Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2015 | Aug. 07, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | AIRWARE LABS CORP. | |
Entity Central Index Key | 1,500,123 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 69,077,883 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2015 | Sep. 30, 2014 |
Current Assets: | ||
Cash and cash equivalents | $ 35,448 | $ 42,582 |
Accounts receivable | 530 | 3,137 |
Inventory | 65,752 | 71,614 |
Deposits | 10,000 | 10,000 |
Prepaid expenses and other current assets | 30,040 | 66,205 |
Total current assets | 141,770 | 193,538 |
Other Assets: | ||
Property and equipment, net | 16,625 | 20,039 |
Intangible assets, net | 259,768 | 292,402 |
Deposits | 2,387 | 2,387 |
Investment in Breathe Active, LLC | 290 | 290 |
Total Assets | 420,840 | 508,656 |
Current Liabilities: | ||
Accounts payable | 1,668,489 | 1,639,529 |
Accrued interest - related parties | 100,760 | 32,076 |
Accrued interest | 1,544 | 1,244 |
Accrued expenses | 99,099 | $ 72,172 |
Notes payable to former officer | 35,625 | |
Convertible notes payable | 5,000 | $ 27,678 |
Convertible notes payable to related parties, net of discount | 2,646,748 | 1,324,659 |
Total current liabilities | 4,557,265 | 3,097,358 |
Accrued interest to related parties | 202 | 106 |
Notes payable to former officer | 11,875 | 47,500 |
Total liabilities | 4,569,342 | 3,144,964 |
Stockholders' Deficit: | ||
Common stock, par value $.0001 per share, 200,000,000 shares authorized; 67,107,677 and 62,256,379 shares issued and outstanding at June 30, 2015 and September 30, 2014, respectively | 6,711 | $ 6,226 |
Common stock to be issued, 180,000 shares, par value $.0001 | 18 | |
Additional paid-in capital | 30,704,140 | $ 29,452,379 |
Accumulated deficit | (34,859,371) | (32,094,913) |
Total stockholders' deficit | (4,148,502) | (2,636,308) |
Total Liabilities and Stockholders' Deficit | $ 420,840 | $ 508,656 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2015 | Sep. 30, 2014 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, issued | 67,107,677 | 62,256,379 |
Common stock, outstanding | 67,107,677 | 62,256,379 |
Common stock to be issued, shares | 180,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 14,106 | $ 113,365 | $ 117,877 | $ 168,705 |
Cost of products sold | 15,635 | 57,970 | 80,435 | 101,577 |
Gross profit | (1,529) | 55,395 | 37,442 | 67,128 |
Operating expenses | ||||
General and administrative | 188,061 | 220,277 | 660,652 | 728,470 |
Sales and marketing | 49,689 | 69,610 | 205,428 | 153,132 |
Total expenses | 237,750 | 289,887 | 866,080 | 881,602 |
Loss from operations | $ (239,279) | $ (234,492) | $ (828,638) | (814,474) |
Other income (expense) | ||||
Interest income | 289 | |||
Forgiveness of debt | 20 | |||
Induced note conversion expense | (2,697) | |||
Interest expense | $ (603,451) | $ (425,204) | $ (1,935,819) | (943,521) |
Valuation (loss) - common stock warrants | (707,400) | |||
Loss on warrants exercised | (13,914,034) | |||
Total other income (expense) | $ (603,451) | $ (425,204) | $ (1,935,819) | (15,567,343) |
Loss before income taxes | $ (842,730) | $ (659,696) | $ (2,764,457) | $ (16,381,817) |
Income tax expense | ||||
Net loss | $ (842,730) | $ (659,696) | $ (2,764,457) | $ (16,381,817) |
Basic and diluted net loss per common share | $ (0.01) | $ (0.01) | $ (0.04) | $ (0.36) |
Basic and diluted weighted average common shares outstanding | 66,818,701 | 59,124,158 | 65,154,828 | 45,896,020 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Operating Activities: | ||
Net loss | $ (2,764,457) | $ (16,381,817) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 51,047 | 45,808 |
Common stock issued for services | 86,000 | 411,408 |
Options and warrants issued for services | 55,406 | 43,773 |
Interest expense from amortization of debt discount | $ 1,322,089 | 735,763 |
Induced conversion expense | 2,697 | |
Stock issued for interest expense | $ 544,057 | 180,059 |
Forgiveness of debt | (20) | |
Loss on warrants exercised | 13,914,034 | |
Valuation expense - common stock warrants | 707,400 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | $ 2,607 | 5,044 |
Inventory | 5,862 | 1,372 |
Prepaid expenses | $ 36,165 | (21,100) |
Deposits | (25,987) | |
Accounts payable | $ 28,960 | (213,437) |
Accrued interest | 69,081 | 11,304 |
Accrued expenses | 26,927 | 28,154 |
Net Cash Used in Operating Activities | (536,256) | $ (555,545) |
Investing Activities: | ||
Purchases of property and equipment | (15,000) | |
Net Cash Used In Investing Activities | (15,000) | |
Financing Activities: | ||
Stock issued for cash | 68,800 | |
Proceeds from convertible notes payable | $ 498,000 | $ 1,252,000 |
Repayment of convertible notes payable | (16,104) | |
Repayment of notes payable | $ (22,678) | (18,178) |
Options re-purchased | (2,500) | |
Stock re-purchased | (601,762) | |
Net Cash Provided by Financing Activities | $ 544,122 | 613,456 |
