Document and Entity Information
Document and Entity Information | 6 Months Ended |
Mar. 31, 2020 | |
Document And Entity Information | |
Entity Registrant Name | KNOW LABS, INC. |
Entity Central Index Key | 0001074828 |
Document Type | S-1 |
Amendment Flag | false |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | false |
Entity Small Business | true |
Entity Incorporation, State or Country Code | NV |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
CURRENT ASSETS: | |||
Cash and cash equivalents | $ 776,752 | $ 1,900,836 | $ 934,407 |
Accounts receivable, net of allowance of $0 and $40,000, respectively | 0 | 63,049 | 320,538 |
Prepaid expenses | 0 | 6,435 | 20,140 |
Inventories, net | 0 | 7,103 | 203,582 |
Total current assets | 776,752 | 1,977,423 | 1,478,667 |
PROPERTY AND EQUIPMENT, NET | 119,774 | 130,472 | 169,333 |
OTHER ASSETS | |||
Intangible assets | 187,780 | 274,446 | 447,778 |
Other assets | 13,766 | 13,766 | 7,170 |
Operating lease right of use asset | 130,100 | 243,526 | 0 |
TOTAL ASSETS | 1,228,172 | 2,639,633 | 2,102,948 |
CURRENT LIABILITIES: | |||
Accounts payable - trade | 693,598 | 810,943 | 1,512,617 |
Accounts payable - related parties | 8,439 | 7,048 | 12,019 |
Accrued expenses | 118,633 | 460,055 | 72,140 |
Accrued expenses - related parties | 677,918 | 458,500 | 657,551 |
Deferred revenue | 0 | 0 | 55,959 |
Convertible notes payable | 2,739,330 | 3,954,241 | 2,255,066 |
Notes payable | 0 | 0 | 145,186 |
Current portion of operating lease right of use liability | 118,568 | 124,523 | 0 |
Total current liabilities | 4,356,486 | 5,815,310 | 4,710,538 |
NON-CURRENT PORTION OF OPERATING LEASE RIGHT OF USE LIABILITY | 12,906 | 121,613 | 0 |
COMMITMENTS AND CONTINGENCIES (Note 14) | |||
STOCKHOLDERS' DEFICIT | |||
Preferred stock | 0 | 0 | 0 |
Common stock - $0.001 par value, 100,000,000 shares authorized, 23,324,128 and 18,366,178 shares issued and outstanding at 3/31/2020 and 9/30/2019, respectively | 23,324 | 18,366 | 17,532 |
Additional paid in capital | 45,581,817 | 39,085,179 | 32,163,386 |
Accumulated deficit | (48,749,166) | (42,403,640) | (34,791,324) |
Total stockholders' deficit | (3,141,220) | (3,297,290) | (2,607,590) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 1,228,172 | 2,639,633 | 2,102,948 |
Series A Convertible Preferred Stock | |||
STOCKHOLDERS' DEFICIT | |||
Preferred stock | 0 | 0 | 11 |
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 ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
CURRENT ASSETS: | |||
Allowance for accounts receivable | $ 0 | $ 40,000 | $ 60,000 |
STOCKHOLDERS' 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 | 23,324,128 | 18,366,178 | 17,531,502 |
Common stock shares outstanding | 23,324,128 | 18,366,178 | 17,531,502 |
Series A Convertible Preferred Stock | |||
STOCKHOLDERS' 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 | 0 | 20,000 |
Preferred stock shares outstanding | 0 | 0 | 20,000 |
Series C Convertible Preferred Stock | |||
STOCKHOLDERS' 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 | |||
STOCKHOLDERS' 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 | 1,016,014 | 1,016,014 | 1,016,004 |
Preferred stock shares outstanding | 1,016,014 | 1,016,014 | 1,016,004 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||||
REVENUE | $ 4,546 | $ 593,712 | $ 121,939 | $ 1,195,921 | $ 1,804,960 | $ 4,303,296 |
COST OF SALES | 3,791 | 454,839 | 69,726 | 927,125 | 1,378,413 | 3,481,673 |
GROSS PROFIT | 755 | 138,873 | 52,213 | 268,796 | 426,547 | 821,623 |
RESEARCH AND DEVELOPMENT EXPENSES | 447,165 | 184,024 | 938,303 | 391,014 | 1,257,872 | 570,514 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 1,622,941 | 1,003,504 | 2,543,492 | 1,692,950 | 4,181,687 | 2,508,846 |
OPERATING LOSS | (2,069,351) | (1,048,655) | (3,429,582) | (1,815,168) | (5,013,012) | (2,257,737) |
OTHER INCOME (EXPENSE): | ||||||
Interest expense | (1,301,674) | (400,201) | (2,981,164) | (409,327) | (2,945,312) | (1,195,329) |
Other income | 40,512 | 6,618 | 65,220 | 13,054 | (9,561) | 25,160 |
Gain on debt settlements | 0 | 0 | 0 | 0 | 355,569 | 170,309 |
Total other (expense), net | (1,261,162) | (393,583) | (2,915,944) | (396,273) | (2,599,304) | (999,860) |
LOSS BEFORE INCOME TAXES | (3,330,513) | (1,442,238) | (6,345,526) | (2,211,441) | (7,612,316) | (3,257,597) |
Income taxes - current provision | 0 | 0 | 0 | 0 | 0 | 0 |
NET LOSS | $ (3,330,513) | $ (1,442,238) | $ (6,345,526) | $ (2,211,441) | $ (7,612,316) | $ (3,257,597) |
Basic and diluted loss per share | $ (0.16) | $ (0.08) | $ (0.33) | $ (0.12) | $ (0.42) | $ (0.38) |
Weighted average shares of common stock outstanding- basic and diluted | 20,424,329 | 18,094,492 | 19,412,240 | 17,829,909 | 18,053,848 | 8,630,891 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) | Series A Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Beginning balance, shares at Sep. 30, 2017 | 23,334 | 1,785,715 | 1,016,004 | 4,655,486 | |||
Beginning balance, amount at Sep. 30, 2017 | $ 23 | $ 1,790 | $ 1,015 | $ 4,655 | $ 27,565,453 | $ (31,533,727) | $ (3,960,791) |
Stock compensation expense - employee options | 50,899 | 50,899 | |||||
Issuance of common stock for services, shares | 1,279,676 | ||||||
Issuance of common stock for services, amount | $ 1,280 | 439,039 | 440,319 | ||||
Issuance of Series D Convertible Preferred Stock, amount | 817,802 | 817,802 | |||||
Conversion of Series A Convertible Preferred Stock, shares | (3,334) | 3,334 | |||||
Conversion of Series A Convertible Preferred Stock, amount | $ (12) | $ 3 | 9 | ||||
Issuance of common stock for cash, shares | 7,000,000 | ||||||
Issuance of common stock for cash, amount | $ 7,000 | 1,743,000 | 1,750,000 | ||||
Conversion of debt offering and accrued interest (Note 10), shares | 2,435,000 | ||||||
Conversion of debt offering and accrued interest (Note 10), amount | $ 2,435 | 709,515 | 711,950 | ||||
Beneficial conversion feature (Note 10) | 348,096 | ||||||
Issuance of warrants to debt holders (Note 10) | 0 | ||||||
Issuance of warrants for services related to debt offering (Note 10) | 0 | ||||||
Stock based compensation - warrants | 239,680 | 239,680 | |||||
Issuance of common stock for technology, shares | 2,000,000 | ||||||
Issuance of common stock for technology, amount | $ 2,000 | 518,000 | 520,000 | ||||
Issuance of common stock for exercise of warrants, shares | 158,006 | ||||||
Issuance of common stock for exercise of warrants, amount | $ 158 | 79,989 | (80,147) | ||||
Net loss | (3,257,597) | (3,257,597) | |||||
Ending balance, shares at Sep. 30, 2018 | 20,000 | 1,785,715 | 1,016,004 | 17,531,522 | |||
Ending balance, amount at Sep. 30, 2018 | $ 11 | $ 1,790 | $ 1,015 | $ 17,531 | 32,163,386 | (34,791,324) | (2,607,590) |
Stock compensation expense - employee options | 171,499 | 171,499 | |||||
Conversion of Series A Convertible Preferred Stock, shares | 279,929 | ||||||
Conversion of Series A Convertible Preferred Stock, amount | $ 280 | (280) | 0 | ||||
Beneficial conversion feature (Note 10) | 0 | ||||||
Issuance of warrants to debt holders (Note 10) | 0 | ||||||
Issuance of warrants for services related to debt offering (Note 10) | 0 | ||||||
Net loss | (769,203) | (769,203) | |||||
Ending balance, shares at Dec. 31, 2018 | 20,000 | 1,785,715 | 1,016,004 | 17,811,451 | |||
Ending balance, amount at Dec. 31, 2018 | $ 11 | $ 1,790 | $ 1,015 | $ 17,811 | 32,334,605 | (35,560,527) | (3,205,295) |
Beginning balance, shares at Sep. 30, 2018 | 20,000 | 1,785,715 | 1,016,004 | 17,531,522 | |||
Beginning balance, amount at Sep. 30, 2018 | $ 11 | $ 1,790 | $ 1,015 | $ 17,531 | 32,163,386 | (34,791,324) | (2,607,590) |
Stock compensation expense - employee options | 263,147 | ||||||
Beneficial conversion feature (Note 10) | 1,570,049 | ||||||
Issuance of warrants to debt holders (Note 10) | 1,244,263 | ||||||
Issuance of warrants for services related to debt offering (Note 10) | 988,876 | ||||||
Stock based compensation - warrants | 30,325 | ||||||
Issuance of common stock for technology, amount | 0 | ||||||
Net loss | (2,211,441) | ||||||
Ending balance, shares at Mar. 31, 2019 | 0 | 1,785,715 | 1,016,004 | 18,192,969 | |||
Ending balance, amount at Mar. 31, 2019 | $ 0 | $ 1,790 | $ 1,015 | $ 18,192 | 36,608,296 | (37,002,765) | (1,442,238) |
Beginning balance, shares at Sep. 30, 2018 | 20,000 | 1,785,715 | 1,016,004 | 17,531,522 | |||
Beginning balance, amount at Sep. 30, 2018 | $ 11 | $ 1,790 | $ 1,015 | $ 17,531 | 32,163,386 | (34,791,324) | (2,607,590) |
Stock compensation expense - employee options | 1,141,674 | 1,141,674 | |||||
Issuance of common stock for services, shares | 245,000 | ||||||
Issuance of common stock for services, amount | $ 245 | 348,655 | $ 348,900 | ||||
Conversion of Series A Convertible Preferred Stock, shares | (20,000) | 80,000 | |||||
Conversion of Series A Convertible Preferred Stock, amount | $ (11) | $ 80 | (69) | ||||
Stock option exercise, shares | 509,656 | ||||||
Beneficial conversion feature (Note 10) | 2,857,960 | $ 2,857,960 | |||||
Issuance of warrants to debt holders (Note 10) | 1,384,530 | 1,384,530 | |||||
Issuance of warrants for services related to debt offering (Note 10) | 1,072,095 | 1,072,095 | |||||
Stock based compensation - warrants | 117,458 | 117,458 | |||||
Issuance of common stock for technology, amount | 0 | ||||||
Issuance of common stock for exercise of warrants, shares | 509,656 | ||||||
Issuance of common stock for exercise of warrants, amount | $ 510 | (510) | 0 | ||||
Net loss | (7,612,316) | (7,612,316) | |||||
Ending balance, shares at Sep. 30, 2019 | 20,000 | 1,785,715 | 1,016,004 | 18,366,178 | |||
Ending balance, amount at Sep. 30, 2019 | $ 11 | $ 1,790 | $ 1,015 | $ 18,366 | 39,085,179 | (42,403,640) | (3,297,290) |
Beginning balance, shares at Dec. 31, 2018 | 20,000 | 1,785,715 | 1,016,004 | 17,811,451 | |||
Beginning balance, amount at Dec. 31, 2018 | $ 11 | $ 1,790 | $ 1,015 | $ 17,811 | 32,334,605 | (35,560,527) | (3,205,295) |
Stock compensation expense - employee options | 91,648 | 91,648 | |||||
Issuance of common stock for services, shares | 245,000 | ||||||
Issuance of common stock for services, amount | $ 245 | 348,655 | 348,900 | ||||
Conversion of Series A Convertible Preferred Stock, shares | (20,000) | 80,000 | |||||
Conversion of Series A Convertible Preferred Stock, amount | $ (11) | $ 80 | (69) | 0 | |||
Beneficial conversion feature (Note 10) | 1,570,049 | 1,570,049 | |||||
Issuance of warrants to debt holders (Note 10) | 1,244,263 | 1,244,263 | |||||
Issuance of warrants for services related to debt offering (Note 10) | 988,876 | 988,876 | |||||
Stock based compensation - warrants | 30,325 | 30,325 | |||||
Issuance of common stock for exercise of warrants, shares | 56,518 | ||||||
Issuance of common stock for exercise of warrants, amount | $ 56 | (56) | 0 | ||||
Net loss | (1,442,238) | (1,442,238) | |||||
Ending balance, shares at Mar. 31, 2019 | 0 | 1,785,715 | 1,016,004 | 18,192,969 | |||
Ending balance, amount at Mar. 31, 2019 | $ 0 | $ 1,790 | $ 1,015 | $ 18,192 | 36,608,296 | (37,002,765) | (1,442,238) |
Beginning balance, shares at Sep. 30, 2019 | 20,000 | 1,785,715 | 1,016,004 | 18,366,178 | |||
Beginning balance, amount at Sep. 30, 2019 | $ 11 | $ 1,790 | $ 1,015 | $ 18,366 | 39,085,179 | (42,403,640) | (3,297,290) |
Stock compensation expense - employee options | 399,897 | $ 399,897 | |||||
Stock option exercise, shares | 73,191 | 28,688 | |||||
Stock option exercise, amount | $ 73 | (73) | $ 0 | ||||
Beneficial conversion feature (Note 10) | 330,082 | 330,082 | |||||
Issuance of warrants to debt holders (Note 10) | 168,270 | 168,270 | |||||
Issuance of warrants for services related to debt offering (Note 10) | 160,427 | 160,427 | |||||
Issuance of common stock for exercise of warrants, shares | 28,688 | ||||||
Issuance of common stock for exercise of warrants, amount | $ 29 | (29) | 0 | ||||
Net loss | (3,015,013) | (3,015,013) | |||||
Ending balance, shares at Dec. 31, 2019 | 20,000 | 1,785,715 | 1,016,004 | 18,468,057 | |||
Ending balance, amount at Dec. 31, 2019 | $ 11 | $ 1,790 | $ 1,015 | $ 18,468 | 40,143,753 | (45,418,653) | (5,253,627) |
Beginning balance, shares at Sep. 30, 2019 | 20,000 | 1,785,715 | 1,016,004 | 18,366,178 | |||
Beginning balance, amount at Sep. 30, 2019 | $ 11 | $ 1,790 | $ 1,015 | $ 18,366 | 39,085,179 | (42,403,640) | (3,297,290) |
Stock compensation expense - employee options | $ 565,726 | ||||||
Stock option exercise, shares | 229,959 | ||||||
Beneficial conversion feature (Note 10) | $ 435,617 | ||||||
Issuance of warrants to debt holders (Note 10) | 189,484 | ||||||
Issuance of warrants for services related to debt offering (Note 10) | 169,969 | ||||||
Stock based compensation - warrants | 0 | ||||||
Issuance of common stock for technology, amount | 0 | ||||||
Net loss | (6,345,526) | ||||||
Ending balance, shares at Mar. 31, 2020 | 0 | 1,785,715 | 1,016,004 | 23,324,128 | |||
Ending balance, amount at Mar. 31, 2020 | $ 0 | $ 1,790 | $ 1,015 | $ 23,324 | 45,581,817 | (48,749,166) | (3,141,220) |
Beginning balance, shares at Dec. 31, 2019 | 20,000 | 1,785,715 | 1,016,004 | 18,468,057 | |||
Beginning balance, amount at Dec. 31, 2019 | $ 11 | $ 1,790 | $ 1,015 | $ 18,468 | 40,143,753 | (45,418,653) | (5,253,627) |
Stock compensation expense - employee options | 165,829 | 165,829 | |||||
Issuance of common stock for services, shares | 540,000 | ||||||
Issuance of common stock for services, amount | $ 540 | 1,025,460 | 1,026,000 | ||||
Conversion of debt offering and accrued interest (Note 10), shares | 4,114,800 | ||||||
Conversion of debt offering and accrued interest (Note 10), amount | $ 4,115 | 4,110,685 | 4,114,800 | ||||
Beneficial conversion feature (Note 10) | 105,535 | 105,535 | |||||
Issuance of warrants to debt holders (Note 10) | 21,214 | 21,214 | |||||
Issuance of warrants for services related to debt offering (Note 10) | 9,542 | 9,542 | |||||
Issuance of common stock for exercise of warrants, shares | 201,271 | ||||||
Issuance of common stock for exercise of warrants, amount | $ 201 | (201) | 0 | ||||
Net loss | (3,330,513) | (3,330,513) | |||||
Ending balance, shares at Mar. 31, 2020 | 0 | 1,785,715 | 1,016,004 | 23,324,128 | |||
Ending balance, amount at Mar. 31, 2020 | $ 0 | $ 1,790 | $ 1,015 | $ 23,324 | $ 45,581,817 | $ (48,749,166) | $ (3,141,220) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | $ (6,345,526) | $ (2,211,441) | $ (7,612,316) | $ (3,257,597) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||||
Depreciation and amortization | 120,745 | 133,019 | 259,347 | 132,615 |
Issuance of capital stock for services and expenses | 1,026,000 | 348,900 | 348,900 | 440,319 |
Stock based compensation - warrants | 0 | 30,325 | 117,458 | 239,680 |
Conversion of interest | 0 | 0 | 0 | 64,233 |
