Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2016 | Jan. 31, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Citius Pharmaceuticals, Inc. | |
Entity Central Index Key | 1,506,251 | |
Document Type | S1 | |
Document Period End Date | Dec. 31, 2016 | |
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 | 74,558,992 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 |
Current Assets | |||
Cash and cash equivalents | $ 46,764 | $ 294,351 | $ 676,137 |
Prepaid expenses | 443,526 | 598,484 | 60,000 |
Total Current Assets | 490,290 | 892,835 | 736,137 |
Property and Equipment, Net of Accumulated Depreciation of 5,452, $4,780 and 0 | 3,070 | 3,742 | |
Other Assets | |||
Trademarks | 5,401 | ||
Deposits | 2,167 | 2,167 | |
Deferred offering costs | 64,801 | ||
In-process research and development | 19,400,000 | 19,400,000 | |
Goodwill | 1,586,796 | 1,586,796 | |
Total Other Assets | 20,988,963 | 21,053,764 | 5,401 |
Total Assets | 21,482,323 | 21,950,341 | 741,538 |
Current liabilities: | |||
Accounts payable | 985,865 | 909,156 | 559,150 |
Accrued expenses | 1,847,062 | 958,101 | 8,260 |
Accrued compensation | 1,010,500 | 903,250 | |
Accrued interest | 44,099 | 30,871 | |
Notes payable - related parties | 1,492,970 | 672,970 | |
Derivative warrant liability | 910,578 | 1,681,973 | 738,955 |
Due to related party | 27,637 | 27,637 | 70,386 |
Total Current Liabilities | 6,318,711 | 5,183,958 | 1,376,751 |
Commitments and contingencies | |||
Stockholders' Equity (Deficit) | |||
Preferred stock - $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding | |||
Common stock - $0.001 par value; 200,000,000 shares authorized; 74,113,060, 73,138,060 and 34,117,886 shares issued and outstanding at December 31, 2016, September 30, 2016 and 2015, respectively | 74,113 | 73,138 | 34,118 |
Additional paid-in capital | 34,601,644 | 34,029,492 | 8,371,218 |
Accumulated deficit | (19,512,145) | (17,336,247) | (9,040,549) |
Total Stockholders' Equity (Deficit) | 15,163,612 | 16,766,383 | (635,213) |
Total Liabilities and Stockholders' Equity (Deficit) | $ 21,482,323 | $ 21,950,341 | $ 741,538 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 |
ASSETS | |||
Property and Equipment, Net of Accumulated Depreciation | $ 5,452 | $ 4,780 | |
Stockholders' Equity (Deficit) | |||
Preferred Stock Par Value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred Stock Shares Authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred Stock Shares Issued | 0 | 0 | 0 |
Preferred Stock Shares Outstanding | 0 | 0 | 0 |
Common Stock Par Value | $ 0.001 | $ 0.001 | $ 0.001 |
Common Stock Shares Authorized | 200,000,000 | 200,000,000 | 200,000,000 |
Common Stock Shares Issued | 74,113,060 | 73,138,060 | 34,117,886 |
Common Stock Shares Outstanding | 74,113,060 | 73,138,060 | 34,117,886 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Consolidated Statements Of Operations | ||||
Revenues | ||||
Operating Expenses | ||||
Research and development | 1,411,159 | 2,933,199 | 1,797,045 | 574 |
General and administrative | 1,132,183 | 3,783,941 | 946,613 | 183,044 |
Stock-based compensation - general and administrative | 241,514 | 732,151 | 732,151 | 470,185 |
Total Operating Expenses | 2,784,856 | 7,449,291 | 3,229,929 | 653,803 |
Operating Loss | (2,784,856) | (7,449,291) | (3,229,929) | (653,803) |
Other Income (Expense), Net: | ||||
Interest income | 806 | 3,066 | 555 | |
Gain (loss) on revaluation of derivative warrant liability | 622,186 | (838,219) | 332,095 | 8,588 |
Interest expense | (13,228) | (8,994) | (7,500) | (93,067) |
Total Other Income (Expense), Net | 608,958 | (846,407) | 327,661 | (83,924) |
Loss before Income Taxes | (2,175,898) | (8,295,698) | (2,902,268) | (737,727) |
Income tax benefit | ||||
Net Loss | $ (2,175,898) | $ (8,295,698) | $ (2,902,268) | $ (737,727) |
Net Loss Per Share - Basic and Diluted | $ (0.03) | $ (0.15) | $ (0.09) | $ (0.04) |
Weighted Average Common Shares Outstanding Basic and diluted | 73,551,375 | 54,348,120 | 31,835,440 | 19,322,206 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows From Operating Activities: | ||||
Net loss | $ (2,175,898) | $ (8,295,698) | $ (2,902,268) | $ (737,727) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Amortization of debt issuance costs | 14,000 | |||
Stock-based compensation expense | 241,514 | 732,151 | 732,151 | 470,185 |
(Gain) loss on revaluation of derivative warrant liability | (622,186) | 838,219 | (332,095) | (8,588) |
Stock issued for services | 150,000 | |||
Depreciation | 672 | 1,343 | ||
Loss on abandoned trademarks | 5,401 | |||
Changes in operating assets and liabilities, net of effect of acquired business: | ||||
Prepaid expenses | 154,958 | (40,759) | (60,000) | 9,174 |
Accounts payable | 76,709 | 105,230 | 452,981 | (66,320) |
Accrued expenses | 888,961 | 351,182 | (52,057) | 56,764 |
Accrued compensation | 107,250 | 288,250 | ||
Accrued interest | 13,228 | 7,009 | 7,500 | 79,067 |
Due to related party | (42,749) | 14,252 | 281 | |
Net Cash Used In Operating Activities | (1,314,792) | (5,900,421) | (2,385,416) | (183,164) |
Cash Flows From Investing Activities: | ||||
Cash acquired in acquisition | 255,748 | |||
Net Cash Used In Investing Activities | 255,748 | |||
Cash Flows From Financing Activities: | ||||
Proceeds from notes payable - related parties | 820,000 | |||
Proceeds from notes payable | 500,000 | |||
Repayment of notes payable | (600,000) | |||
Proceeds from issuance of common stock | 50,000 | |||
Net proceeds from private placement | 247,205 | 5,427,688 | 1,509,493 | 1,630,834 |
Deferred offering costs | (64,801) | |||
Net Cash Provided by Financing Activities | 1,067,205 | 5,262,887 | 1,509,493 | 1,680,834 |
Increase (Decrease) in Cash and Cash Equivalents | (247,587) | (381,786) | (875,923) | 1,497,670 |
Cash and Cash Equivalents - Beginning of Period | 294,351 | 676,137 | 1,552,060 | |
Cash and Cash Equivalents - End of Period | 46,764 | 294,351 | 676,137 | 1,552,060 |
Supplemental Disclosures of Cash Flow Information and Non-cash Transactions: | ||||
Interest paid | 1,985 | |||
Income taxes paid | ||||
Fair value of warrants recorded as derivative warrant liability | 1,198,564 | 768,435 | 1,459,531 | |
Fair value of warrants issued for services | 477,181 | |||
Reclassification of derivative warrant liability to additional paid-in capital | 149,209 | 1,093,765 | 1,148,328 | |
Conversion of promissory notes and accrued interest into common stock | 633,333 | |||
Conversion of convertible promissory notes and accrued interest into common stock | 1,836,813 | |||
Conversion of subordinated convertible promissory note and accrued interest into common stock | $ 394,245 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2013 | 17,757,342 | ||||
Beginning balance, amount at Dec. 31, 2013 | $ 17,757 | $ 2,481,043 | $ (5,400,554) | $ (2,901,754) | |
Issuance of common stock, shares | 200,000 | ||||
Issuance of common stock, amount | $ 200 | 49,800 | 50,000 | ||
Conversion of subordinated convertible promissory note and accrued interest, shares | 606,531 | ||||
Conversion of subordinated convertible promissory note and accrued interest, amount | $ 607 | 393,638 | 394,245 | ||
Conversion of convertible promissory notes and accrued interest, shares | 3,061,355 | ||||
Conversion of convertible promissory notes and accrued interest, amount | $ 3,061 | 1,833,752 | 1,836,813 | ||
Issuance of common stock in private placement, net of costs, shares | 3,400,067 | ||||
Issuance of common stock in private placement, net of costs, amount | $ 3,400 | 142,903 | 146,303 | ||
Issuance of common stock in reverse acquisition, shares | 5,000,000 | ||||
Issuance of common stock in reverse acquisition, amount | $ 5,000 | (5,000) | |||
Stock-based compensation | 470,185 | 470,185 | |||
Net loss | (737,727) | (737,727) | |||
Ending balance, shares at Sep. 30, 2014 | 30,025,295 | ||||
Ending balance, amount at Sep. 30, 2014 | $ 30,025 | 5,366,321 | (6,138,281) | (741,935) | |
Issuance of common stock in private placement, net of costs, shares | 3,037,037 | ||||
Issuance of common stock in private placement, net of costs, amount | $ 3,037 | 738,021 | 741,058 | ||
Conversion of promissory notes and accrued interest, shares | 1,055,554 | ||||
Conversion of promissory notes and accrued interest, amount | $ 1,056 | 632,277 | 633,333 | ||
Reclassification of derivative warrant liability to additional paid-in capital | 1,148,328 | 1,148,328 | |||
Issuance of common stock for services, amount | |||||
Stock-based compensation | 732,151 | 732,151 | |||
Net loss | (2,902,268) | (2,902,268) | |||
Ending balance, shares at Sep. 30, 2015 | 34,117,886 | ||||
Ending balance, amount at Sep. 30, 2015 | $ 34,118 | 8,371,218 | (9,040,549) | (635,213) | |
Issuance of common stock in private placement, net of costs, shares | 9,616,668 | ||||
Issuance of common stock in private placement, net of costs, amount | $ 9,616 | 4,219,508 | 4,229,124 | ||
Reclassification of derivative warrant liability to additional paid-in capital | 1,093,765 | 1,093,765 | |||
Issuance of common stock for services, shares | 266,667 | ||||
Issuance of common stock for services, amount | $ 267 | 149,733 | 150,000 | ||
Issuance of common stock, warrants and stock options for acquisition, shares | 29,136,839 | ||||
Issuance of common stock, warrants and stock options for acquisition, amount | $ 29,137 | 18,985,936 | 19,015,073 | ||
Issuance of warrants for services | 477,181 | 477,181 | |||
Stock-based compensation | 732,151 | 732,151 | |||
Net loss | (8,295,698) | (8,295,698) | |||
Ending balance, shares at Sep. 30, 2016 | 73,138,060 | ||||
Ending balance, amount at Sep. 30, 2016 | $ 73,138 | 34,029,492 | (17,336,247) | 16,766,383 | |
Issuance of common stock in private placement, net of costs, shares | 975,000 | ||||
Issuance of common stock in private placement, net of costs, amount | $ 975 | 181,429 | 182,404 | ||
Reclassification of derivative warrant liability to additional paid-in capital | 149,209 | 149,209 | |||
Issuance of common stock for services, amount | |||||
Stock-based compensation | 241,514 | 241,514 | |||
Net loss | (2,175,898) | (2,175,898) | |||
Ending balance, shares at Dec. 31, 2016 | 74,113,060 | ||||
Ending balance, amount at Dec. 31, 2016 | $ 74,113 | $ 34,601,644 | $ (19,512,145) | $ 15,163,612 |
NATURE OF OPERATIONS, BASIS OF
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Business Citius Pharmaceuticals, Inc. (“Citius” or the “Company”) is a specialty pharmaceutical company dedicated to the development and commercialization of critical care products targeting unmet needs with a focus on anti-infectives, cancer care and unique prescription products. The Company was founded as Citius Pharmaceuticals, LLC, a Massachusetts limited liability company, on January 23, 2007. On September 12, 2014, Citius Pharmaceuticals, LLC entered into a Share Exchange and Reorganization Agreement with Citius Pharmaceuticals, Inc. (formerly Trail One, Inc.), a publicly traded company incorporated under the laws of the State of Nevada. Citius Pharmaceuticals, LLC became a wholly-owned subsidiary of Citius. On March 30, 2016, Citius acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary (see “Acquisition of Leonard-Meron Biosciences, Inc.” below). The Company had one approved product, Suprenza (phentermine hydrochloride), which it licensed out for promotion in the United States, Canada and Mexico. On July 1, 2016, the Company announced that it was discontinuing Suprenza. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. Citius is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius or its competitors of research and development stage products, market acceptance of its products, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental and other regulations. Acquisition of Leonard-Meron Biosciences, Inc. On March 30, 2016, the Company acquired all of the outstanding stock of Leonard-Meron Biosciences, Inc. (“LMB”) by issuing 29,136,839 shares of its common stock. As of March 30, 2016, the stockholders of LMB received approximately 41% of the issued and outstanding common stock of the Company. In addition, the Company converted the outstanding common stock warrants of LMB into 3,645,297 common stock warrants of the Company and converted the outstanding common stock options of LMB into 1,158,770 common stock options of the Company. The Company acquired tangible assets consisting of cash of $255,748, prepaid expenses of $20,544, property and equipment of $5,085, deposits of $2,167, and identifiable intangible assets of $19,400,000 related to in-process research and development. The Company assumed accounts payable of $244,776, accrued expenses of $598,659, accrued compensation of $615,000, accrued interest of $23,862, and notes payable of $772,970. Accordingly, the net assets acquired amounted to $17,428,277. The fair value of LMB’s net assets acquired on the date of the acquisition, based on management’s analysis of the fair value of the 29,136,839 shares of the Company’s common stock issued for LMB’s outstanding stock, the 3,645,297 Company common stock warrants issued for LMB’s outstanding common stock warrants, and the vested portion of the 1,158,770 Company common stock options issued for LMB’s outstanding common stock options was $19,015,073. The fair value of the common stock issued was estimated at $17,482,093, the fair value of the warrants issued was estimated at $1,071,172 and the fair value of the vested options was estimated at $461,808. The Company recorded goodwill of $1,586,796 for the excess of the purchase price of $19,015,073 over the net assets acquired of $17,428,277. In-process research and development represents the value of LMB’s leading drug candidate which is an antibiotic solution used to treat catheter-related bloodstream infections (Mino-Lok™) and is expected to be amortized on a straight-line basis over a period of eight years commencing upon revenue generation. Goodwill represents the value of LMB’s industry relationships and its assembled workforce. Goodwill will not be amortized but will be tested at least annually for impairment. Unaudited pro forma operating results for the three months ended December 31, 2015, assuming the acquisition of LMB had been made as of October 1, 2015, are as follows: 2015 Revenues $ — Net loss $ (1,640,688 ) Net loss per share – basic and diluted $ (0.03 ) Basis of Presentation and Summary of Significant Accounting Policies Basis of Preparation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, without being audited, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary to make the financial statements not misleading have been included. Operating results for the three months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending September 30, 2017. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2016 filed with the Securities and Exchange Commission. Use of Estimates Basic and Diluted Net Loss per Common Share Recently Issued Accounting Standards In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350). | Business Citius Pharmaceuticals, Inc. (“Citius” or the “Company”) is a specialty pharmaceutical company dedicated to the development and commercialization of critical care products targeting unmet needs with a focus on anti-infectives, cancer care and unique prescription products. The Company was founded as Citius Pharmaceuticals, LLC, a Massachusetts limited liability company, on January 23, 2007. On September 12, 2014, Citius Pharmaceuticals, LLC entered into a Share Exchange and Reorganization Agreement (the “Exchange Agreement”), with Citius Pharmaceuticals, Inc. (formerly Trail One, Inc.), a publicly traded company incorporated under the laws of the State of Nevada. Citius Pharmaceuticals, LLC became a wholly-owned subsidiary of Citius (see “Reverse Acquisition” below). On March 30, 2016, Citius acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary (see “Acquisition of Leonard-Meron Biosciences, Inc.” below). The Company had one approved and marketed product, Suprenza (phentermine hydrochloride), which it had out licensed for promotion in the United States, Canada and Mexico. On July 1, 2016, the Company announced that it was discontinuing Suprenza. