Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2017 | Feb. 14, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Drone USA Inc. | |
Entity Central Index Key | 1,704,795 | |
Amendment Flag | false | |
Trading Symbol | DRUS | |
Current Fiscal Year End Date | --09-30 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2017 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 42,724,692 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 |
Current Assets | ||
Cash | $ 181,381 | $ 152,492 |
Accounts receivable | 1,376,481 | 1,169,091 |
Inventory | 628,544 | 681,057 |
Prepaid expenses and other current assets | 122,869 | 56,606 |
Total Current Assets | 2,309,275 | 2,059,246 |
Long-term Assets | ||
Goodwill | 2,410,335 | 2,410,335 |
Tradename | 760,000 | 760,000 |
Customer list, net | 714,032 | 780,281 |
Total Long-term Assets | 3,884,367 | 3,950,616 |
Total Assets | 6,193,642 | 6,009,862 |
Current Liabilities: | ||
Accounts payable | 3,828,784 | 3,815,546 |
Accrued expenses | 1,237,902 | 1,015,880 |
Convertible notes payable - net of discounts and premium | 4,578,290 | 3,779,572 |
Note payable - seller | 900,000 | 900,000 |
Convertible note payable - related party affiliate | 688,444 | 688,444 |
Convertible note payable - related party officer | 32,500 | 122,000 |
Note payable | 239,246 | |
Line of credit - bank | 46,397 | 48,506 |
Contingent liability - advisory fees | 850,000 | 850,000 |
Accrued liability - advisory fees | 1,200,000 | 1,200,000 |
Derivative liability | 97,013 | |
Total Current Liabilities | 13,698,576 | 12,419,948 |
Total Liabilities | 13,698,576 | 12,419,948 |
Commitments and Contingencies (Note 11) | ||
Stockholders' Deficit: | ||
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, Series A preferred stock- no par value, 250 shares designated, issued and outstanding | ||
Common stock - $0.0001 par value, 200,000,000 shares authorized, 43,460,630 and 43,104,692 shares issued at December 31, 2017 and September 30, 2017, respectively and 43,124,692 and 43,104,692 shares outstanding at December 31, 2017 and September 30, 2017, respectively | 4,313 | 4,311 |
Additional paid-in capital | 7,647,751 | 7,442,028 |
Accumulated deficit | (15,156,998) | (13,856,425) |
Total Stockholders' Deficit | (7,504,934) | (6,410,086) |
Total Liabilities and Stockholders' Deficit | $ 6,193,642 | $ 6,009,862 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par or stated value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 250 | 250 |
Preferred stock, shares outstanding | 250 | 250 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 43,460,630 | 43,104,692 |
Common stock, shares outstanding | 43,124,692 | 43,104,692 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Sales | $ 4,433,060 | $ 6,984,392 |
Cost of Goods Sold | 4,141,893 | 6,532,810 |
Gross Profit | 291,167 | 451,582 |
Operating Expenses: | ||
Selling, general, and administrative expenses | 820,762 | 967,476 |
Amortization | 66,250 | 66,250 |
Total Operating Expenses | 887,012 | 1,033,726 |
Loss from Operations | (595,845) | (582,144) |
Other Income (Expenses): | ||
Derivative liability expense | (18,013) | |
Gain on settlement | 33,361 | |
Interest and financing costs | (720,076) | (369,590) |
Total Other Expenses | (704,728) | (369,590) |
Net Loss before Provision for Income Tax | (1,300,573) | (951,734) |
Provision for Income Tax | 50 | |
Net Loss | $ (1,300,573) | $ (951,784) |
Basic and Diluted Loss Per Share | $ (0.03) | $ (0.02) |
Weighted Average Number of Common Shares Outstanding: | ||
Basic and diluted | 43,121,105 | 42,078,659 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (1,300,573) | $ (951,784) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Intangibles amortization | 66,250 | 66,250 |
Amortization of debt discounts | 214,422 | 184,410 |
Accretion of premium on convertible note | 240,550 | |
Share-based compensation expense | 236,997 | 120,955 |
Deferred rent | (2,000) | |
Derivative expense | 18,013 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (207,390) | (108,237) |
Inventory | 52,513 | 1,086,950 |
Prepaid expenses and other current assets | 24,957 | (52,500) |
Accounts payable and accrued expenses | 165,259 | (281,739) |
Customers deposits | (77,248) | |
Income tax payable | 50 | |
Cash Used in Operating Activities | (489,002) | (14,893) |
Cash Flows from Financing Activities: | ||
Net proceeds from convertible notes payable | 377,000 | |
Cash financing costs | ||
Net proceeds from note payable | 232,500 | |
Proceeds from line of credit | 417 | |
Repayment of line of credit | (2,109) | |
Proceeds from lines of credit - related parties | 6,318 | |
(Repayment of) proceeds from loan payable - related party | (89,500) | 5,000 |
Cash Provided by Financing Activities | 517,891 | 11,735 |
Net Increase (Decrease) in Cash | 28,889 | (3,158) |
Cash - beginning of period | 152,492 | 631,020 |
Cash - end of period | 181,381 | 627,862 |
Cash paid for: | ||
Interest | 115,075 | 158,268 |
Noncash financing and investing activities: | ||
Increase in prepaid expenses and accrued expenses | 70,000 | |
Issuance of common stock upon conversion of settlement payable | 48,998 | |
Issuance of warrant for debt issuance costs | 12,508 | |
Initial derivative liability and debt discount | 79,000 | |
Issuance of convertible debt for deferred financing costs | 65,000 | |
Reclassification of debt premium upon conversion | 26,384 | |
Debt discounts on notes | $ 140,500 |
Nature of Operations
Nature of Operations | 3 Months Ended |
Dec. 31, 2017 | |
Nature of Operations [Abstract] | |
NATURE OF OPERATIONS | NOTE 1 - NATURE OF OPERATIONS Drone USA, Inc. (“Drone”) is an Unmanned Aerial Vehicles (“UAV”) and related services and technology company that intends to engage in the research, design, development, testing, manufacturing, distribution, exportation, and integration of advanced low altitude UAV systems, services and products. Drone also provides product procurement, distribution, and logistics services through its wholly-owned subsidiary, HowCo Distributing Co., (“HowCo”) (collectively, the “Company”) to the United States Department of Defense and Defense Logistics Agency. The Company has operations based in West Haven, Connecticut and Vancouver, Washington. The Company is registered with the U.S. State Department and has met the requirements of the Arms Export Control Act and International Traffic in Arms Regulations (“ITAR”). The registration allows for the Company to apply for export, and temporary import, of product, technical data, and services related to defense articles. The Company continues to seek strategic acquisitions and partnerships with UAV firms that offer superior technologies in high-growth markets, as well as acquisitions and partnerships with firms that have complementary technologies and infrastructure. On January 26, 2016, Texas Wyoming Drilling, Inc., an inactive company trading on the Over-the-Counter Markets, acquired 100% of the outstanding membership interests of Drone USA, LLC pursuant to an Equity Exchange Agreement and Drone USA, LLC paid a $100,000 cash fee which was expensed and included in Selling, General and Administrative expenses. Pursuant to the merger, the sole member of Drone USA, LLC received 38,309,321 shares of Texas Wyoming Drilling, Inc. common stock. As a result of this merger, the former sole member of Drone USA, LLC owned approximately 94% of the outstanding common stock of Texas Wyoming Drilling, Inc. immediately following the merger. In connection with the merger, the name of the company was changed to Drone USA, Inc. In connection with the merger, effective January 26, 2016, the Company accepted the resignation of the former Chief Executive Officer and any remaining former officers and directors, and appointed a new Chief Executive Officer, President, Chairman, and board member and a new Chief Financial Officer, Secretary, Treasurer, and board member. The transaction has been accounted for as a reverse merger in which Drone USA, LLC is considered to be the acquirer of Texas Wyoming Drilling, Inc. Accordingly, the reverse merger was accounted for as a recapitalization of Drone USA, LLC in which (i) the assets and liabilities of Drone USA, LLC were recorded at their historical book values, (ii) the common stock and additional paid-in capital accounts which replaced Drone USA, LLC’s member interests were retroactively restated to give effect to the exchange of the Drone USA, LLC member interests for Texas Wyoming Drilling, Inc. common stock, and (iii) the historical member deficit of Drone USA, LLC was recorded as stockholders’ (deficiency). There were no assets, liabilities, or equity to be accounted for related to the former operations of Texas Wyoming Drilling, Inc. In connection with the merger, Drone USA, Inc. is deemed to have issued 2,532,196 shares of common stock to the shareholders of Texas Wyoming Drilling, Inc. In February 2016 the Company effected a 1 for 150 reverse split of the common stock as contemplated by the Equity Exchange Agreement and in April 2016 effected a 1 for 12 reverse split of the common stock. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactive restated to reflect both reverse splits. |
Summary of Significant Accounti
Summary of Significant Accounting Policies and Going Concern | 3 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies and Going Concern [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of Drone USA, Inc. and its wholly-owned subsidiaries, Drone USA, LLC, and HowCo. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly certain information and footnote disclosures normally included in financial statements in accordance with GAAP have been omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended September 30, 2017 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on December 29, 2017. The consolidated balance sheet as of September 30, 2017 contained herein has been derived from the audited consolidated financial statements as of September 30, 2017, but does not include all disclosures required by GAAP. Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the three months ended December 31, 2017, the Company has incurred a net loss of $1,300,573 and used cash in operations of $489,002. The working capital deficit, stockholders’ deficit and accumulated deficit was $11,389,301, $7,504,934, and $15,156,998, respectively, at December 31, 2017. Furthermore, on April 13, 2017 the Company received a default notice on its payment obligations under the senior secured credit facility agreement (see Note 7), defaulted on its Note Payable – Seller in September 2017, and as of December 31, 2017 is subject to lawsuits and has received demands for payment of past due amounts from several consultants and service providers. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon management’s ability to further implement its business plan and raise additional capital as needed from the sales of stock or debt. The Company has been implementing cost-cutting measures and restructuring or setting up payment plans with vendors and service providers and plans to raise equity through a private placement, and restructure or repay its secured obligations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for bad debt on accounts receivable, reserves on inventory, valuation of goodwill and intangible assets for impairment analysis, valuation of the earn-out liability at balance sheet dates, valuation of stock based compensation, the valuation of derivative liabilities and the valuation allowance on deferred tax assets. Fair Value Measurements The Company follows the FASB Fair Value Measurements Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The standard establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. Level 1 inputs include quoted market prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data. The standard requires the utilization of the lowest possible level of input to determine fair value and carrying amounts of current liabilities approximate fair value due to their short-term nature. The Company accounts for certain instruments at fair value using level 3 valuation. At December 31, 2017 At September 30, 2017 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative liability — — $ 97,013 — — $ — A roll forward of the level 3 valuation financial instruments is as follows: Derivative Balance at September 30, 2017 $ - Initial valuation of derivative liability recorded as derivative expense 70,028 Initial valuation of derivative liability recorded as debt discount 79,000 Change in fair value of derivative liability (52,015 ) Balance at December 31, 2017 $ 97,013 Inventory Inventory consists of finished goods, which are purchased directly from manufacturers. The Company utilizes a just in time type of inventory system where products are ordered from the vendor only when the Company has received sales order from its customers. Inventory is stated at the lower of cost and net realizable value on a first-in, first-out basis. Revenue Recognition Sales are recognized upon shipment of product to the customer. Provisions for returns and allowances are recorded in the period the sales occur. Payments received from customers prior to shipment of the product to them, are recorded as customer deposit liabilities. Convertible Notes with Fixed Rate Conversion Options The Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note date with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”. Derivative Liabilities The Company has certain financial instruments that contain embedded derivatives. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to income or expense as part of gain or loss on extinguishment. Net Loss Per Share Basic loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution. Pursuant to ASB 260, as of December 31, 2017, 335,938 contingent shares issuable under a Securities purchase agreement (See Note 7) are not considered outstanding and are not included in basic net loss per shares or as potentially dilutive shares in calculating the diluted EPS. As of December 31, 2017 and 2016, potentially dilutive securities consisted of the following: December 31, 2017 December 31, 2016 Stock options 44,351,200 27,645,000 Warrants 600,000 500,000 Related party convertible debt and accrued interest 4,527,184 3,104,000 Senior convertible debt 28,665,412 - Convertible debt 5,902,192 - Contingent liability – advisory fees 4,944,667 1,437,540 Total 88,990,655 32,686,540 Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. As of December 31, 2017, the Company did not report any segment information since the Company only generates sales from its subsidiary, HowCo. Recent Accounting Pronouncements In May 2014, the FASB issued a new accounting standard that attempts to establish a uniform basis for recording revenue to virtually all industries financial statements, under U.S. GAAP as amended in March 2016 and April 2016. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. In order to accomplish this objective, companies must evaluate the following five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. There are three basic transition methods that are available - full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the third alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. guidance at the date of initial application and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. Prior years would not be restated and additional disclosures would be required to enable users of the financial statements to understand the impact of adopting the new standard in the current year compared to prior years that are presented under legacy U.S. guidance. For public business entities, this standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is prohibited. The Company does not believe that the adoption of this new accounting standard to have a material impact on its consolidated financial position and results of operations. In February 2016, the FASB issued a new accounting standard on leases. The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases. The lease liability will be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs (e.g. commissions). The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented. The Company is currently evaluating the impact of this new accounting standard on its consolidated financial position and results of operations. The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. |
