Cover
Cover - shares | 3 Months Ended | |
Dec. 31, 2022 | Feb. 14, 2023 | |
Cover [Abstract] | ||
Entity Registrant Name | KNOW LABS, INC. | |
Entity Central Index Key | 0001074828 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Dec. 31, 2022 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2023 | |
Entity Common Stock Shares Outstanding | 48,207,937 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 000-30262 | |
Entity Incorporation State Country Code | NV | |
Entity Tax Identification Number | 90-0273142 | |
Entity Address Address Line 1 | 500 Union Street | |
Entity Address Address Line 2 | Suite 810 | |
Entity Address City Or Town | Seattle | |
Entity Address State Or Province | WA | |
Entity Address Postal Zip Code | 98101 | |
City Area Code | 206 | |
Local Phone Number | 903-1351 | |
Security 12b Title | Common Stock, par value $0.001 per share | |
Trading Symbol | KNW | |
Security Exchange Name | NYSE | |
Entity Interactive Data Current | Yes |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 9,680,272 | $ 12,593,692 |
Total current assets | 9,680,272 | 12,593,692 |
PROPERTY AND EQUIPMENT, NET | 770,663 | 862,977 |
OTHER ASSETS | ||
Other assets | 15,765 | 13,767 |
Operating lease right of use asset | 243,526 | 287,930 |
TOTAL ASSETS | 10,710,226 | 13,758,366 |
CURRENT LIABILITIES: | ||
Accounts payable - trade | 404,619 | 526,968 |
Accrued expenses | 464,830 | 462,940 |
Accrued expenses - related parties | 322,697 | 348,264 |
Convertible notes payable, net | 2,255,066 | 2,255,066 |
Current portion of operating lease right of use liability | 210,790 | 215,397 |
Total current liabilities | 3,658,002 | 3,808,635 |
NON-CURRENT LIABILITIES: | ||
Operating lease right of use liability, net of current portion | 45,993 | 87,118 |
Total non-current liabilities | 45,993 | 87,118 |
COMMITMENTS AND CONTINGENCIES (Note 12) | 0 | 0 |
STOCKHOLDERS' EQUITY | ||
Common stock - $0.001 par value, 200,000,000 shares authorized, 48,207,937 and 48,156,062 shares issued and outstanding at 12/31/2022 and 9/30/2022, respectively | 48,209 | 48,158 |
Additional paid in capital | 112,175,814 | 111,209,388 |
Accumulated deficit | (105,220,597) | (101,397,738) |
Total stockholders' equity | 7,006,231 | 9,862,613 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 10,710,226 | 13,758,366 |
Series C Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | 1,790 | 1,790 |
Series D Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | $ 1,015 | $ 1,015 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Sep. 30, 2022 |
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 200,000,000 | 200,000,000 |
Common stock shares issued | 48,207,937 | 48,156,062 |
Common stock shares outstanding | 48,207,937 | 48,156,062 |
Convertible Preferred Stock Series C [Member] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 |
Convertible Preferred Stock Series D [Member] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,016,014 | 1,016,014 |
Preferred stock shares issued | 1,016,004 | 1,016,004 |
Preferred stock shares outstanding | 1,016,004 | 1,016,004 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||
REVENUE- DIGITAL ASSET SALES | $ 0 | $ 4,351,400 |
OPERATING EXPENSES- | ||
RESEARCH AND DEVELOPMENT EXPENSES | 1,743,051 | 885,752 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 1,905,071 | 1,216,947 |
SELLING AND TRANSACTIONAL COSTS FOR DIGITAL ASSETS | 0 | 3,118,360 |
Total operating expenses | 3,648,122 | 5,221,059 |
OPERATING LOSS | (3,648,122) | (869,659) |
OTHER INCOME (EXPENSE): | ||
Interest expense | (227,170) | (4,486,960) |
Other income | 52,433 | 0 |
Total other (expense), net | (174,737) | (4,486,960) |
LOSS BEFORE INCOME TAXES | (3,822,859) | (5,356,619) |
Income tax expense | 0 | 0 |
NET LOSS | $ (3,822,859) | $ (5,356,619) |
Basic and diluted loss per share | $ (0.08) | $ (0.15) |
Weighted average shares of common stock outstanding- basic and diluted | 48,187,339 | 35,479,073 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) (Unaudited) - USD ($) | Total | Series C Convertibles Preferred Stock [Member] | Series D Convertible Preferred Stock [Member] | Common Stock [Member] | Additional Paid In Capital [Member] | Accumulated Deficit [Member] |
Balance, shares at Sep. 30, 2021 | 1,785,715 | 1,016,004 | 35,166,551 | |||
Balance, amount at Sep. 30, 2021 | $ 1,242,163 | $ 1,790 | $ 1,015 | $ 35,168 | $ 82,530,684 | $ (81,326,494) |
Stock compensation expense - employee options | 204,170 | 0 | 0 | $ 0 | 204,170 | 0 |
Issuance of common stock for exercise of warrants, shares | 801,486 | |||||
Issuance of common stock for exercise of warrants, amount | 766,486 | 0 | 0 | $ 801 | 765,685 | 0 |
Issuance of common stock for stock option exercises, shares | 1,875 | |||||
Issuance of common stock for stock option exercises, amount | 2,344 | 0 | 0 | $ 2 | 2,342 | 0 |
Net loss | (5,356,619) | $ 0 | $ 0 | $ 0 | 0 | (5,356,619) |
Balance, shares at Dec. 31, 2021 | 1,785,715 | 1,016,004 | 35,969,912 | |||
Balance, amount at Dec. 31, 2021 | (3,141,456) | $ 1,790 | $ 1,015 | $ 35,971 | 83,502,881 | (86,683,113) |
Balance, shares at Sep. 30, 2022 | 1,785,715 | 1,016,004 | 48,156,062 | |||
Balance, amount at Sep. 30, 2022 | 9,862,613 | $ 1,790 | $ 1,015 | $ 48,158 | 111,209,388 | (101,397,738) |
Stock compensation expense - employee options | 744,640 | 0 | 0 | $ 0 | 744,640 | 0 |
Issuance of common stock for exercise of warrants, shares | 50,000 | |||||
Issuance of common stock for exercise of warrants, amount | 12,500 | 0 | 0 | $ 50 | 12,450 | 0 |
Issuance of common stock for stock option exercises, shares | 1,875 | |||||
Issuance of common stock for stock option exercises, amount | 2,343 | 0 | 0 | $ 1 | 2,342 | 0 |
Net loss | (3,822,859) | 0 | 0 | 0 | 0 | (3,822,859) |
Interest expense for extension of notes and warrants | 206,994 | $ 0 | $ 0 | $ 0 | 206,994 | 0 |
Balance, shares at Dec. 31, 2022 | 1,785,715 | 1,016,004 | 48,207,937 | |||
Balance, amount at Dec. 31, 2022 | $ 7,006,231 | $ 1,790 | $ 1,015 | $ 48,209 | $ 112,175,814 | $ (105,220,597) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (3,822,859) | $ (5,356,619) |
Adjustments to reconcile net loss to net cash (used in) operating activities | ||
Depreciation and amortization | 103,160 | 41,672 |
Stock based compensation- stock option grants | 744,640 | 204,170 |
Right of use, net | (1,328) | (1,781) |
Interest expense for extension of notes and warrants | 206,994 | 0 |
Amortization of debt discount to interest expense | 0 | 4,184,657 |
Changes in operating assets and liabilities: | ||
Other long-term assets | (1,998) | 0 |
Accounts receivable-related party | 0 | (3,124,581) |
Accounts payable - trade and accrued expenses | (146,026) | |
NET CASH (USED IN) OPERATING ACTIVITIES | (2,917,417) | (1,907,817) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of research and development equipment | (10,846) | (385,488) |
NET CASH (USED IN) INVESTING ACTIVITIES: | (10,846) | (385,488) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of common stock for stock options exercise | 2,343 | 2,344 |
Proceeds from issuance of common stock for warrant exercise | 12,500 | 766,486 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 14,843 | 768,830 |
NET (DECREASE) IN CASH AND CASH EQUIVALENTS | (2,913,420) | (1,524,475) |
CASH AND CASH EQUIVALENTS, beginning of period | 12,593,692 | 12,258,218 |
CASH AND CASH EQUIVALENTS, end of period | 9,680,272 | 10,733,743 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 0 | 0 |
Taxes paid | $ 0 | $ 0 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Dec. 31, 2022 | |
ORGANIZATION | |