Stock based compensation - stock option grants | 565,726 | 263,147 | 1,141,674 | 50,899 |
Amortization of debt discount | 2,792,398 | 361,534 | 2,771,270 | 475,174 |
Conversion of accrued liabilites - related parties to notes payable | 0 | 0 | 0 | 491,802 |
Provision on loss on accounts receivable | 2,439 | 8,728 | 0 | 10,747 |
Non-cash gain on debt settlements | 0 | 0 | 0 | 199,935 |
Loss on sale of property and equipment | 0 | 0 | (355,000) | (170,309) |
Right of use, net | (1,236) | 0 | 32,777 | 0 |
Loss on sale of assets | 4,358 | 0 | 2,610 | 0 |
Changes in operating assets and liabilities: | ||||
Accounts receivable | 60,610 | 118,438 | 257,489 | 362,035 |
Prepaid expenses | 6,435 | 7,296 | 13,705 | 7,547 |
Inventory | 7,103 | 102,593 | 196,479 | 22,327 |
Other assets | 0 | (8,697) | (6,596) | (2,100) |
Accounts payable - trade and accrued expenses | 72,618 | (245,393) | (215,873) | (176,495) |
Deferred revenue | 0 | (55,959) | (55,959) | (7,943) |
NET CASH (USED IN) OPERATING ACTIVITIES | (1,688,330) | (1,147,510) | (3,104,035) | (1,117,131) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Investment in research and development equipment | (27,739) | (74,556) | (79,932) | (97,251) |
NET CASH (USED IN) INVESTING ACTIVITIES | (27,739) | (74,556) | (79,932) | (97,251) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Repayments of line of credit | 0 | (92,094) | (92,094) | (220,539) |
Proceeds from convertible notes payable | 715,000 | 3,809,976 | 4,242,490 | 636,000 |
Proceeds from issuance of common/preferred stock, net of costs | 0 | 0 | 0 | 1,750,000 |
Issuance of common stock for warrant exercise | 0 | 0 | 0 | 80,147 |
Repayment of note payable | 0 | 0 | 0 | (200,000) |
Payments for issuance costs from notes payable | (123,015) | (368,322) | 0 | 0 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 591,985 | 3,349,560 | 4,150,396 | 2,045,608 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (1,124,084) | 2,127,494 | 966,429 | 831,226 |
CASH AND CASH EQUIVALENTS, beginning of period | 1,900,836 | 934,407 | 934,407 | 103,181 |
CASH AND CASH EQUIVALENTS, end of period | 776,752 | 3,061,901 | 1,900,836 | 934,407 |
Supplemental disclosures of cash flow information: | ||||
Interest paid | 0 | 7,750 | 22,521 | 64,228 |
Taxes paid | 0 | 0 | 0 | 0 |
Non-cash investing and financing activities: | ||||
Beneficial conversion feature | 435,617 | 1,570,049 | 2,857,960 | 348,096 |
Related party accounts converted to notes | 0 | 0 | 0 | 1,184,066 |
Issuance of common stock for technology | 0 | 0 | 0 | 520,000 |
Penalty on notes payable | 0 | 0 | 0 | 75,000 |
Issuance of warrants to debt holders | 189,484 | 1,244,263 | 1,384,530 | 0 |
Issuance of warrants for services related to debt offering | 169,969 | 988,876 | 1,072,095 | 0 |
Cashless warrant exercise (fair value) | 57,490 | 84,107 | 127,414 | 0 |
Cashless stock options exercise (fair value) | 18,298 | 0 | 0 | 0 |
Conversion of debt offering | 3,800,424 | 0 | 0 | 0 |
Conversion of accrued interest | $ 314,376 | $ 0 | $ 0 | $ 0 |
1. ORGANIZATION
1. ORGANIZATION | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
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 proprietary technologies which are capable of uniquely identifying or authenticating almost any substance or material using electromagnetic energy to record, detect, and identify the unique “signature” of the substance or material. We call these our “Bio-RFID™” and “ChromaID™” technologies. Historically, the Company focused on the development of our proprietary ChromaID technology. Using light from low-cost LEDs (light emitting diodes) the ChromaID technology maps the color of substances, fluids and materials. With the Company’s proprietary processes, the Company can authenticate and identify 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, and identify, and authenticate 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 record, detect and identify 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 calls this new 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 the Company works to create revenue generating products for the marketplace. Today, the sole focus of the Company is on its Bio-RFID technology and its commercialization. In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to the Company’s 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 the Company’s current focus. Moreover, the Company has written down any goodwill associated with this acquisition. The Company expects to shut down TransTech completely by June 30, 2020. 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 fourteen 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 proprietary technologies which are capable of uniquely identifying or authenticating almost any substance or material using electromagnetic energy to record, detect, and identify the unique “signature” of the substance or material. We call these our “Bio-RFID™” and “ChromaID™” technologies. Historically, the Company focused on the development of our proprietary ChromaID technology. Using light from low-cost LEDs (light emitting diodes) the ChromaID technology maps the color of substances, fluids and materials. With the Company’s proprietary processes, the Company can authenticate and identify 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, and identify, and authenticate 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 record, detect and identify 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 calls this new 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 the Company works to create revenue generating products for the marketplace. Today, the sole focus of the Company is on its Bio-RFID technology and its commercialization. In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to the Company’s 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 our current revenues, it is not central to the Company’s current focus. Moreover, the Company has written down any goodwill associated with its historic acquisition. The Company continues to closely monitor this subsidiary and expect it to wind down completely in the near future. that as a result of this wind down, the Company has been negotiating payables with vendors and has settled the liabilities for amounts lower than the face value and recorded the settlements as non cash gain on debt settlement of $355,000. 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. |
2. GOING CONCERN
2. GOING CONCERN | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Exercise Price 13.500 | ||
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 $6,345,526, $7,612,316 and $3,257,597 for the six months ended March 31, 2020 and the years ended September 30, 2019 and 2018, respectively. Net cash used in operating activities was $1,668,330, $3,104,035 and $1,117,131 for the six months ended March 31, 2020 and the years ended September 30, 2019 and 2018, respectively. During the six months ended March 31, 2020 and 2019, the Company incurred non-cash expenses of $4,510,430 and $1,145,653. The Company anticipates that it will record losses from operations for the foreseeable future. As of March 31, 2020, the Company’s accumulated deficit was $48,749,166 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 Chairman of the Board and Interim Chief Financial 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 consolidated financial statements for the year ended September 30, 2019 includes an explanatory paragraph expressing the substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its cash on hand and received since March 31, 2020 will be sufficient to fund our operations until early 2021. The Company needs 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 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 $7,612,316 and $3,257,597 for the years ended September 30, 2019 and 2018, respectively. Net cash used in operating activities was $3,104,035 and $1,117,131 for the years ended September 30, 2019 and 2018, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of September 30, 2019, the Company’s accumulated deficit was $42,403,640. 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 Chairman of the Board and Interim Chief Financial 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 consolidated financial statements for the year ended September 30, 2019 includes an explanatory paragraph expressing the substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its cash on hand will be sufficient to fund our operations until June 30, 2020. The Company needs 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 | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Accounting Policies [Abstract] | ||
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Revenue – TransTech Systems Inc. sells products directly to customers. Our products are typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale do not require customer acceptance. We account for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts have a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue is measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods. Allowance for Doubtful Accounts - Inventories Equipment Long-Lived Assets Intangible Assets Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. We incurred expenses of $938,303, $1,257,872 and $570,514 for the six months ended March 31, 2020 and the years ended September 30, 2019 and 2018, respectively, on 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 March 31, 2020 and September 30, 2019 are based upon the short-term nature of the assets and liabilities. The Company has a money market account which is considered a level 1 asset. The balance as of March 31, 2020 and September 30, 2019 was $651,722 and $1,901,278, respectively. Derivative Financial Instruments – The Company determined that none of the conversion features within its currently outstanding convertible notes payable must be bifurcated and thus there was no derivative liability as of March 31, 2020 and September 30, 2019. Stock Based Compensation Convertible Securities Net Loss per Share As of March 31, 2019, there were options outstanding for the purchase of 2,282,668 common shares, warrants for the purchase of 17,572,583 common shares, and 4,894,071 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 12,829,329 common shares (9,020,264 common shares at the current price of $0.25 per share and 3,808,975 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $6,060,041. All of which could potentially dilute future earnings per share. Dividend Policy Use of Estimates Recent Accounting Pronouncements Based on the Company’s review of accounting standard updates issued since the filing of the 2019 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements. | Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Revenue – TransTech Systems Inc. sells products directly to customers. Our products are typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale do not require customer acceptance. We account for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts have a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue is measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods. Allowance for Doubtful Accounts - Inventories Equipment Long-Lived Assets Intangible Assets Research, Development and Engineering Expenses The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. We incurred expenses of $1,257,872 and $570,514 for the years ended September 30, 2019 and 2018, respectively, on 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, 2019 and 2018 are based upon the short-term nature of the assets and liabilities. The Company has a money market account which is considered a level 1 asset. The balance as of September 30, 2019 was $1,901,278. Derivative Financial Instruments – The Company determined that none of the conversion features within its currently outstanding convertible notes payable must be bifurcated and thus there was no derivative liability as of September 30, 2019 and 2018. Stock Based Compensation Convertible Securities Net Loss per Share 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. None of these securities were included in net loss per share. Dividend Policy Use of Estimates Recent Accounting Pronouncements On October 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) which aligns the accounting treatment of stock awards granted to nonemployee consultants to those granted to employees. The Company adopted the amendment as of October 1, 2018. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements. All share-based compensation for employees and non-employees will be accounted under ASC 718. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which will replace the existing guidance in ASC 840, “Leases.” The FASB has also issued amendments to ASU 2016-02, including ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (ASU 2018-11), which the Company collectively refers to as the new leasing standard. . The Company’s outstanding leases primarily relate to its two facility leases Seattle, Washington. In conjunction with these leases, the Company adopted this new retrospectively on July 1, 2019 and recognized a lease liability and related right-of-use asset on the Company’s consolidated balance sheet. The retrospect adjustment did not require any adjustment to previously reported equity. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for sale debt securities. This standard is effective for the Company in the fiscal year beginning October 1, 2020. The Company adopted ASU No. 2016-13 as of October 1, 2018. The adoption of ASU 2016-13 did not have an impact on the Company’s consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
4. ACCOUNTS RECEIVABLE_CUSTOMER
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||
ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION | Accounts receivable were $0 and $63,049, net of allowance, as of March 31, 2020 and September 30, 2019, respectively. The Company has a total allowance for bad debt in the amount of $0 and $40,000 as of March 31, 2020 and September 30, 2019, respectively. The decrease in accounts receivable related to the winddown of TransTech. | Accounts receivable were $63,049 and $320,538, net of allowance, as of September 30, 2019 and 2018, respectively. The Company has a total allowance for bad debt in the amount of $40,000 and $60,000 as of September 30, 2019 and 2018, respectively. The decrease is due to the winddown of TransTech. |
5. INVENTORIES
5. INVENTORIES | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Inventory Disclosure [Abstract] | ||