Inventory
Inventory | 3 Months Ended |
Dec. 31, 2017 | |
Inventory [Abstract] | |
INVENTORY | NOTE 3 - INVENTORY At December 31, 2017 and September 30, 2017, inventory consists of finished goods which was valued at $628,544 and $681,057, respectively. |
Line of Credit - Bank
Line of Credit - Bank | 3 Months Ended |
Dec. 31, 2017 | |
Line Of Credit Bank [Abstract] | |
LINE OF CREDIT - BANK | NOTE 4 - LINE OF CREDIT - BANK The Company has a revolving line of credit with a financial institution. This revolving line of credit is in the amount of $50,000, and is personally guaranteed by the Company’s Chief Executive Officer (“CEO”). The line bears interest at a fluctuating rate equal to the prime rate plus 4.25%, which at December 31, 2017 and September 30, 2017 and 2016 was 8.75% and 8.50%, respectively. As of December 31, 2017, the balance of the line of credit was $46,397 with $3,603 available. |
Note Payable - Seller
Note Payable - Seller | 3 Months Ended |
Dec. 31, 2017 | |
Notes Payable - Seller [Abstract] | |
NOTE PAYABLE - SELLER | NOTE 5 - NOTE PAYABLE – SELLER In connection with the acquisition of HowCo, the Company issued a note payable in the amount of $900,000 to the sellers of HowCo. The note matured on September 9, 2017 and bears interest at 5.50% per annum. The note requires payment of unpaid principal and interest upon maturity. The note is secured by all assets of HowCo Distribution Co. and subordinated to the Senior Secured Credit Facility discussed below. The note is currently in default and the default interest rate is 8% per annum. At December 31, 2017 and September 30, 2017, accrued interest on this note amounted to $71,830 and $53,682, respectively. |
Convertible Notes Payable - Rel
Convertible Notes Payable - Related Parties | 3 Months Ended |
Dec. 31, 2017 | |
Convertible Notes Payable - Related Parties/Convertible Notes Payable and Advisory Fee Liabilities [Abstract] | |
CONVERTIBLE NOTES PAYABLE - RELATED PARTIES | NOTE 6 - CONVERTIBLE NOTES PAYABLE – RELATED PARTIES The Company has an $840,000 convertible note payable (“Note 1”) to a related party entity controlled by the Company’s CEO. Note 1 bears interest at an annual rate of 7% with an original maturity date of June 11, 2017 that was extended to June 11, 2018, at which time all unpaid principal and interest is due. The holder of Note 1 has the option to convert the outstanding principal and accrued interest, in whole or in part, into shares of common stock at a conversion price equal to the volume weighted average price per share of common stock for the 30-day period prior to conversion. As of December 31, 2017 and September 30, 2017, Note 1 has not been converted and the balance of the note was $688,444 and $688,444, and accrued interest was $89,923 and $77,776, respectively. This note is considered a stock settled debt in accordance with ASC 480 and the fixed monetary amount is equal to the principal amount based on the conversion formula. The Company has a convertible note payable (“Note 2”) with the Company’s CEO. Note 2 bears interest at an annual rate of 7% with a maturity date of December 31, 2017, at which time all unpaid principal and interest was due. On December 15, 2017, the due date of Note 2 was extended to July 2, 2018. The holder of Note 2 has the option to convert the outstanding principal and accrued interest, in whole or in part, into shares of common stock at a conversion price equal to the volume weighted average price per share of common stock for the 30-day period prior to conversion. During the three months ended December 31, 2017, the Company borrowed $500 and repaid $90,000 on this note. As of December 31, 2017 and September 30, 2017, Note 2 has not been converted and the balance was $32,500 and $122,000, and accrued interest was $12,175 and $10,707, respectively. This note is considered a stock settled debt in accordance with ASC 480 and the fixed monetary amount is equal to the principal amount based on the conversion formula. |
Convertible Notes Payable and A
Convertible Notes Payable and Advisory Fee Liabilities | 3 Months Ended |
Dec. 31, 2017 | |
Convertible Notes Payable - Related Parties/Convertible Notes Payable and Advisory Fee Liabilities [Abstract] | |
CONVERTIBLE NOTES PAYABLE AND ADVISORY FEE LIABILITIES | NOTE 7 – CONVERTIBLE NOTES PAYABLE AND ADVISORY FEE LIABILITIES Senior Secured Credit Facility Note Effective September 13, 2016 (“Effective Date”), the Company entered into a senior secured credit facility note (the “Agreement”) with an investment fund to provide capital for the acquisition of HowCo. The Company can borrow up to $6,500,000, subject to lender approval, with an initial convertible promissory note at closing of $3,500,000 (the “Convertible Note”). The Convertible Note bears interest at a rate of 18% per annum, requires monthly payments of $52,500 which is interest only starting on October 13, 2016 through February 13, 2017, and monthly payments, including interest and principal, of $298,341 starting on March 13, 2017 through maturity on March 13, 2018. Events of default are defined in the Agreement and Convertible Note. In the event of default the Convertible Note balance will bear interest at 25% per annum. In connection with this Agreement, the Company was obligated to pay additional advisory fees of $850,000 payable in the form of cash or common stock in accordance with the terms of the Agreement. The Company was also required to reserve 7,000,000 shares of common stock related to this transaction. The reserved shares will be released upon the satisfaction of the loan. In the event the lender makes additional loans under the Agreement, the Company agrees to pay additional advisory fees under similar terms as the $850,000 fee. As of December 31, 2017, the Company issued 539,204 shares of common stock in satisfaction of the $850,000 in accordance with the terms of the agreement, such shares being issued in September 2016. Based upon the value of the shares, at the time the lender sells the shares, of which none were reported as sold by the lender as of December 31, 2017, the Company may be required to redeem unsold shares for the difference between the $850,000 and the lender’s sales proceeds. Accordingly, the $850,000 has been reflected as a current liability as of December 31, 2017 and September 30, 2017. Notwithstanding anything contained in the Agreement to the contrary, in the event the Lender has not realized net proceeds from the sale of Advisory Fee Shares equal to at least the Advisory Fee by the earlier to occur of: (A) the twelve (12) month anniversary of the Effective Date; (B) the occurrence of an Event of Default; or (C) the Maturity Date, then at any time thereafter, the Lender shall have the right, upon written notice to the Borrower, to require that the Borrower redeem all Advisory Fee Shares then in Lender’s possession for cash equal to the Advisory Fee, less any cash proceeds received by the Lender from any previous sales of Advisory Fee Shares, if any. In the event such redemption notice is given by the Lender, the Borrower shall redeem the then remaining Advisory Fee Shares in Lender’s possession for an amount of Dollars equal to the Advisory Fee, less any cash proceeds received by the Lender from any previous sales of Advisory Fee Shares, if any, payable by wire transfer to an account designated by Lender within five (5) Business Days from the date the Lender delivers such redemption notice to the Borrower. As of December 31, 2017 and September 30, 2017, the Convertible Note payable has not been converted and the principal balance of the Convertible Note was $3,500,000 and $3,500,000 and accrued interest was $276,668 and $169,417, respectively. The Convertible Note is only convertible upon default or mutual agreement by both parties at a conversion rate of 85% of the lowest of the daily volume weighted average price of the Company’s common stock during the 5 business days immediately prior to the conversion date. Once a default occurs the Convertible Note will be accounted for as stock settled debt at its fixed monetary value and any shares issued upon conversion are also subject to a make whole provision similar to that described above for the $850,000 advisory fee payable. On March 13, 2017 the Company defaulted on the monthly principal and interest payment of $298,341. Due to this default, as of March 31, 2017, the Company has accounted for the embedded conversion option as stock settled debt and recorded a debt premium of $617,647 with a charge to interest expense, and the interest rate increased to 25% (default rate). The Company has been making interest-only payments of $52,500 each month, however, the Company has not made the full default interest payment of $72,917 per month. On April 13, 2017 the Company received a default notice from the lender and was given a 10-day period to cure the default. Such cure did not occur as of December 31, 2017. The lender has not notified the Company of any intention to convert the debt into shares and has not provided a notice to accelerate principal payments or advisory fee payments, however, in the default notice they reserved the right to do so at any time after the expiration of the cure period. On March 28, 2017, the Company entered into an agreement with the above senior secured credit facility lender to receive a range of advisory services for a total of $1,200,000 with no definitive terms or length of service which is expensed and recorded as an accrued liability – advisory fees as of December 31, 2017 and September 30, 2017. If the Company is a quoted company on any listed exchange, the senior secured credit facility lender will accept a single preferred share convertible into common stock never to exceed 4.99%. The number of shares issued will be set at 100% of the amount due up to availability and subject to a make whole provision. The advisory fee, totaling $1,200,000, was earned upon execution of the agreement and is reported in selling, general, and administrative expenses In January 2018, the Company entered into a settlement agreement and amended note agreements with the investment fund (see Note 13). Other Convertible Debt In July 2017, the FASB issued Accounting Standards Update No. 2017-11 Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815) (“ASU 2017-11”), which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities that present earnings per share (EPS) in accordance with ASC Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. For the Company, ASU 2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company adopted this standard on October 1, 2017. On October 5, 2017, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Power Up”) under which the Company received $78,500, net of $21,500 in fees and expenses to be recorded as a debt discount and amortized to interest expense over the Note term, in return for issuing a convertible promissory note (the “Note”) in the principal amount of $100,000. Power Up received a right of first refusal for the first nine months from the date of the Note to provide any debt or equity financing less than $150,000. The Note bears interest at 10% per annum and has a maturity date of July 15, 2018. The Note may be prepaid at a premium ranging from 112% to 137% depending on the length of time following the date of the Note. The Note is convertible after 180 days into shares of the Company’s common stock at a discount of 35% of the average of the two lowest closing bid prices of Drone USA’s common stock 15 days prior to the date of conversion and the maximum number of shares issued to Power Up may not exceed 4.99% of the issued and outstanding shares of the Company’s common stock. The Note is subject to customary default provisions, including a cross default provision. The Company’s CEO entered into a confession of judgment in the principal amount of the Note. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $53,846 with a charge to interest expense. On November 9, 2017, the Company received a first tranche payment of $75,500 under the terms of a Securities Purchase Agreement dated October 25, 2017, with Crown Bridge Partners, LLC (“Crown Bridge”) under which the Company issued to Crown Bridge a convertible note in the principal amount of $105,000 and a five-year warrant to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.35 as a commitment fee which is equal to the product of one-third of the face value of each tranche divided by $0.35. The warrants have full ratchet price protection and cashless exercise rights. The convertible note (the “Note”) issued to Crown Bridge is in the principal amount of $105,000, has an original issue discount of $10,500 and issue costs of $19,000 both of which are recorded as debt discount along with the warrant relative fair value to be amortized over the twelve month term of this tranche, bears interest of 10% (12% default rate) per annum, and has a maturity date of 12 months from the date of each tranche of payments under the Note with future tranches being at the discretion of Crown Bridge. The conversion rate for any conversion of unpaid principal and interest under the Notes is at a 35% discount to the lowest market price of the shares of the Company’s common stock within a 20 day trading period prior to the date of conversion to which an additional 10% discount will be added if the conversion price of the Company’s common stock is less than $0.05 per share and no shares of the Company’s common stock can be issued to the extent Crown Bridge would own more than 4.99% of the outstanding shares of the Company’s common stock and the conversion shares contain piggy-back registration rights. The Note is subject to customary default provisions including an event of default if the bid price of the Company’s common stock is less than its par value of $.0001 per share. The Company is entitled to prepay the Note between 30 days after its issuance until 180 days from its issuance at amounts that increase from 112% of the prepayment amount to 137% of the prepayment amount depending on the length of time when prepayments are made. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $56,538 with a charge to interest expense. On November 28, 2017, the Company received a payment of $84,000, net of issue costs of $23,500 to be recorded as a debt discount and amortized to interest expense over the Note term, under the terms of a Securities Purchase Agreement dated November 20, 2017, with Labrys Fund, LP (“Labrys”) under which Drone USA issued to Labrys (i) a convertible note (the “Note”) in the principal amount of $107,500 that bears interest of 10% (24% default rate) per annum and (ii) 335,938 shares of the Company’s common stock as a commitment fee which will be returned to the Company in the event that it pays all unpaid principal and interest under the Note within 180 days of November 20, 2017. Pursuant to ASB 260, as of December 31, 2017, the 335,938 contingent shares issued under the Financial Consulting Agreement are not considered outstanding and are not included in basic net loss per share or as potentially dilutive shares in calculating the diluted EPS. The Note has a maturity date of nine months and a conversion rate for any unpaid principal and interest at a 35% discount to the market price which is defined as the average of the two lowest trading prices (defined as the lower of the trading price or closing bid price) for the Company’s common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the date of conversion. The conversion rate is further reduced if the Company enters into any section 3(a)(9) or 3(a)(10) transactions under the Securities Act of 1933, as amended, if the terms of those transactions offer greater discounts on conversion prices or a longer look back period for determining the conversion rate and under certain other enumerated events, including if the conversion price is less than $.01 per share or if the Company loses the “bid” price for its common stock ($0.0001 on the “ask” with zero market makers on the “bid” per Level 2 and/or a market such as OTC Pink). In addition, if the Company issues any shares of its common stock at less than the conversion price Labrys is entitled to full ratchet anti-dilution in such event. No shares of the Company’s common stock can be issued to the extent Labrys would own more than 4.99% of the outstanding shares of the Company’s common stock unless Labrys agrees to increase the ownership to 9.99%. The Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the Note (based on the conversion price of the Note in effect from time to time). Initially, the Company must instruct its transfer agent to reserve 6,198,049 shares of its common stock. The Note is subject to customary default provisions and also includes a cross-default provision as well as default being triggered if the Company loses the “bid” price for its common stock ($0.0001 on the “ask” with zero market makers on the “bid” per Level 2 and/or a market such as OTC Pink) and a $15,000 penalty if not paid by the maturity date. The Company is entitled to prepay the Note between the issue date until 180 days from its issuance but not thereafter. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $57,885 with a charge to interest expense. On December 7, 2017, the Company received a payment of $79,000, net of an original issue discount of $5,800 and issue costs of $20,200 fees to be recorded as a debt discount and amortized to interest expense over the Note term, under the terms of a Securities Purchase Agreement dated November 21, 2017, with EMA Financial, LLC (“EMA Financial”) under which the Company issued to EMA Financial a convertible note (the “Note”) in the principal amount of $105,000 that bears interest of 10% (24% default rate) per annum. The Note has a maturity date of 12 months, has a conversion rate for any unpaid principal and interest and a conversion price which is the lower of (i) the closing sales price of the Company’s common stock on the trading day immediately preceding the date of funding and (ii) a 35% discount to (a) the lowest sales price of the shares of the Company’s common stock within a 20 day trading period including and immediately preceding the conversion date or (b) the lowest bid price on the conversion date, whichever is lower, and the conversion shares contain piggy-back registration rights. The conversion rate is further reduced under certain events, including if the closing sales price is less than $0.095 in which case the conversion rate is a 50% discount under the terms set forth above. No shares of the Company’s common stock can be issued to the extent EMA Financial would own more than 4.99% of the outstanding shares of the Company’s common stock. The Company also is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion or adjustment of the Note (based on the conversion price of the Note in effect from time to time) and initially must instruct its transfer agent to reserve 6,802,000 shares of common stock in the name of EMA Financial for issuance upon conversion. The Note is subject to customary default provisions and also includes a cross-default provision as well as default being triggered if the Company loses the “bid” price for its common stock ($0.0001 on the “ask” with zero market makers on the “bid” per Level 2 and/or a market such as OTC Pink). The Company is entitled to prepay the Note between the issue date until 180 days from its issuance at a premium of 135% of the unpaid principal and interest if paid within 90 days after the issue date and 150% thereafter. In connection with the issuance of this Note, the Company determined that the terms of the Note contain a conversion formula that caused variations in the conversion price resulting in the treatment of the conversion option as a bifurcated derivative to be accounted for at fair value. Accordingly, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”, the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives were determined using the Binomial valuation model. At the end of each period, the Company revalued the embedded conversion option and warrants derivative liabilities. In connection with this Note, on the initial measurement date of December 7, 2017, the fair values of the embedded conversion option derivative of $149,028 was recorded as derivative liabilities, $70,028 was charged to current period operations as initial derivative expense, and $79,000 was recorded as a debt discount and will be amortized into interest expense over the term of this Note. At the end of the period, the Company revalued the embedded conversion option derivative liability. In connection with this revaluations, the Company recorded derivative income of $52,015 for the three months ended December 31, 2017. During the three months ended December 31, 2017, the fair value of the derivative liability was estimated using the Binomial valuation model with the following assumptions: Dividend rate 0 Term (in years) 1.00 year Volatility 136.23 % Risk-free interest rate 1.67% to 1.76 A number of terms included in the Securities Purchase Agreement and Note issued subsequently (see paragraph below) were more favorable than the terms granted to EMA Financial under its Securities Purchase Agreement and the EMA Note. Accordingly, on December 31, 2017, EMA Financial notified the Company that pursuant to the EMA Securities Purchase Agreement that the EMA Note was automatically amended by increasing (i) the annual interest rate to 12% percent and (ii) the Original Issue Discount to $9,450. On December 13, 2017, the Company received a payment of $60,000, net of original issue discount fees of $7,500 and $15,000 of issue costs recorded as debt discounts and amortized to interest expense over the Note term under the terms of a Securities Purchase Agreement dated December 8, 2017, with Morningview Financial, LLC (“Morningview Financial”) under which the Company issued to Morningview Financial a convertible note (the “Note”) in the principal amount of $82,500 that bears interest of 12% (18% default rate) per annum. The Note has a maturity date of 12 months and a conversion rate for any unpaid principal and interest and a conversion price which is a 35% discount to the lowest sales price of the shares of the Company’s common stock within a 20-day trading period including and immediately preceding the conversion date. The conversion rate is further reduced under certain events, including if the closing sales price is less than $0.05 in which case the conversion rate is a 45% discount under the terms set forth above. No shares of the Company’s common stock can be issued to the extent Morningview Financial would own more than 4.99% of the outstanding shares of the Company’s common stock. The Company also is required at all times to have authorized and reserved eight times the number of shares that is actually issuable upon full conversion or adjustment of the Note (based on the conversion price of the Note in effect from time to time). The Note is subject to customary default provisions and also includes a cross-default provision as well as default being triggered if the Company’s Trading Price as that term is defined in the Note is less than $.0001 or if a money judgment, writ or similar process shall be entered or filed against the Company or any of its subsidiaries for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of 20 days unless otherwise consented to by the holder of the Note. Additionally, upon default and default notice by the lender, the amount immediately due shall be increased to 150% or 200% of the outstanding principal and interest due depending upon the default provisions, plus default interest. The Company is entitled to prepay the Note between the issue date until 180 days from its issuance at a premium of 135% of the unpaid principal and interest. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $44,423 with a charge to interest expense. On November 15, 2017, the Company executed a Liability Purchase Term Sheet with Livingston Asset Management (“Livingston”) under which Livingston agreed to purchase up to $10,000,000 that the Company owes to its creditors through direct purchase of the debts from the Company’s creditors in return for (i) a convertible note issued by the Company in the principal amount of $50,000 bearing interest of 10% per year to cover certain legal fees and other expenses of Livingston that matures in six months and is convertible into shares of our common stock at a 30% reduction off the lowest closing bid price for 20 trading days prior to the date of conversion, (ii) a convertible note subject to these same terms as the convertible note issued to Livingston payable to Scottsdale Capital Advisors in the principal amount of $15,000 as a placement agent fee and (iii) the right of Livingston to retain 30% of any negotiated reduction off the face amount of the liability the Company owes to such creditors. Following a court judgment for the liabilities purchased by Livingston, the Company will issue free trading shares of its common stock under section 3(a)(10) of the Securities Act to Livingston in the amount of such judgment in a series of tranches so that Livingston will not own more than 9.99% of our outstanding shares per tranche. The Company has accounted for the convertible promissory notes as stock settled debt under ASC 480 and recorded a debt premium of $27,857 with a charge to interest expense. The senior secured credit facility note balance and convertible debt balances consisted of the following at December 31, 2017 and September 30, 2017: December 31, 2017 September 30, 2017 Principal $ 4,065,000 $ 3,500,000 Premium 858,196 617,647 Unamortized discount (344,906 ) (338,075 ) 4,578,290 3,779,572 Non-current - - Current $ 4,578,290 $ 3,779,572 For the three months ended December 31, 2017 and 2016, amortization of debt discount amounted to $207,676 and $184,410, respectively. |
Notes Payable
Notes Payable | 3 Months Ended |
Dec. 31, 2017 | |
Note Payable [Abstract] | |
NOTE PAYABLE | NOTE 8 – NOTE PAYABLE On October 19, 2017, the Company entered into a loan agreement with a third party entity under which the Company received approximately $232,500, net of fees and expenses of $17,500 recorded as debt discounts and amortized to interest expense over the Note term, in return for issuing a promissory note (the “Note”) in the principal amount of $250,000. The Note bears interest at 12% (18% default rate) per annum and has a maturity date of April 20, 2018. The Note may be prepaid in full or in part with additional premium or penalty. The Note is secured by certain assets of the Company’s CEO, certain assets of HowCo and all of the assets of Drone USA as a junior security interest to the first secured interest of the senior lender. Additionally, the loan is guaranteed by the Company’s CEO. For the three months ended December 31, 2017, amortization of debt discount amounted to $6,746. |
