggregate intrinsic value of $15,949,833. | Authorized Capital Stock The Company 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. The Company has authorized to issue up to 100,000,000 shares of common stock with a par value of $0.001. As of September 30, 2018, we had 17,531,502 shares of common stock issued and outstanding, held by 122 shareholders of record. The number of shareholders, including beneficial owners holding shares through nominee names, is approximately 2,300. Each share of common stock entitles its holder to one vote on each matter submitted to the shareholders for a vote, and no cumulative voting for directors is permitted. Shareholders do not have any preemptive rights to acquire additional securities issued by us. As of September 30, 2018, there were options outstanding for the purchase of 2,182,668 common shares, warrants for the purchase of 15,473,398 common shares and 4,914,071 shares of our common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock. We have Convertible Note Payable of $2,255,066 (9,020,264 common shares at the current price of $0.25 per share). All of which could potentially dilute future earnings per share. Voting Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001. Series A Preferred Stock In July 2015, the Company sold Series A Preferred Stock to two investors for a total of $350,000. As of December 21, 2018, the Company had 20,000 Series A Preferred Stock issued and outstanding. Each holder of outstanding shares of Series A Preferred is entitled to the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred held by such holder are then convertible as of the applicable record date. The Series A Preferred may not be redeemed without the consent of the holder. The Company cannot amend, alter or repeal any preferences, rights, or other terms of the Series A Preferred so as to adversely affect the Series A Preferred, without the written consent or affirmative vote of the holders of at least 66% of the then outstanding shares of Series A Preferred, voting as a separate voting group, given by written consent or by vote at a meeting called for such purpose for which notice shall have been duly given to the holders of the Series A Preferred. In connection with the issuance of the Series A Preferred, the Company also issued (i) a Series C five-year Warrant for 2 shares of common stock and (ii) a Series D five-year Warrant for 23,334 shares of common stock. The Series A Preferred Stock and Series C and D Warrants currently have no registration rights. On August 14, 2017, the price of the Series A Preferred Stock and Series C and D Warrants were adjusted to $0.25 per share pursuant to the documents governing such instruments. On September 23, 2018, a holder of Series A Preferred Stock converted 3,334 shares into 3,334 shares of common stock. In addition, the holder exercised Series C and D Warrants for 6,668 shares of common stock at $0.25 per share. 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 the Company’s 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, 2017, the Company recognized preferred stock dividends of $2.3 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 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 Designations, resulting in an adjustment to the conversion price of all currently outstanding Series D Shares to $0.70 per share. On August 14, 2017, the price of the Series C and D Preferred Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. After adjustment there were 3,108,356 shares of Series D preferred stock authorized. On July 17, 2018, the Company filed with the State of Nevada a second Amended and Restated Certificate of Designation of Preferences, Powers, and Rights of the Series D Convertible Preferred Stock. The Amended Certificate restates the prior Certificate of Designation filed on May 8, 2017 to decrease the number of authorized Series D shares from 3,906,250 shares to 1,016,014 shares. No other amendments were made to the preferences and rights of the Series D Convertible Preferred Stock. The filing of the Amended Certificate was unanimously approved by the Board of Directors and the shareholders of Series D Convertible Preferred Stock. Series F Preferred Stock On August 1, 2018, the Company filed with the State of Nevada a Certificate of Designation establishing the Designations, Preferences, Limitations and Relative Rights of Series F Preferred Stock (the “Designation”). The Designation authorized 500 shares of Series F Preferred Stock. The Series F Preferred Stock shall only be issued to the current Board of Directors on the date of the Designation’s filing and is not convertible into common stock. As set forth in the Designation, the Series F Preferred Stock has no rights to dividends or liquidation preference and carries rights to vote 100,000 shares of common stock per share of Series F upon a Trigger Event, as defined in the Designation. A Trigger Event includes certain unsolicited bids, tender offers, proxy contests, and significant share purchases, all as described in the Designation. Unless and until a Trigger Event, the Series F shall have no right to vote. The Series F Preferred Stock shall remain issued and outstanding until the date which is 731 days after the issuance of Series F Preferred Stock (“Explosion Date”), unless a Trigger Event occurs, in which case the Explosion Date shall be extended by 183 days. Securities Subject to Price Adjustments On August 14, 2017, a private placement triggered a provision in the documents governing 23,334 outstanding shares of Series A Preferred Stock, 1,785,715 outstanding shares of Series C Preferred Stock and 1,016,004 outstanding shares Series D preferred Stock, which adjusted the conversion price of such Preferred Stock to $0.25 per share. In addition, the conversion price of a Convertible Note Payables of $2,390,066 and the exercise price of outstanding warrants to purchase 9,548,741 shares of common stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. As of December 21, 2018, there were outstanding warrants for the purchase of 15,473,398 shares of common stock. In the future, if we sell our common stock at a price below $0.25 per share, the exercise price of 20,000 outstanding shares of Series A Preferred Stock, 1,785,715 outstanding shares of Series C Preferred Stock, 1,016,004 outstanding shares Series D Preferred Stock that adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of a Convertible Note Payable of $2,255,066 (9,020,264 common shares at the current price of $0.25 per share) and the exercise price of additional outstanding warrants to purchase 13,865,286 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. 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 year ended September 30, 2018: The Company issued 779,676 shares of common stock to Names Executive Officers, directors, employees and consultants and for services during the year ended September 30, 2018. The Company expensed $273,068. On April 10, 2018, the Company issued 2,000,000 shares of our common stock to Phillip A. Bosua under the terms of the Merger Agreement with RAAI common stock. The shares were valued at the fair market value of $520,000 or $0.26 per share. On June 25, 2018, the Company closed a private placement and received gross proceeds of $1,750,000 ($1,710,000 as of June 30, 2018) in exchange for issuing 7,000,000 (6,840,000 as of June 30, 2018) shares of common stock and warrants to purchase 3,500,000 (3,420,000 as of June 30, 2018) shares of common stock in a private placement to accredited investors pursuant to a series of substantially identical subscription agreements. The initial exercise price of the warrants described above is $0.25 per share, subject to certain adjustments, and they expired five years after their issuance. The shares and the warrants described above were issued in transactions that were not registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. On June 25, 2018, the Company issued 500,000 shares of our common stock to Phillip A. Bosua under the terms of an Employment agreement dated April 10, 2018. The shares were valued at the fair market value of $165,000 or $0.33 per share. The Company closed debt conversions and issued 1,600,000 shares of common stock in exchange for the conversion of $464,000, 230,000 shares in exchange for $48,300 in legal services and 605,000 shares in for $199.935 in preexisting debt owed by the Company to certain service providers, all of whom are accredited investors. These shares were issued in transactions that were not registered under the Act in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. During the year ended September 30, 2018, the Company issued 158,000 shares of our common stock related to warrant exercises that were valued at $80,128. On September 23, 2018, the Company issued 3,334 shares of our common stock related to the conversion of Series A Preferred Stock for $834. The following equity issuances occurred during the year ended September 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 year ended September 30, 2017. The Company expensed $271,309 during the year ended September 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 year ended September 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. On the year ended September 30, 2017, the Company issued 795,000 shares of restricted common stock to two Names Executive Officers employees, two directors and six employees and consultants and for services during 2015-2017. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $0.17 per share, the market price of our common stock. The Company expensed $135,150 during the year ended September 30, 2017. Warrants to Purchase Common Stock The following warrants were issued during the year ended September 30, 2018: On December 15, 2017, the Company received $250,000 and issued a senior convertible exchangeable debenture with a principal amount of $300,000 and a five year common stock purchase warrant to purchase 1,200,000 shares of common stock in a private placement dated December 12, 2017 to an accredited investor pursuant to a Securities Purchase Agreement dated August 14, 2017. See Note 12 for additional details. The initial exercise price of the warrants described above is $0.25 per share, also subject to certain adjustments. The warrants were valued at $123,600 and the beneficial conversion feature was valued at $93,174. On March 2, 2018, the Company received gross proceeds of $280,000 in exchange for issuing a senior convertible redeemable debenture with a principal amount of $336,000 and a five year warrant to purchase 1,344,000 shares of common stock in a private placement dated February 28, 2018 to an accredited investor pursuant to a Securities Purchase Agreement dated August 14, 2017 See Note 9 for additional details. The initial exercise price of the warrants described above is $0.25 per share, also subject to certain adjustments. The warrants had an estimated fair value of $348,096 and the beneficial conversion feature was value at $252,932. The Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. See Note 9 for additional details. The warrants had an estimated value of $60,820. In addition, effective as of January 31, 2018, Mr. Erickson was issued a warrant to purchase up to 855,000 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. See Note 12 for additional details. The warrants had an estimated value of $49,726. During the year ended September 30, 2018, The Company issued placement agent warrants related to the issuance of senior convertible redeemable debentures and Series D Preferred Stock to purchase up to 538,400 shares of common stock for a period of five years. The initial exercise price of the warrants described above is $0.25 per share, also subject to certain adjustments. The estimated fair value was $134,600. On June 25, 2018, the Company closed a private placement and received gross proceeds of $1,750,000 ($1,710,000 as of June 30, 2018) in exchange for issuing 7,000,000 (6,840,000 as of June 30, 2018) shares of common stock and warrants to purchase 3,500,000 (3,420,000 as of June 30, 2018) shares of common stock in a private placement to accredited investors pursuant to a series of substantially identical subscription agreements. The initial exercise price of the warrants described above is $0.25 per share, subject to certain adjustments, and they expired five years after their issuance. The shares and the warrants described above were issued in transactions that were not registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. The Company issued warrants to purchase 1,229,000 shares of common stock to Named Executive Officers, directors, employees and consultants and for services during the year ended September 30, 2018. The Company expensed $121,710. During the year ended September 30, 2018, the Company issued 158,000 shares of our common stock related to warrant exercises that were valued at $80,128. During the year ended September 30, 2018, warrants for the purchase of 544,998 shares of common stock valued at $136,250 expired. The following warrants were issued during the year ended September 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 $189,938. 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 year ended September 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. On August 14, 2017, the Company issued a common stock purchase warrant to purchase 1,440,000 shares of common stock in a private placement to Clayton Struve for gross proceeds of $300,000 pursuant to a Securities Purchase Agreement dated August 14, 2017. The initial exercise price of the Warrant is $0.25 per share, also subject to certain adjustments. The warrants were valued at $111,429. Warrants to acquire 7,668 shares of common stock at $30.00 per share expired. The conversion price of the Series A, C and D Shares and related warrants is currently $0.250 per share, subject to certain adjustments. A summary of the warrants issued as of September 30, 2018 were as follows: September 30, 2018 Weighted Average Exercise Shares Price Outstanding at beginning of period 6,900,356 $ 0.428 Issued 9,276,066 0.250 Exercised (158,026 ) (0.507 ) Forfeited - - Expired (544,998 ) (0.250 ) Outstanding at end of period 15,473,398 $ 0.326 Exerciseable at end of period 15,473,398 A summary of the status of the warrants outstanding as of September 30, 2018 is presented below: September 30, 2018 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 13,870,286 4.04 $ 0.250 13,870,286 $ 0.250 714,286 2.83 0.700 714,286 0.700 882,159 3.12 1.000 882,159 1.000 6,667 0.25 30.000 6,667 30.000 15,473,398 3.61 $ 0.326 15,473,398 $ 0.326 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the year ended September 30, 2018 were as follows: Dividend yield 0% Expected life 1-2 years Expected volatility 125%-145% Risk free interest rate .0202-.0214% At September 30, 2018, vested warrants totaling 15,466,731 shares had an aggregate intrinsic value of $13,870,286. |
15. STOCK OPTIONS
15. STOCK OPTIONS | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
STOCK OPTIONS | 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 the following stock option transactions during the nine months ended June 30, 2019: On October 31, 2018, the Board awarded stock option grants to two directors to acquire 50,000 shares each of the Company’s common stock. The grants were valued at $3.03 per share and expire on October 31, 2013. The grants vested immediately. On October 31, 2018, the Board awarded Phillip A. Bosua a stock option grant to acquire 100,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign. In addition, Mr. Bosua was granted a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants were valued at $3.03 per share and expire on October 31, 2023. On October 31, 2018, the Board awarded Ronald P Erickson a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon the Company’s successful listing of its Common Stock on NASDAQ or the New York Stock Exchange (including the NYSE American Market). The grant was valued at $3.03 per share and expires on October 31, 2023. On March 26, 2019, the Board awarded an employee a stock option grant to acquire 10,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign. In addition, the employee was granted a stock option grant to acquire 130,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants were valued at $1.50 per share and expire on March 26, 2024. On March 26, 2019, the Board awarded an employee a stock option grant to acquire 10,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign. In addition, the employee was granted a stock option grant to acquire 130,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants were valued at $1.50 per share and expire on March 26, 2024. During April 2019, the Board awarded stock option grants to two employees and a consultant to acquire 155,000 shares each of the Company’s common stock. The grants were valued at $1.56 per share and expire during April 2024. A grant for 5,000 vested immediately and grants totaling 150,000 vests quarterly over four years, with no vesting during the first two quarters. On April 15, 2019, the Board awarded an employee a stock option grant to acquire 5,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign. In addition, the employee was granted a stock option grant to acquire 50,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants were valued at $1.50 per share and expire on April 15, 2024. The Company recently decided that it would not undertake a Kickstarter campaign. Options are expected to have alternative Company milestones. There are currently 2,437,668 options to purchase common stock at an average exercise price of $1.744 per share outstanding as of June 30, 2019 under the 2011 Stock Incentive Plan. The Company recorded $359,051 and $7,334 of compensation expense, net of related tax effects, relative to stock options for the nine months ended June 30, 2019 and 2018 and in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.020) and ($0.000) per share, respectively. As of June 30, 2019, there is approximately $1,595,350, net of forfeitures, 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 4.46 years. Stock option activity for the nine months ended June 30, 2019 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2018 2,182,668 $ 1.698 $ 3,706,519 Granted 255,000 2.136 544,750 Exercised - - - Forfeitures - - - Outstanding as of June 30, 2019 2,437,668 $ 1.744 $ 4,251,269 The following table summarizes information about stock options outstanding and exercisable as of June 30, 2019: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exercisable