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. Citius is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius or its competitors of research and development stage products, market acceptance of its products, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental and other regulations. Reverse Acquisition On September 12, 2014, Citius completed a reverse acquisition transaction with Citius Pharmaceuticals, LLC, which became a wholly-owned subsidiary of Citius. As part of the reverse acquisition, the former members of Citius Pharmaceuticals, LLC received 21,625,219 shares of the Company’s common stock in exchange for their interest in Citius Pharmaceuticals, LLC and, immediately after the transaction, owned 72% of the outstanding common stock. Immediately prior to the transaction, Citius had 5,000,000 shares of common stock outstanding. In connection with the Exchange Agreement, the Company completed the first closing of a Private Offering (see Note 7). Following the acquisition, Citius Pharmaceuticals, LLC began operating as a wholly-owned subsidiary of Citius Pharmaceuticals, Inc. Accounting principles generally accepted in the United States generally require that a company whose security holders retain the majority voting interest in the combined business be treated as the acquirer for financial reporting purposes. The acquisition was accounted for as a reverse acquisition whereby Citius Pharmaceuticals, LLC was deemed to be the accounting acquirer. Accordingly, the historical consolidated financial statements are those of Citius Pharmaceuticals, LLC as the accounting acquirer. The post-merger combination of Citius Pharmaceuticals, Inc. and Citius Pharmaceuticals, LLC is referred to throughout these notes to consolidated financial statements as the “Company.” As the accounting acquirer, Citius Pharmaceuticals, LLC did not acquire any tangible assets from Citius and did not assume any liabilities of Citius. This transaction is not considered a business combination because Citius, the non-operating public corporation, did not meet the definition of a business. Instead, this transaction is considered to be a capital transaction of Citius Pharmaceuticals, LLC and is equivalent to the issuance of shares by Citius Pharmaceuticals, LLC for the net assets of Citius accompanied by a recapitalization. In connection with the reverse acquisition, Citius Pharmaceuticals, LLC adopted the fiscal year end of Citius, thereby changing our fiscal year end from December 31 to September 30. Acquisition of Leonard-Meron Biosciences, Inc. On March 30, 2016, the Company acquired all of the outstanding stock of Leonard-Meron Biosciences, Inc. (“LMB”) by issuing 29,136,839 shares of its common stock. As of March 30, 2016, the stockholders of LMB received approximately 41% of the issued and outstanding common stock of the Company. In addition, the Company converted the outstanding common stock warrants of LMB into 3,645,297 common stock warrants of the Company and converted the outstanding common stock options of LMB into 1,158,770 common stock options of the Company. The Company acquired tangible assets consisting of cash of $255,748, prepaid expenses of $20,544, property and equipment of $5,085, deposits of $2,167, and identifiable intangible assets of $19,400,000 related to in-process research and development. The Company assumed accounts payable of $244,776, accrued expenses of $598,659, accrued compensation of $615,000, accrued interest of $23,862, and notes payable of $772,970. Accordingly, the net assets acquired amounted to $17,428,277. The fair value of LMB’s net assets acquired on the date of the acquisition, based on management’s analysis of the fair value of the 29,136,839 shares of the Company’s common stock issued for LMB’s outstanding stock, the 3,645,297 Company common stock warrants issued for LMB’s outstanding common stock warrants, and the vested portion of the 1,158,770 Company common stock options issued for LMB’s outstanding common stock options was $19,015,073. The fair value of the common stock issued was estimated at $17,482,093, the fair value of the warrants issued was estimated at $1,071,172 and the fair value of the vested options was estimated at $461,808. The Company recorded goodwill of $1,586,796 for the excess of the purchase price of $19,015,073 over the net assets acquired of $17,428,277. In-process research and development represents the value of LMB’s leading drug candidate which is an antibiotic solution used to treat catheter-related bloodstream infections (Mino-Lok™). Goodwill represents the value of LMB’s industry relationships and its assembled workforce. In-process research and development and goodwill will not be amortized but will be tested at least annually for impairment. Unaudited pro forma operating results, assuming the acquisition of LMB had been made as of October 1, 2014, are as follows: Year Ended September 30, 2016 2015 Revenues $ — $ — Net loss $ (11,548,647 ) $ (6,640,600 ) Net loss per share – basic and diluted $ (0.17 ) $ (0.11 ) Basis of Presentation As a result of the reverse acquisition, the accompanying consolidated financial statements include the operations of Citius Pharmaceuticals, LLC (the accounting acquirer). The accompanying consolidated financial statements also include the operations of Citius Pharmaceuticals, Inc. (formerly Trail One, Inc.) since the September 12, 2014 reverse acquisition and the operations of Leonard-Meron Biosciences, Inc. (“LMB”) since the March 30, 2016 acquisition. All significant inter-company balances and transactions have been eliminated in consolidation. All share and per share amounts presented in these consolidated financial statements reflect the one-for-one exchange ratio of Citius Pharmaceuticals, LLC member interests to common shares in the reverse acquisition. |
GOING CONCERN UNCERTAINTY AND M
GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLAN | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 2. GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLAN | The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company experienced negative cash flows from operations of $1,314,792 and $697,086 for the three months ended December 31, 2016 and 2015, respectively. At December 31, 2016, the Company had a working capital deficit of $5,828,421. The Company has no revenue and has relied on proceeds from equity transactions and debt to finance its operations. At December 31, 2016, the Company had limited capital to fund its operations. This raises substantial doubt about the CompanyÂ’s ability to continue as a going concern. The Company plans to raise capital through equity financings from outside investors as well as raise additional funds from existing investors and continued borrowings under related party debt agreements. There is no assurance, however, that the Company will be successful in raising the needed capital and, if funding is available, that it will be available on terms acceptable to the Company. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of the above uncertainty. | The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company experienced negative cash flows from operations of $5,900,421, $2,385,416, and $183,164, for the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014, respectively. At September 30, 2016, the Company had a working capital deficit of $4,291,123. The Company has no revenue and has relied on proceeds from equity transactions and debt to finance its operations. At September 30, 2016, the Company had limited capital to fund its operations. This raises substantial doubt about the CompanyÂ’s ability to continue as a going concern. The Company plans to raise capital through equity financings from outside investors as well as raise additional funds from existing investors. There is no assurance, however, that that the Company will be successful in raising the needed capital and, if funding is available, that it will be available on terms acceptable to the Company. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of the above uncertainty. |
BUSINESS AGREEMENTS
BUSINESS AGREEMENTS | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 3. BUSINESS AGREEMENTS | Alpex Pharma S.A. On June 12, 2008, the Company entered into a collaboration and license agreement (the “Alpex Agreement”) with Alpex Pharma S.A. (“Alpex”), in which Alpex granted the Company an exclusive right and license to use certain Alpex intellectual property in order to develop and commercialize orally disintegrating tablet formulations of pharmaceutical products in United States, Canada and Mexico. In addition, Alpex manufactures Suprenza, the Company’s commercialized pharmaceutical product, on a contract basis. The agreement was amended on November 15, 2011 as part of an Amendment and Coordination Agreement (see the “Three-Party Agreement” below). Under the terms of the Alpex Agreement, as amended by the Three-Party Agreement dated November 15, 2011 (see below), Alpex is entitled to a payment per tablet manufactured and a percentage of all milestone, royalty and other payments received by the Company from Prenzamax, LLC, pursuant to a sublicense agreement (see below). In addition, under the terms of the Alpex Agreement, Alpex retained the right to use the clinical data generated by the Company to file for regulatory approval and market Suprenza in the rest of the world. In the event that Alpex has such sales, Alpex will pay the Company a percentage royalty on net sales, as defined (“Alpex Revenue”). No milestone, royalty or other payments were earned or received by the Company except for the reimbursement of certain regulatory fees under the Three-Party Agreement. On July 1, 2016, the Company announced that it notified the Food and Drug Administration (“FDA”) and Alpex that it was discontinuing Suprenza. Prenzamax, LLC On November 15, 2011, the Company entered into an exclusive license agreement (the “Sublicense Agreement”) with Prenzamax, LLC (“Prenzamax”), in which the Company granted Prenzamax and its affiliates the exclusive right to commercialize Suprenza in the United States. Prenzamax is an affiliate of Akrimax, a related party (see Note 7) and was formed for the specific purpose of managing the Sublicense Agreement. Under the terms of the Sublicense Agreement, Prenzamax is to pay the Company a percentage of the product’s EBITDA, as defined (“Profit Share Payments”). In addition, Prenzamax is to reimburse the Company directly for certain development costs. These payments are to commence once Prenzamax has achieved profitability, as defined in the Sublicense Agreement. Further, under the terms of the Sublicense Agreement, Prenzamax is required to share in the royalty payment due to Alpex under the Alpex Agreement. In addition, Prenzamax is entitled to a percentage of the Alpex Revenue received by the Company. The Company has not been reimbursed for any development costs nor has it earned any Profit Share Payments. On July 1, 2016, the Company announced that it notified Prenzamax that it was discontinuing Suprenza. Three-Party Agreement On November 15, 2011, the Company, Alpex and Prenzamax entered into the Three-Party Agreement wherein the terms of the Alpex Agreement were modified and Prenzamax and the Company agreed to each pay a portion of certain regulatory filing fees for as long as Prenzamax is purchasing Suprenza from Alpex pursuant to the Three-Party Agreement. During the three months ended March 31, 2016, the Company received $292,575 from Alpex as reimbursement for regulatory filing fees that were previously expensed during the three months ended December 31, 2015. The reimbursement was recorded as a reduction of research and development expenses. On July 1, 2016, the Company announced that it notified Alpex and Prenzamax that it was discontinuing Suprenza. Patent and Technology License Agreement LMB has a patent and technology license agreement with Novel Anti-Infective Therapeutics, Inc., (“NAT”) to develop and commercialize Mino-Lok™ on an exclusive, worldwide (except for South America), sub licensable basis. Since May 2014, LMB has paid an annual maintenance fee of $30,000 that increases over five years to $90,000, until commercial sales of a product subject to the license. LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single digits to the low double digits. In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low-single digits. After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties that increase in subsequent years. LMB must also pay NAT up to $1,050,000 upon achieving specified regulatory and sales milestones. Finally, LMB must pay NAT a specified percentage of payments received from any sub licensees. | Alpex Pharma S.A. On June 12, 2008, the Company entered into a collaboration and license agreement (the “Alpex Agreement”) with Alpex Pharma S.A. (“Alpex”), in which Alpex granted the Company an exclusive right and license to use certain Alpex intellectual property in order to develop and commercialize orally disintegrating tablet formulations of pharmaceutical products in United States, Canada and Mexico. In addition, Alpex manufactures Suprenza, the Company’s commercialized pharmaceutical product, on a contract basis. The agreement was amended on November 15, 2011 as part of an Amendment and Coordination Agreement (see the “Three-Party Agreement” below). Under the terms of the Alpex Agreement, as amended by the Three-Party Agreement dated November 15, 2011 (see below), Alpex is entitled to a payment per tablet manufactured and a percentage of all milestone, royalty and other payments received by the Company from Prenzamax, LLC, pursuant to a sublicense agreement (see below). A milestone is generally understood as a completion of a specific defined task towards the completion of a project or performance of a contract. For example, pursuant to the Company’s agreement with Alpex, the Company is required to pay Alpex for the completion of certain tasks including, but not limited to, the development of the analytical methods, formulations and filings of the NDA. In addition, under the terms of the Alpex Agreement, Alpex retained the right to use the clinical data generated by the Company to file for regulatory approval and market Suprenza in the rest of the world. In the event that Alpex has such sales, Alpex will pay the Company a percentage royalty on net sales, as defined (“Alpex Revenue”). No milestone, royalty or other payments have been earned or received by the Company through September 30, 2016 except for the reimbursement of regulatory fees under the Three-Party Agreement. On July 1, 2016, the Company announced that it notified the Food and Drug Administration (“FDA”) and Alpex that it was discontinuing Suprenza. Prenzamax, LLC On November 15, 2011, the Company entered into an exclusive license agreement (the “Sublicense Agreement”) with Prenzamax, LLC (“Prenzamax”), in which the Company granted Prenzamax and its affiliates the exclusive right to commercialize Suprenza in the United States. Prenzamax is an affiliate of Akrimax, a related party (see Note 8) and was formed for the specific purpose of managing the Sublicense Agreement. Under the terms of the Sublicense Agreement, Prenzamax is to pay the Company a percentage of the product’s EBITDA, as defined (“Profit Share Payments”). In addition, Prenzamax is to reimburse the Company directly for certain development costs. These payments are to commence once Prenzamax has achieved profitability, as defined in the Sublicense Agreement. Further, under the terms of the Sublicense Agreement, Prenzamax is required to share in the royalty payment due to Alpex under the Alpex Agreement. In addition, Prenzamax is entitled to a percentage of the Alpex Revenue received by the Company. The Company has not been reimbursed for any development costs nor has it earned any Profit Share Payments through September 30, 2016. On July 1, 2016, the Company announced that it notified Prenzamax that it was discontinuing Suprenza. Three-Party Agreement On November 15, 2011, the Company, Alpex and Prenzamax entered into the Three-Party Agreement wherein the terms of the Alpex Agreement were modified and Prenzamax and the Company agreed to each pay a portion of certain regulatory filing fees for as long as Prenzamax is purchasing Suprenza from Alpex pursuant to the Three-Party Agreement. During the three months ended March 31, 2016, the Company received $292,575 from Alpex as reimbursement for regulatory filing fees that were previously expensed during the three months ended December 31, 2015. The reimbursement was recorded as a reduction of research and development expenses. On July 1, 2016, the Company announced that it notified Alpex and Prenzamax that it was discontinuing Suprenza. Patent and Technology License Agreement LMB has a patent and technology license agreement with Novel Anti-Infective Therapeutics, Inc., (“NAT”) to develop and commercialize Mino-Lok™ on an exclusive, worldwide (except for South America), sub licensable basis. LMB expensed a one-time license fee of $350,000 during the year ended May 31, 2014. LMB will pay an annual maintenance fee of $30,000 that increases over five years to $90,000, until commercial sales of a product subject to the license. LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single digits to the low double digits. In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low-single digits. After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties that increase in subsequent years. LMB must also pay NAT up to $1,050,000 upon achieving specified regulatory and sales milestones. Finally, LMB must pay NAT a specified percentage of payments received from any sub licensees. |
NOTES PAYABLE RELATED PARTIES
