Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 27, 2020 | Mar. 31, 2020 | |
Document And Entity Information | |||
Entity Registrant Name | KNOW LABS, INC. | ||
Entity Central Index Key | 0001074828 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 000-30262 | ||
Entity Public Float | $ 13,419,023 | ||
Entity Common Stock, Shares Outstanding | 25,730,224 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 4,298,179 | $ 1,900,836 |
Accounts receivable, net of allowance of $0 and $40,000, respectively | 0 | 63,049 |
Prepaid expenses | 0 | 6,435 |
Inventories, net | 0 | 7,103 |
Total current assets | 4,298,179 | 1,977,423 |
PROPERTY AND EQUIPMENT, NET | 128,671 | 130,472 |
OTHER ASSETS | ||
Intangible assets, net | 101,114 | 274,446 |
Other assets | 25,180 | 13,766 |
Operating lease right of use asset | 129,003 | 243,526 |
TOTAL ASSETS | 4,682,147 | 2,639,633 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 487,810 | 810,943 |
Accounts payable - related parties | 5,687 | 7,048 |
Accrued expenses | 401,178 | 460,055 |
Accrued expenses - related parties | 591,600 | 458,500 |
Convertible notes payable | 3,967,578 | 3,954,241 |
Notes payable | 226,170 | 0 |
Simple Agreements for Future Equity | 785,000 | 0 |
Current portion of operating lease right of use liability | 108,779 | 124,523 |
Total current liabilities | 6,573,802 | 5,815,310 |
NON-CURRENT PORTION OF OPERATING LEASE RIGHT OF USE LIABILITY | 23,256 | 121,613 |
Total non-current liabilities | 23,256 | 121,613 |
COMMITMENTS AND CONTINGENCIES (Note 14) | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock | 0 | |
Common stock - $0.001 par value, 100,000,000 shares authorized, 18,366,178 and 17,531,502 shares issued and outstanding at 9/30/2019 and 9/30/2018, respectively | 24,807 | 18,366 |
Additional paid in capital | 54,023,758 | 39,085,179 |
Accumulated deficit | (55,966,281) | (42,403,640) |
Total stockholders' equity (deficit) | (1,914,911) | (3,297,290) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 4,682,147 | 2,639,633 |
Series A Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock | 0 | 0 |
Series C Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock | 1,790 | 1,790 |
Series D Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock | $ 1,015 | $ 1,015 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
CURRENT ASSETS: | ||
Allowance for accounts receivable | $ 0 | $ 40,000 |
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 24,804,874 | 18,366,178 |
Common stock shares outstanding | 24,804,874 | 18,366,178 |
Series A Convertible Preferred Stock | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 23,334 | 23,334 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Series C Convertible Preferred Stock | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 |
Series D Convertible Preferred Stock | ||
EQUITY (DEFICIT) | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,016,014 | 1,016,014 |
Preferred stock shares issued | 1,016,004 | 1,016,004 |
Preferred stock shares outstanding | 1,016,004 | 1,016,004 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||
REVENUE | $ 121,939 | $ 1,804,960 |
COST OF SALES | 69,726 | 1,378,413 |
GROSS PROFIT | 52,213 | 426,547 |
RESEARCH AND DEVELOPMENT EXPENSES | 2,033,726 | 1,257,872 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 4,844,415 | 4,181,687 |
OPERATING LOSS | (6,825,928) | (5,013,012) |
OTHER INCOME (EXPENSE): | ||
Interest expense | (6,094,682) | (2,945,312) |
Other income | 65,769 | (9,561) |
(Loss) gain on debt settlements | (707,800) | 355,569 |
Total other (expense), net | (6,736,713) | (2,599,304) |
LOSS BEFORE INCOME TAXES | (13,562,641) | (7,612,316) |
Income taxes - current provision | 0 | 0 |
NET LOSS | $ (13,562,641) | $ (7,612,316) |
Basic and diluted loss per share | $ (0.62) | $ (0.42) |
Weighted average shares of common stock outstanding - basic and diluted | 21,791,058 | 18,053,848 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY - USD ($) | Series A Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Sep. 30, 2018 | 20,000 | 1,785,715 | 1,016,004 | 17,531,502 | |||
Beginning balance, amount at Sep. 30, 2018 | $ 11 | $ 1,790 | $ 1,015 | $ 17,531 | $ 32,163,386 | $ (34,791,324) | $ (2,607,590) |
Stock compensation expense - employee options | 1,141,674 | 1,141,674 | |||||
Issuance of common stock for services, shares | 245,000 | ||||||
Issuance of common stock for services, amount | $ 245 | 348,655 | 348,900 | ||||
Stock based compensation - warrants | 117,458 | 117,458 | |||||
Issuance of common stock for warrant exercise, shares | 509,656 | ||||||
Issuance of common stock for warrant exercise, amount | $ 510 | (510) | 0 | ||||
Conversion of Series A Convertible Preferred Stock, shares | (20,000) | 80,000 | |||||
Conversion of Series A Convertible Preferred Stock, amount | $ (11) | $ 80 | (69) | 0 | |||
Beneficial conversion feature (Note 10) | 2,857,960 | 2,857,960 | |||||
Issuance of warrant to debt holders (Note 10) | 1,384,530 | 1,384,530 | |||||
Issuance of warrants for services related to debt offereing (Note 10) | 1,072,095 | 1,072,095 | |||||
Net loss | (7,612,316) | (7,612,316) | |||||
Ending balance, shares at Sep. 30, 2019 | 0 | 1,785,715 | 1,016,004 | 18,366,178 | |||
Ending balance, amount at Sep. 30, 2019 | $ 0 | $ 1,790 | $ 1,015 | $ 18,366 | 39,085,179 | (42,403,640) | (3,297,290) |
Stock compensation expense - employee options | 1,702,085 | 1,702,085 | |||||
Issuance of common stock for services, shares | 550,000 | ||||||
Issuance of common stock for services, amount | $ 550 | 1,044,450 | 1,045,000 | ||||
Stock based compensation - warrants | 0 | ||||||
Issuance of common stock for warrant exercise, shares | 733,588 | ||||||
Issuance of common stock for warrant exercise, amount | $ 733 | 84,267 | 85,575 | ||||
Conversion of debt offering and accrued interest (Note 10), shares | 4,581,917 | ||||||
Conversion of debt offering and accrued interest (Note 10), amount | $ 4,585 | 4,591,952 | 4,596,537 | ||||
Stock option exercise, shares | 73,191 | ||||||
Stock option exercise, amount | $ 73 | (73) | |||||
Beneficial conversion feature (Note 10) | 3,766,074 | 3,766,074 | |||||
Issuance of warrant to debt holders (Note 10) | 1,824,998 | 1,824,998 | |||||
Issuance of warrants for services related to debt offereing (Note 10) | 975,326 | 975,326 | |||||
Issuance of shares related to Settlement and Mutual Release and Subscription Agreements, shares | 500,000 | ||||||
Issuance of shares related to Settlement and Mutual Release and Subscription Agreements, amount | $ 500 | 949,500 | 950,000 | ||||
Net loss | (13,562,641) | (13,562,641) | |||||
Ending balance, shares at Sep. 30, 2020 | 0 | 1,785,715 | 1,016,004 | 24,804,874 | |||
Ending balance, amount at Sep. 30, 2020 | $ 0 | $ 1,790 | $ 1,015 | $ 24,807 | $ 54,023,758 | $ (55,966,281) | $ (1,914,911) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (13,562,641) | $ (7,612,316) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||
Depreciation and amortization | 242,987 | 259,347 |
Issuance of capital stock for services and expenses | 1,045,000 | 348,900 |
Stock based compensation - warrants | 0 | 117,458 |
Stock based compensation - stock option grants | 1,702,085 | 1,141,674 |
Amortization of debt discount | 5,662,690 | 2,771,270 |
Right of use, net | 422 | 2,610 |
Loss on sale of assets | 4,663 | 32,777 |
(Gain) on debt settlement | (117,200) | (355,000) |
Loss related to issuance of shares for debt settlement | 825,000 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 63,049 | 257,489 |
Prepaid expenses | 6,435 | 13,705 |
Inventory | 7,103 | 196,479 |
Other assets | (11,414) | (6,596) |
Accounts payable - trade and accrued expenses | 218,018 | (215,873) |
Deferred revenue | 0 | (55,959) |
NET CASH (USED IN) OPERATING ACTIVITIES | (3,913,803) | (3,104,035) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of research and development equipment | (70,134) | (79,932) |
NET CASH (USED IN) BY INVESTING ACTIVITIES: | (70,134) | (79,932) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from notes payable | 226,170 | 0 |
Repayments on line of credit | 0 | (92,094) |
Proceeds from convertible notes payable | 5,639,500 | 4,242,490 |
Proceeds from Simple Agreements for Future Equity | 785,000 | 0 |
Payments for issuance costs from notes payable | (479,965) | 0 |
Proceeds from issuance of common stock for warrant exercise | 85,575 | 0 |
Proeeds from issuance of shares related to debt settlement | 125,000 | 0 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 6,381,280 | 4,150,396 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,397,343 | 966,429 |
CASH AND CASH EQUIVALENTS, beginning of period | 1,900,836 | 934,407 |
CASH AND CASH EQUIVALENTS, end of period | 4,298,179 | 1,900,836 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 0 | 22,521 |
Taxes paid | 1,922 | 0 |
Non-cash investing and financing activities: | ||
Beneficial conversion feature | 3,766,074 | 2,857,960 |
Issuance of warrant to debt holders | 1,824,998 | 1,384,530 |
Issuance of warrants for services related to debt offering | 975,326 | 1,072,095 |
Cashless warrant exercise (fair value) | 111,554 | 127,414 |
Cashless stock options exercise (fair value) | 18,298 | 0 |
Conversion of debt offering | 4,245,448 | 0 |
Conversion of accrued interest | $ 351,089 | $ 0 |
1. ORGANIZATION
1. ORGANIZATION | 12 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | Know Labs, Inc. (the “Company”) was incorporated under the laws of the State of Nevada in 1998. The Company has authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share. The Company is focused on the development, marketing and sales of proprietary technologies which are capable of uniquely identifying or authenticating almost any substance or material using electromagnetic energy to record, detect, and identify the unique “signature” of the substance or material. The Company call these our “Bio-RFID™” and “ChromaID™” technologies. Historically, the Company focused on the development of our proprietary ChromaID technology. Using light from low-cost LEDs (light emitting diodes) the ChromaID technology maps the color of substances, fluids and materials. With the Company’s proprietary processes we can authenticate and identify based upon the color that is present. The color is both visible to the Company as humans but also outside of the humanly visible color spectrum in the near infra-red and near ultra-violet and beyond. The Company’s ChromaID scanner sees what we like to call “Nature’s Color Fingerprint.” Everything in nature has a unique color identifier and with ChromaID the Company can see, and identify, and authenticate based upon the color that is present. The Company’s ChromaID scanner is capable of uniquely identifying and authenticating almost any substance or liquid using light to record, detect and identify its unique color signature. Today the Company is focused upon extensions and new inventions that are derived from and extend beyond the Company’s ChromaID technology. The Company calls this new technology “Bio-RFID.” The rapid advances made with the Company’s Bio-RFID technology in our laboratory have caused us to move quickly into the commercialization phase as the Company works to create revenue generating products for the marketplace. Today, the sole focus of the Company is on its Bio-RFID technology and its commercialization. On April 30, 2020, the Company approved and ratified the incorporation of Particle, Inc., a Nevada corporation. The Company is the sole shareholder as of the date of incorporation. Particle is now a direct, majority owned subsidiary of the Company. Particle shall utilize the same corporate offices as the Company and shall focus on the development and commercialization of our extensive intellectual property relating to electromagnetic energy outside of the medical diagnostic arena which remains the parent company’s singular focus with its Bio-RFID technology and its initial application , the non-invasive measurement of blood glucose On June 1, 2020, the Company approved and ratified entry into an intercompany Patent License Agreement dated May 21, 2020 with our majority owned subsidiary, Particle. Pursuant to the Agreement, Particle shall receive an exclusive non-transferrable license to use certain of our patents and trademarks, in exchange the Company shall receive: (i) a one-time fee of $250,000 upon a successful financing of Particle, and (ii) a quarterly royalty payment equal to the greater of 5% of the Gross Sales, net of returns, from Particle or $5,000. In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to our business. Operating as an independent subsidiary, TransTech was a distributor of products for employee and personnel identification and authentication. TransTech historically provided substantially all of the Company’s revenues. The financial results from our TransTech subsidiary had been diminishing as vendors of their products increasingly moved to the Internet and direct sales to their customers. TransTech closed on June 30, 2020. |
