Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2020 | Aug. 14, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | Carrier EQ, LLC | |
Entity Central Index Key | 0001766352 | |
Document Type | 10-Q/A | |
Amendment Description | CarrierEQ, LLC d/b/a Airfox (the “Company”) is filing this Form 10-Q/A (“Form 10-Q/A”) to amend our Quarterly Report on Form 10-Q for the three and nine months ended June 30, 2020, originally filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2020 (“Original Report”), to restate our financial statements and related footnote disclosures for the period from October 1, 2019 through June 30, 2020 (the “Affected Period”). This Form 10-Q/A also amends certain other Items in the Original Report, as listed in “Items Amended in this Form 10-Q/A” below. The correction involves only non-cash adjustments. | |
Document Period End Date | Jun. 30, 2020 | |
Amendment Flag | true | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Is Entity Emerging Growth Company? | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 0 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Name | DE | |
Entity File Number | 000-56037 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2020 | Sep. 30, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 1,921,263 | $ 5,451,348 |
Restricted cash | 824,746 | |
Short-term investments | 100,576 | |
Accounts receivable, net of allowance for doubtful accounts of $0 at June 30, 2020 and September 30, 2019 | 109,000 | 15,836 |
Prepaid expenses and other current assets | 1,010,287 | 819,358 |
Digital assets | 1,392 | |
Total current assets | 3,865,296 | 6,388,510 |
Non-current assets: | ||
Intangibles, net | 3,885,879 | 1,773,312 |
Property and equipment, net | 3,326 | 1,077 |
Security deposits | 334,413 | 1,548,396 |
Operating lease right of use assets | 2,061,756 | |
Due from related party | 8,090 | |
Total non-current assets | 6,293,464 | 3,322,785 |
Total assets | 10,158,760 | 9,711,295 |
Current liabilities: | ||
Accounts payable | 144,919 | 821,612 |
Accrued liabilities | 1,708,876 | 1,385,095 |
Other deferred revenue, current portion | 48,416 | 237,111 |
Deferred revenue - AirToken Project, current portion | 5,011,926 | |
AirToken refund liability | 14,449 | 3,241,948 |
Operating lease liability, current portion | 382,416 | |
Deferred gain on issuance of AirTokens for services, current portion | 158,713 | |
Due to related party | 48,122 | |
Total current liabilities | 2,347,198 | 10,856,405 |
Long-term liabilities: | ||
Simple agreement for future equity | 239,899 | |
Convertible note payable - long-term portion | 10,000,000 | |
Deferred revenue - Mastercard Program Agreement | 11,962,899 | |
Deferred gain on issuance of AirTokens for services, net of current portion | 396,790 | 238,077 |
Operating lease liability, net of current portion | 1,835,238 | |
Deferred revenue - AirToken Project, net of current portion | 12,529,824 | 7,517,898 |
Deferred revenue, net of current portion | 108,935 | |
Total liabilities | 29,180,884 | 28,852,279 |
Commitments and contingencies (Note 17) | ||
Stockholders' deficit: | ||
Convertible Preferred stock | ||
Common stock; par value $0.00001; 0 shares authorized; 0 shares issued and outstanding as of June 30, 2020; 70,000,000 shares authorized; 7,728,821 shares issued and 6,813,928 shares outstanding as of September 30, 2019 | 78 | |
Treasury stock, at cost, 0 shares as of June 30, 2020 and 914,893 shares as of September 30, 2019 | (240,005) | |
Additional paid in capital | 2,014,658 | |
Accumulated deficit | (21,025,864) | |
Accumulated other comprehensive income | 110,363 | |
Total stockholders' deficit attributable to CarrierEQ, Inc. stockholders | (19,140,732) | |
Non-controlling interest in subsidiary | (252) | |
Total stockholders' deficit | (19,140,984) | |
Carrier EQ, LLC member's deficit: | ||
Member's deficit; 1,227,635 limited liability company units outstanding as of June 30, 2020; 0 units outstanding as of September 30, 2019 | (20,250,688) | |
Accumulated other comprehensive income | 1,229,277 | |
Total member's deficit attributable to Carrier EQ, LLC members | (19,021,411) | |
Non-controlling interest in subsidiary | (713) | |
Total member's deficit | (19,022,124) | |
Total liabilities and member's deficit and stockholders' deficit | 10,158,760 | 9,711,295 |
Convertible Preferred Stock Series One [Member] | ||
Stockholders' deficit: | ||
Convertible Preferred stock | 27 | |
Convertible Preferred Stock Series One A [Member] | ||
Stockholders' deficit: | ||
Convertible Preferred stock | $ 11 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2020 | Sep. 30, 2019 |
Allowance for doubtful accounts | $ 0 | $ 0 |
Common stock, par value | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 0 | 70,000,000 |
Common stock, shares issued | 0 | 7,728,821 |
Common stock, shares outstanding | 0 | 6,813,928 |
Treasury stock shares | 0 | 914,893 |
Units outstanding | 1,227,635 | 0 |
Convertible Preferred Stock Series One [Member] | ||
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 0 | 2,678,861 |
Preferred stock, share issued | 0 | 2,652,072 |
Preferred stock, shares outstanding | 0 | 2,652,072 |
Convertible Preferred Stock Series One A [Member] | ||
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 0 | 1,046,147 |
Preferred stock, share issued | 0 | 1,046,147 |
Preferred stock, shares outstanding | 0 | 1,046,147 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenue | $ 34,576 | $ 1,393 | $ 58,407 | $ 1,641 |
Operating expenses: | ||||
Cost of revenue | 114,839 | 114,839 | ||
Selling, general and administrative | 6,212,797 | 2,761,818 | 16,989,307 | 6,318,270 |
Impairment of digital assets | 1,079 | |||
Total operating expenses | 6,327,636 | 2,761,818 | 17,104,146 | 6,319,349 |
Loss from operations | (6,293,060) | (2,760,425) | (17,045,739) | (6,317,708) |
Other income: (expense): | ||||
Realized loss on sale of digital assets | (1,392) | (90,940) | ||
Gain on AirToken issuance for services | 175,717 | 527,152 | ||
Interest income, net | 122,861 | 6,895 | 150,015 | 28,371 |
Other income, net | 122,861 | 182,612 | 148,623 | 464,583 |
Loss before income taxes | (6,170,199) | (2,577,813) | (16,897,116) | (5,853,125) |
Income tax benefit (expense) | 47,620 | (314) | 129,661 | (942) |
Net loss | (6,122,579) | (2,578,127) | (16,767,455) | (5,854,067) |
Net (loss) income attributable to non-controlling interest | (44) | 55 | 461 | 80 |
Net loss attributable to Carrier EQ, LLC. | (6,122,623) | (2,578,072) | (16,766,994) | (5,853,987) |
Other comprehensive income | ||||
Foreign currency translation adjustment | 120,645 | 10,063 | 1,118,914 | 5,488 |
Total comprehensive loss | $ (6,001,978) | $ (2,568,009) | $ (15,648,080) | $ (5,848,499) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF MEMBER'S DEFICIT AND STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) | Preferred Stock Series One [Member] | Preferred Stock Series One A [Member] | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Noncontrolling Interest [Member] | Accumulated Deficit [Member] | Carrier EQ LLC Accumulated Other Comprehensive Income [Member] | Carrier EQ LLC Member's Deficit [Member] | Carrier EQ LLC Noncontrolling Interest [Member] | Total |
Balance at Sep. 30, 2018 | $ 27 | $ 11 | $ 76 | $ (240,005) | $ 1,884,566 | $ (302) | $ (2) | $ (11,001,067) | $ (9,356,696) | |||
Balance SHARES at Sep. 30, 2018 | 2,652,072 | 1,046,147 | 6,745,595 | 914,893 | ||||||||
Options exercised | $ 1 | 2,999 | 3,000 | |||||||||
Options exercised shares | 33,333 | |||||||||||
Stock based compensation | 23,618 | 23,618 | ||||||||||
Non-controlling interest | (5) | (5) | ||||||||||
Net loss | (1,111,958) | (1,111,958) | ||||||||||
Foreign currency translation adjustment | 9,763 | 9,763 | ||||||||||
Balance at Dec. 31, 2018 | $ 27 | $ 11 | $ 77 | $ (240,005) | 1,911,183 | 9,461 | (7) | (12,113,025) | (10,432,278) | |||
Balance SHARES at Dec. 31, 2018 | 2,652,072 | 1,046,147 | 6,778,928 | 914,893 | ||||||||
Balance at Sep. 30, 2018 | $ 27 | $ 11 | $ 76 | $ (240,005) | 1,884,566 | (302) | (2) | (11,001,067) | (9,356,696) | |||
Balance SHARES at Sep. 30, 2018 | 2,652,072 | 1,046,147 | 6,745,595 | 914,893 | ||||||||
Non-controlling interest | (80) | |||||||||||
Net loss | (5,853,987) | |||||||||||
Foreign currency translation adjustment | 5,488 | |||||||||||
Balance at Jun. 30, 2019 | $ 27 | $ 11 | $ 78 | $ (240,005) | 1,984,853 | 5,186 | (82) | (16,855,054) | (15,104,986) | |||
Balance SHARES at Jun. 30, 2019 | 2,652,072 | 1,046,147 | 6,813,928 | 914,893 | ||||||||
Balance at Dec. 31, 2018 | $ 27 | $ 11 | $ 77 | $ (240,005) | 1,911,183 | 9,461 | (7) | (12,113,025) | (10,432,278) | |||
Balance SHARES at Dec. 31, 2018 | 2,652,072 | 1,046,147 | 6,778,928 | 914,893 | ||||||||
Stock based compensation | 21,995 | 21,995 | ||||||||||
Non-controlling interest | (20) | (20) | ||||||||||
Net loss | (2,163,957) | (2,163,957) | ||||||||||
Foreign currency translation adjustment | (14,338) | (14,338) | ||||||||||
Balance at Mar. 31, 2019 | $ 27 | $ 11 | $ 77 | $ (240,005) | 1,933,178 | (4,877) | (27) | (14,276,982) | (12,588,598) | |||
Balance SHARES at Mar. 31, 2019 | 2,652,072 | 1,046,147 | 6,778,928 | 914,893 | ||||||||
Stock based compensation | 28,925 | 28,925 | ||||||||||
Common stock issued in exchange for services | $ 1 | 22,750 | 22,751 | |||||||||
Common stock issued in exchange for services shares | 35,000 | |||||||||||
Non-controlling interest | (55) | (55) | ||||||||||
Net loss | (2,578,072) | (2,578,072) | ||||||||||
Foreign currency translation adjustment | 10,063 | 10,063 | ||||||||||
Balance at Jun. 30, 2019 | $ 27 | $ 11 | $ 78 | $ (240,005) | 1,984,853 | 5,186 | (82) | (16,855,054) | (15,104,986) | |||
Balance SHARES at Jun. 30, 2019 | 2,652,072 | 1,046,147 | 6,813,928 | 914,893 | ||||||||
Balance at Sep. 30, 2019 | $ 27 | $ 11 | $ 78 | $ (240,005) | 2,014,658 | 110,363 | (252) | (21,025,864) | (19,140,984) | |||
Balance SHARES at Sep. 30, 2019 | 2,652,072 | 1,046,147 | 6,813,928 | 914,893 | ||||||||
Options exercised | $ 1 | 33,922 | 33,923 | |||||||||
Options exercised shares | 122,510 | |||||||||||
Stock based compensation | 42,588 | 42,588 | ||||||||||
Non-controlling interest | (248) | (248) | ||||||||||
Net loss | (5,191,690) | (5,191,690) | ||||||||||
Foreign currency translation adjustment | (101,576) | (101,576) | ||||||||||
Balance at Dec. 31, 2019 | $ 27 | $ 11 | $ 79 | $ (240,005) | 2,091,168 | 8,787 | (500) | (26,217,554) | (24,357,987) | |||
Balance SHARES at Dec. 31, 2019 | 2,652,072 | 1,046,147 | 6,936,438 | 914,893 | ||||||||
Balance at Sep. 30, 2019 | $ 27 | $ 11 | $ 78 | $ (240,005) | 2,014,658 | 110,363 | (252) | (21,025,864) | $ (19,140,984) | |||
Balance SHARES at Sep. 30, 2019 | 2,652,072 | 1,046,147 | 6,813,928 | 914,893 | ||||||||
Options exercised shares | 939,141 | |||||||||||
Non-controlling interest | $ (461) | |||||||||||
Net loss | (16,766,994) | |||||||||||
Foreign currency translation adjustment | 1,118,914 | |||||||||||
Balance at Jun. 30, 2020 | $ 1,229,277 | $ (20,250,668) | $ (713) | (19,022,124) | ||||||||
Balance SHARES at Jun. 30, 2020 | 1,277,635 | |||||||||||
Balance at Dec. 31, 2019 | $ 27 | $ 11 | $ 79 | $ (240,005) | 2,091,168 | 8,787 | (500) | (26,217,554) | (24,357,987) | |||
Balance SHARES at Dec. 31, 2019 | 2,652,072 | 1,046,147 | 6,936,438 | 914,893 | ||||||||
Options exercised | $ 8 | 154,449 | 154,457 | |||||||||
Options exercised shares | 816,631 | |||||||||||
Stock based compensation | 168,015 | 168,015 | ||||||||||
Non-controlling interest | (257) | (257) | ||||||||||
Net loss | (5,452,681) | (5,452,681) | ||||||||||
Foreign currency translation adjustment | 1,099,845 | 1,099,845 | ||||||||||
Balance at Mar. 31, 2020 | $ 27 | $ 11 | $ 87 | $ (240,005) | 2,413,632 | 1,108,632 | (757) | (31,670,235) | (28,388,608) | |||
Balance SHARES at Mar. 31, 2020 | 2,652,072 | 1,046,147 | 7,753,069 | 914,893 | ||||||||
Non-controlling interest | 44 | 44 | ||||||||||
Net loss | (6,122,623) | (6,122,623) | ||||||||||
Foreign currency translation adjustment | 120,645 | 120,645 | ||||||||||
Convertible notes converted into common stock | $ 133 | 9,999,867 | 10,000,000 | |||||||||
Convertible notes converted into common stock shares | 13,339,510 | |||||||||||
Conversion of Preferred One and Preferred One A shares to common stock | $ (27) | $ (11) | $ 38 | |||||||||
Conversion of Preferred One and Preferred One A shares to common stock shares | (2,652,072) | (1,046,147) | 3,698,219 | |||||||||
Cancellation of common stock previously outstanding | $ (80) | 80 | ||||||||||
Cancellation of common stock previously outstanding shares | (8,003,706) | |||||||||||
Simple Agreements for Future Equity converted into common stock | $ 5 | 239,894 | 239,899 | |||||||||
Simple Agreements for Future Equity converted into common stock shares | 474,996 | |||||||||||
Stock compensation related to accelerated vesting of options | 114,979 | 114,979 | ||||||||||
Capital contribution - Via Varejo | 1,921,004 | 1,921,004 | ||||||||||
Retirement of treasury stock | $ 240,005 | (240,005) | ||||||||||
Retirement of treasury stock shares | (914,893) | |||||||||||
Issuance of common stock to Option Stockholders | $ 80 | (80) | ||||||||||
Issuance of common stock to Option Stockholders shares | 8,003,706 | |||||||||||
Capital contribution from Via Varejo for payment to Option Holders due to cancellation of stock options | 3,331,255 | 3,331,255 | ||||||||||
Payment to Option Holders due to cancellation of stock options | (238,719) | (238,719) | ||||||||||
Purchase of membership units - Carrier EQ, LLC | $ (263) | (12,289,648) | (1,108,632) | 713 | 31,670,235 | $ 1,108,632 | (19,380,324) | (713) | ||||
Purchase of membership units - Carrier EQ, LLC shares | (25,265,794) | 1,277,635 | ||||||||||
Balance at Jun. 30, 2020 | $ 1,229,277 | $ (20,250,668) | $ (713) | $ (19,022,124) | ||||||||
Balance SHARES at Jun. 30, 2020 | 1,277,635 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (16,767,455) | $ (5,854,067) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization | 569,951 | 86,090 |
Stock based compensation | 325,582 | 74,538 |
Additional stock based compensation due to cancellation of stock options | 3,092,536 | |
Common stock issued in exchange for services | 22,751 | |
Reversal of accrued interest related to conversion of convertible notes | (104,856) | |
Impairment of digital assets | 1,079 | |
Realized loss on sale of digital assets | 1,392 | 90,940 |
Gain on issuance of AirTokens for services | (527,152) | |
Changes in Assets and Liabilities: | ||
Accounts receivable | (93,164) | 256,000 |
Prepaid expenses and other current and long-term assets | 1,058,235 | (1,643,648) |
Accounts payable | (676,693) | 100,595 |
Operating lease right of use assets and liabilities | 120,717 | |
Accrued liabilities and other current liabilities | 2,200,572 | (351,254) |
Deferred revenue - Mastercard Program Agreement | 11,962,899 | |
Other deferred revenue | (188,695) | |
AirToken refund liability | (3,227,499) | |
Due to related party | 48,122 | |
Due from related party | (8,090) | |
Net cash used in operating activities | (1,686,446) | (7,744,128) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (2,249) | |
Acquisition of intangible assets | (2,682,518) | (838,641) |
Net cash used in investing activities | (2,684,767) | (838,641) |
CASH FLOWS FROM FINANCING ACTIVITY | ||
Proceeds from exercise of options | 188,380 | 3,000 |
Proceeds from convertible notes | 6,000,000 | |
Capital contribution - Via Varejo | 1,921,004 | |
Proceeds from Paycheck Protection Program SBA loan | 537,732 | |
Payment of principal from Paycheck Protection Program SBA loan | (537,732) | |
Proceeds from Via Varejo for payment to Option Holders due to cancellation of stock options | 3,331,255 | |
Payment to Option Holders due to cancellation of stock options | (3,331,255) | |
Net cash provided by financing activities | 2,109,384 | 6,003,000 |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (443,510) | |
Net decrease in cash, cash equivalents, and restricted cash | (2,705,339) | (2,579,769) |
Cash, cash equivalents, and restricted cash, beginning of period | 5,451,348 | 8,019,152 |
Cash, cash equivalents, and restricted cash, end of period | 2,746,009 | 5,439,383 |
Supplemental disclosure of non-cash transactions: | ||
Convertible debt instrument settled through issuance of common stock | (10,000,000) | |
Simple agreement for future equity settled through issuance of common stock | (239,899) | |
Lease liabilities arising from obtaining right of use assets | 2,465,218 | |
Cancellation of common stock | (80) | |
Conversion to common stock - Series One | (27) | |
Conversion to common stock - Series One A | (11) | |
Conversion of Preferred One and Preferred One A shares to common stock | 38 | |
Retirement of treasury stock | 240,005 | |
Issuance of common stock to Option Stockholders | 80 | |
Purchase of membership units - Carrier EQ, LLC | $ (263) |
Organization and Nature of Oper
Organization and Nature of Operations | 9 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Note 1 - Organization and Nature of Operations Carrier EQ, LLC., doing business as AirFox (the “Company”), was incorporated in Delaware on May 21, 2020 with a principal place of business in Boston, Massachusetts. The Company was previously formed as a corporation, CarrierEQ, Inc. and was incorporated in Delaware on January 19, 2016. On May 21, 2020, the Company filed a certificate of conversion (the “Certificate of Conversion”) to convert the Corporation to a Limited Liability Company and to change the Company’s name from “CarrierEQ Inc.” to “Carrier EQ, LLC.” The conversion and name change became effective on May 21, 2020. The Company filed a certificate of formation of CarrierEQ, LLC (the “Certificate of Formation”) on May 21, 2020. On May 21, 2020, the Company was fully acquired by Via Varejo S.A, a corporation organized under the laws of the Federative Republic of Brazil (“Via Varejo”) through Lake Niassa Empreendimentos e Participações Ltda., a limited liability company duly organized under the laws of the Federative Republic of Brazil and wholly-owned by Via Varejo (see Note 11). The Company has a 99.99% ownership interest in banQi Instituição de Pagamento Ltda (formerly known as Airfox Servicos E Intermediacoes LTDA) (“Airfox Brazil”), a limited liability company organized under the laws of the Federative Republic of Brazil, and a 100% ownership interest in AirToken GmbH, a Swiss GmbH. Airfox USA, Airfox Brazil and Airtoken GmbH are collectively referred to herein, as the “Company.” On April 6, 2020, Airtoken GmbH was dissolved. Beginning in February 2017, the Company began exploring consumer applications of its legacy prepaid mobile applications. The Company initiated a business plan to introduce a mobile application that would allow users to earn digital tokens, exchange them for free or discounted mobile data and, ultimately, other goods and services in South America as part of a new international business and ecosystem (the “AirToken Project”). The AirToken Project included the issuance of digital tokens (“AirToken(s)”). The AirToken is an ERC-20 token issued on the Ethereum blockchain. The Company obtained Ether and Bitcoin (collectively referred therein as the “Digital Assets”), in August 2017 through early October 2017 from those interested in obtaining AirTokens. The Company raised approximately $15.4 million for the purpose of developing the AirToken Project. The Company’s business is evolving to focus on providing unbanked and financially underserved individuals in emerging markets mobile access to financial services. The Company is developing a software technology platform initially consisting of two applications, a digital wallet application and an alternative credit scoring and lending application. The Company’s software technology platform is designed and built as a Software as Service (or SaaS) offering. The Company expects to generate revenue from these applications from fixed recurring fees, transaction fees, third party fees and interest income. The Company’s initial markets are the cash and unbanked markets in Brazil. The Company’s digital wallet application, branded as banQi, is a digital banking application capable of leveraging machine learning capabilities to build alternative, smartphone-based credit risk models. banQi available on Android and iOS, aims to eliminate the need for traditional financial institutions allowing those without bank accounts or credit cards to more easily and quickly make many everyday transactions using a smartphone. It will also enable to create an alternative credit scoring system for its users for use in connection with the Company’s alternative credit scoring and lending application. The alternative credit scoring and lending application is designed to be a blockchain-based, peer-to-peer lending application that will enable anyone from around the world to provide capital for a microloan to a diversified cohort of borrowers. This technology is expected to harness the decentralized power of the Ethereum blockchain to create a digital ledger of the user’s behavioral and transactional data to fund a new financial asset class from a global pool of lenders seeking to make socially impactful microloans. |
