Cover
Cover - shares | 9 Months Ended | |
Jun. 30, 2023 | Aug. 14, 2023 | |
Cover [Abstract] | ||
Entity Registrant Name | KNOW LABS, INC. | |
Entity Central Index Key | 0001074828 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Jun. 30, 2023 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2023 | |
Entity Common Stock Shares Outstanding | 52,358,463 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 000-30262 | |
Entity Incorporation State Country Code | NV | |
Entity Tax Identification Number | 90-0273142 | |
Entity Address Address Line 1 | 500 Union Street | |
Entity Address Address Line 2 | Suite 810 | |
Entity Address City Or Town | Seattle | |
Entity Address State Or Province | WA | |
Entity Address Postal Zip Code | 98101 | |
City Area Code | 206 | |
Local Phone Number | 903-1351 | |
Security 12b Title | Common Stock, par value $0.001 per share | |
Trading Symbol | KNW | |
Security Exchange Name | NYSE | |
Entity Interactive Data Current | Yes | |
Entity Address Country | US |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 3,928,865 | $ 12,593,692 |
Total current assets | 3,928,865 | 12,593,692 |
PROPERTY AND EQUIPMENT, NET | 300,097 | 862,977 |
OTHER ASSETS | ||
Other assets | 15,766 | 13,767 |
Operating lease right of use asset | 191,769 | 287,930 |
TOTAL ASSETS | 4,436,497 | 13,758,366 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 526,688 | 526,968 |
Accrued expenses | 416,191 | 462,940 |
Accrued expenses - related parties | 320,427 | 348,264 |
Convertible notes payable, net | 2,255,066 | 2,255,066 |
Current portion of operating lease right of use liability | 202,712 | 215,397 |
Total current liabilities | 3,721,084 | 3,808,635 |
NON-CURRENT LIABILITIES: | ||
Operating lease right of use liability, net of current portion | 0 | 87,118 |
Total non-current liabilities | 0 | 87,118 |
COMMITMENTS AND CONTINGENCIES (Note 12) | 0 | 0 |
STOCKHOLDERS' EQUITY | ||
Common stock - $0.001 par value, 200,000,000 shares authorized, 52,358,463 and 48,156,062 shares issued and outstanding at 6/30/2023 and 9/30/2022, respectively | 52,358 | 48,158 |
Additional paid in capital | 119,375,700 | 111,209,388 |
Accumulated deficit | (118,715,450) | (101,397,738) |
Total stockholders' equity | 715,413 | 9,862,613 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 4,436,497 | 13,758,366 |
Series C Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | 1,790 | 1,790 |
Series D Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | $ 1,015 | $ 1,015 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2023 | Sep. 30, 2022 |
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 200,000,000 | 200,000,000 |
Common stock shares issued | 52,358,463 | 48,156,062 |
Common stock shares outstanding | 52,358,463 | 48,156,062 |
Convertible Preferred Stock Series C [Member] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 |
Convertible Preferred Stock Series D [Member] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,016,014 | 1,016,014 |
Preferred stock shares issued | 1,016,004 | 1,016,004 |
Preferred stock shares outstanding | 1,016,004 | 1,016,004 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||
REVENUE- DIGITAL ASSET SALES | $ 0 | $ 0 | $ 0 | $ 4,360,087 |
OPERATING EXPENSES- | ||||
RESEARCH AND DEVELOPMENT EXPENSES | 1,879,519 | 1,272,537 | 6,186,039 | 3,406,996 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 1,359,782 | 1,588,823 | 5,507,511 | 4,253,997 |
SELLING AND TRANSACTIONAL COSTS FOR DIGITAL ASSETS | 0 | 164,093 | 0 | 3,436,955 |
Total operating expenses | 3,239,301 | 3,025,453 | 11,693,550 | 11,097,948 |
OPERATING LOSS | (3,239,301) | (3,025,453) | (11,693,550) | (6,737,861) |
OTHER (EXPENSE): | ||||
Interest income (expense), net | (23,511) | (239,760) | (275,301) | (8,024,709) |
Other (expense) income | (384,137) | 261,927 | (384,137) | 261,927 |
Total other (expense), net | (360,626) | 22,167 | (659,438) | (7,762,782) |
LOSS BEFORE INCOME TAXES | (3,599,927) | (3,003,286) | (12,352,988) | (14,500,643) |
Income tax expense | 0 | 0 | 0 | 0 |
NET LOSS | (3,599,927) | (3,003,286) | (12,352,988) | (14,500,643) |
Common stock dividends on Series D Preferred Stock | (1,627,230) | 0 | (1,627,230) | 0 |
Deemed dividends on Series C and D Preferred Stock | (3,337,494) | 0 | (3,337,494) | 0 |
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (8,564,651) | $ (3,003,286) | $ (17,317,712) | $ (14,500,643) |
Basic and diluted loss per share | $ (0.18) | $ (0.07) | $ (0.36) | $ (0.37) |
Weighted average shares of common stock outstanding- basic and diluted | 48,928,911 | 43,760,904 | 48,604,274 | 39,032,860 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Total | Series C Convertibles Preferred Stock [Member] | Series D Convertible Preferred Stock [Member] | Common Stock [Member] | Additional Paid In Capital [Member] | Accumulated Deficit [Member] |
Balance, shares at Sep. 30, 2021 | 1,785,715 | 1,016,004 | 35,166,551 | |||
Balance, amount at Sep. 30, 2021 | $ 1,242,163 | $ 1,790 | $ 1,015 | $ 35,168 | $ 82,530,684 | $ (81,326,494) |
Stock compensation expense - employee options | 204,170 | 0 | 0 | $ 0 | 204,170 | 0 |
Issuance of common stock for exercise of warrants, shares | 801,486 | |||||
Issuance of common stock for exercise of warrants, amount | 766,486 | 0 | 0 | $ 801 | 765,685 | 0 |
Issuance of common stock for stock option exercises, shares | 1,875 | |||||
Issuance of common stock for stock option exercises, amount | 2,344 | 0 | 0 | $ 2 | 2,342 | 0 |
Net loss | (5,356,619) | $ 0 | $ 0 | $ 0 | 0 | (5,356,619) |
Balance, shares at Dec. 31, 2021 | 1,785,715 | 1,016,004 | 35,969,912 | |||
Balance, amount at Dec. 31, 2021 | (3,141,456) | $ 1,790 | $ 1,015 | $ 35,971 | 83,502,881 | (86,683,113) |
Balance, shares at Sep. 30, 2021 | 1,785,715 | 1,016,004 | 35,166,551 | |||
Balance, amount at Sep. 30, 2021 | 1,242,163 | $ 1,790 | $ 1,015 | $ 35,168 | 82,530,684 | (81,326,494) |
Net loss | (14,500,643) | |||||
Balance, shares at Jun. 30, 2022 | 1,785,715 | 1,016,004 | 43,802,147 | |||
Balance, amount at Jun. 30, 2022 | 4,919,268 | $ 1,790 | $ 1,015 | $ 43,803 | 100,699,797 | (95,827,137) |
Balance, shares at Dec. 31, 2021 | 1,785,715 | 1,016,004 | 35,969,912 | |||
Balance, amount at Dec. 31, 2021 | (3,141,456) | $ 1,790 | $ 1,015 | $ 35,971 | 83,502,881 | (86,683,113) |
Stock compensation expense - employee options | 432,481 | 0 | 0 | $ 0 | 432,481 | 0 |
Issuance of common stock for stock option exercises, shares | 5,000 | |||||
Issuance of common stock for stock option exercises, amount | 9,000 | 0 | 0 | $ 5 | 8,995 | 0 |
Net loss | (6,140,738) | 0 | 0 | $ 0 | 0 | (6,140,738) |
Conversion of debt offering and accrued interest (Note 7), shares | 7,672,860 | |||||
Conversion of debt offering and accrued interest (Note 7), amount | 15,345,720 | 0 | 0 | $ 7,673 | 15,338,047 | 0 |
Issuance of common stock for services, shares | 90,000 | |||||
Issuance of common stock for services, amount | 153,000 | 0 | 0 | $ 90 | 152,910 | 0 |
Issuance of warrant for services | 71,220 | $ 0 | $ 0 | $ 0 | 71,220 | 0 |
Balance, shares at Mar. 31, 2022 | 1,785,715 | 1,016,004 | 43,737,772 | |||
Balance, amount at Mar. 31, 2022 | 6,729,227 | $ 1,790 | $ 1,015 | $ 43,739 | 99,506,534 | (92,823,851) |
Stock compensation expense - employee options | 919,224 | 0 | 0 | $ 0 | 919,224 | 0 |
Issuance of common stock for exercise of warrants, shares | 62,500 | |||||
Issuance of common stock for exercise of warrants, amount | 27,500 | 0 | 0 | $ 62 | 27,438 | 0 |
Issuance of common stock for stock option exercises, shares | 1,875 | |||||
Issuance of common stock for stock option exercises, amount | 2,343 | 0 | 0 | $ 2 | 2,341 | 0 |
Net loss | (3,003,286) | 0 | 0 | 0 | 0 | (3,003,286) |
Modification of warrant-interest expense | 244,260 | $ 0 | $ 0 | $ 0 | 244,260 | 0 |
Balance, shares at Jun. 30, 2022 | 1,785,715 | 1,016,004 | 43,802,147 | |||
Balance, amount at Jun. 30, 2022 | 4,919,268 | $ 1,790 | $ 1,015 | $ 43,803 | 100,699,797 | (95,827,137) |
Balance, shares at Sep. 30, 2022 | 1,785,715 | 1,016,004 | 48,156,062 | |||
Balance, amount at Sep. 30, 2022 | 9,862,613 | $ 1,790 | $ 1,015 | $ 48,158 | 111,209,388 | (101,397,738) |
Stock compensation expense - employee options | 744,640 | 0 | 0 | $ 0 | 744,640 | 0 |
Issuance of common stock for exercise of warrants, shares | 50,000 | |||||
Issuance of common stock for exercise of warrants, amount | 12,500 | 0 | 0 | $ 50 | 12,450 | 0 |
Issuance of common stock for stock option exercises, shares | 1,875 | |||||
Issuance of common stock for stock option exercises, amount | 2,343 | 0 | 0 | $ 1 | 2,342 | 0 |
Net loss | (3,822,859) | 0 | 0 | 0 | 0 | (3,822,859) |
Expenses for extension of notes and warrants | 206,994 | $ 0 | $ 0 | $ 0 | 206,994 | 0 |
Balance, shares at Dec. 31, 2022 | 1,785,715 | 1,016,004 | 48,207,937 | |||
Balance, amount at Dec. 31, 2022 | 7,006,231 | $ 1,790 | $ 1,015 | $ 48,209 | 112,175,814 | (105,220,597) |
Balance, shares at Sep. 30, 2022 | 1,785,715 | 1,016,004 | 48,156,062 | |||
Balance, amount at Sep. 30, 2022 | 9,862,613 | $ 1,790 | $ 1,015 | $ 48,158 | 111,209,388 | (101,397,738) |
Net loss | (12,352,988) | |||||
Balance, shares at Jun. 30, 2023 | 1,785,715 | 1,016,004 | 52,358,463 | |||
Balance, amount at Jun. 30, 2023 | 715,413 | $ 1,790 | $ 1,015 | $ 52,358 | 119,375,700 | (118,715,450) |
Balance, shares at Dec. 31, 2022 | 1,785,715 | 1,016,004 | 48,207,937 | |||
Balance, amount at Dec. 31, 2022 | 7,006,231 | $ 1,790 | $ 1,015 | $ 48,209 | 112,175,814 | (105,220,597) |
Stock compensation expense - employee options | 1,182,547 | 0 | 0 | 0 | 1,182,547 | 0 |
Net loss | (4,930,202) | 0 | 0 | 0 | 0 | (4,930,202) |
Expenses for extension of notes and warrants | 142,727 | $ 0 | $ 0 | $ 0 | 142,727 | 0 |
Balance, shares at Mar. 31, 2023 | 1,785,715 | 1,016,004 | 48,207,937 | |||
Balance, amount at Mar. 31, 2023 | 3,401,303 | $ 1,790 | $ 1,015 | $ 48,209 | 113,501,088 | (110,150,799) |
Stock compensation expense - employee options | 536,858 | 0 | 0 | $ 0 | 536,858 | 0 |
Issuance of common stock for exercise of warrants, shares | 2,582,727 | |||||
Issuance of common stock for exercise of warrants, amount | 374,835 | 0 | 0 | $ 2,581 | 372,254 | 0 |
