10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For The Quarterly Period Ended: June 30, 2019

☐ Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For The Transition Period From ___________ to _______________

Commission File Number: 000-29621

XSUNX, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-1384159
(State of incorporation)	(I.R.S. Employer Identification No.)

65 Enterprise, Aliso Viejo, CA 92656

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number: (949) 330-8060

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒No ☐

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

The number of shares of common stock issued and outstanding as of August 19, 2019 was 1,601,887,744

TABLE OF CONTENTS

	PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	3
Condensed Balance Sheets	3
Condensed Statements of Operations	4
Condensed Statements of Shareholders Deficit	5
Condensed Statements of Cash Flows	6
Notes to Condensed Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Qualitative and Quantitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults upon Senior Securities	20
Item 4. Mine Safety Disclosure	20
Item 5. Other Information	20
Item 6. Exhibits	21
Signatures	22

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements. 

XSUNX, INC.

CONDENSED BALANCE SHEETS

	June 30, 2019			September 30, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	60,318		$	41,090
Contract receivables		247,491			99,907
Prepaid expenses		865			5,399
Contract asset		-			6,919
Total Current Assets		308,674			153,315
PROPERTY & EQUIPMENT
Office & miscellaneous equipment		31,479			29,842
Machinery & equipment		2,045			1,398
		33,524			31,240
Less accumulated depreciation		(30,716	)		(30,374	)
Net Property & Equipment		2,808			866
TOTAL ASSETS	$	311,482		$	154,181
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	150,478		$	134,398
Credit card payable		67,219			64,577
Accrued expenses and interest on notes payable		57,533			55,764
Contract liabilities		213,288			141,688
Derivative liability		2,720,833			4,154,333
Promissory note, related party		7,200			31,500
Convertible promissory note, related party		12,000			12,000
Convertible promissory notes, current portion net of debt discount of $0 and $36,297, respectively		35,144			31,736
Total Current Liabilities		3,263,695			4,625,996
LONG TERM LIABILITIES
Convertible promissory notes, net of debt discount of $0 and $12, respectively		165,880			165,868
Total Long Term Liabilities		165,880			165,868
TOTAL LIABILITIES		3,429,575			4,791,864
SHAREHOLDERS' DEFICIT
Preferred stock 50,000,000 shares authorized, shares issued and outstanding designated as follows:
Preferred Stock Series A, $0.01 par value, 10,000 authorized 5,000 and 5,000 shares issued and outstanding, respectively		50			50
Common stock, no par value; 2,000,000,000 authorized common shares 1,601,887,744 and 1,468,106,819 shares issued and outstanding, respectively		33,403,253			33,311,674
Additional paid in capital		5,335,398			5,335,398
Paid in capital, common stock warrants		3,811,700			3,811,700
Accumulated deficit		(45,668,494	)		(47,096,505	)
TOTAL SHAREHOLDERS' DEFICIT		(3,118,093	)		(4,637,683	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	311,482		$	154,181

The accompanying notes are an integral part of these unaudited condensed financial statements.

3

XSUNX, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
SALES	$	296,237		$	393,011		$	1,159,466		$	524,108
COST OF GOODS SOLD		194,193			307,567			661,224			376,952
GROSS PROFIT		102,044			85,444			498,242			147,156
OPERATING EXPENSES
Selling, general and administrative expenses		119,882			95,744			405,464			308,916
Depreciation and amortization expense		148			70			342			210
TOTAL OPERATING EXPENSES		120,030			95,814			405,806			309,126
LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSES)		(17,986	)		(10,370	)		92,436			(161,970	)
OTHER INCOME/(EXPENSES)
Loss on conversion of debt		-			-			(33,829	)		(207,190	)
Gain (Loss) on change in derivative liability		(434,387	)		(6,226,878	)		1,433,500			(6,356,104	)
Interest expense		(8,067	)		(34,394	)		(64,094	)		(72,128	)
TOTAL OTHER INCOME/(EXPENSES)		(442,454	)		(6,261,272	)		1,335,577			(6,635,422	)
NET INCOME (LOSS)	$	(460,440	)	$	(6,271,642	)	$	1,428,013		$	(6,797,392	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.00	)	$	(0.00	)	$	0.00		$	(0.01	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING  BASIC AND DILUTED		1,601,887,744			1,406,800,138			1,545,192,198			1,320,387,002

The accompanying notes are an integral part of these unaudited condensed financial statements.

4

XSUNX, INC.

CONDENSED STATEMENT OF SHAREHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED JUNE 30, 2019

	FISCAL NINE MONTH PERIOD ENDED JUNE 31, 2018
									Additional		Stock Options/
	Preferred Stock				Common Stock				Paid-in		Warrants		Accumulated
	Shares		Amount		Shares		Amount		Capital		Paid-in-Capital		Deficit			Total
Balance at September 30, 2017		5,000	$	50		1,040,146,548	$	32,935,727	$	5,335,398	$	3,811,700	$	(43,127,099	)	$	(1,044,224	)
Common stock issued upon conversion of debt and accrued interest		-		-		273,701,864		174,467		-		-		-			174,467
Net Loss		-		-		-		-		-		-		(66,544	)		(66,544	)
Balance at December 31, 2017 (unaudited)		5,000		50		1,313,848,412		33,110,194		5,335,398		3,811,700		(43,193,643	)		(936,301	)
Common stock issued upon conversion of debt and accrued interest		-		-		92,951,726		119,620		-		-		-			119,620
Net Loss		-		-		-		-		-		-		(459,206	)		(459,206	)
Balance at March 31, 2018 (unaudited)		5,000		50		1,406,800,138		33,229,814		5,335,398		3,811,700		(43,652,849	)		(1,275,887	)
Net Loss		-		-		-		-		-		-		(6,271,642	)		(6,271,642	)
Balance at June 30, 2018 (unaudited)		5,000	$	50		1,406,800,138		33,229,814		5,335,398		3,811,700		(49,924,491	)		(7,547,529	)