Stockholders' Deficit
Stockholders' Deficit | 3 Months Ended |
Dec. 31, 2017 | |
Stockholders' Deficit [Abstract] | |
STOCKHOLDERS' DEFICIT | NOTE 9 - STOCKHOLDERS’ DEFICIT Preferred Stock As of December 31, 2017, the Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock, with designations, voting, and other rights and preferences to be determined by the Board of Directors of which 4,999,750 remain available for designation and issuance. As of December 31, 2017 and 2016, the Company has designated 250 shares of $0.0001 par value Series A preferred stock, of which 250 shares are issued and outstanding. These preferred shares have voting rights per share equal to the total number of issued and outstanding shares of common stock divided by 0.99. Common Stock Stock Incentive Plan The Company established its 2016 Stock Incentive Plan (the “Plan”) that permits the granting of incentive stock options and other common stock awards. The maximum number of shares available under the Plan is 100,000,000 shares. The Plan is open to all employees, officers, directors, and non-employees of the Company. Option granted under the Plan will terminate and may no longer be exercised (i) immediately upon termination of an employee or consultant for cause or (ii) one year after termination of employment, but not later than the remaining term of the option. As of December 31, 2017, 55,648,800 awards remain available for grant under the Plan. Shares Issued for Services On September 1, 2017, the Company entered into a consulting agreement with an individual. In connection with this agreement, the Company agreed to issue 10,000 common shares per month until the agreement is terminated. During the three months ended December 31, 2017, an aggregate of 20,000 common shares were issuable pursuant to the agreement. Such shares were valued on the vesting dates of October 1, 2017 and November 1, 2017 at $3,950, or $0.20 and $0.195 per share, respectively, based on the quoted trading price. In connection with these shares, during the three months ended December 31, 2017, the Company recorded professional fees of $3,950. This agreement was terminated in December 2017. Shares Issued for debt issuance costs On November 28, 2017, pursuant to a Securities Purchase Agreement and Convertible Note Agreement with Labrys (see Note 7), the Company issued to Labrys 335,938 shares of the Company’s common stock as a commitment fee which will be returned to the Company in the event that it pays all unpaid principal and interest under the Note within 180 days of November 20, 2017. Pursuant to ASB 260, as of December 31, 2017, the 335,938 contingent shares issued under the Securities Purchase Agreement (see Note 7) are not considered outstanding, are not accounted for due to the contingency, and are not included in basic net loss per shares or as potentially dilutive shares in calculating the diluted EPS at December 31, 2017. Stock Options For the three months ended December 31, 2017 and 2016, the Company recorded $189,267 and $63,455 of compensation and consulting expense related to stock options, respectively. Total unrecognized compensation and consulting expense related to unvested stock options at December 31, 2017 amounted to $2,107,131. The weighted average period over which share-based compensation expense related to these options will be recognized is approximately 3 years. For the three months ended December 31, 2017, a summary of the Company’s stock options activity is as follows: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Weighted- Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding at September 30, 2017 44,351,200 $ 0.21 9.27 $ - $ 0 Granted - - - - - Forfeited - - - - - Outstanding at December 31, 2017 44,351,200 $ 0.21 8.93 $ - $ 0 Exercisable at December 31, 2017 27,184,000 $ 0.20 8.76 $ - $ 0 All options were issued at an options price equal to the market price on the date of the grant. Warrants On November 9, 2017, the Company received a first tranche payment of $75,500 under the terms of a Securities Purchase Agreement dated October 25, 2017, with Crown Bridge under which the Company issued to Crown Bridge a convertible note in the principal amount of $105,000 and a five-year warrant to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.35 as a commitment fee which is equal to the product of one-third of the face value of each tranche divided by $0.35. The warrants have full ratchet price protection and cashless exercise rights (See Note 7). For the three months ended December 31 2017, a summary of the Company’s warrant activity is as follows: Number of Warrants Weighted- Average Exercise Weighted- Average Remaining Contractual Term (Years) Weighted- Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding at September 30, 2017 500,000 $ 0.01 3.98 $ - $ 95,000 Granted 100,000 0.35 4.88 - - Outstanding at December 31, 2017 600,000 $ 0.01 4.13 $ - $ 72,500 Exercisable at December 31, 2017 600,000 $ 0.01 4.13 $ - $ 72,500 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10 - RELATED PARTY TRANSACTIONS Since July 2017, the Company utilizes the office space and equipment of an entity in West Haven, Connecticut related to the Company’s CEO at no cost. The Company has certain convertible notes payable to related parties (see Note 6). |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 11 - COMMITMENTS AND CONTINGENCIES Contingencies Legal Matters In connection with the merger with Texas Wyoming Drilling, Inc., a vendor has a claim for unpaid bills of approximately $75,000 against the Company. The Company and its legal counsel believe the Company is not liable for the claim pursuant to its indemnification clause in the merger agreement. During the quarter ended June 30, 2017, the Company received demands for non-payment of five months of rent for its New York location. In July 2017, the Company vacated the New York premises. Subsequent to June 30, 2017, a lawsuit was filed in the Supreme Court of the State of New York for an alleged breach of a Service Agreement for approximately $63,000 in connection with the lease the Company entered into for its former office space in New York. As of September 30, 2017, the Company accrued into accounts payable approximately $63,000 pursuant to ASC 420-10-30 “Cost to Terminate an Operating Lease”. In October 2017, the Company entered into a settlement agreement with the New York lease landlord and paid $30,000 in full settlement and recorded a settlement gain of $33,361. The Company has filed a lawsuit against the former Chief Strategy Officer and member of the Board, who was terminated for cause on July 7, 2017, for breach of contract, breach of the covenant of good faith and fair dealing, and violation of the California Business & Professions Code. On July 31, 2017, the former Chief Strategy Officer and member of the Board subsequently filed a counterclaim against the Company seeking, among other items, damages in excess of $900,000, prejudgment interest, and reimbursement of legal fees. The Company believes it will prevail in this matter and therefore has not accrued any additional liabilities. Prior to the termination and as of December 31, 2017 and September 30, 2017, there was accrued a 401(k) matching contribution of $9,230 and a $100,000 sign on bonus. On August 9, 2017, a lawsuit was filed by an investor relations firm against the Company in the Supreme Court, Westchester County (Index No. 61772/2017). The complaint alleged two causes of action, one for goods and services furnished and one for an account stated, in the amount of $74,325. The plaintiff obtained a default judgment. The Company has filed an Order to Show Cause to vacate the default judgment on the grounds that the service of the complaint was invalid. The court granted the Company’s Order to Show Cause on December 19, 2017 and a hearing occurred on January 12, 2018 and a decision will be forthcoming. The Company intends to contest any claim of damages by the plaintiff on the grounds that it failed to perform its obligations under the agreement between the two companies, however as of December 31, 2017 and September 30, 2017, approximately $70,000 was recorded as accounts payable. On January 3, 2018, under a court order, the bank transferred $77,000 of our funds into an escrow account until resolution of this matter. As of December 31, 2017, the Company has received demand for payment of past due amounts for services by several consultants and service providers. Commitments Exclusive Agreement On June 1, 2016, the Company entered into an exclusive agreement with a Brazilian entity in the drone technology market. The agreement provides that the Company will acquire exclusive rights to this entity’s UAV technology and intellectual property that includes research and development efforts completed by this entity. The Company will also secure exclusive export and representation rights to this entity’s products along with the non-binding option to acquire full ownership of this entity for $1 million should the companies agree at a later date it would be in the best interest of both businesses. As consideration for this agreement, the Brazilian entity CEO was appointed to the position of Chief Technology Officer of the Company and granted an option for 2,000,000 shares of common stock. Consulting Agreements In June 2017, the Company entered into an agreement with an investment bank to provide placement agent services on an exclusive basis as it relates to a private placement (“the placement”). The agreement calls for the investment bank to receive 9% of the gross proceeds of the placement and 2.5% warrant coverage of the amount raised. The warrants shall entitle the investment bank to purchase securities of the Company at a purchase price equal to 110% of the implied price per share of the placement or 100% of the public market closing price of the Company’s common stock on the date of the placement, whichever is lower. The warrants shall have a term of five years after the closing of the placement. The agreement expired on September 30, 2017 but the terms of the agreement was effective for certain capital raised during the three months ended December 31, 2017 (see Note 7). Lease Obligations The Company entered into an agreement with a manufacturer in Pismo Beach, California. The agreement provides for certain services to be provided by the manufacturer as needed by the Company. The agreement has an initial term of three years with one year renewals. In connection with this agreement, the Company has agreed to sublease space based in San Luis Obispo, California from the manufacturer for the purposes of the development and manufacturing of unmanned aerial vehicles. The lease provides for base monthly rent of approximately $15,000 for the initial term to be increased to $16,500 per month upon extension. The lease term begins February 1, 2017 and expires January 31, 2019 with the option to extend the term an additional 24 months. However, the Company never took possession of the premises and in July 2017, the Company made a decision to not take possession of the premises. The Company is in default of the rent payments and had received verbal demand of payments. As of December 31, 2017, the Company has not made any of the required monthly rent payments in connection with this agreement. As of December 31, 2017 and September 30, 2017, the Company had accrued into accounts payable the remaining amounts due under the term of the lease for a total accrual of $360,000 pursuant to ASC 420-10-30. In May 2017, the Company extended HowCo’s office lease through May 30, 2020. The lease requires monthly payments including base rent plus CAM with annual increases. Future minimum lease payments under non-cancelable operating leases at December 31, 2017 are as follows: Years ending December 31, Amount 2018 59,072 2019 60,499 2020 25,460 Total minimum non-cancelable operating lease payments $ 145,031 For the three months ended December 31, 2017 and 2016, rent expense amounted to $14,565 and $50,371, respectively. Purchase commitments The Company entered into agreements to act as a distributor or dealer with third party drone suppliers. Some of these agreements require the Company to maintain certain levels of inventory of the supplier’s products. Such levels of inventory are not quantifiable as of the date of this report. |
Concentrations
Concentrations | 3 Months Ended |
Dec. 31, 2017 | |
Concentrations [Abstract] | |