Net (Decrease)/Increase in Cash | (7,134) | 57,911 |
Cash - Beginning of Period | 42,582 | 19,942 |
Cash - End of Period | 35,448 | 77,853 |
Supplemental disclosure of cash flow information: | ||
Interest paid in cash | $ 292 | 1,718 |
Non-cash investing and financing activities: | ||
Stock issued for convertible notes | $ 5,000 | |
Debt discount on note payable, related party | $ 498,000 |
Summary of Significant Accounti
Summary of Significant Accounting Policies and Use of Estimates | 9 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies and Use of Estimates | 1. Summary of Significant Accounting Policies and Use of Estimates Basis of Presentation and Organization Airware Labs Corp. (Airware Labs or the Company), formerly Crown Dynamics Corp., is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on June 15, 2010. On October 26, 2012, the Articles of Incorporation were amended to reflect a name change to Airware Labs Corp. On March 20, 2012, through an equity exchange agreement, the Company acquired all of the issued and outstanding stock of Airware Holdings, Inc., a Nevada corporation (Airware), in exchange for shares of the Companys newly-issued common stock. Airware Holdings, Inc. was formed in February 2010 and is a non-prescription medical products company. The principal business purpose of the Company is to develop, manufacture and distribute breathing solutions that address major respiratory challenges impacting human health. Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates of the Company include accounting for depreciation and amortization, recoverability of intangible assets, deferred income taxes, accruals and contingencies, the imputed interest rate of the note payable to related party and the fair value of common stock, and the estimated fair value of stock options and warrants. Revenue Recognition The Company recognizes revenue on the sale of products at the time of delivery and acceptance. Delivery is generally FOB destination. At the time of delivery, the following have occurred: · Evidence of delivery; · A price per unit has been determined; and · Collectability has been reasonably assured. Revenues are recorded net of slotting payments and co-operative advertising costs when applicable. Unaudited Interim Financial Statements The interim condensed consolidated financial statements of the Company as of June 30, 2015 and 2014, and for the periods then ended, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Companys financial position as of June 30, 2015 and the results of its operations and its cash flows for the periods ended June 30, 2015 and 2014. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2015. The accompanying condensed consolidated financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States (U.S. GAAP). Income Taxes The Company accounts for income taxes under FASB ASC 740, Income Taxes Net Loss per Share Basic earnings per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. Due to the net losses for the periods ended June 30, 2015 and 2014, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive. As of June 30, 2015, there were total shares of 33,328,622 issuable upon conversion of notes payable, exercise of warrants and options that were not included in the earnings per share calculation as they were anti-dilutive. |
Going Concern
Going Concern | 9 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | 2. Going Concern These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP), which contemplates continuation of the Company as a going concern, which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has experienced negative cash flows from operations since inception, has net losses from continuing operations of $2,764,457, and $16,381,817, for the nine months ended June 30, 2015, and 2014, respectively, and has an accumulated deficit of $34,859,371 at June 30, 2015. These factors raise substantial doubt about the Companys ability to continue as a going concern and to operate in the normal course of business. The Companys selling activity has not yet reached a level of revenue sufficient to fund its operating activities. In response to these financial difficulties, management is continuing to pursue financing from various sources, including private placements from investors and institutions. Management believes these efforts will contribute toward funding the Companys activities until sufficient revenue can be earned from future operations. In addition, the Company is seeking additional distribution partners in both domestic and foreign markets. Management believes these combined efforts, if successful, will be sufficient to meet its working capital needs and its currently anticipated expenditure levels for the next year, however there is no guarantee this will be successful. The Companys ability to meet its cash requirements in the next year is dependent upon obtaining this financing and achieving improved sales levels. If this is not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and therefore, may be unable to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts; nor do they include adjustments to the amounts and classification of liabilities that might be necessary should the Company be unable to continue operations or be required to sell its assets. |