	FISCAL NINE MONTH PERIOD ENDED JUNE 30, 2019
									Additional		Stock Options/
	Preferred Stock				Common Stock				Paid-in		Warrants		Accumulated
	Shares		Amount		Shares		Amount		Capital		Paid-in-Capital		Deficit			Total
Balance at September 30, 2018		5,000	$	50		1,468,106,819	$	33,311,674	$	5,335,398	$	3,811,700	$	(47,096,505	)	$	(4,637,683	)
Common stock issued upon conversion of debt and accrued interest		-		-		52,990,411		39,401		-		-		-			39,401
Net Income		-		-		-		-		-		-		1,406,086			1,406,086
Balance at December 31, 2018 (unaudited)		5,000		50		1,521,097,230		33,351,075		5,335,398		3,811,700		(45,690,419	)		(3,192,196	)
Common stock issued upon conversion of debt and accrued interest		-		-		80,790,514		52,178		-		-		-			52,178
Net Income		-		-		-		-		-		-		482,365			482,365
Balance at March 31, 2019 (unaudited)		5,000		50		1,601,887,744		33,403,253		5,335,398		3,811,700		(45,208,054	)		(2,657,653	)
Net Loss		-		-		-		-		-		-		(460,440	)		(460,440	)
Balance at June 30, 2019 (unaudited)		5,000	$	50		1,601,887,744		33,403,253		5,335,398		3,811,700		(45,668,494	)		(3,118,093	)

The accompanying notes are an integral part of these unaudited condensed financial statements.

5

XSUNX, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED JUNE 30, 2019

(Unaudited)

	Nine Months Ended
	June 30, 2019			June 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$	1,428,013		$	(6,797,392	)
Adjustment to reconcile net income (loss) to net cash       provided by (used in) operating activities
Depreciation & amortization		342			210
(Gain)/Loss on change in derivative liability		(1,433,500	)		6,356,104
Amortization of debt discount recorded as interest expense		36,309			37,095
Loss on conversion of debt		33,829			207,190
(Increase) Decrease in Change in Assets:
Contract receivables		(147,584	)		10,953
Contract assets		6,919			(60,248	)
Prepaid expenses		4,534			6,348
Increase (Decrease) in Change in Liabilities:
Accounts payable		18,722			67,844
Accrued expenses		26,628			22,870
Contract liabilities		71,600			94,558
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		45,812			(54,468	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed asset		(2,284	)		-
NET CASH USED IN INVESTING ACTIVITIES		(2,284	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on related party promissory notes		(24,300	)		-
Proceeds from convertible promissory notes		-			117,000
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(24,300	)		117,000
NET INCREASE (DECREASE) IN CASH		19,228			62,532
CASH, BEGINNING OF PERIOD		41,090			23,056
CASH, END OF PERIOD	$	60,318		$	85,588
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	7,911		$	2,364
Taxes paid	$	-		$	-
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Fair value of issuance of common stock upon conversion of debt and accrued interest	$	91,579		$	294,087

The accompanying notes are an integral part of these unaudited condensed financial statements.

6

XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

1.    Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ended September 30, 2019. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended September 30, 2018.

Going Concern

The accompanying unaudited condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying unaudited condensed financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the nine months ended June 30, 2019, the Company did not generate significant revenue, incurred a net income of $1,428,013, which included a non-cash change in derivative liability of $1,433,500 and cash provided in operations of $45,812. As of June 30, 2019, the Company had a working capital deficiency of $2,955,021, and a shareholders’ deficit of $3,118,093. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from its shareholders since its inception through the nine months ended June 30, 2019. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of its business development efforts in the solar PV industry.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of XsunX, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, revenue recognition, the deferred tax valuation allowance, the fair value of stock options, and derivative liabilities. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents include cash in banks and money markets with an original maturity of three months or less.

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, if evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

7

XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revisions in cost and profit estimates during the contract are reflected in the accounting period in which the facts, which require the revision, become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as any retentions, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs.

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients’ financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers monthly. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The contract receivable balance was $247,491 and $99,907 at June 30, 2019 and September 30, 2018, respectively.

Project Warranties

Customers in our target market of California who purchase solar energy systems are covered by a warranty of up to 10 years in duration for material defects and workmanship. In addition, we provide a pass-through of the major components such as module mounting, inverter and solar panel manufacturers’ warranties to our customers, which generally range from 10 to 25 years. The Company has a limited history of project installations and will access potential warranty costs, and other allowances, based on our experience in servicing warranty claims as they may arise in the future. During the nine months ended June 30, 2019, the Company did not experience costs related to warranty claims.

Stock-Based Compensation

Share-based Payment applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Binomial lattice model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. This has not had a material impact on our results of operations.

Net Earnings (Loss) per Share Calculations

Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).  

 

For the nine months ended June 30, 2019, the Company calculated the dilutive impact of the convertible debt of $201,024, which is convertible into shares of common stock. The convertible debt was not included in the calculation of net income (loss) per share, because their impact was antidilutive.  

For the nine months ended June 30, 2018, the Company calculated the dilutive impact of the convertible debt of $272,913, which is convertible into shares of common stock. The convertible debt was not included in the calculation of net loss per share, because their impact was antidilutive. 

8

XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2019, the balances reported for cash, prepaid expenses, accounts payable, accrued expenses approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2019:

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative Liability	$	2,720,833	$	-	$	-	$	2,720,833
Total Liabilities measured at fair value	$	2,720,833	$	-	$	-	$	2,720,833

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

Balance as of September 30, 2018	$	4,154,333
Net Gain on change in derivative liability		(1,433,500	)
Ending balance as of June 30, 2019	$	2,720,833

Recent Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company has evaluated the impact of the adoption of ASU 2016-15 on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

9

XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

3.    CAPITAL STOCK

Preferred Stock

As of June 30, 2019, the Company had 5,000 shares of issued and outstanding Series A Preferred Stock issued to the Company’s Chief Executive Officer and Director, Tom M. Djokovich. The shares were issued in consideration for the contribution of services by Mr. Djokovich to the Company valued at fifty dollars, which the Board deemed full and fair consideration. Because of such issuance, Mr. Djokovich has the ability to influence and determine stockholder votes.

Common Stock

During the nine months ended June 30, 2019, the Company issued 133,780,925 shares of common stock upon conversion of principal in the amount of $55,000, plus accrued interest of $2,750, with an aggregate fair value loss on settlement of debt of $33,829.

4.    STOCK OPTIONS

On May 20, 2014, the Company adopted the 2014 XSUNX, Inc. Stock Option and Award Plan (the “Plan”) to enable the Company to obtain and retain the services of the types of Employees, Consultants and Directors who will contribute to the Company’s long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all stockholders of the Company. The 2007 Stock Option Plan is superseded by the newly adopted 2014 XSUNX, Inc. Stock Option and Award Plan. Options granted under the Plan may be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board"). Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements may provide. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement. There are no stock options outstanding as of June 30, 2019.