ORGANISATION | 1. ORGANIZATION Know Labs, Inc. (the “Company”) was incorporated under the laws of the State of Nevada in 1998. The Company currently has authorized 205,000,000 shares of capital stock, of which 200,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share. At the annual shareholder meeting held on October 15, 2021, the Company’s authorized shares of common stock was increased to 200,000,000 shares of voting common stock, par value $0.001 per share. The Company is focused on the development and commercialization of proprietary biosensor technologies which are capable of uniquely identifying and measuring almost any material or analyte using electromagnetic energy to detect, record, identify and measure the unique “signature” of said materials or analytes. The Company call these its “Bio-RFID” technology platform when pertaining to radio and microwave spectroscopy and “ChromaID” technology platform when pertaining to optical spectroscopy. The data obtained with biosensor technology is analyzed with trade secret algorithms. There are a significant number of analytes in the human body that relate to health and wellness. The Company’s focus is upon those analytes relating to human health, the identification of which provide diagnostic information and require, by their nature, clearance by the United States Food and Drug Administration. On April 30, 2020, the Company incorporated Particle, Inc. (“Particle”) in the State of Nevada. Particle is focused on the development and commercialization of the Company’s extensive intellectual property relating to electromagnetic energy outside of the medical diagnostic arena which remains the parent company’s singular focus. Since incorporation, Particle has engaged in research and development activities on threaded light bulbs that have a warm white light and can inactivate germs, including bacteria and viruses. It is seeking partners to take the product to market. On September 17, 2021, the Company incorporated AI Mind, Inc. (“AI Mind”) in the State of Nevada. AI Mind was focused on monetizing the AI deep learning platform. Since incorporation, it initially focused on creating graphical images which were sold as Non Fungible Tokens (“NFTs”). The Company does not expect future activity or revenue from that source. During the year ended September 30, 2022, |
LIQUIDITY AND GOING CONCERN
LIQUIDITY AND GOING CONCERN | 3 Months Ended |
Dec. 31, 2022 | |
LIQUIDITY AND GOING CONCERN | |
LIQUIDITY AND GOING CONCERN | 2. LIQUIDITY AND GOING CONCERN The Company has cash and cash equivalents of $9,680,272 and net working capital of $8,277,336 (exclusive of convertible notes payable) as of December 31, 2022. The Company anticipates that it will record losses from operations for the foreseeable future. The Company believes that it has enough available cash to operate until at least February 15, 2024. As of December 31, 2022, the Company’s accumulated deficit was $105,220,597. The Company has had limited capital resources and intends to seek additional cash via equity and debt offerings. On September 20, 2022, the Company completed a public offering of the Company’s common stock pursuant to which the Company sold 4,140,000 shares of common stock, at a purchase price of $2.00 per share, for total gross proceeds of $8,280,000. After deducting underwriting commissions and other offering expenses, we received net proceeds of $7,424,679. The proceeds of warrants currently outstanding, which could be exercised on a cash basis, may generate potential proceeds of up to $15,681,788. The Company expects that portions of these warrants will be exercised. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | 3 Months Ended |
Dec. 31, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | |
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | 3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS Basis of Presentation Principles of Consolidation Cash and Cash Equivalents Equipment Long-Lived Assets Revenue Recognition · identification of the contract, or contracts, with the customer; · identification of the performance obligations in the contract; · determination of the transaction price; · allocation of the transaction price to the performance obligations in the contract; and · recognition of the revenue when, or as, the Company satisfies a performance obligation. Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. During the three months ended December 31, 2021, the Company’s artificial AI deep learning platform generated revenue from digital asset sales of NFTs. The Company engineering team, using its research data, AI and proprietary algorithms, produced NFTs in the form of digital art. The NFTs produced had no recorded cost basis. The Company does not expect future activity or revenue from that source. Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving its Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. The Company believes that continued development of new and enhanced technologies is essential to its future success. The Company incurred expenses of 1,743,051 and $885,752 for the three months ended December 31, 2022 and 2021, 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, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, 2022 and September 30, 2022 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 December 31, 2022 and September 30, 2022 was $9,024,335 and $11,821,931, respectively. 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 December 31, 2022 and September 30, 2022. Stock Based Compensation Convertible Securities Net Loss per Share As of December 31, 2022, the Company had 48,207,937 shares of common stock issued and outstanding. As of December 31, 2022, there were options outstanding for the purchase of 24,480,495 common shares (including unearned stock option grants totaling 9,704,620 shares related to performance targets), warrants for the purchase of 21,736,313 common shares, and 8,108,356 shares of our common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 9,020,264 common shares at the current price of $0.25 per share reserved and are issuable upon conversion of convertible debentures of $2,255,066. All of the foregoing shares could potentially dilute future earnings per share but are excluded from the December 31, 2022, calculation of net loss per share because their impact is antidilutive. As of December 31, 2021, there were options outstanding for the purchase of 18,423,245 common shares (including unearned stock option grants totaling 11,775,745 shares related to performance targets), warrants for the purchase of 21,654,013 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 16,124,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 7,104,500 common shares at the current price of $2.00 per share) reserved and are issuable upon conversion of convertible debentures of $16,464,066. All of which could potentially dilute future earnings per share but are excluded from the December 31, 2021, calculation of net loss per share because their impact is antidilutive. Comprehensive loss Dividend Policy Use of Estimates Recent Accounting Pronouncements Based on the Company’s review of accounting standard updates recently issued, those standards not yet required to be adopted and proposed standards for the future, the Company does believe such items are expected to have a significant impact on the Company’s consolidated financial statements. |
ARTIFICIAL INTELLIGENCE (AI) DE
ARTIFICIAL INTELLIGENCE (AI) DEEP LEARNING PLATFORM | 3 Months Ended |
Dec. 31, 2022 | |
ARTIFICIAL INTELLIGENCE (AI) DEEP LEARNING PLATFORM | |