Convertible Notes Payable
Convertible Notes Payable | 9 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | 3. Convertible Note Payable The Company has a convertible note payable with a principal balance of $5,000, which was due on August 22, 2012, is unsecured, carries an interest rate of 8% and is convertible to common stock at $.50 per share. |
Notes Payable to Former Officer
Notes Payable to Former Officer | 9 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable to Former Officer | 4. Note Payable to Former Officer The Company has a Note payable with a principal balance of $47,500 due to a former officer, which is due on August 1, 2016, is unsecured and carries an interest rate of 0.27%. On December 5, 2013 the Company revised the terms of the Note calling for four equal payments to begin on November 1, 2015 and ending August 1, 2016. As part of this revision, the interest rate was reduced from 2% to 0.27%. The following represents future minimum payments due on the outstanding balance: Principal balance at June 30, 2015 $ 47,500 Less current portion (35,625 ) $ 11,875 |
Convertible Notes Payable to Re
Convertible Notes Payable to Related Parties | 9 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable to Related Parties | 5. Convertible Notes Payable to Related Parties Convertible notes payable to related parties consist of the following: On August 21, 2013 the Company entered into a ninth allonge to a convertible secured bridge note with a significant shareholder. The note provides up to $3,206,000 of available principal at 12% interest and is due September 30, 2015. The note is convertible into shares of the Companys common stock at $.10 per share. The debt is secured by substantially all of the assets of the Company. As of June 30, 2015 the Company has borrowed the full amount of $3,206,000 against the note, and has recorded the balance net of the unamortized debt discount of $579,252 $ 3,206,000 Less: Unamortized debt discount (579,252 ) The Company has a note payable due to an advisory board member, which bears interest at 8%, was due August 26, 2012 and is convertible to common stock at $.50 per share. Interest payments were due at maturity and the note is unsecured. 20,000 $ 2,646,748 |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 6. Related Party Transactions The Company has a note payable due to its former President and Executive Chairman, see footnote 4. The Company has a convertible secured bridge note with a significant shareholder. During the nine months ended June 30, 2015, the Company borrowed $498,000 against this note, see footnote 5. The Company has a convertible note payable due to an advisory board member, see footnote 5. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 7. Commitments and Contingencies The Company has agreed to indemnify its officers and directors for certain events or occurrences that may arise as a result of the officers or director serving in such capacity. The term of the indemnification period is for the officers or directors lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company enters into indemnification provisions under its agreements with other companies in its ordinary course of business, typically with business partners, customers, landlords, lenders and lessors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Companys activities or, in some cases, as a result of the indemnified partys activities under the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of June 30, 2015. On December 22, 2011, the Company entered into a distribution agreement that provides for the issuance of common stock warrants, with an expiration date of 3 years, for the purchase of the Companys common stock in an amount equal to 15% of the total products purchased by the distributor from the Company at the invoice price against the previous years purchases of paid invoices. The warrant price will be equal to the closing price of Airware Labs Corp.s stock price at the anniversary date of the agreement. The Company is in default on a convertible note payable totaling $5,000 and a convertible note payable to a related party totaling $20,000. The Company has attempted communication with the note holders to request extensions or conversion. On April 8, 2013, the Company entered into an exclusive agency agreement with National United Trading and Investment FZ LLC. This is a performance-based agreement to develop new markets in the United Arab Emirates and other Middle Eastern markets of relevance. There has been no expense