5.    CONVERTIBLE PROMISSORY NOTES

As of June 30, 2019, the outstanding convertible promissory notes are summarized as follows:

Convertible Promissory Notes	$	201,024
Less current portion		35,144
Total long-term liabilities	$	165,880

Maturities of long-term debt for the next four years are as follows:

Period Ended
June 30,
2020	$	35,144
2021		15,880
2022		60,000
2023		90,000
	$	201,024

On October 20, 2015, the Company entered into a third extension of the Note originally issued September 30, 2013. The extension terms included mandatory payments of $10,000 per month beginning November 1, 2015 until the note in the amount of $143,033 is paid in full. The Note bears interest at 12% annum, and a conversion price of 60% of the lowest volume weighted average price (“VWAP”) occurring during the twenty trading days preceding any conversion date by Holder. The balance of the provisions of the Note remained substantially the same. As of June 30, 2019, the remaining balance of the Note is $35,144, which includes capitalized interest of $22,111 As of June 30, 2019, the Note has matured, and the Company and the Holder have entered into discussions for the repayment of the Note.

10

XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

5.    CONVERTIBLE PROMISSORY NOTES (Continued)

On November 20, 2014, the Company issued a 10% unsecured convertible promissory note (the “November Note”) for the principal sum of up to $400,000 plus accrued interest on any advanced principal funds. The November Note matures eighteen months from each advance. The November Note may be converted by the lender into shares of common stock of the Company at the lesser of $.0125 per share or (b) fifty percent (50%) of the lowest trade prices following issuance of the November Note or (c) the lowest effective price per share granted to any person or entity. On November 20, 2014, the lender advanced $50,000 to the Company under the November Note at inception. On various dates from February 18, 2015 through September 30, 2016, the lender advanced an additional $350,000 under the November Note. As of June 30, 2019, there remains an aggregate outstanding principal balance of $50,880.

On May 10, 2017, the Company issued a 10% unsecured convertible promissory note (the “May Note”) for the principal sum of up to $150,000 plus accrued interest on any advanced principal funds. The Lender may pay additional consideration at the Lenders discretion. The Company received a tranche in the amount of $25,000 upon execution of the May Note. On various dates, the Company received additional tranches in the aggregate sum of $90,000. The May Note matured twelve months from each tranche. Within thirty (30) days prior to the maturity date, the Lender may extend the maturity date to sixty (60) months. The May Note may be converted by the lender into shares of common stock of the Company at the lesser of $.01 per share or (b) fifty percent (50%) of the lowest trade price of common stock recorded on any trade day after the effective date, or (c) the lowest effective price per share granted to any person or entity. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $12 during the nine months ended June 30, 2019. As of June 30, 2019, the balance remaining on the May Note was $115,000.

On May 7, 2018, the Company issued a 10% unsecured convertible promissory note (the “May 2018 Note”), in the amount of $25,000. The May 2018 Note was funded on May 9, 2018. The Note matures on February 15, 2019 and bears interest at 10% per annum. The Note may be converted into shares of the Company’s common stock at a variable conversion price of 65% of the lowest two-dollar volume weighted average price (“VWAP”) occurring during the fifteen (15) trading days prior to conversion. The conversion feature of the Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. The Company issued 52,990,411 shares of common stock upon conversion of principal of $25,000, plus accrued interest of $1,250, with a fair value loss on conversion of debt of $13,151. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $12,148 during the nine months ended June 30, 2019. As of June 30, 2019, the balance remaining on the May 2018 Note was $0.

On August 6, 2018, the Company issued a 10% unsecured convertible promissory note (the “Aug 2018 Note”), in the amount of $30,000. The Aug 2018 Note was funded on August 9, 2018. The Note matures on May 15, 2019 and bears interest at 10% per annum. The Note may be converted into shares of the Company’s common stock at a variable conversion price of 65% of the lowest two-dollar volume weighted average price (“VWAP”) occurring during the fifteen (15) trading days prior to conversion. The conversion feature of the Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. During the nine months ended June 30, 2019, the Company issued 80,790,514 shares of common stock upon conversion of principal in the amount of $30,000, plus accrued interest of $1,500, with a fair value loss on conversion of debt of $20,678. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $24,149 during the nine months ended June 30, 2019. As of June 30, 2019, the balance remaining on the August 2018 Note was $0.

Issuance of Convertible Promissory Notes for Services to Related Party

As of June 30, 2019, the remaining unsecured Convertible Promissory Notes (the “Notes”) in the amount of $12,000 to a Board member (the “Holder”) in exchange for retention as a director during the fiscal year ending September 30, 2014. The Note can be converted into shares of common stock by the Holder for $0.0045 per share. The Note matured on October 1, 2015 and bore a one-time interest charge of $1,200 which was applied to the principal on October 1, 2014. So long as any shares issuable under a conversion are subject to transfer and sale restrictions imposed pursuant to SEC Rule 144 of the Rules promulgated under the Securities Act of 1933, the Company shall, upon written request by Holder, file Form S-8, if applicable, with the U.S. Securities and Exchange commission to register the issued.

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XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

5.    CONVERTIBLE PROMISSORY NOTES (Continued)

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations.

The convertible notes issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

During the nine months ended June 30, 2019, as a result of the convertible notes (“Notes”) issued that were accounted for as derivative liabilities, we determine the fair value of the conversion feature of the convertible notes at issuance, based upon a Binomial lattice model calculation. We record the full value of the derivative as a liability at issuance with an offset to valuation discount, which would be amortized over the life of the Notes. During the period there were no new issuances.

During the nine months ended June 30, 2019, the Company converted $55,000 in principal of convertible promissory notes, plus accrued interest of $2,750. Due to the conversion of these notes and the change in fair value of the remaining notes, the Company recorded a fair value loss on conversion of debt in the amount of $33,829 in the statement of operations for the nine months ended June 30, 2019. At June 30, 2019, the fair value of the derivative liability was $2,720,833.

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation of the derivative are as follows:

Risk free interest rate	Between 1.71% and 2.18%
Stock volatility factor	Between 48.0% and 140.0%
Months to Maturity	1 - 4 years
Expected dividend yield	None

6.   NOTE PAYABLE-RELATED PARTY

On August 5, 2014 the Company issued a 10% unsecured promissory note (the “Note”) to a related party in the aggregate principal amount of up to $80,000, plus accrued interest on any advanced principal funds. The principal use of the proceeds from any advance under the Note are intended to assist in the purchase of materials, and services for the solar PV systems that we sell and install. Consideration advanced under the Note matures twenty-four (24) months from each advance. During the nine months ended received payment in the amount of $24,300. The balance as of June 30, 2019 was $7,200, plus accrued interest of $12,541.