2. GOING CONCERN
2. GOING CONCERN | 12 Months Ended |
Sep. 30, 2020 | |
Going Concern | |
GOING CONCERN | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $13,562,641 and $7,612,316 for the years ended September 30, 2020 and 2019, respectively. Net cash used in operating activities was $3,913,803 and $3,104,035 for the years ended September 30, 2020 and 2019, respectively. The Company anticipates that it will record losses from operations for the foreseeable future. As of September 30, 2020, the Company’s accumulated deficit was $55,966,281. The Company has limited capital resources. These conditions raise substantial doubt about our ability to continue as a going concern. The audit report prepared by the Company’s independent registered public accounting firm relating to our consolidated financial statements for the year ended September 30, 2020 includes an explanatory paragraph expressing the substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its cash on hand will be sufficient to fund our operations until September 30, 2021. The Company may need additional financing to implement our business plan and to service our ongoing operations and pay our current debts. There can be no assurance that we will be able to secure any needed funding, or that if such funding is available, the terms or conditions would be acceptable to us. If we are unable to obtain additional financing when it is needed, we will need to restructure our operations, and divest all or a portion of our business. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to the Company’s then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, the Company may be required to delay, scale back, eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected. |
3. SIGNIFICANT ACCOUNTING POLIC
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | 12 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Accounts Receivable and Revenue – TransTech Systems Inc. sold products directly to customers. the products were typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale did not require customer acceptance. We accounted for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts had a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue was measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expected to be entitled to receive in exchange for those goods. The Company shut down TransTech on June 30, 2020. Allowance for Doubtful Accounts - Inventories Equipment Long-Lived Assets Intangible Assets Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. The Company incurred expenses of $2,033,726 and $1,257,872 for the years ended September 30, 2020 and 2019, respectively, on development activities. Advertising Fair Value Measurements and Financial Instruments Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2020 and 2019 are based upon the short-term nature of the assets and liabilities. The Company has a money market account which is considered a level 1 asset. The balance as of September 30, 2020 and 2019 was $4,252,959 and $1,901,278, respectively. The following table represents a roll-forward of the fair value of the Simple Agreement for Future Equity (“SAFE”) for which fair value is determined by Level 3 inputs: Balance as of October 1, 2019 $ - Proceeds from issuance of SAFE 785,000 Fair value adjustment - Balance as of September 30, 2020 $ 785,000 Fair value of the SAFE on issuance was determined to be equal to the proceeds received (see Note 11). There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented. Derivative Financial Instruments – The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of September 30, 2020 and 2019. Stock Based Compensation Convertible Securities Net Loss per Share As of September 30, 2019, there were options outstanding for the purchase of 4,532,668 common shares (including unearned stock option grants totaling 2,410,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 17,747,090 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 13,262,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,242,490 common shares at the current price of $1.00 per share) that are issuable upon conversion of convertible debentures of $6,497,581. Issuance of more shares could potentially dilute future earnings per share but are excluded from the September 30, 2019 calculation of net loss per share because their impact is antidilutive. Comprehensive loss Dividend Policy Use of Estimates Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , The Company adopted the new standard on October 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements. In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). Based on the Company’s review of accounting standard updates issued since the filing of the 2020 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
4. ACCOUNTS RECEIVABLE
4. ACCOUNTS RECEIVABLE | 12 Months Ended |
Sep. 30, 2020 | |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |
ACCOUNTS RECEIVABLE | Accounts receivable were $0 and $63,049, net of allowance, as of September 30, 2020 and 2019, respectively. The Company has a total allowance for bad debt in the amount of $0 and $40,000 as of September 30, 2020 and 2019, respectively. The decrease is due to the shutdown of TransTech on June 30, 2020. |
5. INVENTORIES
5. INVENTORIES | 12 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | Inventories were $0 and $7,103 as of September 30, 2020 and 2019, respectively. Inventories consisted primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale related to our TransTech business which shut down on June 30, 2020. There was a $0 and $28,000 reserve for impaired inventory as of September 30, 2020 and 2019, respectively. |
6. FIXED ASSETS
6. FIXED ASSETS | 12 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
FIXED ASSETS | Property and equipment as of September 30, 2020 and 2019 was comprised of the following: Estimated Useful Lives September 30, 2020 September 30, 2019 Machinery and equipment 2-10 years $ 355,271 $ 412,238 Leasehold improvements 2-3 years 3,612 3,612 Furniture and fixtures 2-3 years 26,855 58,051 Software and websites 3- 7 years - 35,830 Less: accumulated depreciation (257,067 ) (379,259 ) $ 128,671 $ 130,472 Total depreciation expense was $69,655 and $86,016 for the year ended September 30, 2020 and 2019, respectively. All equipment is used for selling, general and administrative purposes and accordingly all depreciation is classified in selling, general and administrative expenses. The Company retired assets at TransTech with a net book value of $4,358 as of June 30, 2020. TransTech was shut down on June 30, 2020. |
7. INTANGIBLE ASSETS
7. INTANGIBLE ASSETS | 12 Months Ended |
Sep. 30, 2020 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
INTANGIBLE ASSETS | Intangible assets as of September 30, 2020 and 2019 consisted of the following: Estimated September 30, September 30, Useful Lives 2020 2019 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (418,886 ) (245,554 ) Intangible assets, net $ 101,114 $ 274,446 Total amortization expense was $173,332 and $173,331 for the years ended September 30, 2020 and 2019, respectively. Merger with RAAI Lighting, Inc. On April 10, 2018, the Company entered into an Agreement and Plan of Merger with 500 Union Corporation, a Delaware corporation and a wholly owned subsidiary of the Company, and RAAI Lighting, Inc., a Delaware corporation. Pursuant to the Merger Agreement, the Company acquired all the outstanding shares of RAAI’s capital stock through a merger of Merger Sub with and into RAAI (the “Merger”), with RAAI surviving the Merger as a wholly owned subsidiary of the Company. The fair value of the intellectual property associated with the assets acquired was $520,000 estimated by using a discounted cash flow approach based on future economic benefits. In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the forecasted results. |
8. ACCOUNTS PAYABLE
8. ACCOUNTS PAYABLE | 12 Months Ended |
Sep. 30, 2020 | |
Accounts Payable [Abstract] | |
ACCOUNTS PAYABLE | Accounts payable were $487,810 and $810,943 as of September 30, 2020 and 2019, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases and technology development, external audit, legal and other expenses incurred by the Company. |
9. LEASES
9. LEASES | 12 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
LEASES | The Company has entered into operating leases for office and development facilities. These leases have terms which range from two to three years and include options to renew. These operating leases are listed as separate line items on the Company's September 30, 2020 and September 30, 2019 Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's September 30, 2020 and 2019 Consolidated Balance Sheets. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately $250,000 on October 1, 2018. Operating lease right-of-use assets and liabilities commencing after October 1, 2018 are recognized at commencement date based on the present value of lease payments over the lease term. During the year ended September 30, 2020 and 2019, the Company had one lease expire and recognized the rent payments as an expense in the current period. As of September 30, 2020 and 2019, total right-of-use assets and operating lease liabilities for remaining long term lease was approximately $132,000 and $246,000, respectively. In the year ended September 30, 2020 and 2019, the Company recognized approximately $136,718 and $133,996, respectively in total lease costs for the leases. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating right-of-use assets and related lease liabilities as of and for the year ended September 30, 2020 was as follows: Cash paid for ROU operating lease liability $136,738 Weighted-average remaining lease term 1.3 years Weighted-average discount rate 7% The minimum future lease payments as of September 30, 2020 are as follows: Year $ 2021 $ 113,553 2022 23,968 Imputed interest (5,486) Total lease liability $ 132,035 |
10. CONVERTIBLE NOTES PAYABLE A
10. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | 12 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | Convertible notes payable as of September 30, 2020 and 2019 consisted of the following: Convertible Promissory Notes with Clayton A. Struve The Company owes Clayton A. Struve $1,071,000 under convertible promissory or OID notes. The Company recorded accrued interest of $71,562 and $62,171 as of September 30, 2020 and 2019, respectively. On May 8, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to September 30, 2019. On November 26, 2019, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to June 30, 2020. Mr. Struve also invested $1,000,000 in the May 2019 Debt Offering. On May 11, 2020, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2020. On December 23, 2020, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to March 31, 2021. Convertible Redeemable Promissory Notes with Ronald P. Erickson and J3E2A2Z On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants were valued at $110,545. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. The Company recorded accrued interest of $73,964 as of September 30, 2019. On May 8, 2019, the Company signed Amendment 1 to the convertible redeemable promissory notes, extending the due dates to September 30, 2019 and increasing the interest rate to 6%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. On May 11, 2020, the Company signed Amendment 3 to the convertible promissory or OID notes, extending the due dates to September 30, 2020. On December 8, 2020, the Company signed Amendment 4 to the convertible promissory or OID notes, extending the due dates to March 31, 2021. Convertible Debt Offering which Closed May 28, 2019 On May 28, 2019, the Company closed additional rounds of a debt offering and received gross proceeds of $4,242,515 in exchange for issuing Subordinated Convertible Notes (the “Convertible Notes”) and Warrants (the “Warrants”) in a private placement to 54 accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The Convertible Notes will be automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. The Convertible Notes had an original principal amount of $4,242,515 and bear annual interest of 8%. Both the principal amount and the interest are payable on a payment-in-kind basis in shares of Common Stock of the Company (the “Common Stock”). The Warrants were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion. The Convertible Notes are initially convertible into 4,242,515 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 2,121,258 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. In connection with the debt offering, the placement agent for the Convertible Notes and the Warrants received a cash fee of $361,401 and warrants to purchase 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. The placement agent has also received a $25,000 advisory fee. The warrants issued for these services had a fair value of $1,072,095 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $361,401 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes. As part of the Purchase Agreement, the Company entered into a Registration Rights Agreement, which grants the investors “demand” and “piggyback” registration rights to register the shares of Common Stock issuable upon the conversion of the Convertible Notes and the exercise of the Warrants with the Securities and Exchange Commission for resale or other disposition. In addition, the Convertible Notes are subordinated to certain senior debt of the Company pursuant to a Subordination Agreement executed by the investors. The Convertible Notes and Warrants were issued in transactions that were not registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act. In accordance to ASC 470-20-30, Debt with Conversion and Other Options, the guidance therein applies to both convertible debt and other similar instruments, including convertible preferred shares. The guidance states that “the allocation of proceeds shall be based on the relative fair values of the two instruments at time of issuance. When warrants are issued in conjunction with a debt instrument as consideration in purchase transactions, the amounts attributable to each class of instrument issued shall be determined separately, based on values at the time of issuance. The debt discount or premium shall be determined by comparing the value attributed to the debt instrument with the face amount thereof. In conjunction with the issuance of Convertible Notes and the Warrants, the Company recorded a debt discount of $2,857,960 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes. Intrinsic value of the beneficial conversion feature was calculated at the commitment date as the difference between the conversion price and the fair value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. In accordance to ASC 470-20-30, if the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature shall be limited to the amount of the proceeds allocated to the convertible instrument. The Warrants were indexed to our own stock and no down round provision was identified. The Warrants were not subject to ASC 718. Therefore, the Company concluded that based upon the conversion features, the Warrants should not be accounted for as derivative liabilities. The fair value of the Warrants was $1,384,530 and was recorded as Debt Discount (with an offset to APIC) on the date of issuance and amortized over the one-year term of the notes. During the year ended September 30, 2020, the Company issued 4,581,917 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. Convertible Debt Offering during the year ended September 30, 2020 During the year ended September 30, 2020, the Company closed additional rounds of a debt offering and received gross proceeds of $5,639,500 in exchange for issuing Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The Convertible Notes are initially convertible into 5,639,500 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 2,819,750 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. The fair value of the Warrants issued to debt holders was $1,824,998 on the date of issuance and will be amortized over the one-year term of the Convertible Notes. In connection with the debt offering, the placement agent for the Convertible Notes and the Warrants received a cash fee of $529,965 and warrants to purchase 615,675 shares of the Company’s common stock, all based on 6.3-8%% of gross proceeds to the Company. The warrants issued for these services had a fair value of $1,016,797 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $529,965 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes. The Company recorded a debt discount of $3,766,074 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes. During the year ended September 30, 2020, amortization related to the 2019 and 2020 debt offerings of $5,662,690 of the beneficial conversion feature, warrants issued to debt holders and placement agent was recognized as interest expense in the consolidated statements of operations. Convertible notes payable as of September 30, 2020 and 2019 are summarized below: September 30, 2020 September 30, 2019 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson and affiliates 1,184,066 1,184,066 2019 Convertible notes 4,242,490 4,242,515 Q1 2020 Convertible notes 520,000 - Q2 2020 Convertible notes 195,000 - Q3 2020 Convertible notes 4,924,500 - Bousted fee refund (originally booked as contra debt) 50,000 - Less conversions of 2019 notes (4,242,490 ) - Less debt discount - BCF (2,127,894 ) (1,273,692 ) Less debt discount - warrants (1,025,512 ) (616,719 ) Less debt discount - warrants issued for services (823,582 ) (652,919 ) $ 3,967,578 $ 3,954,251 Note Payable On April 30, 2020, the Company received $226,170 under the Paycheck Protection Program of the U.S. Small Business Administration’s 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). During the year ended September 30, 2020, the Company recorded interest expense of $960. The Company is utilizing the funds in accordance with the legal requirements and expects this loan to be forgiven. Until the loan is legally forgiven, the loan balance will outstanding. The Company expects to start the application for the loan forgiveness during the three months ended December 31, 2020. |
11. SIMPLE AGREEMENTS FOR FUTUR
11. SIMPLE AGREEMENTS FOR FUTURE EQUITY | 12 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
SIMPLE AGREEMENTS FOR FUTURE EQUITY | In July 2020, Particle entered into Simple Agreements for Future Equity (“SAFE”) with twenty two accredited investors pursuant to which Particle received $785,000 in cash in exchange for the providing the investor the right to receive shares of the Particle stock. The Company expects to issue 981,250 shares of the Particle stock that was initially valued at $0.80 per share. The Company paid $47,100 in broker fees which were expensed as business development expenses. The SAFE contained a number of conversion and redemption provisions, including settlement upon liquidity or dissolution events. The final price and shares are not known until settlement upon liquidity or dissolution events conditions are achieved. The Company elected the fair value option of accounting for the SAFE. |
12. EQUITY
12. EQUITY | 12 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
EQUITY | Authorized Capital Stock The Company authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share. Authorized Capital Stock The Company authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share. As of September 30, 2020, the Company had 24,804,874 shares of common stock issued and outstanding, held by 123 stockholders of record. The number of stockholders, including beneficial owners holding shares through nominee names, is approximately 2,300. Each share of common stock entitles its holder to one vote on each matter submitted to the stockholders for a vote, and no cumulative voting for directors is permitted. Stockholders do not have any preemptive rights to acquire additional securities issued by the Company. As of September 30, 2020, there were options outstanding for the purchase of 4,805,000 common shares (including unearned stock option grants totaling 2,630,000 shares related to performance targets), warrants for the purchase of 20,016,367 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,894,566. All of which could potentially dilute future earnings per share. Voting Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001. Series A Preferred Stock There are 23,334 shares of Series A Preferred shares authorized. Series A Preferred is entitled to the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred held by such holder are then convertible as of the applicable record date. The Series A Preferred was not be redeemable without the consent of the holder. On January 29, 2019, a holder of Series A Preferred Stock converted 20,000 shares into 80,000 shares of common stock. There are no Series A Preferred Stock outstanding as of January 29, 2019. On December 14, 2020, the Company cancelled the Certificate of Designations for the Series A Preferred Stock. Series C and D Preferred Stock and Warrants On August 5, 2016, the Company closed a Series C Preferred Stock and Warrant Purchase Agreement with Clayton A. Struve, an accredited investor for the purchase of $1,250,000 of preferred stock with a conversion price of $0.70 per share. The preferred stock has a yield of 8% and an ownership blocker of 4.99%. In addition, Mr. Struve received a five-year warrant to acquire 1,785,714 shares of common stock at $0.70 per share. On August 14, 2017, the price of the Series C Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. On September 30, 2020 and September 30, 2019 there are 1,785,715 Series C Preferred shares outstanding. As of September 30, 2020, and September 30, 2019, the Company has 1,016,014 of Series D Preferred Stock outstanding with Clayton A. Struve, an accredited investor. On August 14, 2017, the price of the Series D Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% if and when dividends are declared. Series F Preferred Stock On August 1, 2018, the Company filed with the State of Nevada a Certificate of Designation establishing the Designations, Preferences, Limitations and Relative Rights of Series F Preferred Stock. The Designation authorized 500 shares of Series F Preferred Stock. The Series F Preferred Stock shall only be issued to the current Board of Directors on the date of the Designation’s