Issuance of common stock for stock option exercises, shares | 165,015 | |||||
Issuance of common stock for stock option exercises, amount | 2,344 | 0 | 0 | $ 165 | 2,179 | 0 |
Net loss | (3,599,927) | (3,599,927) | ||||
Common stock dividends on Series D Preferred Stock, shares | 1,402,784 | |||||
Common stock dividends on Series D Preferred Stock, amount | 0 | $ 1,403 | 1,625,827 | (1,627,230) | ||
Deemed dividends on Series C and D Preferred Stock | 0 | $ 0 | $ 0 | $ 0 | 3,337,494 | (3,337,494) |
Balance, shares at Jun. 30, 2023 | 1,785,715 | 1,016,004 | 52,358,463 | |||
Balance, amount at Jun. 30, 2023 | $ 715,413 | $ 1,790 | $ 1,015 | $ 52,358 | $ 119,375,700 | $ (118,715,450) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (12,352,988) | $ (14,500,643) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||
Depreciation and amortization | 259,541 | 218,683 |
Issuance of common stock for services | 0 | 153,000 |
Issuance of common stock warrants for services | 0 | 71,220 |
Loss on disposal of assets | 384,137 | 0 |
Modification of notes and warrants - interest expense | 349,721 | 244,260 |
Stock based compensation- stock option grants | 2,464,045 | 1,555,875 |
Right of use, net | (3,642) | (20,705) |
Gain on forgiveness of notes payable-PPP Loans | 0 | (252,700) |
Amortization of debt discount to interest expense | 0 | 7,272,911 |
Changes in operating assets and liabilities: | ||
Other long-term assets | (1,999) | 0 |
Accounts receivable-related party | 0 | (46,146) |
Accounts payable - trade and accrued expenses | (74,866) | 1,612,959 |
NET CASH (USED IN) OPERATING ACTIVITIES | (8,976,051) | (3,691,286) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (80,798) | (843,557) |
NET CASH (USED IN) INVESTING ACTIVITIES: | (80,798) | (843,557) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Settlement of notes payable-PPP loans | 0 | (179,103) |
Proceeds from issuance of common stock for stock options exercise | 4,687 | 13,687 |
Proceeds from issuance of common stock for warrant exercise | 387,335 | 793,986 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 392,022 | 628,570 |
NET (DECREASE) IN CASH AND CASH EQUIVALENTS | (8,664,827) | (3,906,273) |
CASH AND CASH EQUIVALENTS, beginning of period | 12,593,692 | 12,258,218 |
CASH AND CASH EQUIVALENTS, end of period | 3,928,865 | 8,351,945 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 0 | 0 |
Taxes paid | 0 | 0 |
Conversion of debt | 0 | 14,209,000 |
Conversion of accrued interest | 0 | 1,136,720 |
Common stock dividends on Series D Preferred Stock | 1,627,230 | 0 |
Deemed dividends on Series C and D Preferred Stock | $ 3,337,494 | $ 0 |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Jun. 30, 2023 | |
ORGANIZATION | |
ORGANISATION | 1. ORGANIZATION Know Labs, Inc. (the “Company”) was incorporated under the laws of the State of Nevada in 1998. The Company currently has authorized 205,000,000 shares of capital stock, of which 200,000,000 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. At the annual shareholder meeting held on October 15, 2021, the Company’s authorized shares of common stock was increased to 200,000,000 shares of voting common stock, par value $0.001 per share. The Company is focused on the development and commercialization of proprietary radio frequency sensor technology which is capable of uniquely identifying and measuring almost any material or analyte using electromagnetic energy to non-invasively detect, record, identify and measure the unique “signature” of said materials or analytes in the human body. The Company calls this its “Bio-RFID” technology platform. The data obtained with our sensor technology is analyzed with the Company’s trade secret algorithms. There are a significant number of analytes in the human body that relate to health and wellness. The Company’s focus is on those analytes relating to human health, the identification of which provide diagnostic information and require, by their nature, clearance by the United States Food and Drug Administration. The first among those analytes is the non-invasive monitoring of blood glucose levels. |
LIQUIDITY AND GOING CONCERN
LIQUIDITY AND GOING CONCERN | 9 Months Ended |
Jun. 30, 2023 | |
LIQUIDITY AND GOING CONCERN | |
LIQUIDITY AND GOING CONCERN | 2. LIQUIDITY AND GOING CONCERN The Company has cash and cash equivalents of $3,928,865 and net working capital of $715,213 ($2,970,479 exclusive of convertible notes payable) as of June 30, 2023. The Company anticipates that it will record losses from operations for the foreseeable future. During the end of the quarter ended March 31, 2023, the Company made some adjustments to its staffing level and the impact of those adjustments, plus the departure of our chief technology and executive office, has significantly reduced our monthly burn rate. The Company will further adjust its cost structure if new debt or equity capital is not received. The Company’s ability to transition profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. The Company believes that it has enough available cash and flexibility with its operating expenses to operate until at least December 31, 2023. Based on current operating levels, the Company will need to raise additional funds by selling additional equity or incurring debt. To date, the Company has funded its operations primarily through issuance of equity securities, and proceeds from the exercise of warrants to purchase common stock and the sale of debt instruments. Additionally, future capital requirements will depend on many factors, including the rate of revenue growth, the selling price of the Company’s products, the expansion of sales and marketing activities, the timing and extent of spending on research and development efforts and the continuing market acceptance of the Company’s products. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months from the date of this Report. Management of the Company intends to raise additional funds through the issuance of equity securities or debt. The Company is currently working on some capital fund raising transactions and while they expect to have something finalized by September 30, 2023, as of this date, there is no commitment. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives. As a result, the substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The proceeds of warrants currently outstanding, which could be exercised on a cash basis, may generate potential proceeds of up to $15,682,308. The Company expects that portions of these warrants will be exercised but there is no guarantee any portion will be exercised. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | 9 Months Ended |
Jun. 30, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | |
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | 3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Property and Equipment Long-Lived Assets Revenue Recognition · identification of the contract, or contracts, with the customer; · identification of the performance obligations in the contract; · determination of the transaction price; · allocation of the transaction price to the performance obligations in the contract; and · recognition of the revenue when, or as, the Company satisfies a performance obligation. Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. During the three months ended December 31, 2021, the Company generated revenue from digital asset sales of NFTs. The Company engineering team, using its research data, AI and proprietary algorithms, produced NFTs in the form of digital art. The NFTs produced had no recorded cost basis. The Company does not expect future activity or revenue from that source. Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving its radio frequency spectroscopy technology and its first focus on non-invasive monitoring of blood glucose levels; extending its capacity and developing new and unique applications for this technology. The Company believes that continued development of new and enhanced technologies is essential to its future success. The Company incurred expenses of $6,186,039 and $3,406,996 for the nine months ended June 30, 2023 and 2022, respectively, on development activities. Included in the expense for 2023 is approximately $859,000 related to severance and other expenses associated with the departure of the Company’s former chief technology officer and chief executive officer, Philip A. Bosua, and other employees. Advertising 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, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of June 30, 2023 and September 30, 2022 are based upon the short-term nature of the assets and liabilities. The fair value of the Company’s convertible notes payable are not readily available given the terms and conditions, including the conversion features, are complex. The Company has a money market account which is considered a Level 1 asset. The balance as of June 30, 2023 and September 30, 2022 was $3,678,865 and $11,821,931, respectively. No other assets or liabilities are required to be recorded at fair value on a recurring nature. Derivative Financial Instruments – The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of June 30, 2023 and September 30, 2022. Stock Based Compensation Convertible Securities Net Loss per Share As of June 30, 2023, the Company had 52,358,463 shares of common stock issued and outstanding. As of June 30, 2023, there were options outstanding for the purchase of 14,506,158 common shares (including unearned stock option grants totaling 3,869,825 shares related to performance targets), warrants for the purchase of 18,856,313 common shares, 8,108,356 shares of our common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock and approximately 2,920,000 of common shares reserved to pay Series C and D preferred stock dividends. In addition, the Company currently has 9,020,264 common shares at the current price of $0.25 per share reserved and are issuable upon conversion of convertible debentures of $2,255,066. All of the foregoing shares could potentially dilute future earnings per share but are excluded from the June 30, 2023, calculation of net loss per share because their impact is antidilutive. As of June 30, 2022, there were options outstanding for the purchase of 20,927,370 common shares (including unearned stock option grants totaling 11,550,745 shares related to performance targets), warrants for the purchase of 21,651,513 common shares, and 8,108,356 shares of our common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 9,020,264 common shares at the current price of $0.25 per share reserved and are issuable upon conversion of convertible debentures of $2,255,066. All of which could potentially dilute future earnings per share but are excluded from the June 30, 2022, calculation of net loss per share because their impact is antidilutive. Comprehensive loss Dividend Policy Use of Estimates Recent Accounting Pronouncements Based on the Company’s review of accounting standard updates recently issued, those standards not yet required to be adopted and proposed standards for the future, the Company does believe such items are expected to have a significant impact on the Company’s consolidated financial statements. |