Financial Condition and Managem
Financial Condition and Management's Plans | 9 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Financial Condition and Management's Plans | Note 2- Financial Condition and Management’s Plans The Company has experienced recurring losses and negative cash flow from operations. At June 30, 2020, the Company had cash and cash equivalents of $1.9 million, a working capital of $1.5 million, and total member’s deficit of $19.0 million. The Company is obligated to refund the remaining amount of claims related to the AirToken Project when valid claims are finalized. As of June 30, 2020, the amount that was not paid was approximately $44 thousand (comprised of amounts recorded in AirToken refund liability and amounts in accounts payable). Additionally, the Company may be subject to other legal liabilities (see Note 17). The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. The Company believes that its ability to continue operations depends on its ability to generate revenues and obtain funding that will be sufficient to sustain its operations until it rolls out its core product offerings and achieve profitability and positive cash flows from operating activities. The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results. The consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. The Company’s management has taken several actions in an effort to secure funding and generate revenue streams including: 1. Entering into a Services Agreement and related convertible notes agreements with Via Varejo (See Note 11 to the consolidated financial statements) whereby the Company has received $10,000,000 by issuing convertible notes in connection with the Company’s software design and development services provided to Via Varejo. The Company has received $10,256,000 in cash and issued convertible notes totaling $10,000,000 which were converted into common stock on May 21, 2020 (See Note 11). 2. Pursuing opportunities to enter into service agreements with insurance companies, travel companies, and other service companies, to use the Company platform as a source of distribution of their products. 3. Entering into a Program Agreement on June 12, 2019 by and among (i) Airfox Brazil (ii) Via Varejo, and (iii) Mastercard Brasil, whereby on December 16, 2019 the Company received an incentive prepayment totaling R$65,000,000 (approximately $15,973,857 in December 2019) (See Note 5). 4. Entering into a Loan Agreement with Via Varejo (the “Lender”) on October 31, 2019 whereby the Company borrowed R$10,000,000 (approximately $2.5 million USD) from Via Varejo. Principal plus interest is payable at the maturity date and matures 181 days from the date the Loan Agreement was executed. The loan was repaid in full on December 17, 2019 in the amount of R$10,167,740 (approximately $2.5 million USD). In addition to the actions above, the Company is evaluating diversifying its revenue streams, raising additional capital, and considering other actions that may yield additional funding. Further, the Company’s management can implement expense reductions, as necessary. While the risks related to generating revenues or obtaining funding to continue operations have been significantly reduced since the Company transaction on May 21, 2020, the Company has no contractual right to funding from its parent company and there is no assurance that the Company will be successful in obtaining funding from other sources or in generating revenues sufficient to fund operations. In the event the Company is unable to raise additional debt or equity financing, it may: 1. have to cease operations, in which case the Company may file a petition for bankruptcy in U.S. Bankruptcy Court under Chapter 7, whereby a trustee will be appointed to assets, and the money will be used to pay off debts in order of their priority 2. file a petition for bankruptcy in U.S. Bankruptcy Court under Chapter 11 to restructure the Company’s debt, including the Company’s debt to AirToken holders seeking refund claims. The priority of an AirToken holder seeking a refund claim, should be equal to all of the Company’s other unsecured creditors. The reorganization plan will spell out rights of and what such investors can expect to receive, if anything, from the Company. COVID-19 Risks, Impacts and Uncertainties On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 Outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally. In Brazil, on March 20, 2020, the Governor of Sao Paulo declared a State of Public Calamity. On March 21, financial hub . Governor of Massachusetts declared a State of Emergency, and on March 23, 2020 the Governor issued an order requiring that all businesses and organizations that do not provide “COVID-19 Essential Services” close their physical workplaces and facilities to workers, customers and the public. The Governor’s order was extended to May 15, 2020 COVID-19 Outbreak The Company is subject to the risks arising from the COVID-19 Outbreak’s social and economic impacts. The Company’s management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: i) the duration and scope of the pandemic; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on U.S. and global economies and the timing and rate of economic recovery; (iv) potential adverse effects on the financial markets and access to capital; (v) potential goodwill or other impairment charges; (vi) increased cybersecurity risks as a result of pervasive remote working conditions; and (vii) the Company’s ability to effectively carry out its operations due to any adverse impacts on the health and safety of the Company’s employees and their families. In response to the COVID-19 Outbreak, the Company’s employees have been required to work from home. The significant increase in remote working, particularly for an extended period of time, could exacerbate certain risks to the Company’s business, including an increased risk of cybersecurity events and improper dissemination of personal or confidential information. The Company does not believe these circumstances have, or will, materially adversely impact the Company’s internal controls or financial reporting systems. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3 - Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated interim financial statements (“interim statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as determined by Financial Accounting Standards Board (the “FASB”) within its Accounting Standards Codification (“ASC”) and under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended September 30, 2019. The Company has elected not to apply pushdown accounting to the accompanying standalone consolidated financial statements in accordance with ASC 805 “ Business Combinations The Company is an emerging growth company as the term is used in The Jumpstart Our Business Startups Act, enacted on April 5, 2012 and has elected to comply with certain reduced public company reporting requirements, however, the Company may adopt accounting standards based on the effective dates for public entities. Principles of Consolidation The accompanying consolidated financial statements includes the accounts of the Company and its majority-owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The Company is not involved with variable interest entities. The Company has a 99.99% controlling interest in banQi Instituição de Pagamento Ltda (formerly known as Airfox Servicos E Intermediacoes LTDA) and a 100% interest in AirToken GmbH; accordingly, the Company consolidates these entities and records non-controlling interests to reflect the economic interest of the non-controlling equity holders. On April 6, 2020, Airtoken GmbH was dissolved. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company's financial statements includes the fair values of AirTokens and Digital Assets, estimated lives of intangible assets, intangible asset impairment, revenue recognition (including the estimated development period for completing the AirToken Project), stock-based compensation and deferred tax valuation allowance. Foreign Currency The Company has operations in Brazil where the local currency is used to prepare the financial statements which are translated into the Company’s reporting currency, U.S. dollars. The local currency is the functional currency for the operations outside the United States. Changes in the exchange rates between this currency and the Company’s reporting currency, are partially responsible for some of the periodic changes in the consolidated financial statements. Assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at the spot rate in effect at the applicable reporting date. Revenues and expenses of the Company’s foreign operations are translated at the average exchange rate during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive income (loss) in stockholders’ deficit. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in other income (loss) in the period in which they occur. Revenue Recognition The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers ASC 606 prescribes a 5-step process to achieve its core principle: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the Company satisfies a performance obligation Display Advertising Services The Company’s revenue historically was derived from display advertising services and totaled $0 and $1,393 for the three months ended June 30, 2020 and 2019, respectively, and $0 and $1,641 for the nine months ended June 30, 2020 and 2019, respectively. The Company historically engaged in a business line known as Airfox Wireless related to technology that the Company developed that generates display advertising revenue for U.S. advertising networks. Pursuant to the Airfox Wireless model, t In January 2019, the Company decided to no longer pursue the display advertising services as a core part of the business plan as the revenue did not represent a significant portion of the Company operations. The Company expects to receive minimal residual income from existing arrangements related to the display advertising services. Additionally, the Company discontinued the AirFox Wireless business line earlier in 2019 so that it can focus on the development of other products. AirToken Project Development Services (Non ASC 606 Revenue) The Company determined that its token issuances represent obligations to perform software development services and accounts for the proceeds received in the token issuances in accordance with Research and Development – Research and Development Arrangements The Company, beginning in August 2017 through early October 2017, obtained Ether and Bitcoin totaling approximately $15.3 million (and cash of $0.1 million) towards the development of the AirToken Project. Pursuant to the terms of the AirTokens, there is no form of partnership, joint venture, agency or any similar relationship between a holder of an AirToken and the Company and/or other individuals or entities involved with the AirToken Project. AirTokens are non-refundable and do not pay interest and have no maturity date. AirTokens confer only the right to services in the AirToken Project and confer no other rights of any form with respect to the Company, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights. Subsequent to the distribution of AirTokens to those parties who contributed towards the funding of the AirToken Project, no AirTokens were sold by the Company. Pursuant to the Settlement Agreement (as defined and described further in Note 17), the Company is obligated to refund amounts raised for the purpose of developing the AirToken Project if valid claims are submitted and may incur other fines and penalties. As of June 30, 2020, the amount that was not paid was approximately $44 thousand (comprised of amounts recorded in AirToken refund liability and amounts in accounts payable). On or before December 28, 2019, the Company paid all approved claims to approved claimants who returned their AirTokens to the Company (approximately 93.5% of the total dollar amount of all approved claim refunds). All amounts were refunded in cash and paid through the Company’s existing cash and cash equivalent reserves. The total claim amounts including interest, totaled $3,289,607 on December 28, 2019. Certain approved claimants did not return their AirTokens to the Company. The Company did not pay approved claims to approved claimants who did not return their AirTokens to the Company. As of June 30, 2020, the amount that was not paid was approximately $44 thousand (comprised of amounts recorded in AirToken refund liability and amounts in accounts payable). All unpaid approved claims are upon return to the Company of approved claimants’ AirTokens The Company will recognize the remaining proceeds of $12.5 million over the remaining estimated development period of the AirToken Project until its completion. Currently, the Company is not able to estimate a date to conclude the development of the AirToken Project due to regulatory matters that affect the continuity of the development process. Due to this reason, the AirToken Project is currently on hold and no revenue has been recognized from the AirToken Project. Mastercard Revenue and Sale Incentives On December 16, 2019, Airfox Brazil, received R$65,000,000 (approximately U.S. $15,973,857 in December 2019) from Mastercard Brasil Soluções de Pagamento Digital Ltda. (“Mastercard Brasil) pursuant to a Strategic Alliance and Incentive Program Agreement (the “Program Agreement”) entered into between Airfox Brazil, Mastercard Brasil and Via Varejo S.A. (“Via Varejo”) on June 12, 2019 (See Note 5). Pursuant to the Program Agreement, Airfox Brazil, as a licensee of MasterCard International, Inc. and a business partner of Mastercard Brasil, entered into the Incentive Program (as defined in the Program Agreement) in order to issue, expand and boost the prepaid card (“Airfox Card”) base of Airfox Brazil as well as the number of transactions and turnover (sales revenue) generated by MasterCard Cards. As a Mastercard prepaid card issuer, Airfox Brazil will be entitled to receive Sales Revenue Incentives pursuant to the Program Agreement. As a result, the Sales Revenue Incentives will be used to amortize the Sales Revenue Incentive Prepayment received on December 11, 2019. Upon complete amortization of Incentive Prepayment, Mastercard will make quarterly payments of the Sales Revenue Incentive, calculated according to the value of transactions completed with the prepaid cards issued by the Airfox Brazil. Airfox Brazil will have no minimum commitment of transaction volumes to be completed with the prepaid cards. The Company will recognize the revenue as earned on a monthly basis, based on a fixed percentage of the total dollar value of card transactions completed during the month in accordance with the terms in the agreement. The Company has identified one performance obligation that meets the series provision and recognizes revenue over time. The Company Sales incentives totaling $429 and $794 have been earned for the three and nine months ended June 30, 2020, respectively, and meets the guidance to be classified as a series. In connection to the Program Agreement, the Company also entered into an agreement with Mastercard, an Interchange Manual (“Interchange Fee Agreement”) from Mastercard dated June 18, 2019, which details the fees paid by a merchant’s bank to Airfox Brazil to compensate for the value and benefits that merchant receives when it accepts electronic payments. The fee is a specified percentage of the total dollar amount of a card transaction, and a fixed percentage based on the type of card transaction (i.e. merchant type, national vs. international, etc.), based on the schedule of fees outlined in the Interchange Fee Agreement (“Interchange Fee Revenue”). On a monthly basis, the Company earns revenue from the Interchange Fee received. The Company has identified one performance obligation that meets the series provision and recognizes revenue over time. Interchange Fee Revenue totaling $3,085 and $6,802 has been earned for the three and nine months ended June 30, 2020, respectively, and meets the guidance to be classified as a series. Via Varejo Services Agreement Revenue The Company entered into a Services Agreement (the “Services Agreement”) as of September 11, 2018 (“the Agreement Effective Date”) with Via Varejo (the “Client”). The Company has been engaged to design and develop a mobile software module and application programming interface that will provide the Client’s customers with access to certain mobile payment functionality, and that integrates banQi (“VV Wallet Services”). The Company will provide certain services, including hosting, maintenance and operation of banQi. The VV Wallet Services are structured into four phases. The Phases are - Phase 1: Specifications and Customization; Phase 2: Features; Phase 3: License and Maintenance Services and Phase 4: Rollout. The development of the VV Wallet Services is considered a bundled performance obligation that includes the development of the API and software as a service which is hosted on the Company’s servers. In addition to the software as a service performance obligation, the Company will provide support services for the software as a service. The Client is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs the services. Accordingly, the revenue from Service Charges will be recognized over time based on the number of transactions made by Client customers with banQi. As of the date of the financial statements no revenue has been received or recognized. Revenue will not be recognized until banQi is utilized by the Client customers. During Phase 1, there was a payment of $256,000 (“Upfront Payment”) from the Client to be recognized as revenue commencing when the product was ready for its intended use and ratably over the remaining term of the Services Agreement through the duration of the Services Agreement. The total revenue recognized for the three and nine months ended June 30, 2020 totaled $12,104 and $24,903, respectively. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. Restricted Cash Restricted cash consists of the money received by AirFox Brazil related to the Mastercard Program Agreement. Airfox Brazil cannot use any Incentives (as defined in the Program Agreement) for the benefit of any product of any Mastercard competitor and/or any card brand other than the Mastercard Network. (Note 5). Short-Term Investments Short-term investments are investments which have a maturity at the date of purchase of three months to five years. Short-term investments consist of a Certificate of Deposit due to mature January 1, 2020 with Santander Bank located in the Cayman Islands. This short-term investment was renewed on January 22, 2020 and matured on May 21, 2020. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. Concentrations of Credit Risk and Off-Balance Sheet Risk The Company is subject to concentration of credit risk with respect to their cash and cash equivalents, which the Company attempts to minimize by maintaining cash, cash equivalents, and restricted cash with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation. At June 30, 2020, Airfox Brazil held cash, cash equivalents, and restricted cash totaling $1,365,616 in Brazilian financial institutions. The Company had cash, cash equivalents, and restricted cash, including amounts held in financial institutions in the USA and Brazil that totaled $2,746,009. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk of loss. Long-Lived Assets, Including Definite Intangible Assets Long-lived assets and other indefinite-lived intangibles are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. The Company’s definite-lived intangible assets primarily consist of various domain names and websites. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. Security Deposits As of June 30, 2020, security deposits primarily include monies being held subject to a security agreement (“Security Agreement”) with Mastercard, Inc. executed on June 7, 2019. The Security Agreement is related to the Services Agreement (See Note 11) to ensure a minimum number of users for the cards, as this is a major phase in the Company’s development process. On April 22, 2020 Mastercard returned $1.2 million plus interest in cash deposit to the Company. Upon Mastercard issuing the minimum number of cards to users, the $300,000 will be paid back to the Company in full. The Company has classified this amount as non-current assets as these funds are not highly liquid and cannot be easily converted into cash. Software Development Costs The Company capitalizes costs related to software developed or obtained for internal use in accordance with the ASC 350-40, Internal-Use Software ● Preliminary project stage: (a) conceptual formulation of alternatives; (b) evaluation of alternatives; (c) determination of existence of needed technology; and (d) final selection of alternatives. Internal and external costs incurred during the preliminary project stage ● Application development stage: (a) design of chosen path, including software configuration and software interfaces; (b) coding; (c) installation to hardware; and (d) testing, including parallel processing phase. Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized. ● Post-implementation-operation stage: (a) training; and (b) application maintenance. Internal and external costs incurred during the post-implementation-operation stage are expensed as incurred. Certain costs incurred are considered enhancements, modifications to existing internal-use software that result in additional functionality. Enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications. When this additional functionality is determinable, the related costs are capitalized. Otherwise, costs are expensed as incurred. Capitalization of internal-use software costs ceases when a computer software project is substantially complete and ready for its intended use. The Company begins amortization when the product is available for general release or use. The Company has capitalized software costs relating to the Via Varejo Services Agreement (see Note 11) and began amortization on January 1, 2020 as the product is now ready for its intended use and will be amortized through the contract term in September 2023. The amortization expense related to the Via Varejo Services Agreement capitalized software for the three and nine months ended June 30, 2020 totaled $234,159 and $468,318, respectively. The Company capitalizes costs related to the development and maintenance of its website in accordance with ASC 350-50, Website Development Costs Capitalizing Software Costs in Connection with Hosting Arrangements and Software as a Service Arrangements The Company develops certain software that is considered to be part of a cloud computing arrangement (or hosting arrangement), whereby, a user or a customer of software does not take possession of the Company’s software; rather, the software is accessed on an as-needed basis over the Internet. Therefore, when the software is used to produce a product or in a process to provide a service to a customer, and the customer is not given the right to obtain or use the software, the related costs are accounted for in accordance with ASC 350-40. When a hosting arrangement includes multiple modules or components, capitalized costs are amortized on a module-by-module basis. When a module or component is substantially ready for its intended use, amortization begins, regardless of whether the overall hosting arrangement is being placed in service in planned stages. If the module’s functionality is entirely dependent on the completion of one or more other modules, then amortization does not begin until that group of interdependent modules is substantially ready for use. Impairment of Long-term Assets The Company evaluates the recoverability of tangible and intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. Leases The Company categorizes leases at their inception as either operating or finance leases based on the criteria in ASC 842, Leases. The Company adopted ASC 842 on October 1, 2019, using the modified retrospective approach, and has established a Right-of-Use (“ROU”) Asset and a current and non-current Lease Liability for each lease arrangement identified. The lease liability is recorded at the present value of future lease payments discounted using the discount rate that approximates the Company’s incremental borrowing rate for the lease established at the commencement date, and the ROU asset is measured as the lease liability plus any initial direct costs, less any lease incentives received before commencement. The Company recognizes a single lease cost, so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis. Advertising Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $179,205 and $75,004 for the three months ended June 30, 2020 and 2019, and $562,200 and $93,536 for the nine months ended June 30, 2020 and 2019, respectively. Income Taxes Income taxes are recorded in accordance with ASC 740, Income Taxes The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. Deferred gain on issuance of AirTokens for services AirTokens issued to vendors for services in connection with raising monies for the purpose of developing the AirToken Project are accounted for in accordance with ASC 845-30-1, Nonmonetary Transactions, which requires that the AirTokens to be recognized at fair value, and resulted in recognizing a deferred gain of approximately $1.7 million in October 2017. The fair value of the AirTokens issued was based on the last price paid ($0.02) by initial investors in acquiring AirTokens towards the development of the AirToken Project (representing a Level 3 non-recurring measurement). The deferred gain will be recognized on a straight-line basis over the estimated development period of the AirToken Project as this represents the best depiction of the measure of progress towards the development of the AirToken Project. The Company will recognize the gain in Other Income beginning October 2017 through the estimated development period of the AirToken Project. Currently, the Company is not able to estimate a date to conclude the development of the AirToken Project due to regulatory matters that affect the continuity of the development process. Due to this reason, the AirToken Project is currently on hold and recognition of deferred gains ceased on September30, 2019. Refer to Note 17 for further information on the rescission offer. Distinguishing Liabilities from Equity The Company relies on the guidance provided by ASC 480, Distinguishing Liabilities from Equity Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet. The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e., at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. The Company records its financial instruments classified as liabilities at their fair value at each subsequent measurement date. The changes in fair value of these financial instruments are recorded as other expense/income. Hedging The Company does not use derivative instruments to hedge exposures to cash flows, market or foreign currency risks. The Company evaluates its financial instruments, including equity-linked financial instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Stock-based Compensation The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Compensation - Stock Based Compensation Common shares issued to third parties for services provided are valued based on the estimated fair value of the Company’s common shares. All stock-based compensation costs are recorded in selling, general and administrative expenses in the condensed consolidated statements of operations. All stock-based compensation awards were cancelled as pursuant to the Transaction which occurred on May 21, 2020 (see Note 11). Fair Value Measurement The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and short and long-term debt. The fair values of cash and cash equivalents, accounts receivable, and accounts payable approximate their stated amounts because of the short maturity of these financial instruments. The Company believes the carrying amount of their simple agreement for future equity approximate fair value based on rates and other terms currently available to the Company for similar debt instruments. The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy under ASC 820 are described below: Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. Adoption of Recent Accounting Pronouncements In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. In February 2016, the FASB established Topic 842, Leases Land Easement Practical Expedient for Transition to Topic 842 Codification Improvements to Topic 842 Leases Targeted Improvements Narrow-Scope Improvements for Lessors The Company adopted ASU 2016-02 effective October 1, 2019 using the modified retrospective approach whereby the Company will continue to present prior period financial statements and disclosures under ASC 840. In addition, the Company elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. Further, the Company adopted a short-term lease exception policy, permitting the Company to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities related to the Company’s operating leases, totaling $2.3 and $2.4 million, respectively, recorded on the Company’s consolidated balance sheet as of October 1, 2019. The standard did not materially affect the Company's consolidated net earnings or cash flows. Recent Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU 2018-15, Intangibles, Goodwill and Other (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes |
Restatement of Previously Issue
Restatement of Previously Issued Financial Statements | 9 Months Ended |
Jun. 30, 2020 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatement of Previously Issued Financial Statements | Note 4 – Restatement of Previously Issued Financial Statements The Company has restated its condensed consolidated interim financial statements for June 30, 2020 that were originally presented in a Form 10-Q filed on August 14, 2020. The nature and impact of these adjustments are described below and detailed in the tables below. The Company identified an error in the presentation of the recognized revenue associated with the AirToken Project. The management reviewed the methodology used to estimate the March 2022 completion date for the AirToken project, which, commencing on October 1, 2019, is the date used to calculate the amount of deferred revenue from the Initial Coin Offering ("ICO Revenue") to be recognized as revenue in the Company's financial statements and is also the date used to calculate the amount of deferred gain on AirTokens issued for services ("AirToken Gains") to be recognized as other income in the Company's financial statements. The AirToken project involves various milestones that can be difficult to forecast. Over time, the achievement of some milestones were determined to be much more difficult than originally projected. Upon the review of the methodology used to estimate the March 2022 completion date, the Company realized that the methodology should have been weighted more heavily on the fact that the completion date is highly dependent on the future rules and approvals from regulatory authorities, such as the Securities and Exchange Commission ("SEC"). These issues are out of the Company's control and thus it is very difficult to estimate when/if these issues might be resolved. These regulatory and license concerns are hindering the Company from further developing the Airtoken project and launching it to the public. Although the Company has advanced in many fronts toward the development of the Airtoken project, there are also business obstacles regarding scaling the loan product and making it profitable with the Company's own capital first before opening it to additional third party lenders. Due to the situation aforementioned, the Company is analyzing the future of the Airtoken project, as its continuity is deeply dependent of the milestones that are completely out of the Company’s control. Once, the regulatory and business obstacles can be overcome, then the Company will be able to decide whether to resume further development of the Airtoken project, since overcoming these hurdles is a prerequisite before spending time on the actual blockchain components and launching a “decentralized lending market-place”. Based upon the factors mentioned above, the Company reevaluated the methodology used to arrive at an estimated March 2022 completion date for the AirToken project was faulty and that since the completion date is highly dependent on milestones that are out of the Company's control, the Company is not able to accurately estimate an accurate completion date and thus, should have ceased recognizing any ICO Revenue and AirToken Gains starting on October 1, 2019. Based on Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 250, Accounting Changes and Error Corrections, the Company deemed this issue to be a correction of an error, resulting in the overstatement of revenue of $1.1 million and other income of $ 39.7 thousand for the three months ended June 30, 2020 and in the overstatement of revenue of $3.6 million and other income of $ 119.0 thousand for the nine months ended June 30, 2020. It also resulted in an understatement of deferred revenue of $3.8 million and deferred gain of $119.0 thousand for the period ended June 30, 2020. The effects of these errors on the Company’s previously reported balance sheet are as follows: June 30, 2020 (unaudited) As reported Adjustments As restated Total assets $ 10,158,760 $ — $ 10,158,760 Current liabilities: Deferred revenue - AirToken Project, current portion 5,011,926 (5,011,926 ) — Deferred gain on issuance of AirTokens for services, current portion 158,713 (158,713 ) — Total Current Liabilities 7,517,837 (5,170,639 ) 2,347,198 Long-term liabilities: Deferred revenue - AirToken Project, net of current portion 3,758,955 8,770,869 12,529,824 Deferred gain on issuance of AirTokens for services, net of current portion 119,043 277,747 396,790 Total liabilities 25,302,907 3,877,977 29,180,884 Stockholders' deficit: Accumulated deficit (16,372,712 ) (3,877,976 ) (20,250,668 ) Total member's deficit attributable to Carrier EQ, LLC members (15,143,435 ) (3,877,976 ) (19,021,411 ) Total member's deficit (15,144,147 ) (3,877,977 ) (19,022,124 ) Total liabilities and stockholders' deficit $ 10,158,760 $ — $ 10,158,760 The effects of these errors on the Company’s previously reported three and nine months ended June 30, 2020 statements of operations and comprehensive loss are as follows: Three months ended Nine months ended June 30, 2020 (unaudited) June 30, 2020 (unaudited) As reported Adjustments As restated As reported Adjustments As restated Revenue $ 1,172,718 (1,138,142 ) $ 34,576 $ 3,702,510 (3,644,103 ) $ 58,407 Cost of revenue $ — (114,839 ) $ (114,839 ) $ — (114,839 ) $ (114,839 ) Other income: Gain on AirToken issuance for services $ 39,678 (39,678 ) $ — $ 119,034 (119,034 ) $ — Net Loss $ (4,829,920 ) (1,292,659 ) $ (6,122,579 ) $ (12,889,479 ) (3,877,976 ) $ (16,767,455 ) Comprehensive net loss $ (4,709,319 ) (1,292,659 ) $ (6,001,978 ) $ (11,770,104 ) (3,877,976 ) $ (15,648,080 ) The effects of these errors on the Company’s previously reported nine months ended June 30, 2020 statement of cash flows as follows: Nine Months Ended June 30, 2020 (unaudited) As reported Adjustments As restated CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (12,889,479 ) (3,877,976 ) $ (16,767,455 ) Gain on issuance of AirTokes for services (119,034 ) 119,034 — Deferred revenue - AirToken Project (3,758,943 ) 3,758,942 (1 ) Net cash used in operating activities $ (1,686,446 ) $ — $ (1,686,446 ) |
Mastercard Program Agreement
Mastercard Program Agreement | 9 Months Ended |
Jun. 30, 2020 | |
Deferred Revenue Disclosure [Abstract] | |
Mastercard Program Agreement | Note 5 – Mastercard Program Agreement On December 16, 2019, Airfox Brazil, received R$65,000,000 (approximately U.S. $15,973,857 in December 2019) from Mastercard Brasil pursuant to the “Program Agreement entered into between Airfox Brazil, Mastercard Brasil and Via Varejo Via Varejo on June 12, 2019. Pursuant to the Program Agreement, Airfox Brazil, as a licensee of MasterCard International, Inc. and a business partner of Mastercard Brasil, entered into the Incentive Program (as defined in the Program Agreement) in order to issue, expand and boost the prepaid card (“Airfox Card”) base of Airfox Brazil as well as the number of transactions and turnover (sales revenue) generated by MasterCard Cards. The Program Incentives monies (as defined in the Program Agreement) cannot be used for the benefit of any product of any Mastercard competitor and/or any card brand other than the Mastercard Network. As an incentive to support the launching of Airfox Card, on December 16, 2019 Mastercard Brasil made to Airfox Brazil the incentive prepayment per sales revenue ("Sales Revenue Incentive Prepayment") totaling R$65,000,000. As a Mastercard prepaid card issuer, Airfox Brazil will be entitled to receive Sales Revenue Incentive pursuant to the Program Agreement. As a result, the Sales Revenue Incentive will be used to amortize the Sales Revenue Incentive Prepayment received on December 11, 2019. Upon complete amortization of Incentive Prepayment, Mastercard will make quarterly payments of the Sales Revenue Incentive, calculated according to the value of transactions completed with the prepaid cards issued by the Airfox Brazil. Airfox Brazil will have no minimum commitment of transaction volumes to be completed with the prepaid cards. The Sales Revenue Incentive Prepayment constitutes the creation of a direct financial obligation on Airfox Brazil since it constitutes prepaid sales revenue from Mastercard Brasil to Airfox Brazil. Via Varejo has agreed to act as a guarantor of Airfox Brazil’s Sales Revenue Incentive Prepayment obligations to Mastercard Brasil pursuant to the Program Agreement and a Guaranty Letter. The Program Agreement has a term of ten years, unless earlier terminated by either party in accordance with specific provisions of the Program Agreement. The Company will recognize the revenue as earned on a monthly basis, based on a fixed percentage of the total dollar value of card transactions completed during the month in accordance with the terms in the agreement. The Company has identified one performance obligation that meets the series provision and recognizes revenue over time. The Company Sales incentives totaling $429 and $794 have been earned for the three and nine months ended June 30, 2020, respectively, and meets the guidance to be classified as a series. |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets | 9 Months Ended |
Jun. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses and Other Current Assets | Note 6 - Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: June 30, September 30, Service contract $ 349,000 $ 349,000 R&D tax credit 418,760 288,187 Prepaid expenses 242,527 182,171 Total Prepaid expenses and other current assets $ 1,010,287 $ 819,358 |
Digital Assets
Digital Assets | 9 Months Ended |
Jun. 30, 2020 | |
Digital Assets | |
Digital Assets | Note 7 - Digital Assets Digital Assets held by the Company consist of Ether and Bitcoin and are included in current assets in the consolidated balance sheets. Due to the lack of authoritative GAAP guidance, the Company has determined its Digital Assets to be akin to intangible assets and are accounted in such manner. As intangible assets, Digital Assets are initially measured at cost. Since there is no limit on the useful life of the Company’s Ether and Bitcoin, they are classified as indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization. Instead they are tested for impairment on an annual basis and more frequently if events or circumstances change that indicate that it’s more likely than not that the asset is impaired. As a result of the aforementioned, the Company will only recognize decreases in the value of its Ether and Bitcoin, and any increase in value will be recognized upon disposition. Ether and Bitcoin are traded on exchanges in which there are observable prices in an active market, the Company views a decline in the quoted price below the cost to be an impairment indicator. The quoted price and observable prices, for Ether and Bitcoin, are determined by the Company using a principal market analysis in accordance with ASC 820, Fair Value Measurement When the Company evaluates its Ether and Bitcoin for impairment under ASC 350, Intangible – Goodwill and Other Changes in Digital Assets during the nine months ended June 30, 2020 was as follows: Ether Bitcoin Total Balance at September 30, 2019 $ 1,392 $ — $ 1,392 Realized loss on the sale of digital assets (1,392 ) — (1,392 ) Balance at June 30, 2020 $ — $ — $ — |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, Net | Note 8 - Intangible Assets, Net The following table summarizes the Company’s definitive-lived intangible assets: June 30, 2020 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Value Domain names 3 $ 140,012 $ — $ (86,545 ) $ 53,467 Capitalized software costs towards VV wallet 3 1,500,058 2,658,813 (468,318 ) 3,690,553 Website 3 272,083 10,562 (167,236 ) 115,409 Software 3 17,486 13,143 (4,179 ) 26,450 $ 1,929,639 $ 2,682,518 $ (726,278 ) $ 3,885,879 September 30, 2019 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Value Domain names 3 $ 86,540 $ 53,472 $ (51,542 ) $ 88,470 Capitalized software costs towards VV wallet 3 — 1,500,058 — 1,500,058 Website 3 120,333 151,750 (104,202 ) 167,881 Software 3 — 17,486 (583 ) 16,903 $ 206,873 $ 1,722,766 $ (156,327 ) $ 1,773,312 The Company uses the straight-line method to determine the amortization expense for its definite-lived intangible assets. The amortization expense related to the definite-lived intangible assets was $266,329 and $569,951 for the three and nine months ended June 30, 2020, and $31,567 and $86,090 for the three and nine months ended June 30, 2019, respectively. |