filing and is not convertible into common stock. As set forth in the Designation, the Series F Preferred Stock has no rights to dividends or liquidation preference and carries rights to vote 100,000 shares of common stock per share of Series F upon a Trigger Event, as defined in the Designation. A Trigger Event includes certain unsolicited bids, tender offers, proxy contests, and significant share purchases, all as described in the Designation. Unless and until a Trigger Event, the Series F shall have no right to vote. The Series F Preferred Stock shall remain issued and outstanding until the date which is 731 days after the issuance of Series F Preferred Stock (“Explosion Date”), unless a Trigger Event occurs, in which case the Explosion Date shall be extended by 183 days. As of September 30, 2020 and September 30, 2019, there are no Series F shares outstanding. Securities Subject to Price Adjustments In the future, if the Company sells its common stock at a price below $0.25 per share, the exercise price of 8,108,356 outstanding shares of Series C and D Preferred Stock that adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of Convertible Notes Payable of $7,894,566 or 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and the exercise price of additional outstanding warrants to purchase 12,588,286 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. Warrants totaling 5,191,636 would adjust below $1.20 per share pursuant to the documents governing such instruments. Common Stock All of the offerings and sales described below were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities, the offerings and sales were made to a limited number of persons, all of whom were accredited investors and transfer was restricted by the company in accordance with the requirements of Regulation D and the Securities Act. All issuances to accredited and non-accredited investors were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D, including limiting the number of non-accredited investors to no more than 35 investors who have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of an investment in our securities. On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants. The stock option grant had an exercise price of $0.25 per share. During the year ended September 30, 2020, the Company issued 550,000 shares of restricted common stock for services. The shares were issued were valued at $1.90 per share, the market price of our common stock, or $1,045,000. During the year ended September 30, 2020, the Company issued 4,581,917 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020. During the year ended September 30, 2020, the Company issued 733,588 shares of common stock at $0.889 per share related to the exercise of warrants. On July 1, 2020, the Company entered into a Settlement Agreement and General Mutual Release with a shareholder of the Company. On July 6, 2020, the shareholder paid $125,000 us and we issued 500,000 shares of common stock. We accrued for the loss on debt settlement of $825,000 as of June 30, 2020 which represents the difference between the fair market value of the stock and $125,000 paid by the shareholder. The following equity issuances occurred during the year ended September 30, 2019: During the year ended September 30, 2019, the Company issued 509,656 shares of common stock at $0.25 per share to consultants and investors related to the cashless exercise of warrants. During the year ended September 30, 2019, the Company issued 145,000 shares of common stock for services provided by two consultants. The common stock was valued at the daily trading price of totaling $246,900 or $1.703 per share. On January 2, 2019, the Company issued 100,000 shares of common stock for services provided to Ronald P. Erickson. The shares were valued at $102,000 or $1.02 per share. On January 29, 2019, a holder of Series A Preferred Stock converted 20,000 shares into 80,000 shares of common stock. Warrants to Purchase Common Stock The following warrant transactions occurred during the year ended September 30, 2020: During the year ended September 30, 2020, the Company issued 733,588 shares of common stock at $0.952 per share and cancelled warrants to purchase 507,560 shares of common stock at $$1.120 per share to related to the exercise of warrants. During the year ended September 30, 2020, the Company issued 75,000 shares of common stock at $1.95 per share. The warrant was valued at $1.770 per share. Convertible Debt Offering Warrants The Warrants issued for the 2020 convertible Debt Offering were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion. Warrants issued in connection with 2020 convertible debt offering are initially exercisable for 2,819,750 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. In connection with the 2020 convertible debt offering, the placement agent for the Convertible Notes and the Warrants received warrants to 615,675 shares of the Company’s common stock, all based on 8% of gross proceeds to the Company. The following warrants were issued during the year ended September 30, 2019: The Company cancelled warrants to purchase 70,011 shares of common stock at $3.08 per share to consultants and investors related to the cashless exercise of warrants or expiration of warrants. The Company issued warrants to purchase 70,000 shares of common stock at $1.61 to $2.72 per share to three consultants. The warrants were valued at $30,325 or $1.989 per share. The warrants expire during the first quarter of 2024. The Company increased warrants by 120,000 shares at $0.25 per shares related to the June 28, 2019 exercise of warrants by a holder of Series A Preferred Stock. Private Placement Warrants The Warrants issued for the private placements discussed above were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion. Warrants are initially exercisable for 2,121,258 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments. In connection with the private placement, the placement agent for the Convertible Notes and the Warrants received warrants to purchase 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. A summary of the warrants outstanding as of September 30, 2020 were as follows: September 30, 2020 Weighted Average Exercise Shares Price Outstanding at beginning of period 17,747,090 $ 0.455 Issued 3,510,425 1.216 Exercised (733,588 ) (0.952 ) Forfeited (507,560 ) (1.120 ) Expired - - Outstanding at end of period 20,016,367 $ 0.556 Exerciseable at end of period 20,016,367 The following table summarizes information about warrants outstanding and exercisable as of September 30, 2020: September 30, 2020 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 13,133,286 1.76 $ 0.250 13,133,286 $ 0.250 714,286 0.83 0.700 714,286 0.700 882,159 1.12 1.000 882,159 1.000 5,191,636 4.12 1.20-1.50 5,191,636 1.20-1.50 95,000 4.19 2.00-4.08 95,000 2.34-4.08 20,016,367 3.04 $ 0.556 20,016,367 $ 0.556 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the year ended September 30, 2020 were as follows: Assumptions Dividend yield 0% Expected life 5 years Expected volatility 176%-177% Risk free interest rate 1.51%-1.71% There were vested and in the money warrants of 19,996,367 with an aggregate intrinsic value of $35,329,983. |
13. STOCK INCENTIVE PLAN
13. STOCK INCENTIVE PLAN | 12 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
STOCK INCENTIVE PLAN | Know Labs, Inc. On January 23, 2019, the Board approved an amendment to its 2011 Stock Incentive Plan increasing the number of shares of common stock reserved under the Incentive Plan from 2,200,000 to 2,500,000 to common shares. On May 22, 2019, the Compensation Committee approved an amendment to its 2011 Stock Incentive Plan increasing the number of shares of common stock reserved under the Incentive Plan from 2,500,000 to 3,000,000 to common shares. See Note 18 for increase in option pool subsequent to September 30, 2020. Determining Fair Value under ASC 718 The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed. Stock Option Activity The Company had the following stock option transactions during the year ended September 30, 2020: During the year ended September 30, 2020, the Company granted stock option grants to executives, directors and consultants for 3,085,000 shares with a weighted average exercise price of $1.142 per share. The grants expire in five years and generally vest quarterly over four years. Stock option grants totaling 2,630,000 shares of common stock are performance stock option grants and are not vested until the performance is achieved. During the year ended September 30, 2020, executives and employees voluntarily cancelled stock option grants for 2,739,477 shares with a weighted average exercise price of $2.593 per share. On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants totaling 93,750 shares. The stock option grant had an exercise price of $0.25 per share. There are currently 4,805,000 (including unearned stock option grants totaling 2,630,000 shares related to performance targets) options to purchase common stock at an average exercise price of $1.161 per share outstanding as of September 30, 2020 under the 2011 Stock Incentive Plan. The Company recorded $868,314 and $1,141,674 of compensation expense, net of related tax effects, relative to stock options for the years ended September 30, 2020 and 2019 and in accordance with ASC 718. As of September 30, 2020, there is approximately $361,947, net of forfeitures, of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately 3.67 years. The Company had the following stock option transactions during the year ended September 30, 2019: On October 31, 2018, the Board awarded stock option grants to two directors to acquire 50,000 shares each of the Company’s common stock. The grants had an exercise price of $3.03 per share and expire on October 31, 2023. The grants vested immediately. On October 31, 2018, the Board awarded Phillip A. Bosua a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants had an exercise price of $3.03 per share and expire on October 31, 2023. On October 31, 2018, the Board awarded Ronald P Erickson a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon the Company’s successful listing of its Common Stock on NASDAQ or the New York Stock Exchange (including the NYSE American Market). The grant had an exercise price of $3.03 per share and expires on October 31, 2023. On March 26, 2019, the Board awarded two employees stock option grants totaling 260,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grant had an exercise price of $1.50 per share and expires on March 26, 2024. During April 2019, the Board awarded stock option grants to two employees and a consultant to acquire 185,000 shares of the Company’s common stock. The grants had an exercise price from $1.39 per share to $1.90 per share and expire during April 2024. Grants totaling 10,000 common shares vested immediately and grants totaling 50,000 vests quarterly over three years. Grants totaling 125,000 common shares vest quarterly over four years, with no vesting during the first six months. On April 15, 2019, the Board awarded an employee was granted a stock option grant to acquire 50,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants had an exercise price of $1.50 per share and expire on April 15, 2024. During July and August of 2019, the Board awarded stock option grants to four consultants to acquire 275,000 shares of the Company’s common stock. The grants have an exercise price from $1.34 per share to $1.40 per share and expire during July and August 2024. Grants totaling 10,000 common shares vested immediately and grants totaling 50,000 vest quarterly over three years. Grants totaling 15,000 common shares vest monthly over six months. A grant of 100,000 shares of common stock vests quarterly over four years, with no vesting during the first