NFT REVENUE
NFT REVENUE | 9 Months Ended |
Jun. 30, 2023 | |
NFT REVENUE | |
NFT REVENUE | 4. NFT REVENUE On September 17, 2021, the Company incorporated AI Mind, Inc. (“AI Mind”) in the State of Nevada. AI Mind was focused on monetizing intellectual property relating to the artificial intelligence utilized as a part of the data analytics performed with trade secret algorithms. Since incorporation, it focused on creating graphical images which were sold as Non Fungible Tokens (“NFTs”). During the year ended September 30, 2022, After the sale of the NFT, the Ethereum was converted to US dollars as soon as practically possible. The Company recorded the total value of the gross NFT sale in revenue. Costs incurred in connection with the NFT transaction were recorded in the statement of operations as selling and transactional cost of digital assets and include costs to outside consultants, estimated employee and former CEO special bonus compensation, digital asset conversion losses and estimated sales and use tax. The amount totaled $3,430,438 for the year ended September 30, 2022. As of June 30, 2023 and September 30, 2022, accrued expenses include $274,019 and $343,878 of expenses, respectively, primarily sales and use tax and other expenses. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Jun. 30, 2023 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 5. PROPERTY AND EQUIPMENT Property and equipment as of June 30, 2023 and September 30, 2022 was comprised of the following: Estimated Useful Lives June 30, 2023 September 30, 2022 Machinery and equipment 2-3 years $ 961,529 $ 1,510,265 Furniture and fixtures 5 years 26,855 26,855 Leasehold improvements 5 years 3,612 3,612 Less: accumulated depreciation (691,899 ) (677,755 ) $ 300,097 $ 862,977 Total depreciation expense was $259,541 and $218,683 for the nine months ended June 30, 2023 and 2022, respectively. Equipment is used primarily for research and development purposes and accordingly $246,563 and $207,440 in depreciation is classified in research and development expenses during the nine months ended June 30, 2023 and 2022, respectively. The Company retired assets with a net book value of $384,137 during the nine months ended June 30, 2023 related to the consolidation of leased offices. |
LEASES
LEASES | 9 Months Ended |
Jun. 30, 2023 | |
LEASES | |
LEASES | 6. LEASES The Company has entered into operating leases for office and development facilities which range from two to three years and include options to renew. The Company determines whether an arrangement is or contains a lease based upon the unique facts and circumstances at the inception of the lease. Operating lease liabilities and their corresponding right-of-use asses are recorded based upon the present value of the lease payments over the expected lease term. As of June 30, 2023 and September 30, 2022, total operating lease liabilities for remaining long term leases was approximately $163,000 and $302,000, respectively. Right of use assets totaled approximately $156,000 and $288,000 at June 30, 2023 and September 30, 2022, respectively. In the nine months ended June 30, 2023 and 2022, the Company recognized $203,000 and $131,000, respectively in total lease costs for the leases. Because the rate implicit in each lease is not readily determinable, the Company uses its estimated incremental borrowing rate to determine the present value of the lease payments. Recently the Company, as a result of certain headcount adjustments, has listed two of its leased premises as available for sublease. There can be no assurance such sublease will be successful or lead to a reduction in current on-going lease payments. The weighted average remaining lease term for the operating leases was 12 months at June 30, 2023 and the weighted average discount rate was 7%. The minimum future lease payments as of June 30, 2023 are as follows: Year Ended June 30, 2024- Total remaining payments $ 204,534 Less imputed interest (1,822 ) Total lease liability $ 202,712 |
CONVERTIBLE NOTES PAYABLE AND N
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | 9 Months Ended |
Jun. 30, 2023 | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | 7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE Convertible notes payable as of June 30, 2023 and September 30, 2022 consisted of the following: Convertible Promissory Notes with Clayton A. Struve The Company owes Clayton A. Struve, a significant stockholder, $1,071,000 under convertible promissory or OID notes. We recorded accrued interest of $92,171 and $86,562 as of June 30, 2023 and September 30, 2022, respectively. On December 7, 2022, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2023. The Company expensed $155,702 as interest during the nine months ended June 30, 2023 related to the extension of the notes. The Company recorded in equity the incremental value related to the conversion feature and as such, the Company recorded the extension value as an expense with an offset to additional paid in capital. Convertible Redeemable Promissory Notes with 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 Company recorded accrued interest of $320,427 and $287,290 as of June 30, 2023 and September 30, 2022, respectively. On December 7, 2022, the Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to January 30, 2023. On January 25, 2023, the Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to September 30, 2023. Mr. Erickson controls J3JE2A2Z. Convertible Debt Offering Beginning in 2019, the Company entered into a series of debt offerings with similar and consistent terms. The Company issued 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. As of September 30, 2022, all convertible notes and accrued interest had been converted to common stock. During the year ended September 30, 2022, amortization related to the debt offerings of $7,272,911 was recognized as interest expense in the consolidated statements of operations. Convertible notes payable as of June 30, 2023 and September 30, 2022 are summarized below: June 30, 2023 September 30, 2022 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson and affiliates 1,184,066 1,184,066 2021 Convertible notes - 14,209,000 Less conversions of notes - (14,209,000 ) $ 2,255,066 $ 2,255,066 |
EQUITY
EQUITY | 9 Months Ended |
Jun. 30, 2023 | |
EQUITY | |
EQUITY | 8. EQUITY Authorized Capital Stock The Company’s authorized capital stock currently consists of 205,000,000 shares, consisting of 200,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which 1,785,715 shares have been designated as series C convertible preferred stock, 1,016,014 shares have been designated as series D convertible preferred stock, and 500 shares have been designated as series F preferred stock. Securities Subject to Price Adjustments If in the future, the Company sells its common stock at a price below $0.25 per share, the conversion price of our outstanding shares of series C convertible preferred stock and series D convertible preferred stock would adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of the convertible promissory notes referred to above and the exercise price of certain outstanding warrants to purchase 7,684,381 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. Warrants totaling 4,439,707 would adjust below $1.20 per share and warrants totaling 4,424,425 would adjust below $2.40 per share, in each case pursuant to the documents governing such instruments. Series C and D Preferred Stock, Warrants and Dividends 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 cumulative dividend of 8% and an ownership blocker of 4.99%. Dividends are due and payable in cash when declared by the Company or when the stock is converted. Series C Preferred stock is senior to Series D Preferred stock and is entitled to receive equal dividends paid to Series D. 