INVENTORIES | Inventories were $0 and $7,103 as of March 31, 2020 and September 30, 2019, respectively. Inventories consisted primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale. There was a $0 and $28,000 reserve for impaired inventory as of March 31, 2020 and September 30, 2019, respectively. The decrease in inventory related to the winddown of TransTech. | Inventories were $7,103 and $203,582 as of September 30, 2019 and 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 $28,000 and $35,000 reserve for impaired inventory as of September 30, 2019 and 2018, respectively. |
6. FIXED ASSETS
6. FIXED ASSETS | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||
FIXED ASSETS | Fixed assets, net of accumulated depreciation, was $119,774 and $130,472 as of March 31, 2020 and September 30, 2019, respectively. Accumulated depreciation was $221,490 and $379,259 as of March 31, 2020 and September 30, 2019, respectively. Total depreciation expense was $34,079 and $18,491 for the six months ended March 31, 2020 and 2019, 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 March 31, 2020 and September 30, 2019 was comprised of the following: Estimated March 31, September 30, Useful Lives 2020 2019 Machinery and equipment 2-10 years $ 310,797 $ 412,238 Leasehold improvements 2-3 years 3,612 3,612 Furniture and fixtures 2-3 years 26,855 58,051 Software and websites 3- 7 years - 35,830 Less: accumulated depreciation (221,490 ) (379,259 ) $ 119,774 $ 130,472 The Company retired assets at TransTech with a net book value of $4,358 as of March 31, 2020. | Fixed assets, net of accumulated depreciation, was $130,472 and $169,333 as of September 30, 2019 and 2018, respectively. Accumulated depreciation was $379,259 and $532,966 as of September 30, 2019 and 2018, respectively. Total depreciation expense was $86,016 and $60,393 for the years ended September 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 September 30, 2019 and 2018 was comprised of the following: Estimated September 30, September 30, Useful Lives 2019 2018 Machinery and equipment 2-10 years $ 412,238 $ 332,306 Leasehold improvements 2-3 years 3,612 276,112 Furniture and fixtures 2-3 years 58,051 58,051 Software and websites 3- 7 years 35,830 35,830 Less: accumulated depreciation (379,259 ) (532,966 ) $ 130,472 $ 169,333 |
7. INTANGIBLE ASSETS
7. INTANGIBLE ASSETS | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||
INTANGIBLE ASSETS | Intangible assets as of March 31, 2020 and September 30, 2019 consisted of the following: Estimated March 31, September 30, Useful Lives 2020 2019 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (332,220 ) (245,554 ) Intangible assets, net $ 187,780 $ 274,446 Total amortization expense was $86,666 for the six months ended March 31, 2020 and 2019, 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, the Company 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) was cancelled and the Company issued 2,000,000 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. 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 technology 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. 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. | Intangible assets as of September 30, 2019 and September 30, 2018 consisted of the following: Estimated September 30, September 30, Useful Lives 2019 2018 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (245,554 ) (72,222 ) Intangible assets, net $ 274,446 $ 447,778 Total amortization expense was $173,331 and $72,222 for the years ended September 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, the Company 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) was cancelled and the Company issued 2,000,000 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. 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 technology 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. 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. |
8. ACCOUNTS PAYABLE
8. ACCOUNTS PAYABLE | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Accounts Payable [Abstract] | ||
ACCOUNTS PAYABLE | Accounts payable were $693,598 (including $308,641 related to TransTech) and $810,943 as of March 31, 2020 and September 30, 2019, 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 expects to settle the TransTech accounts payable during 2020. The Company expects to shut down TransTech completely by June 30, 2020. | Accounts payable were $810,943 and $1,512,617 as of September 30, 2019 and 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. |
9. LEASES
9. LEASES | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Leases [Abstract] | ||
LEASES | The Company has entered into operating leases for office and development facilities. These leases have terms which range from two to three years and include options to renew. These operating leases are listed as separate line items on the Company's March 31, 2020 and September 30, 2019 Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's March 31, 2020 and September 30, 2019 Consolidated Balance Sheets. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately $250,000 on October 1, 2018. Operating lease right-of-use assets and liabilities commencing after October 1, 2018 are recognized at commencement date based on the present value of lease payments over the lease term. During the six months ended March 31, 2020 and the year ended September 30, 2019, the Company had one lease expire and recognized the rent payments as an expense in the current period. As of March 31, 2020 and September 30, 2019, total right-of-use assets and operating lease liabilities for remaining long term lease was approximately $130,000 and $246,000, respectively. In the six months ended March 31, 2020 and 2019, the Company recognized approximately $67,914 and $100,482, respectively in total lease costs for the leases. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating right-of-use assets and related lease liabilities as of and for the six months ended March 31, 2020 was as follows: Cash paid for ROU operating lease liability $66,998 Weighted-average remaining lease term 2 years Weighted-average discount rate 10% The minimum future lease payments as of March 31, 2020 are as follows: Year $ 2021 $ 133,996 2022 12,086 2023 0 2024 - 146,082 Imputed interest (14,608 ) Total lease liability $ 131,474 | The Company has entered into operating leases for office and development facilities. These leases have terms which range from two to three years, and do not include options to renew. These operating leases are listed as separate line items on the Company's September 30, 2019 Consolidated Balance Sheet, and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's September 30, 2019 Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately $250,000 on October 1, 2018. Operating lease right-of-use assets and liabilities commencing after October 1, 2018 are recognized at commencement date based on the present value of lease payments over the lease term. During the year ended September 30, 2019, the Company had one lease expire and recognized the rent payments as an expense in the current period. As of September 30, 2019, total right-of-use assets and operating lease liabilities for remaining long term lease was approximately $246,000. In the year ended September 30, 2019, the Company recognized approximately $133,996 in total lease costs for the lease. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating right-of-use assets and related lease liabilities as of and for the year ended September 30, 2019 were as follows: Cash paid for ROU operating lease liability $135,828 Weighted-average remaining lease term 2-3 years Weighted-average discount rate 7 % The minimum future lease payments as of September 30, 2019 are as follows: Year $ 2019 $ - 2020 133,996 2021 111,492 2022 24,520 2023 - 270,008 Imputer interest (23,872 ) Total lease liability $ 246,136 |
10. CONVERTIBLE NOTES PAYABLE
10. CONVERTIBLE NOTES PAYABLE | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Debt Disclosure [Abstract] | ||
CONVERTIBLE NOTES PAYABLE | Convertible notes payable as of March 31, 2020 and September 30, 2019 consisted of the following: Convertible Promissory Notes with Clayton A. Struve The Company owes Clayton A. Struve $1,071,000 under convertible promissory or OID notes. The Company recorded accrued interest of $67,801 and $62,171 as of March 31, 2020 and September 30, 2019, respectively. On May 8, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to September 30, 2019. On November 26, 2019, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to March 31, 2020. Mr. Struve also invested $1,000,000 in the May 2019 Debt Offering. On May 11, 2020, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2020. 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 $109,583 and $73,964 as of March 31, 2020 and September 30, 2019, respectively. 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%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. On May 11, 2020, the Company signed Amendment 3 to the convertible promissory or OID notes, extending the due dates to September 30, 2020. Debt Offering which Closed May 28, 2019 On May 28, 2019, the Company closed additional rounds of a debt offering 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 will be automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. The Convertible Notes had an original principal amount of $4,242,515 and bear annual interest of 8%. Both the principal amount and the interest are payable on a payment-in-kind basis in shares of Common Stock of the Company (the “Common Stock”). 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 debt offering, 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. The warrants issued for these services had a fair value of $1,072,095 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $361,401 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes. 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. In accordance to ASC 470-20-30, Debt with Conversion and Other Options, the guidance therein applies to both convertible debt and other similar instruments, including convertible preferred shares. The guidance states that “the allocation of proceeds shall be based on the relative fair values of the two instruments at time of issuance. When warrants are issued in conjunction with a debt instrument as consideration in purchase transactions, the amounts attributable to each class of instrument issued shall be determined separately, based on values at the time of issuance. The debt discount or premium shall be determined by comparing the value attributed to the debt instrument with the face amount thereof. In conjunction with the issuance of Convertible Notes and the Warrants, the Company recorded a debt discount of $2,857,960 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes. Intrinsic value of the beneficial conversion feature was calculated at the commitment date as the difference between the conversion price and the fair value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. In accordance to ASC 470-20-30, if the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature shall be limited to the amount of the proceeds allocated to the convertible instrument. The Warrants were indexed to our own stock and no down round provision was identified. The Warrants were not subject to ASC 718. Therefore, the Company concluded that based upon the conversion features, the Warrants should not be accounted for as derivative liabilities. The fair value of the Warrants was $1,384,530 and was recorded as Debt Discount (with an offset to APIC) on the date of issuance and amortized over the one-year term of the notes. During the six months ended March 31, 2020, the Company issued 4,114,800 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. Debt Offering during the Six Months Ended March 31, 2020 During the six months ended March 31, 2020, the Company closed additional rounds of a debt offering and received gross proceeds of $715,000 in exchange for issuing Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The Convertible Notes are initially convertible into 715,000 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 357,500 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. The fair value of the Warrants issued to debt holders was $230,955 on the date of issuance and will be amortized over the one-year term of the Convertible Notes. In connection with the debt offering, the placement agent for the Convertible Notes and the Warrants received a cash fee of $123,015 and warrants to purchase 94,800 shares of the Company’s common stock, all based on 8% of gross proceeds to the Company. The warrants issued for these services had a fair value of $118,956 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $123,015 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes. The Company recorded a debt discount of $105,535 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes. During the six months ended March 31, 2020, amortization related to the 2019 and 2020 debt offerings of $2,792,398 of the beneficial conversion feature, warrants issued to debt holders and placement agent was recognized as interest expense in the consolidated statements of operations. Convertible notes payable as of March 31, 2020 and September 30, 2019 are summarized below: March 31, 2020 September 30, 2019 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson 1,184,066 1,184,066 2019 Debt offering 4,242,490 4,242,515 2020 Debt offering 715,000 - less conversions (3,809,975 ) - less debt discount - beneficial conversion feature (316,894 ) (1,273,692 ) less debt discount - warrants (169,635 ) (616,719 ) less debt discount - warrants issued for services related to debt offering (176,722 ) (652,919 ) $ 2,739,330 $ 3,954,251 | Convertible notes payable as of September 30, 2019 and September 30, 2018 consisted of the following: Convertible Promissory Notes with Clayton A. Struve As of September 30, 2019, the Company owes Clayton A. Struve $1,071,000 under convertible promissory or OID notes. The Company recorded accrued interest of $62,171 as of September 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. On November 26, 2019, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to March 31, 2020. Mr. Struve also invested $1,000,000 in the May 2019 debt offering described below. 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 $73,964 as of September 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%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. Debt Offering On May 28, 2019, the Company closed additional rounds of a debt offering and received gross proceeds of $4,242,490 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 $4,242,490 and bear annual interest of 8%. Both the principal amount 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 4,242,490 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 debt offering, 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. The warrants issued for these services had a fair value of $1,072,095 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $361,401 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes. 