NOTES PAYABLE RELATED PARTIES | 3 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 4. NOTES PAYABLE RELATED PARTIES | On March 30, 2016, the Company assumed $772,970 of demand notes payable in the acquisition of LMB. The principal balance of the notes payable to our Chairman, Leonard Mazur, was $760,470 and the principal balance of the notes payable to our Chief Executive Officer, Myron Holubiak, was $12,500. Notes with a principal balance of $704,000 accrue interest at the prime rate plus 1.0% per annum and notes with a principal balance of $68,970 accrue interest at 12% per annum. In April 2016, $600,000 of the prime rate plus 1.0% demand notes payable and accrued interest of $1,985 was repaid to Leonard Mazur. The Board of Directors has authorized revolving demand promissory notes with Leonard Mazur in an aggregate principal amount of up to $2,500,000, of which $1,320,000 is outstanding at December 31, 2016. On September 7, 2016, the Company issued a $500,000 demand promissory note to our Chairman, Leonard Mazur which matures on demand by the lender. The Company then issued $820,000 of additional demand promissory notes to Leonard Mazur during the three months ended December 31, 2016 which mature on the earlier of December 31, 2017 or demand by the lender. These notes accrue interest at the prime rate plus 1%. Interest expense on notes payable – related parties was $13,228 for the three months ended December 31, 2016. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | A summary of the significant accounting policies followed by the Company in the preparation of the consolidated financial statements is as follows: Use of Estimates The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for acquisitions, stock-based compensation, valuation of warrants, and income taxes. Actual results could differ from those estimates and changes in estimates may occur. Cash and Cash Equivalents The Company considers all highly liquid instruments with maturities of less than three months at the time of purchase to be cash equivalents. From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has never experienced any losses related to these balances. Property and Equipment Property and equipment are valued at cost and are being depreciated over their useful lives using the straight-line method for financial reporting purposes. Routine maintenance and repairs are charged to expense as incurred. Expenditures which materially increase the value or extend useful lives are capitalized. Property and equipment are depreciated over estimated useful lives of three to five years. Property and equipment consisted of the following at September 30, 2016: 2016 Computer equipment $ 8,522 Less accumulated depreciation (4,780 ) $ 3,742 Depreciation and amortization expense for the year ended September 30, 2016 was $1,343. There was no depreciation and amortization expense for the year ended September 30, 2015 and the nine months ended September 30, 2014. Research and Development Research and development costs, including upfront fees and milestones paid to collaborators who are performing research and development activities under contractual agreement with the Company, are expensed as incurred. The Company defers and capitalizes its nonrefundable advance payments that are for research and development activities until the related goods are delivered or the related services are performed. When the Company is reimbursed by a collaboration partner for work the Company performs, it records the costs incurred as research and development expenses and the related reimbursement as a reduction to research and development expenses in its consolidated statement of operations. Research and development expenses primarily consist of clinical and non-clinical studies, materials and supplies, third-party costs for contracted services, and payments related to external collaborations and other research and development related costs. In-process Research and Development and Goodwill In-process research and development represents the value of LMB’s leading drug candidate which is an antibiotic solution used to treat catheter-related bloodstream infections (Mino-Lok™). Goodwill represents the value of LMB’s industry relationships and its assembled workforce. In-process research and development and goodwill will not be amortized but will be tested at least annually for impairment. The Company reviews intangible assets annually to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life of any intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. No triggering events occurred since the acquisition of LMB that would suggest that a potential impairment may have occurred through September 30, 2016. The Company evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying value of an asset might be impaired. Goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a two-step process is then performed. The Company performed a qualitative assessment for our 2016 analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying value of the reporting unit exceeds its fair value. Accordingly, no further testing was performed as management believes that there are no impairment issues in regards to goodwill as of September 30, 2016. Patents and Trademarks Certain costs of outside legal counsel related to obtaining trademarks for the Company are capitalized. Patent costs are amortized over the legal life of the patents, generally twenty years, starting at the patent issuance date. The costs of unsuccessful and abandoned applications are expensed when abandoned. The cost of maintaining existing patents are expensed as incurred. Revenue Recognition The Company recognizes revenue using the four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the selling price is fixed and determinable, and (4) collectability is reasonably assured. Provisions for discounts, rebates, estimated returns and allowances, and other adjustments are provided in the period that the revenue is recorded. The Company’s license and collaboration agreements with certain partners also provide for contingent payments to us based solely upon the performance of the respective partner. For such contingent amounts we expect to recognize the payments as revenue when earned under the applicable contract, which is generally upon completion of performance by the respective partner, provided that collection is reasonably assured. The Company’s license and collaboration agreements with its partners also provide for payments to us upon the achievement of specified sales volumes of approved drugs. We consider these payments to be similar to royalty payments and we will recognize such sales-based payments upon achievement of such sales volumes, provided that collection is reasonably assured. Stock-Based Compensation The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees and directors, net of expected forfeitures, as an expense in the consolidated statement of operations over the requisite service period based on the fair value for each stock award on the grant date. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. Due to its limited operating history, limited number of sales of its common stock and limited history of its shares being publicly traded, the Company estimates its volatility in consideration of a number of factors including the volatility of comparable public companies. The estimated forfeiture rate is based on historical forfeiture information as well as subsequent events occurring prior to the issuance of the financial statements. Because our stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide a reliable single measure of fair value of our stock options The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the consolidated statement of operations over the service period based on the measurement of fair value for each stock award. Derivative Instruments The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks; however, certain warrants to purchase common stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. Income Taxes Citius Pharmaceuticals, LLC was treated as a partnership for federal and state income taxes prior to the September 12, 2014 Reverse Acquisition. A partnership’s income or loss is allocated directly to the Members for income tax purposes. The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing our tax returns, including the position that Citius Pharmaceuticals, LLC qualified as a pass-through entity, are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions that require accrual or disclosure as of September 30, 2016. Any interest or penalties are charged to expense. During the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014, the Company did not recognize any interest and penalties. Tax years subsequent to December 31, 2012 are subject to examination by federal and state authorities. After the Reverse Acquisition, we recognize deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We provide a valuation allowance, if necessary, for deferred tax assets for which we do not consider realization of such assets to be “more-likely-than-not”. The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. Basic and Diluted Net Loss per Common Share Basic and diluted net loss per common share is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of options, warrants and convertible securities were not included in the calculation of the diluted loss per share because they were anti-dilutive. Fair Value of Financial Instruments The financial statements include various estimated fair value information. Financial instruments are initially recorded at historical cost. If subsequent circumstances indicate that a decline in the fair value of a financial asset is other than temporary, the financial asset is written down to its fair value. Unless otherwise indicated, the fair values of financial instruments approximate their carrying amounts. By their nature, all financial instruments involve risk, including credit risk for non-performance by counterparties. The fair values of cash and cash equivalents, accounts payable, accrued interest, accrued expenses, notes payable and due to related party approximate their recorded amounts because of their relatively short settlement terms. The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The Company's financial liabilities measured at fair value on September 30, 2016 and 2015 consists solely of the derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 6). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. The Company has no financial assets measured at fair value. The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the years ended September 30, 2016 and 2015, and the nine month period ended September 30, 2014. Segment Reporting The Company currently operates as a single segment. Concentrations of Credit Risk The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements. Recently Issued Accounting Standards In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which applies should a company be facing probable liquidation within one year of the issuance of the financial statements, but is not actually in liquidation at the time of issuance. The applicable accounting basis for presentation remains as a going concern, but if liquidation within one year is probable, then certain disclosures must be included in the financial statement presentation. ASU 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. In August 2015, the FASB also issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date which deferred the effective date of ASU 2014-09 by one year. Originally scheduled to be effective for fiscal years beginning after December 15, 2016, ASU 2015-14 is effective for the year ended September 30, 2019. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of this ASU on the financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” to require changes to several areas of employee share-based payment accounting in an effort to simplify share-based reporting. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, forfeitures, and intrinsic value accounting for private entities. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this ASU on the financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows in an effort to reduce existing diversity in practice. The update includes eight specific cash flow issues and provides guidance on the appropriate cash flow presentation for each. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017. The Company does not expect the adoption of this guidance to have a material impact on the financial statements. |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
NOTE 6. NOTES PAYABLE | Convertible Promissory Notes Between July 12, 2010 and November 30, 2012, the Company issued several convertible promissory notes (collectively the “Convertible Notes”) to two existing investors in aggregate total principal amount of $1,460,000. The Convertible Notes accrued interest at 3.00% per annum and were payable on demand only after their respective 10-year maturities. Between January 1, 2013 and March 25, 2013, the Company issued additional Convertible Notes to existing investors in aggregate total principal amount of $225,000. The additional Convertible Notes accrued interest at 5.00% per annum and were payable on demand only after their respective 10-year maturities. The unpaid principal and accrued interest were only convertible into common stock following a reorganization or conversion into a corporation at the option of the holder. The unpaid principal and accrued interest will convert into common stock at the greater of the fair value of the common stock on the date of the conversion or $0.25 ($0.69 if the Company’s common stock is admitted to trade on a national exchange prior to the date of conversion). On July 31, 2014, in anticipation of the completion of the reverse acquisition and the Private Offering, the note holders demanded conversion of the outstanding $1,685,000 Convertible Notes and accrued interest of $151,813 into 3,061,355 shares of common stock at a conversion price of $0.60 per share. Promissory Notes In November 2013, the Company issued two promissory notes (the “Promissory Notes”) to two existing investors in aggregate total principal amount of $600,000. The Promissory Notes accrued interest at 5.00% per annum and were due at the earliest of (1) December 19, 2014, (2) the occurrence of an event of default as defined in the Promissory Notes, (3) an initial installment of $100,000 principal amount, to each investor, upon the receipt by the Company of a minimum $6,500,000 in aggregate proceeds under any financing transaction, (4) a second installment of $100,000 principal amount, to each investor, upon the receipt by the Company of a minimum $8,500,000 in aggregate proceeds under any financing transaction, and (5) a third installment of $100,000 principal amount, to each investor, upon the receipt by the Company of a minimum $10,000,000 in aggregate proceeds under any financing transaction. At September 30, 2014, the Promissory Notes had an outstanding aggregate principal balance of $600,000. On December 31, 2014, the note holders requested conversion of the outstanding $600,000 Promissory Notes and accrued interest of $33,333 into 1,055,554 shares of common stock at a conversion price of $0.60 per share. Subordinated Convertible Promissory Note In 2013, the Company entered into an investment banking agreement to raise up to $6 million of 10% subordinated convertible promissory notes. The agreement contemplated a reverse acquisition with a public company and an automatic conversion of the notes into units of common stock and warrants, as defined therein. In April 2013, the Company issued a $350,000 subordinated convertible promissory note (the “Subordinated Note”). The Subordinated Note accrued interest at 10% per annum and was payable on demand any time after April 2014. If the Company has not repaid the Subordinated Note at the closing of a reverse acquisition, the unpaid principal and accrued interest will automatically convert into common stock by dividing the amount due by a price per unit of $0.65. Also, upon automatic conversion, the purchaser of the Subordinated Note will receive a warrant to purchase the same number of shares in to which the Subordinated Note converts. On July 31, 2014, in anticipation of the completion of the reverse acquisition and the Private Offering, the note holder demanded conversion of the outstanding $350,000 Subordinated Note and accrued interest of $44,245 into 606,531 shares of common stock at a conversion price of $0.65 per share. Notes Payable – Related Parties On March 30, 2016, the Company assumed $772,970 of demand notes payable in the acquisition of LMB. The principal balance of the notes payable to our Chairman, Leonard Mazur, was $760,470 and the principal balance of the notes payable to our Chief Executive Officer, Myron Holubiak, was $12,500. Notes with a principal balance of $704,000 accrue interest at the “Prime Rate”, as published in the Wall Street Journal on the last day of each month plus 1% and notes with a principal balance of $68,970 accrue interest at 12% per annum. In April 2016, $600,000 of the “Prime Rate” plus 1% demand notes payable and accrued interest of $1,985 was repaid to Leonard Mazur. On September 7, 2016, the Company issued a $500,000 demand promissory note to our Chairman, Leonard Mazur which matures on the earlier of December 31, 2016 or demand by the lender. The note accrues interest at the “Prime Rate”, as published in the Wall Street Journal on the last day of each month, plus 1%. Interest Expense During 2013, the Company incurred $42,000 of debt issuance costs related to the Subordinated Note which was amortized over the term of the underlying debt. Amortization of debt issuance costs recorded as interest expense for the nine months ended September 30, 2014 amounted to $14,000. Interest expense on the notes for the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014, including non-cash interest related to debt issuance costs, was $8,994, $7,500, and $93,067, respectively. |