CONCENTRATIONS | NOTE 12 - CONCENTRATIONS Concentration of Credit Risk The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. At December 31, 2017, cash in bank exceeded the federally insured limits of $250,000 by $200,594. The Company has not experienced any losses in such accounts through September 30, 2017. Economic Concentrations With respect to customer concentration, four customers accounted for approximately 53%, 19%, 19% and 10%, of total sales for the three months ended December 31, 2017. Two customers accounted for approximately 69% and 12% of total sales for the three months ended December 31, 2016. With respect to accounts receivable concentration, four customers accounted for approximately 96% of total accounts receivable at December 31, 2017. Three customers accounted for approximately 59% of total accounts receivable at September 30, 2017. With respect to supplier concentration, one supplier accounted for approximately 39% of total purchases for the three months ended December 31, 2017. Two suppliers accounted for approximately 52% and 12% of total purchases for the three months ended December 31, 2016. With respect to accounts payable concentration, one supplier accounted for approximately 36% of total accounts payable at December 31, 2017. Two suppliers accounted for approximately 42% and 11% of total accounts payable at September 30, 2017. With respect to foreign sales, it totaled approximately $27,000 for the three months ended December 31, 2017. Foreign sales totaled approximately $180,000 for the period ended December 31, 2016. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13 - SUBSEQUENT EVENTS Securities Purchase Agreements and Convertible Notes On January 3, 2018, the Company entered into a Securities Purchase Agreement with Power Up under which the Company received $42,000, net of $11,000 in fees and expenses to be recorded as a debt discount and amortized to interest expense over the Note term, in return for issuing a convertible promissory note (the “Note”) in the principal amount of $53,000. Power Up received a right of first refusal for the first nine months from the date of the Note to provide any debt or equity financing less than $150,000. The Note bears interest at 10% per annum and has a maturity date of October 15, 2018. The Note may be prepaid at a premium ranging from 112% to 137% depending on the length of time following the date of the Note. The Note is convertible after 180 days into shares of the Company’s common stock at a discount of 35% of the average of the two lowest closing bid prices of the Company’s common stock 15 days prior to the date of conversion and the maximum number of shares issued to Power Up may not exceed 4.99% of the issued and outstanding shares of Drone USA common stock. The Note is subject to customary default provisions, including a cross default provision. The Company is required to have authorized for issuance six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation is not in effect) and based on the applicable conversion price of the Note in effect from time to time, initially to be 3,462,355 shares of common stock. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $28,538 with a charge to interest expense. On January 9, 2018, the Company received a payment of $84,000, net of $23,500 in fees and expenses to be recorded as a debt discount and amortized to interest expense over the Note term under the terms of a Securities Purchase Agreement dated November 20, 2017, with Labrys under which the Company issued to Labrys (i) a convertible note (the “Note”) in the principal amount of $107,500 that bears interest of 10% per annum and (ii) 421,238 shares of the Company’s common stock as a commitment fee which will be returned to the Company in the event that it pays all unpaid principal and interest under the Note within 180 days of December 26, 2017. The Note has a maturity date of nine months or September 26, 2018, and a conversion rate for any unpaid principal and interest at a 35% discount to the market price which is defined as the average of the two lowest trading prices (defined as the lower of the trading price or closing bid price) for the Company’s common stock during the 20 trading day period ending on the latest complete trading day prior to the date of conversion. The conversion rate is further reduced if the Company enters into any section 3(a)(9) or 3(a)(10) transactions under the Securities Act of 1933, as amended, if the terms of those transactions offer greater discounts on conversion prices or a longer look back period for determining the conversion rate and under certain other enumerated events, including if the conversion price is less than $.01 per share or if the Company loses the “bid” price for its common stock ($0.0001 on the “ask” with zero market makers on the “bid” per Level 2 and/or a market such as OTC Pink). In addition, if the Company issues any shares of its common stock at less than the conversion price, Labrys is entitled to full ratchet anti-dilution in such event. No shares of Drone USA common stock can be issued to the extent Labrys would own more than 4.99% of the outstanding shares of the Company’s common stock unless Labrys agrees to increase the ownership to 9.99%. The Company is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the Note (based on the conversion price of the Note in effect from time to time). Initially, the Company must instruct its transfer agent to reserve 8,535,980 shares of its common stock. The Note is subject to customary default provisions and also includes a cross-default provision as well as default being triggered if the Company loses the “bid” price for its common stock ($0.0001 on the “ask” with zero market makers on the “bid” per Level 2 and/or a market such as OTC Pink). The Company is entitled to prepay the Note between the issue date until 180 days from its issuance but not thereafter. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $57,885 with a charge to interest expense. On February 7, 2018 the lender notified the Company of a non-financial default related to the maintenance of the Company’s market capitalization level. The lender has proposed a waiver of the default in exchange for keeping the 421,238 shares as non-returnable. On January 31, 2018 the Company received a payment of $95,000, net of $2,750 for legal fees and $7,250 for due diligence to be recorded as a debt discount and amortized to interest expense over the Note term under the terms of a Securities Purchase Agreement dated January 31, 2018, with Auctus Fund, LLC (“Auctus”) under which the Company issued to Auctus a convertible note (the “Note”) in the principal amount of $105,000 that bears interest of 10% per annum. The Note has a maturity date of nine months or October 26, 2018, and a conversion rate for any unpaid principal and interest at a 35% discount to the market price which is defined as the average of the two lowest trading prices (defined as the lower of the trading price or closing bid price) for the Company’s common stock during the fifteen trading day period ending on the latest complete trading day prior to the date of conversion. The conversion rate is further reduced if the Company enters into any section 3(a)(9) or 3(a)(10) transactions under the Securities Act of 1933, as amended, if the terms of those transactions offer greater discounts on conversion prices or a longer look back period for determining the conversion rate and under certain other enumerated events, including if the conversion shares cannot be delivered by DWAC. In addition, if the Company issues any shares of its common stock at less than the conversion price, Auctus is entitled to full ratchet anti-dilution in such event. No shares of the Company’s common stock can be issued to the extent Auctus would own more than 4.99% of the outstanding shares of the Company’s common stock unless Auctus agrees to increase the ownership to 9.99%. The Company is required at all times to have authorized and reserved ten times the number of shares that is actually issuable upon full conversion of the Note (based on the conversion price of the Note in effect from time to time). The Note is subject to customary default provisions and also includes a cross-default provision as well as default being triggered if the Company loses the “bid” price for its common stock ($0.0001 on the “ask” with zero market makers on the “bid” per Level 2 and/or a market such as OTC Pink). The Company is entitled to prepay the Note between the issue date until 180 days from its issuance but not thereafter. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $56,538 with a charge to interest expense. Amendment to the Senior Secured Credit Facility Note On January 3, 2018, the Company entered into a settlement agreement (the “Settlement Agreement”) and replacement note agreements with an investment fund related to a senior secured credit facility note dated September 13, 2016 (See Note 7). This settlement did not waive the prior defaults. On the effective date of the Settlement Agreement, all debt owed to the investment fund aggregated $5,788,642 and consisted of a convertible promissory note of $3,500,000, accrued interest payable of $238,642, and accrued advisory fees payable of $2,050,000. Additionally, on the effective date, the amount due of $5,788,642 was split and apportioned into 2 separate and distinct replacement notes (“Replacement Note A” and “Replacement Note B”). Replacement Note A shall have a principal amount of $1,000,000 and Replacement Note B shall have a principal balance of $4,788,642, both of which shall be and remained secured by the original security agreements, the pledge agreements, the guarantee agreement and other applicable loan documents. The Credit Agreement is hereby amended such that the Maturity Date shall be extended to January 13, 20l9 (the “Extended Maturity Date”). Notwithstanding anything contained in this Agreement to the contrary, all Obligations owing by the Borrower and all other Credit Parties under the Credit Agreement, First Replacement Note B, and all other Loan Documents shall be paid in full by the Extended Maturity Date as follows: $52,500 per month from January 13, 2018 to December 13, 2018 and $5,394,121 on January 13, 2019. On January 30, 2018, the Lender assigned Replacement Note A in the principal amount of $1,000,000 to Livingston Asset Management LLC (“Livingston”) Replacement Note A is now due to Livingston and bears interest at 18% per annum. At any time while this Note is outstanding, but only upon: (i) the occurrence of an Event of Default under any of the Loan Documents; or (ii) mutual agreement between the Borrower and the Holder, the Holder may convert all or any portion of the outstanding principal, accrued and unpaid interest, and any other sums due and payable hereunder or under any other Loan Documents (such total amount, the “Conversion Amount”) into shares of common stock of the Company (the “Conversion Shares”) at a price equal to: (i) the Conversion Amount (the numerator); divided by minus (ii) divided by Other On January 29, 2018, the Company entered into a settlement agreement and mutual release with a vendor who had provided public relations and other consulting services whereby the Company shall pay to this vendor an aggregate amount of $60,000 of which $30,000 was paid on February 2, 2018 Additionally, the Company shall pay ten monthly payments of $3,000 per month beginning on February 29, 2018. Additionally, the vendor returned 400,000 common shares of the Company’s common stock which will be cancelled. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies and Going Concern (Policies) | 3 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies and Going Concern [Abstract] | |
Going Concern | Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the three months ended December 31, 2017, the Company has incurred a net loss of $1,300,573 and used cash in operations of $489,002. The working capital deficit, stockholders’ deficit and accumulated deficit was $11,389,301, $7,504,934, and $15,156,998, respectively, at December 31, 2017. Furthermore, on April 13, 2017 the Company received a default notice on its payment obligations under the senior secured credit facility agreement (see Note 7), defaulted on its Note Payable – Seller in September 2017, and as of December 31, 2017 is subject to lawsuits and has received demands for payment of past due amounts from several consultants and service providers. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon management’s ability to further implement its business plan and raise additional capital as needed from the sales of stock or debt. The Company has been implementing cost-cutting measures and restructuring or setting up payment plans with vendors and service providers and plans to raise equity through a private placement, and restructure or repay its secured obligations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for bad debt on accounts receivable, reserves on inventory, valuation of goodwill and intangible assets for impairment analysis, valuation of the earn-out liability at balance sheet dates, valuation of stock based compensation, the valuation of derivative liabilities and the valuation allowance on deferred tax assets. |
Fair Value Measurements | Fair Value Measurements The Company follows the FASB Fair Value Measurements Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The standard establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. Level 1 inputs include quoted market prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data. The standard requires the utilization of the lowest possible level of input to determine fair value and carrying amounts of current liabilities approximate fair value due to their short-term nature. The Company accounts for certain instruments at fair value using level 3 valuation. At December 31, 2017 At September 30, 2017 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative liability — — $ 97,013 — — $ — A roll forward of the level 3 valuation financial instruments is as follows: Derivative Balance at September 30, 2017 $ - Initial valuation of derivative liability recorded as derivative expense 70,028 Initial valuation of derivative liability recorded as debt discount 79,000 Change in fair value of derivative liability (52,015 ) Balance at December 31, 2017 $ 97,013 |
Inventory | Inventory Inventory consists of finished goods, which are purchased directly from manufacturers. The Company utilizes a just in time type of inventory system where products are ordered from the vendor only when the Company has received sales order from its customers. Inventory is stated at the lower of cost and net realizable value on a first-in, first-out basis. |
Revenue Recognition | Revenue Recognition Sales are recognized upon shipment of product to the customer. Provisions for returns and allowances are recorded in the period the sales occur. Payments received from customers prior to shipment of the product to them, are recorded as customer deposit liabilities. |
Convertible Notes with Fixed Rate Conversion Options | Convertible Notes with Fixed Rate Conversion Options The Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note date with a charge to interest expense in accordance with ASC 480 - "Distinguishing Liabilities from Equity". |
Derivative Liabilities | Derivative Liabilities The Company has certain financial instruments that contain embedded derivatives. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to income or expense as part of gain or loss on extinguishment. |
Net Loss Per Share | Net Loss Per Share Basic loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution. Pursuant to ASB 260, as of December 31, 2017, 335,938 contingent shares issuable under a Securities purchase agreement (See Note 7) are not considered outstanding and are not included in basic net loss per shares or as potentially dilutive shares in calculating the diluted EPS. As of December 31, 2017 and 2016, potentially dilutive securities consisted of the following: - December 31, 2017 December 31, 2016 Stock options 44,351,200 27,645,000 Warrants 600,000 500,000 Related party convertible debt and accrued interest 4,527,184 3,104,000 Senior convertible debt 28,665,412 Convertible debt 5,902,192 - Contingent liability – advisory fees 4,944,667 1,437,540 Total 88,990,655 32,686,540 |