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 and warrant and its conversion price, were adjusted to $0.25 per share pursuant to the documents governing such instruments. As of June 30, 2023, Mr. Struve owns all of the 1,785,715 issued and outstanding shares of Series C Preferred Stock. Each holder of Preferred Series C is allowed to vote as a common shareholder as if the shares were converted to common stock up to the ownership blocker of 4.99%. In 2017 the Company closed a $750,000 Series D Preferred Stock and Warrant offering with Mr. Struve. As of June 30, 2023, Mr. Struve owns all of the 1,016,004 issued and outstanding shares of Series D Preferred Stock. Each outstanding share of series D preferred stock will accrue cumulative cash dividends at a rate equal to 8.0% per annum, subject to adjustment as provided in the series D preferred stock certificate of designations. Dividends are due and payable in cash when declared by the Company or when the stock is converted. In addition, On August 14, 2017, the price of the Series D Preferred Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. Each holder of Preferred Series D is allowed to vote as a common shareholder as if the shares were converted to common stock up to the ownership blocker of 4.99%. In August, 2023, as part of a modification of the Series C and Series D Preferred certificates of designation, such preferred stock does not accrue or pay cash dividends. All future dividends will be accrued and paid in Series C or Series D stock, as applicable. As was the case prior to the modifications of the Series C and Series D preferred stock, although accrual of dividends is required as described below, no dividends are actually paid, and no shares actually issued, until a conversion of such stock or declaration of the dividend by the Board of Directors. Additionally the Series D Preferred stock will no longer be required to automatically convert to common stock based on listing of the Company’s common stock on the NYSE American, except if the volume weighted average price of the common stock is at least $2.50 per share for 20 trading days and certain other requirements are satisfied. The cumulative dividends accrued and paid in preferred stock will be determined based upon a $.70 stated value. The conversion from preferred stock into common stock is determined based dividing the $.70 stated value by the $.25 conversion price. In June, 2023, as part of the anticipated modification of the certificates of designation of the Series C and Series D preferred stock, at Mr. Struve’s request, the Company settled all cash dividends with respect to the Series D preferred stock accrued and accumulated through December 31, 2022 in exchange for the issuance to Mr. Struve of 1,402,784 shares of the Company’s common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. In connection with this transaction, the Company recorded $1,627,230 in dividends, representing the fair market value of the 1,402,784 shares issued. Based upon the modified terms and conditions of Series C and D certificates of designations, it was determined that Series C and D preferred dividends need to be accreted going forward. As of June 30, 2023, cumulative unpaid Series C and D dividends totaled approximately $730,000, which on a converted-to-common-stock basis represents approximately 2,920,000 shares of common stock. The value of the 2.9 million shares of common totaled $3,337,494. The Company recorded $3,337,494 in cumulative deemed dividends related to Series C and D Preferred Stock which have not been paid, net of the approximately $351,000 of accumulated dividends with respect to the Series D preferred that were settled for 1,402,784 shares of common stock as noted above. Mr. Struve is subject to an ownership blocker limiting his ownership to 4.99% and thus the amount of common shares he can receive for dividends. Unpaid accreted stock dividends will be issued to Mr. Struve if he converts preferred stock or if the Board declares a dividend thereon, limited to his 4.99% ownership blocker. Assuming no changes in the amount of outstanding Preferred Series C or D ownership, going forward on a quarterly basis the Company will accrete as a preferred dividend the value of approximately 160,000 shares of common stock, which are issuable if such dividends become payable as additional shares of preferred stock, and such preferred stock is then converted into common stock. Common Stock 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. Nine Months Ended June 30, 2023 The Company issued 2,632,727 shares of common stock related to warrant exercises and received $387,335. On June 27, 2023, at Mr. Struve’s request, the Company settled all cash dividends with respect to the Series D preferred stock accrued and accumulated through December 31, 2022 in exchange for the issuance to Mr. Struve of 1,402,784 shares of the Company’s common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The Company issued 3,750 shares related to the exercise of stock option grants and received $4,687. Warrants to Purchase Common Stock Nine Months Ended June 30, 2023 On December 7, 2022, the Company signed an Extension of Warrant Agreement with Clayton Struve, extending the exercise dates as follows: Warrant No./Class Issue Date No. Warrant Shares Exercise Price Current Expiration Date Amended Expiration Date Clayton A. Struve Warrant 08-14-2017 1,440,000 $ 0.25 08-13-2024 08-13-2025 Clayton A. Struve Warrant 12-12-2017 1,200,000 $ 0.25 12-11-2024 12-11-2025 Clayton A. Struve Warrant 08-04-2016 1,785,715 $ 0.25 08-04-2024 08-04-2025 Clayton A. Struve Warrant 02-28-2018 1,344,000 $ 0.25 02-28-2024 02-28-2025 The Company recorded interest expense of $194,019 during the nine months ended June 30, 2023 related to the extension of the warrants. The Company recorded the original value of warrants in equity and as such, the Company recorded the extension value as an expense with an offset to additional paid in capital. On January 19, 2023, the Company signed an Extension of Warrant Agreements with Ronald P. Erickson and an entity controlled by Mr. Erickson, extending the exercise dates from January 30, 2023 to January 30, 2024. The Company issued 2,632,727 shares of common stock related to warrant exercises and received $387,335. Warrants to purchase 297,273 shares of common stock at $0.250 per share expired. A summary of the warrants outstanding as of June 30, 2023 were as follows: June 30, 2023 Weighted Average Exercise Shares Price Outstanding October 1, 2022 21,786,313 $ 1.029 Issued - - Exercised (2,632,727 ) (0.250 ) Forfeited (297,273 ) (0.250 ) Expired - - Outstanding at end of period 18,856,313 $ 1.150 Exercisable at end of period 18,856,313 The following table summarizes information about warrants outstanding and exercisable as of June 30, 2023: June 30, 2023 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 7,639,381 1.70 $ 0.250 7,639,381 $ 0.250 6,512,207 1.62 1.20-1.85 6,512,207 1.20-1.85 4,694,725 2.86 2.00-3.00 4,694,725 2.00-3.00 10,000 0.68 4.080 10,000 4.080 18,856,313 2.27 $ 1.150 18,856,313 $ 1.150 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the nine months ended June 30, 2023 were as follows: Dividend yield 0 % Expected life 3-5 years Expected volatility 104 % Risk free interest rate 2.96 % There were vested warrants of 18,856,313 with an aggregate intrinsic value of $6,569,868. |
STOCK INCENTIVE PLANS
STOCK INCENTIVE PLANS | 9 Months Ended |
Jun. 30, 2023 | |
STOCK INCENTIVE PLANS | |
STOCK INCENTIVE PLANS | 9. STOCK INCENTIVE PLANS On August 12, 2021, the Company established its 2021 Equity Incentive Plan (the “2021 Plan”), which was adopted by stockholders on October 15, 2021. The Company initially had 20,000,000 shares of its common stock authorized as the maximum number of shares of common stock that may be delivered to participants under the 2021 Plan, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. This number was increased to 22,000,000 shares of common stock as of January 1, 2022 as a result of the automatic share reserve increase described below. Nine Months Ended June 30, 2023 During the nine months ended June 30, 2023, the Company issued stock option grants to eighteen employees and consultants for 4,158,333 shares at an average exercise price of $1.381 per share. The stock option grants expire in five years. The stock option grants primarily vest quarterly over two to four years. During the nine months ended June 30, 2023, stock option grants for 10,277,655 shares at an average exercise price of $1.647 per share were forfeited. During the nine months ended June 30, 2023, stock option grants for 166,890 shares at an average exercise price of $0.272 per share were exercised. Stock option activity for the nine months ended June 30, 2023 and the years ended September 30, 2022 and 2021 was as follows: Weighted Average Options Exercise Price Proceed $ Outstanding October 1, 2020 4,805,000 $ 1.161 $ 5,580,550 Granted 10,650,745 1.766 18,807,990 Exercised (20,625 ) (1.359 ) (28,031 ) Forfeitures (120,000 ) (3.300 ) (396,000 ) Outstanding October 1, 2021 15,315,120 1.565 23,964,509 Granted 6,636,000 1.815 12,045,330 Exercised (26,293 ) (1.376 ) (36,170 ) Forfeitures (1,132,457 ) (2.057 ) (2,329,267 ) Outstanding October 1, 2022 20,792,370 1.618 33,644,402 Granted 4,158,333 1.381 5,744,716 Exercised (166,890 ) (0.272 ) (45,473 ) Forfeitures (10,277,655 ) (1.647 ) (16,923,131 ) Outstanding June 30, 2023 14,506,158 $ 1.546 22,420,514 The following table summarizes information about stock options outstanding and exercisable as of June 30, 2023: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exercisable Exercisable $0.88-1.25 2,161,875 3.16 0.941 1,857,891 $ 1.131 1.28-1.67 9,754,283 3.25 1.398 2,609,458 1.589 1.79-3.67 2,590,000 3.30 2.173 1,106,563 2.041 14,506,158 3.25 $ 1.546 5,573,912 $ 1.400 There are stock option grants of 14,506,158 shares as of June 30, 2023 with an aggregate intrinsic value of $364,605. There are 14,506,158 (including unearned stock option grants totaling 3,869,825 shares related to performance milestones) options to purchase common stock at an average exercise price of $1.546 per share outstanding as of June 30, 2023 under the 2021 Plan. The Company recorded $2,464,045 and $1,555,875 of compensation expense, net of related tax effects, relative to stock options for the nine months ended June 30, 2023 and 2022, respectively, in accordance with ASC 718. As of June 30, 2023, there is $5,454,046 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 3.25 years. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Jun. 30, 2023 | |
INCOME TAXES | |
INCOME TAXES | 10. INCOME TAXES The Company recorded a provision for income taxes of $0 for the three and nine months ended June 30, 2023 and 2022. The Company’s effective tax rate was 0.0% for the three and nine month period ended June 30, 2023 and 2022. The difference between the effective tax rate and the federal statutory tax rate primarily relates to the valuation allowance on the Company’s deferred tax assets. For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes. The Company also computes the tax provision or benefit related to items reported separately and recognizes the items net of their related tax effect in the interim periods in which they occur. The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur. As of June 30, 2023 and September 30, 2022, the Company retains a full valuation allowance on its deferred tax assets. The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods. The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income. |