DERIVATIVE WARRANT LIABILITY
DERIVATIVE WARRANT LIABILITY | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 7. DERIVATIVE WARRANT LIABILITY | Derivative financial instruments are recognized as a liability on the consolidated balance sheet and measured at fair value. At December 31, 2016 and September 30, 2016, the Company had outstanding warrants to purchase 4,033,334 shares and 4,616,668 shares, respectively, of its common stock that are considered to be derivative instruments since the agreements contain “down round” provisions whereby the exercise price of the warrants is subject to adjustment in the event that the Company issues common stock for less than $0.60 per share within one-year of the original issuance of the warrants (see Note 6). The Company performs valuations of the warrants using the Black-Scholes option pricing model which value was also compared to a Binomial Option Pricing Model for reasonableness. The Black-Scholes option pricing model requires input of assumptions including the risk-free interest rates, volatility, expected life and dividends. Selection of these inputs involves management’s judgment and may impact net loss. Due to our limited operating history and limited number of sales of our common stock, we estimate our volatility based on a number of factors including the volatility of comparable publicly traded pharmaceutical companies. The volatility factor used in the Black-Scholes option pricing model has a significant effect on the resulting valuation of the derivative liabilities on our balance sheet. The volatility calculated at December 31, 2016 was 76%. We used a risk-free interest rate of 1.93%, estimated lives of 4.02 to 4.32 years, which are the remaining contractual lives of the warrants subject to “down round” provisions, and no dividends to our common stock. The volatility calculated at September 30, 2016 was 73%. We used a risk-free interest rate of 1.14%, estimated lives of 4.10 to 4.57 years, which are the remaining contractual lives of the warrants subject to “down round” provisions, and no dividends to our common stock. During the three months ended December 31, 2016, anti-dilution rights related to warrants to purchase 583,334 shares of common stock expired which resulted in a reclassification from derivative warrant liability to additional paid-in capital of $149,209. The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in the fair value hierarchy: Three Months Ended December 31, 2016 Three Months Ended December 31, 2015 Derivative warrant liability, beginning of period $ 1,681,973 $ 738,955 Fair value of warrants issued — 157,984 Total realized/unrealized gains included in net loss (622,186 ) (23,940 ) Reclassification of liability to additional paid-in capital (149,209 ) — Derivative warrant liability, end of period $ 910,578 $ 872,999 | Derivative financial instruments are recognized as a liability on the consolidated balance sheet and measured at fair value. At September 30, 2016 and 2015, the Company had outstanding warrants to purchase 4,616,668 and 3,037,037 shares, respectively, of its common stock that are considered to be derivative instruments since the agreements contain “down round” provisions whereby the exercise price of the warrants is subject to adjustment in the event that the Company issues common stock for less than $0.60 per share within one-year of the issuance of the warrants (see Note 7). The Company performs valuations of the warrants using a probability weighted Black-Scholes option pricing model which value was also compared to a Binomial Option Pricing Model for reasonableness. This model requires input of assumptions including the risk-free interest rates, volatility, expected life and dividend rates, and has also considered the likelihood of “down-round” financings. Selection of these inputs involves management’s judgment and may impact net income. Due to our limited operating history and limited number of sales of our common stock, we estimate our volatility based on a number of factors including the volatility of comparable publicly traded pharmaceutical companies. The volatility factor used in the Black-Scholes option pricing model has a significant effect on the resulting valuation of the derivative liabilities on our balance sheet. The volatility calculated at September 30, 2016 was 73% and we used a risk-free interest rate of 1.14%, estimated lives of 4.10 to 4.57 years, which are the remaining contractual lives of the warrants subject to “down-round” provisions, and no dividends to our common stock. The volatility calculated at September 30, 2015 was 57% and we used a risk-free interest rate of 1.37%, estimated lives of 4.47 to 4.96 years, which are the remaining contractual lives of the warrants subject to “down-round” provisions, and no dividends to our common stock. On September 12, 2015, anti-dilution rights related to warrants to purchase 5,080,080 shares of common stock expired which resulted in a reclassification from derivative warrant liability to additional paid-in capital of $1,148,328. During the year ended September 30, 2016, anti-dilution rights related to warrants to purchase 3,037,037 shares of common stock expired which resulted in a reclassification from derivative warrant liability to additional paid-in capital of $1,093,765. The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy (see Note 4): Year Ended September 30, 2016 Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Derivative warrant liability, beginning of period $ 738,955 $ 1,450,943 $ — Fair value of warrants issued 1,198,564 768,435 1,459,531 Total realized/unrealized losses (gains) included in net loss 838,219 (332,095 ) (8,588 ) Reclassification of liability to additional paid-in capital (1,093,765 ) (1,148,328 ) — Derivative warrant liability, end of period $ 1,681,973 $ 738,955 $ 1,450,943 |
COMMON STOCK, STOCK OPTIONS AND
COMMON STOCK, STOCK OPTIONS AND WARRANTS | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 7. COMMON STOCK, STOCK OPTIONS AND WARRANTS | Common Stock On September 15, 2016, the stockholders approved an increase in the number of shares of authorized common stock from 90,000,000 shares to 200,000,000 shares. In addition, the stockholders granted the Board of Directors the authority to affect a reverse stock split of our common stock by a ratio of not less than 1-for-8 and not more than 1-for-20 at any time prior to September 15, 2017. Private Offerings On September 12, 2014, the Company sold 3,400,067 Units for a purchase price of $0.60 per Unit for gross proceeds of $2,040,040. Each Unit consists of one share of common stock and one five-year warrant (the “Investor Warrants”) to purchase one share of common stock at an exercise price of $0.60 (the “Private Offering”). The Investor Warrants will be redeemable by the Company at a price of $0.001 per Investor Warrant at any time subject to the conditions that (i) the common stock has traded for twenty (20) consecutive trading days with a closing price of at least $1.50 per share with an average trading volume of 50,000 shares per day and (ii) the Company provides 20 trading days prior notice of the redemption and the closing price of the common stock is not less than $1.17 for more than any 3 days during such notice period and (iii) the underlying shares of common stock are registered. The Company issued the Placement Agent and their designees five-year warrants (the “Placement Agent Unit Warrants”) to purchase 680,013 Units at an exercise price of $0.60 per Unit. The Placement Agent Unit Warrants are exercisable on a cash or cashless basis with respect to purchase of the Units, and will be exercisable only for cash with respect to warrants received as part of the Units. In addition, the Placement Agent was issued warrants to purchase 1,000,000 shares of common stock exercisable for cash at $0.60 per share for investment banking services provided in connection with the transaction (the “Placement Agent Share Warrants”). In connection with the Private Offering, the Company entered into a Registration Rights Agreement pursuant to which the Company filed a registration statement, registering for resale all shares of common stock (i) included in the Units; and (ii) issuable upon exercise of the Investor Warrants. The Company filed the Registration Statement on September 11, 2015 and it was declared effective on January 21, 2016. During the year ended September 30, 2015, the Company sold an additional 2,837,037 Units for a purchase price of $0.54 per Unit and 200,000 Units for a purchase price of $0.60 per Unit for gross proceeds of $1,652,000. Each Unit consists of one share of common stock and one Investor Warrant (see description above). During the year ended September 30, 2016, the Company sold an additional 4,350,001 Units for a purchase price of $0.54 per Unit and 266,667 Units for a purchase price of $0.60 per Unit for gross proceeds of $2,509,000. Each Unit consists of one share of common stock and one Investor Warrant (see description above). On May 12, 2016, the Company announced that it had completed the final phase of the Private Offering. On March 22, 2016, the Company sold 5,000,000 shares of common stock at $0.60 per share to its Chairman of the Board, Leonard Mazur, for gross proceeds of $3,000,000. There were no expenses related to this placement. In October 2016, the Company commenced an offering (the “2016 Offering”) of up to 15,000,000 Units at a price of $0.40 per Unit (the “2016 Offering Units”), each 2016 Offering Unit consists of (i) one share of common stock and (ii) a warrant to purchase one share of common stock (the “2016 Offering Warrants”) for gross proceeds of up to $6,000,000 with an over-subscription allotment of up to $2,000,000. Each 2016 Offering Warrant has an exercise price of $0.55 and is exercisable for five years from the date of issuance. The Placement Agent will receive a 10% cash commission on the gross proceeds of each sale of the 2016 Offering Units. In addition, on each closing the Placement Agent will also receive (i) an expense allowance equal to 3% of the proceeds of the sale, and (ii) warrants to purchase a number of shares of common stock equal to 10% of the 2016 Offering Units sold at an exercise price of $0.55 per share. On November 23, 2016, the Company sold 975,000 2016 Offering Units for gross proceeds of $390,000. The estimated fair value of the warrants included in the 2016 Offering Units sold to the investors was $234,505. Additionally, a warrant to purchase 97,500 shares of common stock was granted to the Placement Agent pursuant to the above pricing terms. The estimated fair value of the warrant granted to the Placement Agent was $23,451. The Placement agent was paid commissions and an expense allowance of $50,700. Other costs of the placement were $156,896. Stock Options On September 12, 2014, the Board of Directors adopted the 2014 Stock Incentive Plan (the “2014 Plan”) and reserved 13,000,000 shares of common stock for issuance to employees, directors and consultants. On September 12, 2014, the stockholders approved the plan. Pursuant to the 2014 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards. As of December 31, 2016, there were options to purchase an aggregate of 8,732,770 shares of common stock outstanding under the 2014 Plan and 4,267,230 shares available for future grants. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Due to its limited operating history and limited number of sales of its Common Stock, the Company estimated its volatility in consideration of a number of factors including the volatility of comparable public companies. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the consolidated financial statements, to estimate option exercises and employee terminations within the valuation model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term. A summary of option activity under the 2014 Plan as of December 31, 2016 and the changes during the three months then ended is presented below: Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at October 1, 2016 8,732,770 $ 0.54 8.59 years $ 1,355,924 Granted — — Exercised — — Forfeited or expired — — Outstanding at December 31, 2016 8,732,770 $ 0.54 8.34 years $ 468,958 Exercisable at December 31, 2016 5,286,654 $ 0.45 7.91 years $ 336,484 Stock-based compensation expense for the three months ended December 31, 2016 and 2015 was $241,514 and $121,299, respectively. At December 31, 2016, unrecognized total compensation cost related to unvested awards of $1,145,334 is expected to be recognized over a weighted average period of 1.58 years. Warrants The Company has reserved 19,131,595 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at December 31, 2016: Exercise price Number Expiration Dates Investor Warrants $ 0.60 3,400,067 September 12, 2019 Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Warrants underlying Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Placement Agent Share Warrants 0.60 1,000,000 September 12, 2019 Investor Warrants 0.60 2,145,371 March 19, 2020 – June 26, 2020 Investor Warrants 0.60 891,666 July 2, 2020 – September 14, 2020 Investor Warrants 0.60 583,334 November 5, 2020 – November 20, 2020 Investor Warrants 0.60 2,133,334 (1) January 7, 2021 – March 21, 2021 Investor Warrants 0.60 1,900,000 (1) April 15, 2021 – April 25, 2021 LMB Warrants 0.41 1,352,266 June 12, 2019 - March 2, 2021 LMB Warrants 0.66 122,319 September 30, 2019 - January 8, 2020 LMB Warrants 1.38 265,814 November 3, 2019 - March 6, 2020 LMB Warrants 0.50 1,108,249 August 18, 2020 – March 14, 2021 LMB Warrants 0.91 796,649 March 24, 2022 – April 29, 2022 Financial Advisor Warrants 0.20 1,000,000 August 15, 2021 2016 Offering Warrants 0.55 975,000 November 23, 2021 2016 Offering Placement Agent Warrants 0.55 97,500 November 23, 2021 19,131,595 __________ (1) Fair value of these warrants are included in the derivative warrant liability On November 23, 2016, the Company sold 975,000 2016 Offering Units, at a price of $0.40 per Unit, consisting of (i) one share of common stock and (ii) a warrant to purchase one share of common stock. Each 2016 Offering Warrant has an exercise price of $0.55 and is exercisable for five years from the date of issuance. Additionally, a warrant to purchase 97,500 shares of common stock was granted to the Placement Agent pursuant to the above pricing terms. At December 31, 2016, the weighted average remaining life of all of the outstanding warrants is 3.59 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants outstanding was $280,568. | Common Stock In May 2014, the Company issued 200,000 shares of common stock for $50,000, or $0.25 per share. On September 12, 2014, in connection with the Reverse Acquisition, 5,000,000 shares of common stock were recorded in the financial statements of Citius Pharmaceuticals, LLC, the accounting acquirer (See Note 1 – Reverse Acquisition). On September 15, 2016, the stockholders approved an increase in the number of shares of authorized common stock from 90,000,000 shares to 200,000,000 shares. In addition, the stockholders granted the Board of Directors the authority to effect a reverse stock split of our common stock by a ratio of not less than 1-for-8 and not more than 1-for-20 at any time prior to September 15, 2017. Private Offerings In 2014, the Company entered into an investment banking agreement to raise up to $5.1 million and issue up to 8,500,000 Units described below. The agreement contemplated a Reverse Acquisition with a public company. As of December 31, 2013, the Company capitalized as deferred offering costs a $25,000 retainer for legal costs associated with this offering. The $25,000 retainer was charged to additional paid-in capital on completion of the first closing of the offering. On September 12, 2014, the Company sold 3,400,067 Units for a purchase price of $0.60 per Unit for gross proceeds of $2,040,040. Each Unit consists of one share of common stock and one five-year warrant (the “Investor Warrants”) to purchase one share of common stock at an exercise price of $0.60, (the “Private Offering”). The exercise price of the Investor Warrants is subject to adjustment, for up to one year, if the Company issues common stock at a price lower than the exercise price, subject to certain exceptions. The 2015 private placement described below did not result in an adjustment of the exercise price of the Investor Warrants. The Investor Warrants will be redeemable by the Company at a price of $0.001 per Investor Warrant at any time subject to the conditions that (i) the common stock has traded for twenty (20) consecutive trading days with a closing price of at least $1.50 per share with an average trading volume of 50,000 shares per day and (ii) the Company provides 20 trading days prior notice of the redemption and the closing price of the common stock is not less than $1.17 for more than any 3 days during such notice period and (iii) the underlying shares of common stock are registered. The Placement Agent was paid a commission of