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. In accordance to ASC 470-20-30, Debt with Conversion and Other Options, the guidance therein applies to both convertible debt and other similar instruments, including convertible preferred shares. The guidance states that “the allocation of proceeds shall be based on the relative fair values of the two instruments at time of issuance. When warrants are issued in conjunction with a debt instrument as consideration in purchase transactions, the amounts attributable to each class of instrument issued shall be determined separately, based on values at the time of issuance. The debt discount or premium shall be determined by comparing the value attributed to the debt instrument with the face amount thereof. In conjunction with the issuance of Convertible Notes and the Warrants, the Company recorded a debt discount of $2,857,960 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes. Intrinsic value of the beneficial conversion feature was calculated at the commitment date as the difference between the conversion price and the fair value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. In accordance to ASC 470-20-30, if the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature shall be limited to the amount of the proceeds allocated to the convertible instrument. During the year ended September 30, 2019, amortization of $1,584,293 of the beneficial conversion feature was recognized as interest expense in the consolidated statements of operations. The Warrants were indexed to our own stock and no down round provision was identified. The Warrants were not subject to ASC 718. Therefore, the Company concluded that based upon the conversion features, the Warrants should not be accounted for as derivative liabilities. The fair value of the Warrants was $1,384,530 and was recorded as Debt Discount (with an offset to APIC) on the date of issuance and amortized over the one-year term of the notes. During the year ended September 30, 2019, amortization of the warrants was $767,801 and is presented as interest expense in the consolidated statements of operations. The Convertible Notes as of September 30, 2019 and 2018 are summarized below: September 30, 2019 September 30, 2018 Convertible Redeemable Note – Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible Redeemable Note – J3E2A2Z LP 1,184,066 1,184,066 2019 Convertible Notes 4,242,490 - 6,497,556 2,255,066 less debt discount – beneficial conversion feature (1,273,667 ) - less debt discount – warrants (616,729 ) - less debt discount – warrants issued for services related to debt offering (652,919 ) - $ 3,954,241 $ 2,255,066 |
11. NOTES PAYABLE, CAPITALIZED
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT | 12 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT | Notes payable, capitalized leases and long-term debt as of September 30, 2019 and 2018 consisted of the following: September 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. |
12. EQUITY
12. EQUITY | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Equity [Abstract] | ||
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 March 31, 2020, the Company had 23,324,128 shares of common stock issued and outstanding, held by 135 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 the Company. As of March 31, 2020, there were options outstanding for the purchase of 4,891,334 common shares (including unearned stock option grants totaling 2,680,000 shares), warrants for the purchase of 17,755,448 common shares, and 8,108,356 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 10,167,804 common shares (9,020,264 common shares at the current price of $0.25 per share and 1,147,540 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $3,402,606. 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 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. On March 31, 2020 and September 30, 2019 there are 1,785,715 Series C Preferred shares outstanding. As of March 31, 2020, and September 30, 2019, the Company has 1,106,014 of Series D Preferred Stock outstanding with Clayton A. Struve, an accredited investor. 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. The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% if and when dividends are declared. 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. As of March 31, 2020 and September 30, 2019, there are no Series F shares outstanding. Securities Subject to Price Adjustments In the future, if the Company sells its common stock at a price below $0.25 per share, the exercise price of 8,108,356 outstanding shares of Series C and 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 $3,402,606 (9,020,264 common shares at the current price of $0.25 per share and 1,147,540 shares at $1.00 per share) and the exercise price of additional outstanding warrants to purchase 12,838,286 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. Warrants totaling 2,755,717 would adjust below $1.20 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 six months ended March 31, 2020: On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants. The stock option grant had an exercise price of $0.25 per share. The former employee forfeited stock option grants 226,809 at an exercise price of $0.25 per share, 150,000 at an exercise price of $1.28 per share and,130,000 at an exercise price of $1.50 per share. On January 1, 2020, the Company issued 540,000 shares of restricted common stock to two Named Executive Officer, three directors and one consultant for services. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of our common stock, or $1,026,000. During the six months ended March 31, 2020, the Company issued 4,114,800 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. During the six months ended March 31, 2020, the Company issued 229,529 shares of common stock at $0.979 per share to five investors related to the cashless exercise of warrants. Warrants to Purchase Common Stock The following warrant transactions occurred during the six months ended March 31, 2020: During the six months ended March 31, 2020, the Company issued 229,529 shares of common stock at $0.979 per share and cancelled warrants to purchase 213,893 shares of common stock at $1.065 per share to five investors related to the cashless exercise of warrants. Debt Offering Warrants The Warrants issued for the 2019 and 2020 Debt Offering 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 issued in connection with 2020 debt offering are initially exercisable for 357,500 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 2020 debt offering, the placement agent for the Convertible Notes and the Warrants received warrants to 94,800 shares of the Company’s common stock, all based on 8% of gross proceeds to the Company. A summary of the warrants outstanding as of March 31, 2020 were as follows: March 31, 2020 Weighted Average Exercise Shares Price Outstanding at beginning of period 17,747,090 $ 0.455 Issued 452,300 1.200 Exercised (229,959 ) (0.979 ) Forfeited (213,983 ) (1.065 ) Expired - - Outstanding at end of period 17,755,448 $ 0.460 Exercisable at end of period 17,755,448 The following table summarizes information about warrants outstanding and exercisable as of March 31, 2020: March 31, 2020 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 13,333,286 2.53 $ 0.250 13,333,286 $ 0.250 714,286 1.33 0.700 714,286 0.700 882,158 1.62 1.000 882,158 1.000 2,805,718 4.04 1.20-1.50 2,805,718 1.20-1.50 20,000 3.87 2.34-4.08 20,000 2.34-4.08 17,755,448 3.00 $ 0.460 17,755,448 $ 0.460 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the six months ended March 31, 2020 were as follows: Assumptions Dividend yield 0% Expected life 5 years Expected volatility 176%-177% Risk free interest rate 1.51%-1.71% There were vested and in the money warrants of 14,047,572 as of March 31, 2020 with an aggregate intrinsic value of $8,809,493. | 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, 2019, the Company had 18,366,178 shares of common stock issued and outstanding, held by 116 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 September 30, 2019, there were options outstanding for the purchase of 4,532,668 common shares (including unearned stock option grants totaling 2,410,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 17,747,090 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 13,262,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,242,490 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $6,497,581. 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 There are 23,334 shares Series A Preferred shares authorized. 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. On September 23, 2018, a holder of Series A Preferred Stock converted 3,334 shares into 3,334 shares of common 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 January 29, 2019. Series C Preferred Stock and Warrants On August 11, 2016, the Company filed a Certificate of Designations, Preferences, and Rights of Series C Convertible Preferred Stock. On August 14, 2017, the price of the Series C Preferred Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. The Certificate designated 1,785,715 shares as Series C Convertible Preferred Stock at a par value of $.001 per share that is currently convertible into common stock at $0.25 per share, with certain adjustments as set forth in the Certificate. The Series C Preferred stock has a yield of 8% if and when dividends are declared and an ownership blocker of 4.99%. As of September 30, 2019, the Company has 1,785,715 shares of Series C Preferred Stock outstanding, which could potentially be converted into 5,000,000 shares of common stock. In addition, a corresponding number of five-year warrants to acquire 1,785,715 shares of common stock at $0.25 per share were issued in conjunction with the Series C Preferred Shares and remain outstanding. Series D Preferred Stock and Warrants The Company authorized the designation of 1,016,014 shares as Series D Convertible Preferred Stock (“Series D Preferred”). On August 14, 2017, the price of the Series D Preferred Stock was adjusted to $0.25 per share pursuant to the documents governing such instruments. On May 8, 2017, the Company applied with the State of Nevada for approval of the Certificate of Designations, Preferences, and Rights of Series D Convertible Preferred Stock. 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 to decrease the number of authorized Series D Shares from 3,906,250 to 1,016,014. The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% if and when dividends are declared. In conjunction with Series D Preferred Stock we authorized Series F Common Stock Warrants, which are exercisable for a term of five years at strike price of $0.25. The underlying common stock upon the conversion of the Series D Preferred and Series F Common Stock Warrants issued were required to be included in a registration statement as filed by the Company. As of September 30, 2019, the Company has 1,016,004 shares of Series D Preferred Stock outstanding, which could be potentially be converted into 3,108,356 shares of common stock shares if the underlying conversion price remains $0.25, and there are 3,984,000 Series F warrant shares. 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 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 12,838,286 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. The conversion price of Convertible Note Payable of $4,242,490 (4,242,490 common shares at the current price of $1.00 per share) would adjust below $1.00 per share pursuant to the documents governing such instruments. Warrants totaling 2,663,359 would adjust below $1.20 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. Unless Registered on Form S-1, 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, 2019: During the year ended September 30, 2019, the Company issued 509,656 shares of common stock at $0.25 per share to consultants and investors related to the cashless exercise of warrants. During the year ended September 30, 2019, the Company issued 145,000 shares of common stock for services provided by two consultants. The common stock was valued at the daily trading price of totaling $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. The following equity issuances occurred during the year ended September 30, 2018: The Company issued 779,676 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 $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. During the year ended September 30, 2018, 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. Warrants to Purchase Common Stock The following warrants were issued during the year ended September 30, 2019: The Company cancelled warrants to purchase 70,011 shares of common stock at $3.08 per share to consultants and investors related to the cashless exercise of warrants or expiration 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 Placement Warrants 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 purchase 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. The Warrants were indexed to our own stock and no down round provision was identified. The Warrants were not subject to ASC 718. Therefore, the Company concluded that based upon the conversion features, the Warrants should not be accounted for as derivative liabilities. The fair value of the Warrants was recorded as Debt Discount (with an offset to APIC) on the date of issuance and amortized over the one-year term of the Convertible Notes. See Note 10 for more information on allocation and fair value of Warrants. 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. 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. 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 on the debenture was valued 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. 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. 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 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, 2019 were as follows: September 30, 2019 Weighted Average Exercise Shares Price Outstanding at beginning of period 15,473,398 $ 0.326 Issued 2,853,359 1.179 Exercised (509,656 ) (0.250 ) Forfeited - - Expired (70,011 ) (3.083 ) Outstanding at end of period 17,747,090 $ 0.455 Exercisable at end of period 17,747,090 A summary of the status of the warrants outstanding as of September 30, 2019 is presented below: September 30, 2019 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 13,417,286 3.02 $ 0.250 13,417,286 $ 0.250 714,286 - 0.700 714,286 0.700 882,159 2.12 1.000 882,159 1.000 2,713,359 4.45 1.20-1.50 2,713,359 1.20-1.50 20,000 4.42 2.34-4.08 20,000 2.34-4.08 17,747,090 3.44 $ 0.455 17,747,090 $ 0.455 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the year ended September 30, 2019 were as follows: Dividend yield 0% Expected life 5 years Expected volatility 180%-182% Risk free interest rate 2.06%-2.52% At September 30, 2019, vested warrants totaling 17,677,091 shares had an aggregate intrinsic value of $18,052,811. |