ARTIFICIAL INTELLIGENCE (AI) DEEP LEARNING PLATFORM | 4. Artificial Intelligence (AI) Deep Learning Platform AI Revenue During the year ended September 30, 2022, the Company’s AI deep learning platform began generating revenue from digital asset sales of NFTs and had sales of $4,360,087. The Company’s sales of NFTs are generated using the NFT digital exchange, OpenSea. Customers purchasing the NFT’s must make payments in the crypto currency, Ethereum. The Ethereum is received into a digital wallet and then moved to an account at Coinbase where the Ethereum is converted to U.S. dollars. During the three months ended December 31, 2021, the Company was not able to establish a digital wallet and corporate account at Coinbase in order to receive the Ethereum. The Company used the digital wallet and Coinbase account of the Company’s CEO. The Company and the CEO executed an assignment of his account to the Company while the Company establishes its own Coinbase account. All proceeds received from the sale of NFT were deposited in the CEO’s personal digital accounts. After the sale of the NFT, the Ethereum was converted to US dollars as soon as practically possible. The Company recorded the total value of the gross NFT sale in revenue. Costs incurred in connection with the NFT transaction were recorded in the statement of operations as selling and transactional cost of digital assets and include costs to outside consultants, estimated employee and CEO special bonus compensation, digital asset conversion losses and estimated sales and use tax. The amount totaled $3,430,438 for the year ended September 30, 2022. As of December 31, 2022 and September 30, 2022, accrued expenses include $343,878 of expenses, primarily sales and use tax and other expenses. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Dec. 31, 2022 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 5. PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2022 and September 30, 2022 was comprised of the following: Estimated Useful Lives December 31, 2022 September 30, 2022 Machinery and equipment 2-3 years $ 1,521,110 $ 1,510,265 Furniture and fixtures 5 years 26,855 26,855 Leasehold improvements 5 years 3,612 3,612 Less: accumulated depreciation (780,914 ) (677,755 ) $ 770,663 $ 862,977 Total depreciation expense was $103,160 and $41,672 for the three months ended December 31, 2022 and 2021, respectively. All equipment is used primarily for research and development purposes and accordingly $98,002 in depreciation is classified in research and development expenses during the three months ended December 31, 2022. |
LEASES
LEASES | 3 Months Ended |
Dec. 31, 2022 | |
LEASES | |
LEASES | 6. LEASES The Company has entered into operating leases for office and development facilities which range from two to three years and include options to renew. The Company determines whether an arrangement is or contains a lease based upon the unique facts and circumstances at the inception of the lease. Operating lease liabilities and their corresponding right-of-use asses are recorded based upon the present value of the lease payments over the expected lease term. As of December 31, 2022 and September 30, 2022, total operating lease liabilities for remaining long term leases was approximately $257,000 and $302,000, respectively. Right of use assets totaled approximately $244,000 and $288,000 at December 31, 2022 and September 30, 2022, respectively. In the three months ended December 31, 2022 and 2021, the Company recognized $81,599 and $40,629, respectively in total lease costs for the leases. Because the rate implicit in each lease is not readily determinable, the Company uses its estimated incremental borrowing rate to determine the present value of the lease payments. The weighted average remaining lease term for the operating leases was 15 months at December 31, 2022 and the weighted average discount rate was 7%. The minimum future lease payments as of December 31, 2022 are as follows: Years Ended December 31, $ 2023 $ 143,828 2024 127,232 Total remaining payments 271,060 Less Imputed Interest 14,277 Total lease liability $ 256,783 |
CONVERTIBLE NOTES PAYABLE AND N
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | 3 Months Ended |
Dec. 31, 2022 | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | 7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE Convertible notes payable as of December 31, 2022 and September 30, 2022 consisted of the following: Convertible Promissory Notes with Clayton A. Struve The Company owes Clayton A. Struve, a significant stockholder, $1,071,000 under convertible promissory or OID notes. We recorded accrued interest of $88,452 and $86,562 as of December 31, 2022 and September 30, 2022, respectively. On December 7, 2022, we signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2023. The Company expensed $12,975 during the three months ended December 31, 2022 related to the extension of the notes. Convertible Redeemable Promissory Notes with J3E2A2Z On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The Company recorded accrued interest of $305,197 and $287,290 as of December 31, 2022 and September 30, 2022, respectively. On December 7, 2022, the Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to January 30, 2023. On January 25, 2023, the Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to September 30, 2023. Mr. Erickson controls J3JE2A2Z. Convertible Debt Offering Beginning in 2019, the Company entered into series of debt offerings with similar and consistent terms. The Company issued Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. As of September 30, 2022, all convertible notes and accrued interest had been converted to common stock. During the year ended September 30, 2022, amortization related to the debt offerings of $7,272,911 was recognized as interest expense in the consolidated statements of operations. Convertible notes payable as of December 31, 2022 and September 30, 2022 are summarized below: December 31, 2022 September 30, 2022 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson and affiliates 1,184,066 1,184,066 2021 Convertible notes - 14,209,000 Less conversions of notes - (14,209,000 ) $ 2,255,066 $ 2,255,066 |
EQUITY
EQUITY | 3 Months Ended |
Dec. 31, 2022 | |
EQUITY | |
EQUITY | 8. EQUITY Authorized Capital Stock The Company’s authorized capital stock currently consists of 205,000,000 shares, consisting of 200,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which 1,785,715 shares have been designated as series C convertible preferred stock, 1,016,014 shares have been designated as series D convertible preferred stock, and 500 shares have been designated as series F preferred stock. Securities Subject to Price Adjustments If in the future, the Company sells its common stock at a price below $0.25 per share, the conversion price of our outstanding shares of series C convertible preferred stock and series D convertible preferred stock would adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of the convertible promissory notes referred to above and the exercise price of certain outstanding warrants to purchase 10,074,381 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. Warrants totaling 4,439,707 would adjust below $1.20 per share and warrants totaling 4,424,425 would adjust below $2.40 per share, in each case pursuant to the documents governing such instruments. Common Stock Each share of common stock entitles its holder to one vote on each matter submitted to the stockholders for a vote, and no cumulative voting for directors is permitted. Stockholders do not have any preemptive rights to acquire additional securities issued by the Company. Three Months Ended December 31, 2022 The Company issued 50,000 shares of common stock related to the exercise of warrants and received $12,500. The Company issued 1,875 shares related to the exercise of stock option grants and received $2,343. Warrants