ten percent (10%) and a non-accountable expense allowance of three percent (3%) of the funds raised in the Private Offering. As a result of the foregoing arrangement, the Placement Agent was paid commissions and expenses of $265,206. In addition, the Company issued to the Placement Agent and their designees five-year warrants (the “Placement Agent Unit Warrants”) to purchase 680,013 Units at an exercise price of $0.60 per Unit. The Placement Agent Unit Warrants are exercisable on a cash or cashless basis with respect to purchase of the Units, and will be exercisable only for cash with respect to warrants received as part of the Units. The exercise price of the warrants underlying the Placement Agent Unit Warrants is subject to adjustment, for up to one year, if the Company issues common stock at a price lower than the exercise price, subject to certain exceptions. In addition, the Placement Agent was issued warrants to purchase 1,000,000 shares of common stock exercisable for cash at $0.60 per share for investment banking services provided in connection with the transaction (the “Placement Agent Share Warrants”). Other cash expenses related to the private placement totaled $169,000. The Placement Agent may, while the Placement Agent Unit Warrants are outstanding, appoint one person to the Board of Directors, and designate one person who may attend meetings of the Board of Directors as an observer. On November 2, 2015, the Placement Agent waived its right to appoint a person to the Board of Directors. In connection with the Private Offering, the Company entered into a Registration Rights Agreement pursuant to which the Company is required to file a registration statement (the “Registration Statement”), registering for resale all shares of common stock (i) included in the Units; and (ii) issuable upon exercise of the Investor Warrants. The Company has agreed to use its reasonable efforts to cause the Registration Statement to be filed no later than 60 days after the completion of the Private Offering (the “Filing Deadline”), and to have the Registration Statement declared effective within 180 days of the Filing Deadline. Any holders of the shares of common stock removed from the Registration Statement as a result of a Section 415 comment from the SEC shall be included in a subsequent registration statement the Company will file no later than six months after the prior registration statement (or such other period as permitted by SEC rules). The Company filed the Registration Statement on September 11, 2015 and it was declared effective on January 21, 2016. During the year ended September 30, 2015, the Company sold an additional 2,837,037 Units for a purchase price of $0.54 per Unit and 200,000 Units for a purchase price of $0.60 per Unit for gross proceeds of $1,652,000. Each Unit consists of one share of common stock and one Investor Warrant (see description above). There was no placement agent for the 2015 private placements and other cash expenses related to the placements were $142,507. In connection with these placements, the Company credited $741,058 to stockholders’ equity (deficit) and $768,435 to derivative warrant liability. During the year ended September 30, 2016, the Company sold an additional 4,350,001 Units for a purchase price of $0.54 per Unit and 266,667 Units for a purchase price of $0.60 per Unit for gross proceeds of $2,509,000. Each Unit consists of one share of common stock and one Investor Warrant (see description above). There was no placement agent for these private placements and other cash expenses related to the placements were $81,312. In connection with these placements, the Company credited $1,229,124 to stockholders’ equity (deficit) and $1,198,564 to derivative warrant liability. On March 22, 2016, the Company sold 5,000,000 shares of common stock at $0.60 per share to its Chairman of the Board, Leonard Mazur, for gross proceeds of $3,000,000. There were no expenses related to this placement. Stock Options On September 12, 2014, the Board of Directors adopted the 2014 Stock Incentive Plan (the “2014 Plan”) and reserved 13,000,000 shares of common stock for issuance to employees, directors and consultants. On September 12, 2014, the stockholders approved the plan. Pursuant to the 2014 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards. As of September 30, 2016, there were options to purchase an aggregate of 8,732,770 shares of common stock outstanding under the 2014 Plan and 4,267,230 shares available for future grants. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Due to its limited operating history and limited number of sales of its common stock, the Company estimated its volatility in consideration of a number of factors including the volatility of comparable public companies. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the consolidated financial statements, to estimate option exercises and employee terminations within the valuation model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term. The following assumptions were used in determining the fair value of stock option grants: Year Ended September 30, 2016 Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Risk-free interest rate 0.95 – 1.40 % 1.37 – 1.52 % 1.83 % Expected dividend yield 0 % 0 % 0 % Expected term 4.75 – 9 years 2.5 – 6 years 5 – 6 years Forfeiture rate 0 % 0 % 0 % Expected volatility 57 – 74 % 53 – 58 % 54 % A summary of option activity under the 2014 Plan is presented below: Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2014 — $ — Granted 3,300,000 0.45 Exercised — — Forfeited or expired — — Outstanding at September 30, 2014 3,300,000 0.45 9.96 years $ 495,000 Granted 600,000 0.60 Exercised — — Forfeited or expired — — Outstanding at September 30, 2015 3,900,000 0.47 8.94 years $ 297,000 Granted 3,674,000 0.76 Assumed in acquisition 1,158,770 0.07 Exercised — — Forfeited or expired — — Outstanding at September 30, 2016 8,732,770 $ 0.54 8.59 years $ 1,355,924 Exercisable at September 30, 2016 5,136,654 $ 0.45 8.14 years $ 1,059,615 On September 12, 2014, the Board of Directors granted stock options to purchase 3,300,000 shares of common stock at an exercise price of $0.45 per share. The weighted average grant-date fair value of the options granted was estimated at $0.34 per share. These options vest over three years and have a term of 10 years. On April 1, 2015, the Board of Directors granted stock options to purchase 100,000 shares of common stock at an exercise price of $0.60 per share. The weighted average grant-date fair value of the options granted was estimated at $0.16 per share. These options vested immediately and have a term of 5 years. On June 1, 2015, the Board of Directors granted stock options to purchase 500,000 shares of common stock at an exercise price of $0.60 per share. The weighted average grant-date fair value of the options granted was estimated at $0.27 per share. These options vest over three years and have a term of 10 years. In October 2015, the Company appointed two new directors. Each director received an option to purchase 400,000 shares of common stock at an exercise price of $0.54 per share in consideration for their services as members of the Board of Directors. The weighted average grant-date fair value of the options was estimated at $0.28 per share. These options vest over 14 months and have a term of 10 years. On March 30, 2016, the Company assumed stock options to purchase 1,158,770 shares of common stock in connection with the acquisition of LMB. The LMB option holders received stock options to purchase 1,068,241 shares at an exercise price of $0.001 per share and 90,529 shares at an exercise price of $0.91 per share. Pursuant to the original grants, options to purchase 72,423 shares were immediately vested and options to purchase 1,086,347 shares vest over three years. The March 30, 2016 estimated fair value of the stock options was $670,242. The fair value of the vested options was estimated at $461,808 and has been included in the purchase price of LMB. The March 30, 2016 fair value of the unvested options was estimated at $208,434 per share and will be expensed over the remaining vesting period of the options. These options all had original terms of 10 years. On June 23, 2016, the Board of Directors granted stock options to four directors. Each director received an option to purchase 200,000 shares of common stock at an exercise price of $0.80 per share in consideration for their services as members of the Board of Directors. The weighted average grant-date fair value of the options was estimated at $0.44 per share. These options vest in full on June 23, 2017 and have a term of 10 years. In July 2016, the Board of Directors granted stock options to purchase a total of 2,074,000 shares to three employees at prices ranging from $0.70 to $0.90 per share. The weighted average grant date fair value of the options was estimated at $0.52 per share. These options vest over terms of 19 to 48 months and have a term of 10 years. Stock-based compensation expense for the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014 was $732,151, $486,271 and $470,185, respectively. At September 30, 2016, unrecognized total compensation cost related to unvested awards of $1,510,923 is expected to be recognized over a weighted average period of 1.67 years. Warrants The Company has reserved 18,059,095 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2016: Exercise price Number Expiration Dates Investor Warrants $ 0.60 3,400,067 September 12, 2019 Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Warrants underlying Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Placement Agent Share Warrants 0.60 1,000,000 September 12, 2019 Investor Warrants 0.60 2,145,371 March 19, 2020 – June 26, 2020 Investor Warrants 0.60 891,666 July 2, 2020 – September 14,2020 Investor Warrants 0.60 583,334 (1) November 5, 2020 – November 20, 2020 Investor Warrants 0.60 2,133,334 (1) January 7, 2021 – March 21, 2021 Investor Warrants 0.60 1,900,000 (1) April 15, 2021 – April 25, 2021 LMB Warrants 0.41 1,352,266 June 12, 2019 – March 2, 2021 LMB Warrants 0.66 122,319 September 30, 2019 – January 8, 2020 LMB Warrants 1.38 265,814 November 3, 2019 – March 6, 2020 LMB Warrants 0.50 1,108,249 August 18, 2020 – March 14, 2021 LMB Warrants 0.91 796,649 March 24, 2022 – April 29, 2022 Financial Advisor Warrants 0.20 1,000,000 August 15, 2021 18,059,095 _____________________ (1) Fair value of these warrants are included in the derivative warrant liability On March 30, 2016, the Company granted warrants to purchase 3,645,297 shares of common stock in connection with the acquisition of LMB. The warrants have exercise prices between $0.41 and $1.38 per share. All warrants were vested at March 30, 2016. The fair value of the warrants was estimated at $1,071,172 and has been included in the purchase price of LMB. On August 16, 2016, the Company granted warrants to purchase 1,000,000 shares of common stock in connection with a one year financial advisory agreement. The warrants were vested on issuance, have an exercise price of $0.20 per share and are exercisable on a cash or cashless basis. The fair value of the warrants was estimated at $477,181 and recorded as a prepaid expense on the issuance date. During the year ended September 30, 2016, the Company expensed $60,000 of the initial prepaid expense amount and the balance will be expensed over the remaining term of the agreement. At September 30, 2016, the weighted average remaining life of all of the outstanding warrants is 3.77 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants outstanding was $1,273,985. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 8. RELATED PARTY TRANSACTIONS | As of December 31, 2016 and September 30, 2016, the Company owed $27,637 to a company affiliated through common ownership for the expenses the related party paid on the Company’s behalf and services performed by the related party. Our Chairman of the Board, Leonard Mazur, is the cofounder and Vice Chairman of Akrimax Pharmaceuticals, LLC (“Akrimax”), a privately held pharmaceutical company specializing in producing cardiovascular and general pharmaceutical products (see Note 3). Our Chairman of the Board, Leonard Mazur, and our Chief Executive Officer, Myron Holubiak, were co-founders and significant shareholders in LMB. In connection with the acquisition of LMB, our Chairman purchased an additional 5,000,000 shares of the Company. The Company has outstanding debt due to Leonard Mazur and Myron Holubiak (see Note 4). General and administrative expense for each of the three months ended December 31, 2016 and 2015 includes $12,000 paid to a financial consultant who is a stockholder of the Company. | The Company’s headquarters were previously located in Maynard, MA in the office space of a company affiliated through common ownership. In connection with the March 30, 2016 acquisition of LMB, the Company moved its principal executive offices to Cranford, NJ. The Company did not record any revenue or expense related to the use of the Maynard, MA office space as management has determined the usage to be immaterial and the affiliate has not charged for the usage. As of September 30, 2016 and 2015, the Company owed $27,637 and $70,386, respectively, to a company affiliated through common ownership for the expenses the related party paid on the Company’s behalf and services performed by the related party. Our Chairman of the Board, Leonard Mazur, is the cofounder and Vice Chairman of Akrimax Pharmaceuticals, LLC (“Akrimax”), a privately held pharmaceutical company specializing in producing cardiovascular and general pharmaceutical products (see Note 3). Our Chairman of the Board, Leonard Mazur, and our Chief Executive Officer, Myron Holubiak, are co-founders and were significant shareholders in LMB. In connection with the acquisition of LMB, our Chairman purchased an additional 5,000,000 shares of the Company. |
OPERATING LEASE
OPERATING LEASE | 3 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 9. OPERATING LEASE | LMB leases office space from Akrimax (see Note 7) in Cranford, New Jersey at a monthly rental rate of $2,167 pursuant to an agreement which currently expires on October 31, 2017. Rent expense for the three months ended December 31, 2016 was $6,501. There was no rent expense for the three months ended December 31, 2015. |
EMPLOYMENT AND CONSULTING AGREE
EMPLOYMENT AND CONSULTING AGREEMENTS | 12 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
NOTE 10. EMPLOYMENT AND CONSULTING AGREEMENTS | Employment Agreements The Company entered into a three year employment agreement with its Chief Executive Officer, Leonard Mazur, effective September 12, 2014. Upon expiration, the agreement automatically renews for successive periods of one-year. The agreement requires the Company to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement. Under the agreement, Leonard Mazur was granted options to purchase 3,300,000 shares of common stock (see Note 7 – Stock Options On March 30, 2016, in connection with the acquisition of LMB, the Company entered into a three year employment agreement with Myron Holubiak to serve as Chief Executive Officer. Upon expiration, the agreement automatically renews for successive periods of one-year. The agreement requires the Company to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement. The Company has employment agreements with certain other employees that require the Company to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement. Consulting Agreements Effective September 1, 2014, the Company entered into three consulting agreements. Two of the agreements are for financial consulting services including accounting, preparation of financial statements and filings with the SEC. The third agreement is for financing activities, product development strategies and corporate development. The agreements may be terminated by the Company or the consultant with 90 days written notice. Consulting expense under the agreements for the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014 was $460,000, $348,000 and $29,000, respectively. Consulting expense for the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014 includes $48,000, $48,000 and $4,000, respectively, paid to a financial consultant who is a stockholder of the Company. In addition, one financial consulting services agreement provides for the grant of options to purchase 500,000 shares of common stock contingent upon approval by the Board of Directors. The options were granted on June 1, 2015. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 11. COMMITMENTS AND CONTINGENCIES | Operating Lease The Company leases office space from Akrimax (see Note 8) in Cranford, New Jersey at a monthly rental rate of $2,167 pursuant to an agreement which currently expires on October 31, 2017. Rent expense for the year ended September 30, 2016 was $13,002. There was no rent expense for the year ended September 30, 2015 and the nine months ended September 30, 2014. Future minimum rentals for the years ending September 30, 2017 and 2018 are $26,004 and $2,167, respectively Legal Proceedings The Company is not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting our company or our officers or directors in their capacities as such. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 12. INCOME TAXES | There was no provision for federal or state income taxes for the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014 due to the Company’s operating losses and a full valuation reserve on deferred tax assets. In addition, Citius Pharmaceuticals, LLC (the accounting acquirer) was treated as a partnership for federal and state income taxes from inception until the Reverse Acquisition was completed on September 12, 2014. A partnership’s income or loss is allocated directly to the partners for income tax purposes. The income tax benefit differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income due to the following: Year Ended September 30, 2016 Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Computed “expected” tax benefit (35.0 )% (35.0 )% (35.0 )% Increase (decrease) in income taxes resulting from: State taxes, net of federal benefit (5.2 )% (5.2 )% (5.2 )% Permanent differences 4.2 % (4.6 )% — % Tax reporting differences due to the reverse acquisition — % — % 11.3 % Increase in the valuation reserve 36.0 % 44.8 % 28.9 % 0.0 % 0.0 % 0.0 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: September 30, 2016 September 30, 2015 Deferred tax assets: Net operating loss carryforward $ 3,801,000 $ 1,131,000 Stock-based compensation 703,000 384,000 Valuation allowance (4,504,000 ) (1,515,000 ) Deferred tax assets $ — $ — The Company has recorded a valuation allowance against deferred tax assets as the utilization of the net operating loss carryforward and other deferred tax assets is uncertain. There were no deferred tax assets or liabilities carried forward from Trail One, Inc. (the legal acquirer in the Reverse Acquisition) as the Company did not acquire any assets or liabilities in the Reverse Acquisition. Accordingly, during the nine months ended September 30, 2014, the valuation allowance increased by $216,000. During the years ended September 30, 2016 and 2015, the valuation allowance increased by $2,989,000 and $1,299,000, respectively. The increase in the valuation allowance during the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014 was due to the Company’s net operating loss. At September 30, 2016, the Company has a net operating loss carryforward of approximately $9,456,000 which begins expiring in 2034. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Notes to Financial Statements | ||