7.    REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). The cost of uninstalled materials or equipment will generally be excluded from our recognition of profit, unless specifically produced or manufactured for a project, because such costs are not considered to be a measure of progress.

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XSUNX, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED

JUNE 30, 2019

7.    REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

The following table represents a disaggregation of revenue by customer type from contracts with customers for the nine months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019		2018
Commercial	$	1,091,691	$	502,108
Residential		50,525		-
Management fees		17,250		22,000
	$	1,159,466	$	524,108

Contract assets represents revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represents billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion. The contract asset for the nine months ending June 30, 2019 and the year ended September 30, 2018 was $0 and $6,919, respectively. The contract liability for the nine months ended June 30, 2019 and the year ended September 30, 2018 was $213,288 and $141,688, respectively.

8.    SUBSEQUENT EVENTS

Management has evaluated subsequent events as of the financial statement date according to the requirements of ASC TOPIC 855 and has no subsequent events to report.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY AND FORWARD LOOKING STATEMENTS

In addition to statements of historical fact, this Quarterly Report on Form 10-Q contains forward-looking statements. The presentation of future aspects of XsunX, Inc. (“XsunX”, the “Company” or “issuer”) found in these statements is subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. Without limiting the generality of the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “intend”, or “could” or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Item 1A: Risk Factors” in the Company’s Annual Report on Form 10-K.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause XsunX’s actual results to be materially different from any future results expressed or implied by XsunX in those statements. Important facts that could prevent XsunX from achieving any stated goals include, but are not limited to, the following:

Some of these risks might include, but are not limited to, the following:

(a) volatility or decline of the Company’s stock price;

(b) potential fluctuation in quarterly results;

(c) failure of the Company to earn revenues or profits;

(d) inadequate capital to continue or expand its business, inability to raise additional capital or financing to implement its    business plans;

(e) failure to commercialize its technology or to make sales;

(f) rapid and significant changes in markets;

(g) litigation with or legal claims and allegations by outside parties;

(h) insufficient revenues to cover operating costs.

There is no assurance that the Company will be profitable, the Company may not be able to successfully develop, manage or market its products and services. The Company may not be able to attract or retain qualified executives and technology personnel, the Company’s products and services may become obsolete, government regulation may hinder the Company’s business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of warrants and stock options, and other risks inherent in the Company’s businesses.

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K and Form 10-K/A filed by the Company and any Current Reports on Form 8-K filed by the Company.

Management believes the summary data presented herein is a fair presentation of the Company’s results of operations for the periods presented. Due to the Company’s change in primary business focus and new business opportunities these historical results may not necessarily be indicative of results to be expected for any future period. As such, future results of the Company may differ significantly from previous periods.

Organization

XsunX, Inc. (“XsunX,” the “Company” or the “issuer”) is a Colorado corporation formerly known as Sun River Mining Inc. “Sun River”). The Company was originally incorporated in Colorado on February 25, 1997. Effective September 24, 2003, the Company completed a plan of reorganization and name change to XsunX, Inc.

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Business Overview/Summary

XsunX specializes in the sale, design, and installation of solar photovoltaic power generation (PV), energy storage in the form of managed battery systems (ESS), and energy use management technologies to provide our clients long term savings, predictability, and control of their energy costs. Making solar and managed energy solutions a sound investment for our clients is our mission.

We service the commercial self-generation energy market in California, and to a lesser extent the residential solar PV market marketplace. We provide project assessment and installation services to our customers including technology selection, system engineering, procurement, permitting, construction, grid connection, warranty service, system monitoring and maintenance. We offer a wide variety of energy production and management technologies, design our systems in-house to ensure that the performance of the systems we deliver match the financial projections, and our full-time project management and licensed assembly crews ensure a seamless process, from start to finish.

The Company operates as licensed contractor in California, and our executive management provides over 30 years of extensive experience in all aspects of construction and project assembly to ensure the accuracy and quality of systems, the continued integrity of the improved building or site, and compliance with all construction codes.

We guide our performance by striving to deliver consistently on the following core objectives:

● Commitment – to keeping the customer’s best interests at the forefront at all times; and,

● Value – through a focus on performance and follow through that meets or exceeds customer expectations.

Critical Accounting Policies

The Securities and Exchange Commission (“SEC”) defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition.

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined. 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Fair Value of Financial Instruments

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2019, the amounts reported for cash, prepaid expenses, accounts payable and accrued expenses approximate the fair value because of their short maturities.

Recently Issued Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU 2016-15 on the Company’s financial statements. 

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2019 COMPARED TO THREE MONTHS ENDED JUNE 30, 2018.

Revenue and Cost of Sales:

The Company generated revenues in the three months ended June 30, 2019 and 2018 of $296,237 and $393,011 respectively. The decrease in revenue of $96,774 during the three months ended June 30, 2019 was attributable to delays in procuring permits for the installation of sold commercial projects in the period. We anticipate that through our marketing efforts that purchase interest, and sales, for our solar carport and energy storage systems will continue to improve and provide us with increased project flow that may result in more consistent period to period revenue growth results.

The costs of goods sold for the three months ended June 30, 2019 and 2018 was $192,086 and $307,567, respectively. The Company to date has had minimal revenue and cost of sales and anticipates continuing to generate revenues while working to increase sales volumes as it matures the scope of the Company’s capabilities and brand awareness.

Selling, General and Administrative Expenses:

Selling, General and Administrative (SG&A) expenses increased by $26,246 during the three months ended June 30, 2019 to $121,990 as compared to $95,744 for the three months ended June 30, 2018. The increase in SG&A expenses was related primarily due to the Company experiencing an increase in administrative costs. Management expects SG&A expenses to increase in future periods as the Company continues to expand its marketing, sales, and service efforts.

Depreciation Expense:

Depreciation expense for the three months ended June 30, 2019 was $148, compared to $70 for the three months ended June 30, 2018.

Other Income/(Expenses):

Other income and (expenses) decreased by $5,818,819 to $(442,453) for the three months ended June 30, 2019, compared to $(6,261,272) for the three months ended June 30, 2018. The decrease was the result of a decrease in non-cash loss on change of fair value of the derivative instruments of $5,792,491, and a decrease in interest expense of $26,328, which included a decrease in non-cash amortization of debt discount in the amount of $21,772.