Exercisable Exercisable 0.25 530,000 4.36 $ 0.25 184,375 $ 0.25 1.28-1.90 1,305,000 4.5 1.31 359,375 1.31 3.03 100,000 4.46 3.03 100,000 3.03 4.08-4.20 500,000 4.48 4.13 125,000 4.13 13.500 1,334 0.38 13.5 1,334 13.5 15.000 1,334 - 15 - 15 2,437,668 4.46 $ 1.744 770,084 $ 1.746 The significant weighted average assumptions relating to the valuation of the Company’s stock option grants for the nine months ended June 30, 2019 were as follows: Assumptions Dividend yield 0% Expected life 3 yrs Expected volatility 125% Risk free interest rate 2.0% There were stock option grants of 530,000 shares as of June 30, 2019 with an aggregate intrinsic value of $577,700. | 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. On April 10, 2018, the Board approved an amendment to its 2011 Stock Incentive Plan increasing the number of shares of common stock reserved under the Incentive Plan from 93,333 to 1,200,000. On August 7, 2018, the Board approved an amendment to its 2011 Stock Incentive Plan increasing the number of shares of common stock reserved under the Incentive Plan from 1,200,000 to 2,000,000 to common 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 the following stock option transactions during the year ended September 30, 2018. A former employee forfeited stock option grants for 10,668 shares of common stock at $14.719 per share. During the year ended September 30, 2018, four employee and two consultants were granted options to purchase 1,180,000 shares of common stock at an exercise price of $2.024 per share. The stock option grants vest quarterly over four years (none during the first six months) and are exercisable for 5 years. The stock option grants were valued at an average of $2.38 per share. On July 30, 2018, Mr. Bosua was awarded a stock option grant for 1,000,000 shares of common stock that was awarded at $1.28 per share and was valued at the black scholes value of $1.22 per share. The stock option grant vests quarterly over four years and is exercisable for 5 years. The Company had the following stock option transactions during the year ended September 30, 2017: During the year ended September 30, 2017, employees forfeited stock option grants for 35,504 shares of common stock at $19.51 per share. There are currently 534,736 options to purchase common stock at an average exercise price of $1.698 per share outstanding as of September 30, 2018 under the 2011 Stock Incentive Plan. The Company recorded $50,899 and $37,848 of compensation expense, net of related tax effects, relative to stock options for the year ended September 30, 2018 and in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.006) and ($0.01) per share, respectively. As of September 30, 2018, there is approximately $1,789,384, net of forfeitures, 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 4.94 years. Stock option activity for the years ended September 30, 2018 and 2017 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2016 50,908 $ 18.045 $ 918,627 Granted - - - Exercised - - - Forfeitures (35,504 ) (19.507 ) (692,568 ) Outstanding as of September 30, 2017 15,404 14.675 226,059 Granted 2,180,000 1.683 3,668,500 Exercised - - - Forfeitures (12,736 ) 14.764 (188,040 ) Outstanding as of September 30, 2018 2,182,668 $ 1.698 $ 3,706,519 The following table summarizes information about stock options outstanding and exercisable as of September 30, 2018: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exerciseable Exerciseable Exerciseable 0.25 530,000 4.98 $ 0.250 - $ - 1.28 1,150,000 4.96 1.28 - - 4.08-4.20 500,000 4.98 - - 13.500 1,334 0.44 13.50 1,334 13.50 15.000 1,334 - 15.00 - 15.00 2,182,668 4.94 $ 1.698 1,334 $ 13.50 There were stock option grants of 1,680,000 shares as of September 30, 2018 with an aggregate intrinsic value of $4,964,300. |
16. OTHER SIGNIFICANT TRANSACTI
16. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson See Notes 10 and 13 for related party transactions with Ronald P. Erickson. Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $478,861 as of June 30, 2019. Related Party Transaction with Phillip A. Bosua See Note 13 for related party transactions with Phillip A. Bosua. Stock Option Grants to Directors See Note 13 for related party transactions with Directors. | Related Party Transactions with Ronald P. Erickson See Notes 11, 12 and 13 for related party transactions with Ronald P. Erickson. On September 7, 2017 Mr. Erickson was issued 200,000 of restricted common stock to at the grant date market value of $0.17 per share. On January 16, 2018 Mr. Erickson was issued 100,000 of restricted common stock on to at the grant date market value of $0.21 per share. On January 25, 2018, the Company entered into amendments to two demand promissory notes, totaling $600,000 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 December 31, 2017 to September 30, 2018 and continue to provide for interest of 3% per annum and a third lien on company assets if not repaid by September 30, 2018 or converted into convertible debentures or equity on terms acceptable to the Holder. On March 16, 2018, the demand promissory notes and accrued interest were converted into convertible notes payable. On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of our common stock for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants had an estimated value of $0.12 per share. On July 9, 2018, the Company repaid a $199,935 Business Loan Agreement with Umpqua Bank from funds previously provided by an entity affiliated with Ronald P. Erickson, our Chairman of the Board. The Company paid $27,041 and issued 800,000 shares of common stock in exchange for the conversion of this debt. Mr. Erickson is an accredited investor. These shares were issued in transactions that were not registered under the Act in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $513,149 as of September 30, 2018. Related Party Transaction with Phillip A. Bosua On July 14, 2017, the Company issued 50,000 shares of our common stock to Phillip A. Bosua under the terms of a consulting agreement dated July 6, 2017. The fair value of the stock was $8,500. On February 7, 2018, the Company issued 50,000 shares of our common stock to Phillip A. Bosua under the terms of a consulting agreement dated July 6, 2017. On April 10, 2018, the Company issued 2,000,000 shares of our common stock to Phillip A. Bosua under the terms of the Merger Agreement with RAAI common stock. The fair value of the stock was $520,000. On June 25, 2018, the Company issued 500,000 shares of our common stock to Phillip A. Bosua under the terms of an Employment agreement dated April 10, 2018. The fair value of the stock was $165,000. On June 25, 2018, the Company closed a debt conversion with an entity controlled by Phillip A. Bosua and issued 255,000 shares of common stock in exchange for the conversion of $63,750 in preexisting debt owed by the Company to this entity. On July 30, 2018, Mr. Bosua was awarded a stock option grant for 1,000,000 shares of our common stock that was awarded at $1.28 per share and was valued at the black scholes value of $1.22 per share. Stock Issuances to Named Executive Officers and Directors On September 7, 2017, the Company issued 400,000 shares of restricted common stock to one Named Executive Officer and two directors for services during 2015-2017. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $0.17 per share, the market price of our common stock. During January to May 2018, the Company issued 275,000 shares of restricted common stock to one Named Executive Officer and two directors for services during 2018. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $0.246 per share, the market price of our common stock. Stock Option Grant Cancellations During the year ended September 30, 2017, two Named Executive Officers forfeited stock option grants for 35,366 shares of common stock at $19.53 per share. |
17. COMMITMENTS, CONTINGENCIES
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