to Purchase Common Stock Three Months Ended December 31, 2022 On December 7, 2022, the Company signed an extension of warrant agreement with Clayton Struve, extending the exercise dates as follows: Warrant No./Class Issue Date No. Warrant Shares Exercise Price Current Expiration Date Amended Expiration Date Clayton A. Struve Warrant 08-14-2017 1,440,000 $ 0.25 08-13-2024 08-13-2025 Clayton A. Struve Warrant 12-12-2017 1,200,000 $ 0.25 12-11-2024 12-11-2025 Clayton A. Struve Warrant 08-04-2016 1,785,715 $ 0.25 08-04-2024 08-04-2025 Clayton A. Struve Warrant 02-28-2018 1,344,000 $ 0.25 02-28-2024 02-28-2025 The Company recorded interest expense of $194,019 during the three months ended December 31, 2022 related to the extension of the warrants. A summary of the warrants outstanding as of December 31, 2022 were as follows: December 31, 2022 Weighted Average Exercise Shares Price Outstanding at beginning of period 21,786,313 $ 1.029 Issued - - Exercised (50,000 ) (0.250 ) Forfeited - - Expired - - Outstanding at end of period 21,736,313 $ 1.031 Exercisable at end of period 21,736,313 The following table summarizes information about warrants outstanding and exercisable as of December 31, 2022: December 31, 2022 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 10,519,381 1.74 $ 0.250 10,519,381 $ 0.250 6,512,207 2.13 1.20-1.85 6,512,207 1.20-1.85 4,694,725 3.36 2.00-3.00 4,694,725 2.00-3.00 10,000 0.50 4.080 10,000 4.080 21,736,313 2.70 $ 1.031 21,736,313 $ 1.031 The significant weighted average assumptions relating to the valuation of the Company’s warrants for the three months ended December 31, 2022 were as follows: Assumptions Dividend yield 0 % Expected life 3-5 years Expected volatility 104 % Risk free interest rate 2.96 % There were vested warrants of 21,736,313 with an aggregate intrinsic value of $16,806,047. |
STOCK INCENTIVE PLANS
STOCK INCENTIVE PLANS | 3 Months Ended |
Dec. 31, 2022 | |
STOCK INCENTIVE PLANS | |
STOCK INCENTIVE PLANS | 9. STOCK INCENTIVE PLANS On August 12, 2021, the Company established its 2021 Equity Incentive Plan (the “2021 Plan”), which was adopted by stockholders on October 15, 2021. The Company initially had 20,000,000 shares of its common stock authorized as the maximum number of shares of common stock that may be delivered to participants under the 2021 Plan, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. This number was increased to 22,000,000 shares of common stock as of January 1, 2022 as a result of the automatic share reserve increase described below. Three Months Ended December 31, 2022 On December 14, 2022, the Company issued a stock option grant to Ronald P. Erickson for 1,000,000 shares at an exercise price of $1.41 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years. On December 14, 2022, the Company issued a stock option grant to Phillip A. Bosua for 1,250,000 shares at an exercise price of $1.41 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years. During the three months ended December 31, 2022, the Company issued stock option grants to four employees and consultants for 1,440,000 shares at an average exercise price of $1.420 per share. The stock option grants expire in five years. The stock option grants primarily vest quarterly over four years. Stock option activity for the three months ended December 31, 2022 and the years ended September 30, 2022 and 2021 was as follows: Options Exercise Price Proceed $ Outstanding as of September 30, 2020 4,805,000 $ 1.161 $ 5,580,550 Granted 10,650,745 1.766 18,807,990 Exercised (20,625 ) (1.359 ) (28,031 ) Forfeitures (120,000 ) (3.300 ) (396,000 ) Outstanding as of September 30, 2021 15,315,120 1.565 23,964,509 Granted 6,636,000 1.815 12,045,330 Exercised (26,293 ) (1.376 ) (36,170 ) Forfeitures (1,132,457 ) (2.057 ) (2,329,267 ) Outstanding as of September 30, 2022 20,792,370 1.618 33,644,402 Granted 3,690,000 1.414 5,217,300 Exercised (1,875 ) (1.250 ) (2,344 ) Forfeitures - - - Outstanding as of December 31, 2022 24,480,495 $ 1.587 38,859,358 The following table summarizes information about stock options outstanding and exercisable as of December 31, 2022: Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exercisable Exercisable $ 0.25 230,000 1.65 $ 0.250 230,000 $ 0.250 1.10-1.25 2,903,750 2.96 1.100 1,797,813 1.100 1.28-1.67 16,010,745 4.03 1.479 2,008,938 1.407 1.79-3.67 5,336,000 3.82 2.234 1,185,688 2.150 24,480,495 3.84 $ 1.587 5,222,439 $ 1.466 There are stock option grants of 24,480,495 shares as of December 31, 2022 with an aggregate intrinsic value of $3,693,865. There are 24,480,495 (including unearned stock option grants totaling 9,704,620 shares related to performance milestones) options to purchase common stock at an average exercise price of $1.587 per share outstanding as of December 31, 2022 under the 2021 Plan. The Company recorded $744,640 and $204,170 of compensation expense, net of related tax effects, relative to stock options for the three months ended December 31, 2022 and 2021, respectively, in accordance with ASC 718. As of December 31, 2022, there is $11,532,729 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 3.84 years. |
OTHER SIGNIFICANT TRANSACTIONS
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 3 Months Ended |
Dec. 31, 2022 | |
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | |
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | 10. SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES Transactions with Clayton Struve See Notes 7 and 9 for related party transactions with Clayton A. Struve, a significant stockholder. Related Party Transactions with Ronald P. Erickson See Notes 7, 9 and 11 for related party transactions with Ronald P. Erickson, the Company’s Chairman and Chief Executive Officer and affiliated entities. The Company paid $40,385 of salaries and vacation pay to Mr. Erickson during the three months ended December 31, 2022 that were previously accrued and reported but were deferred. On December 14, 2022, the Company issued a stock option grant to Ronald P. Erickson for 1,000,000 shares at an exercise price of $1.41 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years. Related Party Transaction with Phillip A. Bosua See Notes 9 and 11 for related party transactions with Phillip A. Bosua. On December 14, 2022, the Company issued a stock option grant to Phillip A. Bosua for 1,250,000 shares at an exercise price of $1.41 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years. Mr. Bosua was paid month to month rent totaling $21,000 in the three months ended December 31, 2022 for leased lab facilities and executive offices in Yucca Valley, CA. |
COMMITMENTS, CONTINGENCIES AND
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 3 Months Ended |