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Net Income (Loss):

For the three months ended June 30, 2019, our net loss was $(460,440) as compared to a net loss of $(6,271,642) for the three months ended June 30, 2018. The majority of the decrease in net income of was due primarily to an increase in other (expenses) associated with the net change in derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. While management is working to increase sales and revenues as it matures the scope of the Company’s capabilities and brand awareness for its commercial and residential solar PV systems, the Company anticipates there is no assurance that any continued trend in sales growth will continue.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2019 COMPARED TO NINE MONTHS ENDED JUNE 30, 2018.

Revenue and Cost of Sales:

The Company generated revenues in the nine months ended June 30, 2019 and 2018 of $1,159,466 and $524,108, respectively. The increase in revenue of $635,358 during the nine months ended June 30, 2019 was attributable to an increase in sold commercial projects for which we were able to secure permits and begin installations in the period. We anticipate that through our marketing efforts purchase interest, and sales, for our solar carport and energy storage systems will continue to improve and provide us with increased project flow that may result in more consistent period to period revenue growth results.

The costs of goods sold for the nine months ended June 30, 2019 and 2018 was $659,117 and $376,952, respectively. The Company to date has had minimal revenue and cost of sales and anticipates continuing to generate revenues while working to increase sales volumes as it matures the scope of the Company’s capabilities and brand awareness.

Selling, General and Administrative Expenses:

Selling, General and Administrative (SG&A) expenses increased by $98,655 during the nine months ended June 30, 2019 to $407,571 as compared to $308,916 for the nine months ended June 30, 2018. The increase in SG&A expenses was related primarily due to an increase in labor wages, and other administrative expenses. Management expects SG&A expenses to increase in future periods as the Company continues to expand its marketing, sales, and service efforts.

Depreciation Expense:

Depreciation expense for the nine months ended June 30, 2019 was $342, compared to $210 for the nine months ended June 30, 2018.

Other Income/(Expenses):

Other income and (expenses) decreased by $7,970,999 to $1,335,577 for the nine months ended June 30, 2019, compared to $(6,635,422) for the nine months ended June 30, 2018. The decrease was the result of a decrease in non-cash loss on change of fair value of the derivative instruments of $7,789,604, a decrease in interest expense of $8,034, which included a decrease in non-cash amortization of debt discount in the amount of $22,290, and a decrease in non-cash loss on conversion of debt in the amount of $173,361. The decrease in other income/(expenses) was due to financing through the issuance of convertible promissory notes.

Net Income (Loss):

For the nine months ended June 30, 2019, our net income was $1,428,013 as compared to a net loss of $(6,797,392) for the nine months ended June 30, 2018. The majority of the increase in net income of was due primarily to an increase in other (expenses) associated with the net change in derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. While management is working to increase sales and revenues as it matures the scope of the Company’s capabilities and brand awareness for its commercial and residential solar PV systems, the Company anticipates there is no assurance that any continued trend in sales growth will continue.

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Liquidity and Capital Resources

We had a working capital deficit at June 30, 2019 of $2,955,021, as compared to a working capital deficit of $4,472,681 as of September 30, 2018. The decrease in working capital deficit was the result of an increase in cash, contract receivables, accounts payable, accrued expenses, contract liabilities, with a decrease in prepaid expenses, contract asset, derivative liability, convertible notes payable.

Cash flow provided by operating activities was $45,812 for the nine months ended June 30, 2019, as compared to cash flows used in operating activities of $(54,468) for the nine months ended June 30, 2018. The increase in cash flow provided by operating activities was due to an increase in contract receivables.

Cash flow used in investing activities for the nine months ended June 30, 2019 and 2018 were $2,284 in the current period for the purchase of tangible assets, compared to the prior period of $0.

Cash used in financing activities for the nine months ended June 30, 2019 was $(24,300), as compared to cash provided of $117,000 in financing activities for the nine months ended June 30, 2018. Our capital needs have primarily been met from the proceeds of private placements, convertible notes, and initial revenues resulting from our change in business operations focused on the sale, design, and installation of Solar Photovoltaic (PV), and managed Energy Storage Systems (ESS) for commercial and industrial real-estate in in the period.

Our financial statements as of June 30, 2019 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued their report dated January 4, 2019, that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

For the nine months ended June 30, 2019, the Company’s capital needs have been met from the use of working capital provided by the proceeds from revenues in the amount of $1,159,466.

Capital Resources

We have only common and preferred stock as our capital resources. We have no material commitments for capital expenditures within the next year, however as we work to market and make sales of our commercial solar PV system services, substantial capital may be needed to expand and pay for these activities.

Need for Additional Financing

We do not have capital sufficient to meet our cash needs.  We will have to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made by our management or other stockholders.  Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity or capital expenditures.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

We do not have any market risk sensitive instruments. Since all operations are in U.S. dollar denominated accounts, we do not have foreign currency risk. Our operating costs are reported in U.S. dollars.

The Company does not invest in term financial products or instruments or derivatives involving risk other than money market accounts, which fluctuate with interest rates at market.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  

Changes in Internal Control over Financial Reporting

There was no change to our internal control over financial reporting that occurred during our second fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

None

Item 1A.  Risk Factors

There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed with the Securities and Exchange Commission dated January 4, 2019. 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mining and Safety Disclosures

None.

Item 5.  Other information

None

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Item 6.  Exhibits

The following is a complete list of exhibits filed as part of this Form 10-Q.  Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

Exhibit	Description
31.1	Certification of Chief Financial Officer and Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (1)
32.1	Certification of Principal Executive and Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act (1)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Label Linkbase Document
101.LAB	XBRL Taxonomy Extension Presentation Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Filed Herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	XSUNX, INC.
Dated: August 19, 2019	By:	/s/ Tom M. Djokovich
		Tom M. Djokovich, Principal Executive and Accounting Officer

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EX-31.1

EXHIBIT 31.1

OFFICER’S CERTIFICATE

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Tom M. Djokovich, certify that:

1.     I have reviewed this Form 10-Q for the period ended June 30, 2019 of XsunX, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer (s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 19, 2019

/s/  Tom M. Djokovich

Name: Tom M. Djokovich

Titles: Chief Executive Officer, Principal Financial and

Accounting Officer, and Director 

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of XsunX, Inc. (the “Company”) on Form 10-Q for the six months ended June 30, 2019 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date:     August 19, 2019

/s/  Tom M. Djokovich

Name: Tom M. Djokovich

Title: Chief Executive Officer, Principal Financial and

Accounting Officer, and Director 

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.