13. STOCK OPTIONS
13. STOCK OPTIONS | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Equity [Abstract] | ||
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 718 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 six months ended March 31, 2020: During the six months ended March 31, 2020, the Company granted stock option grants to executives, directors and consultants for 3,020,000 shares with an exercise price of $1.125 per share. The grants expire in five years and generally vest quarterly over four years. Stock option grants totaling 2,680,000 shares of common stock are performance stock option grants and are not vested until the performance is achieved. During the six months ended March 31, 2020, two executives and three employees voluntarily cancelled stock option grants for 2,588,143 shares with an exercise price of $2.65 per share. On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants totaling 93,750 shares. The stock option grant had an exercise price of $0.25 per share. The former employee forfeited stock option grants 226,809 at an exercise price of $0.25 per share, 150,000 at an exercise price of $1.28 per share and 130,000 at an exercise price of $1.50 per share. There are currently 4,891,334 (including unearned stock option grants totaling 2,680,000 shares related to performance targets) options to purchase common stock at an average exercise price of $1.165 per share outstanding as of March 31, 2020 under the 2011 Stock Incentive Plan. The Company recorded $565,726 and $263,145 of compensation expense, net of related tax effects, relative to stock options for the six months ended March 31, 2020 and 2019 and in accordance with ASC 718. As of March 31, 2020, there is approximately $614,953, 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 4.19 years. Stock option activity for the six months ended March 31, 2020 and the years ended September 30, 2019 and 2018 was as follows: Options Weighted Average Exercise Price $ Outstanding as of September 30, 2017 15,404 $ 14.68 $ 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 Granted 2,870,000 2.615 7,504,850 Exercised - - - Forfeitures (520,000 ) (3.906 ) (2,031,000 ) Outstanding as of September 30, 2019 4,532,668 2.025 9,180,369 Granted 3,020,000 1.125 3,397,600 Exercised (73,191 ) (0.250 ) (18,298 ) Forfeitures (2,588,143 ) (2.650 ) (6,859,712 ) Outstanding as of March 31, 2020 4,891,334 $ 1.165 $ 5,699,959 The following table summarizes information about stock options outstanding and exercisable as of March 31, 2020: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exercisable Exercisable $ 0.25 230,000 3.21 $ 0.250 100,625 $ 0.250 1.10-1.25 2,940,000 4.60 1.37 233,854 1.096 1.28-1.50 1,610,000 4.60 1.31 498,438 1.296 1.79-2.25 110,000 4.39 1.01 40,000 1.153 13.50-15.00 1,334 0.19 13.50 1,334 13.500 4,891,334 4.19 $ 1.165 874,251 $ 1.212 There were in the money stock option grants of 230,000 shares as of March 31, 2020 with an aggregate intrinsic value of $149,500. | 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 718 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, 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 had an exercise price of $3.03 per share and expire on October 31, 2023. The grants vested immediately. On October 31, 2018, the Board awarded Phillip A. Bosua 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 had an exercise price of $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 had an exercise price of $3.03 per share and expires on October 31, 2023. On March 26, 2019, the Board awarded two employees stock option grants totaling 260,000 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 grant had an exercise price of $1.50 per share and expires on March 26, 2024. During April 2019, the Board awarded stock option grants to two employees and a consultant to acquire 185,000 shares of the Company’s common stock. The grants had an exercise price from $1.39 per share to $1.90 per share and expire during April 2024. Grants totaling 10,000 common shares vested immediately and grants totaling 50,000 vest quarterly over three years. Grants totaling 125,000 common shares vest quarterly over four years, with no vesting during the first six months. On April 15, 2019, the Board awarded an 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 had an exercise price of $1.50 per share and expire on April 15, 2024. During July and August of 2019, the Board awarded stock option grants to four consultants to acquire 275,000 shares of the Company’s common stock. The grants have an exercise price from $1.34 per share to $1.40 per share and expire during July and August 2024. Grants totaling 10,000 common shares vested immediately and grants totaling 50,000 vest quarterly over three years. Grants totaling 15,000 common shares vest monthly over six months. A grant of 100,000 shares of common stock vests quarterly over four years, with no vesting during the first six months. A grants for 100,000 shares of common stock vests quarterly over four years, with no vesting during the first six months. A grant for 100,000 shares of common stock vests upon upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration During the year ended September 30, 2019, the Board four employees a stock option grants to acquire 125,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign at a price range for $1.50 to $3.03 per share. During the year ended September 30, 2019, the Company recently decided that it would not undertake a Kickstarter campaign. Options are expected to be cancelled or have alternative Company milestones. During the year ended September 2019, stock option grants for 520,000 shares of common stock with an exercise price ranging from $3.03 to $4.20 per share were forfeited. 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. There are currently 4,532,668 options to purchase common stock at an average exercise price of $2.025 per share outstanding as of September 30, 2019 under the 2011 Stock Incentive Plan. The Company recorded $1,141,674 and $50,899 of compensation expense, net of related tax effects, relative to stock options for the year ended September 30, 2019 and 2018 and in accordance with ASC 718. Net loss per share (basic and diluted) associated with this expense was approximately ($0.060) and ($0.010) per share, respectively. As of September 30, 2019, there is approximately $631,026, 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 3.70 years. Stock option grants totaling 2,410,000 shares of common stock are performance stock option grants and are not vested until the performance is achieved. Stock option activity for the years ended September 30, 2019 and 2018 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2017 15,404 $ 14.68 $ 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 Granted 2,870,000 2.615 7,504,850 Exercised - - - Forfeitures (520,000 ) (3.906 ) (2,031,000 ) Outstanding as of September 30, 2019 4,532,668 $ 2.025 $ 9,180,369 The following table summarizes information about stock options outstanding and exercisable as of September 30, 2019: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exercisable Exercisable $ 0.250 530,000 0.50 $ 0.250 165,625 $ 0.25 1.28-1.50 1,860,000 3.83 1.35 360,000 1.28 11.79-1.90 60,000 4.56 1.85 12,083 1.84 3.03-4.2 2,080,000 4.08 3.08 20,000 4.20 13.5-15.00 2,668 0.50 14.25 1,334 13.50 4,532,668 3.70 $ 2.025 559,042 $ 1.122 There were stock option grants of 1,980,000 shares as of September 30, 2019 with an aggregate intrinsic value of $826,720. |
14. OTHER SIGNIFICANT TRANSACTI
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Related Party Transactions [Abstract] | ||
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson On January 16, 2018, Mr. Erickson was issued 100,000 of restricted common stock at the grant date market value of $0.21 per share. On January 2, 2019, Mr. Erickson was issued 100,000 shares of restricted common stock at the grant date market value of $1.02 per share. On January 25, 2018, the Company entered into amendments to two demand promissory notes, totaling $600,000 with Mr. Erickson, our former Chief Executive Officer and current chairman of the board 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 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 $73,964 as of September 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%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. On May 11, 2020, the Company signed Amendment 3 to the convertible promissory or OID notes, extending the due dates to September 30, 2020. 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. On October 4, 2019, Ronald P. Erickson voluntarily cancellated a stock option grant for 1,000,000 shares with an exercise price of $3.03 per share. The grant was related to performance and was not vested. On November 4, 2019, the Company granted a stock option grant to Ronald P. Erickson for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2024 and vests upon uplisting to the NASDAQ or NYSE exchanges. On January 1, 2020, the Company issued 100,000 shares of restricted common stock to Ronald P. Erickson. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $190,000. Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $613,525 and $487,932 as of March 31, 2020 and September 30, 2019, respectively. Related Party Transaction with Phillip A. Bosua 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. The fair value of the shares issued was $12,000. 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 shares issued was $520,000. On June 25, 2018, we 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 shares issued was $165,000. On June 25, 2018, we 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 $0.96 per share. On October 4, 2019, Philip A. Bosua voluntarily cancellated a stock option grant for 1,000,000 shares with an exercise price of $3.03 per share. The grants was related to performance and was not vested. On November 4, 2019, the Company granted a stock option grant to Philip A. Bosua for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2024 and vests upon FDA approval of the UBAND blood glucose monitor. On January 1, 2020, the Company issued 150,000 shares of restricted common stock to Phillip A. Bosua. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $285,000. Other Stock Option Grants and Cancellations 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. On September 17, 2019, two directors voluntarily forfeited stock option grants for 100,000 shares of common stock with an exercise price of $3.03 per share. On November 4, 2019, the Company granted stock option grants to two directors totaling 105,000 shares with an exercise price of $1.10 per share. The stock option grants expire in five years. The stock option grants vested immediately. On January 1, 2020, the Company issued 120,000 shares of restricted common stock to three directors. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $228,000. | Related Party Transactions with Ronald P. Erickson See Notes 10, 13 and 15 for related party transactions with Ronald P. Erickson. On January 16, 2018, Mr. Erickson was issued 100,000 of restricted common stock at the grant date market value of $0.21 per share. On January 2, 2019, Mr. Erickson was issued 100,000 shares of restricted common stock at the grant date market value of $1.02 per share. On January 25, 2018, the Company entered into amendments to two demand promissory notes, totaling $600,000 with Mr. Erickson, our former Chief Executive Officer and current chairman of the board 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 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 $73,964 as of September 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%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. 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 $657,551 as of September 30, 2018. Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $487,932 as of September 30, 2019. Related Party Transaction with Phillip A. Bosua 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. The fair value of the shares issued was $12,000. 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 shares issued was $520,000. On June 25, 2018, we 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 shares issued was $165,000. On June 25, 2018, we 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 $0.96 per share. Stock Issuances to Named Executive Officers and Directors 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, 2019, two directors voluntarily forfeited stock option grants for 100,000 shares of common stock with an exercise price of $3.03 per share. |
15. COMMITMENTS, CONTINGENCIES
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | ||
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. 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. 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 with at least ninety (90) days prior to the end of the Initial Term or renewal term. 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 March 5, 2019, Mr. Bosua’s annual compensation was increased to $240,000. 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 we engaged Mr. Erickson as our Chief Executive Officer through September 30, 2018. 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. automatically be extended for additional one (1) year periods unless either Party delivers written notice of such Party’s intention to terminate this Agreement at least ninety (90) days prior to the end of the Initial Term or renewal term. Mr. Erickson’s annual compensation was $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. On March 5, 2019, Mr. Erickson’s annual compensation was increased to $195,000. Mr. Erickson will be entitled to participate in all group employment benefits that are offered by us 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. Properties and Operating Leases The Company is obligated under the following leases for its various facilities. 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 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. | 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 with at least ninety (90) days prior to the end of the Initial Term or renewal term.. 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 March 5, 2019, Mr. Bosua’s annual compensation was increased to $240,000. 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 we engaged Mr. Erickson as our Chief Executive Officer through September 30, 2018. 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. automatically be extended for additional one (1) year periods unless either Party delivers written notice of such Party’s intention to terminate this Agreement at least ninety (90) days prior to the end of the Initial Term or renewal term. Mr. Erickson’s annual compensation was $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. On March 5, 2019, Mr. Erickson’s annual compensation was increased to $195,000. Mr. Erickson will be entitled to participate in all group employment benefits that are offered by us 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. Properties and Operating Leases The Company is obligated under the following leases for its various facilities. 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 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. Terminated Leases 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. TransTech was located at 12142 NE Sky Lane, Suite 130, Aurora, OR 97002. TransTech terminated this lease effective May 31, 2019. |