recognized through June 30, 2015 as a result of this agreement. On January 6, 2014, the Company entered into a license agreement with Eastar Industries, Co., pursuant to which the Company granted Eastar an exclusive license to sell its products in China for a term of five years in exchange for a royalty equal to 18% of gross profits generated by the sales of products in China. Additionally, the Company and Eastar agree to establish a joint venture company in Hong Kong of Shanghai which will be assigned Eastars rights under the agreement and of which 18% of the joint venture will be owned by the Company. On April 23, 2014, the Company entered into a product development agreement with Dan Pool of Designer Products. This agreement was modified on June 16, 2014. As compensation, the Company would pay $5,000 monthly, as well as issue up to two million stock options as the Companys stock price hits certain benchmarks. Additionally, the Company will pay a monthly royalty of 5% of net sales of any products created by Dan Pool as inventor. As of June 15, 2015, this agreement has been terminated by the Company and there will be no further liability or cost related to this agreement. On August 28, 2014, the Company was named as a Defendant in a lawsuit by a former officer alleging wrongful termination. On March 31, 2015, the Company entered into a settlement agreement with the former officer wherein the Company shall pay $30,000 over the course of six months, starting on April 7, 2015. The payments through June 30, 2015, totaling $15,000, have been made timely and the remaining balance is recorded on the balance sheet as part of accrued expenses. The Company sells the majority of its products through major distributors. The Company warrants to the distributors that the product will be free from defects in material and workmanship. The Company has determined its product warranty to be immaterial at June 30, 2015. The likelihood that the Companys estimate of the accrued product warranty claims will materially change in the near term is considered remote. |
Stockholders' Deficit
Stockholders' Deficit | 9 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Stockholders' Deficit | 8. Stockholders Deficit Common Stock During the nine months ended June 30, 2015, the Company issued 4,103,027 shares of common stock in payment of interest on the convertible note due to a significant shareholder. On November 20, 2014, the Company issued 322,250 shares of common stock for the payment of consulting services. 72,250 shares were recorded at the grant date fair value of $12,000. The remaining 250,000 shares were valued at the closing stock price on the date of agreement ($0.20). On January 28, 2015, the Company issued 82,051 shares of common stock for the payment of consulting services. The Company recorded the grant date fair value of the shares, totaling $12,000. On April 28, 2015, the Company issued 250,000 shares of common stock per a subscription agreement totaling $50,000. The Company received net proceeds of $40,000, net of issuance costs of $10,000 paid as a capital marketing fee. On April 28, 2015, the Company issued 93,970 shares of common stock for the payment of consulting services. The Company recorded the grant date fair value of the shares totaling $12,000. During the quarter ended June 30, 2015, the company received $36,000 towards the purchase of 180,000 shares of common stock. This was part of a subscription agreement totaling $375,000. The shares were not issued as of the end of the quarter. Warrants The balance of warrants outstanding for purchase of the Companys common stock as of June 30, 2015 is as follows: Common Shares Issuable Upon Exercise of Warrants Exercise Price of Warrants Date Issued Expiration Date Issued for financing expense 20,000 $ 0.25 3/08/2012 3/07/2017 Issued per distribution agreement 125,464 $ 0.75 12/22/2012 12/21/2015 Issued per distribution agreement 172,028 $ 0.14 12/22/2013 12/22/2016 Issued under a private placement memorandum 25,000 $ 0.40 7/2/2014 6/1/2016 Issued under a private placement memorandum 50,000 $ 0.60 7/2/2014 6/1/2016 Issued under a private placement memorandum 25,000 $ 0.80 7/2/2014 6/1/2016 Issued per distribution agreement 145,510 $ 0.13 12/22/2014 12/22/2017 Balance of Warrants at June 30, 2015 563,002 Stock Options The Company had the following options outstanding at June 30, 2015: Common Shares Issuable Upon Exercise of Options Exercise Price of Options Date Issued Expiration Date Options granted to former officer & two former senior advisory board members 775,000 $ 0.50 4/20/2011 4/19/2021 Options granted to former employee and three consultants 300,000 $ 0.50 7/19/2011 7/18/2016 Options granted under a consultant agreement settlement 52,844 $ 0.25 4/30/2012 4/29/2022 Options granted to Board member 150,000 $ 0.30 1/25/2013 1/24/2023 Options granted to employee and two consultants 1,550,000 $ 0.30 1/25/2013 