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, Total 2020 $ 132,941 2021 169,297 2022 - 2023 - 2024 - Beyond - Total $ 302,238 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 on May 31, 2022. Lab Facilities and Executive Offices On May 1, 2018, the Company leased its lab facilities and executive offices located at 304 Alaskan Way South, Suite 102, Seattle, Washington, USA, 98101. The Company leases 2,800 square feet and the net monthly payment is $4,000. The lease expired on April 30, 2019. On February 1, 2019, the Company leased its lab facilities and executive offices located at 915 E Pine Street, Suite 212, Seattle, WA 98122. The Company leases 2,642 square feet and the net monthly payment is $8,256. The monthly payment increases approximately 3% on July 1, 2019 and annually thereafter. The lease expires on June 30, 2021 and can be extended. TransTech Facilities TransTech was located at 12142 NE Sky Lane, Suite 130, Aurora, OR 97002.TransTech terminated this lease effective May 31, 2019. | 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. Employment Agreement with Phillip A. Bosua, Chief Executive Officer On April 10, 2018, the Company appointed Mr. Bosua as Chief Executive Officer of the Company, replacing Ronald P. Erickson, who remains Chairman of the Company. Mr. Erickson has been a director and officer of Know Labs since April 2003. He was appointed as our CEO and President in November 2009 and as Chairman of the Board in February 2015. Previously, Mr. Erickson was our President and Chief Executive Officer from September 2003 through August 2003 and was Chairman of the Board from August 2004 until May 2011. Phillip A. Bosua was appointed the Company’s CEO on April 10, 2018. Previously, Mr. Bosua served as the Company’s Chief Product Officer since August 2017. The Company entered into a Consulting Agreement with Mr. Bosua’s company, Blaze Clinical on July 7, 2017. From September 2012 to February 2015, Mr. Bosua was the founder and Chief Executive Officer of LIFX Inc. (where he developed and marketed an innovative “smart” light bulb) and from August 2015 until February 2016 was Vice President Consumer Products at Soraa (which markets specialty LED light bulbs). From February 2016 to July 2017, Mr. Bosua was the founder and CEO of RAAI, Inc. (where he continued the development of his smart lighting technology). From May 2008 to February 2013 he was the Founder and CEO of LimeMouse Apps, a leading developer of applications for the Apple App Store. On April 10, 2018, the Company entered into an Employment Agreement with Mr. Bosua reflecting his appointment as Chief Executive Officer. The Employment Agreement is for an initial term of 12 months (subject to earlier termination) and will be automatically extended for additional 12-month terms unless either party notifies the other party of its intention to terminate the Employment Agreement. Mr. Bosua will be paid a base salary of $225,000 per year, received 500,000 shares of common stock valued at $0.33 per share and may be entitled to bonuses and equity awards at the discretion of the Board or a committee of the Board. The Employment Agreement provides for severance pay equal to 12 months of base salary if Mr. Bosua is terminated without “cause” or voluntarily terminates his employment for “good reason.” Employment Agreement with Ronald P. Erickson, Chairman of the Board and Interim Chief Financial 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 our Chief Executive Officer through September 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 our 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. On April 10, 2018, the Company entered into an Amended Employment Agreement for Ronald P. Erickson which amends the Employment Agreement dated July 1, 2017. The Agreement expires March 21, 2019. Properties and Operating Leases The Company is obligated under the following non-cancelable operating leases for its various facilities and certain equipment. Years Ended September 30, Total 2019 $ 118,190 2020 85,914 2021 23,498 2022 - 2023 - Beyond - Total $ 227,602 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 on May 31, 2022. Lab Facilities and Executive Offices On May 1, 2018, the Company leased its lab facilities and executive offices located at 304 Alaskan Way South, Suite 102, Seattle, Washington, USA, 98101. The Company leases 2,800 square feet and the net monthly payment is $4,000. The lease expires on April 30, 2019. TransTech Facilities TransTech is located at 12142 NE Sky Lane, Suite 130, Aurora, OR 97002. TransTech leases a total of approximately 6,340 square feet of office and warehouse space for its administrative offices, product inventory and shipping operations. Effective December 1, 2017, TransTech leases this office from December 1, 2017 at $4,465 per month. The monthly payment increases approximately 3% each year and the lease expires on January 31, 2020. Until December 1, 2017, TransTech leased this office on a month to month basis at $6,942 per month. |
18. INCOME TAXES
18. INCOME TAXES | 12 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise from United States sources. Pretax losses arising from United States operations were approximately $3,258,000 for the year ended September 30, 2018. Pretax losses arising from United States operations were approximately $3,901,000 for the year ended September 30, 2017. The Company has net operating loss carryforwards of approximately $27,352,000, which expire in 2022-2036. Because it is not more likely than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, a corresponding valuation allowance of approximately $5,744,000 was established as of September 30, 2018. Additionally, under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances, including a change in control. Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. There can be no assurance that the Company will be able to utilize any net operating loss carryforwards in the future. The Company is subject to possible tax examination for the years 2012 through 2018 For the year ended September 30, 2018, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses and warrants issued for services. U.S. Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Reform Act). The Tax Reform Act significantly revises the future ongoing federal income tax by, among other things, lowering U.S. corporate income tax rates effective January 1, 2018. The Company has calculated a blended U.S. federal income tax rate of approximately 21% for the fiscal year ending September 30, 2018 and 21.0% for subsequent fiscal years. Remeasurement of the Company’s deferred tax balance under the Tax Reform Act resulted in a non-cash tax benefit reduction of approximately $2.3 million for the year ended September 30, 2018. The changes included in the Tax Reform Act are broad and complex. The final transition impacts of the Tax Reform Act may differ from the above estimate due to, among other things, changes in interpretations of the Tax Reform Act, any legislative action to address questions that arise because of the Tax Reform Act and any changes in accounting standards for income taxes or related interpretations in response to the Tax Reform Act. The principal components of the Company’s deferred tax assets at September 30, 2018 and 2017 are as follows: 2018 2017 U.S. operations loss carry forward at statutory rate of 21% $ (5,743,840 ) $ (5,804,285 ) Non-U.S. operations loss carry forward at statutory rate of 20.5% - - Total (5,743,840 ) (5,804,285 ) Less Valuation Allowance 5,743,840 5,804,285 Net Deferred Tax Assets - - Change in Valuation allowance $ 60,445 $ (1,036,276 ) A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended September 30, 2018 and 2017 are as follows: 2018 2017 Federal Statutory Rate -21.0 % -21.0 % Increase in Income Taxes Resulting from: Change in Valuation allowance 21.0 % 21.0 % Effective Tax Rate 0.0 % 0.0 % |
19. SUBSEQUENT EVENTS
19. SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Subsequent Events [Abstract] | ||
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, 2019, there were the following material transactions that require disclosure: The Company issued 41,007 shares of common stock and cancelled warrants to purchase 8,993 shares of common stock at $0.25 per share to an investor related to the cashless exercise of warrants. On July 8, 2019, the Board awarded a stock option grant to a consultant to acquire 100,000 shares each of the Company’s common stock. The grant was valued at $1.40 per share and will expire on July 8, 2024. The grant vests quarterly over four years, with no vesting during the first two quarters. On July 8, 2019, the Board awarded a stock option grant to a consultant to acquire 15,000 shares each of the Company’s common stock. The grant was valued at $1.40 per share and will expire on July 8, 2024. The grant vests on January 8, 2020. On July 8, 2019, the Board awarded an employee a stock option grant to acquire 100,000 shares of the Company’s Common stock which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grant was valued at $1.40 per share and expires on July 8, 2024. | The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued. On October 31, 2018, the Board awarded stock option grants to two directors to acquire 50,000 shares each of the Company’s common stock. The grants were valued at $3.03 per share and expire on October 31, 2013. The grants vested immediately. On October 31, 2018, the Board awarded Phillip A. Bosua a stock option grant to acquire 100,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign. In addition, Mr. Bosua was granted a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants were valued at $3.03 per share and expire on October 31, 2023. On October 31, 2018, the Board awarded Ronald P Erickson a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon the Company’s successful listing of its Common Stock on Nasdaq or the New York Stock Exchange (including the NYSE American Market). The grant was valued at $3.03 per share and expires on October 31, 2023. On November 16, 2018, the Company signed Amendment 1 to Senior Secured Convertible Redeemable Notes dated September 30, 2016, August 14, 2017 and December 12, 2017, extending the due dates of the Notes to February 27, 2019. On November 21, 2018, the Company’s Board of Directors amended the Company’s Audit, Compensation and Nominating and Corporate Governance Committee Charters. In addition, on November 21, 2018, the Company’s Board of Directors amended the Company’s Code of Ethics Policy. |
3. SIGNIFICANT ACCOUNTING POL_2
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