16. INCOME TAXES
16. INCOME TAXES | 12 Months Ended |
Sep. 30, 2019 | |
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 $2,834,000 for the year ended September 30, 2019. Pretax losses arising from United States operations were approximately $1,609,000 for the year ended September 30, 2018. The Company has net operating loss carryforwards of approximately $32,083,000, which expire in 2022-2037. 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 $6,930,000 was established as of September 30, 2019. 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 2019. For the year ended September 30, 2019, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses, interest expense 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, 2019 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, 2019 and 2018 are as follows: 2019 2018 U.S. operations loss carry forward at statutory rate of 21% $ 6,737,300 $ 6,142,138 Deferred tax assets related to timing differences-accruals 192,897 - Total 6,930,197 6,142,138 Less Valuation Allowance (6,930,197 ) (6,142,138 ) Net Deferred Tax Assets - - Change in Valuation allowance $ (788,059 ) $ (337,853 ) A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended September 30, 2019 and 2018 are as follows: 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 % |
17. SEGMENT REPORTING
17. SEGMENT REPORTING | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Segment Reporting [Abstract] | ||
SEGMENT REPORTING | The management of the Company considers the business to have two operating segments (i) the development of the Bio-RFID™” and “ChromaID™” technologies and (ii) TransTech, 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 our current revenues, it is not central to our current focus as a Company. Moreover, we have written down any goodwill associated with its historic acquisition. We continue to closely monitor this subsidiary and expect it to wind down completely in the near future. The reporting for the three and six months ended March 31, 2020 and 2019 was as follows (in thousands): Segment Gross Net Segment Segment Revenue Margin Profit (Loss) Assets Three Months Ended March 31, 2020 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (3,346 ) $ 1,224 TransTech distribution business 5 1 15 4 Total segments $ 5 $ 1 $ (3,331 ) $ 1,228 Three Months Ended March 31, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (1,434 ) $ 3,565 TransTech distribution business 594 139 (8 ) 379 Total segments $ 594 $ 139 $ (1,442 ) $ 3,944 Segment Gross Net Segment Segment Revenue Margin Profit (Loss) Assets Six Months Ended March 31, 2020 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (6,418 ) $ 1,224 TransTech distribution business 122 52 72 4 Total segments $ 122 $ 52 $ (6,346 ) $ 1,228 Six Months Ended March 31, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (2,171 ) $ 3,565 TransTech distribution business 1,196 269 (40 ) 379 Total segments $ 1,196 $ 269 $ (2,211 ) $ 3,944 During the six months ended March 31, 2020, the segment development of Bio-RFID™” and “ChromaID™” incurred non-cash expenses of $4,510,430. | The management of the Company considers the business to have two operating segments (i) the development of the Bio-RFID™” and “ChromaID™” technologies.and (ii) TransTech, 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 our current revenues, it is not central to our current focus as a Company. Moreover, we have written down any goodwill associated with its historic acquisition. We continue to closely monitor this subsidiary and expect it to wind down completely in the near future. During the year ended September 30, 2019, the Company began to report both entities as segments. The reporting for the year ended September 30, 2019 and 2018 was as follows: Segment Gross Net Segment Segment Revenue Margin Loss Assets Year Ended September 30, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (7,534,739 ) $ 2,882,194 TransTech distribution business 1,804,960 426,547 (77,577 ) 57,439 Total segments $ 1,804,960 $ 426,547 $ (7,612,316 ) $ 2,939,633 Year Ended September 30, 2018 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (3,294,707 ) $ 1,311,134 TransTech distribution business 4,303,296 821,623 37,110 791,814 Total segments $ 4,303,296 $ 821,623 $ (3,257,597 ) $ 2,102,948 |
18. SUBSEQUENT EVENTS
18. SUBSEQUENT EVENTS | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Subsequent Events [Abstract] | ||
SUBSEQUENT EVENTS | The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued. Subsequent to March 31, 2020, there were the following material transactions that require disclosure: The Company closed additional rounds of a debt offering and received gross proceeds of $1,979,500 in exchange for issuing Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The Convertible Notes are initially convertible into 1,979,500 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 989,750 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 debt offering, the placement agent for the Convertible Notes and the Warrants received a cash fee of $158,360 and warrants to purchase 237,540 shares of the Company’s common stock, all based on 8% of gross proceeds to the Company. The Company issued 305,117 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. On April 29, 2020, the Company increased the salary of Ronald P. Erickson and Phillip A. Bosua by $20,000 per year. On April 30, 2020, the Company received $226,170 under the Paycheck Protection Program of the U.S. Small Business Administration’s 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020 | The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued. Subsequent to September 30, 2019, there were the following material transactions that require disclosure: Convertible Promissory Notes with Clayton A. Struve As of September 30, 2019, the Company owes Clayton A. Struve $1,071,000 under convertible promissory or OID notes. On November 26, 2019, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to March 31, 2020. 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. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. Convertible Notes Dated October 17, 2019 On October 17, 2019, the Company closed funding on Convertible Notes totaling principal amount of $385,000 which 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 we issue 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 385,000 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 192,500 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 $36,800 and warrants to purchase 55,200 shares of our common stock, all based on 8-10% of gross proceeds to the Company. As part of the Purchase Agreement, we 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. Stock Option Exercise and Cancellation On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants totaling 93,750 shares. The stock option grant had an exercise price of $0.25 per share. The former employee forfeited stock option grants 206,250 at an exercise price of $0.25 per share and 150,000 at an exercise price of $1.28 per share. Stock Option Cancellations On October 4, 2019, Ronald P. Erickson and Philip A. Bosua, named executive officers, each voluntarily cancellated stock option grants totaling for 1,000,000 shares with an exercise price of $3.03 per share. The grants were related to performance and were not vested. On October 4, 2019, an employee voluntarily cancellated a stock option grant totaling 80,000 shares with an exercise price of $4.20 per share. Stock Option Issuances On December 19, 2019, the Board of Directors approved the following stock option grants: Stock option grants to two directors, 2 employees and two consultants totaling 315,000 shares with an exercise price of $1.12 per share. The stock option grants expire in five years. The stock option grants have various vesting terms and expire during the fourth quarter of 2024. Stock option grant to Philip A. Bosua, a named executive officer, for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2019 and vests upon FDA approval of the UBAND blood glucose monitor. Stock option grant to Ronald P. Erickson, a named executive officer, for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2019 and vests upon uplisting to NASDAQ or NYSE exchanges. |
3. SIGNIFICANT ACCOUNTING POL_2
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Accounting Policies [Abstract] | ||
Basis of Presentation | Basis of Presentation | Basis of Presentation |
Principles of Consolidation | Principles of Consolidation | Principles of Consolidation |
Cash and Cash Equivalents | Cash and Cash Equivalents | Cash and Cash Equivalents |
Accounts Receivable and Revenue | Accounts Receivable and Revenue – TransTech Systems Inc. sells products directly to customers. Our products are typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale do not require customer acceptance. We account for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts have a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue is measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods. | Accounts Receivable and Revenue – TransTech Systems Inc. sells products directly to customers. Our products are typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale do not require customer acceptance. We account for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts have a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue is measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts - | Allowance for Doubtful Accounts - |
Inventories | Inventories | Inventories |
Equipment | Equipment | Equipment |
Long-Lived Assets | Long-Lived Assets | Long-Lived Assets |
Intangible Assets | Intangible Assets | Intangible Assets |
Research and Development Expenses | Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. We incurred expenses of $938,303, $1,257,872 and $570,514 for the six months ended March 31, 2020 and the years ended September 30, 2019 and 2018, respectively, on development activities. | Research, Development and Engineering Expenses The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. We incurred expenses of $1,257,872 and $570,514 for the years ended September 30, 2019 and 2018, respectively, on 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 March 31, 2020 and September 30, 2019 are based upon the short-term nature of the assets and liabilities. The Company has a money market account which is considered a level 1 asset. The balance as of March 31, 2020 and September 30, 2019 was $651,722 and $1,901,278, respectively. | 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, 2019 and 2018 are based upon the short-term nature of the assets and liabilities. The Company has a money market account which is considered a level 1 asset. The balance as of September 30, 2019 was $1,901,278. |
Derivative Financial Instruments | Derivative Financial Instruments – The Company determined that none of the conversion features within its currently outstanding convertible notes payable must be bifurcated and thus there was no derivative liability as of March 31, 2020 and September 30, 2019. | Derivative Financial Instruments – The Company determined that none of the conversion features within its currently outstanding convertible notes payable must be bifurcated and thus there was no derivative liability as of September 30, 2019 and 2018. |
Stock Based Compensation | Stock Based Compensation | Stock Based Compensation |
Convertible Securities | Convertible Securities | Convertible Securities |
Net Loss per Share | Net Loss per Share As of March 31, 2019, there were options outstanding for the purchase of 2,282,668 common shares, warrants for the purchase of 17,572,583 common shares, and 4,894,071 shares of the Company’s common stock issuable upon the conversion of Series A, Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 12,829,329 common shares (9,020,264 common shares at the current price of $0.25 per share and 3,808,975 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $6,060,041. All of which could potentially dilute future earnings per share. | Net Loss per Share 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. None of these securities were included in net loss per share. |
Dividend Policy | Dividend Policy | Dividend Policy |
Use of Estimates | Use of Estimates | Use of Estimates |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Based on the Company’s review of accounting standard updates issued since the filing of the 2019 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements. | Recent Accounting Pronouncements On October 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) which aligns the accounting treatment of stock awards granted to nonemployee consultants to those granted to employees. The Company adopted the amendment as of October 1, 2018. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements. All share-based compensation for employees and non-employees will be accounted under ASC 718. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which will replace the existing guidance in ASC 840, “Leases.” The FASB has also issued amendments to ASU 2016-02, including ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (ASU 2018-11), which the Company collectively refers to as the new leasing standard. . The Company’s outstanding leases primarily relate to its two facility leases Seattle, Washington. In conjunction with these leases, the Company adopted this new retrospectively on July 1, 2019 and recognized a lease liability and related right-of-use asset on the Company’s consolidated balance sheet. The retrospect adjustment did not require any adjustment to previously reported equity. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for sale debt securities. This standard is effective for the Company in the fiscal year beginning October 1, 2020. The Company adopted ASU No. 2016-13 as of October 1, 2018. The adoption of ASU 2016-13 did not have an impact on the Company’s consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