SIGNIFICANT AND OTHER TRANSACTI
SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES | 9 Months Ended |
Jun. 30, 2023 | |
SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES | |
SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES | 11. SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES Transactions with Clayton Struve See Notes 7 and 8 for related party transactions with Clayton A. Struve, a significant stockholder. On June 27, 2023, at Mr. Struve’s request, the Company settled all cash dividends with respect to the Series D preferred stock accrued and accumulated through December 31, 2022 in exchange for the issuance to Mr. Struve of 1,402,784 shares of the Company’s common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. In connection with this transaction, the Company recorded $1,627,230 in dividends, representing the fair market value of the 1,402,784 shares issued. Related Party Transactions with Ronald P. Erickson See Notes 7, 8 and 12 for related party transactions with Ronald P. Erickson, the Company’s Chairman and Chief Executive Officer and affiliated entities. On December 14, 2022, the Company issued a stock option grant to Ronald P. Erickson for 1,000,000 shares at an exercise price of $1.41 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years. Related Party Transactions with Directors On February 15, 2023, the Company issued stock option grants to two directors for a total of 50,000 shares at an exercise price of $1.24 per share. The stock option grant expires in five years. The stock option grants vested at issuance. |
COMMITMENTS, CONTINGENCIES AND
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 9 Months Ended |
Jun. 30, 2023 | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 12. 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 business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to the Company’s business. Employment and Related Agreements Separation and Release Agreement with Phillip A. Bosua, Former Chief Technology Officer and Chief Executive Officer On January 23, 2023, Mr. Bosua resigned from the Board and from his position as Chief Executive Officer of the Company. In connection with his resignation, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Mr. Bosua containing customary terms and mutual releases, pursuant to which Mr. Bosua is entitled receive a $400,000 severance payment and benefits pursuant to his prior employment agreement. Pursuant to the Separation Agreement, Mr. Bosua’s outstanding stock options ceased vesting as of January 23, 2023, and all vested stock options remain exercisable through January 23, 2024. Mr. Bosua has been engaged as a consultant to the Company for a period of one year at a rate of $10,000 per month. Mr. Bosua also entered into a lock up and leak out agreement with respect to 3,005,000 common shares owned by Mr. Bosua and shares issuable upon exercise of his vested option awards. During the period commencing March 17, 2023 through March 17, 2024, Mr. Bosua may sell no more than 1,500,000 shares. During the period commencing April 1, 2024 through June 30, 2026, Mr. Bosua may sell no more than 375,000 shares per quarter (or 1,500,000 shares per year), unless the stock price of the Company’s common stock exceeds $5.00 per share on the NYSE American (the “Stock Price Threshold”), then Mr. Bosua may sell a maximum of 750,000 shares during any such quarter that the Stock Price Threshold is met. Notwithstanding the foregoing, any lock-up or leak-out restrictions are waived for any sales of shares from Mr. Bosua to Todd Baszucki. During the nine months ended June 30, 2023, the Company paid severance of $400,000, employee taxes of $14,027 and server costs of $44,000. During the nine months ended June 30, 2023, the Company expensed $421,782 related to the extension of the vested stock option awards. Employment Agreement with Ronald P. Erickson, Chairman of the Board and Chief Executive Officer See the Employment Agreement for Ronald P. Erickson that was disclosed in Form 10-K filed with the SEC on December 22, 2022. Mr. Erickson was appointed Chief Executive Officer on January 23, 2023. Employment Agreement with Peter J. Conley, Chief Financial Officer and Senior Vice President, Intellectual Property See the Employment Agreement for Peter J. Conley that was disclosed in Form 10-K filed with the SEC on December 22, 2022. Properties and Operating Leases The Company is obligated under the following leases for its various facilities. Corporate and Executive 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 current net monthly payment is $3,334. The monthly payment increases approximately 3% each year and the lease expired on May 31, 2022. On October 31, 2021, the Company extended the lease from June 1, 2022 to May 31, 2023 at $2,986 per month. On April 26, 2023, the Company extended the lease from June 1, 2023 to May 31, 2024 at $2,908. Lab Facilities On May 18, 2021, the Company entered into a lease for its lab facilities located at 914 E Pine Street, Suite 212, Seattle, WA 98122 and leased 2,642 square feet. The net monthly lease payment was $8,697 and increases by 3% annually. The lease expires on June 30, 2024. The lease can be extended for one additional three-year term. On October 11, 2021, the Company entered into the First Amendment of Lease and added 2,485 square feet for $5,000 per month. On September 20, 2022, the Company entered into the Second Amendment of Lease for additional space. The expanded space will be utilized for research and testing. The Amendment of Lease expires on December 31, 2023. On September 22, 2022, the Company leased lab facilities and executive offices in Yucca Valley, CA from Phillip Bosua, the Company’s former CEO. The Company leased 1,700 square feet of the total 2,134 square feet of the premises and the current net monthly payment is $7,000. The lease was to expire September 30, 2023 and could be extended on a month to month basis. The Company paid $91,500 in rent on September 28, 2022 for the period September 1, 2021 to September 30, 2022. The Company paid $28,000 for the nine months ended June 30, 2023. The lease was terminated on January 23, 2023, the date of Mr. Bosua’s resignation from the Company. On November 22, 2022, the Company leased an additional 1,800 square feet of lab facilities at 123 Boylston Ave, Suite C, Seattle, WA 98102 with a net monthly payment is $2,250. The lease expires on August 31, 2023. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Jun. 30, 2023 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | 13. SEGMENT REPORTING The Company considers the business to currently have one operating segment; the development of its radio frequency spectroscopy technology with a first focus on non-invasively ascertaining blood glucose levels. Previously, two subsidiary segments were active; (i) Particle, Inc. technology; and (ii) AI Mind sales of NFT products. On April 30, 2020, the Company incorporated Particle, Inc. in the State of Nevada. Particle was focused on the development and commercialization of the Company’s extensive intellectual property relating to electromagnetic energy outside of the medical diagnostic arena which remains the parent company’s singular focus. Since incorporation, Particle has engaged in research and development activities on threaded light bulbs that have a warm white light and can inactivate germs, including bacteria and viruses. It is seeking partners to take the product to market. AI Mind commenced operations during the year ended September 30, 2021. The Company was dissolved on July 25, 2023. The reporting for the three months and nine months ended June 30, 2023 and 2022 was as follows (in thousands): Segment Operating Segment Segment Revenue Profit (Loss) Assets Three Months Ended June 30, 2023 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ 3,239 $ 4,436 Particle, Inc. technology - - - Digital asset sales - - - Total segments $ - $ 3,239 $ 4,436 Three Months Ended June 30, 2022 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (2,838 ) $ 7,522 Particle, Inc. technology - (23 ) - Digital asset sales - (164 ) 2,105 Total segments $ - $ (3,025 ) $ 9,627 Nine Months Ended June 30, 2023 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (11,694 ) $ 4,436 Particle, Inc. technology - - - Digital asset sales - - - Total segments $ - $ (11,694 ) $ 4,436 Nine Months Ended June 30, 2022 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (7,617 ) $ 7,522 Particle, Inc. technology - (45 ) - Digital asset sales 4,360 923 2,105 Total segments $ 4,360 $ (6,739 ) $ 9,627 During the nine months ended June 30, 2023 and 2022, the Company incurred non-cash expenses related to operations of $3,453,802 and $9,242,544, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Jun. 30, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 14. 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 June 30, 2023, there were the following material transactions that require disclosure: AI Mind was dissolved on July 25, 2023. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS (Policies) | 9 Months Ended |
Jun. 30, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | |
Basis of Presentation | Basis of Presentation |
Principles of Consolidation | Principles of Consolidation |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Property and Equipment | Property and Equipment |
Long-Lived Assets | Long-Lived Assets |