Dec. 31, 2022 | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | 11. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS Legal Proceedings The Company may from time to time become a party to various legal proceedings arising in the ordinary course of business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to the Company’s business. Employment Agreements Employment Agreement with Phillip A. Bosua, Former Chief Executive Officer See the Employment Agreement for Phillip A. Bosua that was disclosed in Form 10-K filed with the SEC on December 20, 2022. Mr. Bosua resigned effective January 23, 2023. Employment Agreement with Ronald P. Erickson, Chairman of the Board and Chief Executive Officer See the Employment Agreement for Ronald P. Erickson that was disclosed in Form 10-K filed with the SEC on December 22, 2022. Mr. Erickson was appointed Chief Executive Officer on January 23, 2023. Employment Agreement with Peter J. Conley, Chief Financial Officer and Senior Vice President, Intellectual Property See the Employment Agreement for Peter J. Conley that was disclosed in Form 10-K filed with the SEC on December 22, 2022. Properties and Operating Leases The Company is obligated under the following leases for its various facilities. Corporate Offices On April 13, 2017, the Company leased its executive office located at 500 Union Street, Suite 810, Seattle, Washington, USA, 98101. The Company leases 943 square feet and the current net monthly payment is $3,334. The monthly payment increases approximately 3% each year and the lease expired on May 31, 2022. On October 31, 2021, the Company extended the lease from June 1, 2022 to May 31, 2023 at $2,986 per month. Lab Facilities and Executive Offices On May 18, 2021, the Company entered into a lease for its lab facilities located at 914 E Pine Street, Suite 212, Seattle, WA 98122 and leased 2,642 square feet. The net monthly lease payment was $8,697 and increases by 3% annually. The lease expires on June 30, 2024. The lease can be extended for one additional three year term. On October 11, 2021, the Company entered into the First Amendment of Lease and added 2,485 square feet for $5,000 per month. On September 20, 2022, the Company entered into the Second Amendment of Lease for additional space. The expanded space will be utilized for research and testing. The Amendment of Lease expires on December 31, 2023. On September 22, 2022, the Company leased lab facilities and executive offices in Yucca Valley, CA from Phillip Bosua, the Company’s CEO. The Company leased 1,700 square feet of the total 2,134 square feet of the premises and the current net monthly payment is $7,000. The lease expires September 30, 2023 and can be extended on a month to month basis. The Company paid $91,500 in rent on September 28, 2022 for the period September 1, 2021 to September 30, 2022. The Company paid $21,000 for the three months ended December 31, 2022. The lease was terminated on January 23, 2023. On November 22, 2022, the Company leased additional lab facilities at 123 Boylston Ave, Suite C, Seattle, WA 98102. The Company leased 1,800 square feet and the current net monthly payment is $2,250. The lease expires on August 31, 2023. |
SEGMENT REPORTING
SEGMENT REPORTING | 3 Months Ended |
Dec. 31, 2022 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | 12. SEGMENT REPORTING The management of the Company considers the business to currently have two operating segments (i) the development of the Bio-RFID™” and “ChromaID™” technologies; (ii) Particle, Inc. technology; and (iii) AI sales of NFT products. Particle commenced operations in the year ended September 30, 2020. It is now looking for partners to take the product to market. AI commenced operations during the year ended September 30, 2021. The Company does not expect future activity or revenue from that source. The reporting for the three months ended December 31, 2022 and 2021 was as follows (in thousands): Segment Operating Segment Segment Revenue Profit (Loss) Assets Three Months Ended December 31, 2022 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (3,648 ) $ 10,710 Particle, Inc. technology - - - Digital asset sales - - - Total segments $ - $ (3,648 ) $ 10,710 Three Months Ended December 31, 2021 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (2,087 ) $ 11,755 Particle, Inc. technology - (15 ) 5 Digital asset sales 4,351 1,233 3,125 Total segments $ 4,351 $ (869 ) $ 14,885 During the three months ended December 31, 2022 and 2021, the Company incurred non-cash expenses related to operations of $846,472 and $244,061. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Dec. 31, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 13. 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 December 31, 2022, there were the following material transactions that require disclosure: |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS (Policies) | 3 Months Ended |
Dec. 31, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS | |
Basis of Presentation | Basis of Presentation |
Principles of Consolidation | Principles of Consolidation |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Equipment | Equipment |
Long-Lived Assets | Long-Lived Assets |
Revenue Recognition | Revenue Recognition · identification of the contract, or contracts, with the customer; · identification of the performance obligations in the contract; · determination of the transaction price; · allocation of the transaction price to the performance obligations in the contract; and · recognition of the revenue when, or as, the Company satisfies a performance obligation. Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. During the three months ended December 31, 2021, the Company’s artificial AI deep learning platform generated revenue from digital asset sales of NFTs. The Company engineering team, using its research data, AI and proprietary algorithms, produced NFTs in the form of digital art. The NFTs produced had no recorded cost basis. The Company does not expect future activity or revenue from that source. |
Research and Development Expenses | Research and Development Expenses The Company’s current research and development efforts are primarily focused on improving its Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. The Company believes that continued development of new and enhanced technologies is essential to its future success. The Company incurred expenses of 1,743,051 and $885,752 for the three months ended December 31, 2022 and 2021, respectively, on development activities. |
Advertising | Advertising |
Fair Value Measurements and Financial Instruments | Fair Value Measurements and Financial Instruments Fair Value Measurement and Disclosures Level 1 – Quoted prices in active markets for identical assets and liabilities; Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, 2022 and September 30, 2022 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 December 31, 2022 and September 30, 2022 was $9,024,335 and $11,821,931, respectively. |
Derivative Financial Instruments | Derivative Financial Instruments – The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of December 31, 2022 and September 30, 2022. |
Stock Based Compensation | Stock Based Compensation |
Convertible Securities | Convertible Securities |
Net Loss per Share | Net Loss per Share As of December 31, 2022, the Company had 48,207,937 shares of common stock issued and outstanding. As of December 31, 2022, there were options outstanding for the purchase of 24,480,495 common shares (including unearned stock option grants totaling 9,704,620 shares related to performance targets), warrants for the purchase of 21,736,313 common shares, and 8,108,356 shares of our common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 9,020,264 common shares at the current price of $0.25 per share reserved and are issuable upon conversion of convertible debentures of $2,255,066. All of the foregoing shares could potentially dilute future earnings per share but are excluded from the December 31, 2022, calculation of net loss per share because their impact is antidilutive. As of December 31, 2021, there were options outstanding for the purchase of 18,423,245 common shares (including unearned stock option grants totaling 11,775,745 shares related to performance targets), warrants for the purchase of 21,654,013 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 16,124,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 7,104,500 common shares at the current price of $2.00 per share) reserved and are issuable upon conversion of convertible debentures of $16,464,066. All of which could potentially dilute future earnings per share but are excluded from the December 31, 2021, calculation of net loss per share because their impact is antidilutive. |