BASIS OF PRESENTATION | 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 | Principles of Consolidation | The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries, TransTech Systems, Inc and RAAI Lighting, Inc. Inter-Company items and transactions have been eliminated in consolidation. |
CASH AND CASH EQUIVALENTS | 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 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 | 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 $35,000 reserve for impaired inventory as of September 30, 2018 and 2017, respectively. |
EQUIPMENT | 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 2-3 years. |
LONG-LIVED ASSETS | 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. |
INTANGIBLE ASSETS | Intangible Assets | Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable. If the life is not determinable, amortization is not recorded. We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable. When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets. |
RESEARCH, DEVELOPMENT, AND ENGINEERING EXPENSES | Research, Development and Engineering Expenses The Company’s research and development efforts are primarily focused improving the core foundational ChromaID technology and developing new and unique applications for the technology. As part of this effort, the Company typically conduct testing to ensure that ChromaID application methods are compatible with the customer’s requirements, and that they can be implemented in a cost effective manner. The Company is also actively involved in identifying new application methods. Know Lab’s team has considerable experience working with the application of light-based technologies and their application to various industries. The Company believes that its continued development of new and enhanced technologies relating to our core business is essential to its future success. The Company spent $832,555, $570,514 and $79,405 during the nine months ended June 30, 2019 and the years ended September 30, 2018 and 2017, respectively, on research and development activities. | Research, development and engineering expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials, supplies and facilities used in producing prototypes. The Company’s research and development efforts are primarily focused improving the core foundational ChromaID technology and developing new and unique applications for the technology. As part of this effort, the Company typically conduct testing to ensure that ChromaID application methods are compatible with the customer’s requirements, and that they can be implemented in a cost effective manner. The Company is also actively involved in identifying new application methods. Know Lab’s team has considerable experience working with the application of light-based technologies and their application to various industries. The Company believes that its continued development of new and enhanced technologies relating to our core business is essential to its future success. The Company spent $570,514 and $79,405 during the years ended September 30, 2018 and 2017, respectively, on research and development activities. |
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS | 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, 2019 and September 30, 2018 are based upon the short-term nature of the assets and liabilities. | 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 September 30, 2018 and 2017 are based upon the short-term nature of the assets and liabilities. |
DERIVATIVE FINANCIAL INSTRUMENTS | 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 | Revenue Recognition | Know Lab 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 | 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 | Convertible Securities | Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities. 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 | Net Loss per Share As of June 30, 2018, there were options outstanding for the purchase of 534,736 common shares, warrants for the purchase of 15,586,424 common shares, 4,914,405 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock. In addition, the Company has an unknown number of shares issuable upon conversion of convertible debentures of $2,390,066. All of which could potentially dilute future earnings 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 September 30, 2018, there were options outstanding for the purchase of 2,182,668 common shares, warrants for the purchase of 15,473,398 common shares, 4,914,071 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock. In addition, we have an unknown number of shares (9,020,264 common shares at the current price of $0.25 per share) are issuable upon conversion of convertible debentures of $2,255,066. All of which could potentially dilute future earnings per share. As of September 30, 2017, there were options outstanding for the purchase of 15,404 common shares, warrants for the purchase of 6,900,356 common shares, 2,825,053 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock and up to 332,940 shares of the Company’s common stock issuable upon the exercise of placement agent warrants. In addition, the Company has an unknown number of shares are issuable upon conversion of convertible debentures of $570,000. All of which could potentially dilute future earnings per share. |
DIVIDEND POLICY | 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 | 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 | 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. | In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-11, “Simplifying the Measurement of Inventory,” Topic 330, “Inventory” (ASU 2015-11). The amendments in ASU 2015-11, which apply to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, require that entities measure inventory at the lower of cost and net realizable value. The amendments in ASU 2015-11 should be applied on a prospective basis. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The Company adopted the amendments of ASU 2015-11 effective October 1, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements for the year ended September 30, 2018. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” Topic 718, “Compensation-Stock Compensation” (ASU 2016-09). ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the Company’s financial statements, including income tax consequences, forfeitures and classification on the statement of cash flows. Under previous guidance, excess tax benefits and deficiencies from share-based compensation arrangements were recorded in equity when the awards vested or were settled. ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies in income tax expense, rather than paid-in-capital. The Company adopted the amendments of ASU 2016-09 effective October 1, 2017.The adoption of this standard did not have a material impact on the Company’s consolidated statements of income for the year ended September 30, 2018. In addition, under ASU 2016-09, excess tax income tax benefits from share-based compensation arrangements are classified as cash flow from operations, rather than as cash flow from financing activities. For the year ended September 30, 2018, there were no excess income tax benefits. The Company has elected to continue to estimate the number of share-based awards expected to vest, as permitted by ASU 2016-09, rather than electing to account for forfeitures as they occur. ASU 2016-09 requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the calculation of diluted shares, resulting in an immaterial decrease in diluted weighted average shares outstanding for the year ended September 30, 2018. In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” Topic 350, “Intangibles – Goodwill and Other” (ASU 2017-04). The amendments in ASU 2017-04 simplify the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments should be applied on a prospective basis. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017, and the ASU is effective for the Company’s first quarter of the fiscal year ending September 30, 2020. The Company is currently evaluating the impact that the adoption of these provisions will have on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases,” Topic 842, “Leases” (ASU 2016-02). ASU No. 2016-02 requires lessees to recognize a right-of-use asset and corresponding lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. ASU 2016-02 also requires certain quantitative and qualitative disclosures. The provisions of ASU 2016-02 are effective for the Company’s first quarter of the fiscal year ending September 30, 2020, with early adoption permitted. The Company will apply the transition provisions of ASU 2016-02 at its adoption date, rather than the earliest comparative period presented in the financial statements, as permitted by ASU 2018-11, “Leases,” Topic 842, “Targeted Improvements,” released in July 2018. The adoption of ASU 2016-02 may result in a material increase to the Company’s consolidated balance sheets for lease liabilities and right-of-use assets. The Company is also performing a comprehensive review of its current processes to determine and implement changes required to support the adoption of this standard. The Company is currently evaluating the other effects the adoption of ASU 2016-02 will have on its consolidated financial statements. In January 2018, the FASB issued ASU 2018-01, “Leases,” Topic 842, “Land Easement Practical Expedient for Transition to Topic 842” (ASU 2018-01). ASU 2018-01 permits an entity to elect a transition practical expedient to not assess, under Accounting Standards Codification (ASC) 842, land easements that exist or expired before the standard’s effective date that were not previously accounted for as leases under ASC 840. The Company plans to elect this practical expedient in implementing ASU 2016-02. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” Topic 606, “Revenue from Contracts with Customers” (ASU 2014-09). ASU 2014-09 provides guidance for revenue recognition and will replace most existing revenue recognition guidance in GAAP when it becomes effective. ASU 2014-09’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled for the transfer of those goods or services. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. Additionally, the amendments in this ASU provide a practical expedient for entities to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less, The Company plans to elect this practical expedient upon adoption. In July 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers – Deferral of the Effective Date.” The FASB approved the deferral of ASU 2014-09, by extending the new revenue recognition standard’s mandatory effective date by one year and permitting public companies to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. The guidance in ASU 2014-09 will be effective for the Company in the first quarter of the fiscal year ending September 30, 2019. Further to ASU 2014-09 and ASU 2015-14, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers,” Topic 606, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (ASU 2016-08) in March 2016, ASU 2016-12, “Revenue from Contracts with Customers,” Topic 606, “Narrow-Scope Improvements and Practical Expedients” (ASU 2016-12) in May 2016 and ASU 2016-20, “Revenue from Contracts with Customers,” Topic 606, “Technical Corrections and Improvements” (ASU 2016-20) in December 2016. The amendments in ASU 2016-08 clarify the implementation guidance on principal versus agent considerations, including indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU 2016-12 addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The Company plans to make such election. The Company also plans to elect the practical expedient in ASU 2016-20 that provides entities do not need to disclose the transaction price allocated to performance obligations when the related contracts have a duration of one year or less. This includes loyalty rewards, which can be redeemed in the month subsequent to the quarter earned, and marketing promotions that cross accounting periods. Both of these classes of transactions are currently immaterial to the Company. The effective date and transition requirements for ASU 2016-08, ASU 2016-12 and ASU 2016-20 are the same as for ASU 2014-09. The Company does not plan to early adopt the new revenue recognition guidance; adoption will be on the modified retrospective basis beginning in fiscal year 2019. The Company has substantially concluded its assessment of the impact of the adoption of this standard on its consolidated financial statements. Most of the Company’s revenue is expected to continue to be generated from point-of-sale transactions, which ASU 2014-09 treats generally consistent with current accounting standards. The Company does not expect this standard will have a material impact on the accounting for point-of-sale transactions or related areas including the right of return and customer incentives. Although the impact on the consolidated financial statements is not expected to be material, additional disclosures will be required. In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation,” Topic 718, “Improvements to Nonemployee Share-Based Payment Accounting” (ASU 2018-07) as part of its Simplification Initiative to reduce complexity when accounting for share-based payments to non-employees. ASU 2018-07 expands the scope of Topic 718 to more closely align share-based payment transactions for acquiring goods and services from non-employees with the accounting for share-based payments to employees, with certain exceptions. The provisions of ASU 2018-07 are effective for the Company’s first quarter of the fiscal year ending September 30, 2020, with early adoption permitted. |
7. FIXED ASSETS (Tables)
7. FIXED ASSETS (Tables) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
Schedule of Property and equipment | Estimated June 30, 2019 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 412,240 $ 42,681 $ 454,921 Leasehold improvements 2-3 years 3,612 - 3,612 Furniture and fixtures 2-3 years 58,051 95,020 153,071 Software and websites 3- 7 years 35,830 - 35,830 Less: accumulated depreciation (363,508 ) (137,701 ) (501,209 ) $ 146,225 $ - $ 146,225 | Estimated September 30, 2018 Useful Lives Purchased Capital Leases Total Machinery and equipment 2-10 years $ 332,305 $ 42,681 $ 374,986 Leasehold improvements 2-3 years 276,112 - 276,112 Furniture and fixtures 2-3 years 58,051 95,020 153,071 Software and websites 3- 7 years 35,830 - 35,830 Less: accumulated depreciation (532,966 ) (137,700 ) (670,666 ) $ 169,332 $ 1 $ 169,333 |
8. INTANGIBLE ASSETS (Tables)
8. INTANGIBLE ASSETS (Tables) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Intangible Assets Tables Abstract | ||
Schedule of Intangible assets | Estimated June 30, September 30, Useful Lives 2019 2018 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (202,221 ) (72,222 ) Intangible assets, net $ 317,779 $ 447,778 | Estimated September 30, September 30, Useful Lives 2018 2017 Technology 3 years $ 520,000 $ - Less: accumulated amortization (72,222 ) - Intangible assets, net $ 447,778 $ - |
13. NOTES PAYABLE, CAPITALIZE_2
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Tables) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
Notes payable, capitalized leases and long term debt | June 30, September 30, 2019 2018 Capital Source Business Finance Group $ - $ 145,186 Total debt - 145,186 Less current portion of long term debt - (145,186 ) Long term debt $ - $ - | September 30, September 30, 2018 2017 Capital Source Business Finance Group $ 145,186 $ 365,725 Note payable to Umpqua Bank 0 199,935 Secured note payable to J3E2A2Z LP - related party - 600,000 Total debt 145,186 1,165,660 Less current portion of long term debt (145,186 ) (1,165,660 ) Long term debt $ - $ - |
14. EQUITY (Tables)
14. EQUITY (Tables) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
Summary of the warrants issued | June 30, 2019 Weighted Average Exercise Shares Price Outstanding at beginning of period 15,473,398 $ 0.326 Issued 2,853,359 1.179 Exercised (468,649 ) (0.250 ) Forfeited - - Expired (61,018 ) (3.501 ) Outstanding at end of period 17,797,090 $ 0.454 Exercisable at end of period 17,797,090 | September 30, 2018 Weighted Average Exercise Shares Price Outstanding at beginning of period 6,900,356 $ 0.428 Issued 9,276,066 0.250 Exercised (158,026 ) (0.507 ) Forfeited - - Expired (544,998 ) (0.250 ) Outstanding at end of period 15,473,398 $ 0.326 Exerciseable at end of period 15,473,398 |
Summary of the status of the warrants outstanding | June 30, 2019 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 13,467,286 3.27 $ 0.250 13,467,286 $ 0.250 714,286 2.08 0.700 714,286 0.700 882,159 2.37 1.000 882,159 1.000 2,713,359 4.74 1.20-1.50 2,713,359 1.20-1.50 20,000 2.99 2.34-4.08 20,000 2.34-4.08 - - - - - 17,797,090 3.69 $ 0.454 17,797,090 $ 0.454 | September 30, 2018 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 13,870,286 4.04 $ 0.250 13,870,286 $ 0.250 714,286 2.83 0.700 714,286 0.700 882,159 3.12 1.000 882,159 1.000 6,667 0.25 30.000 6,667 30.000 15,473,398 3.61 $ 0.326 15,473,398 $ 0.326 |
Weighted average assumptions relating to the valuation of the Companys warrants | Dividend yield 0% Expected life 1 yr Expected volatility 125% Risk free interest rate 2.0% | Dividend yield 0% Expected life 1-2 years Expected volatility 125%-145% Risk free interest rate .0202-.0214% |
15. STOCK OPTIONS (Tables)
15. STOCK OPTIONS (Tables) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Notes to Financial Statements | ||
Stock option activity | Weighted Average Options Exercise Price $ Outstanding as of September 30, 2018 2,182,668 $ 1.698 $ 3,706,519 Granted 255,000 2.136 544,750 Exercised - - - Forfeitures - - - Outstanding as of June 30, 2019 2,437,668 $ 1.744 $ 4,251,269 | Weighted Average Options Exercise Price $ Outstanding as of September 30, 2016 50,908 $ 18.045 $ 918,627 Granted - - - Exercised - - - Forfeitures (35,504 ) (19.507 ) (692,568 ) Outstanding as of September 30, 2017 15,404 14.675 226,059 Granted 2,180,000 1.683 3,668,500 Exercised - - - Forfeitures (12,736 ) 14.764 (188,040 ) Outstanding as of September 30, 2018 2,182,668 $ 1.698 $ 3,706,519 |
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 Exercisable Exercisable Exercisable 0.25 530,000 4.36 $ 0.25 184,375 $ 0.25 1.28-1.90 1,305,000 4.5 1.31 359,375 1.31 3.03 100,000 4.46 3.03 100,000 3.03 4.08-4.20 500,000 4.48 4.13 125,000 4.13 13.500 1,334 0.38 13.5 1,334 13.5 15.000 1,334 - 15 - 15 2,437,668 4.46 $ 1.744 770,084 $ 1.746 | Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Exerciseable Exerciseable Exerciseable 0.25 530,000 4.98 $ 0.250 - $ - 1.28 1,150,000 4.96 1.28 - - 4.08-4.20 500,000 4.98 - - 13.500 1,334 0.44 13.50 1,334 13.50 15.000 1,334 - 15.00 - 15.00 2,182,668 4.94 $ 1.698 1,334 $ 13.50 |