Revenue Recognition | Revenue Recognition · identification of the contract, or contracts, with the customer; · identification of the performance obligations in the contract; · determination of the transaction price; · allocation of the transaction price to the performance obligations in the contract; and · recognition of the revenue when, or as, the Company satisfies a performance obligation. Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. During the three months ended December 31, 2021, the Company generated revenue from digital asset sales of NFTs. The Company engineering team, using its research data, AI and proprietary algorithms, produced NFTs in the form of digital art. The NFTs produced had no recorded cost basis. The Company does not expect future activity or revenue from that source. |
Research and Development Expenses | Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving its radio frequency spectroscopy technology and its first focus on non-invasive monitoring of blood glucose levels; extending its capacity and developing new and unique applications for this technology. The Company believes that continued development of new and enhanced technologies is essential to its future success. The Company incurred expenses of $6,186,039 and $3,406,996 for the nine months ended June 30, 2023 and 2022, respectively, on development activities. Included in the expense for 2023 is approximately $859,000 related to severance and other expenses associated with the departure of the Company’s former chief technology officer and chief executive officer, Philip A. Bosua, and other employees. |
Advertising | Advertising |
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, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of June 30, 2023 and September 30, 2022 are based upon the short-term nature of the assets and liabilities. The fair value of the Company’s convertible notes payable are not readily available given the terms and conditions, including the conversion features, are complex. The Company has a money market account which is considered a Level 1 asset. The balance as of June 30, 2023 and September 30, 2022 was $3,678,865 and $11,821,931, respectively. No other assets or liabilities are required to be recorded at fair value on a recurring nature. |
Derivative Financial Instruments | Derivative Financial Instruments – The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of June 30, 2023 and September 30, 2022. |
Stock Based Compensation | Stock Based Compensation |
Convertible Securities | Convertible Securities |
Net Loss per Share | Net Loss per Share As of June 30, 2023, the Company had 52,358,463 shares of common stock issued and outstanding. As of June 30, 2023, there were options outstanding for the purchase of 14,506,158 common shares (including unearned stock option grants totaling 3,869,825 shares related to performance targets), warrants for the purchase of 18,856,313 common shares, 8,108,356 shares of our common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock and approximately 2,920,000 of common shares reserved to pay Series C and D preferred stock dividends. In addition, the Company currently has 9,020,264 common shares at the current price of $0.25 per share reserved and are issuable upon conversion of convertible debentures of $2,255,066. All of the foregoing shares could potentially dilute future earnings per share but are excluded from the June 30, 2023, calculation of net loss per share because their impact is antidilutive. As of June 30, 2022, there were options outstanding for the purchase of 20,927,370 common shares (including unearned stock option grants totaling 11,550,745 shares related to performance targets), warrants for the purchase of 21,651,513 common shares, and 8,108,356 shares of our common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 9,020,264 common shares at the current price of $0.25 per share reserved and are issuable upon conversion of convertible debentures of $2,255,066. All of which could potentially dilute future earnings per share but are excluded from the June 30, 2022, calculation of net loss per share because their impact is antidilutive. |
Comprehensive Loss | Comprehensive loss |
Dividend Policy | Dividend Policy |
Use of Estimates | Use of Estimates |
Recent Accounting Pronouncements | Based on the Company’s review of accounting standard updates recently issued, those standards not yet required to be adopted and proposed standards for the future, the Company does believe such items are expected to have a significant impact on the Company’s consolidated financial statements. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
PROPERTY AND EQUIPMENT | |
Schedule of Property and equipment | Estimated Useful Lives June 30, 2023 September 30, 2022 Machinery and equipment 2-3 years $ 961,529 $ 1,510,265 Furniture and fixtures 5 years 26,855 26,855 Leasehold improvements 5 years 3,612 3,612 Less: accumulated depreciation (691,899 ) (677,755 ) $ 300,097 $ 862,977 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
LEASES | |
Summary of minimum future lease payments | Year Ended June 30, 2024- Total remaining payments $ 204,534 Less imputed interest (1,822 ) Total lease liability $ 202,712 |
CONVERTIBLE NOTES PAYABLE AND_2
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | |
Schedule of convertible notes payable | June 30, 2023 September 30, 2022 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson and affiliates 1,184,066 1,184,066 2021 Convertible notes - 14,209,000 Less conversions of notes - (14,209,000 ) $ 2,255,066 $ 2,255,066 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
EQUITY | |
Schedule of Warrant activity | Warrant No./Class Issue Date No. Warrant Shares Exercise Price Current Expiration Date Amended Expiration Date Clayton A. Struve Warrant 08-14-2017 1,440,000 $ 0.25 08-13-2024 08-13-2025 Clayton A. Struve Warrant 12-12-2017 1,200,000 $ 0.25 12-11-2024 12-11-2025 Clayton A. Struve Warrant 08-04-2016 1,785,715 $ 0.25 08-04-2024 08-04-2025 Clayton A. Struve Warrant 02-28-2018 1,344,000 $ 0.25 02-28-2024 02-28-2025 |
Schedule of Warrants outstanding and exercisable | June 30, 2023 Weighted Average Exercise Shares Price Outstanding October 1, 2022 21,786,313 $ 1.029 Issued - - Exercised (2,632,727 ) (0.250 ) Forfeited (297,273 ) (0.250 ) Expired - - Outstanding at end of period 18,856,313 $ 1.150 Exercisable at end of period 18,856,313 June 30, 2023 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 7,639,381 1.70 $ 0.250 7,639,381 $ 0.250 6,512,207 1.62 1.20-1.85 6,512,207 1.20-1.85 4,694,725 2.86 2.00-3.00 4,694,725 2.00-3.00 10,000 0.68 4.080 10,000 4.080 18,856,313 2.27 $ 1.150 18,856,313 $ 1.150 |
Schedule of weighted average assumptions | Dividend yield 0 % Expected life 3-5 years Expected volatility 104 % Risk free interest rate 2.96 % |
STOCK INCENTIVE PLANS (Tables)
STOCK INCENTIVE PLANS (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
STOCK INCENTIVE PLANS | |
Schedule of Stock option activity | Weighted Average Options Exercise Price Proceed $ Outstanding October 1, 2020 4,805,000 $ 1.161 $ 5,580,550 Granted 10,650,745 1.766 18,807,990 Exercised (20,625 ) (1.359 ) (28,031 ) Forfeitures (120,000 ) (3.300 ) (396,000 ) Outstanding October 1, 2021 15,315,120 1.565 23,964,509 Granted 6,636,000 1.815 12,045,330 Exercised (26,293 ) (1.376 ) (36,170 ) Forfeitures (1,132,457 ) (2.057 ) (2,329,267 ) Outstanding October 1, 2022 20,792,370 1.618 33,644,402 Granted 4,158,333 1.381 5,744,716 Exercised (166,890 ) (0.272 ) (45,473 ) Forfeitures (10,277,655 ) (1.647 ) (16,923,131 ) Outstanding June 30, 2023 14,506,158 $ 1.546 22,420,514 |
Schedule of 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 $0.88-1.25 2,161,875 3.16 0.941 1,857,891 $ 1.131 1.28-1.67 9,754,283 3.25 1.398 2,609,458 1.589 1.79-3.67 2,590,000 3.30 2.173 1,106,563 2.041 14,506,158 3.25 $ 1.546 5,573,912 $ 1.400 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
SEGMENT REPORTING | |
Schedule of Segment reporting | Segment Operating Segment Segment Revenue Profit (Loss) Assets Three Months Ended June 30, 2023 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ 3,239 $ 4,436 Particle, Inc. technology - - - Digital asset sales - - - Total segments $ - $ 3,239 $ 4,436 Three Months Ended June 30, 2022 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (2,838 ) $ 7,522 Particle, Inc. technology - (23 ) - Digital asset sales - (164 ) 2,105 Total segments $ - $ (3,025 ) $ 9,627 Nine Months Ended June 30, 2023 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (11,694 ) $ 4,436 Particle, Inc. technology - - - Digital asset sales - - - Total segments $ - $ (11,694 ) $ 4,436 Nine Months Ended June 30, 2022 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (7,617 ) $ 7,522 Particle, Inc. technology - (45 ) - Digital asset sales 4,360 923 2,105 Total segments $ 4,360 $ (6,739 ) $ 9,627 |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - $ / shares | Jun. 30, 2023 | Sep. 30, 2022 | Oct. 15, 2021 |
ORGANIZATION | |||
Authorized shares of capital common stock | 200,000,000 | ||
Authorized shares of capital stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 | |
Preferred stock share par value | $ 0.001 | $ 0.001 | |
Authorized common stock increased | 200,000,000 |
LIQUIDITY AND GOING CONCERN (De
LIQUIDITY AND GOING CONCERN (Details Narrative) | 9 Months Ended |
Jun. 30, 2023 USD ($) $ / shares | |
Cash and cash equivalents | $ 3,928,865 |
Net proceed from deducting issue stock | 15,682,308 |
Net working capital | 715,213 |
Convertible notes payable | $ 2,970,479 |
31 December,2023 [Member] | |
Offering price | $ / shares | $ 2 |
Gross proceed from public issue stock | $ 8,280,000 |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | |
FDIC insurance | $ 250,000 | $ 250,000 | |||
Severance and other expenses | 859,000 | ||||
Convertible debentures | 2,255,066 | ||||
Research and development expense | 1,879,519 | $ 1,272,537 | 6,186,039 | $ 3,406,996 | |
Advertising and marketing costs | 149,297 | $ 514,401 | |||
Money market accounts | $ 3,678,865 | $ 3,678,865 | $ 11,821,931 | ||
Common stock shares issued | 52,358,463 | 52,358,463 | 48,156,062 | ||
Common stock shares outstanding | 14,506,158 | 14,506,158 | |||
Issuable upon conversion of convertible debentures | 2,255,066 | 2,255,066 | |||
Common shares current price per share | $ 1.381 | $ 1.381 | |||
Leasehold Improvements | |||||