Accrued liabilities
Accrued liabilities | 9 Months Ended |
Jun. 30, 2020 | |
Accrued Liabilities [Abstract] | |
Accrued liabilities | Note 9 - Accrued liabilities Accrued liabilities consisted of the following: June 30, September 30, Other accrued liabilities $ 402,987 $ 562,840 Customer deposits 557,106 193,267 Accrued compensation 334,945 167,760 Accrued taxes 262,773 — Legal and professional 151,065 97,957 Software and website development — 363,271 Total accrued liabilities $ 1,708,876 $ 1,385,095 |
Debt
Debt | 9 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Note 10 – Debt Note Payable – Paycheck Protection Program Loan On April 21, 2020, the Company received $537,732 in loan funding from the Paycheck Protection Program (the “PPP”), established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company dated April 21, 2020 (the “Note”) in the principal amount of $537,732, to Silicon Valley Bank (the “Bank”), the lender. Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest, beginning seven months from the date of the Note, until the maturity date. The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan amount is used for eligible payroll costs; the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the entire Loan amount for qualifying expense, though n The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including, but not limited to, failing to make a payment when due under the Note, failure to do anything required by the Note, the Company defaulting under certain agreements in favor of any third party, making false statements, the Company’s insolvency, and the commencement of creditor or forfeiture proceedings against the Company. Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company. On May 21, 2020, the PPP loan of $537,732 plus interest of $433 was paid back in full by the Company. |
Via Varejo Services Agreement a
Via Varejo Services Agreement and Convertible Notes | 9 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Via Varejo Services Agreement and Convertible Notes | Note 11 – Via Varejo Services Agreement and Convertible Notes Services Agreement The Company entered into a Services Agreement (the “Services Agreement”) as of September 11, 2018 (“the Agreement Effective Date”) with Via Varejo S.A., a corporation organized under the laws of the Federative Republic of Brazil (the “Client”) and those stockholders of the Company that have signed the Call Option Agreement (defined below) as well as any stockholder of the Company who signs a joinder to the Services Agreement after September 11, 2018 (the “Stockholders”). Concurrently, the Client and the Company entered into a convertible note purchase and call option agreement (the “Call Option Agreement”). The Client has the irrevocable option to acquire shares of the Company’s capital stock owned by certain stockholders and convert notes issued, in connection with the Call Option Agreement, into shares of the Company’s capital stock representing, in the aggregate, up to eighty percent (80%) of the Company’s common stock (the “Call Option”). The Company may issue up to $10,000,000 in convertible notes for cash dependent on the completion of designated phases outlined in the Services Agreement. The Client has engaged the Company to design and develop a mobile software module and application programming interface that will provide Client customers with access to certain mobile payment functionality, and that integrates banQi (“VV Wallet Services”). In conjunction with the Services Agreement, the Company will provide certain services, including hosting, maintenance and operation of banQi (the “VV Ongoing Services”). The VV Wallet Services are structured into four phases. The Phases are - Phase 1: Specifications and Customization; Phase 2: Features; Phase 3: License and Maintenance Services and Phase 4: Rollout. The Client will make the following payments to the Company related to the VV Wallet Services: ● $256,000, non-refundable, to be paid within thirty days of the date of the Services Agreement. This payment was received on December 14, 2018, and the Company has recognized $12,104 and $24,903 of the revenue for the three and nine months ended June 30, 2020, respectively. ● $2,500,000, to be paid upon completion of Phase 1, in exchange for a convertible note in the same amount to be issued by the Company. This payment was received on February 14, 2019 and the Company issued a Convertible Note (defined below). ● $3,500,000, to be paid upon completion of Phase 2, in exchange for a convertible note in the same amount to be issued by the Company. This payment was received on June 10, 2019 and the Company issued a convertible note. ● $4,000,000, to be paid upon completion, as defined, of Phase 3, in exchange for a convertible note in the same amount to be issued by the Company. This payment was received on September 6, 2019 and the Company issued a convertible note. On May 21, 2020, convertible notes in the aggregate principal amount of $10,000,000 were converted into 13,339,510 shares of the Company’s Common Stock in connection with the Call Exercise Notice received from the Client. The common stock was subsequently cancelled. In consideration for the VV Ongoing Services rendered by the Company, the Client will pay the Company amounts monthly for the services outlined in the Services Agreement (the “Service Charges”). The development of the VV Wallet Services is considered a bundled performance obligation that includes the development of the API and software as a service which is hosted on the Company’s servers. In addition to the software as a service performance obligation, the Company will provide support services for the software as a service. The Client is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs the services. Accordingly, the revenue from Service Charges will be recognized over time based on the number of transactions made by Client customers with banQi. As of the date of the financial statements no revenue has been received or recognized. Revenue will not be recognized until banQi is utilized by the Client customers. The Company has begun recognizing the upfront payment of $256,000 (“Upfront Payment”) on January 1, 2020 as revenue, ratably over the remaining term of the Services Agreement through the duration of the Services Agreement. The funding received in exchange for the convertible notes is not considered revenue but is a liability of the Company. The total revenue recognized for the three and nine months ended June 30, 2020 totaled $12,104 and $24,903, respectively. All payments to the Company under the Services Agreement will be based in U.S. dollars except those in connection with the Service Charges, which will be in Brazilian Real. This Services Agreement has a term of five years, unless earlier terminated by either the Client or the Company as set forth below: i. The Client may terminate the Services Agreement at its sole discretion upon written notice to the Company at any time prior to the completion of Phase 1; ii. In the event that the Company is not able to complete any of its deliverables for any phase of the Services Agreement; iii. After the commencement of Phase 3, provided that the Phase 3 funding has been paid to the Company; iv. At any time, if the Company’s obligation under the Settlement Agreement exceeds $15,000,000 (as defined in Note 16); or v. If the Call Option expires without being exercised. In the event that this Services Agreement is terminated by the Client, the Company shall retain all right, title and ownership interest in and to banQi and the Company shall retain the payment of $256,000 received in December 2018. Either Party shall be entitled to terminate the Services Agreement upon written notice to the other party, in the event of a material breach, as defined in the Services Agreement, by the other party and that the breaching party has failed to remedy such breach within the applicable period. If there is a Company liquidity event, as defined in the Services Agreement, within five years of the date of termination, the Company will, within ten business days from the closing of such liquidity event, pay to Client an amount equivalent to eighty percent (80%) of the proceeds from such liquidity event(s), less the Liquidated Damages Amount. In addition, and pursuant to certain data transfer limitations, as defined in the Services Agreement, the Company shall grant to Client a market-priced, royalty-bearing, non-exclusive, non- sublicensable, non-transferable, revocable license to use and operate the banQi App for a term of thirty (30) years. In the event that the Services Agreement is terminated by Client pursuant to a material technical breach, as defined in the Services Agreement, by the Company: i. The outstanding convertible notes shall become immediately due and payable; ii. The Company shall pay to Client liquidated damages in the amount of $500,000 (the “Reduced Liquidation Damages Amount”) within five business days of termination; iii. Certain data transfer limitations will apply; and iv. If there is any Company liquidity event within two years of the date of termination, the Company shall, within ten business days from the closing of such liquidity event, pay to Client an amount equivalent to: eighty percent (80%) of the proceeds from such Company Liquidity Event(s), less the Reduced Liquidated Damages Amount the (“Liquidated Damages Amount”). In the event that the Services Agreement is terminated by the Company pursuant to a material breach, as defined in the Services Agreement, by Client: i. The convertible notes shall be canceled; ii. The Call Option shall be terminated; iii. Certain data transfer limitations will apply; iv. The banQi License shall be immediately terminated; and v. The Company will retain the payment of $256,000 and any funding it has received as of the date of such termination, and Client shall not be entitled to convert any convertible notes into common stock of the Company and shall not be entitled to exercise the Call Option. The Company shall have the right to terminate the Services Agreement, upon written notice to Client, commencing two years after the Call Option Expiration Date, in the event that Client does not exercise its Call Option. In the event that the Services Agreement is terminated by the Company the convertible notes shall remain outstanding and the Company may repay the obligations under the convertible notes at any time until the respective convertible note maturity date without any penalty; and data transfer limitations apply. Either Party may terminate the Services Agreement if either Party experiences or undergoes a bankruptcy event. In the event that this Services Agreement is terminated: i. Due to a Company Bankruptcy Event: a) The outstanding convertible notes shall become immediately due and payable; and b) Certain data transfer limitations apply. ii. Due to a Client bankruptcy event: a) the convertible notes shall remain outstanding, and the Company may repay the obligations under the convertible notes without penalty at any point until the maturity date; and b) Certain data transfer limitations apply. Convertible Notes On September 11, 2018, the Company entered into an agreement (the “Notes Agreement”) to sell up to $10,000,000 of one or more Convertible Promissory Notes (the “Notes”) to the Client. The Company received cash and issued convertible notes totaling $2,500,000, $3,500,000, and $4,000,000 on February 14, 2019, June 10, 2019, and September 6, 2019 respectively, under these agreements. On May 21, 2020, convertible notes in the aggregate principal amount of $10,000,000 were converted into 13,339,510 common shares of the Company, and immediately cancelled pursuant to the terms of the Call Exercise Notice. Interest Rates The outstanding principal amount of the Notes bear interest at the annual rate of 1.00%, compounded monthly. If any amount payable under the Notes are not paid when due, such overdue amount shall bear interest of 3.00%. The Notes were converted based on the principal outstanding amount of the Notes and excluded any accrued and unpaid interest due under the Notes at the conversion date, and the accrued and unpaid interest of approximately $105,000 was forgiven per the terms in the Notes Agreement. Call Option The Call Option Period for the Notes is the period commencing on the Agreement Effective Date and ending upon the earlier to occur of (a) November 30, 2020 or (b) 30 days following the date on which banQi has been downloaded 12 million times in the aggregate by customers in Brazil for use with the VV Wallet Services (the "Call Option Period End Date"). The Call Option Period End Date may be extended to September 30, 2021 by certain events detailed in the Notes Agreement (collectively, the “Call Options Expiration Date”). The Notes features both primary and secondary call rights in which, during the Call Option Period, at the option of the Client, the Notes may be converted into $10,000,000 and $6,000,000, respectively, of the Company’s Common Stock. On May 21, 2020, the convertible notes in the aggregate amount of $10,000,000 was converted into shares of the Company’s Common Stock, and an additional $6,000,000 of shares of the Company Common Stock (8,003,706 shares) was purchased directly from certain Company stockholders (the “Option Stockholders”) . The Company analyzed the call options and determined they did not meet the definition of derivatives and therefore they will not be bifurcated from the host agreement. Exercise of Call Rights During the Call Option Period, the Client may choose to exercise certain call rights (the “Call Rights”). In such instance, the Client will notify the Company and specify that the exercise is with respect to one of the following alternatives: a. Majority Exercise - An aggregate amount of (i) Notes equal to $4,000,000 being converted into shares of the Company’s Common Stock (“Primary Shares”) and (ii) $6,000,000 of shares of the Company’s Common Stock being purchased directly from the Stockholders (“Secondary Shares”), provided, that, in the event that there are less than $4,000,000 in Notes outstanding ("Insufficient Notes") at the time the Client elects to exercise the Call Rights, the Company agrees to issue to the Client, at an established valuation of the Company, as defined in the Notes Agreement (the “Agreed Valuation”) and the Client agrees to purchase, such additional shares of the Company’s common stock in an amount such that when combined with, and after giving effect to, the conversion of the Insufficient Notes into Primary Shares and the purchase of $6,000,000 in Secondary Shares, The Client shall own at least a majority of the shares of Company Stock then issued and outstanding, on a fully diluted basis; or b. Eighty Percent Exercise - An aggregate amount of (i) Notes equal to $10,000,000 being converted into Primary Shares and (ii) $6,000,000 of Secondary Shares being purchased from the Stockholders, such that the Client shall own 80% of the Company Stock on a fully diluted basis, provided, that, in the event that, at the time the Client elects to exercise the Call Right, there are less than $6,000,000 of Secondary Shares available for purchase from the Stockholders, the Company agrees to issue to the Client, at the Agreed Valuation, and Client agrees to purchase, such additional shares of the Company’s common stock in an amount such that when combined with, and after giving effect to, the conversion of the Notes into Primary Shares and the purchase of the Secondary Shares available for purchase from the Stockholders, the Client shall own at least 80% of the shares of common stock then issued and outstanding, on a fully diluted basis. On May 21, 2020, the convertible notes in the aggregate amount of $10,000,000 was converted into 13,339,510 shares of the Company’s Common Stock, and an additional $6,000,000 of shares of the Company Common Stock was purchased directly from Option Stockholders, totaling 8,003,706 shares. The common stock was subsequently cancelled, and the Buyer received 100% membership interests in the Company. Call Exercise Notice and Business Combination On February 7, 2020, Via Varejo notified the Company and the Option Stockholders Pursuant to the Call Exercise Notice, Via Varejo’s exercise of the Call Right, and its obligation to consummate the Transaction, is subject to and conditioned upon the satisfaction by the Company or the Option Stockholders of certain conditions (or waiver of such conditions by Via Varejo) prior to the consummation of the Transaction, which closed on May 21, 2020. These conditions include, among other things, (a) the Company amending its certificate of incorporation to provide for (i) a single class of common stock (and automatic conversion of any and all outstanding shares of preferred stock into common stock) (the “Conversion of Shares”) and (ii) no preferential rights in favor of any person other than Via Varejo, (b) obtaining preemptive rights waivers’ from certain Option Stockholders and (c) the acceleration of vesting of all stock options issued under the Company’s 2016 Equity Incentive Plan, as amended (the “Plan”) whereby upon the consummation of the Transaction, all stock options then issued and outstanding under the Plan are cancelled in exchange for a cash payment (calculated based on the per share price contained in the form of Second Amendment to Stock Purchase Agreement, dated as of May 18, 2020 entered into by the Buyer and certain employees of the Company (the “Employee SPAs”)) funded by Via Varejo and made to the holders of such stock options. Additionally, the execution and delivery of a stock purchase agreement, substantially in the form contemplated by the Call Option Agreement, by each of Via Varejo, the Company and the Option Stockholders, is a condition to closing the Transaction. Additionally, in connection with the Call Exercise Notice, the two outstanding SAFE agreements in the aggregate fair value amount of $239,899 were converted into 474,996 common shares of the Company, which was paid to the holders of the SAFEs by the Buyer, and determined pursuant to the terms of the Call Exercise Notice. The Buyer also purchased 279,354 shares of common stock from five shareholders, who were not included in the purchase of common stock related to the Call Option Agreement, SPAs, or SAFE agreements (the “Remaining Shareholders”) as described above. The Buyer acquired each share of common stock owned by the Remaining Shareholders pursuant to the Employee SPAs and the Non-Employee SPAs. The Buyer owned an aggregate of 25,265,794 common shares of the Company from the above transactions, which were immediately cancelled on May 21, 2020, and the Buyer received 100% membership interests in the Company. Concurrently with the consummation of the Transaction and as a condition precedent under the Call Option Agreement, the Company’s Board of Directors cancelled all outstanding options to purchase Company common stock granted under the Plan. All of the holders of the outstanding options issued under the Plan were immediately cancelled and, in consideration for such cancellation, were entitled to a lump sum cash payment from the Company, funded by Via Varejo. |
Simple Agreement for Future Equ