Weighted average assumptions relating to the valuation of the Company's stock option grants | Dividend yield 0% Expected life 3 yrs Expected volatility 125% Risk free interest rate 2.0% |
17. COMMITMENTS, CONTINGENCIE_2
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Tables) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Commitments Contingencies And Legal Proceedings | ||
Future minimum lease payments under non-cancelable operating leases | Years Ended June 30, Total 2020 $ 132,941 2021 169,297 2022 - 2023 - 2024 - Beyond - Total $ 302,238 | Years Ended September 30, Total 2019 $ 118,190 2020 85,914 2021 23,498 2022 - 2023 - Beyond - Total $ 227,602 |
18. INCOME TAXES (Tables)
18. INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of components of the Company's deferred tax assets | 2018 2017 U.S. operations loss carry forward at statutory rate of 21% $ (5,743,840 ) $ (5,804,285 ) Non-U.S. operations loss carry forward at statutory rate of 20.5% - - Total (5,743,840 ) (5,804,285 ) Less Valuation Allowance 5,743,840 5,804,285 Net Deferred Tax Assets - - Change in Valuation allowance $ 60,445 $ (1,036,276 ) |
Schedule of effective tax rate reconciliation | 2018 2017 Federal Statutory Rate -21.0 % -21.0 % Increase in Income Taxes Resulting from: Change in Valuation allowance 21.0 % 21.0 % Effective Tax Rate 0.0 % 0.0 % |
2. GOING CONCERN (Details Narra
2. GOING CONCERN (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Going Concern | ||||||
Net loss | $ (805,433) | $ (506,254) | $ (3,299,254) | $ (2,333,673) | $ (3,257,597) | $ (3,901,232) |
Net cash used in operating activities | (2,306,763) | $ (842,373) | (1,117,131) | (1,264,324) | ||
Accumulated deficit | $ (38,090,578) | $ (38,090,578) | $ (34,791,324) | $ (31,533,727) |
3. SIGNIFICANT ACCOUNTING POL_3
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Reserve for impaired inventory | $ 35,000 | $ 35,000 | $ 35,000 | $ 35,000 | ||
Research and development expense | $ 441,541 | $ 125,789 | $ 832,555 | $ 366,809 | $ 570,514 | $ 79,405 |
Minimum | ||||||
Estimated useful lives of assets | 2 years | 2 years | ||||
Minimum | Leasehold Improvements | ||||||
Estimated useful lives of assets | 5 years | 2 years | ||||
Maximum | ||||||
Estimated useful lives of assets | 10 years | 5 years | ||||
Maximum | Leasehold Improvements | ||||||
Estimated useful lives of assets | 20 years | 3 years |
4. ACCOUNTS RECEIVABLE_CUSTOM_2
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION (Details Narrative) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
Notes to Financial Statements | |||
Accounts receivable, net of allowance | $ 81,548 | $ 320,538 | $ 693,320 |
Allowance for bad debt | $ 60,000 | $ 60,000 |
5. INVENTORIES (Details Narrati
5. INVENTORIES (Details Narrative) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
Inventories | |||
Inventory | $ 63,937 | $ 203,582 | $ 225,909 |
Reserve for impaired inventory | $ 35,000 | $ 35,000 | $ 35,000 |
7. FIXED ASSETS (Details)
7. FIXED ASSETS (Details) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
Machinery and equipment (2-10 years) | $ 454,921 | $ 374,986 | |
Leasehold improvements (5-20 years) | 3,612 | 276,112 | |
Furniture and fixtures (3-10 years) | 153,071 | 153,071 | |
Software and websites (3- 7 years) | 35,830 | 35,830 | |
Less: accumulated depreciation | (501,209) | (670,666) | $ (662,855) |
Property and equipment, net | 146,225 | 169,333 | $ 133,204 |
Purchased | |||
Machinery and equipment (2-10 years) | 412,240 | 332,305 | |
Leasehold improvements (5-20 years) | 3,612 | 276,112 | |
Furniture and fixtures (3-10 years) | 58,051 | 58,051 | |
Software and websites (3- 7 years) | 35,830 | 35,830 | |
Less: accumulated depreciation | (363,508) | (532,966) | |
Property and equipment, net | 146,225 | 169,332 | |
Capital Leases | |||
Machinery and equipment (2-10 years) | 42,681 | 42,681 | |
Leasehold improvements (5-20 years) | 0 | 0 | |
Furniture and fixtures (3-10 years) | 95,020 | 95,020 | |
Software and websites (3- 7 years) | 0 | 0 | |
Less: accumulated depreciation | (137,701) | (137,700) | |
Property and equipment, net | $ 0 | $ 1 |
7. FIXED ASSETS (Details Narrat
7. FIXED ASSETS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Notes to Financial Statements | ||||
Property and equipment, net | $ 146,225 | $ 169,333 | $ 133,204 | |
Property and equipment, accumulated depreciation | 501,209 | 670,666 | 662,855 | |
Depreciation expense | $ 43,982 | $ 70,265 | 60,393 | 38,031 |
Loss on sale of assets | $ 0 | $ (113,244) |
8. INTANGIBLE ASSETS (Details)
8. INTANGIBLE ASSETS (Details) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
Intangible assets, net | $ 317,779 | $ 447,778 | $ 0 |
Technology | |||
Intangible assets | 520,000 | 520,000 | 0 |
Less: accumulated amortization | (202,221) | (72,222) | 0 |
Intangible assets, net | $ 317,779 | $ 447,778 | $ 0 |
8. INTANGIBLE ASSETS (Details N
8. INTANGIBLE ASSETS (Details Narrative) - USD ($) | 9 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Amortization expense | $ 129,999 | $ 0 |
9. GOODWILL (Details Narrative)
9. GOODWILL (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Goodwill | ||
Impairment of goodwill | $ 0 | $ 983,645 |
10. ACCOUNTS PAYABLE (Details N
10. ACCOUNTS PAYABLE (Details Narrative) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
Notes to Financial Statements | |||
Accounts payable | $ 833,586 | $ 1,512,617 | $ 2,156,646 |
12. CONVERTIBLE NOTES PAYABLE (
12. CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Jun. 30, 2019 | |
Interest expense | $ 156,941 | |
Convertible Promissory Note | ||
Accrued interest | $ 60,281 | |
Convertible Redeemable Promissory Note | ||
Accrued interest | $ 56,261 |
13. NOTES PAYABLE, CAPITALIZE_3
13. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT (Details) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 |
Notes Payable Capitalized Leases And Long Term Debt | |||
Capital Source Business Finance Group | $ 0 | $ 145,186 | $ 365,725 |
Note payable to Umpqua Bank | 0 | 199,935 | |
Secured note payable to J3E2A2Z LP - related party | 0 | 600,000 | |
Total debt | 0 | 145,186 | 1,165,660 |
Less current portion of long term debt | 0 | (145,186) | (1,165,660) |
Long term debt | $ 0 | $ 0 | $ 0 |
14. EQUITY (Details)
14. EQUITY (Details) - Warrants - $ / shares | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Shares | ||
Outstanding at beginning of period | 15,473,398 | 6,900,356 |
Issued | 2,853,359 | 9,276,066 |
Exercised | (468,649) | (158,026) |
Forfeited | 0 | 0 |
Expired | (61,018) | (544,998) |
Outstanding at end of period | 17,797,090 | 15,473,398 |
Exerciseable at end of period | 17,797,090 | |
Weighted Average Exercise Price: | ||
Outstanding at beginning of period | $ 0.326 | $ 0.428 |
Issued | 1.179 | 0.25 |
Exercised | (0.250) | (0.507) |
Forfeited | 0 | 0 |
Expired | (0.3501) | (0.250) |
Outstanding at end of period | $ 0.454 | $ 0.326 |
14. EQUITY (Details 1)
14. EQUITY (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Number of Warrants | 17,797,090 | 15,473,398 |
Weighted Average Remaining Life (years) | 3 years 8 months 8 days | 3 years 7 months 10 days |
Weighted Average Exercise Price | $ 0.454 | $ 0.326 |
Shares Exercisable | 17,797,090 | 15,473,398 |
Weighted Average Exercise Price | $ 0.454 | $ 0.326 |
Warrant 1 | ||
Number of Warrants | 13,467,286 | 13,870,286 |
Weighted Average Remaining Life (years) | 3 years 3 months 7 days | 4 years 14 days |
Weighted Average Exercise Price | $ 0.250 | $ 0.25 |
Shares Exercisable | 13,467,286 | 13,870,286 |
Weighted Average Exercise Price | $ 0.250 | $ 0.25 |
Warrant 2 | ||
Number of Warrants | 714,286 | 714,286 |
Weighted Average Remaining Life (years) | 2 years 29 days | 2 years 9 months 29 days |
Weighted Average Exercise Price | $ 0.700 | $ 0.70 |
Shares Exercisable | 714,286 | 714,286 |
Weighted Average Exercise Price | $ 0.700 | $ 0.7 |
Warrant 3 | ||
Number of Warrants | 882,159 | 882,159 |
Weighted Average Remaining Life (years) | 2 years 4 months 13 days | 3 years 1 month 13 days |
Weighted Average Exercise Price | $ 1 | $ 1 |
Shares Exercisable | 882,159 | 882,159 |
Weighted Average Exercise Price | $ 1 | $ 1 |
Warrant 4 | ||
Number of Warrants | 2,713,359 | 6,667 |
Weighted Average Remaining Life (years) | 4 years 8 months 27 days | 3 months |
Weighted Average Exercise Price | $ 30 | |
Shares Exercisable | 2,713,359 | 6,667 |
Weighted Average Exercise Price | $ 30 | |
Warrant 4 | Minimum | ||
Weighted Average Exercise Price | $ 1.20 | |
Weighted Average Exercise Price | 1.20 | |
Warrant 4 | Maximum | ||
Weighted Average Exercise Price | 1.50 | |
Weighted Average Exercise Price | $ 1.50 | |
Warrant 5 | ||
Number of Warrants | 20,000 | |
Weighted Average Remaining Life (years) | 2 years 11 months 26 days | |
Shares Exercisable | 20,000 | |
Warrant 5 | Minimum | ||
Weighted Average Exercise Price | $ 2.34 | |
Weighted Average Exercise Price | 2.34 | |
Warrant 5 | Maximum | ||
Weighted Average Exercise Price | 4.08 | |
Weighted Average Exercise Price | $ 4.08 | |
Warrant 6 | ||
Number of Warrants | 0 | |
Weighted Average Remaining Life (years) | 0 years | |