Estimated useful lives of assets | 5 years | ||||
Minimum | |||||
Estimated useful lives of assets | 2 years | ||||
Maximum | |||||
Estimated useful lives of assets | 5 years | ||||
Convertible Preferred Stock | |||||
Common stock shares issued | 8,108,356 | 8,108,356 | |||
Common stock shares outstanding | 9,020,264 | 9,020,264 | 9,020,264 | 9,020,264 | |
Reserved shares to pay series C and D dividends | 2,920,000 | 2,920,000 | |||
Antidilutive securities | 8,108,356 | ||||
Common shares current price per share | $ 0.25 | $ 0.25 | $ 0.25 | $ 0.25 | |
Warrants | |||||
Antidilutive securities | 18,856,313 | 21,651,513 | |||
Stock Option 1 [Member] | |||||
Stock options outstanding | 20,927,370 | ||||
Unearned stock option grants | 3,869,825 | 11,550,745 |
NFT REVENUE (Details Narrative)
NFT REVENUE (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2022 | Jun. 30, 2023 | |
Accrued expenses | $ 462,940 | $ 416,191 |
Technology Equipment [Member] | ||
Revenue Digital Asset Sales | 4,360,087 | |
Amount total | 3,430,438 | |
Accrued expenses | $ 343,878 | $ 274,019 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
PROPERTY AND EQUIPMENT | ||
Machinery and equipment (2-3 years) | $ 961,529 | $ 1,510,265 |
Leasehold improvements (5 years) | 3,612 | 3,612 |
Furniture and fixtures (5 years) | 26,855 | 26,855 |
Less: accumulated depreciation | (691,899) | (677,755) |
Property and equipment, net | $ 300,097 | $ 862,977 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 9 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Net book value of assets | $ 384,137 | |
Depreciation expense | 259,541 | $ 218,683 |
Research And Development And Sellings General And Administrative [Mmber] | ||
Depreciation expense | $ 246,563 | $ 207,440 |
LEASES (Details)
LEASES (Details) | Jun. 30, 2023 USD ($) |
LEASES | |
Total Remaining Payments | $ 204,534 |
Less imputed interest | (1,822) |
Total lease liability | $ 202,712 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | |
LEASES | |||
Lease cost | $ 203,000 | $ 131,000 | |
Right-of-use assets | 156,000 | $ 288,000 | |
Total lease liability | $ 163,000 | $ 302,000 | |
Weighted-average remaining lease term | 12 months | ||
Weighted-average discount rate | 7% |
CONVERTIBLE NOTES PAYABLE AND_3
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details) - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
less conversions of notes | $ 0 | $ (14,209,000) |
Convertible notes, net | 2,255,066 | 2,255,066 |
Convertibles Note - Clayton A. Struve | ||
Convertible notes, gross | 1,071,000 | 1,071,000 |
Convertibles Note - Ronald P. Erickson and Affiliates | ||
Convertible notes, gross | 1,184,066 | 1,184,066 |
2021 Convertibles notes | ||
Convertible notes, gross | $ 0 | $ 14,209,000 |
CONVERTIBLE NOTES PAYABLE AND_4
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2023 | Sep. 30, 2022 | Mar. 16, 2018 | |
Expensed | $ 155,702 | ||
Amortization related to the debt | $ 7,272,911 | ||
Accrued interest | 92,171 | 86,562 | |
Convertible Note - Ronald P. Erickson and Affiliates | |||
Warrant to purchase common stock shares | 1,039,666 | ||
Exercise price of warrants | $ 0.50 | ||
Convertible Note - Clayton A. Struve | |||
Accrued interest amount | 320,427 | $ 287,290 | |
Convertible promissory or OID notes | $ 1,071,000 | ||
Convertible Note - J3E2A2Z Notes | |||
Convertible redeemable promissory note amount | $ 664,233 | ||
Convertible redeemable promissory note principal amount | 664,233 | ||
Convertible Note - J3E2A2Z Account Payable | |||
Convertible redeemable promissory note amount | 519,833 | ||
Convertible redeemable promissory note principal amount | $ 519,833 |
EQUITY (Details)
EQUITY (Details) | 3 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Warrant Three [Member] | |
Number of warrant shares | shares | 1,785,715 |
Issue date | Aug. 04, 2016 |
Original Expiration Date | Aug. 04, 2024 |
Amended Expiration Date | Aug. 04, 2025 |
Exercise price | $ / shares | $ 0.25 |
Warrant Four [Member] | |
Number of warrant shares | shares | 1,344,000 |
Issue date | Feb. 28, 2018 |
Original Expiration Date | Feb. 28, 2024 |
Amended Expiration Date | Feb. 28, 2025 |
Exercise price | $ / shares | $ 0.25 |
Warrant One [Member] | |
Number of warrant shares | shares | 1,440,000 |
Issue date | Aug. 14, 2017 |
Original Expiration Date | Aug. 13, 2024 |
Amended Expiration Date | Aug. 13, 2025 |
Exercise price | $ / shares | $ 0.25 |
Warrant Two [Member] | |
Number of warrant shares | shares | 1,200,000 |
Issue date | Dec. 12, 2017 |
Original Expiration Date | Dec. 11, 2024 |
Amended Expiration Date | Dec. 11, 2025 |
Exercise price | $ / shares | $ 0.25 |
EQUITY (Details 1)
EQUITY (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Jun. 30, 2023 | Sep. 30, 2022 | |
Shares | ||
Share Outstanding at beginning of period | 21,786,313 | 22,564,255 |
Issued | 0 | |
Exercised | (2,632,727) | |
Forfeited | (297,273) | |
Expired | 0 | |
Outstanding at end of period | 18,856,313 | |
Exercisable at end of period | 18,856,313 | |
Weighted Average Exercise Price: | ||
Outstanding at begin of period | $ 1.029 | $ 0.998 |
Weighted Average Exercise Price Exercised | 0.250 | |
Weighted Average Exercise Price Forfeited | 0.250 | |
Weighted Average Exercise PriceExpired | 0 | |
Outstanding at end of period | $ 1.150 |
EQUITY (Details 2)
EQUITY (Details 2) | 9 Months Ended |
Jun. 30, 2023 $ / shares shares | |
Number of warrants | shares | 18,856,313 |
Weighted average remaining life (years) | 2 years 3 months 7 days |
Weighted average exercise price, outstanding | $ 1.150 |
Shares exercisable | shares | 18,856,313 |
Weighted average exercise price, exercisable | $ 1.150 |
Warrant Three [Member] | |
Number of warrants | shares | 4,694,725 |
Weighted average remaining life (years) | 2 years 10 months 9 days |
Shares exercisable | shares | 4,694,725 |
Warrant Four [Member] | |
Number of warrants | shares | 10,000 |
Weighted average remaining life (years) | 8 months 4 days |
Weighted average exercise price, outstanding | $ 4.080 |
Shares exercisable | shares | 10,000 |
Weighted average exercise price, exercisable | $ 4.080 |
Warrant One [Member] | |
Number of warrants | shares | 7,639,381 |
Weighted average remaining life (years) | 1 month 21 days |
Weighted average exercise price, outstanding | $ 0.250 |
Shares exercisable | shares | 7,639,381 |
Weighted average exercise price, exercisable | $ 0.250 |
Warrant Two [Member] | |
Number of warrants | shares | 6,512,207 |
Weighted average remaining life (years) | 1 year 7 months 13 days |
Shares exercisable | shares | 6,512,207 |
Maximum | Warrant Three [Member] | |
Weighted average exercise price, outstanding | $ 3 |
Weighted average exercise price, exercisable | 3 |
Maximum | Warrant Two [Member] | |
Weighted average exercise price, outstanding | 1.85 |
Weighted average exercise price, exercisable | 1.85 |
Minimum | Warrant Three [Member] | |
Weighted average exercise price, outstanding | 2 |
Weighted average exercise price, exercisable | 2 |
Minimum | Warrant Two [Member] | |
Weighted average exercise price, outstanding | 1.20 |
Weighted average exercise price, exercisable | $ 1.20 |
EQUITY (Details 3)
EQUITY (Details 3) | 9 Months Ended |
Jun. 30, 2023 | |
EQUITY | |
Dividend yield | 0% |
Expected life minimum | 3 years |
Expected life Maximum | 5 years |
Expected volatility | 104% |
Risk free interest rate | 2.96% |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | |||||||
Aug. 05, 2016 | Aug. 31, 2023 | Dec. 31, 2022 | Jun. 30, 2023 | Aug. 30, 2023 | Jun. 27, 2023 | Sep. 30, 2022 | Oct. 15, 2021 | Aug. 14, 2017 | |
Common stock shares value | $ 52,358 | $ 48,158 | |||||||
warrants and received | 387,335 | ||||||||
Intrinsic value | 6,569,868 | ||||||||
Money warrants | $ 18,856,313 | ||||||||
Warrant issued to common stock | 2,632,727 | ||||||||
Shrare issued warrant to purchased | 7,684,381 | ||||||||
Interest expenses | $ 194,019 | ||||||||
Authorized shares of capital stock par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Preferred stock share par value | $ 0.001 | $ 0.001 | |||||||
Common stock share issued | 52,358,463 | 48,156,062 | |||||||
Preferred stock shares authorized | 5,000,000 | 5,000,000 | |||||||
Common stock shares authorized | 200,000,000 | 200,000,000 | |||||||
Share issued price | $ 0.25 | ||||||||
Three Director [Member] | |||||||||
Shrare issued warrant to purchased price | $ 2.40 | ||||||||
Warrants to Purchase Common Stock [Member] | |||||||||
warrants and received | $ 387,335 | ||||||||
Warrant issued to common stock | 2,632,727 | ||||||||
Warrants to purchase common stock | 297,273 | ||||||||
Warrants expired per share | $ 0.250 | ||||||||
Series C Preferred Stock [Member] | |||||||||
Purchase preferred stock | $ 1,790 | $ 1,790 | |||||||
Series D Preferred Stock [Member] | |||||||||
Purchase preferred stock | 1,015 | $ 1,015 | |||||||
Common Preferred Stock [Member] | |||||||||
Proceeds from issuance of common stock | $ 3,750 | ||||||||
Exercise of stock option | 4,687 | ||||||||
Authorized Capital Stock [Member] | |||||||||
Authorized shares of capital stock par value | $ 0.001 | ||||||||
Preferred stock share par value | $ 0.001 | ||||||||
Common stock share issued | 200,000,000 | ||||||||
Preferred stock shares issued | 500 | ||||||||
Preferred stock shares authorized | 5,000,000 | ||||||||
Common stock shares authorized | 205,000,000 | ||||||||
Common shares | 1,785,715 | ||||||||
Convertible preferred stock | 1,016,014 | ||||||||
Convertible Preferred Stock Series C [Member] | |||||||||
Share issued price | $ 0.25 | ||||||||
Stock at 0.25 | |||||||||
Share issued price | $ 1.20 | ||||||||
Warrants totaling | $ 4,424,425 | ||||||||
Stock at 2.00 | |||||||||
Share issued price | $ 0.25 | ||||||||
Warrants totaling | $ 4,439,707 | ||||||||
Mr. Struve [Member] | |||||||||
Series D preferred stock dividends shares | 1,402,784 | ||||||||
Mr. Struve [Member] | Series C Preferred Stock [Member] | |||||||||
Ownership interest | 4.99% | ||||||||
Cumulative Dividend | 8% | ||||||||
Purchase preferred stock | $ 1,250,000 | ||||||||
Conversion price | $ 0.70 | ||||||||
Warrant to acquire common stock shares | 1,785,714 | ||||||||