Segment Reporting | Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. As of December 31, 2017, the Company did not report any segment information since the Company only generates sales from its subsidiary, HowCo. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued a new accounting standard that attempts to establish a uniform basis for recording revenue to virtually all industries financial statements, under U.S. GAAP as amended in March 2016 and April 2016. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. In order to accomplish this objective, companies must evaluate the following five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. There are three basic transition methods that are available - full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the third alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. guidance at the date of initial application and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. Prior years would not be restated and additional disclosures would be required to enable users of the financial statements to understand the impact of adopting the new standard in the current year compared to prior years that are presented under legacy U.S. guidance. For public business entities, this standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is prohibited. The Company does not believe that the adoption of this new accounting standard to have a material impact on its consolidated financial position and results of operations. In February 2016, the FASB issued a new accounting standard on leases. The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases. The lease liability will be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs (e.g. commissions). The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented. The Company is currently evaluating the impact of this new accounting standard on its consolidated financial position and results of operations. The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies and Going Concern (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies and Going Concern [Abstract] | |
Summary instruments at fair value using level 3 valuation | At December 31, 2017 At September 30, 2017 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative liability — — $ 97,013 — — $ — |
Schedule of roll forward of the level 3 valuation financial instruments | Derivative Balance at September 30, 2017 $ - Initial valuation of derivative liability recorded as derivative expense 70,028 Initial valuation of derivative liability recorded as debt discount 79,000 Change in fair value of derivative liability (52,015 ) Balance at December 31, 2017 $ 97,013 |
Schedule of potentially dilutive securities | December 31, 2017 December 31, 2016 Stock options 44,351,200 27,645,000 Warrants 600,000 500,000 Related party convertible debt and accrued interest 4,527,184 3,104,000 Senior convertible debt 28,665,412 - Convertible debt 5,902,192 - Contingent liability – advisory fees 4,944,667 1,437,540 Total 88,990,655 32,686,540 |
Convertible Notes Payable and21
Convertible Notes Payable and Advisory Fee Liabilities (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Convertible Notes Payable - Related Parties/Convertible Notes Payable and Advisory Fee Liabilities [Abstract] | |
Schedule of fair value of the derivative liability | Dividend rate 0 Term (in years) 1.00 year Volatility 136.23 % Risk-free interest rate 1.67% to 1.76 |
Schedule of senior secured credit facility note balance and convertible debt balances | December 31, 2017 September 30, 2017 Principal $ 4,065,000 $ 3,500,000 Premium 858,196 617,647 Unamortized discount (344,906 ) (338,075 ) 4,578,290 3,779,572 Non-current - - Current $ 4,578,290 $ 3,779,572 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Class of Stock [Line Items] | |
Summary of the company's stock options activity | Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Weighted- Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding at September 30, 2017 44,351,200 $ 0.21 9.27 $ - $ 0 Granted - - - - - Forfeited - - - - - Outstanding at December 31, 2017 44,351,200 $ 0.21 8.93 $ - $ 0 Exercisable at December 31, 2017 27,184,000 $ 0.20 8.76 $ - $ 0 |
Summary of the company's warrant activity | Number of Warrants Weighted- Average Exercise Weighted- Average Remaining Contractual Term (Years) Weighted- Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding at September 30, 2017 500,000 $ 0.01 3.98 $ - $ 95,000 Granted 100,000 0.35 4.88 - - Outstanding at December 31, 2017 600,000 $ 0.01 4.13 $ - $ 72,500 Exercisable at December 31, 2017 600,000 $ 0.01 4.13 $ - $ 72,500 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies [Abstract] | |
Schedule of future minimum lease payments | Years ending December 31, Amount 2018 59,072 2019 60,499 2020 25,460 Total minimum non-cancelable operating lease payments $ 145,031 |
Nature of Operations (Details)
Nature of Operations (Details) - USD ($) | 1 Months Ended | ||
Apr. 30, 2016 | Feb. 29, 2016 | Jan. 26, 2016 | |
Restructuring Cost and Reserve [Line Items] | |||
Reverse split of the common stock | 1 for 12 | 1 for 150 | |
Drone USA, Inc. [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Acquired outstanding membership interests rate | 100.00% | ||
Received shares of Texas | 38,309,321 | ||
Drone USA, Inc. [Member] | Selling, General and Administrative expenses [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Cash fees | $ 100,000 | ||
Texas Wyoming Drilling, Inc. [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Received shares of Texas | 2,532,196 | ||
Owned of the outstanding common stock of Texas rate | 94.00% |
Summary of Significant Accoun25
Summary of Significant Accounting Policies and Going Concern (Details) - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 |
Level 1 [Member] | ||
Summary instruments at fair value using level 3 valuation | ||
Derivative liability | ||
Level 2 [Member] | ||
Summary instruments at fair value using level 3 valuation | ||
Derivative liability | ||
Level 3 [Member] | ||
Summary instruments at fair value using level 3 valuation | ||
Derivative liability | $ 97,013 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies and Going Concern (Details 1) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Schedule of roll forward of the level 3 valuation financial instruments | ||
Balance at September 30, 2017 | ||
Initial valuation of derivative liability recorded as derivative expense | 70,028 | |
Initial valuation of derivative liability recorded as debt discount | 79,000 | |
Change in fair value of derivative liability | (52,015) | |
Balance at December 31, 2017 | $ 97,013 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies and Going Concern (Details 2) - shares | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Schedule of potentially dilutive securities | ||
Stock options | 44,351,200 | 27,645,000 |
Warrants | 600,000 | 500,000 |
Related party convertible debt and accrued interest | 4,527,184 | 3,104,000 |
Senior convertible debt | 28,665,412 | |
Convertible debt | 5,902,192 | |
Contingent liability - advisory fees | 4,944,667 | 1,437,540 |
Total | 88,990,655 | 32,686,540 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies and Going Concern (Details Textual) - USD ($) | 3 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | |
Summary of Significant Accounting Policies and Going Concern (Textual) | |||
Net loss | $ (1,300,573) | $ (951,784) | |
Cash in operations | (489,002) | $ (14,893) | |
Working capital deficit | 11,389,301 | ||
Stockholders' deficit | 7,504,934 | ||
Accumulated deficit | $ (15,156,998) | $ (13,856,425) | |
Contingent shares issuable under a securities purchase agreement | 335,938 |
Inventory (Details)
Inventory (Details) - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 |
Inventory (Textual) | ||
Finished goods value | $ 628,544 | $ 681,057 |
Line of Credit - Bank (Details)
Line of Credit - Bank (Details) - USD ($) | 3 Months Ended | ||
Dec. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
Line of Credit Bank (Textual) | |||
Line bears interest, description | The line bears interest at a fluctuating rate equal to the prime rate plus 4.25%. | ||
Balance of the line of credit | $ 46,397 | $ 48,506 | |
Revolving line of credit [Member] | |||
Line of Credit Bank (Textual) | |||
Revolving line of credit | $ 50,000 | ||
Debt instrument, interest rate, effective percentage | 8.75% | 8.50% | |
Balance of the line of credit | $ 46,397 | ||
Line of credit facility, available | $ 3,603 |
Note Payable - Seller (Details)
Note Payable - Seller (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Sep. 30, 2017 | |
Notes Payable By Seller (Textual) | ||
Accrued interest | $ 71,830 | $ 53,682 |
HowCo. [Member] | ||
Notes Payable By Seller (Textual) | ||
Issued a note payable | $ 900,000 | |
Notes bears interest rate | 5.50% | |
Maturity date of note | Sep. 9, 2017 | |
Default interest rate | 8.00% |
Convertible Notes Payable - R32
Convertible Notes Payable - Related Parties (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Sep. 30, 2017 | |
Convertible Notes Payable - Related Parties (Textual) | ||
Convertible note payable - related party affiliate | $ 688,444 | $ 688,444 |
Convertible note payable - related party officer | 32,500 | 122,000 |
Convertible notes payable - net of discounts and premium | 4,578,290 | 3,779,572 |
Convertible note payable ("Note 1") [Member] | ||
Convertible Notes Payable - Related Parties (Textual) | ||
Convertible note payable | $ 840,000 | |
Convertible note payable, description | Note 1 bears interest at an annual rate of 7% with an original maturity date of June 11, 2017 that was extended to June 11, 2018, at which time all unpaid principal and interest is due. | |
Accrued interest | $ 89,923 | 77,776 |
Convertible note payable ("Note 2") [Member] | ||
Convertible Notes Payable - Related Parties (Textual) | ||
Convertible note payable, description | Note 2 bears interest at an annual rate of 7% with a maturity date of December 31, 2017, at which time all unpaid principal and interest was due. On December 15, 2017, the due date of Note 2 was extended to July 2, 2018. | |
Accrued interest | $ 12,175 | $ 10,707 |
Borrowed amount | 500 | |
Repayments of borrowed amount | $ 90,000 |
Convertible Notes Payable and33
Convertible Notes Payable and Advisory Fee Liabilities (Details) | 3 Months Ended |
Dec. 31, 2017 | |
Schedule of fair value of the derivative liability | |
Dividend rate | 0.00% |
Term (in years) | 1 year |
Volatility | 136.23% |
Minimum [Member] | |
Schedule of fair value of the derivative liability | |
Risk-free interest rate | 1.67% |
Maximum [Member] | |
Schedule of fair value of the derivative liability | |
Risk-free interest rate | 1.76% |
Convertible Notes Payable and34
Convertible Notes Payable and Advisory Fee Liabilities (Details 1) - Senior secured credit facility note [Member] - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 |
Schedule of senior secured credit facility note balance and convertible debt balances | ||
Principal amount | $ 4,065,000 | $ 3,500,000 |
Premium | 858,196 | 617,647 |
Unamortized discount | (344,906) | (338,075) |
Convertible note payable | 4,578,290 | 3,779,572 |
Non-current | ||
Current | $ 4,578,290 | $ 3,779,572 |
Convertible Notes Payable and35
Convertible Notes Payable and Advisory Fee Liabilities (Details Textual) - USD ($) | Nov. 09, 2017 | Nov. 09, 2017 | Oct. 05, 2017 | Mar. 28, 2017 | Sep. 13, 2016 | Nov. 28, 2017 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | Sep. 01, 2017 |
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Reserve shares of common stock | 10,000 | ||||||||||
Advisory fee | $ 850,000 | $ 850,000 | |||||||||
Embedded conversion option as stock settled debt | $ 617,647 | ||||||||||
Increase in interest rate, percentage | 25.00% | ||||||||||
Payment of interest | $ 52,500 | ||||||||||
Payment of monthly principal and interest | 72,917 | ||||||||||
Accrued liabilities, current | 1,237,902 | 1,015,880 | |||||||||
Amortization of debt discounts | 214,422 | $ 184,410 | |||||||||
Payment of convertible debt | 377,000 | ||||||||||
Payment of issue costs | |||||||||||
Common stock commitment fee | 335,938 | ||||||||||
Contingent shares issued | 4,944,667 | 1,437,540 | |||||||||
Crown Bridge [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Principal amount | $ 105,000 | $ 105,000 | |||||||||
Investments received | 75,500 | ||||||||||
Convertible Notes Payable [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Convertible note, description | Note 1 bears interest at an annual rate of 7% with an original maturity date of June 11, 2017 that was extended to June 11, 2018, at which time all unpaid principal and interest is due. | ||||||||||
Conversion of stock, amount | $ 3,500,000 | 3,500,000 | |||||||||
Accrued interest | 276,668 | 169,417 | |||||||||
Convertible Notes Payable [Member] | Power Up [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Convertible note, description | Power Up received a right of first refusal for the first nine months from the date of the Note to provide any debt or equity financing less than $150,000. The Note bears interest at 10% per annum and has a maturity date of July 15, 2018. The Note may be prepaid at a premium ranging from 112% to 137% depending on the length of time following the date of the Note. The Note is convertible after 180 days into shares of the Company's common stock at a discount of 35% of the average of the two lowest closing bid prices of Drone USA's common stock 15 days prior to the date of conversion and the maximum number of shares issued to Power Up may not exceed 4.99% of the issued and outstanding shares of the Company's common stock. | ||||||||||
Principal amount | $ 100,000 | ||||||||||
Debt premium | 53,846 | ||||||||||
Fees and expenses | 21,500 | ||||||||||
Investments received | $ 78,500 | ||||||||||
Other Convertible Debt [Member] | Crown Bridge [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Amortization of debt discounts | 10,500 | ||||||||||
Principal amount | $ 105,000 | $ 105,000 | |||||||||
Warrants to purchase of common stock shares | 100,000 | 100,000 | |||||||||
Exercise price of warrants | $ 0.35 | $ 0.35 | |||||||||