six months. A grant for 100,000 shares of common stock vests quarterly over four years, with no vesting during the first six months. A grant for 100,000 shares of common stock vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. During the year ended September 30, 2019, the Board four employees a stock option grants to acquire 125,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign at a price range for $1.50 to $3.03 per share. During the year ended September 30, 2019, the Company recently decided that it would not undertake a Kickstarter campaign. Options are expected to be cancelled or have alternative Company milestones. During the year ended September 2019, stock option grants for 520,000 shares of common stock with an exercise price ranging from $3.03 to $4.20 per share were forfeited. Stock option activity for the years ended September 30, 2020 and 2019 was as follows: Weighted Average Options Exercise Price $ Outstanding as of September 30, 2018 2,182,668 $ 1.698 $ 3,706,519 Granted 2,870,000 2.615 7,504,850 Exercised - - - Forfeitures (520,000 ) (3.906 ) (2,031,000 ) Outstanding as of September 30, 2019 4,532,668 2.025 9,180,369 Granted 3,085,000 1.142 3,522,400 Exercised (73,191 ) (0.250 ) (18,298 ) Forfeitures (2,739,477 ) (2.593 ) (7,103,921 ) Outstanding as of September 30, 2020 4,805,000 $ 1.161 $ 5,580,550 The following table summarizes information about stock options outstanding and exercisable as of September 30, 2020: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exerciseable Exerciseable $ 0.25 230,000 2.71 $ 0.250 129,375 $ 0.250 1.10-1.25 2,940,000 4.10 1.10 306,250 1.103 1.28-1.52 1,500,000 4.10 1.33 695,313 1.310 1.79-2.25 135,000 3.75 1.37 66,250 1.961 4,805,000 3.67 $ 1.161 1,197,188 $ 1.158 There were in the money stock option grants of 4,805,000 shares as of September 30, 2020 with an aggregate intrinsic value of $5,446,854. Particle, Inc. On May 21, 2020, Particle approved a 2020 Stock Incentive Plan and reserved 8,000,000 shares under the Plan. The Plan requires vesting annually over four years, with no vesting in the first two quarters. During July 2020, Particle approved stock option grants to non-executive employees and consultants totaling 2,250,000 shares at an average of $0.147 per share. The stock option grants vest annually over four years, with no vesting in the first two quarters. On July 2, 2020, Particle approved stock option grants for 1,500,000 shares at $0.10 per share to both Phillip A. Bosua and Ronald P. Erickson. The stock option grants vest (i) 33.3% upon issuance; (ii) 33.3% after the first sale; and (iii) 33.4% after one million in sales are achieved. The 500,000 vests stock option grants for both Mr. Bosua and Erickson were valued at $0.788 per share or $394,000. The Company recorded $833,771 and $0 of compensation expense, net of related tax effects, relative to stock options for the years ended September 30, 2020 and 2019 and in accordance with ASC 718. As of September 30, 2020, there is approximately $840,729, net of forfeitures, of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately 3.77 years. The following table summarizes information about Particle stock options outstanding and exercisable as of September 30, 2020: Weighted Weighted Average Weighted Average Range of Number Remaining Life Average Number Exercise Price Exercise Prices Outstanding In Years Exercise Price Exerciseable Exerciseable $ 0.10 5,100,000 4.76 $ 0.10 1,116,170 $ 0.10 0.80 150,000 5.00 $ 0.80 - - 5,250,000 4.77 $ 0.12 1,116,170 $ 0.10 There were in the money stock option grants of 1,116,170 shares as of September 30, 2020 with an aggregate intrinsic value of $758,996. |
14. OTHER SIGNIFICANT TRANSACTI
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 12 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson See Notes 10, 13 and 15 for related party transactions with Ronald P. Erickson. On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants were valued at $110,545. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. The Company recorded accrued interest of $73,964 as of September 30, 2019. On May 8, 2019, the Company signed Amendment 1 to the convertible redeemable promissory notes, extending the due dates to September 30, 2019 and increasing the interest rate to 6%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. On May 11, 2020, the Company signed Amendment 3 to the convertible promissory or OID notes, extending the due dates to September 30, 2020. On December 8, 2020, the Company signed Amendment 4 to the convertible promissory or OID notes, extending the due dates to March 31, 2021. On January 2, 2019, Mr. Erickson was issued 100,000 shares of restricted common stock at the grant date market value of $1.02 per share. On October 4, 2019, Ronald P. Erickson voluntarily cancelted a stock option grant for 1,000,000 shares with an exercise price of $3.03 per share. The grant was related to performance and was not vested. On November 4, 2019, the Company granted a stock option grant to Ronald P. Erickson for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2024 and vests upon uplisting to the NASDAQ or NYSE exchanges. On January 1, 2020, the Company issued 100,000 shares of restricted common stock to Ronald P. Erickson. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $190,000. On June 1, 2020, Mr. Erickson received a salary of $10,000 per month for work on Particle, Inc. Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $597,177 and $487,932 as of September 30, 2020 and 2019, respectively. On July 2, 2020, Particle issued a stock option grant for 1,500,000 shares at $0.10 per share to Ronald P. Erickson. The stock option grant vests (i) 33.3% upon issuance; (ii) 33.3% after the first sale; and (iii) 33.4% after one million in sales are achieved. Related Party Transaction with Phillip A. Bosua On October 4, 2019, Philip A. Bosua voluntarily cancelled a stock option grant for 1,000,000 shares with an exercise price of $3.03 per share. The grants was related to performance and was not vested. On November 4, 2019, the Company granted a stock option grant to Philip A. Bosua for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2024 and vests upon FDA approval of the UBAND blood glucose monitor. On January 1, 2020, the Company issued 150,000 shares of restricted common stock to Phillip A. Bosua. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $285,000. On June 1, 2020, Mr. Bosua received a salary of $10,000 per month for work on Particle, Inc. On July 2, 2020, Particle issued a stock option grant for 1,500,000 shares at $0.10 per share to Philip A. Bosua. The stock option grant vests (i) 33.3% upon issuance; (ii) 33.3% after the first sale; and (iii) 33.4% after one million in sales are achieved. Stock Issuances and Cancellations to Named Executive Officers and Directors During the year ended September 30, 2019, two directors voluntarily forfeited stock option grants for 100,000 shares of common stock at $3.03 per share. On November 4, 2019, the Company granted stock option grants to two directors totaling 105,000 shares with an exercise price of $1.10 per share. The stock option grants expire in five years. The stock option grants vested immediately. On January 1, 2020, the Company issued 120,000 shares of restricted common stock to three directors. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $228,000. |
15. COMMITMENTS, CONTINGENCIES
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 12 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | Legal Proceedings The Company may from time to time become a party to various legal proceedings arising in the ordinary course of our business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to our business. Employment Agreement with Phillip A. Bosua, Chief Executive Officer Phillip A. Bosua was appointed our Chief Executive Officer on April 10, 2018. Previously, Mr. Bosua served as the Company’s Chief Product Officer since August 2017. The Company entered into a Consulting Agreement with Mr. Bosua’s company, Blaze Clinical on July 7, 2017. From September 2012 to February 2015, Mr. Bosua was the founder and Chief Executive Officer of LIFX Inc. (where he developed and marketed an innovative “smart” light bulb) and from August 2015 until February 2016 was Vice President Consumer Products at Soraa (which markets specialty LED light bulbs). From February 2016 to July 2017, Mr. Bosua was the founder and CEO of RAAI, Inc. (where he continued the development of his smart lighting technology). From May 2008 to February 2013 he was the Founder and CEO of LimeMouse Apps, a leading developer of applications for the Apple App Store. On April 10, 2018, the Company entered into an Employment Agreement with Mr. Bosua reflecting his appointment as Chief Executive Officer. The Employment Agreement is for an initial term of 12 months (subject to earlier termination) and will be automatically extended for additional 12-month terms unless either party notifies the other party of its intention to terminate the Employment Agreement with at least ninety (90) days prior to the end of the Initial Term or renewal term. Mr. Bosua was paid a base salary of $225,000 per year, received 500,000 shares of common stock valued at $0.33 per share and may be entitled to bonuses and equity awards at the discretion of the Board or a committee of the Board. The Employment Agreement provides for severance pay equal to 12 months of base salary if Mr. Bosua is terminated without “cause” or voluntarily terminates his employment for “good reason.” From March 5, 2019 to May 1, 2020, the annual compensation was $240,000, and from May 5, 2020 to September 30, 2020, the annual compensation was $260,000. The Compensation Committee and the Board of Particle, Inc. compensated Phillip A. Bosua with an annual salary of $120,000 from June 1, 2020. Employment Agreement with Ronald P. Erickson, Chairman of the Board and Interim Chief Financial Officer On April 10, 2018, the Company entered into an Amended Employment Agreement for Ronald P. Erickson which amends the Employment Agreement dated July 1, 2017. The Agreement expires March 21, 2019. automatically be extended for additional one (1) year periods unless either Party delivers written notice of such Party’s intention to terminate this Agreement at least ninety (90) days prior to the end of the Initial Term or renewal term. Mr. Erickson’s annual compensation was $180,000. Mr. Erickson is also entitled to receive an annual bonus and equity awards compensation as approved by the Board. The bonus should be paid no later than 30 days following earning of the bonus. From October 1, 2018 to March 4, 2019, from March 5, 2019 to May 1, 2020, the annual compensation was $195,000, and from May 5, 2020 to September 30, 2020, the annual compensation was $215,000. The Compensation Committee and the Board of Particle Inc. compensated Ronald P. Erickson with an annual salary of $120,000 from June 1, 2020. Mr. Erickson will be entitled to participate in all group employment benefits that are offered by the Company to its senior executives and management employees from time to time, subject to the terms and conditions of such benefit plans, including any eligibility requirements. If the Company terminates Mr. Erickson’s employment at any time prior to the expiration of the Term without Cause, as defined in the Employment Agreement, or if Mr. Erickson terminates his employment at any time for “Good Reason” or due to a “Disability”, Mr. Erickson will be entitled to receive (i) his Base Salary amount for one year; and (ii) medical benefits for eighteen months. Properties and Operating Leases The Company is obligated under the following leases for its various facilities. Corporate Offices On April 13, 2017, the Company leased its executive office located at 500 Union Street, Suite 810, Seattle, Washington, USA, 98101. The Company leases 943 square feet and the net monthly payment is $2,672. The monthly payment increases approximately 3% each year and the lease expires on May 31, 2022. Lab Facilities and Executive Offices On February 1, 2019, the Company leased its lab facilities and executive offices located at 915 E Pine Street, Suite 212, Seattle, WA 98122. The Company leases 2,642 square feet and the net monthly payment is $8,256. The monthly payment increases approximately 3% on July 1, 2019 and annually thereafter. The lease expires on June 30, 2021 and can be extended. On June 26, 2020, the Company leased temporary lab facilities located at 3131 Western Avenue, Suite A350, Seattle, WA 98121. The Company leased 5,707 square feet and the net monthly payment is $11,414. The lease was terminated August 31, 2020. |