NOTE 13. SUBSEQUENT EVENTS | During January 2017, the Company issued additional demand notes to its Chairman in the aggregate amount of $260,000 under the same terms as the notes issued during the three months ending December 31, 2016. During January 2017, the Company issued 445,932 shares of its common stock for investor relations services. During February 2017, the Company sold an additional 399,750 Offering Units for gross proceeds of $159,900. Additionally, a warrant to purchase 39,975 shares of common stock was granted to the Placement Agent pursuant to the 2016 Offering pricing terms. | The Company issued demand promissory notes in favor of Leonard Mazur, Chairman of the Board, on October 20, 2016 in the principal amount of $500,000, on December 9, 2016 in the principal amount of $50,000 and on December 14, 2016 in the principal amount of $100,000 (collectively, the “Notes”). The Notes mature on the earlier of December 31, 2017 or demand by the lender. And accrue interest at the prime rate plus 1%. The Board of Directors has authorized additional revolving demand promissory notes with Leonard Mazur on substantially similar terms in an aggregate principal amount of up to $2,500,000, of which $1,150,000 is outstanding at December 15, 2016. In October 2016, the Company commenced an offering (the “2016 Offering”) of up to 15,000,000 units (the “2016 Offering Units”), each 2016 Offering Unit consists of (i) one share of common stock and (ii) a warrant to purchase one share of common stock (the “2016 Offering Warrants”) for gross proceeds of up to $6,000,000 with an over-subscription allotment of up to $2,000,000. Each 2016 Offering Unit will be sold at a negotiated price of $0.40. Each 2016 Offering Warrant shall have an exercise price of $0.55 (the “Exercise Price”). Each 2016 Offering Warrant is exercisable for a period of five years from the date of issuance. The Placement Agent will receive a 10% cash commission on the gross proceeds of each sale of the 2016 Offering Units. In addition, on each closing the Placement Agent will also receive (i) an expense allowance equal to 3% of the proceeds of the sale, and (ii) warrants to purchase a number of shares of common stock equal to 10% of the 2016 Offering Units sold at an exercise price of $0.55 per share. On November 23, 2016, the Company sold 975,000 2016 Offering Units for gross proceeds of $390,000. Additionally, a warrant to purchase 97,500 shares of common stock was granted to the Placement Agent pursuant to the above pricing terms. |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Summary Of Significant Accounting Policies Policies | ||
Basis of Preparation | The accompanying consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, Citius Pharmaceuticals, LLC, and LMB since the March 30, 2016 acquisition. All significant inter-company balances and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, without being audited, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary to make the financial statements not misleading have been included. Operating results for the three months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending September 30, 2017. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2016 filed with the Securities and Exchange Commission. | |
Use of Estimates | Our accounting principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for acquisitions, stock-based compensation, valuation of warrants, and income taxes. Actual results could differ from those estimates and changes in estimates may occur. | The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for acquisitions, stock-based compensation, valuation of warrants, and income taxes. Actual results could differ from those estimates and changes in estimates may occur. |
Cash and Cash Equivalents | The Company considers all highly liquid instruments with maturities of less than three months at the time of purchase to be cash equivalents. From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has never experienced any losses related to these balances. | |
Property and Equipment | Property and equipment are valued at cost and are being depreciated over their useful lives using the straight-line method for financial reporting purposes. Routine maintenance and repairs are charged to expense as incurred. Expenditures which materially increase the value or extend useful lives are capitalized. Property and equipment are depreciated over estimated useful lives of three to five years. Property and equipment consisted of the following at September 30, 2016: 2016 Computer equipment $ 8,522 Less accumulated depreciation (4,780 ) $ 3,742 Depreciation and amortization expense for the year ended September 30, 2016 was $1,343. There was no depreciation and amortization expense for the year ended September 30, 2015 and the nine months ended September 30, 2014. | |
Research and Development | Research and development costs, including upfront fees and milestones paid to collaborators who are performing research and development activities under contractual agreement with the Company, are expensed as incurred. The Company defers and capitalizes its nonrefundable advance payments that are for research and development activities until the related goods are delivered or the related services are performed. When the Company is reimbursed by a collaboration partner for work the Company performs, it records the costs incurred as research and development expenses and the related reimbursement as a reduction to research and development expenses in its consolidated statement of operations. Research and development expenses primarily consist of clinical and non-clinical studies, materials and supplies, third-party costs for contracted services, and payments related to external collaborations and other research and development related costs. | |
In-process Research and Development and Goodwill | In-process research and development represents the value of LMB’s leading drug candidate which is an antibiotic solution used to treat catheter-related bloodstream infections (Mino-Lok™). Goodwill represents the value of LMB’s industry relationships and its assembled workforce. In-process research and development and goodwill will not be amortized but will be tested at least annually for impairment. The Company reviews intangible assets annually to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life of any intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. No triggering events occurred since the acquisition of LMB that would suggest that a potential impairment may have occurred through September 30, 2016. The Company evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying value of an asset might be impaired. Goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a two-step process is then performed. The Company performed a qualitative assessment for our 2016 analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying value of the reporting unit exceeds its fair value. Accordingly, no further testing was performed as management believes that there are no impairment issues in regards to goodwill as of September 30, 2016. | |
Patents and Trademarks | Certain costs of outside legal counsel related to obtaining trademarks for the Company are capitalized. Patent costs are amortized over the legal life of the patents, generally twenty years, starting at the patent issuance date. The costs of unsuccessful and abandoned applications are expensed when abandoned. The cost of maintaining existing patents are expensed as incurred. | |
Revenue Recognition | The Company recognizes revenue using the four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the selling price is fixed and determinable, and (4) collectability is reasonably assured. Provisions for discounts, rebates, estimated returns and allowances, and other adjustments are provided in the period that the revenue is recorded. The CompanyÂ’s license and collaboration agreements with certain partners also provide for contingent payments to us based solely upon the performance of the respective partner. For such contingent amounts we expect to recognize the payments as revenue when earned under the applicable contract, which is generally upon completion of performance by the respective partner, provided that collection is reasonably assured. The CompanyÂ’s license and collaboration agreements with its partners also provide for payments to us upon the achievement of specified sales volumes of approved drugs. We consider these payments to be similar to royalty payments and we will recognize such sales-based payments upon achievement of such sales volumes, provided that collection is reasonably assured. | |
Stock-Based Compensation | The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees and directors, net of expected forfeitures, as an expense in the consolidated statement of operations over the requisite service period based on the fair value for each stock award on the grant date. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. Due to its limited operating history, limited number of sales of its common stock and limited history of its shares being publicly traded, the Company estimates its volatility in consideration of a number of factors including the volatility of comparable public companies. The estimated forfeiture rate is based on historical forfeiture information as well as subsequent events occurring prior to the issuance of the financial statements. Because our stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide a reliable single measure of fair value of our stock options The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the consolidated statement of operations over the service period based on the measurement of fair value for each stock award. | |
Derivative Instruments | The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks; however, certain warrants to purchase common stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. | |
Income Taxes | Citius Pharmaceuticals, LLC was treated as a partnership for federal and state income taxes prior to the September 12, 2014 Reverse Acquisition. A partnership’s income or loss is allocated directly to the Members for income tax purposes. The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing our tax returns, including the position that Citius Pharmaceuticals, LLC qualified as a pass-through entity, are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions that require accrual or disclosure as of September 30, 2016. Any interest or penalties are charged to expense. During the years ended September 30, 2016 and 2015, and the nine months ended September 30, 2014, the Company did not recognize any interest and penalties. Tax years subsequent to December 31, 2012 are subject to examination by federal and state authorities. After the Reverse Acquisition, we recognize deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We provide a valuation allowance, if necessary, for deferred tax assets for which we do not consider realization of such assets to be “more-likely-than-not”. The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. | |
Basic and Diluted Net Loss per Common Share | Basic and diluted net loss per common share is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of options, warrants and convertible securities were not included in the calculation of the diluted loss per share because they were anti-dilutive. | Basic and diluted net loss per common share is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of options, warrants and convertible securities were not included in the calculation of the diluted loss per share because they were anti-dilutive. |
Fair Value of Financial Instruments | The financial statements include various estimated fair value information. Financial instruments are initially recorded at historical cost. If subsequent circumstances indicate that a decline in the fair value of a financial asset is other than temporary, the financial asset is written down to its fair value. Unless otherwise indicated, the fair values of financial instruments approximate their carrying amounts. By their nature, all financial instruments involve risk, including credit risk for non-performance by counterparties. The fair values of cash and cash equivalents, accounts payable, accrued interest, accrued expenses, notes payable and due to related party approximate their recorded amounts because of their relatively short settlement terms. The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The Company's financial liabilities measured at fair value on September 30, 2016 and 2015 consists solely of the derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 6). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. The Company has no financial assets measured at fair value. The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the years ended September 30, 2016 and 2015, and the nine month period ended September 30, 2014. | |
Segment Reporting | The Company currently operates as a single segment. | |
Concentrations of Credit Risk | The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements | |
Recently Issued Accounting Standards | In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350). | In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which applies should a company be facing probable liquidation within one year of the issuance of the financial statements, but is not actually in liquidation at the time of issuance. The applicable accounting basis for presentation remains as a going concern, but if liquidation within one year is probable, then certain disclosures must be included in the financial statement presentation. ASU 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. In August 2015, the FASB also issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date which deferred the effective date of ASU 2014-09 by one year. Originally scheduled to be effective for fiscal years beginning after December 15, 2016, ASU 2015-14 is effective for the year ended September 30, 2019. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of this ASU on the financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” to require changes to several areas of employee share-based payment accounting in an effort to simplify share-based reporting. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, forfeitures, and intrinsic value accounting for private entities. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this ASU on the financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows in an effort to reduce existing diversity in practice. The update includes eight specific cash flow issues and provides guidance on the appropriate cash flow presentation for each. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017. The Company does not expect the adoption of this guidance to have a material impact on the financial statements. |