Comprehensive Loss | Comprehensive loss |
Dividend Policy | Dividend Policy |
Use of Estimates | Use of Estimates |
Recent Accounting Pronouncements | Based on the Company’s review of accounting standard updates recently issued, those standards not yet required to be adopted and proposed standards for the future, the Company does believe such items are expected to have a significant impact on the Company’s consolidated financial statements. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
PROPERTY AND EQUIPMENT | |
Schedule of Property and equipment | Estimated Useful Lives December 31, 2022 September 30, 2022 Machinery and equipment 2-3 years $ 1,521,110 $ 1,510,265 Furniture and fixtures 5 years 26,855 26,855 Leasehold improvements 5 years 3,612 3,612 Less: accumulated depreciation (780,914 ) (677,755 ) $ 770,663 $ 862,977 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
LEASES | |
Summary of minimum future lease payments | Years Ended December 31, $ 2023 $ 143,828 2024 127,232 Total remaining payments 271,060 Less Imputed Interest 14,277 Total lease liability $ 256,783 |
CONVERTIBLE NOTES PAYABLE AND_2
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | |
Schedule of convertible notes payable | December 31, 2022 September 30, 2022 Convertible note- Clayton A. Struve $ 1,071,000 $ 1,071,000 Convertible note- Ronald P. Erickson and affiliates 1,184,066 1,184,066 2021 Convertible notes - 14,209,000 Less conversions of notes - (14,209,000 ) $ 2,255,066 $ 2,255,066 |
EQUITY (Tables)
EQUITY (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
EQUITY | |
Schedule of Warrant activity | Warrant No./Class Issue Date No. Warrant Shares Exercise Price Current Expiration Date Amended Expiration Date Clayton A. Struve Warrant 08-14-2017 1,440,000 $ 0.25 08-13-2024 08-13-2025 Clayton A. Struve Warrant 12-12-2017 1,200,000 $ 0.25 12-11-2024 12-11-2025 Clayton A. Struve Warrant 08-04-2016 1,785,715 $ 0.25 08-04-2024 08-04-2025 Clayton A. Struve Warrant 02-28-2018 1,344,000 $ 0.25 02-28-2024 02-28-2025 |
Schedule of Warrants outstanding and exercisable | December 31, 2022 Weighted Average Exercise Shares Price Outstanding at beginning of period 21,786,313 $ 1.029 Issued - - Exercised (50,000 ) (0.250 ) Forfeited - - Expired - - Outstanding at end of period 21,736,313 $ 1.031 Exercisable at end of period 21,736,313 December 31, 2022 Weighted Weighted Weighted Average Average Average Number of Remaining Exercise Shares Exercise Warrants Life ( In Years) Price Exercisable Price 10,519,381 1.74 $ 0.250 10,519,381 $ 0.250 6,512,207 2.13 1.20-1.85 6,512,207 1.20-1.85 4,694,725 3.36 2.00-3.00 4,694,725 2.00-3.00 10,000 0.50 4.080 10,000 4.080 21,736,313 2.70 $ 1.031 21,736,313 $ 1.031 |
Schedule of weighted average assumptions | Assumptions Dividend yield 0 % Expected life 3-5 years Expected volatility 104 % Risk free interest rate 2.96 % |
STOCK INCENTIVE PLANS (Tables)
STOCK INCENTIVE PLANS (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
STOCK INCENTIVE PLANS | |
Schedule of Stock option activity | Options Exercise Price Proceed $ Outstanding as of September 30, 2020 4,805,000 $ 1.161 $ 5,580,550 Granted 10,650,745 1.766 18,807,990 Exercised (20,625 ) (1.359 ) (28,031 ) Forfeitures (120,000 ) (3.300 ) (396,000 ) Outstanding as of September 30, 2021 15,315,120 1.565 23,964,509 Granted 6,636,000 1.815 12,045,330 Exercised (26,293 ) (1.376 ) (36,170 ) Forfeitures (1,132,457 ) (2.057 ) (2,329,267 ) Outstanding as of September 30, 2022 20,792,370 1.618 33,644,402 Granted 3,690,000 1.414 5,217,300 Exercised (1,875 ) (1.250 ) (2,344 ) Forfeitures - - - Outstanding as of December 31, 2022 24,480,495 $ 1.587 38,859,358 |
Schedule of Stock options outstanding and exercisable | Weighted Weighted Weighted Average Average Average Range of Number Remaining Life Exercise Price Number Exercise Price Exercise Prices Outstanding In Years Outstanding Exercisable Exercisable $ 0.25 230,000 1.65 $ 0.250 230,000 $ 0.250 1.10-1.25 2,903,750 2.96 1.100 1,797,813 1.100 1.28-1.67 16,010,745 4.03 1.479 2,008,938 1.407 1.79-3.67 5,336,000 3.82 2.234 1,185,688 2.150 24,480,495 3.84 $ 1.587 5,222,439 $ 1.466 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
SEGMENT REPORTING | |
Schedule of Segment reporting | Segment Operating Segment Segment Revenue Profit (Loss) Assets Three Months Ended December 31, 2022 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (3,648 ) $ 10,710 Particle, Inc. technology - - - Digital asset sales - - - Total segments $ - $ (3,648 ) $ 10,710 Three Months Ended December 31, 2021 Development of the Bio-RFID™” and “ChromaID™” technologies $ - $ (2,087 ) $ 11,755 Particle, Inc. technology - (15 ) 5 Digital asset sales 4,351 1,233 3,125 Total segments $ 4,351 $ (869 ) $ 14,885 |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | 3 Months Ended | |||
Dec. 31, 2022 | Sep. 30, 2022 | Oct. 15, 2021 | Sep. 30, 2021 | |
ORGANIZATION | ||||
Authorized shares of capital stock | 205,000,000 | |||
Authorized shares of capital common stock | 200,000,000 | |||
Authorized shares of capital stock par value | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | |
Preferred stock share par value | $ 0.001 | $ 0.001 | $ 0.001 | |
Sales | $ 4,360,087 | |||
Authorized common stock increased | 200,000,000 |
LIQUIDITY AND GOING CONCERN (De
LIQUIDITY AND GOING CONCERN (Details Narrative) - USD ($) $ / shares in Units, shares in Millions | 3 Months Ended | ||
Jul. 29, 2022 | Dec. 31, 2022 | Sep. 30, 2022 | |
Cash and cash equivalents | $ 9,680,272 | ||
Net working capital | 8,277,336 | ||
Accumulated deficit | (105,220,597) | $ (101,397,738) | |
Proceeds of warrants currently outstanding | $ 7,424,679 | ||
31 December,2023 [Member] | |||
New offering of shares of its common stock | 4,140,000 | ||
Offering price | $ 2 | ||
Gross proceed from public issue stock | $ 8,280,000 | ||
Net proceed from deducting issue stock | $ 15,681,788 |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) | 3 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
FDIC insurance | $ 250,000 | ||
Research and development expense | 1,743,051 | $ 885,752 | |
Advertising and marketing costs | 51,084 | 294,391 | |
Money market accounts | $ 9,024,335 | $ 11,821,931 | |
Common stock shares issued | 48,207,937 | 18,423,245 | 48,156,062 |
Common stock shares outstanding | 24,480,495 | ||
Additional common shares reserved | 16,124,764 | ||
Issuable upon conversion of convertible debentures | 2,255,066 | 16,464,066 | |
Common shares current price per share | $ 1.420 | ||
Leasehold Improvements | |||
Estimated useful lives of assets | 5 years | ||
Minimum | |||
Estimated useful lives of assets | 2 years | ||
Maximum | |||
Estimated useful lives of assets | 5 years | ||
Transaction 1 | |||
Common stock shares | 9,020,264 | 9,020,264 | |
Common shares current price per share | $ 0.25 | $ 0.25 | |
Transaction 2 | |||
Common stock shares | 7,104,500 | ||
Common shares current price per share | $ 2 | ||
Convertible Preferred Stock | |||
Antidilutive securities | 8,108,356 | 8,108,356 | |
Warrants | |||
Antidilutive securities | 21,736,313 | 21,654,013 | |
Stock Option 1 | |||
Unearned stock option grants | 9,704,620 | 11,775,745 |
ARTIFICIAL INTELLIGENCE (AI) _2
ARTIFICIAL INTELLIGENCE (AI) DEEP LEARNING PLATFORM (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Sep. 30, 2022 | |
Accrued expenses | $ 464,830 | $ 462,940 |
Technology Equipment [Member] | ||
Amount total | 3,430,438 | |
Revenue Digital Asset Sales | 4,360,087 | |
Accrued expenses | $ 343,878 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
PROPERTY AND EQUIPMENT | ||