Payment of dividend face value | $ 0.35 | $ 0.35 | |||||||||
Debt issuance cost | $ 19,000 | ||||||||||
Debt discount maturity term | 12 months | ||||||||||
Debt instrument interest rate, percentage | 10.00% | 10.00% | |||||||||
Debt instrument fixed interest rate, percentage | 12.00% | 12.00% | |||||||||
Debt instrument conversion price, description | The conversion rate for any conversion of unpaid principal and interest under the Notes is at a 35% discount to the lowest market price of the shares of the Company's common stock within a 20 day trading period prior to the date of conversion to which an additional 10% discount will be added if the conversion price of the Company's common stock is less than $0.05 per share and no shares of the Company's common stock can be issued to the extent Crown Bridge would own more than 4.99% of the outstanding shares of the Company's common stock and the conversion shares contain piggy-back registration rights. | ||||||||||
Debt default common stock par value, description | The Note is subject to customary default provisions including an event of default if the bid price of the Company's common stock is less than its par value of $.0001 per share. | ||||||||||
Warrants maturity term | 5 years | ||||||||||
Debt conversion, description | The Company is entitled to prepay the Note between 30 days after its issuance until 180 days from its issuance at amounts that increase from 112% of the prepayment amount to 137% of the prepayment amount depending on the length of time when prepayments are made. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $56,538 with a charge to interest expense. | ||||||||||
Securities purchase agreement term, description | The terms of a Securities Purchase Agreement dated October 25, 2017. | ||||||||||
Other Convertible Debt [Member] | Labrys [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Reserve shares of common stock | 6,198,049 | ||||||||||
Principal amount | $ 107,500 | ||||||||||
Debt discount maturity term | 9 months | ||||||||||
Debt instrument interest rate, percentage | 10.00% | ||||||||||
Debt instrument fixed interest rate, percentage | 24.00% | ||||||||||
Debt conversion, description | No shares of the Company's common stock can be issued to the extent Labrys would own more than 4.99% of the outstanding shares of the Company's common stock unless Labrys agrees to increase the ownership to 9.99%. | ||||||||||
Securities purchase agreement term, description | The terms of a Securities Purchase Agreement dated November 20, 2017. | ||||||||||
Payment of issue costs | $ 23,500 | ||||||||||
Common stock commitment fee | 335,938 | ||||||||||
Debt instrument penalty | $ 15,000 | ||||||||||
Debt premium | $ 57,885 | ||||||||||
Debt conversion rate, description | A conversion rate for any unpaid principal and interest at a 35% discount to the market price which is defined as the average of the two lowest trading prices (defined as the lower of the trading price or closing bid price) for the Company's common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the date of conversion. The conversion rate is further reduced if the Company enters into any section 3(a)(9) or 3(a)(10) transactions under the Securities Act of 1933, as amended, if the terms of those transactions offer greater discounts on conversion prices or a longer look back period for determining the conversion rate and under certain other enumerated events, including if the conversion price is less than $.01 per share or if the Company loses the "bid" price for its common stock ($0.0001 on the "ask" with zero market makers on the "bid" per Level 2 and/or a market such as OTC Pink). | ||||||||||
Additional loans [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Additional advisory fees | 850,000 | ||||||||||
Advisory fee | $ 850,000 | 850,000 | |||||||||
Issued of stock, shares | 539,204 | ||||||||||
Issued of stock | $ 850,000 | ||||||||||
Common Stock [Member] | Convertible Notes Payable [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Convertible note, description | The Convertible Note is only convertible upon default or mutual agreement by both parties at a conversion rate of 85% of the lowest of the daily volume weighted average price of the Company's common stock during the 5 business days immediately prior to the conversion date. | ||||||||||
Senior secured credit facility note [Member] | |||||||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | |||||||||||
Maximum borrowing amount | $ 6,500,000 | ||||||||||
Convertible note, description | The Convertible Note bears interest at a rate of 18% per annum, requires monthly payments of $52,500 which is interest only starting on October 13, 2016 through February 13, 2017, and monthly payments, including interest and principal, of $298,341 starting on March 13, 2017 through maturity on March 13, 2018. | ||||||||||
Remaining borrowing amount | $ 3,500,000 | ||||||||||
Interest rate | 100.00% | ||||||||||
Interest rate at period end | 25.00% | ||||||||||
Additional advisory fees | $ 850,000 | ||||||||||
Reserve shares of common stock | 7,000,000 | ||||||||||
Payments of interest, line of credit facility | $ 52,500 | ||||||||||
Advisory fee | $ 1,200,000 | ||||||||||
Increase in interest rate, percentage | 4.99% | ||||||||||
Payment of monthly principal and interest | $ 298,341 | ||||||||||
Advisory fee earned | $ 1,200,000 | ||||||||||
Principal amount | $ 4,065,000 | 3,500,000 | |||||||||
Debt premium | $ 858,196 | $ 617,647 |
Convertible Notes Payable and36
Convertible Notes Payable and Advisory Fee Liabilities (Details Textual 1) - USD ($) | Dec. 13, 2017 | Dec. 07, 2017 | Nov. 15, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 01, 2017 |
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | ||||||
Reserve shares of common stock | 10,000 | |||||
Amortization of debt discounts | $ 214,422 | $ 184,410 | ||||
Payment of convertible debt | 377,000 | |||||
Recorded derivative income | 52,015 | |||||
Livingston Asset Management [Member] | ||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | ||||||
Debt premium | $ 27,857 | |||||
Long-term purchase commitment, description | A convertible note issued by the Company in the principal amount of $50,000 bearing interest of 10% per year to cover certain legal fees and other expenses of Livingston that matures in six months and is convertible into shares of our common stock at a 30% reduction off the lowest closing bid price for 20 trading days prior to the date of conversion, (ii) a convertible note subject to these same terms as the convertible note issued to Livingston payable to Scottsdale Capital Advisors in the principal amount of $15,000 as a placement agent fee and (iii) the right of Livingston to retain 30% of any negotiated reduction off the face amount of the liability the Company owes to such creditors. | |||||
Long-term purchase commitment, amount | $ 10,000,000 | |||||
Percentage of outstanding shares per tranche | 9.99% | |||||
Other Convertible Debt [Member] | EMA Financial [Member] | ||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | ||||||
Reserve shares of common stock | 6,802,000 | |||||
Amortization of debt discounts | $ 79,000 | |||||
Principal amount | 105,000 | |||||
Debt issuance cost | $ 20,200 | |||||
Debt discount maturity term | 12 months | |||||
Debt instrument interest rate, percentage | 10.00% | |||||
Debt instrument fixed interest rate, percentage | 24.00% | |||||
Debt conversion, description | No shares of the Company's common stock can be issued to the extent EMA Financial would own more than 4.99% of the outstanding shares of the Company's common stock. | |||||
Securities purchase agreement term, description | The terms of a Securities Purchase Agreement dated November 21, 2017. | |||||
Debt conversion rate, description | A conversion price which is the lower of (i) the closing sales price of the Company's common stock on the trading day immediately preceding the date of funding and (ii) a 35% discount to (a) the lowest sales price of the shares of the Company's common stock within a 20 day trading period including and immediately preceding the conversion date or (b) the lowest bid price on the conversion date, whichever is lower, and the conversion shares contain piggy-back registration rights. The conversion rate is further reduced under certain events, including if the closing sales price is less than $0.095 in which case the conversion rate is a 50% discount under the terms set forth above. | |||||
Debt instrument redemption, description | The Company is entitled to prepay the Note between the issue date until 180 days from its issuance at a premium of 135% of the unpaid principal and interest if paid within 90 days after the issue date and 150% thereafter. | |||||
Embedded conversion option derivative liabilities | $ 149,028 | $ 70,028 | ||||
Annual interest rate | 12.00% | |||||
Original issue discount | $ 5,800 | $ 9,450 | ||||
Convertible Debt [Member] | Morningview Financial, LLC [Member] | ||||||
Convertible Notes Payable and Advisory Fee Liabilities (Textual) | ||||||
Amortization of debt discounts | $ 7,500 | |||||
Principal amount | 82,500 | |||||
Debt issuance cost | $ 15,000 | |||||
Debt discount maturity term | 12 months | |||||
Debt instrument interest rate, percentage | 12.00% | |||||
Debt instrument fixed interest rate, percentage | 18.00% | |||||
Debt conversion, description | No shares of the Company's common stock can be issued to the extent Morningview Financial would own more than 4.99% of the outstanding shares of the Company's common stock. | |||||
Debt conversion rate, description | A conversion rate for any unpaid principal and interest and a conversion price which is a 35% discount to the lowest sales price of the shares of the Company's common stock within a 20-day trading period including and immediately preceding the conversion date. The conversion rate is further reduced under certain events, including if the closing sales price is less than $0.05 in which case the conversion rate is a 45% discount under the terms set forth above. | |||||
Debt instrument redemption, description | The Company is entitled to prepay the Note between the issue date until 180 days from its issuance at a premium of 135% of the unpaid principal and interest | |||||
Debt default common stock par value, description | The Note is subject to customary default provisions and also includes a cross-default provision as well as default being triggered if the Company's Trading Price as that term is defined in the Note is less than $.0001 or if a money judgment, writ or similar process shall be entered or filed against the Company or any of its subsidiaries for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of 20 days unless otherwise consented to by the holder of the Note. | |||||
Debt default, short-term debt, increase percentage | The amount immediately due shall be increased to 150% or 200% of the outstanding principal and interest due depending upon the default provisions, plus default interest. | |||||
Debt premium | $ 44,423 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Oct. 19, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Note Payable (Textual) | |||
Net proceeds from note payable | $ 232,500 | ||
Amortization of debt discounts | 214,422 | $ 184,410 | |
Third Party [Member] | |||
Note Payable (Textual) | |||
Net proceeds from note payable | $ 232,500 | ||
Net of fees and expenses | 17,500 | ||
Principal amount | $ 250,000 | ||
Bears interest rate | 12.00% | ||
Default rate | 18.00% | ||
Maturity date | Apr. 20, 2018 | ||
Amortization of debt discounts | $ 6,746 |
Stockholders' Deficit (Details)
Stockholders' Deficit (Details) - Stock Options [Member] | 3 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Option Indexed to Issuer's Equity [Line Items] | |
Number of Options, Outstanding | shares | 44,351,200 |
Number of Options, Granted | shares | |
Number of Options, Forfeited | shares | |
Number of Options, Outstanding | shares | 44,351,200 |
Number of Options, Exercisable | shares | 27,184,000 |
Weighted-Average Exercise Price, Outstanding | $ 0.21 |
Weighted-Average Exercise Price, Granted | |
Weighted-Average Exercise Price, Forfeited | |
Weighted-Average Exercise Price, Outstanding | 0.21 |
Weighted-Average Exercise Price, Exercisable | $ 0.20 |
Weighted-Average Remaining Contractual Term (Years),Outstanding | 9 years 3 months 8 days |
Weighted-Average Remaining Contractual Term (Years),Outstanding | 8 years 11 months 4 days |
Weighted-Average Remaining Contractual Term (Years), Exercisable | 8 years 9 months 3 days |
Weighted-Average Grant-Date Fair Value, Outstanding | |
Weighted-Average Grant-Date Fair Value, Granted | |
Weighted-Average Grant-Date Fair Value, Forfeited | |
Weighted-Average Grant-Date Fair Value, Outstanding | |
Aggregate Intrinsic Value, Outstanding | $ | $ 0 |
Aggregate Intrinsic Value, Outstanding | $ | 0 |
Aggregate Intrinsic Value, Exercisable | $ | $ 0 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details 1) - Warrant [Member] | 3 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Class of Stock [Line Items] | |
Number of Warrants, Outstanding | shares | 500,000 |
Number of Warrants, Granted | shares | 100,000 |
Number of Warrants, Outstanding | shares | 600,000 |
Number of Warrants, Exercisable | shares | 600,000 |
Weighted-Average Exercise Price, Outstanding | $ 0.01 |
Weighted-Average Exercise Price, Granted | 0.35 |
Weighted-Average Exercise Price, Outstanding | 0.01 |
Weighted-Average Exercise Price, Exercisable | $ 0.01 |
Weighted-Average Remaining Contractual Term (Years), Outstanding | 3 years 11 months 23 days |
Weighted-Average Remaining Contractual Term (Years), Granted | 4 years 10 months 17 days |
Weighted-Average Remaining Contractual Term (Years), Outstanding | 4 years 1 month 16 days |
Weighted-Average Remaining Contractual Term (Years), Exercisable | 4 years 1 month 16 days |
Weighted-Average Grant-Date Fair Value, Outstanding | |
Weighted-Average Grant-Date Fair Value, Granted | |
Weighted-Average Grant-Date Fair Value, Outstanding | |
Aggregate Intrinsic Value, Outstanding | $ | $ 95,000 |
Aggregate Intrinsic Value, Outstanding | $ | 72,500 |
Aggregate Intrinsic Value, Exercisable | $ | $ 72,500 |
Stockholders' Deficit (Detail40
Stockholders' Deficit (Details Textual) - USD ($) | Nov. 09, 2017 | Nov. 09, 2017 | Nov. 01, 2017 | Sep. 01, 2017 | Nov. 28, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Feb. 28, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Oct. 05, 2017 | Sep. 30, 2017 |