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Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2019	Aug. 19, 2019
Document Information Line Items
Entity Registrant Name	XSUNX INC
Document Type	10-Q
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		1,601,887,744
Amendment Flag	false
Entity Central Index Key	0001039466
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Ex Transition Period	false
Entity Interactive Data Current	Yes

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CONDENSED BALANCE SHEETS - USD ($)	Jun. 30, 2019	Sep. 30, 2018
CURRENT ASSETS
Cash	$ 60,318	$ 41,090
Contract receivables	247,491	99,907
Prepaid expenses	865	5,399
Contract asset	0	6,919
Total Current Assets	308,674	153,315
PROPERTY & EQUIPMENT
Office & miscellaneous equipment	31,479	29,842
Machinery & equipment	2,045	1,398
	33,524	31,240
Less accumulated depreciation	(30,716)	(30,374)
Net Property & Equipment	2,808	866
TOTAL ASSETS	311,482	154,181
CURRENT LIABILITIES
Accounts payable	150,478	134,398
Credit card payable	67,219	64,577
Accrued expenses and interest on notes payable	57,533	55,764
Contract liabilities	213,288	141,688
Derivative liability	2,720,833	4,154,333
Promissory note, related party	7,200	31,500
Convertible promissory note, related party	12,000	12,000
Convertible promissory notes, current portion net of debt discount of $0 and $36,297, respectively	35,144	31,736
Total Current Liabilities	3,263,695	4,625,996
LONG TERM LIABILITIES
Convertible promissory notes, net of debt discount of $0 and $12, respectively	165,880	165,868
Total Long Term Liabilities	165,880	165,868
TOTAL LIABILITIES	3,429,575	4,791,864
SHAREHOLDERS' DEFICIT
Preferred stock
Common stock, no par value; 2,000,000,000 authorized common shares 1,601,887,744 and 1,468,106,819 shares issued and outstanding, respectively	33,403,253	33,311,674
Additional paid in capital	5,335,398	5,335,398
Paid in capital, common stock warrants	3,811,700	3,811,700
Accumulated deficit	(45,668,494)	(47,096,505)
TOTAL SHAREHOLDERS' DEFICIT	(3,118,093)	(4,637,683)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	311,482	154,181
Series A Preferred Stock [Member]
SHAREHOLDERS' DEFICIT
Preferred stock	$ 50	$ 50

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CONDENSED BALANCE SHEETS (Parentheticals) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Convertible promissory notes, discount (in Dollars)	$ 0	$ 36,297
Convertible promissory notes, discount (in Dollars)	$ 0	$ 12
Preferred stock, shares authorized	50,000,000	50,000,000
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	1,601,887,744	1,468,106,819
Common stock, shares outstanding	1,601,887,744	1,468,106,819
Common stock, no par value (in Dollars per share)	$ 0	$ 0
Series A Preferred Stock [Member]
Preferred stock, shares authorized	10,000	10,000
Preferred stock shares, authorized (in Dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares issued	5,000	5,000
Preferred stock shares, authorized	5,000	5,000

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CONDENSED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
SALES	$ 296,237	$ 393,011	$ 1,159,466	$ 524,108
COST OF GOODS SOLD	194,193	307,567	661,224	376,952
GROSS PROFIT	102,044	85,444	498,242	147,156
OPERATING EXPENSES
Selling, general and administrative expenses	119,882	95,744	405,464	308,916
Depreciation and amortization expense	148	70	342	210
TOTAL OPERATING EXPENSES	120,030	95,814	405,806	309,126
LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSES)	(17,986)	(10,370)	92,436	(161,970)
OTHER INCOME/(EXPENSES)
Loss on conversion of debt	0	0	(33,829)	(207,190)
Gain (Loss) on change in derivative liability	(434,387)	(6,226,878)	1,433,500	(6,356,104)
Interest expense	(8,067)	(34,394)	(64,094)	(72,128)
TOTAL OTHER INCOME/(EXPENSES)	(442,454)	(6,261,272)	1,335,577	(6,635,422)
NET INCOME (LOSS)	$ (460,440)	$ (6,271,642)	$ 1,428,013	$ (6,797,392)
BASIC AND DILUTED LOSS PER SHARE (in Dollars per share)	$ 0.00	$ 0.00	$ 0.00	$ (0.01)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED (in Shares)	1,601,887,744	1,406,800,138	1,545,192,198	1,320,387,002