Simple Agreement for Future Equity | 9 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Simple Agreement for Future Equity | Note 12 - Simple Agreement for Future Equity In July 2017, the Board of Directors of the Company approved and designated a right to Investors for certain shares of the Company’s capital stock (otherwise known as Simple Agreement for Future Equity (“SAFE”), utilizing a valuation estimate, as defined, (“Valuation Cap”) and 80% discount rate (the “Discount Rate”). On July 15, 2017, the Company entered into two SAFE’s in the amount of $189,899, and $50,000, respectively. The number of shares to be issued upon conversion of the SAFE’s are subject to the following: ● Equity Financing – Prior to the expiration of termination of the SAFEs, if there is an equity financing that occurs, the Company is to automatically issue a number of shares of Preferred Stock, equal to the Purchase amount divided by the Conversion Price of shares. ● Conversion Price – Means either: (1) the SAFE Price or (2) the Discount Price, whichever calculation results in the greater number of shares of Preferred Stock. The SAFE Price is the price per share equal to the Valuation Cap divided by the Company’s capitalization amount on a fully-diluted basis. The Discount Price is the price per share of the equity instrument sold in an Equity Financing multiplied by the Discount Rate. ● Liquidity Event – If there is Liquidity Event, as defined, before the scheduled termination of the SAFE instruments, the holder of a SAFE can either (i) receive a cash payment equal to the amount paid for the SAFE (“SAFE Amount”) or (ii) automatically receive from the Company a number of shares of Common Stock equal to the SAFE Amount divided by the price per share from the Liquidation Event. The SAFE amount is due and payable by the Company to the holder of a SAFE concurrent with a Liquidation Event. If there are insufficient funds to pay the holders of SAFEs, the remaining funds available for distribution will be done on a pro rate basis among the holders in proportion with their SAFE Amounts. ● Dissolution Event – Upon a dissolution event that occurs before the expiration of the SAFEs, the Company will pay an amount equal to the SAFE Amount to the holder at the time of the Dissolution Event. If the Company has insufficient funds to make complete payment to all holders of SAFEs, the Company will then be liable to distribute available assets to the holder for the remaining portion due. The Company evaluated the SAFEs in accordance with ASC 480-10 and determined that the SAFEs represented an obligation that the Company must settle by issuing a variable number of its equity shares, the monetary value of which is known when entering into the SAFE. On May 21, 2020, in connection with the Call Exercise Notice, the two outstanding SAFE agreements in the aggregate fair value amount of $239,899 were converted into 474,996 common shares of the Company, which was paid to the holders of the SAFEs by the Buyer, and determined pursuant to the terms of the Call Exercise Notice, which were immediately cancelled. |
Preferred Stock
Preferred Stock | 9 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Preferred Stock | Note 13 - Preferred Stock Series One and One-A Preferred Stock Purchase Agreement On July 15, 2016, the Company sold to accredited investors an aggregate of 2,652,072 shares of Series One and 1,046,147 of Series One-A Preferred Shares (collectively, “Preferred Stock”). The Preferred Stock is convertible into the Company’s Common Stock on a 1 for 1 basis at the holders’ option. The Preferred Stock does not contain any redemption provisions. The Preferred Stock does not pay dividends and vote together with the common stock of the Company as a single class on all actions to be taken by the stockholders of the Company. On May 21, 2020, in connection with the Call Exercise Notice, the aggregate of 2,652,072 shares of Series One and 1,046,146 of Series One-A Preferred Shares were converted into the Company’s Common Stock during the Transaction which were subsequently cancelled. The Company amended its Certificate of Incorporation and filed the Second Restated Certificate of Incorporation (the “Restated Certificate of Incorporation”) with the Delaware Secretary of State on May 21, 2020, to provide for (i) a single class of common stock (and automatic conversion of any and all outstanding shares of preferred stock into common stock) and (ii) no preferential rights in favor of any shareholder. |
Common Stock
Common Stock | 9 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Common Stock | Note 14 - Common Stock On January 25, 2016, the Company issued 497,873 shares of common stock to an investor (the “Investor”) for a purchase price of $20,000, which at the time represented 6% of the capital stock of the Company. As part of this transaction, the Company agreed to issue additional shares of common stock (for no additional consideration) to maintain the investor’s ownership interest at 6% of the total capital stock upon a subsequent equity financing greater than $250,000. This 6% ownership is calculated on a fully diluted basis, including all outstanding shares of common and preferred stock, all outstanding options and warrants, phantom stock, stock appreciation rights, and any shares reserved for issuance under the Company’s equity incentive plans. However, the capital stock does exclude shares issuable, but contingent on conversion of any current or future convertible debt and equity instruments (which would include the SAFE’s). Therefore, as part of any issuance of capital stock to any future investors, the Company must issue additional stock to the Investor, as well, to ensure that they remain at 6% of the Company’s capital stock. There were 133,893 additional shares issued on July 15, 2016 to the Investor in order to maintain their 6% equity interest. The contingent issuance of shares of common stock to the Investor was evaluated to determine whether the embedded feature would be required to be recorded as a derivative liability. It was determined the embedded feature qualifies for equity classification. On February 28, 2018, the Company repurchased 414,893 shares of common stock which it had previously granted to an independent entity in exchange for $240,000. The Company recorded these repurchased shares as Treasury shares in its consolidated balance sheet. On May 21, 2020, in connection with the Call Exercise Notice, all of the Company’s previously outstanding common stock was purchased by the Buyer, which is included in the total aggregate of 25,265,794 of the Company’s Common Stock that was purchased by the Buyer during the Transaction. All shares of common stock were immediately then cancelled, including the shares held in treasury. |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock Based Compensation | Note 15 - Stock Based Compensation The Company established the 2016 Equity Incentive Plan (the “Plan”) during 2016 and issued stock-based awards to certain employees and non-employees under the Plan. The Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units and other stock awards. On February 3, 2020, the Company’s Board of Directors approved an amendment to the Plan to decrease the aggregate number of shares of the Company’s common stock that may be issued pursuant to Stock Awards (as defined in the Plan) from 2,834,837 to 2,676,126; and waived the restrictions on transfer and right of first refusal in favor of the Company, as set forth in the Company’s Amended and Restated Bylaws, for certain stockholders. Additionally, on February 3, 2020, the Company’s Board of Directors approved the acceleration of vesting of 751,849 outstanding stock option awards awarded to employees and a third-party. On February 6, 2020, the Board approved the acceleration of vesting of 149,564 outstanding stock options awarded to a third-party. On February 26, 2020, the Board approved the acceleration of vesting of 277,564 outstanding stock options awarded to employees and other third-parties. On May 21, 2020, concurrently with the consummation of the Transaction and as a condition precedent under the Call Option Agreement, the Company’s Board of Directors cancelled all outstanding options to purchase the Company’s Common Stock granted under the Plan. All of the holders of the outstanding options issued under the Plan were immediately cancelled and, in consideration for such cancellation were entitled to a lump sum cash payment from the Company. The Company lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a set of publicly traded peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The fair value of the Company’s common stock was estimated to be $0.29 at September 30, 2019. There was no common stock outstanding at June 30, 2020. In order to determine the fair value, the Company considered, among other things, the Company’s business, financial condition and results of operations; the lack of marketability of the Company’s common stock; the market performance of comparable publicly traded companies; and U.S. and global economic and capital market conditions. The Company used the Black-Scholes option-pricing model to estimate the fair value of options issued using the following assumptions: Nine Months Ended June 30, Nine Months Ended June 30, Price of Common Stock $ 0.25 - 0.29 $ 0.29 Volatility 60 - 72% 60 % Expected term (in years) 0 - 6.90 5.30 - 6.08 Risk free rate 1.39 - 1.74% 1.82 - 2.25% The following table summarizes the Company’s stock option activity and related information for the period indicated: Number of Weighted Average Remaining Contractual Term (in years) Weighted Average Exercise Price ($) Outstanding at September 30, 2019 2,684,717 9.47 $ 0.23 Granted 17,000 9.46 $ 0.26 Forfeited (355,745 ) 8.03 $ 0.30 Exercised (939,141 ) 8.08 $ 0.20 Cancelled (1,406,831 ) 8.30 $ 0.25 Outstanding at June 30, 2020 — — $ — Exercisable at June 30, 2020 — — $ — On May 21, 2020, there was a change in control when the Company was fully acquired by Via Varejo, and as a condition precedent under the Call Option Agreement, the Company’s Board of Directors cancelled all outstanding options. As noted in the 2016 Equity Incentive Plan Amendment, for instances where a change in control occurs, vesting will be accelerated for all outstanding stock award and a cash payment will be paid to all Option Stockholders by Via Varejo. The total unrecognized compensation cost based on the fair value of the options was recognized as stock-based compensation expense at May 21, 2020 totaling $114,979. Additionally, all of the holders of the outstanding options issued under the Plan were immediately cancelled and, in consideration for such cancellation, were entitled to a lump sum cash payment totaling $3,331,255, contributed by Via Varejo to the Company and paid from the Company to the Option Holders. The conversion price per option was determined pursuant to the terms of the Call Exercise Notice. Any additional payment over the original fair value of the stock options ($238,719) was recognized by the Company as additional stock-based compensation expense due to the cancellation of stock options, which totaled $3,092,536 at May 21, 2020. The expense for stock-based compensation awards was $3,207,515 and $28,925 for the three months ended June 30, 2020 and 2019, respectively. The expense for stock-based compensation awards was $3,418,118 and $74,538 for the nine months ended June 30, 2020 and 2019, respectively. |
Concentrations
Concentrations | 9 Months Ended |
Jun. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentrations | Note 16 - Concentrations Accounts Payable As of June 30, 2020, and September 30, 2019 the Company had approximately 85% and 86%, respectively, of its accounts payable balances held by its top five vendors. During each of these same aforementioned periods, the Company had one and two of its vendors accounting for more than 10% each of the Company’s accounts payables balances. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 17 - Commitments and Contingencies Operating Leases The Compa n r a l f f r r y s r e w a a a b e Leases with an initi a r we v r r r a n r a r s r r a a r a r a n n ’ s r r f r o v n ’ a r s v a b a re a r r x s w r b r r f f f e The Company determined that the exercise of the renewal option became reasonably certain for its office space in Boston and Brazil; therefore, the payments associated with the renewal are now included in the measurement of the lease liability and ROU asset for those locations. The useful life of the Boston and Brazil office spaces will extend through February 2028 and September 2021, respectively. The Company’s lease a r r a l ro r o r a e r f r e n r a r iv a r a r a e n r k e a r r a r a b a iv r a es w were r a a a s a a e T he Compa n on the Consolidated Statements of Operations and Comprehensive Loss. No re a r f r a v r Lease Costs The t a b e o r f r a re a f n ’ r a f three and n Three Months Ended Nine Months Ended June 30, June 30, Components of total lease cost: Operating lease expense $ 168,115 504,345 Short-term lease expense — — Total lease cost $ 168,115 $ 504,345 Lease P Right of use lease assets and lease li a f r a w r r r a a f o As of June 30, 2020 Assets Operating lease right of use assets $ 2,061,756 Total lease assets $ 2,061,756 Liabilities Current liabilities: Operating lease liability, current portion $ 382,416 Noncurrent liabilities: Operating lease liability, net of current portion 1,835,238 Total lease liability $ 2,217,654 Lease T R The t a b e o r f r a re a w a v r a r r w a v r a r a f n ’ r a Weighted average remaining lease term (in years) – operating leases 6.86 Weighted average discount rate – operating leases 7.7 % Undiscounted Cash Flows Futu r a r a a a f f o f iv f a y r w r f o Year ending September 30, Operating Leases Remaining 2020 $ 141,550 2021 525,434 2022 326,453 2023 333,104 2024 339,755 2025 346,406 2026 353,055 2027 359,714 2028 152,420 Total Minimum Lease Payments $ 2,877,891 Less effects of discounting (660,237 ) Present value of future minimum lease payments $ 2,217,654 Legal Proceedings The Company may be involved in various lawsuits, claims and proceedings incidental to the ordinary course of business. The Company accounts for such contingencies when a loss is considered probable and can be reasonably estimated. Between August and October 2017, the Company offered and sold AirTokens pursuant to the 2017 ICO and raised approximately $15 million in capital. The SEC determined that the AirToken offering was an offer and sale of “securities” as defined by Section 2(a)(1) of the Securities Act. On November 16, 2018 the Company settled the 2017 ICO matter with the SEC pursuant to the Settlement Agreement. As part of the Settlement Agreement, the Company agreed to offer rescission rights to the Potential AirToken Claimants and paid a penalty of $250,000 to the SEC. On March 15, 2019, the Company filed an initial registration statement on Form 10 with the SEC under the Exchange Act on a voluntary basis in connection with the Settlement Agreement and to provide current information to Potential AirToken Claimants pursuant to Section 12(a) of the Securities Act. The Form 10 registration statement became effective on May 14, 2019, and on October 18, 2019 was notified that the SEC had completed its review of the Form 10 registration statement. In conjunction with the Settlement Agreement, Potential AirToken Claimants are entitled to return their AirTokens to the Company and receive a refund in the amount of consideration paid, plus interest, less the amount of any income received thereon. Pursuant to the Settlement Agreement, as modified in May 2019, the Company timely distributed the claim forms on June 28, 2019. The claims period closed on September 28, 2019. All forms were processed in accordance with the terms and provisions set forth by the Settlement Agreement. The Company received claim forms from 174 Potential AirToken Claimants during the claims period and the Company determined to approve payment on 163 out of the 174 claims, which is approximately 93% of the claim forms received during the claims period. On December 11, 2019 the Company commenced the process of notifying, via email only, all 174 Potential AirToken Claimants of the Company’s resolution of their claim. On or before December 28, 2019 the Company paid all approved claims to approved claimants who returned their AirTokens to the Company (approximately 93.5% of the total dollar amount of all approved claim refunds). All amounts were refunded in cash and paid through the Company’s existing cash and cash equivalent reserves. The total claim amounts including interest, totaled $3,289,607 on December 28, 2019. Certain approved claimants did not return their AirTokens to the Company. The Company did not pay approved claims to approved claimants who did not return their AirTokens to the Company. As of June 30, 2020, the amount that was not paid was approximately $44 thousand (comprised of amounts recorded in AirToken refund liability and amounts in accounts payable). All unpaid approved claims are upon return to the Company of approved claimants’ AirTokens Additionally, the Settlement Agreement requires the Company to: ● Maintain timely filings of all reports required by Section 13(a) of the Exchange Act for at least one year from the date the Form 10 becomes effective (the “ Effective Date ● Provide monthly reports to the SEC which include the amount of the claims paid, and any claims not paid as well as the reasons for non-payment. ● Submit to the SEC a final report of its handling of all claims received within seven months from the Effective Date of the Form 10 filing. Also, on November 16, 2018, the Company entered into a settlement with the Massachusetts Securities Division related to our issuance of AirTokens in the Company’s 2017 ICO whereby the Company agreed to pay a penalty of $100,000 to the Commonwealth of Massachusetts. As a result of the Company’s inability to timely resolve these accounting issues, the Company did not timely file with the SEC the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, and the Company’s annual report on Form 10-K for the year ended September 30, 2019, which puts the Company in violation of Section 13(a) of the Exchange Act and the Settlement Agreement. In addition, the Company did not timely file certain Current Reports on Form 8-K. As a result of the Company’s failure to timely file these various reports, the SEC may through civil or administrative actions seek monetary and non-monetary relief from the Company, including fines, penalties, undertakings and conduct-based injunctions, and officer and director bars and suspensions. On December 30, 2019 a claimant who purchased AirTokens in the 2017 ICO whose claim was denied for failure to comply with the deadlines and the claim process filed a civil lawsuit against the Company in the Supreme Court of the State of New York, County of New York. The lawsuit alleges a claim of sale of unregistered securities to the plaintiff under Section 12(a) of the Securities Act of 1933 in connection with the plaintiff’s purchase of AirTokens in the 2017 ICO. The plaintiff demands a full refund in the amount of consideration paid, plus interest and other costs. On February 25, 2020 the Company settled this claim with the plaintiff and the lawsuit was dismissed. The claims period officially came to a close on Sept. 28, 2019. All claims were processed in accordance with the terms and provisions set forth in the SEC Order. Other than with respect to the matters described above, the Company is not aware of any pending or threatened claims that the Company violated any federal or state securities laws. However, the Company cannot assure you that any such claim will not be asserted in the future or that the claimant in any such action will not prevail. The possibility that such claims may be asserted in the future will continue until the expiration of the applicable federal and state statutes of limitations. If the payment of additional rescission claims or fines is significant, it could have a material adverse effect on the Company’s cash flow, financial condition or prospects and the value of the AirTokens. On January 29, 2020 Gad Red Propaganda Ltda. (“GAD”) filed a civil lawsuit against the Company’s operating subsidiary banQi Instituição de Pagamento Ltda (dba “banQi”) in 41o Civil Court of Justice of the Estate of Sao Paulo. The lawsuit alleges that banQi failed to fully compensate GAD for certain marketing and other services GAD performed on behalf of banQi pursuant to an alleged strategic partnership GAD entered into with banQi. GAD demands payments of up to approximately U.S. $690,820 for services performed. banQi filed an answer to the claim on May 15, 2020. The Company accounts for contingencies when a loss is considered probable or possible (more likely than not) and can be reasonably estimated. banQi filed an answer to the claim on May 15, 2020 denying any liability for any payments GAD is seeking. During the quarter ended March 31, 2020, the Company entered into agreements with respect to contracts involving third parties and accrued liabilities of approximately $1.6 million. $1.4 million has been paid as of June 30, 2020. |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 18 - Income Taxes A nominal provision for taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company’s net deferred income tax assets as of June 30, 2020 and September 30, 2019 consist of income tax loss carryforwards. These amounts are available for carryforward indefinitely for use in offsetting taxable income. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry-forward period. Prior to May 21, 2020 the Company was classified as a C Corporation for tax purposes. As of May 21, 2020, when the Company was converted from a C Corporation to a limited liability company. The Company also then elected to be classified as a C Corporation for U.S. tax purposes. On May 21, 2020, the Company was fully acquired by Via Varejo S.A, a corporation organized under the laws of the Federative Republic of Brazil (“Via Varejo”) through Lake Niassa Empreendimentos e Participações Ltda., a limited liability company duly organized under the laws of the Federative Republic of Brazil and wholly-owned by Via Varejo. As a result of the acquisition, the utilization of some of the net operating loss carryforwards generated in both prior and the current fiscal years may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. As of the date of these financial statements, the Company has not undertaken an IRC 382 study to estimate the amount of the net operating losses that may be utilized in the future. However, throughout the Company’s history the Company has generated substantial net operating losses. These deferred tax assets arising from the future tax benefits are currently considered not likely to be realized and are thus reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes other than those amounts required to properly accrued for the various state minimum income taxes owed by the Company to the jurisdictions in which it operates. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 19 - Related Party Transaction The related party transactions between the Company and Via Varejo were unbilled receivables totaling $8.1 thousand, accounts payable totaling $8.4 thousand, and deferred revenue totaling $197 thousand as of June 30, 2020. Additionally, on May 28, 2020, the Company received $1.9 million from Lake Niassa as a capital contribution with no additional membership interests issued. There were no related party transactions as of June 30, 2019. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 20 - Subsequent Events On July 29, 2020, the Company entered into an agreement with Lake Niassa to receive a capital contribution in the amount of $1.5 million. Additionally, the Company will receive capital contributions of $1 million on August 31, 2020, and $1.4 million on September 30, 2020 per the terms of the agreement. On July 30, 2020, Lake Niassa made a capital contribution to Airfox Brazil in the amount of R$7,370,000 (approximately $1,429,043 USD) in exchange for 7,370,000 shares of Airfox Brazil, with a par value of R$1.00 (approximately $0.19 USD) per share. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated interim financial statements (“interim statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as determined by Financial Accounting Standards Board (the “FASB”) within its Accounting Standards Codification (“ASC”) and under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended September 30, 2019. The Company has elected not to apply pushdown accounting to the accompanying standalone consolidated financial statements in accordance with ASC 805 “ Business Combinations The Company is an emerging growth company as the term is used in The Jumpstart Our Business Startups Act, enacted on April 5, 2012 and has elected to comply with certain reduced public company reporting requirements, however, the Company may adopt accounting standards based on the effective dates for public entities. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements includes the accounts of the Company and its majority-owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The Company is not involved with variable interest entities. The Company has a 99.99% controlling interest in banQi Instituição de Pagamento Ltda (formerly known as Airfox Servicos E Intermediacoes LTDA) and a 100% interest in AirToken GmbH; accordingly, the Company consolidates these entities and records non-controlling interests to reflect the economic interest of the non-controlling equity holders. On April 6, 2020, Airtoken GmbH was dissolved. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company's financial statements includes the fair values of AirTokens and Digital Assets, estimated lives of intangible assets, intangible asset impairment, revenue recognition (including the estimated development period for completing the AirToken Project), stock-based compensation and deferred tax valuation allowance. |
Foreign Currency | Foreign Currency The Company has operations in Brazil where the local currency is used to prepare the financial statements which are translated into the Company’s reporting currency, U.S. dollars. The local currency is the functional currency for the operations outside the United States. Changes in the exchange rates between this currency and the Company’s reporting currency, are partially responsible for some of the periodic changes in the consolidated financial statements. Assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at the spot rate in effect at the applicable reporting date. Revenues and expenses of the Company’s foreign operations are translated at the average exchange rate during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive income (loss) in stockholders’ deficit. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in other income (loss) in the period in which they occur. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers ASC 606 prescribes a 5-step process to achieve its core principle: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the Company satisfies a performance obligation Display Advertising Services The Company’s revenue historically was derived from display advertising services and totaled $0 and $1,393 for the three months ended June 30, 2020 and 2019, respectively, and $0 and $1,641 for the nine months ended June 30, 2020 and 2019, respectively. The Company historically engaged in a business line known as Airfox Wireless related to technology that the Company developed that generates display advertising revenue for U.S. advertising networks. Pursuant to the Airfox Wireless model, t In January 2019, the Company decided to no longer pursue the display advertising services as a core part of the business plan as the revenue did not represent a significant portion of the Company operations. The Company expects to receive minimal residual income from existing arrangements related to the display advertising services. Additionally, the Company discontinued the AirFox Wireless business line earlier in 2019 so that it can focus on the development of other products. AirToken Project Development Services (Non ASC 606 Revenue) The Company determined that its token issuances represent obligations to perform software development services and accounts for the proceeds received in the token issuances in accordance with Research and Development – Research and Development Arrangements The Company, beginning in August 2017 through early October 2017, obtained Ether and Bitcoin totaling approximately $15.3 million (and cash of $0.1 million) towards the development of the AirToken Project. Pursuant to the terms of the AirTokens, there is no form of partnership, joint venture, agency or any similar relationship between a holder of an AirToken and the Company and/or other individuals or entities involved with the AirToken Project. AirTokens are non-refundable and do not pay interest and have no maturity date. AirTokens confer only the right to services in the AirToken Project and confer no other rights of any form with respect to the Company, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights. Subsequent to the distribution of AirTokens to those parties who contributed towards the funding of the AirToken Project, no AirTokens were sold by the Company. Pursuant to the Settlement Agreement (as defined and described further in Note 17), the Company is obligated to refund amounts raised for the purpose of developing the AirToken Project if valid claims are submitted and may incur other fines and penalties. As of June 30, 2020, the amount that was not paid was approximately $44 thousand (comprised of amounts recorded in AirToken refund liability and amounts in accounts payable). On or before December 28, 2019, the Company paid all approved claims to approved claimants who returned their AirTokens to the Company (approximately 93.5% of the total dollar amount of all approved claim refunds). All amounts were refunded in cash and paid through the Company’s existing cash and cash equivalent reserves. The total claim amounts including interest, totaled $3,289,607 on December 28, 2019. Certain approved claimants did not return their AirTokens to the Company. The Company did not pay approved claims to approved claimants who did not return their AirTokens to the Company. As of June 30, 2020, the amount that was not paid was approximately $44 thousand (comprised of amounts recorded in AirToken refund liability and amounts in accounts payable). All unpaid approved claims are upon return to the Company of approved claimants’ AirTokens The Company will recognize the remaining proceeds of $12.5 million over the remaining estimated development period of the AirToken Project, on a straight-line basis, until its completion. Currently, the Company is not able to estimate a date to conclude the development of the AirToken Project due to regulatory matters that affect the continuity of the development process. Due to this reason, the AirToken Project is currently on hold and no revenue has been recognized from the AirToken Project. Mastercard Revenue and Sale Incentives On December 16, 2019, Airfox Brazil, received R$65,000,000 (approximately U.S. $15,973,857 in December 2019) from Mastercard Brasil Soluções de Pagamento Digital Ltda. (“Mastercard Brasil) pursuant to a Strategic Alliance and Incentive Program Agreement (the “Program Agreement”) entered into between Airfox Brazil, Mastercard Brasil and Via Varejo S.A. (“Via Varejo”) on June 12, 2019 (See Note 5). Pursuant to the Program Agreement, Airfox Brazil, as a licensee of MasterCard International, Inc. and a business partner of Mastercard Brasil, entered into the Incentive Program (as defined in the Program Agreement) in order to issue, expand and boost the prepaid card (“Airfox Card”) base of Airfox Brazil as well as the number of transactions and turnover (sales revenue) generated by MasterCard Cards. As a Mastercard prepaid card issuer, Airfox Brazil will be entitled to receive Sales Revenue Incentives pursuant to the Program Agreement. As a result, the Sales Revenue Incentives will be used to amortize the Sales Revenue Incentive Prepayment received on December 11, 2019. Upon complete amortization of Incentive Prepayment, Mastercard will make quarterly payments of the Sales Revenue Incentive, calculated according to the value of transactions completed with the prepaid cards issued by the Airfox Brazil. Airfox Brazil will have no minimum commitment of transaction volumes to be completed with the prepaid cards. The Company will recognize the revenue as earned on a monthly basis, based on a fixed percentage of the total dollar value of card transactions completed during the month in accordance with the terms in the agreement. The Company has identified one performance obligation that meets the series provision and recognizes revenue over time. The Company Sales incentives totaling $429 and $794 have been earned for the three and nine months ended June 30, 2020, respectively, and meets the guidance to be classified as a series. In connection to the Program Agreement, the Company also entered into an agreement with Mastercard, an Interchange Manual (“Interchange Fee Agreement”) from Mastercard dated June 18, 2019, which details the fees paid by a merchant’s bank to Airfox Brazil to compensate for the value and benefits that merchant receives when it accepts electronic payments. The fee is a specified percentage of the total dollar amount of a card transaction, and a fixed percentage based on the type of card transaction (i.e. merchant type, national vs. international, etc.), based on the schedule of fees outlined in the Interchange Fee Agreement (“Interchange Fee Revenue”). On a monthly basis, the Company earns revenue from the Interchange Fee received. The Company has identified one performance obligation that meets the series provision and recognizes revenue over time. Interchange Fee Revenue totaling $3,085 and $6,802 has been earned for the three and nine months ended June 30, 2020, respectively, and meets the guidance to be classified as a series. Via Varejo Services Agreement Revenue The Company entered into a Services Agreement (the “Services Agreement”) as of September 11, 2018 (“the Agreement Effective Date”) with Via Varejo (the “Client”). The Company has been engaged to design and develop a mobile software module and application programming interface that will provide the Client’s customers with access to certain mobile payment functionality, and that integrates banQi (“VV Wallet Services”). The Company will provide certain services, including hosting, maintenance and operation of banQi. The VV Wallet Services are structured into four phases. The Phases are - Phase 1: Specifications and Customization; Phase 2: Features; Phase 3: License and Maintenance Services and Phase 4: Rollout. The development of the VV Wallet Services is considered a bundled performance obligation that includes the development of the API and software as a service which is hosted on the Company’s servers. In addition to the software as a service performance obligation, the Company will provide support services for the software as a service. The Client is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs the services. Accordingly, the revenue from Service Charges will be recognized over time based on the number of transactions made by Client customers with banQi. As of the date of the financial statements no revenue has been received or recognized. Revenue will not be recognized until banQi is utilized by the Client customers. During Phase 1, there was a payment of $256,000 (“Upfront Payment”) from the Client to be recognized as revenue commencing when the product was ready for its intended use and ratably over the remaining term of the Services Agreement through the duration of the Services Agreement. The total revenue recognized for the three and nine months ended June 30, 2020 totaled $12,104 and $24,903, respectively. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. |
Restricted Cash | Restricted Cash Restricted cash consists of the money received by AirFox Brazil related to the Mastercard Program Agreement. Airfox Brazil cannot use any Incentives (as defined in the Program Agreement) for the benefit of any product of any Mastercard competitor and/or any card brand other than the Mastercard Network. (Note 5). |
Short-Term Investments | Short-Term Investments Short-term investments are investments which have a maturity at the date of purchase of three months to five years. Short-term investments consist of a Certificate of Deposit due to mature January 1, 2020 with Santander Bank located in the Cayman Islands. This short-term investment was renewed on January 22, 2020 and matured on May 21, 2020. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. |
Concentrations of Credit Risk and Off-Balance Sheet Risk | Concentrations of Credit Risk and Off-Balance Sheet Risk The Company is subject to concentration of credit risk with respect to their cash and cash equivalents, which the Company attempts to minimize by maintaining cash, cash equivalents, and restricted cash with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation. At June 30, 2020, Airfox Brazil held cash, cash equivalents, and restricted cash totaling $1,365,616 in Brazilian financial institutions. The Company had cash, cash equivalents, and restricted cash, including amounts held in financial institutions in the USA and Brazil that totaled $2,746,009. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk of loss. |
Long-Lived Assets, Including Definite Intangible Assets | Long-Lived Assets, Including Definite Intangible Assets Long-lived assets and other indefinite-lived intangibles are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. The Company’s definite-lived intangible assets primarily consist of various domain names and websites. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. |
Security Deposits | Security Deposits As of June 30, 2020, security deposits primarily include monies being held subject to a security agreement (“Security Agreement”) with Mastercard, Inc. executed on June 7, 2019. The Security Agreement is related to the Services Agreement (See Note 11) to ensure a minimum number of users for the cards, as this is a major phase in the Company’s development process. On April 22, 2020 Mastercard returned $1.2 million plus interest in cash deposit to the Company. Upon Mastercard issuing the minimum number of cards to users, the $300,000 will be paid back to the Company in full. The Company has classified this amount as non-current assets as these funds are not highly liquid and cannot be easily converted into cash. |
Software Development Costs | Software Development Costs The Company capitalizes costs related to software developed or obtained for internal use in accordance with the ASC 350-40, Internal-Use Software ● Preliminary project stage: (a) conceptual formulation of alternatives; (b) evaluation of alternatives; (c) determination of existence of needed technology; and (d) final selection of alternatives. Internal and external costs incurred during the preliminary project stage ● Application development stage: (a) design of chosen path, including software configuration and software interfaces; (b) coding; (c) installation to hardware; and (d) testing, including parallel processing phase. Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized. ● Post-implementation-operation stage: (a) training; and (b) application maintenance. Internal and external costs incurred during the post-implementation-operation stage are expensed as incurred. Certain costs incurred are considered enhancements, modifications to existing internal-use software that result in additional functionality. Enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications. When this additional functionality is determinable, the related costs are capitalized. Otherwise, costs are expensed as incurred. Capitalization of internal-use software costs ceases when a computer software project is substantially complete and ready for its intended use. The Company begins amortization when the product is available for general release or use. The Company has capitalized software costs relating to the Via Varejo Services Agreement (see Note 11) and began amortization on January 1, 2020 as the product is now ready for its intended use and will be amortized through the contract term in September 2023. The amortization expense related to the Via Varejo Services Agreement capitalized software for the three and nine months ended June 30, 2020 totaled $234,159 and $468,318, respectively. The Company capitalizes costs related to the development and maintenance of its website in accordance with ASC 350-50, Website Development Costs |
Capitalizing Software Costs in Connection with Hosting Arrangements and Software as a Service Arrangements | Capitalizing Software Costs in Connection with Hosting Arrangements and Software as a Service Arrangements The Company develops certain software that is considered to be part of a cloud computing arrangement (or hosting arrangement), whereby, a user or a customer of software does not take possession of the Company’s software; rather, the software is accessed on an as-needed basis over the Internet. Therefore, when the software is used to produce a product or in a process to provide a service to a customer, and the customer is not given the right to obtain or use the software, the related costs are accounted for in accordance with ASC 350-40. When a hosting arrangement includes multiple modules or components, capitalized costs are amortized on a module-by-module basis. When a module or component is substantially ready for its intended use, amortization begins, regardless of whether the overall hosting arrangement is being placed in service in planned stages. If the module’s functionality is entirely dependent on the completion of one or more other modules, then amortization does not begin until that group of interdependent modules is substantially ready for use. |