16. INCOME TAXES
16. INCOME TAXES | 12 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise from United States sources. Pretax losses arising from United States operations were approximately $4,077,000 and $2,957,000 for the years ended September 30, 2020 and 2019. The Company has net operating loss carryforwards of approximately $36,209,000 which expire in 2021-2038. Because it is not more likely than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, a corresponding valuation allowance of approximately $8,248,000 was established as of September 30, 2020. Additionally, under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances, including a change in control. Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. There can be no assurance that the Company will be able to utilize any net operating loss carryforwards in the future. The Company is subject to possible tax examination for the years 2013 through 2020. For the year ended September 30, 2020, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses, interest expense and warrants issued for services. The principal components of the Company’s deferred tax assets at September 30, 2020 and 2019 are as follows: 2020 2019 U.S. operations loss carry forward at statutory rate of 21% $ 6,536,413 $ 6,763,238 Deferred tax assets related to timing differences-accruals 1,746,486 192,897 Total 8,282,899 6,956,135 Less Valuation Allowance (8,248,637) (6,956,135) Other (34,263) - Deferred tax liabilities (34,263) - Net Deferred Tax Assets - - Change in Valuation allowance $ (1,292,502) $ (813,996) A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended September 30, 2020 and 2019 are as follows: 2020 2019 Federal Statutory Rate 21.0% 21.0% State Taxes 0.9% 0.0% Meals 0.0% 0.0% Warrants Int. Exp. -8.8% 0.0% PY True-up -3.8% 0.0% Increase in Income Taxes Resulting from: Change in Valuation allowance -9.3% -21.0% Effective Tax Rate 0.0% 0.0% As of September 30, 2020, there were no uncertain tax positions. Management does not anticipate any future adjustments in the next twelve months which would result in a material change to its tax position. For the years ended September 30, 2020 and 2019, the Company did not have any interest and penalties. |
17. SEGMENT REPORTING
17. SEGMENT REPORTING | 12 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | The management of the Company considers the business to have two operating segments (i) the development of the Bio-RFID™” and “ChromaID™” technologies; (ii) Particle, Inc. technology; and (iii) TransTech, a distributor of products for employee and personnel identification and authentication. TransTech has historically provided substantially all of the Company’s revenues. TransTech was shut down on June 30, 2020. Particle commenced operations in the three months ended June 30, 2020. The reporting for the year ended September 30, 2020 and 2019 was as follows (in thousands): Segment Gross Operating Segment Segment Revenue Margin Profit (Loss) Assets Year Ended September 30, 2020 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (5,481 ) $ 4,360 Particle, Inc. technology - - (1,280 ) 322 TransTech distribution business 122 70 (65 ) - Total segments $ 122 $ 70 $ (6,826 ) $ 4,682 Year Ended September 30, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (4,935 ) $ 2,882 TransTech distribution business 1,805 427 (78 ) 58 Total segments $ 1,805 $ 427 $ (5,013 ) $ 2,940 During years ended September 30, 2020 and 2019, the Company incurred non-cash expenses of $2,990,072 and $1,867,379. |
18. SUBSEQUENT EVENTS
18. SUBSEQUENT EVENTS | 12 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued. Subsequent to September 30, 2020, there were the following material transactions that require disclosure: Convertible Notes Dated October 17, 2019 The Company issued 561,600 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary. 2011 Stock Incentive Plan On November 23, 2020, the Board of Directors increased the size of the stock available under the Stock Option Plan by 9,750,000 shares. This increase is based on an industry peer group study. Convertible Redeemable Promissory Notes with Ronald P. Erickson and J3E2A2Z On December 8, 2020, the Company signed Amendment 4 to the $1,184,066 convertible promissory or OID notes, extending the due dates to March 31, 2021. Convertible Promissory Notes with Clayton A. Struve On December 23, 2020, the Company signed Amendments to the $1,071,000 convertible promissory or OID notes, extending the due dates to March 31, 2021. Stock Option Exercises and Issuances A consultant exercised a stock option grants on a cashless basis. The consultant received 3,750 shares of common stock for vested stock option grants and forfeited 11,250 shares. The stock option grant had an exercise price of $1.25 per share. The compensation committee of Particle, Inc. issued a stock option grant to a consultant for 50,000 shares of Particle common stock. The stock option grant had an exercise price at $0.80 per share. The grant vests annually over four years after a six month cliff vesting period. The Compensation committee issued a stock option grant to a consultant for 140,000 shares at an exercise price of $1.24 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years after a six month cliff vesting period. On December 15, 2020, the Company issued 30,000 shares each to three directors shares at an exercise price of $1.53 per share. On December 15, 2020, the Company issued 20,000 warrants to purchase common stock each to three directors shares at $1.53 per share. The warrants expire on December 15, 2025. On December 15, 2020, the Company issued a warrant for to purchase common stock for 2,000,000 shares to Ronald P. Erickson at $1.53 per share. The warrants were issued for the extension of loans and deferral of other expenses. The warrant expires on December 15, 2025. On December 15, 2020, the Company stock option grant to Ronald P. Erickson for 1,865,675 shares at an exercise price of $1.53 per share. The stock option grant expires in five years. The stock option grants vest when earned based on certain performance criteria. On December 15, 2020, the Company stock option grant to Phillip A. Bosua for 2,132,195 shares at an exercise price of $1.53 per share. The stock option grant expires in five years. The stock option grants vest when earned based on certain performance criteria. Simple Agreement for Future Equity Particle entered into Simple Agreements for Future Equity (“SAFE”) with two accredited investors pursuant to which Particle received $55,000 in cash in exchange for the providing the investor the right to receive shares of the Particle stock. The Company expects to issue 44,000 shares of the Particle stock that was initially valued at $0.80 per share. The Company paid $1,800 in broker fees which were expensed as business development expenses. |
3. SIGNIFICANT ACCOUNTING POL_2
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) | 12 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. The preparation of these unaudited condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). |
PRINCIPLES OF CONSOLIDATION | The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, TransTech Systems, Inc. and RAAI Lighting, Inc., and majority-owned subsidiary, Particle, Inc. Inter-Company items and transactions have been eliminated in consolidation. The ownership of Particle not owned by the Company at September 30, 2020 is not material and thus no non-controlling interest is recognized. |
CASH AND CASH EQUIVALENTS | The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. At September 30, 2020, the Company had uninsured deposits in the amount of $4,048,719. |
ACCOUNTS RECEIVABLE AND REVENUE | The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires the application of the five-step-principles-based-accounting-model for revenue recognition. These steps include (1) a legally enforceable contract, written or unwritten is identified; (2) performance obligations in the contracts are identified; (3) the transaction price reflecting variable consideration, if any, is identified; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when the control of goods is transferred to the customer at a particular time or over time. For TransTech, the Company extends thirty day terms to some customers. Accounts receivable were reviewed periodically for collectability. TransTech Systems Inc. sold products directly to customers. the products were typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale did not require customer acceptance. We accounted for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts had a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue was measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expected to be entitled to receive in exchange for those goods. The Company shut down TransTech on June 30, 2020. |
ALLOWANCE FOR DOUBTFUL ACCOUNTS | We maintain an allowance for uncollectible accounts receivable. It is our practice to regularly review and revise, when deemed necessary, our estimates of uncollectible accounts receivable, which are based primarily on actual historical return rates. We record estimated uncollectible accounts receivable as selling, general and administrative expense. As of September 30, 2020 and 2019, there was a reserve for sales returns of $0 and $40,000, respectively, which is minimal based upon our historical experience. The Company shut down TransTech on June 30, 2020. |
INVENTORIES | Inventories consisted primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale and are stated at the lower of cost or market on the first-in, first-out (“FIFO”) method. Inventories are considered available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received by TransTech. The Company records a provision for excess and obsolete inventory whenever an impairment has been identified. There is a $0 and $28,000 reserve for impaired inventory as of September 30, 2020 and 2019, respectively. |
EQUIPMENT | Equipment consists of machinery, leasehold improvements, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 2-10 years, except for leasehold improvements which are depreciated over 5 years. |
LONG-LIVED ASSETS | The Company reviews its long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results. |
INTANGIBLE ASSETS | Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable. If the life is not determinable, amortization is not recorded. We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable. When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets. |
RESEARCH, DEVELOPMENT, AND ENGINEERING EXPENSES | Research and development expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials, supplies and facilities used in producing prototypes. The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. The Company incurred expenses of $2,033,726 and $1,257,872 for the years ended September 30, 2020 and 2019, respectively, on development activities. |