Machinery and equipment (2-3 years) | $ 1,521,110 | $ 1,510,265 |
Leasehold improvements (5 years) | 3,612 | 3,612 |
Furniture and fixtures (5 years) | 26,855 | 26,855 |
Less: accumulated depreciation | (780,914) | (677,755) |
Property and equipment, net | $ 770,663 | $ 862,977 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Depreciation expense | $ 103,160 | $ 41,672 |
Research And Development And Sellings General And Administrative [Mmber] | ||
Depreciation expense | $ 98,002 |
LEASES (Details)
LEASES (Details) | Dec. 31, 2022 USD ($) |
LEASES | |
2023 | $ 143,828 |
2024 | 127,232 |
Total Remaining Payments | 271,060 |
Imputed interest | (14,277) |
Total lease liability | $ 256,783 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 3 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
LEASES | |||
Lease cost | $ 81,599 | $ 40,629 | |
Right-of-use assets | 244,000 | $ 288,000 | |
Total lease liability | $ 257,000 | $ 302,000 | |
Weighted-average remaining lease term | 15 years | ||
Weighted-average discount rate | 7% |
CONVERTIBLE NOTES PAYABLE AND_3
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
less conversions of notes | $ 0 | $ (14,209,000) |
Convertible notes, net | 2,255,066 | 2,255,066 |
Convertibles Note - Clayton A. Struve | ||
Convertible notes, gross | 1,071,000 | 1,071,000 |
Convertibles Note - Ronald P. Erickson and Affiliates | ||
Convertible notes, gross | 1,184,066 | 1,184,066 |
2021 Convertibles notes | ||
Convertible notes, gross | $ 0 | $ 14,209,000 |
CONVERTIBLE NOTES PAYABLE AND_4
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details Narrative) - USD ($) | 3 Months Ended | ||
Dec. 31, 2022 | Sep. 30, 2022 | Mar. 16, 2018 | |
Expensed | $ 12,975 | ||
Accrued interest | 88,452 | $ 86,562 | |
Convertible Note - Ronald P. Erickson and Affiliates | |||
Warrant to purchase common stock shares | 1,039,666 | ||
Exercise price of warrants | $ 0.50 | ||
Convertible Note - Clayton A. Struve | |||
Accrued interest amount | 305,197 | $ 287,290 | |
Convertible promissory or OID notes | $ 1,071,000 | ||
Convertible Note - J3E2A2Z Notes | |||
Convertible redeemable promissory note amount | $ 664,233 | ||
Convertible redeemable promissory note principal amount | 664,233 | ||
Convertible Note - J3E2A2Z Account Payable | |||
Convertible redeemable promissory note amount | 519,833 | ||
Convertible redeemable promissory note principal amount | $ 519,833 |
EQUITY (Details)
EQUITY (Details) | 3 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Warrant Three [Member] | |
Number of warrant shares | shares | 1,785,715 |
Issue date | Aug. 04, 2016 |
Original Expiration Date | Aug. 04, 2024 |
Amended Expiration Date | Aug. 04, 2025 |
Exercise price | $ / shares | $ 0.25 |
Warrant Four [Member] | |
Number of warrant shares | shares | 1,344,000 |
Issue date | Feb. 28, 2018 |
Original Expiration Date | Feb. 28, 2024 |
Amended Expiration Date | Feb. 28, 2025 |
Exercise price | $ / shares | $ 0.25 |
Warrant One [Member] | |
Number of warrant shares | shares | 1,440,000 |
Issue date | Aug. 14, 2017 |
Original Expiration Date | Aug. 13, 2024 |
Amended Expiration Date | Aug. 13, 2025 |
Exercise price | $ / shares | $ 0.25 |
Warrant Two [Member] | |
Number of warrant shares | shares | 1,200,000 |
Issue date | Dec. 12, 2017 |
Original Expiration Date | Dec. 11, 2024 |
Amended Expiration Date | Dec. 11, 2025 |
Exercise price | $ / shares | $ 0.25 |
EQUITY (Details 1)
EQUITY (Details 1) - $ / shares | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Shares | |||
Share Outstanding at beginning of period | 21,736,313 | 22,564,255 | |
Exercised | (50,000) | ||
Expired | (122,018) | ||
Outstanding at end of period | 21,736,313 | ||
Exercisable at end of period | 21,736,313 | ||
Weighted Average Exercise Price: | |||
Outstanding at begin of period | $ 1.029 | $ 0.998 | |
Weighted Average Exercise Price Issued | 1.414 | 1.815 | $ 1.766 |
Weighted Average Exercise Price Exercised | (0.250) | ||
Weighted Average Exercise Price Forfeited | 0 | ||
Weighted Average Exercise PriceExpired | $ (1.031) | ||
Outstanding at end of period | $ 1.029 |
EQUITY (Details 2)
EQUITY (Details 2) | 3 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Warrant Three [Member] | |
Number of warrants | shares | 4,694,725 |
Weighted average remaining life (years) | 3 years 4 months 9 days |
Weighted average exercise price, outstanding | $ 3 |
Shares exercisable | shares | 4,694,725 |
Weighted average exercise price, exercisable | $ 3 |
Warrant Three [Member] | Minimum | |
Weighted average exercise price, outstanding | 2 |
Weighted average exercise price, exercisable | $ 2 |
Warrant Four [Member] | |
Number of warrants | shares | 10,000 |
Weighted average remaining life (years) | 6 months |
Weighted average exercise price, outstanding | $ 4.080 |
Shares exercisable | shares | 10,000 |
Weighted average exercise price, exercisable | $ 4.080 |
Warrant One [Member] | |
Number of warrants | shares | 10,519,381 |
Weighted average remaining life (years) | 1 year 8 months 26 days |
Weighted average exercise price, outstanding | $ 0.250 |
Shares exercisable | shares | 10,519,381 |
Weighted average exercise price, exercisable | $ 0.250 |
Warrant Two [Member] | |
Number of warrants | shares | 6,512,207 |
Weighted average remaining life (years) | 2 years 1 month 17 days |
Weighted average exercise price, outstanding | $ 1.85 |
Shares exercisable | shares | 6,512,207 |
Weighted average exercise price, exercisable | $ 1.85 |
Warrant Two [Member] | Minimum | |
Weighted average exercise price, outstanding | 1.20 |
Weighted average exercise price, exercisable | 1.20 |
Warrant Two [Member] | Maximum | |
Weighted average exercise price, outstanding | 1.85 |
Weighted average exercise price, exercisable | $ 1.85 |
Warrent Five [Member] | |
Number of warrants | shares | 21,736,313 |
Weighted average remaining life (years) | 2 years 8 months 12 days |
Weighted average exercise price, outstanding | $ 1.031 |
Shares exercisable | shares | 21,736,313 |
Weighted average exercise price, exercisable | $ 1.031 |
EQUITY (Details 3)
EQUITY (Details 3) | 3 Months Ended |
Dec. 31, 2022 | |
EQUITY | |
Dividend yield | 0% |
Expected life minimum | 3 years |
Expected life Maximum | 5 years |
Expected volatility | 104% |
Risk free interest rate | 2.96% |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | 3 Months Ended | |||||
Jan. 05, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | Oct. 15, 2021 | Sep. 30, 2021 | |
No of share convertibae common stock | $ 50,000 | |||||
warrants and received | 12,500 | |||||
Intrinsic value | 16,806,047 | |||||
Money warrants | $ 21,736,313 | |||||
Warrant issued to common stock | 50,000 | |||||
Warrants expiration period | Jan. 05, 2027 | |||||
Shrare issued warrant to purchased | 10,074,381 | |||||
Interest expenses | $ 194,019 | |||||
Authorized shares of capital stock par value | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||
Preferred stock share par value | $ 0.001 | $ 0.001 | $ 0.001 | |||
Preferred stock shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | |||
Interest expenses | $ 227,170 | $ 4,486,960 | ||||
Common stock share issued | 48,207,937 | 18,423,245 | 48,156,062 | |||
Common stock shares authorized | 200,000,000 | 200,000,000 | ||||
Director And Consultants Member | ||||||
Share issued price | $ 2 | |||||
Common Preferred Stock [Member] | ||||||
Proceeds from issuance of common stock | $ 1,875 | |||||
Exercise of stock option | 2,343 | |||||
Authorized Capital Stock [Member] | ||||||
Authorized shares of capital stock par value | $ 0.001 | |||||
Preferred stock share par value | $ 0.001 | |||||
Preferred stock shares authorized | 5,000,000 | |||||
Common stock share issued | 200,000,000 | |||||