1/24/2023 Options granted to medical advisory board member 250,000 $ 0.26 5/20/2013 5/19/2016 Options granted to consultant 250.000 $ 0.28 9/5/2013 9/4/2016 Options issued for investment in Breathe Active, LLC 500,000 $ 0.25 9/28/2013 12/31/2014 Options issued for investment in Breathe Active, LLC 500,000 $ 0.50 9/28/2013 12/31/2014 Options granted to Board member 150,000 $ 0.11 10/4/2013 10/3/2023 Options granted to Officers 433,333 $ 0.11 10/4/2013 10/3/2023 Options granted to Board member 150,000 $ 0.25 9/5/2014 9/4/2024 Options granted to Officers and consultants 633,333 $ 0.25 9/5/2014 9/4/2024 Options granted to consultant 200,000 $ 0.10 4/2/2015 4/2/2025 Balance of Options at June 30, 2015 5,894,510 On April 2, 2015, the Company and Gerdz Investments Limited Partnership, RLLP (Gerdz) entered into a Cancellation Agreement with regards to 200,000 options originally issued on July 19, 2011, exercisable at $0.50. On April 2, 2015, the Company issued 200,000 options to Gerdz, exercisable at $0.10 per share, which vest immediately and shall expire on April 2, 2025. During the nine months ended June 30, 2015, $51,413 was expensed for the pro-rata vesting of stock-based compensation. As of June 30, 2015, the balance of unrecognized compensation cost related to non-vested stock-based compensation to be expensed in future periods was $53,501. |
Significant Customer
Significant Customer | 9 Months Ended |
Jun. 30, 2015 | |
Risks and Uncertainties [Abstract] | |
Significant Customer | 9. Significant Customer For the nine months ended June 30, 2015, 71% of the Companys revenues were from one customer. Accounts receivable for this customer as of June 30, 2015 totaled $0. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | 10. Subsequent Events On July 9, 2015, the Company issued an aggregate of 1,892,106 restricted shares of common stock as payment for interest totaling $94,605 on loans to the Company. On July 9, 2015, the Company issued 78,100 restricted shares of common stock in settlement of amounts owed to a consultant for services rendered to the Company, at a grant date fair value of $19,525. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies and Use of Estimates (Policies) | 9 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Organization | Basis of Presentation and Organization Airware Labs Corp. (Airware Labs or the Company), formerly Crown Dynamics Corp., is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on June 15, 2010. On October 26, 2012, the Articles of Incorporation were amended to reflect a name change to Airware Labs Corp. On March 20, 2012, through an equity exchange agreement, the Company acquired all of the issued and outstanding stock of Airware Holdings, Inc., a Nevada corporation (Airware), in exchange for shares of the Companys newly-issued common stock. Airware Holdings, Inc. was formed in February 2010 and is a non-prescription medical products company. The principal business purpose of the Company is to develop, manufacture and distribute breathing solutions that address major respiratory challenges impacting human health. |
Accounting Estimates | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates of the Company include accounting for depreciation and amortization, recoverability of intangible assets, deferred income taxes, accruals and contingencies, the imputed interest rate of the note payable to related party and the fair value of common stock, and the estimated fair value of stock options and warrants. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue on the sale of products at the time of delivery and acceptance. Delivery is generally FOB destination. At the time of delivery, the following have occurred: · Evidence of delivery; · A price per unit has been determined; and · Collectability has been reasonably assured. Revenues are recorded net of slotting payments and co-operative advertising costs when applicable. |
Unaudited Interim Financial Statements | Unaudited Interim Financial Statements The interim condensed consolidated financial statements of the Company as of June 30, 2015 and 2014, and for the periods then ended, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Companys financial position as of June 30, 2015 and the results of its operations and its cash flows for the periods ended June 30, 2015 and 2014. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2015. The accompanying condensed consolidated financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States (U.S. GAAP). |
Income Taxes | Income Taxes The Company accounts for income taxes under FASB ASC 740, Income Taxes |
Net Loss per Share | Net Loss per Share Basic earnings per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. Due to the net losses for the periods ended June 30, 2015 and 2014, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive. As of June 30, 2015, there were total shares of 33,328,622 issuable upon conversion of notes payable, exercise of warrants and options that were not included in the earnings per share calculation as they were anti-dilutive. |