NATURE OF OPERATIONS, BASIS O22
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Nature Of Operations Basis Of Presentation And Summary Of Significant Accounting Policies Tables | ||
Acquisition Pro forma information | 2015 Revenues $ — Net loss $ (1,640,688 ) Net loss per share – basic and diluted $ (0.03 ) | Year Ended September 30, 2016 2015 Revenues $ — $ — Net loss $ (11,548,647 ) $ (6,640,600 ) Net loss per share – basic and diluted $ (0.17 ) $ (0.11 ) |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Summary Of Significant Accounting Policies Tables | |
Property and equipment | 2016 Computer equipment $ 8,522 Less accumulated depreciation (4,780 ) $ 3,742 |
DERIVATIVE WARRANT LIABILITY (T
DERIVATIVE WARRANT LIABILITY (Tables) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Derivative Warrant Liability Tables | ||
Schedule of derivative warrant liabilities | Three Months Ended December 31, 2016 Three Months Ended December 31, 2015 Derivative warrant liability, beginning of period $ 1,681,973 $ 738,955 Fair value of warrants issued — 157,984 Total realized/unrealized gains included in net loss (622,186 ) (23,940 ) Reclassification of liability to additional paid-in capital (149,209 ) — Derivative warrant liability, end of period $ 910,578 $ 872,999 | Year Ended September 30, 2016 Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Derivative warrant liability, beginning of period $ 738,955 $ 1,450,943 $ — Fair value of warrants issued 1,198,564 768,435 1,459,531 Total realized/unrealized losses (gains) included in net loss 838,219 (332,095 ) (8,588 ) Reclassification of liability to additional paid-in capital (1,093,765 ) (1,148,328 ) — Derivative warrant liability, end of period $ 1,681,973 $ 738,955 $ 1,450,943 |
COMMON STOCK, STOCK OPTIONS A25
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Tables) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Sep. 30, 2016 | |
Common Stock Stock Options And Warrants Tables | ||
Schedule of fair value stock option grants | Year Ended September 30, 2016 Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Risk-free interest rate 0.95 – 1.40 % 1.37 – 1.52 % 1.83 % Expected dividend yield 0 % 0 % 0 % Expected term 4.75 – 9 years 2.5 – 6 years 5 – 6 years Forfeiture rate 0 % 0 % 0 % Expected volatility 57 – 74 % 53 – 58 % 54 % | |
Schedule of stock option activity | Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at October 1, 2016 8,732,770 $ 0.54 8.59 years $ 1,355,924 Granted — — Exercised — — Forfeited or expired — — Outstanding at December 31, 2016 8,732,770 $ 0.54 8.34 years $ 468,958 Exercisable at December 31, 2016 5,286,654 $ 0.45 7.91 years $ 336,484 | Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2014 — $ — Granted 3,300,000 0.45 Exercised — — Forfeited or expired — — Outstanding at September 30, 2014 3,300,000 0.45 9.96 years $ 495,000 Granted 600,000 0.60 Exercised — — Forfeited or expired — — Outstanding at September 30, 2015 3,900,000 0.47 8.94 years $ 297,000 Granted 3,674,000 0.76 Assumed in acquisition 1,158,770 0.07 Exercised — — Forfeited or expired — — Outstanding at September 30, 2016 8,732,770 $ 0.54 8.59 years $ 1,355,924 Exercisable at September 30, 2016 5,136,654 $ 0.45 8.14 years $ 1,059,615 |
Schedule of Warrants | Exercise price Number Expiration Dates Investor Warrants $ 0.60 3,400,067 September 12, 2019 Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Warrants underlying Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Placement Agent Share Warrants 0.60 1,000,000 September 12, 2019 Investor Warrants 0.60 2,145,371 March 19, 2020 – June 26, 2020 Investor Warrants 0.60 891,666 July 2, 2020 – September 14, 2020 Investor Warrants 0.60 583,334 November 5, 2020 – November 20, 2020 Investor Warrants 0.60 2,133,334 (1) January 7, 2021 – March 21, 2021 Investor Warrants 0.60 1,900,000 (1) April 15, 2021 – April 25, 2021 LMB Warrants 0.41 1,352,266 June 12, 2019 - March 2, 2021 LMB Warrants 0.66 122,319 September 30, 2019 - January 8, 2020 LMB Warrants 1.38 265,814 November 3, 2019 - March 6, 2020 LMB Warrants 0.50 1,108,249 August 18, 2020 – March 14, 2021 LMB Warrants 0.91 796,649 March 24, 2022 – April 29, 2022 Financial Advisor Warrants 0.20 1,000,000 August 15, 2021 2016 Offering Warrants 0.55 975,000 November 23, 2021 2016 Offering Placement Agent Warrants 0.55 97,500 November 23, 2021 19,131,595 | Exercise price Number Expiration Dates Investor Warrants $ 0.60 3,400,067 September 12, 2019 Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Warrants underlying Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Placement Agent Share Warrants 0.60 1,000,000 September 12, 2019 Investor Warrants 0.60 2,145,371 March 19, 2020 – June 26, 2020 Investor Warrants 0.60 891,666 July 2, 2020 – September 14,2020 Investor Warrants 0.60 583,334 (1) November 5, 2020 – November 20, 2020 Investor Warrants 0.60 2,133,334 (1) January 7, 2021 – March 21, 2021 Investor Warrants 0.60 1,900,000 (1) April 15, 2021 – April 25, 2021 LMB Warrants 0.41 1,352,266 June 12, 2019 – March 2, 2021 LMB Warrants 0.66 122,319 September 30, 2019 – January 8, 2020 LMB Warrants 1.38 265,814 November 3, 2019 – March 6, 2020 LMB Warrants 0.50 1,108,249 August 18, 2020 – March 14, 2021 LMB Warrants 0.91 796,649 March 24, 2022 – April 29, 2022 Financial Advisor Warrants 0.20 1,000,000 August 15, 2021 18,059,095 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Income Taxes Tables | |
Schedule of U.S. federal income tax rate | Year Ended September 30, 2016 Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Computed “expected” tax benefit (35.0 )% (35.0 )% (35.0 )% Increase (decrease) in income taxes resulting from: State taxes, net of federal benefit (5.2 )% (5.2 )% (5.2 )% Permanent differences 4.2 % (4.6 )% — % Tax reporting differences due to the reverse acquisition — % — % 11.3 % Increase in the valuation reserve 36.0 % 44.8 % 28.9 % 0.0 % 0.0 % 0.0 % |
Schedule of deferred income taxes | September 30, 2016 September 30, 2015 Deferred tax assets: Net operating loss carryforward $ 3,801,000 $ 1,131,000 Stock-based compensation 703,000 384,000 Valuation allowance (4,504,000 ) (1,515,000 ) Deferred tax assets $ — $ — |
NATURE OF OPERATIONS AND BASIS
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Nature Of Operations And Basis Of Presentation Details | |||
Revenues | |||
Net loss | $ (1,640,688) | $ (11,548,647) | $ (6,640,600) |
Net loss per share – basic and diluted | $ (0.03) | $ (0.17) | $ (0.11) |
NATURE OF OPERATIONS AND BASI28
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | Mar. 31, 2016 | Mar. 30, 2016 | Sep. 12, 2014 | May 31, 2014 | |
Entity incorporation date | Jan. 23, 2007 | ||||||||
Common stock, shares | 21,625,219 | ||||||||
Percentage of Common stock, | 41.00% | 72.00% | |||||||
common stock, shares outstanding | 1,158,770 | 5,000,000 | |||||||
Common Stock Shares Issued | 74,113,060 | 73,138,060 | 34,117,886 | 13,000,000 | 29,136,839 | 29,136,839 | 200,000 | ||
Converted common stock warrants | 3,645,297 | ||||||||
Converted common stock options | 1,158,770 | ||||||||
Prepaid expenses | $ 20,544 | ||||||||
Property and equipment | 5,085 | ||||||||
Deposits | 2,167 | ||||||||
Accounts payable | 244,776 | ||||||||
Accrued expenses | 598,659 | ||||||||
Accrued compensation | 615,000 | ||||||||
Accrued interest | 23,862 | ||||||||
Notes payable | 772,970 | ||||||||
Outstanding common stock options | 468,958 | $ 1,355,924 | |||||||
Fair value of common stock issued | 29,136,839 | ||||||||
Fair value of warrants issued estimated | 3,645,297 | ||||||||
Fair value of vested options estimated | 1,158,770 | ||||||||
Goodwill | $ 1,586,796 | ||||||||
Issued and outstanding common stock | 41.00% | ||||||||
Common stock warrants outstanding | 74,113,060 | 73,138,060 | 34,117,886 | 3,645,297 | |||||
Tangible assets consisting of cash | $ 255,748 | ||||||||
Intangible assets | $ 19,400,000 | ||||||||
Vested portion of common stock options issued | 1,158,770 | ||||||||
Estimated fair value | $ 17,482,093 | ||||||||
Estimated fair value warrant issued | $ 157,984 | $ 1,198,564 | $ 768,435 | $ 1,459,531 | |||||
Estimated vested options of fair value | 461,808 | ||||||||
Purchase price | 19,015,073 | ||||||||
Assets acquired | $ 17,428,277 | ||||||||
LMB [Member] | |||||||||
Common Stock Shares Issued | 29,136,839 | ||||||||
Converted common stock warrants | 3,645,297 | ||||||||
Converted common stock options | 1,158,770 | ||||||||
Cash | $ 255,748 | ||||||||
Prepaid expenses | 20,544 | ||||||||
Property and equipment | 5,085 | ||||||||
Deposits | 2,167 | ||||||||
Identifiable intangible assets | 19,400,000 | ||||||||
Accounts payable | 244,776 | ||||||||
Accrued expenses | 598,659 | ||||||||
Accrued compensation | 615,000 | ||||||||
Accrued interest | 23,862 | ||||||||
Notes payable | 772,970 | ||||||||
Net assets acquired | 17,428,277 | ||||||||
Outstanding common stock options | 19,015,073 | ||||||||
Fair value of common stock issued | 17,482,093 | ||||||||
Fair value of warrants issued estimated | 1,071,172 | ||||||||
Fair value of vested options estimated | 461,808 | ||||||||
Goodwill | $ 1,586,796 |
GOING CONCERN UNCERTAINTY AND29
GOING CONCERN UNCERTAINTY AND MANAGEMENT’S PLAN (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Going Concern Uncertainty And Managements Plan Details Narrative | |||||
Cash flows from operations | $ (1,314,792) | $ (697,086) | $ (5,900,421) | $ (2,385,416) | $ (183,164) |
Working capital deficit | $ 5,828,421 | $ (4,291,123) |
BUSINESS AGREEMENTS (Details Na
BUSINESS AGREEMENTS (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Sep. 30, 2016 | May 31, 2014 | |
Regulatory filing fees | $ 292,575 | ||
License fee | 30,000 | ||
Maintenance fee | 90,000 | ||
Payable amount to NAT | $ 1,050,000 | ||
LMB [Member] | |||
License fee | $ 350,000 | ||
Maintenance fee | $ 30,000 | ||
Licence period | over five years to $90,000, | ||
Sales milestones | $ 1,050,000 |
NOTES PAYABLE RELATED PARTIES (
NOTES PAYABLE RELATED PARTIES (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Apr. 30, 2016 | Mar. 31, 2016 | Mar. 30, 2016 | Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 07, 2016 | |
Notes assumed | $ 772,970 | |||||||
Principal amount | $ 2,500,000 | |||||||
Outstanding amount | $ 1,320,000 | |||||||
Percentage of accrued interest above prime rate | 1.00% | |||||||
Interest expense | $ 13,228 | $ 8,994 | $ 7,500 | $ 93,067 | ||||
Notes payable | 772,970 | |||||||
Additional notes payable | $ 820,000 | |||||||
Chairman [Member] | ||||||||
Percentage of accrued interest above prime rate | 1.00% | |||||||
Repayment of principal amount | $ 600,000 | |||||||
Repayment of accured interest | $ 1,985 | |||||||
Notes Payable One [Member] | ||||||||
Principal amount | 68,970 | |||||||
Interest rate | 12.00% | |||||||
Notes Payable [Member] | ||||||||
Principal amount | $ 704,000 | |||||||
Percentage of accrued interest above prime rate | 1.00% | |||||||
Board of Directors [Member] | ||||||||
Principal amount | $ 760,470 | |||||||
Notes payable | $ 500,000 | |||||||
Chief Executive Officer [Member] | ||||||||
Principal amount | $ 12,500 |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 |
Summary Of Significant Accounting Policies Details | |||
Computer equipment | $ 8,522 | ||
Less accumulated depreciation | (4,780) | ||
Total | $ 3,070 | $ 3,742 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Summary Of Significant Accounting Policies Details Narrative | ||||
Depreciation | $ 672 | $ 1,343 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||||
Mar. 30, 2016USD ($) | Nov. 30, 2013USD ($)Unit | Apr. 30, 2013USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($)$ / shares | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2013USD ($) | Sep. 07, 2016USD ($) | Apr. 30, 2016USD ($) | Mar. 31, 2016shares | Dec. 31, 2014USD ($)$ / sharesshares | Sep. 12, 2014shares | Jul. 31, 2014USD ($)$ / sharesshares | |
Interest expense | $ 13,228 | $ 8,994 | $ 7,500 | $ 93,067 | ||||||||||
Principal amount | $ 600,000 | |||||||||||||
Percentage of accrued interest | 5.00% | |||||||||||||
Converted common stock | The unpaid principal and accrued interest will convert into common stock at the greater of the fair value of the common stock on the date of the conversion or $0.25 ($0.69 if the CompanyÂ’s common stock is admitted to trade on a national exchange prior to the date of conversion). | |||||||||||||
Common stock, shares | shares | 1,158,770 | 5,000,000 | ||||||||||||
Conversion price | $ / shares | $ 0.65 | |||||||||||||
Number of promissory notes | Unit | 2 | |||||||||||||
Initial installment of principal amount | $ 100,000 | |||||||||||||
Second installment of principal amount | 100,000 | |||||||||||||
Third installment of principal amount | 100,000 | |||||||||||||
Aggregate proceeds | $ 10,000,000 | |||||||||||||
Notes payable | $ 772,970 | |||||||||||||
Debt issuance costs | $ 42,000 | |||||||||||||
Investors One [Member] | ||||||||||||||
Aggregate proceeds | 6,500,000 | |||||||||||||
Investors Two [Member] | ||||||||||||||
Aggregate proceeds | $ 8,500,000 | |||||||||||||
Investors Two [Member] | Convertible Promissory Notes [Member] | ||||||||||||||
Principal amount | $ 225,000 | |||||||||||||
Percentage of accrued interest | 5.00% | |||||||||||||
Maturity period | 10-year | |||||||||||||
Leonard Mazur [Member] | ||||||||||||||
Accrued interest | $ 1,985 | |||||||||||||
Principal balance of notes payable | $ 760,470 | |||||||||||||
Prime Rate | 1.00% | 1.00% | ||||||||||||
Demand promissory note | $ 500,000 | |||||||||||||
Wall Street [Member] | ||||||||||||||
Percentage of accrued interest | 12.00% | |||||||||||||
Principal balance of notes payable | $ 68,970 | |||||||||||||
Prime Rate | 1.00% | |||||||||||||
Myron Holubiak [Member] | ||||||||||||||
Accrued interest | $ 704,000 | |||||||||||||
Principal balance of notes payable | 12,500 | |||||||||||||
Notes Payable Related Parties [Member] | ||||||||||||||
Notes payable | $ 772,970 | |||||||||||||
Subordinated Convertible Promissory Note [Member] | ||||||||||||||
Percentage of accrued interest | 10.00% | |||||||||||||
Convertible notes outstanding | $ 350,000 | |||||||||||||
Accrued interest | $ 44,245 | |||||||||||||
Common stock, shares | shares | 606,531 | |||||||||||||
Conversion price | $ / shares | $ 0.65 | |||||||||||||
Convertible promissory notes | $ 350,000 | $ 600,000 | ||||||||||||
Percentage of convertible promissory notes | 10.00% | |||||||||||||
Promissory Notes [Member] | ||||||||||||||
Convertible notes outstanding | $ 600,000 | |||||||||||||
Accrued interest | $ 33,333 | |||||||||||||
Common stock, shares | shares | 1,055,554 | |||||||||||||
Conversion price | $ / shares | $ 0.60 | |||||||||||||
Convertible Promissory Notes [Member] | ||||||||||||||
Convertible notes outstanding | $ 1,685,000 | |||||||||||||
Accrued interest | $ 151,813 | |||||||||||||
Common stock, shares | shares | 3,061,355 | |||||||||||||
Conversion price | $ / shares | $ 0.60 | |||||||||||||
Convertible Promissory Notes [Member] | Investors One [Member] | ||||||||||||||
Principal amount | $ 1,460,000 | |||||||||||||
Percentage of accrued interest | 3.00% | |||||||||||||
Maturity period | 10-year |
DERIVATIVE WARRANT LIABILITY (D
DERIVATIVE WARRANT LIABILITY (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Derivative Warrant Liability Details | |||||
Derivative warrant liability, beginning of period | $ 1,681,973 | $ 738,955 | $ 738,955 | $ 1,450,943 | |
Fair value of warrants issued | 157,984 | 1,198,564 | 768,435 | $ 1,459,531 | |
Total realized/unrealized losses included in net loss | (622,186) | (23,940) | 838,219 | (332,095) | (8,588) |
Reclassification of liability to additional paid-in capital | (149,209) | (1,093,765) | (1,148,328) | ||
Derivative warrant liability, end of period | $ 910,578 | $ 872,999 | $ 1,681,973 | $ 738,955 | $ 1,450,943 |
DERIVATIVE WARRANT LIABILITY 36
DERIVATIVE WARRANT LIABILITY (Details Narrative) - USD ($) | Sep. 12, 2015 | Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 |
Outstanding warrants to purchase of its common stock | 4,033,334 | 4,616,668 | 4,616,668 | ||
Common stock per shares | $ 0.60 | ||||
Volatility rate | 76.00% | 73.00% | 54.00% | ||
Risk-free interest rate | 1.93% | 1.14% | 1.83% | ||
Anti dilution warrants expired | 5,080,080 | 583,334 | 3,037,037 | ||
Reclassification from derivative warrant liability to additional paid-in capital | $ 1,148,328 | $ 149,209 | $ 1,093,765 | ||
Exercise price of warrant | $ 0.60 | ||||
Minimum [Member] | |||||
Volatility rate | 57.00% | 53.00% | |||
Risk-free interest rate | 0.95% | 1.37% | |||
Estimated life | 4 years 7 days | 4 years 9 months | 2 years 6 months | 5 years | |
Maximum [Member] | |||||
Volatility rate | 74.00% | 58.00% | |||
Risk-free interest rate | 1.40% | 1.52% | |||
Estimated life | 4 years 3 months 26 days | 9 years | 6 years | 6 years |
COMMON STOCK, STOCK OPTIONS A37
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Risk-free interest rate | 1.93% | 1.14% | 1.83% | |
Expected dividend yield | 0.00% | 0.00% | 0.00% | |
Forfeiture rate | 0.00% | 0.00% | 0.00% | |
Expected volatility | 76.00% | 73.00% | 54.00% | |
Minimum [Member] | ||||
Risk-free interest rate | 0.95% | 1.37% | ||