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CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Additional Paid in Capital Stock Options / Warrants [Member]	Retained Earnings [Member]	Total
Balance at Sep. 30, 2017	$ 50	$ 32,935,727	$ 5,335,398	$ 3,811,700	$ (43,127,099)	$ (1,044,224)
Balance (in Shares) at Sep. 30, 2017	5,000	1,040,146,548
Common stock issued upon conversion of debt and accrued interest		$ 174,467				174,467
Common stock issued upon conversion of debt and accrued interest (in Shares)		273,701,864
Net income (loss) for the year					(66,544)	(66,544)
Balance at Dec. 31, 2017	$ 50	$ 33,110,194	5,335,398	3,811,700	(43,193,643)	(936,301)
Balance (in Shares) at Dec. 31, 2017	5,000	1,313,848,412
Balance at Sep. 30, 2017	$ 50	$ 32,935,727	5,335,398	3,811,700	(43,127,099)	(1,044,224)
Balance (in Shares) at Sep. 30, 2017	5,000	1,040,146,548
Net income (loss) for the year						(6,797,392)
Balance at Jun. 30, 2018	$ 50	$ 33,229,814	5,335,398	3,811,700	(49,924,491)	(7,547,529)
Balance (in Shares) at Jun. 30, 2018	5,000	1,406,800,138
Balance at Dec. 31, 2017	$ 50	$ 33,110,194	5,335,398	3,811,700	(43,193,643)	(936,301)
Balance (in Shares) at Dec. 31, 2017	5,000	1,313,848,412
Common stock issued upon conversion of debt and accrued interest		$ 119,620				119,620
Common stock issued upon conversion of debt and accrued interest (in Shares)		92,951,726
Net income (loss) for the year					(459,206)	(459,206)
Balance at Mar. 31, 2018	$ 50	$ 33,229,814	5,335,398	3,811,700	(43,652,849)	(1,275,887)
Balance (in Shares) at Mar. 31, 2018	5,000	1,406,800,138
Net income (loss) for the year					(6,271,642)	(6,271,642)
Balance at Jun. 30, 2018	$ 50	$ 33,229,814	5,335,398	3,811,700	(49,924,491)	(7,547,529)
Balance (in Shares) at Jun. 30, 2018	5,000	1,406,800,138
Balance at Sep. 30, 2018	$ 50	$ 33,311,674	5,335,398	3,811,700	(47,096,505)	(4,637,683)
Balance (in Shares) at Sep. 30, 2018	5,000	1,468,106,819
Common stock issued upon conversion of debt and accrued interest		$ 39,401				39,401
Common stock issued upon conversion of debt and accrued interest (in Shares)		52,990,411
Net income (loss) for the year					1,406,086	1,406,086
Balance at Dec. 31, 2018	$ 50	$ 33,351,075	5,335,398	3,811,700	(45,690,419)	(3,192,196)
Balance (in Shares) at Dec. 31, 2018	5,000	1,521,097,230
Balance at Sep. 30, 2018	$ 50	$ 33,311,674	5,335,398	3,811,700	(47,096,505)	(4,637,683)
Balance (in Shares) at Sep. 30, 2018	5,000	1,468,106,819
Net income (loss) for the year						1,428,013
Balance at Jun. 30, 2019	$ 50	$ 33,403,253	5,335,398	3,811,700	(45,668,494)	(3,118,093)
Balance (in Shares) at Jun. 30, 2019	5,000	1,601,887,744
Balance at Dec. 31, 2018	$ 50	$ 33,351,075	5,335,398	3,811,700	(45,690,419)	(3,192,196)
Balance (in Shares) at Dec. 31, 2018	5,000	1,521,097,230
Common stock issued upon conversion of debt and accrued interest		$ 52,178				52,178
Common stock issued upon conversion of debt and accrued interest (in Shares)		80,790,514
Net income (loss) for the year					482,365	482,365
Balance at Mar. 31, 2019	$ 50	$ 33,403,253	5,335,398	3,811,700	(45,208,054)	(2,657,653)
Balance (in Shares) at Mar. 31, 2019	5,000	1,601,887,744
Net income (loss) for the year					(460,440)	(460,440)
Balance at Jun. 30, 2019	$ 50	$ 33,403,253	$ 5,335,398	$ 3,811,700	$ (45,668,494)	$ (3,118,093)
Balance (in Shares) at Jun. 30, 2019	5,000	1,601,887,744

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CONDENSED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$ 1,428,013	$ (6,797,392)
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation & amortization	342	210
(Gain)/Loss on change in derivative liability	(1,433,500)	6,356,104
Amortization of debt discount recorded as interest expense	36,309	37,095
Loss on conversion of debt	33,829	207,190
(Increase) Decrease in Change in Assets:
Contract receivables	(147,584)	10,953
Contract assets	6,919	(60,248)
Prepaid expenses	4,534	6,348
Accounts payable	18,722	67,844
Accrued expenses	26,628	22,870
Contract liabilities	71,600	94,558
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	45,812	(54,468)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed asset	(2,284)	0
NET CASH USED IN INVESTING ACTIVITIES	(2,284)	0
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on related party promissory notes	(24,300)	0
Proceeds from convertible promissory notes	0	117,000
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(24,300)	117,000
NET INCREASE (DECREASE) IN CASH	19,228	62,532
CASH, BEGINNING OF PERIOD	41,090	23,056
CASH, END OF PERIOD	60,318	85,588
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	7,911	2,364
Taxes paid	0	0
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Fair value of issuance of common stock upon conversion of debt and accrued interest	$ 91,579	$ 294,087

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1. Basis of Presentation

9 Months Ended

Jun. 30, 2019

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.    Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ended September 30, 2019. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended September 30, 2018.

Going Concern

The accompanying unaudited condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying unaudited condensed financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the nine months ended June 30, 2019, the Company did not generate significant revenue, incurred a net income of $1,428,013, which included a non-cash change in derivative liability of $1,433,500 and cash provided in operations of $45,812. As of June 30, 2019, the Company had a working capital deficiency of $2,955,021, and a shareholders’ deficit of $3,118,093. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from its shareholders since its inception through the nine months ended June 30, 2019. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of its business development efforts in the solar PV industry.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of XsunX, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, revenue recognition, the deferred tax valuation allowance, the fair value of stock options, and derivative liabilities. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents include cash in banks and money markets with an original maturity of three months or less.

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, if evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

Revisions in cost and profit estimates during the contract are reflected in the accounting period in which the facts, which require the revision, become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as any retentions, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs.

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients’ financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers monthly. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The contract receivable balance was $247,491 and $99,907 at June 30, 2019 and September 30, 2018, respectively.

Project Warranties

Customers in our target market of California who purchase solar energy systems are covered by a warranty of up to 10 years in duration for material defects and workmanship. In addition, we provide a pass-through of the major components such as module mounting, inverter and solar panel manufacturers’ warranties to our customers, which generally range from 10 to 25 years. The Company has a limited history of project installations and will access potential warranty costs, and other allowances, based on our experience in servicing warranty claims as they may arise in the future. During the nine months ended June 30, 2019, the Company did not experience costs related to warranty claims.

Stock-Based Compensation

Share-based Payment applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Binomial lattice model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. This has not had a material impact on our results of operations.

Net Earnings (Loss) per Share Calculations

Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).  

For the nine months ended June 30, 2019, the Company calculated the dilutive impact of the convertible debt of $201,024, which is convertible into shares of common stock. The convertible debt was not included in the calculation of net income (loss) per share, because their impact was antidilutive.  

For the nine months ended June 30, 2018, the Company calculated the dilutive impact of the convertible debt of $272,913, which is convertible into shares of common stock. The convertible debt was not included in the calculation of net loss per share, because their impact was antidilutive. 

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2019, the balances reported for cash, prepaid expenses, accounts payable, accrued expenses approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2019:

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative Liability	$	2,720,833	$	-	$	-	$	2,720,833
Total Liabilities measured at fair value	$	2,720,833	$	-	$	-	$	2,720,833

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

Balance as of September 30, 2018	$	4,154,333
Net Gain on change in derivative liability		(1,433,500	)
Ending balance as of June 30, 2019	$	2,720,833

Recent Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company has evaluated the impact of the adoption of ASU 2016-15 on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

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3. CAPITAL STOCK

9 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

3.    CAPITAL STOCK

Preferred Stock

As of June 30, 2019, the Company had 5,000 shares of issued and outstanding Series A Preferred Stock issued to the Company’s Chief Executive Officer and Director, Tom M. Djokovich. The shares were issued in consideration for the contribution of services by Mr. Djokovich to the Company valued at fifty dollars, which the Board deemed full and fair consideration. Because of such issuance, Mr. Djokovich has the ability to influence and determine stockholder votes.