Notes Payable to Former Offic17
Notes Payable to Former Officer (Tables) | 9 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Future minimum payments due on the outstanding balance | Principal balance at June 30, 2015 $ 47,500 Less current portion (35,625 ) $ 11,875 |
Convertible Notes Payable to 18
Convertible Notes Payable to Related Parties (Tables) | 9 Months Ended |
Jun. 30, 2015 | |
Convertible Notes Payable To Related Parties Tables | |
Convertible notes payable to related parties | On August 21, 2013 the Company entered into a ninth allonge to a convertible secured bridge note with a significant shareholder. The note provides up to $3,206,000 of available principal at 12% interest and is due September 30, 2015. The note is convertible into shares of the Companys common stock at $.10 per share. The debt is secured by substantially all of the assets of the Company. As of June 30, 2015 the Company has borrowed the full amount of $3,206,000 against the note, and has recorded the balance net of the unamortized debt discount of $579,252 $ 3,206,000 Less: Unamortized debt discount (579,252 ) The Company has a note payable due to an advisory board member, which bears interest at 8%, was due August 26, 2012 and is convertible to common stock at $.50 per share. Interest payments were due at maturity and the note is unsecured. 20,000 $ 2,646,748 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 9 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Balance of warrants outstanding for purchase of Company's common stock | Common Shares Issuable Upon Exercise of Warrants Exercise Price of Warrants Date Issued Expiration Date Issued for financing expense 20,000 $ 0.25 3/08/2012 3/07/2017 Issued per distribution agreement 125,464 $ 0.75 12/22/2012 12/21/2015 Issued per distribution agreement 172,028 $ 0.14 12/22/2013 12/22/2016 Issued under a private placement memorandum 25,000 $ 0.40 7/2/2014 6/1/2016 Issued under a private placement memorandum 50,000 $ 0.60 7/2/2014 6/1/2016 Issued under a private placement memorandum 25,000 $ 0.80 7/2/2014 6/1/2016 Issued per distribution agreement 145,510 $ 0.13 12/22/2014 12/22/2017 Balance of Warrants at June 30, 2015 563,002 |
Options outstanding | Common Shares Issuable Upon Exercise of Options Exercise Price of Options Date Issued Expiration Date Options granted to former officer & two former senior advisory board members 775,000 $ 0.50 4/20/2011 4/19/2021 Options granted to former employee and three consultants 300,000 $ 0.50 7/19/2011 7/18/2016 Options granted under a consultant agreement settlement 52,844 $ 0.25 4/30/2012 4/29/2022 Options granted to Board member 150,000 $ 0.30 1/25/2013 1/24/2023 Options granted to employee and two consultants 1,550,000 $ 0.30 1/25/2013 1/24/2023 Options granted to medical advisory board member 250,000 $ 0.26 5/20/2013 5/19/2016 Options granted to consultant 250.000 $ 0.28 9/5/2013 9/4/2016 Options issued for investment in Breathe Active, LLC 500,000 $ 0.25 9/28/2013 12/31/2014 Options issued for investment in Breathe Active, LLC 500,000 $ 0.50 9/28/2013 12/31/2014 Options granted to Board member 150,000 $ 0.11 10/4/2013 10/3/2023 Options granted to Officers 433,333 $ 0.11 10/4/2013 10/3/2023 Options granted to Board member 150,000 $ 0.25 9/5/2014 9/4/2024 Options granted to Officers and consultants 633,333 $ 0.25 9/5/2014 9/4/2024 Options granted to consultant 200,000 $ 0.10 4/2/2015 4/2/2025 Balance of Options at June 30, 2015 5,894,510 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies and Use of Estimates (Details Narrative) | 9 Months Ended |
Jun. 30, 2015shares | |
Accounting Policies [Abstract] | |
Anti-dilutive shares issuable not included in earnings per share calculation | 33,328,622 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Sep. 30, 2014 | |
Going Concern Details Narrative | |||||
Net losses from continuing operations | $ (842,730) | $ (659,696) | $ (2,764,457) | $ (16,381,817) | |
Accumulated deficit | $ (34,859,371) | $ (34,859,371) | $ (32,094,913) |
Convertible Notes Payable - Con
Convertible Notes Payable - Convertible notes payable (Details) - Jun. 30, 2015 - Convertible Notes Payable A - USD ($) | Total |
Notes payable, amount | $ 5,000 |
Notes payable, interest rate | 8.00% |
Notes payable, due date | Aug. 22, 2012 |
Notes payable, conversion to common stock price per share | $ 0.50 |
Notes Payable to Former Offic23
Notes Payable to Former Officer - Future minimum payments due on the outstanding balance (Details) - USD ($) | Jun. 30, 2015 | Sep. 30, 2014 |
Notes payable to former officer, amount | $ 11,875 | $ 47,500 |
Notes payable to former officer | ||
Notes payable to former officer, amount | 47,500 | |
Less Current Portion | ||
Notes payable to former officer, amount | (35,625) | |
Balance | ||