Expected term | 4 years 7 days | 4 years 9 months | 2 years 6 months | 5 years |
Expected volatility | 57.00% | 53.00% | ||
Maximum [Member] | ||||
Risk-free interest rate | 1.40% | 1.52% | ||
Expected term | 4 years 3 months 26 days | 9 years | 6 years | 6 years |
Expected volatility | 74.00% | 58.00% |
COMMON STOCK, STOCK OPTIONS A38
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Stock Options | ||||
Outstanding, beginning balance | 8,732,770 | |||
Granted | ||||
Assumed in acquisition | ||||
Exercised | ||||
Forfeited or expired | ||||
Outstanding, ending balance | 8,732,770 | 8,732,770 | ||
Exercisable, ending balance | 5,286,654 | |||
Weighted Average Exercise Price | ||||
Outstanding, beginning balance | $ 0.54 | |||
Granted | ||||
Assumed in acquisition | ||||
Exercised | ||||
Forfeited or expired | ||||
Outstanding, ending balance | 0.54 | $ 0.54 | ||
Exercisable, ending balance | $ 0.45 | |||
Weighted Average Remaining Contractual Life (years) | ||||
Weighted Average Remaining Contractual Life (years), Beginning | 8 years 7 months 2 days | |||
Weighted Average Remaining Contractual Life (years), Ending | 8 years 4 months 2 days | |||
Exercisable Remaining Contractual Life (years) | 7 years 10 months 28 days | |||
Aggregate Intrinsic value | ||||
Outstanding beginning balance | $ 1,355,924 | |||
Outstanding ending balance | 468,958 | $ 1,355,924 | ||
Exercisable ending balance | $ 336,484 | |||
Stock Options [Member] | ||||
Stock Options | ||||
Outstanding, beginning balance | 3,900,000 | 3,300,000 | 3,300,000 | |
Granted | 3,674,000 | 600,000 | ||
Assumed in acquisition | $ 1,158,770 | |||
Exercised | ||||
Forfeited or expired | ||||
Outstanding, ending balance | 8,732,770 | 3,900,000 | 3,300,000 | |
Exercisable, ending balance | 5,136,654 | |||
Weighted Average Exercise Price | ||||
Outstanding, beginning balance | $ 0.54 | $ 0.47 | $ 0.45 | $ 0.45 |
Granted | 0.76 | 0.60 | ||
Assumed in acquisition | 0.07 | |||
Exercised | ||||
Forfeited or expired | ||||
Outstanding, ending balance | 0.54 | $ 0.47 | $ 0.45 | |
Exercisable, ending balance | $ 0.45 | |||
Weighted Average Remaining Contractual Life (years) | ||||
Weighted Average Remaining Contractual Life (years), Beginning | 8 years 11 months 9 days | |||
Weighted Average Remaining Contractual Life (years), Ending | 8 years 7 months 2 days | 8 years 11 months 9 days | 9 years 11 months 16 days | |
Exercisable Remaining Contractual Life (years) | 8 years 1 month 21 days | |||
Aggregate Intrinsic value | ||||
Outstanding beginning balance | $ 1,355,924 | $ 297,000 | $ 495,000 | |
Outstanding ending balance | 1,355,924 | $ 297,000 | $ 495,000 | |
Exercisable ending balance | $ 1,059,615 |
COMMON STOCK, STOCK OPTIONS A39
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details 2) - $ / shares | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Sep. 30, 2016 | Oct. 31, 2016 | |
Exercise price | $ 0.54 | $ 0.54 | $ 0.55 |
Number | 8,732,770 | 8,732,770 | |
Investor Warrants [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 3,400,067 | 3,400,067 | |
Expiration Date | September 12, 2019 | September 12, 2019 | |
Placement Agent Unit Warrants [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 680,013 | 680,013 | |
Expiration Date | September 12, 2019 | September 12, 2019 | |
Warrants underlying Placement Agent Unit Warrants [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 680,013 | 680,013 | |
Expiration Date | September 12, 2019 | September 12, 2019 | |
Placement Agent Share Warrants [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 1,000,000 | 1,000,000 | |
Expiration Date | September 12, 2019 | September 12, 2019 | |
Investor Warrants One [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 2,145,371 | 2,145,371 | |
Expiration Date | March 19, 2020 - June 26, 2020 | March 19, 2020 - June 26, 2020 | |
Investor Warrants Two [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 891,666 | 891,666 | |
Expiration Date | July 2, 2020 - September 14, 2020 | July 2, 2020 - September 14, 2020 | |
Investor Warrants Three [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 583,334 | 583,334 | |
Expiration Date | November 5, 2020 - November 20, 2020 | November 5, 2020 - November 20, 2020 | |
Investor Warrants Four [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 2,133,334 | 2,133,334 | |
Expiration Date | January 7, 2021 - March 21, 2021 | January 7, 2021 - March 21, 2021 | |
Investor Warrants Five [Member] | |||
Exercise price | $ 0.60 | $ 0.60 | |
Number | 1,900,000 | 1,900,000 | |
Expiration Date | April 15, 2021 - April 25, 2021 | April 15, 2021 - April 25, 2021 | |
LMB Warrants One [Member] | |||
Exercise price | $ 0.41 | $ 0.41 | |
Number | 1,352,266 | 1,352,266 | |
Expiration Date | June 12, 2019 - March 2, 2021 | June 12, 2019 - March 2, 2021 | |
LMB Warrants Two [Member] | |||
Exercise price | $ 0.66 | $ 0.66 | |
Number | 122,319 | 122,319 | |
Expiration Date | September 30, 2019 - January 8, 2020 | September 30, 2019 - January 8, 2020 | |
LMB Warrants Three [Member] | |||
Exercise price | $ 1.38 | $ 1.38 | |
Number | 265,814 | 265,814 | |
Expiration Date | November 3, 2019 - March 6, 2020 | November 3, 2019 - March 6, 2020 | |
LMB Warrants Four [Member] | |||
Exercise price | $ 0.50 | $ 0.50 | |
Number | 1,108,249 | 1,108,249 | |
Expiration Date | August 18, 2020 - March 14, 2021 | August 18, 2020 - March 14, 2021 | |
LMB Warrants Five [Member] | |||
Exercise price | $ 0.91 | $ 0.91 | |
Number | 796,649 | 796,649 | |
Expiration Date | March 24, 2022 - April 29, 2022 | March 24, 2022 - April 29, 2022 | |
Financial Advisor Warrants [Member] | |||
Exercise price | $ 0.20 | $ 0.20 | |
Number | 1,000,000 | 1,000,000 | |
Expiration Date | August 15, 2021 | August 15, 2021 | |
Warrants [Member] | |||
Exercise price | $ 0.55 | ||
Number | 975,000 | 18,059,095 | |
Expiration Date | November 23, 2021 | ||
Offering Placement Agent Warrants 2016 [Member] | |||
Exercise price | $ 0.55 | ||
Number | 975,000 | ||
Expiration Date | November 23, 2021 |
COMMON STOCK, STOCK OPTIONS A40
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details Narrative) | Sep. 12, 2014USD ($)Unit$ / sharesshares | Nov. 23, 2016USD ($)Unit$ / sharesshares | Sep. 15, 2016 | Mar. 30, 2016USD ($)$ / sharesshares | Oct. 31, 2015Unit$ / sharesshares | Dec. 31, 2016USD ($)Unit$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 30, 2016USD ($)Unit$ / sharesshares | Sep. 30, 2015USD ($)Unit$ / sharesshares | Sep. 30, 2014USD ($)Unit$ / sharesshares | Mar. 31, 2016shares | Mar. 22, 2016USD ($)$ / sharesshares | May 31, 2014USD ($)$ / sharesshares | Dec. 31, 2013USD ($) | Sep. 30, 2013shares |
Common Stock Par Value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.25 | |||||||||||
Common Stock Shares Issued | 29,136,839 | 74,113,060 | 13,000,000 | 73,138,060 | 34,117,886 | 13,000,000 | 29,136,839 | 200,000 | |||||||
Common stock | $ | $ 74,113 | $ 73,138 | $ 34,118 | $ 50,000 | |||||||||||
Reverse acquisition of common stock | 5,000,000 | ||||||||||||||
Description of increase in authorized shares of common stock | Stockholders approved an increase in the number of shares of authorized common stock from 90,000,000 shares to 200,000,000 shares. | Stockholders approved an increase in the number of shares of authorized common stock from 90,000,000 shares to 200,000,000 shares. | |||||||||||||
Description of reverse stock split | Reverse stock split of our common stock by a ratio of not less than 1-for-8 and not more than 1-for-20 at any time prior to September 15, 2017. | Stockholders granted the Board of Directors the authority to effect a reverse stock split of our common stock by a ratio of not less than 1-for-8 and not more than 1-for-20 at any time prior to September 15, 2017. | |||||||||||||
Deferred offering costs | $ | $ 25,000 | ||||||||||||||
Banking agreement for raise cash | $ | $ 5,100,000 | $ 5,100,000 | |||||||||||||
Units issued to raise cash | 8,500,000 | 8,500,000 | |||||||||||||
Common stock outstanding | 8,732,770 | 8,732,770 | |||||||||||||
Stock-based compensation expense | $ | $ 241,514 | $ 470,185 | $ 732,151 | $ 732,151 | $ 470,185 | ||||||||||
Options to purchase of common stock | 4,033,334 | 4,616,668 | 4,616,668 | ||||||||||||
Additional warrant purchase | 97,500 | ||||||||||||||
LMB [Member] | |||||||||||||||
Common Stock Shares Issued | 29,136,839 | ||||||||||||||
Weighted average remaining life | 10 years | ||||||||||||||
Stock options granted | 1,068,241 | ||||||||||||||
Common stock exercise price per share | $ / shares | $ 0.001 | ||||||||||||||
Stock options purchase | 1,158,770 | ||||||||||||||
Fair value vested options | $ | $ 461,808 | ||||||||||||||
Fair value unvested options | $ | $ 461,808 | ||||||||||||||
2014 Plan [Member] | |||||||||||||||
Shares available for future grants | 4,267,230 | ||||||||||||||
Stock-based compensation expense | $ | $ 121,299 | ||||||||||||||
Unrecognized total compensation cost related to unvested awards | $ | $ 1,145,334 | ||||||||||||||
Options to purchase of common stock | 8,732,770 | ||||||||||||||
Private Offering [Member] | |||||||||||||||
Description of warrant redeemable | Common stock has traded for twenty (20) consecutive trading days with a closing price of at least $1.50 per share with an average trading volume of 50,000 shares per day and (ii) the Company provides 20 trading days prior notice of the redemption and the closing price of the common stock is not less than $1.17 for more than any 3 days during such notice period and (iii) the underlying shares of common stock are registered. | ||||||||||||||
Shares available for future grants | 4,267,230 | ||||||||||||||
Number of additional units sold | Unit | 1,000,000 | 266,667 | 200,000 | 1,000,000 | |||||||||||
Number of additional units sold, per unit | $ / shares | $ 0.60 | $ 0.60 | $ 0.60 | $ 0.60 | |||||||||||
Number of units sold | Unit | 3,400,067 | 4,350,001 | 2,837,037 | 3,400,067 | |||||||||||
Number of units sold, per unit | $ / shares | $ 0.60 | $ 0.54 | $ 0.54 | $ 0.60 | |||||||||||
Number of units sold for gross proceeds | $ | $ 2,040,040 | $ 2,509,000 | $ 1,652,000 | $ 2,040,040 | |||||||||||
Placement Agent paid commissions and expenses | $ | 1,229,124 | 741,058 | 265,206 | ||||||||||||
Other cash expenses related to private placement | $ | 81,312 | 142,507 | $ 169,000 | ||||||||||||
Derivative warrant liability | $ | $ 1,198,564 | $ 768,435 | |||||||||||||
Common stock sold | 5,000,000 | ||||||||||||||
Common stock sale prise | $ / shares | $ 0.60 | $ 0.60 | |||||||||||||
Common stock, value, Outstanding | $ | $ 8,732,770 | ||||||||||||||
Common stock exercise price per share | $ / shares | $ 0.001 | $ 0.001 | |||||||||||||
Stock sold | 5,000,000 | ||||||||||||||
Stock sold per share price | $ / shares | $ 0.60 | $ 0.60 | |||||||||||||
Stock sold for gross proceeds | $ | $ 3,000,000 | ||||||||||||||
Stock Options [Member] | Board of Directors [Member] | |||||||||||||||
Common stock reserved for employees | 13,000,000 | ||||||||||||||
Warrants [Member] | |||||||||||||||
Common stock outstanding | 975,000 | 18,059,095 | |||||||||||||
Intrinsic value of warrant | $ | $ 1,273,985 | ||||||||||||||
Weighted average remaining life | 3 years 9 months 7 days | ||||||||||||||
Number of units sold | Unit | 975,000 | ||||||||||||||
Additional warrant purchase | 50,700 | ||||||||||||||
Number of units sold for gross proceeds | $ | $ 390,000 | ||||||||||||||
Common stock exercise price per share | $ / shares | $ 0.55 | ||||||||||||||
Common stock reserved for employees | 19,131,595 | ||||||||||||||
Warrants outstanding | 280,568 | ||||||||||||||
Estimated fair value | $ | 23,451 | $ 234,505 | |||||||||||||
Other cost | $ | $ 156,896 | ||||||||||||||
Placement Agent Unit Warrants [Member] | |||||||||||||||
Common stock outstanding | 680,013 | 680,013 | |||||||||||||
Options to purchase of common stock | 1,000,000 | ||||||||||||||
Common stock exercise price per share | $ / shares | $ 0.60 | ||||||||||||||
Stock Options [Member] | |||||||||||||||
Common stock outstanding | 8,732,770 | 3,300,000 | 3,900,000 | 3,300,000 | 3,300,000 | ||||||||||
Shares available for future grants | 6,341,230 | ||||||||||||||
Stock-based compensation expense | $ | $ 470,185 | $ 486,271 | $ 732,151 | ||||||||||||
Unrecognized total compensation cost related to unvested awards | $ | $ 831,020 | ||||||||||||||
Weighted average remaining life | 1 year 15 days | 1 year 8 months 1 day | 5 years | 10 years | |||||||||||
Stock options granted | 90,529 | 400,000 | 100,000 | 3,300,000 | |||||||||||
Common stock exercise price per share | $ / shares | $ 0.91 | $ 0.54 | $ 0.45 | $ 0.60 | $ 0.45 | ||||||||||
Weighted average options granted | $ / shares | $ 0.28 | $ 0.27 | $ 0.34 | ||||||||||||
Number of directors | Unit | 2 | ||||||||||||||
Stock options vested | 1,086,347 | ||||||||||||||
Average contractual term | P8Y4M2D | ||||||||||||||
Offering Warrants 2016 [Member] | |||||||||||||||
Weighted average remaining life | 3 years 7 months 2 days | ||||||||||||||
Number of unit offering | Unit | 15,000,000 | ||||||||||||||
Number of unit offering per share price | $ / shares | $ 0.40 | ||||||||||||||
Number of units offering for gross proceeds | $ | $ 6,000,000 | ||||||||||||||
Percentage of cash commission on gross proceeds | 0.10 | ||||||||||||||
Number of units sold | Unit | 975,000 | ||||||||||||||
Number of units sold, per unit | $ / shares | $ 0.40 | ||||||||||||||
Additional warrant purchase | 97,500 | ||||||||||||||
Warrant offering description | On November 23, 2016, the Company sold 975,000 2016 Offering Units, at a price of $0.40 per Unit, consisting of (i) one share of common stock and (ii) a warrant to purchase one share of common stock. Each 2016 Offering Warrant has an exercise price of $0.55 and is exercisable for five years from the date of issuance. |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Company owes to related party | $ 27,637 | $ 70,386 | |||
General and administrative expense | $ 1,132,183 | 3,783,941 | $ 946,613 | $ 183,044 | |
Expenses paid by related party | $ 27,637 | $ 27,637 | |||
Chairman [Member] | |||||
Additional stock purchased | 5,000,000 | ||||
Financial Consultant [Member] | |||||
General and administrative expense | $ 12,000 | $ 12,000 |
EMPLOYMENT AND CONSULTING AGR42
EMPLOYMENT AND CONSULTING AGREEMENTS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Jun. 01, 2015 | |
Employment And Consulting Agreements Details Narrative | ||||
Consulting expense under the agreements | $ 29,000 | $ 460,000 | $ 348,000 | |
Consulting expense | $ 4,000 | $ 48,000 | $ 48,000 | |
Purchase of common stock for the grant of options | 500,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 |
Commitments And Contingencies Details Narrative | |||||
Rent expenses | $ 13,002 | $ 0 | $ 0 | ||
Monthly rental rate | $ 2,167 | ||||
Future minimum rental for fiscal year | $ 26,004 | ||||
Future minimum rental due in two years | $ 2,167 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes Details | |||
Computed expected tax benefit | (35.00%) | (35.00%) | (35.00%) |
State taxes, net of federal benefit | (5.20%) | (5.20%) | (5.20%) |
Permanent differences | 4.20% | (4.60%) | |
Tax reporting differences due to the reverse acquisition | 11.30% | ||
Increase in the valuation reserve | 28.90% | 36.00% | 44.80% |
Total difference | 0.00% | 0.00% | 0.00% |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 3,801,000 | $ 1,131,000 |
Stock-based compensation | 703,000 | 384,000 |
Valuation allowance | (4,504,000) | (1,515,000) |
Deferred tax assets |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Taxes Details Narrative | |||
Increase in valuation allowance | $ 2,989,000 | $ 1,299,000 | $ 216,000 |
Net operating loss carry forward | $ 9,456,000 | ||
Expiration date | 2,034 |
SUBSEQUENT EVENTS (Detail Narra
SUBSEQUENT EVENTS (Detail Narrative) - USD ($) | 1 Months Ended | ||||||||||
Feb. 28, 2017 | Jan. 30, 2017 | Nov. 23, 2016 | Oct. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 15, 2016 | Dec. 14, 2016 | Dec. 09, 2016 | Oct. 20, 2016 | Sep. 30, 2016 | |
Promissory notes | $ 100,000 | $ 500,000 | $ 500,000 | ||||||||
Accrued interest rate | 1.00% | ||||||||||
Aggregate principal amount | $ 250,000 | ||||||||||
Outstanding principal amount | $ 1,150,000 | ||||||||||
Proceeds from share of common stock and warrant,share | 975,000 | ||||||||||
Proceeds from share of common stock and warrant, amount | $ 390,000 | $ 6,000,000 | |||||||||
Purchase of common stock in exchange of warrant | 97,500 | ||||||||||
Over-subscription allotment | $ 2,000,000 | ||||||||||
Negotiated price per common share | $ 0.40 | ||||||||||
Exercise price per warrant | $ 0.55 | $ 0.54 | $ 0.54 | ||||||||
Commission paid to placement agent | 10.00% | ||||||||||
Expense allowance | 3.00% | ||||||||||
Warrant to purchase number of common stock | 10.00% | ||||||||||
Investor Relations Services [Member] | |||||||||||
Common stock issued | 445,932 | ||||||||||
Subsequent Event [Member] | |||||||||||
Additional offering units | 399,750 | ||||||||||
Number Of Units Sold For Gross Proceeds | $ 159,900 | ||||||||||
Subsequent Event [Member] | Chairman [Member] | |||||||||||
Additional demand notes | $ 260,000 | ||||||||||
Placement Agent [Member] | |||||||||||
Warrant to purchase common stock | 39,975 |