Share price | $ 0.70 | ||||||||
Adjusted conversion price | $ 0.25 | ||||||||
Preferred stock shares issued | 1,785,715 | ||||||||
Mr. Struve [Member] | Series D Preferred Stock [Member] | |||||||||
Ownership interest | 4.99% | 4.99% | |||||||
Cumulative dividend cash | $ 351,000 | ||||||||
Cumulative Dividend | 8% | ||||||||
Weighted average price of the common stock | $ 2.50 | ||||||||
Convertible common stock shares | 1,402,784 | ||||||||
Common stock shares value | $ 1,627,230 | ||||||||
Purchase preferred stock | $ 750,000 | ||||||||
Adjusted conversion price | $ 0.25 | ||||||||
Preferred stock shares issued | 1,016,004 | ||||||||
Preferred stock shares outstanding | 1,016,004 | ||||||||
Mr. Struve [Member] | Series C and D Preferred Stock [Member] | |||||||||
Ownership interest | 4.99% | ||||||||
Cumulative Dividend | 4.99% | ||||||||
Shares of common stock issued during period | 2,900,000 | ||||||||
Number of common stock shares settled | 1,402,784 | 1,402,784 | |||||||
Dividend distributed per share | The cumulative dividends accrued and paid in preferred stock will be determined based upon a $.70 stated value. The conversion from preferred stock into common stock is determined based dividing the $.70 stated value by the $.25 conversion price. | ||||||||
Convertible common stock shares | 2,920,000 | ||||||||
Common stock shares value | $ 3,337,494 | ||||||||
Cumulative unpaid dividend | 730,000 | ||||||||
Cumulative deemed dividends | $ 3,337,494 | ||||||||
Preferred dividend value accrete common stock shares | 160,000 |
STOCK INCENTIVE PLANS (Details)
STOCK INCENTIVE PLANS (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2021 | |
Options | |||
Shares Granted | 0 | ||
Exercised | (2,632,727) | ||
Shares Forfeitures | (10,277,655) | ||
Weighted Average Exercise Price | |||
Weighted Average Exercise Price Exercised | $ (0.272) | ||
Weighted Average Exercise Price Forfeitures | $ (1.647) | ||
Stock Option [Member] | |||
Options | |||
Share Outstanding at beginning of period | 20,792,370 | 15,315,120 | 4,805,000 |
Shares Granted | 4,158,333 | 6,636,000 | 10,650,745 |
Exercised | (166,890) | (26,293) | (20,625) |
Shares Forfeitures | (10,277,655) | (1,132,457) | (120,000) |
Share Outstanding at ending of period | 14,506,158 | 20,792,370 | 15,315,120 |
Weighted Average Exercise Price | |||
Outstanding at begin of period | $ 1.618 | $ 1.565 | $ 1.161 |
Weighted Average Exercise Price Granted | 1.381 | 1.815 | 1.766 |
Weighted Average Exercise Price Exercised | (0.272) | (1.376) | (1.359) |
Weighted Average Exercise Price Forfeitures | (1.647) | (2.057) | (3.300) |
Outstanding at end of period | $ 1.546 | $ 1.618 | $ 1.565 |
Aggregate Intrinsic Value | |||
Aggregate Outstanding at beginning of period | $ 33,644,402 | $ 23,964,509 | $ 5,580,550 |
Granted | 5,744,716 | 12,045,330 | 18,807,990 |
Forfeitures | (16,923,131) | (2,329,267) | (396,000) |
Aggregate Outstanding at end of period | $ 22,420,514 | $ 33,644,402 | $ 23,964,509 |
STOCK INCENTIVE PLANS (Details
STOCK INCENTIVE PLANS (Details 1) - $ / shares | 3 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2023 | |
Number of outstanding stock options | 18,856,313 | |
Number exercisable | 18,856,313 | |
Weighted average exercise price exerciseable | $ 1.150 | |
Employee Stock Options One [Member] | ||
Number of outstanding stock options | 14,506,158 | |
Weighted average remaining life (years) | 3 years 3 months | |
Weighted average exercise price outstanding | $ 1.546 | |
Number exercisable | 5,573,912 | |
Weighted average exercise price exerciseable | $ 1.400 | |
Stock Option 3 [Member] | ||
Number of outstanding stock options | 2,590,000 | |
Weighted average remaining life (years) | 3 months 9 days | |
Weighted average exercise price outstanding | $ 2.173 | |
Number exercisable | 1,106,563 | |
Weighted average exercise price exerciseable | $ 2.041 | |
Stock Options 1 [Member] | ||
Number of outstanding stock options | 2,161,875 | |
Weighted average remaining life (years) | 3 years 1 month 28 days | |
Weighted average exercise price outstanding | $ 0.941 | |
Number exercisable | 1,857,891 | |
Weighted average exercise price exerciseable | $ 1.131 | |
Stock Options 2 [Member] | ||
Number of outstanding stock options | 9,754,283 | |
Weighted average remaining life (years) | 3 years 3 months | |
Weighted average exercise price outstanding | $ 1.398 | |
Number exercisable | 2,609,458 | |
Weighted average exercise price exerciseable | $ 1.589 | |
Minimum | Stock Option 2 [Member] | ||
Range of exercise prices | 1.28 | |
Minimum | Stock Option 3 [Member] | ||
Range of exercise prices | 1.79 | |
Minimum | Stock Option 1 [Member] | ||
Range of exercise prices | 0.88 | |
Maximum | Stock Option 2 [Member] | ||
Range of exercise prices | 1.67 | |
Maximum | Stock Option 3 [Member] | ||
Range of exercise prices | 3.67 | |
Maximum | Stock Option 1 [Member] | ||
Range of exercise prices | $ 1.25 |
STOCK INCENTIVE PLANS (Detail_2
STOCK INCENTIVE PLANS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||||
Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Jan. 01, 2022 | Oct. 15, 2021 | |
Compensation expense | $ 2,464,045 | $ 1,555,875 | ||||
Unrecognized compensation costs | 5,454,046 | |||||
Intrinsic value | $ 364,605 | |||||
Stock option grants | 14,506,158 | |||||
Weighted Average Exercise Price Exercised | $ 0.272 | |||||
Weighted Average Exercise Price Forfeitures | 1.647 | |||||
Average exercise price | $ 1.150 | |||||
Number of common stock authorized shares | 18,856,313 | |||||
Unearned stock option grants | 4,158,333 | |||||
Common shares current price per share | $ 1.381 | |||||
Stock option grants share exercised | 166,890 | |||||
Stock option grants shares forfeitures | 10,277,655 | |||||
2021 Equity Incentive Plan [Member] | ||||||
Average exercise price | $ 1.546 | |||||
Number of common stock authorized shares | 20,000,000 | |||||
Number of common stock shares increase | 22,000,000 | |||||
Unearned stock option grants | 3,869,825 | |||||
Stock Option | ||||||
Weighted Average Exercise Price Exercised | $ 0.272 | $ 1.376 | $ 1.359 | |||
Weighted Average Exercise Price Forfeitures | $ 1.647 | $ 2.057 | $ 3.300 | |||
Stock option grants shares forfeitures | 10,277,655 | 1,132,457 | 120,000 | |||
Stock Option | An Employee [Member] | ||||||
Period for recognition | 3 months 7 days |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
INCOME TAXES | ||||
Provision for income taxes | $ 0 | $ 0 | ||
Effective tax rate | 0% | 0% | 0% | 0% |
SIGNIFICANT AND OTHER TRANSAC_2
SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES (Details Narrative) - USD ($) | Dec. 14, 2022 | Jun. 30, 2023 | Jun. 27, 2023 |
Ronald P. Erickson [Member] | |||
No of share granted for stock option | 1,000,000 | ||
Share exercise price | $ 1.41 | ||
Mr. Struve [Member] | |||
Series D preferred stock dividends | $ 1,627,230 | ||
Preferred stock shares issued | 1,402,784 | ||
Director [Member] | |||
Share exercise price | $ 1.24 | ||
Rent | $ 50,000 |
COMMITMENTS CONTINGENCIES AND L
COMMITMENTS CONTINGENCIES AND LEGAL PROCEEDINGS (Details narrative) - USD ($) | 1 Months Ended | 9 Months Ended | |||||||
Apr. 13, 2017 | Apr. 26, 2023 | Jan. 23, 2023 | Nov. 22, 2022 | Sep. 28, 2022 | Sep. 22, 2022 | Oct. 11, 2021 | May 18, 2021 | Jun. 30, 2023 | |
Leases, net monthly payment | $ 3,334 | $ 2,908 | $ 2,250 | $ 7,000 | $ 5,000 | $ 8,697 | $ 2,986 | ||
Lease description | increases by 3% annually. The lease expires on June 30, 2024. The lease can be extended for one additional three-year term | ||||||||
Rent paid | $ 91,500 | 28,000 | |||||||
Mr. Bosua [Member] | |||||||||
Sepration agreement terms | pursuant to which Mr. Bosua is entitled receive a $400,000 severance payment and benefits pursuant to his prior employment agreement. Pursuant to the Separation Agreement, Mr. Bosua’s outstanding stock options ceased vesting as of January 23, 2023, and all vested stock options remain exercisable through January 23, 2024. Mr. Bosua has been engaged as a consultant to the Company for a period of one year at a rate of $10,000 per month. Mr. Bosua also entered into a lock up and leak out agreement with respect to 3,005,000 common shares owned by Mr. Bosua and shares issuable upon exercise of his vested option awards. During the period commencing March 17, 2023 through March 17, 2024, Mr. Bosua may sell no more than 1,500,000 shares. During the period commencing April 1, 2024 through June 30, 2026, Mr. Bosua may sell no more than 375,000 shares per quarter (or 1,500,000 shares per year), unless the stock price of the Company’s common stock exceeds $5.00 per share on the NYSE American (the “Stock Price Threshold”), then Mr. Bosua may sell a maximum of 750,000 shares during any such quarter that the Stock Price Threshold is met. Notwithstanding the foregoing, any lock-up or leak-out restrictions are waived for any sales of shares from Mr. Bosua to Todd Baszucki | ||||||||
Severance payment | 400,000 | ||||||||
Employee taxes | 14,027 | ||||||||
Server costs | 44,000 | ||||||||
Extended vested options | $ 421,782 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Revenue | $ 0 | $ 0 | $ 0 | $ 4,360 |
Segment Operating Profit (Loss) | 3,239,000 | (3,025,000) | (11,694,000) | (6,739,000) |
Segment assets | 4,436,000 | 9,627,000 | 4,436,000 | 9,627,000 |
Development of the Bio-RFID and ChromaID Technologies [Member] | ||||
Revenue | 0 | 0 | 0 | 0 |
Segment Operating Profit (Loss) | 3,239,000 | (2,838,000) | (11,694,000) | (7,617,000) |
Segment assets | 4,436,000 | 7,522,000 | 4,436,000 | 7,522,000 |
Particle, Inc. Technology [Member] | ||||
Revenue | 0 | 0 | 0 | 0 |
Segment Operating Profit (Loss) | 0 | (23,000) | 0 | (45,000) |
Segment assets | 0 | 0 | 0 | 0 |
Digital asset sales [Member] | ||||
Revenue | 0 | 0 | 0 | 4,360,000 |
Segment Operating Profit (Loss) | 0 | (164,000) | 0 | 923,000 |
Segment assets | $ 0 | $ 2,105,000 | $ 0 | $ 2,105,000 |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative) - USD ($) | 9 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
SEGMENT REPORTING | ||
Non-cash expenses | $ 3,453,802 | $ 9,242,544 |