Notes payable to former officer, amount | $ 11,875 |
Notes Payable to Former Offic24
Notes Payable to Former Officer (Details Narrative) - Interest rate information | Dec. 05, 2013 |
Notes payable to former officer, original interest rate | 2.00% |
Notes payable to former officer, reduced interest rate | 0.27% |
Convertible Notes Payable to 25
Convertible Notes Payable to Related Parties - Convertible notes payable to related parties (Details) - Jun. 30, 2015 - USD ($) | Total |
Convertible notes payable to related parties A | |
Note payable, amount | $ 3,206,000 |
Note payable, interest rate | 12.00% |
Less: Unamortized debt discount | $ (579,252) |
Note payable, due date | Sep. 30, 2015 |
Note payable, conversion to common stock price per share | $ 0.10 |
Ninth allonge to convertible secured bridge note with Stockbridge, maximum line of credit | $ 3,206,000 |
Ninth allonge to convertible secured bridge note with Stockbridge, current borrowed portion | 3,206,000 |
Convertible notes payable to related parties B | |
Note payable, amount | $ 20,000 |
Note payable, interest rate | 8.00% |
Note payable, due date | Aug. 26, 2012 |
Note payable, conversion to common stock price per share | $ 0.50 |
Convertible notes payable to related parties Total | |
Note payable, amount | $ 2,646,748 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 9 Months Ended |
Jun. 30, 2015USD ($) | |
Related Party Transactions [Abstract] | |
Amount borrowed against convertible secured note with Stockbridge | $ 498,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Dec. 23, 2011 | Oct. 07, 2015 | Jun. 30, 2015 | Jun. 30, 2015 | Aug. 26, 2012 | Aug. 22, 2012 |
Distribution Agreement | ||||||
Expiration of common stock warrants made available for issuance by agreement | 3 years | |||||
Amount of common stock available for purchase, percentage of total products purchased by distributor at invoice price against previous year's purchase of paid invoices | 15.00% | |||||
Defaults on Convertible Notes Payable | ||||||
Default on convertible note payable | $ 5,000 | |||||
Default on convertible note payable to a related party | $ 20,000 | |||||
License Agreement with Eastar Industries, Co. | ||||||
Sales license term | 5 years | |||||
Royalty to Company, percentage of gross profits generated by sales of products in China | 18.00% | |||||
Percentage of joint venture company established with Eastar owned by Company | 18.00% | |||||
Product Development Agreement with Dan Pool or Designer Products | ||||||
Monthly development fee | $ 5,000 | |||||
Monthly royalty paid, percentage of net sales | 5.00% | |||||
Lawsuits | ||||||
Settlement agreement with former officer | $ 30,000 | |||||
Settlement paid | $ 15,000 |
Stockholders' Deficit - Balance
Stockholders' Deficit - Balance of warrants outstanding for purchase of Company's common stock (Details) - Jun. 30, 2015 - $ / shares | Total |
Issued for financing expense | |
Common shares issued upon exercise of warrants | 20,000 |
Exercise price of warrants | $ 0.25 |
Date issued | Mar. 8, 2012 |
Expiration date | Mar. 7, 2017 |
Issued per distribution agreement (a) | |
Common shares issued upon exercise of warrants | 125,464 |
Exercise price of warrants | $ 0.75 |
Date issued | Dec. 22, 2012 |
Expiration date | Dec. 21, 2015 |
Issued per distribution agreement (b) | |
Common shares issued upon exercise of warrants | 172,028 |
Exercise price of warrants | $ 0.14 |
Date issued | Dec. 22, 2013 |
Expiration date | Dec. 22, 2016 |
Issued under a private placement memorandum (a) | |
Common shares issued upon exercise of warrants | 25,000 |
Exercise price of warrants | $ 0.40 |
Date issued | Jul. 2, 2014 |
Expiration date | Jun. 1, 2016 |
Issued under a private placement memorandum (b) | |
Common shares issued upon exercise of warrants | 50,000 |
Exercise price of warrants | $ 0.60 |
Date issued | Jul. 2, 2014 |
Expiration date | Jun. 1, 2016 |
Issued under a private placement memorandum (c) | |
Common shares issued upon exercise of warrants | 25,000 |
Exercise price of warrants | $ 0.80 |
Date issued | Jul. 2, 2014 |
Expiration date | Jun. 1, 2016 |
Issued per distribution agreement (c) | |
Common shares issued upon exercise of warrants | 145,510 |
Exercise price of warrants | $ 0.13 |
Date issued | Dec. 22, 2014 |
Expiration date | Dec. 22, 2017 |
Balance of Warrants | |
Common shares issued upon exercise of warrants | 563,002 |
Stockholders' Deficit - Options
Stockholders' Deficit - Options outstanding (Details) - Jun. 30, 2015 - $ / shares | Total |
Options granted to former officer & two former senior advisory board members | |
Common shares issuable upon exercise of options | 775,000 |
Exercise price of options | $ 0.50 |
Date issued | Apr. 20, 2011 |
Expiration date | Apr. 19, 2021 |
Options granted to former employee and three consultants | |
Common shares issuable upon exercise of options | 300,000 |
Exercise price of options | $ 0.50 |