Impairment of Long-term Assets | Impairment of Long-term Assets The Company evaluates the recoverability of tangible and intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. |
Leases | Leases The Company categorizes leases at their inception as either operating or finance leases based on the criteria in ASC 842, Leases. The Company adopted ASC 842 on October 1, 2019, using the modified retrospective approach, and has established a Right-of-Use (“ROU”) Asset and a current and non-current Lease Liability for each lease arrangement identified. The lease liability is recorded at the present value of future lease payments discounted using the discount rate that approximates the Company’s incremental borrowing rate for the lease established at the commencement date, and the ROU asset is measured as the lease liability plus any initial direct costs, less any lease incentives received before commencement. The Company recognizes a single lease cost, so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis. |
Advertising | Advertising Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $179,205 and $75,004 for the three months ended June 30, 2020 and 2019, and $562,200 and $93,536 for the nine months ended June 30, 2020 and 2019, respectively. |
Income Taxes | Income Taxes Income taxes are recorded in accordance with ASC 740, Income Taxes The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. |
Deferred gain on issuance of AirTokens for services | Deferred gain on issuance of AirTokens for services AirTokens issued to vendors for services in connection with raising monies for the purpose of developing the AirToken Project are accounted for in accordance with ASC 845-30-1, Nonmonetary Transactions, which requires that the AirTokens to be recognized at fair value, and resulted in recognizing a deferred gain of approximately $1.7 million in October 2017. The fair value of the AirTokens issued was based on the last price paid ($0.02) by initial investors in acquiring AirTokens towards the development of the AirToken Project (representing a Level 3 non-recurring measurement). The deferred gain will be recognized on a straight-line basis over the estimated development period of the AirToken Project as this represents the best depiction of the measure of progress towards the development of the AirToken Project. The Company will recognize the gain in Other Income beginning October 2017 through the estimated development period of the AirToken Project. Currently, the Company is not able to estimate a date to conclude the development of the AirToken Project due to regulatory matters that affect the continuity of the development process. Due to this reason, the AirToken Project is currently on hold and recognition of deferred gains ceased on September30, 2019. Refer to Note 17 for further information on the rescission offer. |
Distinguishing Liabilities from Equity | Distinguishing Liabilities from Equity The Company relies on the guidance provided by ASC 480, Distinguishing Liabilities from Equity Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet. The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e., at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. The Company records its financial instruments classified as liabilities at their fair value at each subsequent measurement date. The changes in fair value of these financial instruments are recorded as other expense/income. |
Hedging | Hedging The Company does not use derivative instruments to hedge exposures to cash flows, market or foreign currency risks. The Company evaluates its financial instruments, including equity-linked financial instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. |
Stock-based Compensation | Stock-based Compensation The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Compensation - Stock Based Compensation Common shares issued to third parties for services provided are valued based on the estimated fair value of the Company’s common shares. All stock-based compensation costs are recorded in selling, general and administrative expenses in the condensed consolidated statements of operations. All stock-based compensation awards were cancelled as pursuant to the Transaction which occurred on May 21, 2020 (see Note 11). |
Fair Value Measurement | Fair Value Measurement The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and short and long-term debt. The fair values of cash and cash equivalents, accounts receivable, and accounts payable approximate their stated amounts because of the short maturity of these financial instruments. The Company believes the carrying amount of their simple agreement for future equity approximate fair value based on rates and other terms currently available to the Company for similar debt instruments. The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy under ASC 820 are described below: Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. |
Adoption of Recent Accounting Pronouncements | Adoption of Recent Accounting Pronouncements In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. In February 2016, the FASB established Topic 842, Leases Land Easement Practical Expedient for Transition to Topic 842 Codification Improvements to Topic 842 Leases Targeted Improvements Narrow-Scope Improvements for Lessors The Company adopted ASU 2016-02 effective October 1, 2019 using the modified retrospective approach whereby the Company will continue to present prior period financial statements and disclosures under ASC 840. In addition, the Company elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. Further, the Company adopted a short-term lease exception policy, permitting the Company to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities related to the Company’s operating leases, totaling $2.3 and $2.4 million, respectively, recorded on the Company’s consolidated balance sheet as of October 1, 2019. The standard did not materially affect the Company's consolidated net earnings or cash flows. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU 2018-15, Intangibles, Goodwill and Other (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes |
Restatement of Previously Iss_2
Restatement of Previously Issued Financial Statements (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Accounting Changes and Error Corrections [Abstract] | |
Schedule of previously reported balance sheet | The effects of these errors on the Company’s previously reported balance sheet are as follows: June 30, 2020 (unaudited) As reported Adjustments As restated Total assets $ 10,158,760 $ — $ 10,158,760 Current liabilities: Deferred revenue - AirToken Project, current portion 5,011,926 (5,011,926 ) — Deferred gain on issuance of AirTokens for services, current portion 158,713 (158,713 ) — Total Current Liabilities 7,517,837 (5,170,639 ) 2,347,198 Long-term liabilities: Deferred revenue - AirToken Project, net of current portion 3,758,955 8,770,869 12,529,824 Deferred gain on issuance of AirTokens for services, net of current portion 119,043 277,747 396,790 Total liabilities 25,302,907 3,877,977 29,180,884 Stockholders' deficit: Accumulated deficit (16,372,712 ) (3,877,976 ) (20,250,668 ) Total member's deficit attributable to Carrier EQ, LLC members (15,143,435 ) (3,877,976 ) (19,021,411 ) Total member's deficit (15,144,147 ) (3,877,977 ) (19,022,124 ) Total liabilities and stockholders' deficit $ 10,158,760 $ — $ 10,158,760 |
Schedule of statement of operations and comprehensive loss | The effects of these errors on the Company’s previously reported three and nine months ended June 30, 2020 statements of operations and comprehensive loss are as follows: Three months ended Nine months ended June 30, 2020 (unaudited) June 30, 2020 (unaudited) As reported Adjustments As restated As reported Adjustments As restated Revenue $ 1,172,718 (1,138,142 ) $ 34,576 $ 3,702,510 (3,644,103 ) $ 58,407 Cost of revenue $ — (114,839 ) $ (114,839 ) $ — (114,839 ) $ (114,839 ) Other income: Gain on AirToken issuance for services $ 39,678 (39,678 ) $ — $ 119,034 (119,034 ) $ — Net Loss $ (4,829,920 ) (1,292,659 ) $ (6,122,579 ) $ (12,889,479 ) (3,877,976 ) $ (16,767,455 ) Comprehensive net loss $ (4,709,319 ) (1,292,659 ) $ (6,001,978 ) $ (11,770,104 ) (3,877,976 ) $ (15,648,080 ) |
Schedul of statement of cash flows | The effects of these errors on the Company’s previously reported nine months ended June 30, 2020 statement of cash flows as follows: Nine Months Ended June 30, 2020 (unaudited) As reported Adjustments As restated CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (12,889,479 ) (3,877,976 ) $ (16,767,455 ) Gain on issuance of AirTokes for services (119,034 ) 119,034 — Deferred revenue - AirToken Project (3,758,943 ) 3,758,942 (1 ) Net cash used in operating activities $ (1,686,446 ) $ — $ (1,686,446 ) |
Prepaid Expenses and Other Cu_2
Prepaid Expenses and Other Current Assets (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets consisted of the following: June 30, September 30, Service contract $ 349,000 $ 349,000 R&D tax credit 418,760 288,187 Prepaid expenses 242,527 182,171 Total Prepaid expenses and other current assets $ 1,010,287 $ 819,358 |
Digital Assets (Tables)
Digital Assets (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Digital Assets | |
Digital Assets | Changes in Digital Assets during the nine months ended June 30, 2020 was as follows: Ether Bitcoin Total Balance at September 30, 2019 $ 1,392 $ — $ 1,392 Realized loss on the sale of digital assets (1,392 ) — (1,392 ) Balance at June 30, 2020 $ — $ — $ — |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, Net | The following table summarizes the Company’s definitive-lived intangible assets: June 30, 2020 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Value Domain names 3 $ 140,012 $ — $ (86,545 ) $ 53,467 Capitalized software costs towards VV wallet 3 1,500,058 2,658,813 (468,318 ) 3,690,553 Website 3 272,083 10,562 (167,236 ) 115,409 Software 3 17,486 13,143 (4,179 ) 26,450 $ 1,929,639 $ 2,682,518 $ (726,278 ) $ 3,885,879 September 30, 2019 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Value Domain names 3 $ 86,540 $ 53,472 $ (51,542 ) $ 88,470 Capitalized software costs towards VV wallet 3 — 1,500,058 — 1,500,058 Website 3 120,333 151,750 (104,202 ) 167,881 Software 3 — 17,486 (583 ) 16,903 $ 206,873 $ 1,722,766 $ (156,327 ) $ 1,773,312 |
Accrued liabilities (Tables)
Accrued liabilities (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Accrued Liabilities [Abstract] | |
Accrued liabilities | Accrued liabilities consisted of the following: June 30, September 30, Other accrued liabilities $ 402,987 $ 562,840 Customer deposits 557,106 193,267 Accrued compensation 334,945 167,760 Accrued taxes 262,773 — Legal and professional 151,065 97,957 Software and website development — 363,271 Total accrued liabilities $ 1,708,876 $ 1,385,095 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock option valuation assumptions | The Company used the Black-Scholes option-pricing model to estimate the fair value of options issued using the following assumptions: Nine Months Ended June 30, Nine Months Ended June 30, Price of Common Stock $ 0.25 - 0.29 $ 0.29 Volatility 60 - 72% 60 % Expected term (in years) 0 - 6.90 5.30 - 6.08 Risk free rate 1.39 - 1.74% 1.82 - 2.25% |
Stock option activity | The following table summarizes the Company’s stock option activity and related information for the period indicated: Number of Weighted Average Remaining Contractual Term (in years) Weighted Average Exercise Price ($) Outstanding at September 30, 2019 2,684,717 9.47 $ 0.23 Granted 17,000 9.46 $ 0.26 Forfeited (355,745 ) 8.03 $ 0.30 Exercised (939,141 ) 8.08 $ 0.20 Cancelled (1,406,831 ) 8.30 $ 0.25 Outstanding at June 30, 2020 — — $ — Exercisable at June 30, 2020 — — $ — |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease cost | The t a b e o r f r a re a f n ’ r a f three and n Three Months Ended Nine Months Ended June 30, June 30, Components of total lease cost: Operating lease expense $ 168,115 504,345 Short-term lease expense — — Total lease cost $ 168,115 $ 504,345 |
Leases Recorded Balance Sheet | Right of use lease assets and lease li a f r a w r r r a a f o As of June 30, 2020 Assets Operating lease right of use assets $ 2,061,756 Total lease assets $ 2,061,756 Liabilities Current liabilities: Operating lease liability, current portion $ 382,416 Noncurrent liabilities: Operating lease liability, net of current portion 1,835,238 Total lease liability $ 2,217,654 |
Lease Terms and Discount Rate | The t a b e o r f r a re a w a v r a r r w a v r a r a f n ’ r a Weighted average remaining lease term (in years) – operating leases 6.86 Weighted average discount rate – operating leases 7.7 % |
Future lease payments | Futu r a r a a a f f o f iv f a y r w r f o Year ending September 30, Operating Leases Remaining 2020 $ 141,550 2021 525,434 2022 326,453 2023 333,104 2024 339,755 2025 346,406 2026 353,055 2027 359,714 2028 152,420 Total Minimum Lease Payments $ 2,877,891 Less effects of discounting (660,237 ) Present value of future minimum lease payments $ 2,217,654 |
Organization and Nature of Op_2
Organization and Nature of Operations (Details Narrative) - USD ($) | 9 Months Ended | |
Jun. 30, 2020 | Sep. 30, 2018 | |
AirToken obligation | $ 15,400,000 | |
AirFox Brazil [Member] | ||
Ownership percentage | 99.99% |
Financial Condition and Manag_2
Financial Condition and Management's Plans (Details Narrative) | Dec. 17, 2019USD ($) | Dec. 17, 2019BRL (R$) | Dec. 16, 2019USD ($) | Dec. 16, 2019BRL (R$) | Oct. 31, 2019USD ($) | Oct. 31, 2019BRL (R$) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Sep. 30, 2019USD ($) |
Cash and cash equivalents | $ 1,921,263 | $ 5,451,348 | |||||||
Stockholders' deficit | (19,140,984) | ||||||||
Total deficit | 19,021,411 | ||||||||
Working capital deficits | 1,500,000 | ||||||||
AirToken refund liability | 14,449 | $ 3,241,948 | |||||||
Cash from convertible notes | 10,256,000 | ||||||||
Proceeds from convertible note | $ 6,000,000 | ||||||||
Prepayment Incentive Agreement | $ 15,973,857 | ||||||||
Loan Agreement amount borrowed | $ 2,500,000 | ||||||||
Loan repayment | $ 2,500,000 | ||||||||
AirToken refunds not paid | $ 44,000 | ||||||||
Brazil Real [Member] | |||||||||
Prepayment Incentive Agreement | R$ | R$ 65000000 | ||||||||
Loan Agreement amount borrowed | R$ | R$ 10000000 | ||||||||
Loan repayment | R$ | R$ 10167740 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) | Apr. 22, 2020USD ($) | Dec. 28, 2019USD ($) | Dec. 16, 2019USD ($) | Dec. 16, 2019BRL (R$) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Oct. 31, 2017USD ($)$ / shares | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Oct. 02, 2019USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) |
Advertising revenue | $ 0 | $ 1,393 | $ 0 | $ 1,641 | ||||||||
Payments for Ether and Bitcoin | $ 15,300,000 | |||||||||||
Cash obtained for Ether and Bitcoin | 100,000 | |||||||||||
Deferred gain on fair value of AirTokens | $ 1,700,000 | |||||||||||
Last price paid by investors | $ / shares | $ 0.02 | |||||||||||
Security deposits | $ 300,000 | 334,413 | 334,413 | $ 1,548,396 | ||||||||
Security deposit returned | $ 1,200,000 | |||||||||||
Approved claims paid | $ 3,289,607 | |||||||||||
AirToken refunds not paid | 44,000 | 44,000 | ||||||||||
Deferred revenue | 12,500,000 | 12,500,000 | ||||||||||
Cash in Brazilian financial institutions | 1,365,616 | 1,365,616 | ||||||||||
Advertising | 179,205 | 75,004 | 562,200 | 93,536 | ||||||||
Right of use asset | 2,061,756 | 2,061,756 | $ 2,300,000 | |||||||||
Operating lease liability | 2,217,654 | 2,217,654 | $ 2,400,000 | |||||||||
Cash, cash equivalents, and restricted cash | 2,746,009 | 5,439,383 | 2,746,009 | 5,439,383 | $ 5,451,348 | $ 8,019,152 | ||||||
Prepayment Incentive Agreement | $ 15,973,857 | |||||||||||
Sales incentives earned | 429 | 794 | ||||||||||
Interchange fee revenue | 3,085 | 6,802 | ||||||||||
Upfront payment revenue | 12,104 | 24,903 | ||||||||||
Amortization | 266,329 | $ 31,567 | 569,951 | $ 86,090 | ||||||||
Capitalized software costs towards VV Wallet [Member] | ||||||||||||
Amortization | 234,159 | 468,318 | ||||||||||
VV Wallet Services [Member] | ||||||||||||
Payment one for VV Wallet Service | $ 256,000 | $ 256,000 | ||||||||||
Brazil Real [Member] | ||||||||||||
Prepayment Incentive Agreement | R$ | R$ 65000000 | |||||||||||
AirFox Brazil [Member] | ||||||||||||
Ownership percentage | 99.99% |
Restatement of Previously Iss_3
Restatement of Previously Issued Financial Statements (Details) - USD ($) | Jun. 30, 2020 | Sep. 30, 2019 |
Total assets | $ 10,158,760 | $ 9,711,295 |
Current liabilities | ||
Deferred revenue - AirToken Project, current portion | 5,011,926 | |
Deferred gain on issuance of AirTokens for services, current portion | 158,713 | |
Total Current Liabilities | 2,347,198 | 10,856,405 |
Long-term liabilities: | ||
Deferred revenue - AirToken Project, net of current portion | 12,529,824 | 7,517,898 |
Deferred gain on issuance of AirTokens for services, net of current portion | 396,790 | 238,077 |
Total liabilities | 29,180,884 | 28,852,279 |
Stockholders' deficit: | ||
Accumulated deficit | (21,025,864) | |
Total stockholders' deficit attributable to CarrierEQ, Inc. stockholders | (19,140,732) | |
Total stockholders' deficit | (19,140,984) | |
Total liabilities and stockholders' deficit | 10,158,760 | $ 9,711,295 |
As reported [Member] | ||
Total assets | 10,158,760 | |
Current liabilities | ||
Deferred revenue - AirToken Project, current portion | 5,011,926 | |
Deferred gain on issuance of AirTokens for services, current portion | 158,713 | |
Total Current Liabilities | 7,517,837 | |
Long-term liabilities: | ||
Deferred revenue - AirToken Project, net of current portion | 3,758,955 | |
Deferred gain on issuance of AirTokens for services, net of current portion | 119,043 | |
Total liabilities | 25,302,907 | |
Stockholders' deficit: | ||
Accumulated deficit | (16,372,712) | |
Total stockholders' deficit attributable to CarrierEQ, Inc. stockholders | (15,143,435) | |
Total stockholders' deficit | (15,144,147) | |
Total liabilities and stockholders' deficit | 10,158,760 | |
Adjustments [Member] | ||
Total assets | ||
Current liabilities | ||
Deferred revenue - AirToken Project, current portion | (5,011,926) | |
Deferred gain on issuance of AirTokens for services, current portion | (158,713) | |
Total Current Liabilities | (5,170,639) | |
Long-term liabilities: | ||
Deferred revenue - AirToken Project, net of current portion | 8,770,869 | |
Deferred gain on issuance of AirTokens for services, net of current portion | 277,747 | |
Total liabilities | 3,877,977 | |
Stockholders' deficit: | ||
Accumulated deficit | (3,877,976) | |
Total stockholders' deficit attributable to CarrierEQ, Inc. stockholders | (3,877,976) | |
Total stockholders' deficit | (3,877,977) | |
Total liabilities and stockholders' deficit | ||
As restated [Member] | ||
Total assets | 10,158,760 | |
Current liabilities | ||
Deferred revenue - AirToken Project, current portion | ||
Deferred gain on issuance of AirTokens for services, current portion | ||
Total Current Liabilities | 2,347,198 | |
Long-term liabilities: | ||
Deferred revenue - AirToken Project, net of current portion | 12,529,824 | |
Deferred gain on issuance of AirTokens for services, net of current portion | 396,790 | |
Total liabilities | 29,180,884 | |
Stockholders' deficit: | ||
Accumulated deficit | (20,250,668) | |
Total stockholders' deficit attributable to CarrierEQ, Inc. stockholders | (19,021,411) | |
Total stockholders' deficit | (19,022,124) | |
Total liabilities and stockholders' deficit | $ 10,158,760 |
Restatement of Previously Iss_4
Restatement of Previously Issued Financial Statements (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue | $ 34,576 | $ 1,393 | $ 58,407 | $ 1,641 |
Cost of revenue | (114,839) | (114,839) | ||
Other income: | ||||
Gain on AirToken issuance for services | 175,717 | 527,152 | ||
Net Loss | (6,122,579) | (2,578,127) | (16,767,455) | (5,854,067) |
Comprehensive net loss | (6,001,978) | $ (2,568,009) | (15,648,080) | $ (5,848,499) |
As reported [Member] | ||||
Revenue | 1,172,718 | 3,702,510 | ||
Cost of revenue | ||||
Other income: | ||||
Gain on AirToken issuance for services | 39,678 | 119,034 | ||
Net Loss | (4,829,920) | (12,889,479) | ||
Comprehensive net loss | (4,709,319) | (11,770,104) | ||
Adjustments [Member] | ||||
Revenue | (1,138,142) | (3,644,103) | ||
Cost of revenue | (114,839) | (114,839) | ||
Other income: | ||||
Gain on AirToken issuance for services | (39,678) | (119,034) | ||
Net Loss | (1,292,659) | (3,877,976) | ||