Advertising | Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising and marketing costs for the years ended September 30, 2020 and 2019 were $230,844 and $0, respectively. |
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS | ASC Topic 820, Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2020 and 2019 are based upon the short-term nature of the assets and liabilities. The Company has a money market account which is considered a level 1 asset. The balance as of September 30, 2020 and 2019 was $4,252,959 and $1,901,278, respectively. The following table represents a roll-forward of the fair value of the Simple Agreement for Future Equity (“SAFE”) for which fair value is determined by Level 3 inputs: Balance as of October 1, 2019 $ - Proceeds from issuance of SAFE 785,000 Fair value adjustment - Balance as of September 30, 2020 $ 785,000 Fair value of the SAFE on issuance was determined to be equal to the proceeds received (see Note 11). There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented. |
DERIVATIVE FINANCIAL INSTRUMENTS | Pursuant to ASC 815 “Derivatives and Hedging”, the Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company then determines if embedded derivative must bifurcated and separately accounted for. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of September 30, 2020 and 2019. |
STOCK BASED COMPENSATION | The Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options and warrants to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. |
CONVERTIBLE SECURITIES | Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first. |
NET LOSS PER SHARE | Under the provisions of ASC 260, “Earnings Per Share,” basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net 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. As of September 30, 2020, there were options outstanding for the purchase of 4,805,000 common shares (including unearned stock option grants totaling 2,630,000 shares related to performance targets), warrants for the purchase of 20,016,367 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,894,566. All of which could potentially dilute future earnings per share but excluded from the September 30, 2020 calculation of net loss per share because their impact is antidilutive. As of September 30, 2019, there were options outstanding for the purchase of 4,532,668 common shares (including unearned stock option grants totaling 2,410,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 17,747,090 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 13,262,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,242,490 common shares at the current price of $1.00 per share) that are issuable upon conversion of convertible debentures of $6,497,581. Issuance of more shares could potentially dilute future earnings per share but are excluded from the September 30, 2019 calculation of net loss per share because their impact is antidilutive. |
Comprehensive loss | Comprehensive loss is defined as the change in equity of a business during a period from non-owner sources. There were no differences between net loss for the years ended September 30, 2020 and 2019 and comprehensive loss for those periods. |
DIVIDEND POLICY | The Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities. |
USE OF ESTIMATES | The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
RECENT ACCOUNTING PRONOUNCEMENTS | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , The Company adopted the new standard on October 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements. In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). Based on the Company’s review of accounting standard updates issued since the filing of the 2020 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
3. SIGNIFICANT ACCOUNTING POL_3
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Tables) (USD $) | 12 Months Ended |
Sep. 30, 2020 | |
Significant Accounting Policies Adoption Of Accounting Standards Tables | |
Fair value of the Simple Agreement for Future Equity | Balance as of October 1, 2019 $ - Proceeds from issuance of SAFE 785,000 Fair value adjustment - Balance as of September 30, 2020 $ 785,000 |
6. FIXED ASSETS (Tables)
6. FIXED ASSETS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Estimated Useful Lives September 30, 2020 September 30, 2019 Machinery and equipment 2-10 years $ 355,271 $ 412,238 Leasehold improvements 2-3 years 3,612 3,612 Furniture and fixtures 2-3 years 26,855 58,051 Software and websites 3- 7 years - 35,830 Less: accumulated depreciation (257,067 ) (379,259 ) $ 128,671 $ 130,472 |
7. INTANGIBLE ASSETS (Tables)
7. INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Schedule of intangible assets | Estimated September 30, September 30, Useful Lives 2020 2019 Technology 3 years $ 520,000 $ 520,000 Less: accumulated amortization (418,886 ) (245,554 ) Intangible assets, net $ 101,114 $ 274,446 |
9. LEASES (Tables)
9. LEASES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Schedule of minimum future lease payments | Year $ 2021 $ 113,553 2022 23,968 Imputed interest (5,486) Total lease liability $ 132,035 |
10. CONVERTIBLE NOTES PAYABLE_2
10. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Summary of convertible notes | September 30, 2020 September 30, 2019 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson and affiliates 1,184,066 1,184,066 2019 Convertible notes 4,242,490 4,242,515 Q1 2020 Convertible notes 520,000 - Q2 2020 Convertible notes 195,000 - Q3 2020 Convertible notes 4,924,500 - Bousted fee refund (originally booked as contra debt) 50,000 - Less conversions of 2019 notes (4,242,490 ) - Less debt discount - BCF (2,127,894 ) (1,273,692 ) Less debt discount - warrants (1,025,512 ) (616,719 ) Less debt discount - warrants issued for services (823,582 ) (652,919 ) $ 3,967,578 $ 3,954,251 |
12. EQUITY (Tables)
12. EQUITY (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Summary of the warrants issued | September 30, 2020 Weighted Average Exercise Shares Price Outstanding at beginning of period 17,747,090 $ 0.455 Issued 3,510,425 1.216 Exercised (733,588 ) (0.952 ) Forfeited (507,560 ) (1.120 ) Expired - - Outstanding at end of period 20,016,367 $ 0.556 Exerciseable at end of period 20,016,367 |
Summary of the status of the warrants outstanding | September 30, 2020 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exerciseable Price 13,133,286 1.76 $ 0.250 13,133,286 $ 0.250 714,286 0.83 0.700 714,286 0.700 882,159 1.12 1.000 882,159 1.000 5,191,636 4.12 1.20-1.50 5,191,636 1.20-1.50 95,000 4.19 2.00-4.08 95,000 2.34-4.08 20,016,367 3.04 $ 0.556 20,016,367 $ 0.556 |
Weighted average assumptions relating to the valuation of the Companys warrants | Assumptions Dividend yield 0% Expected life 5 years Expected volatility 176%-177% Risk free interest rate 1.51%-1.71% |
13. STOCK INCENTIVE PLAN (Table
13. STOCK INCENTIVE PLAN (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Stock option activity | Weighted Average Options Exercise Price $ Outstanding as of September 30, 2018 2,182,668 $ 1.698 $ 3,706,519 Granted 2,870,000 2.615 7,504,850 Exercised - - - Forfeitures (520,000 ) (3.906 ) (2,031,000 ) Outstanding as of September 30, 2019 4,532,668 2.025 9,180,369 Granted 3,085,000 1.142 3,522,400 Exercised (73,191 ) (0.250 ) (18,298 ) Forfeitures (2,739,477 ) (2.593 ) (7,103,921 ) Outstanding as of September 30, 2020 4,805,000 $ 1.161 $ 5,580,550 |
Stock options outstanding and exercisable | Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exerciseable Exerciseable $ 0.25 230,000 2.71 $ 0.250 129,375 $ 0.250 1.10-1.25 2,940,000 4.10 1.10 306,250 1.103 1.28-1.52 1,500,000 4.10 1.33 695,313 1.310 1.79-2.25 135,000 3.75 1.37 66,250 1.961 4,805,000 3.67 $ 1.161 1,197,188 $ 1.158 |
Particle, Inc. technology | |
Stock options outstanding and exercisable | Weighted Weighted Average Weighted Average Range of Number Remaining Life Average Number Exercise Price Exercise Prices Outstanding In Years Exercise Price Exerciseable Exerciseable $ 0.10 5,100,000 4.76 $ 0.10 1,116,170 $ 0.10 0.80 150,000 5.00 $ 0.80 - - 5,250,000 4.77 $ 0.12 1,116,170 $ 0.10 |
16. INCOME TAXES (Tables)
16. INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of components of the Company's deferred tax assets | 2020 2019 U.S. operations loss carry forward at statutory rate of 21% $ 6,536,413 $ 6,763,238 Deferred tax assets related to timing differences-accruals 1,746,486 192,897 Total 8,282,899 6,956,135 Less Valuation Allowance (8,248,637) (6,956,135) Other (34,263) - Deferred tax liabilities (34,263) - Net Deferred Tax Assets - - Change in Valuation allowance $ (1,292,502) $ (813,996) |
Schedule of effective tax rate reconciliation | 2020 2019 Federal Statutory Rate 21.0% 21.0% State Taxes 0.9% 0.0% Meals 0.0% 0.0% Warrants Int. Exp. -8.8% 0.0% PY True-up -3.8% 0.0% Increase in Income Taxes Resulting from: Change in Valuation allowance -9.3% -21.0% Effective Tax Rate 0.0% 0.0% |
17. SEGMENT REPORTING (Tables)
17. SEGMENT REPORTING (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Schedule of segment reporting | Segment Gross Operating Segment Segment Revenue Margin Profit (Loss) Assets Year Ended September 30, 2020 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (5,481 ) $ 4,360 Particle, Inc. technology - - (1,280 ) 322 TransTech distribution business 122 70 (65 ) - Total segments $ 122 $ 70 $ (6,826 ) $ 4,682 Year Ended September 30, 2019 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ - $ (4,935 ) $ 2,882 TransTech distribution business 1,805 427 (78 ) 58 Total segments $ 1,805 $ 427 $ (5,013 ) $ 2,940 |
2. GOING CONCERN (Details Narra
2. GOING CONCERN (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Going Concern | ||
Net loss | $ (13,562,641) | $ (7,612,316) |
Net cash used in operating activities | (3,913,803) | (3,104,035) |
Accumulated deficit | $ (55,966,281) | $ (42,403,640) |
3. SIGNIFICANT ACCOUNTING POL_4
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Balance as of October 1, 2019 | $ 0 | |
Proceeds from issuance of SAFE | 785,000 | $ 0 |
Balance as of September 30, 2020 | 785,000 | 0 |
Simple Agreement for Future Equity (“SAFE”) | ||
Balance as of October 1, 2019 | 0 | |
Proceeds from issuance of SAFE | 785,000 | |
Fair value adjustment | 0 | |
Balance as of September 30, 2020 | $ 785,000 | $ 0 |
3. SIGNIFICANT ACCOUNTING POL_5
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Uninsured deposits | $ 4,048,719 | |
Allowance for accounts receivable | 0 | $ 40,000 |
Reserve for impaired inventory | 0 | 28,000 |
Development expenses | 2,033,726 | 1,257,872 |
Money market account | $ 4,252,959 | $ 1,901,278 |
Leasehold Improvements | ||
Estimated useful lives of assets | 5 years | |
Minimum | ||
Estimated useful lives of assets | 2 years | |
Maximum | ||
Estimated useful lives of assets | 10 years |
4. ACCOUNTS RECEIVABLE (Details
4. ACCOUNTS RECEIVABLE (Details Narrative) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||
Accounts receivable, net of allowance | $ 0 | $ 63,049 |
Allowance for accounts receivable | $ 0 | $ 40,000 |
5. INVENTORIES (Details Narrati
5. INVENTORIES (Details Narrative) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Inventory Disclosure [Abstract] | ||
Inventory | $ 0 | $ 7,103 |
Reserve for impaired inventory | $ 0 | $ 28,000 |
6. FIXED ASSETS (Details)
6. FIXED ASSETS (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Property, Plant and Equipment [Abstract] | ||
Machinery and equipment (2-10 years) | $ 355,271 | $ 412,238 |
Leasehold improvements (2-3 years) | 3,612 | 3,612 |
Furniture and fixtures (2-3 years) | 26,855 | 58,051 |
Software and websites (3- 7 years) | 0 | 35,830 |
Less: accumulated depreciation | (257,067) | (379,259) |
Property and equipment, net | $ 128,671 | $ 130,472 |
6. FIXED ASSETS (Details Narrat
6. FIXED ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Property and equipment, net | $ 128,671 | $ 130,472 |
Property and equipment, accumulated depreciation | 257,067 | 379,259 |