Weighted Average Exercise Price | $ 0 | |
Shares Exercisable | 0 | |
Weighted Average Exercise Price | $ 0 |
14. EQUITY (Details 2)
14. EQUITY (Details 2) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Dividend yield | 0.00% | 0.00% |
Expected life | 1 year | |
Expected volatility | 125.00% | |
Risk free interest rate | 2.00% | |
Minimum | ||
Expected life | 1 year | |
Expected volatility | 125.00% | |
Risk free interest rate | 2.02% | |
Maximum | ||
Expected life | 2 years | |
Expected volatility | 145.00% | |
Risk free interest rate | 2.14% |
14. EQUITY (Details Narrative)
14. EQUITY (Details Narrative) | Jun. 30, 2019USD ($)shares |
Equity [Abstract] | |
Warrants vested | shares | 16,573,772 |
Intrinsic value | $ | $ 15,949,833 |
15. STOCK OPTIONS (Details)
15. STOCK OPTIONS (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2017 | |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, End | $ 15,949,833 | ||
Stock Options | |||
Shares: | |||
Outstanding at beginning of period | 2,182,668 | 15,404 | 50,908 |
Shares granted | 255,000 | 2,180,000 | 0 |
Shares exercised | 0 | 0 | |
Shares forfeitures | 0 | (12,736) | (35,504) |
Outstanding at end of period | 2,437,668 | 2,182,668 | 15,404 |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $ 1.698 | $ 14.675 | $ 18.045 |
Shares granted | 2.136 | 1.683 | 0 |
Shares exercised | 0 | 0 | |
Shares forfeitures | 0 | 14.764 | (19.507) |
Outstanding at end of period | $ 1.744 | $ 1.698 | $ 14.675 |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, Beginning | $ 3,706,519 | $ 226,059 | $ 918,627 |
Aggregate Intrinsic Value Outstanding, Granted | $ 544,750 | $ 3,668,500 | $ 0 |
Aggregate Intrinsic Value Outstanding, Exercised | $ 0 | $ 0 | |
Aggregate Intrinsic Value Outstanding, Forefeitures | $ 0 | $ (188,040) | $ (692,568) |
Aggregate Intrinsic Value Outstanding, End | $ 4,251,269 | $ 3,706,519 | $ 226,059 |
15. STOCK OPTIONS (Details 1)
15. STOCK OPTIONS (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Number of outstanding stock options | 17,797,090 | 15,473,398 |
Weighted Average Remaining Life (years) | 3 years 8 months 8 days | 3 years 7 months 10 days |
Weighted Average Exercise Price Exerciseable | $ 0.454 | $ 0.326 |
Number Exercisable | 17,797,090 | 15,473,398 |
Weighted Average Exercise Price Exerciseable | $ 0.454 | $ 0.326 |
Stock Options | ||
Number of outstanding stock options | 2,182,668 | |
Weighted Average Remaining Life (years) | 4 years 11 months 8 days | |
Weighted Average Exercise Price Exerciseable | $ 1.698 | |
Number Exercisable | 1,334 | |
Weighted Average Exercise Price Exerciseable | $ 13.5 | |
Exercise Price 0.25 | ||
Number of outstanding stock options | 530,000 | |
Weighted Average Remaining Life (years) | 4 years 11 months 23 days | |
Weighted Average Exercise Price Exerciseable | $ 0.25 | |
Number Exercisable | 0 | |
Weighted Average Exercise Price Exerciseable | $ 0 | |
Exercise Price 1.28 | ||
Number of outstanding stock options | 1,150,000 | |
Weighted Average Remaining Life (years) | 4 years 11 months 16 days | |
Weighted Average Exercise Price Exerciseable | $ 1.28 | |
Number Exercisable | 0 | |
Weighted Average Exercise Price Exerciseable | $ 0 | |
Exercise Price 4.08-4.20 | ||
Number of outstanding stock options | 500,000 | |
Weighted Average Remaining Life (years) | 4 years 11 months 23 days | |
Number Exercisable | 0 | |
Weighted Average Exercise Price Exerciseable | $ 0 | |
Exercise Price 13.500 | ||
Number of outstanding stock options | 1,334 | |
Weighted Average Remaining Life (years) | 5 months 8 days | |
Weighted Average Exercise Price Exerciseable | $ 13.5 | |
Number Exercisable | 1,334 | |
Weighted Average Exercise Price Exerciseable | $ 13.5 | |
Exercise Price 15.000 | ||
Number of outstanding stock options | 1,334 | |
Weighted Average Remaining Life (years) | ||
Weighted Average Exercise Price Exerciseable | $ 15 | |
Number Exercisable | 0 | |
Weighted Average Exercise Price Exerciseable | $ 15 |
15. STOCK OPTIONS (Details 2)
15. STOCK OPTIONS (Details 2) - $ / shares | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Number of outstanding stock options | 17,797,090 | 15,473,398 |
Weighted average remaining life (years) | 3 years 8 months 8 days | 3 years 7 months 10 days |
Weighted average exercise price exerciseable | $ 0.454 | $ 0.326 |
Number exercisable | 17,797,090 | 15,473,398 |
Stock Option 1 | ||
Range of exercise prices | $ 0.25 | |
Number of outstanding stock options | 530,000 | |
Weighted average remaining life (years) | 4 years 4 months 10 days | |
Weighted average exercise price exerciseable | $ 0.250 | |
Number exercisable | 184,375 | |
Weighted average exercise price exerciseable | $ 0.25 | |
Stock Option 2 | ||
Number of outstanding stock options | 1,305,000 | |
Weighted average remaining life (years) | 4 years 6 months | |
Weighted average exercise price exerciseable | $ 1.31 | |
Number exercisable | 359,375 | |
Weighted average exercise price exerciseable | $ 1.31 | |
Stock Option 2 | Minimum | ||
Range of exercise prices | 1.28 | |
Stock Option 2 | Maximum | ||
Range of exercise prices | 1.90 | |
Stock Option 3 | ||
Range of exercise prices | $ 3.03 | |
Number of outstanding stock options | 100,000 | |
Weighted average remaining life (years) | 4 years 5 months 16 days | |
Weighted average exercise price exerciseable | $ 3.03 | |
Number exercisable | 100,000 | |
Weighted average exercise price exerciseable | $ 3.03 | |
Stock Option 4 | ||
Number of outstanding stock options | 500,000 | |
Weighted average remaining life (years) | 4 years 5 months 23 days | |
Weighted average exercise price exerciseable | $ 4.13 | |
Number exercisable | 125,000 | |
Weighted average exercise price exerciseable | $ 4.13 | |
Stock Option 4 | Minimum | ||
Range of exercise prices | 4.08 | |
Stock Option 4 | Maximum | ||
Range of exercise prices | 4.20 | |
Stock Option 5 | ||
Range of exercise prices | $ 13.500 | |
Number of outstanding stock options | 1,334 | |
Weighted average remaining life (years) | 4 months 17 days | |
Weighted average exercise price exerciseable | $ 13.50 | |
Number exercisable | 1,334 | |
Weighted average exercise price exerciseable | $ 13.50 | |
Stock Option 6 | ||
Range of exercise prices | $ 15 | |
Number of outstanding stock options | 1,334 | |
Weighted average remaining life (years) | 0 years | |
Weighted average exercise price exerciseable | $ 15 | |
Number exercisable | 0 | |
Weighted average exercise price exerciseable | $ 15 | |
Stock Options | ||
Number of outstanding stock options | 2,437,668 | |
Weighted average remaining life (years) | 4 years 5 months 16 days | |
Weighted average exercise price exerciseable | $ 1.744 | |
Number exercisable | 770,084 | |
Weighted average exercise price exerciseable | $ 1.746 |
13. STOCK OPTIONS (Details 3)
13. STOCK OPTIONS (Details 3) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Sep. 30, 2018 | |
Dividend yield | 0.00% | 0.00% |
Expected life | 1 year | |
Expected volatility | 125.00% | |
Risk free interest rate | 2.00% | |
Stock Options | ||
Dividend yield | 0.00% | |
Expected life | 3 years | |
Expected volatility | 125.00% | |
Risk free interest rate | 2.00% |
15. STOCK OPTIONS (Details Narr
15. STOCK OPTIONS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Options to purchase common stock under 2011 Stock Incentive Plan | 17,797,090 | 15,473,398 | ||
Average exercise price under 2011 Stock Incentive Plan | $ 0.454 | |||
Compensation expense | $ 7,334 | $ 359,051 | $ 50,899 | $ 37,848 |
Unrecognized compensation costs | 1,595,350 | |||
Period for recognition | 4 years 5 months 16 days | |||
Stock options granted | 530,000 | |||
Aggregate intrinsic value | $ 577,700 | |||
2011 Stock Incentive Plan | ||||
Options to purchase common stock under 2011 Stock Incentive Plan | 2,437,668 | 534,736 | ||
Average exercise price under 2011 Stock Incentive Plan | $ 1.744 | $ 1.698 |
16. OTHER SIGNIFICANT TRANSAC_2
16. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details Narrative) - Chief Executive Officer - USD ($) | 9 Months Ended | |
Jun. 30, 2019 | Sep. 30, 2018 | |
Due to related party | $ 513,149 | |
Accrued liabilities related parties from advances | $ 478,861 |
17. COMMITMENTS, CONTINGENCIE_3
17. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Details) - USD ($) | Jun. 30, 2019 | Sep. 30, 2018 |
Commitments Contingencies And Legal Proceedings Details Abstract | ||
2019 | $ 132,941 | $ 118,190 |
2020 | 169,297 | 85,914 |
2021 | 0 | 23,498 |
2022 | 0 | 0 |
2023 | 0 | 0 |
Beyond | 0 | 0 |
Total | $ 302,238 | $ 227,602 |
18. INCOME TAXES (Details)
18. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Income Taxes | ||
U.S. operations loss carry forward at statutory rate of 34% | $ (5,743,840) | $ (5,804,285) |
Non-U.S. operations loss carry forward at statutory rate of 20.5% | 0 | 0 |
Total | (5,743,840) | (5,804,285) |
Less Valuation Allowance | (5,743,840) | (5,804,285) |
Net Deferred Tax Assets | 0 | 0 |
Change in Valuation allowance | $ 60,445 | $ (1,036,276) |
17. INCOME TAXES (Details 1)
17. INCOME TAXES (Details 1) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Income Taxes Effective Tax Rate Details Abstract | ||
Federal Statutory Rate | (21.00%) | (21.00%) |
Increase in Income Taxes Resulting from: | ||
Change in Valuation allowance | 21.00% | 21.00% |
Effective Tax Rate | 0.00% | 0.00% |