6. FIXED ASSETS (Tables)
6. FIXED ASSETS (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Schedule of property and equipment | Estimated March 31, September 30, Useful Lives 2020 2019 Machinery and equipment 2-10 years $ 310,797 $ 412,238 Leasehold improvements 2-3 years 3,612 3,612 Furniture and fixtures 2-3 years 26,855 58,051 Software and websites 3- 7 years - 35,830 Less: accumulated depreciation (221,490 ) (379,259 ) $ 119,774 $ 130,472 | Estimated September 30, September 30, Useful Lives 2019 2018 Machinery and equipment 2-10 years $ 412,238 $ 332,306 Leasehold improvements 2-3 years 3,612 276,112 Furniture and fixtures 2-3 years 58,051 58,051 Software and websites 3- 7 years 35,830 35,830 Less: accumulated depreciation (379,259 ) (532,966 ) $ 130,472 $ 169,333 |
7. INTANGIBLE ASSETS (Tables)
7. INTANGIBLE ASSETS (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Schedule of intangible assets | Estimated March 31, September 30, Useful Lives 2020 2019 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (332,220 ) (245,554 ) Intangible assets, net $ 187,780 $ 274,446 | Estimated September 30, September 30, Useful Lives 2019 2018 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (245,554 ) (72,222 ) Intangible assets, net $ 274,446 $ 447,778 |
9. LEASES (Tables)
9. LEASES (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Leases [Abstract] | ||
Schedule of minimum future lease payments | Year $ 2021 $ 133,996 2022 12,086 2023 0 2024 - 146,082 Imputed interest (14,608 ) Total lease liability $ 131,474 | Year $ 2019 $ - 2020 133,996 2021 111,492 2022 24,520 2023 - 270,008 Imputer interest (23,872 ) Total lease liability $ 246,136 |
10. CONVERTIBLE NOTES PAYABLE (
10. CONVERTIBLE NOTES PAYABLE (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Debt Disclosure [Abstract] | ||
Summary of convertible notes | March 31, 2020 September 30, 2019 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson 1,184,066 1,184,066 2019 Debt offering 4,242,490 4,242,515 2020 Debt offering 715,000 - less conversions (3,809,975 ) - less debt discount - beneficial conversion feature (316,894 ) (1,273,692 ) less debt discount - warrants (169,635 ) (616,719 ) less debt discount - warrants issued for services related to debt offering (176,722 ) (652,919 ) $ 2,739,330 $ 3,954,251 | September 30, 2019 September 30, 2018 Convertible Redeemable Note – Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible Redeemable Note – J3E2A2Z LP 1,184,066 1,184,066 2019 Convertible Notes 4,242,490 - 6,497,556 2,255,066 less debt discount – beneficial conversion feature (1,273,667 ) - less debt discount – warrants (616,729 ) - less debt discount – warrants issued for services related to debt offering (652,919 ) - $ 3,954,241 $ 2,255,066 |
11. NOTES PAYABLE, CAPITALIZE_2
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Notes payable, capitalized leases and long-term debt | September 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 $ - $ - |
12. EQUITY (Tables)
12. EQUITY (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Equity [Abstract] | ||
Summary of the warrants issued | March 31, 2020 Weighted Average Exercise Shares Price Outstanding at beginning of period 17,747,090 $ 0.455 Issued 452,300 1.200 Exercised (229,959 ) (0.979 ) Forfeited (213,983 ) (1.065 ) Expired - - Outstanding at end of period 17,755,448 $ 0.460 Exercisable at end of period 17,755,448 | September 30, 2019 Weighted Average Exercise Shares Price Outstanding at beginning of period 15,473,398 $ 0.326 Issued 2,853,359 1.179 Exercised (509,656 ) (0.250 ) Forfeited - - Expired (70,011 ) (3.083 ) Outstanding at end of period 17,747,090 $ 0.455 Exercisable at end of period 17,747,090 |
Summary of the status of the warrants outstanding | March 31, 2020 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 13,333,286 2.53 $ 0.250 13,333,286 $ 0.250 714,286 1.33 0.700 714,286 0.700 882,158 1.62 1.000 882,158 1.000 2,805,718 4.04 1.20-1.50 2,805,718 1.20-1.50 20,000 3.87 2.34-4.08 20,000 2.34-4.08 17,755,448 3.00 $ 0.460 17,755,448 $ 0.460 | September 30, 2019 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 13,417,286 3.02 $ 0.250 13,417,286 $ 0.250 714,286 - 0.700 714,286 0.700 882,159 2.12 1.000 882,159 1.000 2,713,359 4.45 1.20-1.50 2,713,359 1.20-1.50 20,000 4.42 2.34-4.08 20,000 2.34-4.08 17,747,090 3.44 $ 0.455 17,747,090 $ 0.455 |
Weighted average assumptions relating to the valuation of the Company's warrants | Assumptions Dividend yield 0% Expected life 5 years Expected volatility 176%-177% Risk free interest rate 1.51%-1.71% | Dividend yield 0% Expected life 5 years Expected volatility 180%-182% Risk free interest rate 2.06%-2.52% |
13. STOCK OPTIONS (Tables)
13. STOCK OPTIONS (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Equity [Abstract] | ||
Stock option activity | Options Weighted Average Exercise Price $ Outstanding as of September 30, 2017 15,404 $ 14.68 $ 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 Granted 2,870,000 2.615 7,504,850 Exercised - - - Forfeitures (520,000 ) (3.906 ) (2,031,000 ) Outstanding as of September 30, 2019 4,532,668 2.025 9,180,369 Granted 3,020,000 1.125 3,397,600 Exercised (73,191 ) (0.250 ) (18,298 ) Forfeitures (2,588,143 ) (2.650 ) (6,859,712 ) Outstanding as of March 31, 2020 4,891,334 $ 1.165 $ 5,699,959 | Weighted Average Options Exercise Price $ Outstanding as of September 30, 2017 15,404 $ 14.68 $ 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 Granted 2,870,000 2.615 7,504,850 Exercised - - - Forfeitures (520,000 ) (3.906 ) (2,031,000 ) Outstanding as of September 30, 2019 4,532,668 $ 2.025 $ 9,180,369 |
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 Outstanding Exercisable Exercisable $ 0.25 230,000 3.21 $ 0.250 100,625 $ 0.250 1.10-1.25 2,940,000 4.60 1.37 233,854 1.096 1.28-1.50 1,610,000 4.60 1.31 498,438 1.296 1.79-2.25 110,000 4.39 1.01 40,000 1.153 13.50-15.00 1,334 0.19 13.50 1,334 13.500 4,891,334 4.19 $ 1.165 874,251 $ 1.212 | Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exercisable Exercisable $ 0.250 530,000 0.50 $ 0.250 165,625 $ 0.25 1.28-1.50 1,860,000 3.83 1.35 360,000 1.28 11.79-1.90 60,000 4.56 1.85 12,083 1.84 3.03-4.2 2,080,000 4.08 3.08 20,000 4.20 13.5-15.00 2,668 0.50 14.25 1,334 13.50 4,532,668 3.70 $ 2.025 559,042 $ 1.122 |
16. INCOME TAXES (Tables)
16. INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of components of the Company’s deferred tax assets | 2019 2018 U.S. operations loss carry forward at statutory rate of 21% $ 6,737,300 $ 6,142,138 Deferred tax assets related to timing differences-accruals 192,897 - Total 6,930,197 6,142,138 Less Valuation Allowance (6,930,197 ) (6,142,138 ) Net Deferred Tax Assets - - Change in Valuation allowance $ (788,059 ) $ (337,853 ) |
Schedule of effective tax rate reconciliation | 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 % |
17. SEGMENT REPORTING (Tables)
17. SEGMENT REPORTING (Tables) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Segment Reporting [Abstract] | ||
Schedule of segment reporting | Segment Gross Net Segment Segment Revenue Margin Profit (Loss) Assets Three Months Ended March 31, 2020 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (3,346 ) $ 1,224 TransTech distribution business 5 1 15 4 Total segments $ 5 $ 1 $ (3,331 ) $ 1,228 Three Months Ended March 31, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (1,434 ) $ 3,565 TransTech distribution business 594 139 (8 ) 379 Total segments $ 594 $ 139 $ (1,442 ) $ 3,944 Segment Gross Net Segment Segment Revenue Margin Profit (Loss) Assets Six Months Ended March 31, 2020 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (6,418 ) $ 1,224 TransTech distribution business 122 52 72 4 Total segments $ 122 $ 52 $ (6,346 ) $ 1,228 Six Months Ended March 31, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (2,171 ) $ 3,565 TransTech distribution business 1,196 269 (40 ) 379 Total segments $ 1,196 $ 269 $ (2,211 ) $ 3,944 | Segment Gross Net Segment Segment Revenue Margin Loss Assets Year Ended September 30, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (7,534,739 ) $ 2,882,194 TransTech distribution business 1,804,960 426,547 (77,577 ) 57,439 Total segments $ 1,804,960 $ 426,547 $ (7,612,316 ) $ 2,939,633 Year Ended September 30, 2018 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (3,294,707 ) $ 1,311,134 TransTech distribution business 4,303,296 821,623 37,110 791,814 Total segments $ 4,303,296 $ 821,623 $ (3,257,597 ) $ 2,102,948 |
2. GOING CONCERN (Details Narra
2. GOING CONCERN (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Exercise Price 13.500 | ||||||||
Net loss | $ (3,330,513) | $ (3,015,013) | $ (1,442,238) | $ (769,203) | $ (6,345,526) | $ (2,211,441) | $ (7,612,316) | $ (3,257,597) |
Net cash used in operating activities | (1,688,330) | (1,147,510) | (3,104,035) | (1,117,131) | ||||
Non-cash expenses | 4,510,430 | $ 1,145,653 | ||||||
Accumulated deficit | $ (48,749,166) | $ (48,749,166) | $ (42,403,640) | $ (34,791,324) |
3. SIGNIFICANT ACCOUNTING POL_3
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Uninsured deposits | $ 526,752 | $ 526,752 | ||||
Allowance for accounts receivable | 0 | 0 | $ 40,000 | $ 60,000 | ||
Reserve for impaired inventory | 0 | 0 | 28,000 | 35,000 | ||
Research and development expense | 447,165 | $ 184,024 | 938,303 | $ 391,014 | 1,257,872 | $ 570,514 |
Money market accounts | $ 651,722 | $ 651,722 | $ 1,901,278 | |||
Minimum | ||||||
Estimated useful lives of assets | 2 years | |||||
Maximum | ||||||
Estimated useful lives of assets | 10 years | |||||
Leasehold Improvements | ||||||
Estimated useful lives of assets | 5 years |
4. ACCOUNTS RECEIVABLE_CUSTOM_2
4. ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION (Details Narrative) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||
Accounts receivable, net of allowance | $ 0 | $ 63,049 | $ 320,538 |
Allowance for bad debt | $ 0 | $ 40,000 | $ 60,000 |
5. INVENTORIES (Details Narrati
5. INVENTORIES (Details Narrative) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Inventory Disclosure [Abstract] | |||
Inventories | $ 0 | $ 7,103 | $ 203,582 |
Reserve for impaired inventory | $ 0 | $ 28,000 | $ 35,000 |
6. FIXED ASSETS (Details)
6. FIXED ASSETS (Details) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Property, Plant and Equipment [Abstract] | |||
Machinery and equipment (2-10 years) | $ 310,797 | $ 412,238 | $ 332,306 |
Leasehold improvements (2-3 years) | 3,612 | 3,612 | 276,112 |
Furniture and fixtures (2-3 years) | 26,855 | 58,051 | 58,051 |
Software and websites (3-7 years) | 0 | 35,830 | 35,830 |
Less: accumulated depreciation | (221,490) | (379,259) | (532,966) |
Property and equipment, net | $ 119,774 | $ 130,472 | $ 169,333 |
6. FIXED ASSETS (Details Narrat
6. FIXED ASSETS (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Property and equipment, net | $ 119,774 | $ 130,472 | $ 169,333 | |
Property and equipment, accumulated depreciation | 221,490 | 379,259 | 532,966 | |
Depreciation expense | $ 34,079 | $ 18,491 | $ 86,016 | $ 60,393 |
7. INTANGIBLE ASSETS (Details)
7. INTANGIBLE ASSETS (Details) - Technology - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Intangible assets, gross | $ 520,000 | $ 520,000 | $ 520,000 |
Less: accumulated amortization | (332,220) | (245,554) | (72,222) |
Intangible assets, net | $ 187,780 | $ 274,446 | $ 447,778 |
7. INTANGIBLE ASSETS (Details N
7. INTANGIBLE ASSETS (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||||
Amortization expense | $ 86,666 | $ 86,666 | $ 173,331 | $ 72,222 |
8. ACCOUNTS PAYABLE (Details Na
8. ACCOUNTS PAYABLE (Details Narrative) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Accounts Payable [Abstract] | |||
Accounts payable - trade | $ 693,598 | $ 810,943 | $ 1,512,617 |
9. LEASES (Details)
9. LEASES (Details) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 |
Leases [Abstract] | ||
2019 | $ 0 | $ 0 |
2021 | 133,996 | 133,996 |
2022 | 12,086 | 111,492 |
2023 | 0 | 24,520 |
2024 | 0 | 0 |
Total | 146,082 | 270,008 |
Imputed interest | (14,608) | (23,872) |
Total lease liability | $ 131,474 | $ 246,136 |
9. LEASES (Details Narrative)
9. LEASES (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Right-of-use assets | $ 130,100 | $ 243,526 | $ 0 | |
Operating lease liabilities | 131,474 | 246,136 | ||
Lease cost | 67,914 | $ 100,482 | 133,996 | |
Cash paid for ROU operating lease liability | $ 66,998 | $ 135,828 | ||
Weighted-average remaining lease term | 2 years | |||
Weighted-average discount rate | 10.00% | 7.00% | ||
Minimum | ||||
Weighted-average remaining lease term | 2 years | |||
Maximum | ||||
Weighted-average remaining lease term | 3 years |
10. CONVERTIBLE NOTES PAYABLE_2
10. CONVERTIBLE NOTES PAYABLE (Details) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Convertible notes, gross | $ 7,212,556 | $ 6,497,556 | $ 2,255,066 |
less conversions | (3,809,975) | 0 | 0 |
less debt discount - beneficial conversion feature | (316,894) | (1,273,692) | 0 |
less debt discount - warrants | (169,635) | (616,719) | 0 |
less debt discount - warrants issued for services related to debt offering | (176,722) | (652,919) | 0 |
Convertible notes, net | 2,739,330 | 3,954,251 | 2,255,066 |
Convertible Note - Clayton A. Struve | |||
Convertible notes, gross | 1,071,000 | 1,071,000 | 1,071,000 |
Convertible Note - Ronald P. Erickson | |||
Convertible notes, gross | 1,184,066 | 1,184,066 | 1,184,066 |
2019 Debt Offering | |||
Convertible notes, gross | 4,242,490 | 4,242,515 | 0 |
2020 Debt Offering | |||
Convertible notes, gross | $ 715,000 | $ 0 | $ 0 |
10. CONVERTIBLE NOTES PAYABLE_3
10. CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Amortization of debt discount | $ 2,792,398 | $ 361,534 | $ 2,771,270 | $ 475,174 |
Convertible Note - Clayton A. Struve | ||||
Accrued interest | 67,801 | 62,171 | ||
Convertible Note - Ronald P. Erickson | ||||
Accrued interest | $ 109,583 | $ 73,964 |
11. NOTES PAYABLE, CAPITALIZE_3
11. NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT (Details) - USD ($) | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Debt Disclosure [Abstract] | |||
Capital Source Business Finance Group | $ 0 | $ 145,186 | |
Total debt | 0 | 145,186 | |
Less current portion of long term debt | $ 0 | 0 | (145,186) |
Long term debt | $ 0 | $ 0 |
12. EQUITY (Details)
12. EQUITY (Details) - $ / shares | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Dec. 31, 2019 | Mar. 31, 2020 | Sep. 30, 2019 | |