Class of Stock [Line Items] | ||||||||||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | ||||||||||
Preferred stock, par or stated value per share | $ 0.0001 | $ 0.0001 | ||||||||||
Preferred stock designations amount | 4,999,750 | |||||||||||
Preferred stock, shares issued | 250 | 250 | ||||||||||
Preferred stock, shares outstanding | 250 | 250 | ||||||||||
Shares available under the Plan | 55,648,800 | |||||||||||
Shares issued for services | 400,000 | 400,000 | ||||||||||
Price per share | $ 0.1764 | |||||||||||
First tranche payment | $ 72,917 | |||||||||||
Consulting Agreement [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Shares issued for services | 10,000 | 20,000 | ||||||||||
Value issued for services | $ 3,950 | |||||||||||
Professional Fees | $ 3,950 | |||||||||||
Price per share | $ 0.195 | $ 0.20 | ||||||||||
Securities Purchase Agreement [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Shares Issued for debt issuance costs | 335,938 | 335,938 | ||||||||||
Convertible Note Agreement [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Shares Issued for debt issuance costs | 335,938 | |||||||||||
2016 Stock Incentive Plan [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Shares available under the Plan | 100,000,000 | |||||||||||
Series A Preferred Stock [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Preferred stock, shares authorized | 250 | 250 | ||||||||||
Preferred stock, par or stated value per share | $ 0.0001 | $ 0.0001 | ||||||||||
Preferred Stock, voting rights | These preferred shares have voting rights per share equal to the total number of issued and outstanding shares of common stock divided by 0.99. | |||||||||||
Preferred stock, shares issued | 250 | 250 | ||||||||||
Preferred stock, shares outstanding | 250 | 250 | ||||||||||
Stock Options [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Compensation and consulting expense related to stock options | $ 189,267 | $ 63,455 | ||||||||||
Total unrecognized compensation and consulting expense related to unvested stock options | $ 2,107,131 | |||||||||||
Weighted average period share-based compensation expense | 3 years | |||||||||||
Warrant [Member] | Securities Purchase Agreement [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Convertible note, description | The Company received a first tranche payment of $75,500 under the terms of a Securities Purchase Agreement dated October 25, 2017, with Crown Bridge under which the Company issued to Crown Bridge a convertible note in the principal amount of $105,000 and a five-year warrant to purchase 100,000 shares of the Company's common stock at an exercise price of $0.35 as a commitment fee which is equal to the product of one-third of the face value of each tranche divided by $0.35. The warrants have full ratchet price protection and cashless exercise rights | |||||||||||
First tranche payment | $ 75,000 | |||||||||||
Issuance date | Oct. 25, 2017 | |||||||||||
Principal amount | $ 105,000 | |||||||||||
Exercise price | $ 0.35 | |||||||||||
Purchase of common stock | 100,000 | |||||||||||
Warrant term | 5 years |
Commitments and Contingencies41
Commitments and Contingencies (Details) | Dec. 31, 2017USD ($) |
Commitments and Contingencies [Abstract] | |
2,018 | $ 59,072 |
2,019 | 60,499 |
2,020 | 25,460 |
Total minimum non-cancelable operating lease payments | $ 145,031 |
Commitments and Contingencies42
Commitments and Contingencies (Details Textual) - USD ($) | Aug. 09, 2017 | Jun. 01, 2016 | Oct. 31, 2017 | Jul. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 03, 2018 | Sep. 30, 2017 |
Loss Contingencies [Line Items] | ||||||||
Percentage of gross proceeds of the placement | 9.00% | |||||||
Percentage of warrant | 2.50% | |||||||
Leases rent expense | $ 14,565 | $ 50,371 | ||||||
Lease payment | $ 30,000 | |||||||
Total accrual under the lease term | 360,000 | $ 360,000 | ||||||
Accounts payable | $ 3,828,784 | 3,815,546 | ||||||
Accrued accounts payable | 63,000 | |||||||
Settlement gain amount | $ 33,361 | |||||||
Description of agreement term | The agreement has an initial term of three years with one year renewals. | |||||||
Description of commitments | The Company will also secure exclusive export and representation rights to this entity's products along with the non-binding option to acquire full ownership of this entity for $1 million should the companies agree at a later date it would be in the best interest of both businesses. | |||||||
Texas Wyoming Drilling, Inc. [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount of claim for unpaid bills | $ 75,000 | |||||||
Causes of action [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount of claim for unpaid bills | $ 74,325 | |||||||
Accounts payable | 70,000 | 70,000 | ||||||
Chief Technology Officer [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of Options, Granted | 2,000,000 | |||||||
Former Chief Strategy Officer [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount of claim for unpaid bills | $ 900,000 | |||||||
Subsequent Event [Member] | Causes of action [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Funds transferred to escrow account | $ 77,000 | |||||||
Other current liabilities one [Member] | Former Chief Strategy Officer [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Matching contribution | 9,230 | 9,230 | ||||||
Other current liabilities two [Member] | Former Chief Strategy Officer [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Matching contribution | 100,000 | $ 100,000 | ||||||
Maximum [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Monthly lease rent obligation | 16,500 | |||||||
Minimum [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Monthly lease rent obligation | $ 15,000 |
Concentrations (Details)
Concentrations (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | |
Concentrations Of Foreign Sales | $ 27,000 | $ 180,000 | |
Cash, FDIC Insured Amount | 250,000 | ||
Cash, Uninsured Amount | $ 200,594 | ||
Accounts Payable [Member] | Supplier One [Member] | |||
Concentration Risk, Percentage | 36.00% | 42.00% | |
Accounts Payable [Member] | Supplier Two [Member] | |||
Concentration Risk, Percentage | 11.00% | ||
Supplier Concentration Risk [Member] | Supplier One [Member] | |||
Concentration Risk, Percentage | 39.00% | 52.00% | |
Supplier Concentration Risk [Member] | Supplier Two [Member] | |||
Concentration Risk, Percentage | 12.00% | ||
Sales Revenue, Net [Member] | Customer One [Member] | |||
Concentration Risk, Percentage | 53.00% | 69.00% | |
Sales Revenue, Net [Member] | Customer Two [Member] | |||
Concentration Risk, Percentage | 19.00% | 12.00% | |
Sales Revenue, Net [Member] | Customer Three [Member] | |||
Concentration Risk, Percentage | 19.00% | ||
Sales Revenue, Net [Member] | Customer Four [Member] | |||
Concentration Risk, Percentage | 10.00% | ||
Accounts Receivable [Member] | Customer One [Member] | |||
Concentration Risk, Percentage | 96.00% | 59.00% |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Jan. 09, 2018 | Jan. 03, 2018 | Jan. 03, 2018 | Feb. 07, 2018 | Jan. 31, 2018 | Jan. 30, 2018 | Jan. 29, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 01, 2017 |
Subsequent Events (Textual) | ||||||||||
Payment of convertible debt | $ 377,000 | |||||||||
Payment of issue costs | ||||||||||
Reserve shares of common stock | 10,000 | |||||||||
Subsequent Event [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | $ 5,788,642 | $ 5,788,642 | ||||||||
Convertible note, description | (i) the Conversion Amount (the numerator); divided by (ii) 85% of the lowest of the daily volume weighted average price of the Company's common stock during the five business days immediately prior to the conversion date, which price shall be indicated in the conversion notice (the denominator) (the "Conversion Price"). | |||||||||
Waiver of non financial instrument, description | On February 7, 2018 the lender notified the Company of a non-financial default related to the maintenance of the Company's market capitalization level. The lender has proposed a waiver of the default in exchange for keeping the 421,238 shares as non-returnable. | |||||||||
Accrued advisory fees payable | 2,050,000 | 2,050,000 | ||||||||
Accrued interest payable | 238,642 | $ 238,642 | ||||||||
Maturity date, description | The Credit Agreement is hereby amended such that the Maturity Date shall be extended to January 13, 20l9 (the "Extended Maturity Date"). Notwithstanding anything contained in this Agreement to the contrary, all Obligations owing by the Borrower and all other Credit Parties under the Credit Agreement, First Replacement Note B, and all other Loan Documents shall be paid in full by the Extended Maturity Date as follows: $52,500 per month from January 13, 2018 to December 13, 2018 and $5,394,121 on January 13, 2019. | |||||||||
Debt instrument payments, description | On January 29, 2018, the Company entered into a settlement agreement and mutual release with a vendor who had provided public relations and other consulting services whereby the Company shall pay to this vendor an aggregate amount of $60,000 of which $30,000 was paid on February 2, 2018 Additionally, the Company shall pay ten monthly payments of $3,000 per month beginning on February 29, 2018. Additionally, the vendor returned 400,000 common shares of the Company's common stock which will be cancelled. | |||||||||
Subsequent Event [Member] | Convertible Debt [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | 3,500,000 | $ 3,500,000 | ||||||||
Subsequent Event [Member] | Power Up [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | $ 53,000 | $ 53,000 | ||||||||
Debt instrument interest rate, percentage | 10.00% | 10.00% | ||||||||
Payment of convertible debt | $ 42,000 | |||||||||
Debt instrument, maturity date | Oct. 15, 2018 | |||||||||
Payment of issue costs | $ 11,000 | |||||||||
Convertible note, description | A right of first refusal for the first nine months from the date of the Note to provide any debt or equity financing less than $150,000. | |||||||||
Debt instrument conversion price, description | A premium ranging from 112% to 137% depending on the length of time following the date of the Note. The Note is convertible after 180 days into shares of the Company's common stock at a discount of 35% of the average of the two lowest closing bid prices of the Company's common stock 15 days prior to the date of conversion and the maximum number of shares issued to Power Up may not exceed 4.99% of the issued and outstanding shares of Drone USA common stock. The Note is subject to customary default provisions, including a cross default provision. The Company is required to have authorized for issuance six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation is not in effect) and based on the applicable conversion price of the Note in effect from time to time, initially to be 3,462,355 shares of common stock. | |||||||||
Debt premium | $ 28,538 | $ 28,538 | ||||||||
Subsequent Event [Member] | Labrys [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | $ 107,500 | |||||||||
Debt instrument interest rate, percentage | 10.00% | |||||||||
Payment of convertible debt | $ 84,000 | |||||||||
Debt instrument, maturity date | Sep. 26, 2018 | |||||||||
Payment of issue costs | $ 23,500 | |||||||||
Convertible note, description | No shares of Drone USA common stock can be issued to the extent Labrys would own more than 4.99% of the outstanding shares of the Company's common stock unless Labrys agrees to increase the ownership to 9.99%. | |||||||||
Debt instrument conversion price, description | A conversion rate for any unpaid principal and interest at a 35% discount to the market price which is defined as the average of the two lowest trading prices (defined as the lower of the trading price or closing bid price) for the Company's common stock during the 20 trading day period ending on the latest complete trading day prior to the date of conversion. The conversion rate is further reduced if the Company enters into any section 3(a)(9) or 3(a)(10) transactions under the Securities Act of 1933, as amended, if the terms of those transactions offer greater discounts on conversion prices or a longer look back period for determining the conversion rate and under certain other enumerated events, including if the conversion price is less than $.01 per share or if the Company loses the "bid" price for its common stock ($0.0001 on the "ask" with zero market makers on the "bid" per Level 2 and/or a market such as OTC Pink). | |||||||||
Common stock commitment fee | 421,238 | |||||||||
Reserve shares of common stock | 8,535,980 | |||||||||
Debt premium | $ 57,885 | |||||||||
Subsequent Event [Member] | Auctus Fund [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | $ 105,000 | |||||||||
Debt instrument interest rate, percentage | 10.00% | |||||||||
Legal fees | $ 2,750 | |||||||||
Payment of convertible debt | $ 95,000 | |||||||||
Debt instrument, maturity date | Oct. 26, 2018 | |||||||||
Payment of issue costs | $ 7,250 | |||||||||
Convertible note, description | No shares of the Company's common stock can be issued to the extent Auctus would own more than 4.99% of the outstanding shares of the Company's common stock unless Auctus agrees to increase the ownership to 9.99%. | |||||||||
Debt instrument conversion price, description | A conversion rate for any unpaid principal and interest at a 35% discount to the market price which is defined as the average of the two lowest trading prices (defined as the lower of the trading price or closing bid price) for the Company's common stock during the fifteen trading day period ending on the latest complete trading day prior to the date of conversion. | |||||||||
Debt premium | $ 56,538 | |||||||||
Subsequent Event [Member] | Replacement Note A [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | 1,000,000 | 1,000,000 | ||||||||
Subsequent Event [Member] | Replacement Note A [Member] | Livingston Asset Management LLC [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | $ 1,000,000 | |||||||||
Debt instrument interest rate, percentage | 18.00% | |||||||||
Subsequent Event [Member] | Replacement Note B [Member] | ||||||||||
Subsequent Events (Textual) | ||||||||||
Principal amount | $ 4,788,642 | $ 4,788,642 |