Date issued | Jul. 19, 2011 |
Expiration date | Jul. 18, 2016 |
Options granted under consultant settlement agreement | |
Common shares issuable upon exercise of options | 52,844 |
Exercise price of options | $ 0.25 |
Date issued | Apr. 30, 2012 |
Expiration date | Apr. 29, 2022 |
Options granted to Board member (a) | |
Common shares issuable upon exercise of options | 150,000 |
Exercise price of options | $ 0.30 |
Date issued | Jan. 25, 2013 |
Expiration date | Jan. 24, 2023 |
Options granted to employee and two consultants | |
Common shares issuable upon exercise of options | 1,550,000 |
Exercise price of options | $ 0.30 |
Date issued | Jan. 25, 2013 |
Expiration date | Jan. 24, 2023 |
Options granted to medical advisory board member | |
Common shares issuable upon exercise of options | 250,000 |
Exercise price of options | $ 0.26 |
Date issued | May 20, 2013 |
Expiration date | May 19, 2016 |
Options granted to consultant (a) | |
Common shares issuable upon exercise of options | 250,000 |
Exercise price of options | $ 0.28 |
Date issued | Sep. 5, 2013 |
Expiration date | Sep. 4, 2016 |
Options issued for investment in Breathe Active, LLC (a) | |
Common shares issuable upon exercise of options | 500,000 |
Exercise price of options | $ 0.25 |
Date issued | Sep. 28, 2013 |
Expiration date | Dec. 31, 2014 |
Options issued for investment in Breathe Active, LLC (b) | |
Common shares issuable upon exercise of options | 500,000 |
Exercise price of options | $ 0.50 |
Date issued | Sep. 28, 2013 |
Expiration date | Dec. 31, 2014 |
Options granted to Board member (b) | |
Common shares issuable upon exercise of options | 150,000 |
Exercise price of options | $ 0.11 |
Date issued | Oct. 4, 2013 |
Expiration date | Oct. 3, 2023 |
Options granted to Officers | |
Common shares issuable upon exercise of options | 433,333 |
Exercise price of options | $ 0.11 |
Date issued | Oct. 4, 2013 |
Expiration date | Oct. 3, 2023 |
Options granted to Board member (c) | |
Common shares issuable upon exercise of options | 150,000 |
Exercise price of options | $ 0.25 |
Date issued | Sep. 5, 2014 |
Expiration date | Sep. 4, 2024 |
Options granted to Officers and consultants | |
Common shares issuable upon exercise of options | 633,333 |
Exercise price of options | $ 0.25 |
Date issued | Sep. 5, 2014 |
Expiration date | Sep. 4, 2024 |
Options granted to consultant (b) | |
Common shares issuable upon exercise of options | 200,000 |
Exercise price of options | $ 0.10 |
Date issued | Apr. 2, 2015 |
Expiration date | Apr. 2, 2025 |
Balance of Options | |
Common shares issuable upon exercise of options | 5,894,510 |
Stockholders' Deficit - Common
Stockholders' Deficit - Common Stock (Details Narrative) - USD ($) | Apr. 28, 2015 | Jan. 28, 2015 | Nov. 20, 2014 | Jun. 30, 2015 | Jun. 30, 2015 |
Equity [Abstract] | |||||
Shares issued in payment of interest on convertible note due to shareholder | 4,103,027 | ||||
Shares issued for payment of consulting services | 93,970 | 82,051 | 322,250 | ||
Shares recorded at grant date, shares | 72,250 | ||||
Shares recorded at grant date, fair value | $ 12,000 | $ 12,000 | $ 12,000 | ||
Consulting services shares valued at closing price on date of agreement, shares | 250,000 | ||||
Consulting services shares valued at closing price on date of agreement, price per share | $ 0.20 | ||||
Sale of stock, net proceeds received | $ 40,000 | $ 36,000 | |||
Sale of stock, shares issued | 250,000 | ||||
Sale of stock, subscription agreement total | $ 50,000 | $ 375,000 | |||
Sale of stock, issuance costs paid | $ 10,000 | ||||
Sale of stock, shares to be purchased | 180,000 |
Stockholders' Deficit - Stock O
Stockholders' Deficit - Stock Options (Details Narrative) - USD ($) | Apr. 02, 2015 | Jun. 30, 2015 |
Expenses for pro-rata vesting of stock-based compensation | $ 51,413 | |
Balance of unrecognized compensation cost related to non-vested stock-based compensation to be expensed in future periods | $ 53,501 | |
Gerdz Investments Limited Partnership, RLLP | ||
Options canceled per Cancellation Agreement | 200,000 | |
Options canceled per Cancellation Agreement, exercise price | $ 0.50 | |
Options issued | 200,000 | |
Options issued, exercise price | $ 0.10 | |
Options issued, expiration date | Apr. 2, 2025 |
Significant Customer (Details N
Significant Customer (Details Narrative) - Jun. 30, 2015 - USD ($) | Total |
Significant Customer Details Narrative | |
Percentage of Company's revenues from one customer | 71.00% |
Accounts receivable from one customer | $ 0 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Jul. 09, 2015 - USD ($) | Total |
Issued as payment for interest on loans to Company | |
Restricted common stock issued, shares | 1,892,106 |
Restricted common stock issued, value | $ 94,605 |
Issued to consultant as compensation for services rendered | |
Restricted common stock issued, shares | 78,100 |
Restricted common stock issued, value | $ 19,525 |