Comprehensive net loss | (1,292,659) | (3,877,976) | ||
As restated [Member] | ||||
Revenue | 34,576 | 58,407 | ||
Cost of revenue | (114,839) | (114,839) | ||
Other income: | ||||
Gain on AirToken issuance for services | ||||
Net Loss | (6,122,579) | (16,767,455) | ||
Comprehensive net loss | $ (6,001,978) | $ (15,648,080) |
Restatement of Previously Iss_5
Restatement of Previously Issued Financial Statements (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | $ (6,122,579) | $ (2,578,127) | $ (16,767,455) | $ (5,854,067) |
Gain on issuance of AirTokes for services | $ (175,717) | (527,152) | ||
Net cash provided by operating activities | (1,686,446) | $ (7,744,128) | ||
As reported [Member] | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | (4,829,920) | (12,889,479) | ||
Gain on issuance of AirTokes for services | (39,678) | (119,034) | ||
Deferred revenue - AirToken Project | (3,758,943) | |||
Net cash provided by operating activities | (1,686,446) | |||
Adjustments [Member] | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | (1,292,659) | (3,877,976) | ||
Gain on issuance of AirTokes for services | 39,678 | 119,034 | ||
Deferred revenue - AirToken Project | 3,758,942 | |||
Net cash provided by operating activities | ||||
As restated [Member] | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | (6,122,579) | (16,767,455) | ||
Gain on issuance of AirTokes for services | ||||
Deferred revenue - AirToken Project | (1) | |||
Net cash provided by operating activities | $ (1,686,446) |
Restatement of Previously Iss_6
Restatement of Previously Issued Financial Statements (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue | $ 34,576 | $ 1,393 | $ 58,407 | $ 1,641 |
Adjustments [Member] | ||||
Revenue | (1,138,142) | (3,644,103) | ||
Other income | $ 39,700 | 119,000 | ||
Deferred revenue | 3,758,942 | |||
Gain on deferred revenue | $ 119,000 |
Mastercard Program Agreement (D
Mastercard Program Agreement (Details Narrative) | Dec. 16, 2019USD ($) | Dec. 16, 2019BRL (R$) | Jun. 30, 2020USD ($) | Jun. 30, 2020USD ($) |
Prepayment Incentive Agreement | $ 15,973,857 | |||
Sales incentives earned | $ 429 | $ 794 | ||
Brazil Real [Member] | ||||
Prepayment Incentive Agreement | R$ | R$ 65000000 |
Prepaid Expenses and Other Cu_3
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Jun. 30, 2020 | Sep. 30, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Service contract | $ 349,000 | $ 349,000 |
R&D tax credit | 418,760 | 288,187 |
Prepaid expenses | 242,527 | 182,171 |
Prepaid expenses and other current assets | $ 1,010,287 | $ 819,358 |
Digital Assets (Details)
Digital Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Balance at beginning | $ 1,392 | |||
Realized loss on sale of digital assets | (1,392) | $ (90,940) | ||
Balance at end | ||||
Ether [Member] | ||||
Balance at beginning | 1,392 | |||
Realized loss on sale of digital assets | (1,392) | |||
Balance at end | ||||
Bitcoin [Member] | ||||
Balance at beginning | ||||
Realized loss on sale of digital assets | ||||
Balance at end |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Sep. 30, 2019 | |
Gross | $ 1,929,639 | $ 206,873 |
Additions | 2,682,518 | 1,722,766 |
Accumulated amortization | (726,278) | (156,327) |
Net Carrying Value | $ 3,885,879 | $ 1,773,312 |
Domain Names [Member] | ||
Useful life | 3 years | 3 years |
Gross | $ 140,012 | $ 86,540 |
Additions | 53,472 | |
Accumulated amortization | (86,545) | (51,542) |
Net Carrying Value | $ 53,467 | $ 88,470 |
Capitalized software costs towards VV Wallet [Member] | ||
Useful life | 3 years | 3 years |
Gross | $ 1,500,058 | |
Additions | 2,658,813 | 1,500,058 |
Accumulated amortization | (468,318) | |
Net Carrying Value | $ 3,690,553 | $ 1,500,058 |
Website [Member] | ||
Useful life | 3 years | 3 years |
Gross | $ 272,083 | $ 120,333 |
Additions | 10,562 | 151,750 |
Accumulated amortization | (167,236) | (104,202) |
Net Carrying Value | $ 115,409 | $ 167,881 |
Software [Member] | ||
Useful life | 3 years | 3 years |
Gross | $ 17,486 | |
Additions | 13,143 | 17,486 |
Accumulated amortization | (4,179) | (583) |
Net Carrying Value | $ 26,450 | $ 16,903 |
Intangible Assets, Net (Detai_2
Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 266,329 | $ 31,567 | $ 569,951 | $ 86,090 |
Accrued liabilities (Details)
Accrued liabilities (Details) - USD ($) | Jun. 30, 2020 | Sep. 30, 2019 |
Accrued Liabilities [Abstract] | ||
Other accrued liabilities | $ 402,987 | $ 562,840 |
Customer deposits | 557,106 | 193,267 |
Accrued compensation | 334,945 | 167,760 |
Accrued taxes | 262,773 | |
Legal and professional | 151,065 | 97,957 |
Software and website development | 363,271 | |
Accrued liabilities | $ 1,708,876 | $ 1,385,095 |
Debt (Details Narrative)
Debt (Details Narrative) - USD ($) | Apr. 21, 2020 | Jun. 30, 2020 | Jun. 30, 2019 |
Debt Disclosure [Abstract] | |||
Loan funding Paycheck Protection Program | $ 537,732 | ||
Interest rate | 1.00% | ||
Term | 2 years | ||
Payment of principal from Paycheck Protection Program SBA loan | $ 537,732 | ||
Interest | $ 433 |
Via Varejo Services Agreement_2
Via Varejo Services Agreement and Convertible Notes (Details Narrative) - USD ($) | May 21, 2020 | Apr. 21, 2020 | Sep. 06, 2019 | Jun. 10, 2019 | Feb. 14, 2019 | Sep. 11, 2018 | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Sep. 30, 2019 |
Term | 2 years | |||||||||
Proceeds from convertible note | $ 6,000,000 | |||||||||
Upfront payment revenue | $ 12,104 | $ 24,903 | ||||||||
Call Rights | Call Option The Call Option Period for the Notes is the period commencing on the Agreement Effective Date and ending upon the earlier to occur of (a) November 30, 2020 or (b) 30 days following the date on which banQi has been downloaded 12 million times in the aggregate by customers in Brazil for use with the VV Wallet Services (the "Call Option Period End Date"). The Call Option Period End Date may be extended to September 30, 2021 by certain events detailed in the Notes Agreement (collectively, the Call Options Expiration Date). The Notes features both primary and secondary call rights in which, during the Call Option Period, at the option of the Client, the Notes may be converted into $10,000,000 and $6,000,000, respectively, of the Companys Common Stock. On May 21, 2020, the convertible notes in the aggregate amount of $10,000,000 was converted into shares of the Companys Common Stock, and an additional $6,000,000 of shares of the Company Common Stock (8,003,706 shares) was purchased directly from certain Company stockholders (the Option Stockholders). The Common Stock was immediately cancelled pursuant to the terms of the Call Exercise Notice, and the Buyer received 100% membership interests in the Company. The Company analyzed the call options and determined they did not meet the definition of derivatives and therefore they will not be bifurcated from the host agreement. Exercise of Call Rights During the Call Option Period, the Client may choose to exercise certain call rights (the Call Rights). In such instance, the Client will notify the Company and specify that the exercise is with respect to one of the following alternatives: a. Majority Exercise - An aggregate amount of (i) Notes equal to $4,000,000 being converted into shares of the Companys Common Stock (Primary Shares) and (ii) $6,000,000 of shares of the Companys Common Stock being purchased directly from the Stockholders (Secondary Shares), provided, that, in the event that there are less than $4,000,000 in Notes outstanding ("Insufficient Notes") at the time the Client elects to exercise the Call Rights, the Company agrees to issue to the Client, at an established valuation of the Company, as defined in the Notes Agreement (the Agreed Valuation) and the Client agrees to purchase, such additional shares of the Companys common stock in an amount such that when combined with, and after giving effect to, the conversion of the Insufficient Notes into Primary Shares and the purchase of $6,000,000 in Secondary Shares, The Client shall own at least a majority of the shares of Company Stock then issued and outstanding, on a fully diluted basis; or b. Eighty Percent Exercise - An aggregate amount of (i) Notes equal to $10,000,000 being converted into Primary Shares and (ii) $6,000,000 of Secondary Shares being purchased from the Stockholders, such that the Client shall own 80% of the Company Stock on a fully diluted basis, provided, that, in the event that, at the time the Client elects to exercise the Call Right, there are less than $6,000,000 of Secondary Shares available for purchase from the Stockholders, the Company agrees to issue to the Client, at the Agreed Valuation, and Client agrees to purchase, such additional shares of the Companys common stock in an amount such that when combined with, and after giving effect to, the conversion of the Notes into Primary Shares and the purchase of the Secondary Shares available for purchase from the Stockholders, the Client shall own at least 80% of the shares of common stock then issued and outstanding, on a fully diluted basis. On May 21, 2020, the convertible notes in the aggregate amount of $10,000,000 was converted into 13,339,510 shares of the Companys Common Stock, and an additional $6,000,000 of shares of the Company Common Stock was purchased directly from Option Stockholders, totaling 8,003,706 shares. The common stock was subsequently cancelled, and the Buyer received 100% membership interests in the Company. Call Exercise Notice and Business Combination On February 7, 2020, Via Varejo notified the Company and the Option Stockholders of Via Varejos intention to exercise its call right pursuant to a Convertible Note Purchase and Call Option Agreement, dated as of September 11, 2018, as amended on June 10, 2019 by the First Amendment to the Convertible Note Purchase and Call Option Agreement, through Lake Niassa (the Buyer), whereby (i) convertible notes in the aggregate principal amount of $10,000,000 will be converted into shares of the Companys common stock and (ii) $6,000,000 of shares of the Companys common stock will be purchased directly from the Option Stockholders, such that, after purchasing the Primary Shares and the Secondary Shares, Via Varejo shall own 80% of the Companys common stock on a fully diluted basis (the Transaction). The agreed upon valuation of the Company for the purposes of the Transaction is $20 million. The Transaction closed on May 21, 2020. On May 21, 2020, the Buyer, Via Varejo, the Company and Victor Santos, solely in his capacity as the Companys Representative (as such term is defined in the Call Option Agreement) entered into that certain Side Letter Agreement (the Side Letter), which defined the term Diligence Liabilities, as such term is used in the Call Option Agreement. Pursuant to the Call Exercise Notice, Via Varejos exercise of the Call Right, and its obligation to consummate the Transaction, is subject to and conditioned upon the satisfaction by the Company or the Option Stockholders of certain conditions (or waiver of such conditions by Via Varejo) prior to the consummation of the Transaction, which closed on May 21, 2020. These conditions include, among other things, (a) the Company amending its certificate of incorporation to provide for (i) a single class of common stock (and automatic conversion of any and all outstanding shares of preferred stock into common stock) (the Conversion of Shares) and (ii) no preferential rights in favor of any person other than Via Varejo, (b) obtaining preemptive rights waivers from certain Option Stockholders and (c) the acceleration of vesting of all stock options issued under the Companys 2016 Equity Incentive Plan, as amended (the Plan) whereby upon the consummation of the Transaction, all stock options then issued and outstanding under the Plan are cancelled in exchange for a cash payment (calculated based on the per share price contained in the form of Second Amendment to Stock Purchase Agreement, dated as of May 18, 2020 entered into by the Buyer and certain employees of the Company (the Employee SPAs)) funded by Via Varejo and made to the holders of such stock options. Additionally, the execution and delivery of a stock purchase agreement, substantially in the form contemplated by the Call Option Agreement, by each of Via Varejo, the Company and the Option Stockholders, is a condition to closing the Transaction. | |||||||||
Converted debt shares issued | 474,996 | |||||||||
Common stock cancelled | 25,265,794 | |||||||||
Simple agreement for future equity | $ 239,899 | $ 239,899 | ||||||||
February 14, 2019 Convertible Promissory Note [Member] | ||||||||||
Interest rate | The outstanding principal amount of the Notes bear interest at the annual rate of 1.00%, compounded monthly. If any amount payable under the Notes are not paid when due, such overdue amount shall bear interest of 3.00%. | |||||||||
Proceeds from convertible note | $ 2,500,000 | |||||||||
June 10, 2019 Convertible Promissory Note [Member] | ||||||||||
Proceeds from convertible note | $ 3,500,000 | |||||||||
September 6, 2019 Convertible Promissory Note [Member] | ||||||||||
Proceeds from convertible note | $ 4,000,000 | |||||||||
VV Wallet Services [Member] | ||||||||||
Payment one for VV Wallet Service | 256,000 | 256,000 | ||||||||
Payment two for VV Wallet Service | 2,500,000 | 2,500,000 | ||||||||
Payment three for VV Wallet Service | 3,500,000 | 3,500,000 | ||||||||
Payment four for VV Wallet Service | $ 4,000,000 | $ 4,000,000 | ||||||||
Convertible Debt [Member] | ||||||||||
Term | 5 years | |||||||||
Converted debt | $ 10,000,000 | |||||||||
Converted debt shares issued | 13,339,510 | |||||||||
Accrued interest forgiven | $ 105,000 | |||||||||
Common stock cancelled | 6,000,000 | |||||||||
Cancelled stock shares | 8,003,706 | |||||||||
Convertible Debt [Member] | Maximum [Member] | ||||||||||
Debt amount | $ 10,000,000 |
Simple Agreement for Future E_2
Simple Agreement for Future Equity (Details Narrative) - USD ($) | May 21, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Jul. 31, 2017 |
Equity [Abstract] | ||||
Original Simple Agreement for Future Equity one | $ 189,899 | |||
Original Simple Agreement for Future Equity two | $ 50,000 | |||
Simple agreement for future equity | $ 239,899 | $ 239,899 | ||
Converted | 474,996 |
Preferred Stock (Details Narrat
Preferred Stock (Details Narrative) - shares | May 21, 2020 | Jul. 15, 2016 | Jan. 25, 2016 |
Stock sold | 133,893 | 497,873 | |
Convertible Preferred Stock Series One [Member] | |||
Stock sold | 2,652,072 | ||
Stock cancelled | 2,652,072 | ||
Convertible Preferred Stock Series One A [Member] | |||
Stock sold | 1,046,147 | ||
Stock cancelled | 1,046,147 |
Common Stock (Details Narrative
Common Stock (Details Narrative) - USD ($) | May 21, 2020 | Feb. 28, 2018 | Jul. 15, 2016 | Jan. 25, 2016 |
Equity [Abstract] | ||||
Stock sold | $ 20,000 | |||
Stock shares sold | 133,893 | 497,873 | ||
Purchase of treasury stock | $ 240,000 | |||
Purchase of treasury stock shares | 414,893 | |||
Common stock cancelled | 25,265,794 |
Stock Based Compensation (Detai
Stock Based Compensation (Details) - $ / shares | 9 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Price of Common Stock | $ 0.29 | |
Volatility minimum | 60.00% | |
Volatility maximum | 72.00% | |
Volatility | 60.00% | |
Risk free rate minimum | 1.39% | 1.82% |
Risk free rate maximum | 1.74% | 2.25% |
Minimum [Member] | ||
Price of Common Stock | $ 0.25 | |
Expected term (in years) | 0 years | 5 years 3 months 19 days |
Maximum [Member] | ||
Price of Common Stock | $ 0.29 | |
Expected term (in years) | 6 years 10 months 25 days | 6 years 29 days |
Stock Based Compensation (Det_2
Stock Based Compensation (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | ||
Outstanding, beginning of year | 2,684,717 | |
Granted | 17,000 | |
Forfeited | (355,745) | |
Exercised | (939,141) | |
Cancelled | (1,406,831) | |
Outstanding, end of year | 0 | 2,684,717 |
Exercisable, end of year | 0 | |
Outstanding, beginning of year | $ 0.23 | |
Granted | 0.26 | |
Forfeited | 0.30 | |
Exercised | 0.20 | |
Cancelled | 0.25 | |
Outstanding, end of year | 0 | $ 0.23 |
Exercisable | $ 0 | |
Weighted Average Contractual Term Outstanding | 9 years 5 months 20 days | |
Weighted Average Contractual Term Granted | 9 years 5 months 16 days | |
Weighted Average Contractual Term Forfeited | 8 years 11 days | |
Weighted Average Contractual Term Exercised | 8 years 29 days | |
Weighted Average Contractual Term Cancelled | 8 years 3 months 19 days |
Stock Based Compensation (Det_3
Stock Based Compensation (Details Narrative) - USD ($) | May 21, 2020 | Feb. 26, 2020 | Feb. 06, 2020 | Feb. 03, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Sep. 30, 2019 |
Share-based Payment Arrangement [Abstract] | |||||||||
Common stock authorized under plan | 2,676,126 | 2,834,837 | |||||||
Accelerated vested shares | 277,564 | 149,564 | 751,849 | ||||||
Fair value of stock | $ 0.29 | ||||||||
Granted shares | 17,000 | ||||||||
Grant date fair value | $ 0.17 | ||||||||
Unrecognized compensation | $ 114,979 | ||||||||
Lump sum cash payment | $ 3,331,255 | ||||||||
Additional stock based compensation | $ 3,092,536 | ||||||||
Compensation expense | $ 3,207,515 | $ 28,925 | $ 325,582 | $ 74,538 |
Concentrations (Details Narrati
Concentrations (Details Narrative) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Sep. 30, 2019 | |
Accounts Payable Top Five Vendors [Member] | ||
Percentage | 85.00% | 86.00% |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Jun. 30, 2020 | Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease expense | $ 168,115 | $ 504,345 |
Short-term lease expense | ||
Total lease cost | $ 168,115 | $ 504,345 |
Commitments and Contingencies_3
Commitments and Contingencies (Details 1) - USD ($) | Jun. 30, 2020 | Oct. 02, 2019 | Sep. 30, 2019 |
Commitments and Contingencies Disclosure [Abstract] | |||
Operating lease right of use assets | $ 2,061,756 | $ 2,300,000 | |
Lease liability, current portion | 382,416 | ||
Lease liability, net of current portion | 1,835,238 | ||
Total lease liability | $ 2,217,654 | $ 2,400,000 |
Commitments and Contingencies_4
Commitments and Contingencies (Details 2) | Jun. 30, 2020 |
Commitments and Contingencies Disclosure [Abstract] | |
Weighted average remaining lease term (in years) - operating leases | 6 years 10 months 10 days |
Weighted average discount rate - operating leases | 7.70% |
Commitments and Contingencies_5
Commitments and Contingencies (Details 3) - USD ($) | Jun. 30, 2020 | Oct. 02, 2019 |
Commitments and Contingencies Disclosure [Abstract] | ||
Remaining 2020 | $ 141,550 | |
2021 | 525,434 | |
2022 | 326,453 | |
2023 | 333,104 | |
2024 | 339,755 | |
2025 | 346,406 | |
2026 | 353,055 | |
2027 | 359,714 | |
2028 | 152,420 | |
Total | 2,877,891 | |
Less effects of discounting | (660,237) | |
Present value of future minimum lease payments | $ 2,217,654 | $ 2,400,000 |
Commitments and Contingencies_6
Commitments and Contingencies (Details Narrative) - USD ($) | Dec. 28, 2019 | Oct. 31, 2017 | Jun. 30, 2020 | Nov. 16, 2018 |
Commitments and Contingencies Disclosure [Abstract] | ||||
Incremental borrowing rate lease one | 7.52% | |||
Incremental borrowing rate lease two | 5.73% | |||
Incremental borrowing rate lease three | 9.68% | |||
Capital raised sale of AirTokens | $ 15,000,000 | |||
Penalties to the SEC | $ 250,000 | |||
Penalties Commonwealth of Massachusetts | $ 100,000 | |||
Approved claims paid | $ 3,289,607 | |||
AirToken refunds not paid | $ 44,000 | |||
Loss contingencies | 690,820 | |||
Third party agreements | 1,600,000 | |||
Third party agreements paid | 1,400,000 | |||
Sublease income | $ 30,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 9 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Related Party Transactions [Abstract] | ||
Unbilled receivables | $ 8,100 | |
Related party payables | 8,400 | |
Deferred revenue | 197,000 | |
Capital contribution - Via Varejo | $ 1,921,004 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Jul. 30, 2020USD ($)$ / sharesshares | Jul. 30, 2020BRL (R$)shares | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jul. 30, 2020R$ / shares | Jul. 29, 2020USD ($) |
Capital contribution | $ 1,921,004 | |||||
Subsequent Event [Member] | ||||||
Future capital contribution | $ 1,500,000 | |||||
Future capital contribution August 31, 2020 | 1,000,000 | |||||
Future capital contribution September 30, 2020 | $ 1,400,000 | |||||
Subsequent Event [Member] | AirFox Brazil [Member] | ||||||
Capital contribution | $ 1,429,043 | |||||
Shares exchanged for contributions | shares | 7,370,000 | 7,370,000 | ||||
Price | $ / shares | $ 0.19 | |||||
Subsequent Event [Member] | AirFox Brazil [Member] | Brazil Real [Member] | ||||||
Capital contribution | R$ | R$ 7370000 | |||||
Price | R$ / shares | R$ 1.00 |