Shares | |||
Outstanding at beginning of period | 1,747,090 | 1,747,090 | 15,473,398 |
Issued | 452,300 | 2,853,359 | |
Exercised | (28,688) | (229,959) | (509,656) |
Forfeited | (213,983) | 0 | |
Expired | 0 | (70,011) | |
Outstanding at end of period | 17,755,448 | 1,747,090 | |
Exercisable at end of period | 17,755,448 | 1,747,090 | |
Weighted Average Exercise Price: | |||
Outstanding at beginning of period | $ 0.455 | $ 0.455 | $ 0.326 |
Issued | 1.200 | 1.179 | |
Exercised | (.979) | (0.250) | |
Forfeited | (1.065) | 0 | |
Expired | (.000) | (3.083) | |
Outstanding at end of period | $ .460 | $ 0.455 |
12. EQUITY (Details 1)
12. EQUITY (Details 1) - $ / shares | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Number of warrants | 17,755,448 | 17,747,090 |
Weighted average remaining life (years) | 3 years | 3 years 5 months 8 days |
Weighted average exercise price, outstanding | $ .460 | $ 0.455 |
Shares exercisable | 17,755,448 | 17,747,090 |
Weighted average exercise price, exercisable | $ .460 | |
Warrant One | ||
Number of warrants | 13,333,286 | |
Weighted average remaining life (years) | 2 years 6 months 11 days | |
Weighted average exercise price, outstanding | $ .250 | |
Shares exercisable | 13,333,286 | |
Weighted average exercise price, exercisable | $ 0.250 | |
Warrant Two | ||
Number of warrants | 714,286 | |
Weighted average remaining life (years) | 1 year 3 months 29 days | |
Weighted average exercise price, outstanding | $ .700 | |
Shares exercisable | 714,286 | |
Weighted average exercise price, exercisable | $ 0.700 | |
Warrant Three | ||
Number of warrants | 882,158 | |
Weighted average remaining life (years) | 1 year 7 months 13 days | |
Weighted average exercise price, outstanding | $ 1 | |
Shares exercisable | 882,158 | |
Weighted average exercise price, exercisable | $ 1 | |
Warrant Four | ||
Number of warrants | 2,805,718 | |
Weighted average remaining life (years) | 4 years 14 days | |
Shares exercisable | 2,805,718 | |
Warrant Four | Minimum | ||
Weighted average exercise price, outstanding | $ 1.200 | |
Weighted average exercise price, exercisable | 1.200 | |
Warrant Four | Maximum | ||
Weighted average exercise price, outstanding | 1.500 | |
Weighted average exercise price, exercisable | $ 1.500 | |
Warrant Five | ||
Number of warrants | 20,000 | |
Weighted average remaining life (years) | 3 years 10 months 13 days | |
Shares exercisable | 20,000 | |
Warrant Five | Minimum | ||
Weighted average exercise price, outstanding | $ 2.340 | |
Weighted average exercise price, exercisable | 2.340 | |
Warrant Five | Maximum | ||
Weighted average exercise price, outstanding | 4.080 | |
Weighted average exercise price, exercisable | $ 4.080 |
12. EQUITY (Details 2)
12. EQUITY (Details 2) - $ / shares | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Number of warrants | 17,755,448 | 17,747,090 |
Weighted average remaining life (years) | 3 years | 3 years 5 months 8 days |
Weighted average exercise price | $ .460 | $ 0.455 |
Shares exercisable | 17,755,448 | 17,747,090 |
Weighted average exercise price | $ 0.455 | |
Warrant 1 | ||
Number of warrants | 13,417,286 | |
Weighted average remaining life (years) | 3 years 7 days | |
Weighted average exercise price | $ 0.250 | |
Shares exercisable | 13,417,286 | |
Weighted average exercise price | $ 0.250 | |
Warrant 2 | ||
Number of warrants | 714,286 | |
Weighted average remaining life (years) | 0 years | |
Weighted average exercise price | $ 0.700 | |
Shares exercisable | 714,286 | |
Weighted average exercise price | $ 0.700 | |
Warrant 3 | ||
Number of warrants | 882,159 | |
Weighted average remaining life (years) | 2 years 1 month 13 days | |
Weighted average exercise price | $ 1 | |
Shares exercisable | 882,159 | |
Weighted average exercise price | $ 1 | |
Warrant 4 | ||
Number of warrants | 2,713,359 | |
Weighted average remaining life (years) | 4 years 5 months 12 days | |
Shares exercisable | 2,713,359 | |
Warrant 4 | Minimum | ||
Weighted average exercise price | $ 1.200 | |
Weighted average exercise price | 1.200 | |
Warrant 4 | Maximum | ||
Weighted average exercise price | 1.500 | |
Weighted average exercise price | $ 1.500 | |
Warrant 5 | ||
Number of warrants | 20,000 | |
Weighted average remaining life (years) | 4 years 5 months 1 day | |
Shares exercisable | 20,000 | |
Warrant 5 | Minimum | ||
Weighted average exercise price | $ 2.340 | |
Weighted average exercise price | 2.340 | |
Warrant 5 | Maximum | ||
Weighted average exercise price | 4.080 | |
Weighted average exercise price | $ 4.080 |
12. EQUITY (Details 3)
12. EQUITY (Details 3) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Dividend yield | 0.00% | |
Expected life | 5 years | |
Expected volatility, minimum | 180.00% | |
Expected volatility, maximum | 182.00% | |
Risk free interest rate, minimum | 2.06% | |
Risk free interest rate, maximum | 2.52% | |
Warrants | ||
Dividend yield | 0.00% | |
Expected life | 5 years | |
Expected volatility, minimum | 176.00% | |
Expected volatility, maximum | 177.00% | |
Risk free interest rate, minimum | 1.51% | |
Risk free interest rate, maximum | 1.71% |
12. EQUITY (Details Narrative)
12. EQUITY (Details Narrative) | Mar. 31, 2020USD ($)shares |
Equity [Abstract] | |
Warrants vested | shares | 14,047,572 |
Intrinsic value | $ | $ 8,809,493 |
13. STOCK OPTIONS (Details)
13. STOCK OPTIONS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2019 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Shares: | ||||
Outstanding at beginning of period | 1,747,090 | 1,747,090 | 15,473,398 | |
Shares granted | 452,300 | 2,853,359 | ||
Shares exercised | 28,688 | 229,959 | 509,656 | |
Shares forfeitures | (213,983) | 0 | ||
Outstanding at end of period | 17,755,448 | 1,747,090 | 15,473,398 | |
Weighted Average Exercise Price: | ||||
Outstanding at beginning of period | $ 0.455 | $ 0.455 | $ 0.326 | |
Shares granted | 1.200 | 1.179 | ||
Shares exercised | .979 | 0.250 | ||
Shares forfeitures | 1.065 | 0 | ||
Outstanding at end of period | $ .460 | $ 0.455 | $ 0.326 | |
Aggregate Intrinsic Value | ||||
Outstanding at end of period | $ 8,809,493 | |||
Stock Options | ||||
Shares: | ||||
Outstanding at beginning of period | 4,532,668 | 4,532,668 | 2,182,668 | 15,404 |
Shares granted | 3,020,000 | 2,870,000 | 2,180,000 | |
Shares exercised | (73,191) | 0 | 0 | |
Shares forfeitures | (2,588,143) | (520,000) | (12,736) | |
Outstanding at end of period | 4,891,334 | 4,532,668 | 2,182,668 | |
Weighted Average Exercise Price: | ||||
Outstanding at beginning of period | $ 2.025 | $ 2.025 | $ 1.698 | $ 14.68 |
Shares granted | 1.125 | 2.615 | 1.683 | |
Shares exercised | (.250) | .000 | .000 | |
Shares forfeitures | (2.650) | (3.906) | 14.764 | |
Outstanding at end of period | $ 1.165 | $ 2.025 | $ 1.698 | |
Aggregate Intrinsic Value | ||||
Outstanding at beginning of period | $ 9,180,369 | $ 9,180,369 | $ 3,706,519 | $ 226,059 |
Shares granted | $ 3,397,600 | $ 7,504,850 | $ 3,668,500 | |
Shares exercised | $ (18,298) | $ 0 | $ 0 | |
Shares forfeitures | $ (6,859,712) | $ (2,031,000) | $ (188,040) | |
Outstanding at end of period | $ 5,699,959 | $ 9,180,369 | $ 3,706,519 |
13. STOCK OPTIONS (Details 1)
13. STOCK OPTIONS (Details 1) - $ / shares | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Number of outstanding stock options | 17,755,448 | 17,747,090 |
Weighted average remaining life (years) | 3 years | 3 years 5 months 8 days |
Weighted average exercise price exerciseable | $ .460 | $ 0.455 |
Number exercisable | 17,755,448 | 17,747,090 |
Stock Option 1 | ||
Range of exercise prices | $ .25 | |
Number of outstanding stock options | 230,000 | |
Weighted average remaining life (years) | 3 years 2 months 16 days | |
Weighted average exercise price exerciseable | $ .250 | |
Number exercisable | 100,625 | |
Weighted average exercise price exerciseable | $ .250 | |
Stock Option 2 | ||
Number of outstanding stock options | 2,940,000 | |
Weighted average remaining life (years) | 4 years 7 months 6 days | |
Weighted average exercise price exerciseable | $ 1.370 | |
Number exercisable | 233,854 | |
Weighted average exercise price exerciseable | $ 1.096 | |
Stock Option 2 | Minimum | ||
Range of exercise prices | 1.10 | |
Stock Option 2 | Maximum | ||
Range of exercise prices | $ 1.25 | |
Stock Option 3 | ||
Number of outstanding stock options | 1,610,000 | |
Weighted average remaining life (years) | 4 years 7 months 6 days | |
Weighted average exercise price exerciseable | $ 1.310 | |
Number exercisable | 498,438 | |
Weighted average exercise price exerciseable | $ 1.296 | |
Stock Option 3 | Minimum | ||
Range of exercise prices | 1.28 | |
Stock Option 3 | Maximum | ||
Range of exercise prices | $ 1.50 | |
Stock Option 4 | ||
Number of outstanding stock options | 110,000 | |
Weighted average remaining life (years) | 4 years 4 months 20 days | |
Weighted average exercise price exerciseable | $ 1.010 | |
Number exercisable | 40,000 | |
Weighted average exercise price exerciseable | $ 1.153 | |
Stock Option 4 | Minimum | ||
Range of exercise prices | 1.79 | |
Stock Option 4 | Maximum | ||
Range of exercise prices | $ 2.25 | |
Stock Option 5 | ||
Number of outstanding stock options | 1,334 | |
Weighted average remaining life (years) | 2 months 8 days | |
Weighted average exercise price exerciseable | $ 13.500 | |
Number exercisable | 1,334 | |
Weighted average exercise price exerciseable | $ 13.500 | |
Stock Option 5 | Minimum | ||
Range of exercise prices | 13.50 | |
Stock Option 5 | Maximum | ||
Range of exercise prices | $ 15 | |
Stock Options | ||
Number of outstanding stock options | 4,891,334 | |
Weighted average remaining life (years) | 4 years 2 months 8 days | |
Weighted average exercise price exerciseable | $ 1.165 | |
Number exercisable | 874,251 | |
Weighted average exercise price exerciseable | $ 1.212 |
13. STOCK INCENTIVE PLAN (Detai
13. STOCK INCENTIVE PLAN (Details 2) - $ / shares | 6 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2019 | |
Number of outstanding stock options | 17,755,448 | 17,747,090 |
Weighted average remaining life (years) | 3 years | 3 years 5 months 8 days |
Weighted average exercise price exerciseable | $ .460 | $ 0.455 |
Number exercisable | 17,755,448 | 17,747,090 |
Weighted average exercise price exerciseable | $ 0.455 | |
Stock Options | ||
Number of outstanding stock options | 4,532,668 | |
Weighted average remaining life (years) | 3 years 8 months 12 days | |
Weighted average exercise price exerciseable | $ 2.025 | |
Number exercisable | 559,042 | |
Weighted average exercise price exerciseable | $ 1.122 | |
$0.250 | ||
Number of outstanding stock options | 530,000 | |
Weighted average remaining life (years) | 6 months | |
Weighted average exercise price exerciseable | $ 0.250 | |
Number exercisable | 165,625 | |
Weighted average exercise price exerciseable | $ 0.250 | |
$1.28 - $1.50 | ||
Number of outstanding stock options | 1,860,000 | |
Weighted average remaining life (years) | 3 years 9 months 29 days | |
Weighted average exercise price exerciseable | $ 1.350 | |
Number exercisable | 360,000 | |
Weighted average exercise price exerciseable | $ 1.280 | |
$11.79 - $1.90 | ||
Number of outstanding stock options | 60,000 | |
Weighted average remaining life (years) | 4 years 6 months 22 days | |
Weighted average exercise price exerciseable | $ 1.850 | |
Number exercisable | 12,083 | |
Weighted average exercise price exerciseable | $ 1.840 | |
$3.03 - $4.20 | ||
Number of outstanding stock options | 2,080,000 | |
Weighted average remaining life (years) | 4 years 29 days | |
Weighted average exercise price exerciseable | $ 3.080 | |
Number exercisable | 20,000 | |
Weighted average exercise price exerciseable | $ 4.200 | |
$13.50 - $15.00 | ||
Number of outstanding stock options | 2,668 | |
Weighted average remaining life (years) | 6 months | |
Weighted average exercise price exerciseable | $ 14.250 | |
Number exercisable | 1,334 | |
Weighted average exercise price exerciseable | $ 13.500 |
13. STOCK OPTIONS (Details Narr
13. STOCK OPTIONS (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Options to purchase common stock under 2011 Stock Incentive Plan | 17,755,448 | 17,747,090 | ||
Average exercise price under 2011 Stock Incentive Plan | $ .460 | |||
Compensation expense | $ 565,726 | $ 263,145 | $ 1,141,674 | $ 50,899 |
Unrecognized compensation costs | $ 614,953 | |||
Period for recognition | 4 years 2 months 8 days | |||
Stock options granted | 230,000 | |||
Aggregate intrinsic value | $ 149,500 | |||
2011 Stock Incentive Plan | ||||
Options to purchase common stock under 2011 Stock Incentive Plan | 4,891,334 | 4,532,668 | ||
Average exercise price under 2011 Stock Incentive Plan | $ 2.025 |
14. OTHER SIGNIFICANT TRANSAC_2
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details narrative) - USD ($) | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Chief Executive Officer | |||
Accrued compensation, travel and interest | $ 613,525 | $ 487,932 | $ 657,551 |
16. INCOME TAXES (Details)
16. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||
U.S. operations loss carry forward at statutory rate of 21% | $ 6,737,300 | $ 6,142,138 |
Deferred tax assets related to timing differences - accruals | 192,897 | 0 |
Total | 6,930,197 | 6,142,138 |
Less valuation allowance | (6,930,197) | (6,142,138) |
Net deferred tax assets | 0 | 0 |
Change in valuation allowance | $ (788,059) | $ (337,853) |
16. INCOME TAXES (Details 1)
16. INCOME TAXES (Details 1) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [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% |
17. SEGMENT REPORTING (Details)
17. SEGMENT REPORTING (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenue | $ 4,546 | $ 593,712 | $ 121,939 | $ 1,195,921 | $ 1,804,960 | $ 4,303,296 | ||
Gross margin | 755 | 138,873 | 52,213 | 268,796 | 426,547 | 821,623 | ||
Segment net loss | (3,330,513) | $ (3,015,013) | (1,442,238) | $ (769,203) | (6,345,526) | (2,211,441) | (7,612,316) | (3,257,597) |
Segment assets | 1,228,172 | 3,944,000 | 1,228,172 | 3,944,000 | 2,639,633 | 2,102,948 | ||
Development of the Bio-RFID and ChromaID Technologies | ||||||||
Revenue | 0 | 0 | 0 | 0 | 0 | 0 | ||
Gross margin | 0 | 0 | 0 | 0 | 0 | 0 | ||
Segment net loss | (3,346,000) | (1,434,000) | (6,418,000) | (2,171,000) | (7,534,739) | (3,294,707) | ||
Segment assets | 1,224,000 | 3,565,000 | 1,224,000 | 3,565,000 | 2,882,194 | 1,311,134 | ||
TransTech Distribution Business | ||||||||
Revenue | 5,000 | 594,000 | 122,000 | 1,196,000 | 1,804,960 | 4,303,296 | ||
Gross margin | 1,000 | 139,000 | 52,000 | 269,000 | 426,547 | 821,623 | ||
Segment net loss | 15,000 | (8,000) | 72,000 | (40,000) | (77,577) | 37,110 | ||
Segment assets | $ 4,000 | $ 379,000 | $ 4,000 | $ 379,000 | $ 57,439 | $ 791,814 |