Common stock shares authorized | 205,000,000 | |||||
Common shares | 1,785,715 | |||||
Conversion of convertible debentures | $ 2,255,066 | |||||
Convertible preferred stock | 1,016,014 | |||||
Series F preferred stock | 500 | |||||
Convertible Preferred Stock Series C [Member] | ||||||
Share issued price | $ 0.25 | |||||
Stock at 0.25 | ||||||
Share issued price | $ 0.25 | |||||
Warrants totaling | $ 4,424,425 | |||||
Stock at 2.00 | ||||||
Warrants totaling | $ 4,439,707 | |||||
Three Director [Member] | ||||||
Shrare issued warrant to purchased price | $ 2.40 | |||||
Warrants to Purchase Common Stock [Member] | ||||||
Interest expenses | $ 194,019 | |||||
Common Stock Shares issued | 104,634 |
STOCK INCENTIVE PLANS (Details)
STOCK INCENTIVE PLANS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Outstanding at begin of period | $ 1.618 | $ 1.565 | $ 1.161 |
Weighted Average Exercise Price Granted | 1.414 | 1.815 | 1.766 |
Weighted Average Exercise Price Exercised | (1.250) | (1.376) | (1.359) |
Weighted Average Exercise Price Forfeitures | 0 | (2.057) | (3.300) |
Outstanding at end of period | $ 1.587 | $ 1.618 | $ 1.565 |
Aggregate Intrinsic Value | |||
Aggregate Outstanding at beginning of period | $ 33,644,402 | $ 23,964,509 | $ 5,580,550 |
Granted | 5,217,300 | 12,045,330 | 18,807,990 |
Exercised | (2,344) | (36,170) | (28,031) |
Forfeitures | 0 | 2,329,267 | 396,000 |
Aggregate Outstanding at end of period | $ 38,859,358 | $ 33,644,402 | $ 23,964,509 |
Exercised | (50,000) | ||
Stock Option | |||
Aggregate Intrinsic Value | |||
Share Outstanding at beginning of period | 20,792,370 | 15,315,120 | 4,805,000 |
Shares Granted | (3,690,000) | (6,636,000) | (10,650,745) |
Exercised | (1,875) | (26,293) | (20,625) |
Shares Forfeitures | 0 | (1,132,457) | (120,000) |
Share Outstanding at ending of period | 24,480,495 | 20,792,370 | 15,315,120 |
STOCK INCENTIVE PLANS (Details
STOCK INCENTIVE PLANS (Details 1) | 3 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Employee Stock Options One [Member] | |
Number of outstanding stock options | shares | 24,480,495 |
Weighted average remaining life (years) | 3 years 10 months 2 days |
Weighted average exercise price outstanding | $ 1.587 |
Weighted average exercise price exerciseable | $ 1.466 |
Number exercisable | shares | 5,222,439 |
Stock Option 3 | |
Number of outstanding stock options | shares | 16,010,745 |
Weighted average remaining life (years) | 4 years 10 days |
Weighted average exercise price outstanding | $ 1.479 |
Weighted average exercise price exerciseable | $ 1.407 |
Number exercisable | shares | 2,008,938 |
Stock Option 4 | |
Number of outstanding stock options | shares | 5,336,000 |
Weighted average remaining life (years) | 3 years 9 months 25 days |
Weighted average exercise price outstanding | $ 2.234 |
Weighted average exercise price exerciseable | $ 2.150 |
Number exercisable | shares | 1,185,688 |
Minimum | Stock Option 2 | |
Range of exercise prices | $ 1.10 |
Minimum | Stock Option 3 | |
Range of exercise prices | 1.28 |
Minimum | Stock Option 4 | |
Range of exercise prices | 1.79 |
Maximum | Stock Option 2 | |
Range of exercise prices | 1.25 |
Maximum | Stock Option 3 | |
Range of exercise prices | 1.67 |
Maximum | Stock Option 4 | |
Range of exercise prices | 3.67 |
Stock Options 1 | |
Range of exercise prices | $ 0.25 |
Number of outstanding stock options | shares | 230,000 |
Weighted average remaining life (years) | 1 year 7 months 24 days |
Weighted average exercise price outstanding | $ 0.250 |
Weighted average exercise price exerciseable | $ 0.250 |
Number exercisable | shares | 230,000 |
Stock Options 2 | |
Number of outstanding stock options | shares | 2,903,750 |
Weighted average remaining life (years) | 2 years 11 months 15 days |
Weighted average exercise price outstanding | $ 1.100 |
Weighted average exercise price exerciseable | $ 1.100 |
Number exercisable | shares | 1,797,813 |
STOCK INCENTIVE PLANS (Detail_2
STOCK INCENTIVE PLANS (Details Narrative) - USD ($) | 3 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Jan. 01, 2022 | Oct. 15, 2021 | |
Compensation expense | $ 744,640 | $ 204,170 | ||
Unrecognized compensation costs | 11,532,729 | |||
Intrinsic value | $ 3,693,865 | |||
Exercise stock option grants | 24,480,495 | |||
Exercise price | $ 1.420 | |||
Unearned stock option grants | 1,440,000 | |||
Warrant issued to common stock | 50,000 | |||
2021 Equity Incentive Plan | ||||
Unearned stock option grants | 9,704,620 | |||
Average exercise price | $ 1.587 | |||
Number of outstanding stock options | 20,000,000 | |||
Number of common stock shares increase | 22,000,000 | |||
Stock Option | Nineteen Employees And Consultants [Member] | ||||
Period for recognition | 4 years | |||
Stock Option | An Employee [Member] | ||||
Period for recognition | 3 years 10 months 2 days | |||
Ronald P. Erickson [Member] | ||||
Exercise price | $ 1.41 | |||
Period for recognition | 5 years | |||
Warrant issued to common stock | 1,000,000 | |||
Phillip A. Bosua [Member] | ||||
Exercise price | $ 1.41 | |||
Period for recognition | 4 years | |||
Warrant issued to common stock | 1,250,000 | |||
Peter Conley [Member] | ||||
Exercise price | $ 1.48 | |||
Period for recognition | 4 years | |||
Warrant issued to common stock | 1,000,000 |
OTHER SIGNIFICANT TRANSACTION_2
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 14, 2022 | Dec. 31, 2022 | |
Executive Officers And Director Member | ||
Common Stock Shares issued | 30,000 | |
Ronald P. Erickson [Member] | ||
No of share granted for stock option | 1,000,000 | |
Share exercise price | $ 1.41 | |
Salaries & Vacation Pay | $ 40,385 | |
Phillip A. Bosua [Member] | ||
Share exercise price | $ 1.41 | |
Rent | $ 21,000 | |
Purchase of common stock | 1,250,000 |
COMMITMENTS, CONTINGENCIES AN_2
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS (Details narrative) - USD ($) | 1 Months Ended | |||||
Apr. 13, 2017 | Nov. 22, 2022 | Sep. 28, 2022 | Sep. 22, 2022 | Oct. 11, 2021 | May 18, 2021 | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | ||||||
Leases, net monthly payment | $ 3,334 | $ 2,250 | $ 7,000 | $ 5,000 | $ 8,697 | |
Extended lease, amount | $ 2,986 | |||||
Lease description | The monthly payment increases approximately 3% each year and the lease expired on May 31, 2022. | The lease expires September 30, 2023 and can be extended on a month to month basis | increases by 3% annually. The lease expires on June 30, 2024. The lease can be extended for one additional three year term. | |||
Rent paid | $ 21,000 | $ 91,500 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenue | $ 0 | $ 4,351,000 |
Segment Operating Profit (Loss) | (3,648,000) | (869,000) |
Segment assets | 10,710,000 | 14,885,000 |
Development of the Bio-RFID and ChromaID Technologies | ||
Revenue | 0 | 0 |
Segment Operating Profit (Loss) | (3,648,000) | (2,087,000) |
Segment assets | 10,710,000 | 11,755,000 |
Particle, Inc. Technology | ||
Revenue | 0 | 0 |
Segment Operating Profit (Loss) | 0 | (15,000) |
Segment assets | 0 | 5,000 |
Digital asset sales [Member] | ||
Revenue | 0 | 4,351,000 |
Segment Operating Profit (Loss) | 0 | 1,233,000 |
Segment assets | $ 0 | $ 3,125,000 |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SEGMENT REPORTING | ||
Non-cash expenses | $ 846,472 | $ 244,061 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | 1 Months Ended | ||
Jan. 23, 2023 | Nov. 22, 2022 | Sep. 28, 2022 | |
Monthly payment to party | $ 21,000 | $ 91,500 | |
Subsequent Event [Member] | |||
Monthly payment to party | $ 10,000 | ||
Stock option grants | 7,384,795 | ||
Subsequent Event [Member] | Philip A. Bosua[Member] | |||
Payroll taxes | $ 400,000 | ||
Consulting fee | $ 10,000 |