Depreciation expense | $ 69,655 | $ 86,016 |
7. INTANGIBLE ASSETS (Details)
7. INTANGIBLE ASSETS (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Intangible assets, net | $ 101,114 | $ 274,446 |
Technology | ||
Intangible assets, gross | 520,000 | 520,000 |
Less: accumulated amortization | (418,886) | (245,554) |
Intangible assets, net | $ 101,114 | $ 274,446 |
7. INTANGIBLE ASSETS (Details N
7. INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Amortization expense | $ 173,332 | $ 173,331 |
8. ACCOUNTS PAYABLE (Details Na
8. ACCOUNTS PAYABLE (Details Narrative) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Accounts Payable [Abstract] | ||
Accounts payable | $ 487,810 | $ 810,943 |
9. LEASES (Details)
9. LEASES (Details) | Sep. 30, 2020USD ($) |
Leases [Abstract] | |
2021 | $ 113,553 |
2022 | 23,968 |
Imputed interest | (5,486) |
Total lease liability | $ 132,035 |
9. LEASES (Details Narrative)
9. LEASES (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Right-of-use assets | $ 129,003 | $ 243,526 |
Operating lease liabilities | 132,035 | |
Lease cost | 136,718 | $ 133,996 |
Cash paid for ROU operating lease liability | $ 136,738 | |
Weighted-average remaining lease term | 1 year 3 months 18 days | |
Weighted-average discount rate | 7.00% |
10. CONVERTIBLE NOTES PAYABLE_3
10. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Convertible notes, gross | $ 12,187,056 | $ 6,497,556 |
less conversions | (4,242,490) | 0 |
less debt discount - beneficial conversion feature | (2,127,894) | (1,273,667) |
less debt discount - warrants | (1,025,512) | (616,729) |
less debt discount - warrants issued for services related to debt offering | (823,582) | (652,919) |
Convertible notes, net | 3,967,578 | 3,954,241 |
Convertible Redeemable Note - Clayton A. Struve | ||
Convertible notes, gross | 1,071,000 | 1,071,000 |
Convertible Redeemable Note - J3E2A2ZLP | ||
Convertible notes, gross | 1,184,066 | 1,184,066 |
2019 Convertible Notes | ||
Convertible notes, gross | 4,242,490 | 4,242,490 |
Q1 2020 Convertible notes | ||
Convertible notes, gross | 520,000 | 0 |
Q2 2020 Convertible notes | ||
Convertible notes, gross | 195,000 | 0 |
Q3 2020 Convertible notes | ||
Convertible notes, gross | 4,924,500 | 0 |
Bousted fee refund (originally booked as contra debt) | ||
Convertible notes, gross | $ 50,000 | $ 0 |
12. EQUITY (Details)
12. EQUITY (Details) - Warrants | 12 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Shares | |
Outstanding at beginning of period | 17,747,090 |
Issued | 3,510,425 |
Exercised | (733,588) |
Forfeited | (507,560) |
Expired | 0 |
Outstanding at end of period | 20,016,367 |
Exerciseable at end of period | 20,016,367 |
Weighted Average Exercise Price: | |
Outstanding at beginning of period | $ / shares | $ 0.455 |
Issued | $ / shares | 1.216 |
Exercised | $ / shares | (0.952) |
Forfeited | $ / shares | (1.120) |
Expired | $ / shares | 0 |
Outstanding at end of period | $ / shares | $ 0.556 |
12. EQUITY (Details 1)
12. EQUITY (Details 1) | 12 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Number of warrants | shares | 20,016,367 |
Weighted average remaining life (years) | 3 years 14 days |
Weighted average exercise price | $ 0.556 |
Shares exercisable | shares | 20,016,367 |
Weighted average exercise price | $ 0.556 |
Warrant 1 | |
Number of warrants | shares | 13,133,286 |
Weighted average remaining life (years) | 1 year 9 months 4 days |
Weighted average exercise price | $ 0.25 |
Shares exercisable | shares | 13,133,286 |
Weighted average exercise price | $ 0.25 |
Warrant 2 | |
Number of warrants | shares | 714,286 |
Weighted average remaining life (years) | 9 months 29 days |
Weighted average exercise price | $ 0.70 |
Shares exercisable | shares | 714,286 |
Weighted average exercise price | $ 0.70 |
Warrant 3 | |
Number of warrants | shares | 882,159 |
Weighted average remaining life (years) | 1 year 1 month 13 days |
Weighted average exercise price | $ 1 |
Shares exercisable | shares | 882,159 |
Weighted average exercise price | $ 1 |
Warrant 4 | |
Number of warrants | shares | 5,191,636 |
Weighted average remaining life (years) | 4 years 1 month 13 days |
Shares exercisable | shares | 5,191,636 |
Warrant 4 | Minimum | |
Weighted average exercise price | $ 1.20 |
Weighted average exercise price | 1.20 |
Warrant 4 | Maximum | |
Weighted average exercise price | 1.50 |
Weighted average exercise price | $ 1.50 |
Warrant 5 | |
Number of warrants | shares | 95,000 |
Weighted average remaining life (years) | 4 years 2 months 8 days |
Shares exercisable | shares | 95,000 |
Warrant 5 | Minimum | |
Weighted average exercise price | $ 2 |
Weighted average exercise price | 2.34 |
Warrant 5 | Maximum | |
Weighted average exercise price | 4.08 |
Weighted average exercise price | $ 4.08 |
12. EQUITY (Details 2)
12. EQUITY (Details 2) | 12 Months Ended |
Sep. 30, 2020 | |
Dividend yield | 0.00% |
Expected life | 5 years |
Minimum | |
Expected volatility | 176.00% |
Risk free interest rate | 1.51% |
Maximum | |
Expected volatility | 177.00% |
Risk free interest rate | 1.71% |
13. STOCK INCENTIVE PLAN (Detai
13. STOCK INCENTIVE PLAN (Details) - Stock Options - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Shares: | ||
Outstanding at beginning of period | 4,532,668 | 2,182,668 |
Shares granted | 3,085,000 | 2,870,000 |
Shares exercised | (73,191) | 0 |
Shares forfeitures | (2,739,477) | (50,000) |
Outstanding at end of period | (2,739,477) | 4,532,668 |
Weighted Average Exercise Price: | ||
Outstanding at beginning of period | $ 2.025 | $ 1.698 |
Shares granted | 1.142 | 2.615 |
Shares exercised | (0.250) | 0 |
Shares forfeitures | (2.593) | (3.906) |
Outstanding at end of period | $ 1.161 | $ 2.025 |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value outstanding at beginning of period | $ 9,180,369 | $ 3,706,519 |
Aggregate intrinsic value granted | $ 3,522,400 | $ 7,504,850 |
Aggregate intrinsic value exercised | $ (18,298) | $ 0 |
Aggregate intrinsic value forefeitures | $ (7,103,921) | $ (2,031,000) |
Aggregate intrinsic value outstanding at end of period | $ 5,580,550 | $ 9,180,369 |
13. STOCK INCENTIVE PLAN (Det_2
13. STOCK INCENTIVE PLAN (Details 1) | 12 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Number of outstanding stock options | shares | 20,016,367 |
Weighted average remaining life (years) | 3 years 14 days |
Weighted average exercise price exerciseable | $ / shares | $ 0.556 |
Number exercisable | shares | 20,016,367 |
Weighted average exercise price exerciseable | $ / shares | $ 0.556 |
Stock Options | |
Number of outstanding stock options | shares | 4,805,000 |
Weighted average remaining life (years) | 3 years 8 months 1 day |
Weighted average exercise price exerciseable | $ / shares | $ 1.161 |
Number exercisable | shares | 1,197,188 |
Weighted average exercise price exerciseable | $ / shares | $ 1.158 |
$0.250 | |
Number of outstanding stock options | shares | 230,000 |
Weighted average remaining life (years) | 2 years 8 months 16 days |
Weighted average exercise price exerciseable | $ / shares | $ 0.25 |
Number exercisable | shares | 129,375 |
Weighted average exercise price exerciseable | $ / shares | $ 0.25 |
$1.10 - $1.25 | |
Number of outstanding stock options | shares | 2,940,000 |
Weighted average remaining life (years) | 4 years 1 month 6 days |
Weighted average exercise price exerciseable | $ / shares | $ 1.1 |
Number exercisable | shares | 306,250 |
Weighted average exercise price exerciseable | $ / shares | $ 1.103 |
$1.28 - $1.52 | |
Number of outstanding stock options | shares | 1,500,000 |
Weighted average remaining life (years) | 4 years 1 month 6 days |
Weighted average exercise price exerciseable | $ / shares | $ 1.33 |
Number exercisable | shares | 695,313 |
Weighted average exercise price exerciseable | $ / shares | $ 1.31 |
$1.79 - $2.25 | |
Number of outstanding stock options | shares | 135,000 |
Weighted average remaining life (years) | 3 years 9 months |
Weighted average exercise price exerciseable | $ / shares | $ 1.37 |
Number exercisable | shares | 66,250 |
Weighted average exercise price exerciseable | $ / shares | $ 1.961 |
13. STOCK INCENTIVE PLAN (Det_3
13. STOCK INCENTIVE PLAN (Details 2) (USD $) | 12 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Number of outstanding stock options | shares | 20,016,367 |
Weighted average remaining life (years) | 3 years 14 days |
Weighted average exercise price exerciseable | $ / shares | $ 0.556 |
Number exercisable | shares | 20,016,367 |
Weighted average exercise price exerciseable | $ / shares | $ 0.556 |
Particle, Inc. technology | |
Number of outstanding stock options | shares | 5,250,000 |
Weighted average remaining life (years) | 4 years 9 months 7 days |
Weighted average exercise price exerciseable | $ / shares | $ 0.12 |
Number exercisable | shares | 1,116,170 |
Weighted average exercise price exerciseable | $ / shares | $ 0.10 |
Particle, Inc. technology | 0.10 | |
Number of outstanding stock options | shares | 5,100,000 |
Weighted average remaining life (years) | 4 years 9 months 4 days |
Weighted average exercise price exerciseable | $ / shares | $ 0.10 |
Number exercisable | shares | 1,116,170 |
Weighted average exercise price exerciseable | $ / shares | $ 0.10 |
Particle, Inc. technology | 0.80 | |
Number of outstanding stock options | shares | 150,000 |
Weighted average remaining life (years) | 5 years |
Weighted average exercise price exerciseable | $ / shares | $ 0.80 |
Number exercisable | shares | 0 |
Weighted average exercise price exerciseable | $ / shares | $ 0 |
13. STOCK INCENTIVE PLAN (Det_4
13. STOCK INCENTIVE PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Options to purchase common stock under 2011 Stock Incentive Plan | 20,016,367 | |
Compensation expense | $ 868,314 | $ 1,141,674 |
2011 Stock Incentive Plan | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 4,805,000 | |
Average exercise price under 2011 Stock Incentive Plan | $ 1.161 |
14. OTHER SIGNIFICANT TRANSAC_2
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details Narrative) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Chief Executive Officer | ||
Due to related party | $ 597,177 | $ 487,932 |
16. INCOME TAXES (Details)
16. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||
U.S. operations loss carry forward at statutory rate of 21% | $ 6,536,413 | $ 6,763,238 |
Deferred tax assets related to timing differences - accruals | 1,746,486 | 192,897 |
Total | 8,282,899 | 6,956,135 |
Less valuation allowance | (8,248,637) | (6,956,135) |
Other | 34,263 | 0 |
Deferred tax liabilities | 34,263 | 0 |
Net deferred tax assets | 0 | 0 |
Change in valuation allowance | $ (1,292,502) | $ (813,996) |
16. INCOME TAXES (Details 1)
16. INCOME TAXES (Details 1) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 21.00% | 21.00% |
State Taxes | 0.90% | 0.00% |
Meals | 0.00% | 0.00% |
Warrants Int. Exp. | (8.80%) | 0.00% |
PY True-up | (3.80%) | 0.00% |
Increase in Income Taxes Resulting from: | ||
Change in valuation allowance | (9.30%) | (21.00%) |
Effective tax rate | 0.00% | 0.00% |
17. SEGMENT REPORTING (Details)
17. SEGMENT REPORTING (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue | $ 121,939 | $ 1,804,960 |
Gross margin | 52,213 | 426,547 |
Segment net loss | (6,825,928) | (5,013,012) |
Segment assets | 4,682,147 | 2,639,633 |
Development of the Bio-RFID and ChromaID Technologies | ||
Revenue | 0 | 0 |
Gross margin | 0 | 0 |
Segment net loss | (5,481,000) | (4,935,000) |
Segment assets | 4,360,000 | 2,882,194 |
Particle, Inc. technology | ||
Revenue | 0 | 0 |
Gross margin | 0 | 0 |
Segment net loss | (1,280,000) | 0 |
Segment assets | 322,000 | 0 |
TransTech Distribution Business | ||
Revenue | 121,939 | 1,804,960 |
Gross margin | 52,213 | 426,547 |
Segment net loss | (65,000) | (78,000) |
Segment assets | $ 0 | $ 57,439 |