Common Stock

During the nine months ended June 30, 2019, the Company issued 133,780,925 shares of common stock upon conversion of principal in the amount of $55,000, plus accrued interest of $2,750, with an aggregate fair value loss on settlement of debt of $33,829.

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4. STOCK OPTIONS

9 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-based Payment Arrangement [Text Block]

4.    STOCK OPTIONS

On May 20, 2014, the Company adopted the 2014 XSUNX, Inc. Stock Option and Award Plan (the “Plan”) to enable the Company to obtain and retain the services of the types of Employees, Consultants and Directors who will contribute to the Company’s long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all stockholders of the Company. The 2007 Stock Option Plan is superseded by the newly adopted 2014 XSUNX, Inc. Stock Option and Award Plan. Options granted under the Plan may be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board"). Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements may provide. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement. There are no stock options outstanding as of June 30, 2019.

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5. CONVERTIBLE PROMISSORY NOTES

9 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

5.    CONVERTIBLE PROMISSORY NOTES

As of June 30, 2019, the outstanding convertible promissory notes are summarized as follows:

Convertible Promissory Notes	$	201,024
Less current portion		35,144
Total long-term liabilities	$	165,880

Maturities of long-term debt for the next four years are as follows:

Period Ended
June 30,
2020	$	35,144
2021		15,880
2022		60,000
2023		90,000
	$	201,024

On October 20, 2015, the Company entered into a third extension of the Note originally issued September 30, 2013. The extension terms included mandatory payments of $10,000 per month beginning November 1, 2015 until the note in the amount of $143,033 is paid in full. The Note bears interest at 12% annum, and a conversion price of 60% of the lowest volume weighted average price (“VWAP”) occurring during the twenty trading days preceding any conversion date by Holder. The balance of the provisions of the Note remained substantially the same. As of June 30, 2019, the remaining balance of the Note is $35,144, which includes capitalized interest of $22,111 As of June 30, 2019, the Note has matured, and the Company and the Holder have entered into discussions for the repayment of the Note.

On November 20, 2014, the Company issued a 10% unsecured convertible promissory note (the “November Note”) for the principal sum of up to $400,000 plus accrued interest on any advanced principal funds. The November Note matures eighteen months from each advance. The November Note may be converted by the lender into shares of common stock of the Company at the lesser of $.0125 per share or (b) fifty percent (50%) of the lowest trade prices following issuance of the November Note or (c) the lowest effective price per share granted to any person or entity. On November 20, 2014, the lender advanced $50,000 to the Company under the November Note at inception. On various dates from February 18, 2015 through September 30, 2016, the lender advanced an additional $350,000 under the November Note. As of June 30, 2019, there remains an aggregate outstanding principal balance of $50,880.

On May 10, 2017, the Company issued a 10% unsecured convertible promissory note (the “May Note”) for the principal sum of up to $150,000 plus accrued interest on any advanced principal funds. The Lender may pay additional consideration at the Lenders discretion. The Company received a tranche in the amount of $25,000 upon execution of the May Note. On various dates, the Company received additional tranches in the aggregate sum of $90,000. The May Note matured twelve months from each tranche. Within thirty (30) days prior to the maturity date, the Lender may extend the maturity date to sixty (60) months. The May Note may be converted by the lender into shares of common stock of the Company at the lesser of $.01 per share or (b) fifty percent (50%) of the lowest trade price of common stock recorded on any trade day after the effective date, or (c) the lowest effective price per share granted to any person or entity. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $12 during the nine months ended June 30, 2019. As of June 30, 2019, the balance remaining on the May Note was $115,000.

On May 7, 2018, the Company issued a 10% unsecured convertible promissory note (the “May 2018 Note”), in the amount of $25,000. The May 2018 Note was funded on May 9, 2018. The Note matures on February 15, 2019 and bears interest at 10% per annum. The Note may be converted into shares of the Company’s common stock at a variable conversion price of 65% of the lowest two-dollar volume weighted average price (“VWAP”) occurring during the fifteen (15) trading days prior to conversion. The conversion feature of the Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. The Company issued 52,990,411 shares of common stock upon conversion of principal of $25,000, plus accrued interest of $1,250, with a fair value loss on conversion of debt of $13,151. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $12,148 during the nine months ended June 30, 2019. As of June 30, 2019, the balance remaining on the May 2018 Note was $0.

On August 6, 2018, the Company issued a 10% unsecured convertible promissory note (the “Aug 2018 Note”), in the amount of $30,000. The Aug 2018 Note was funded on August 9, 2018. The Note matures on May 15, 2019 and bears interest at 10% per annum. The Note may be converted into shares of the Company’s common stock at a variable conversion price of 65% of the lowest two-dollar volume weighted average price (“VWAP”) occurring during the fifteen (15) trading days prior to conversion. The conversion feature of the Notes was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. During the nine months ended June 30, 2019, the Company issued 80,790,514 shares of common stock upon conversion of principal in the amount of $30,000, plus accrued interest of $1,500, with a fair value loss on conversion of debt of $20,678. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $24,149 during the nine months ended June 30, 2019. As of June 30, 2019, the balance remaining on the August 2018 Note was $0.

Issuance of Convertible Promissory Notes for Services to Related Party

As of June 30, 2019, the remaining unsecured Convertible Promissory Notes (the “Notes”) in the amount of $12,000 to a Board member (the “Holder”) in exchange for retention as a director during the fiscal year ending September 30, 2014. The Note can be converted into shares of common stock by the Holder for $0.0045 per share. The Note matured on October 1, 2015 and bore a one-time interest charge of $1,200 which was applied to the principal on October 1, 2014. So long as any shares issuable under a conversion are subject to transfer and sale restrictions imposed pursuant to SEC Rule 144 of the Rules promulgated under the Securities Act of 1933, the Company shall, upon written request by Holder, file Form S-8, if applicable, with the U.S. Securities and Exchange commission to register the issued.

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations.

The convertible notes issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

During the nine months ended June 30, 2019, as a result of the convertible notes (“Notes”) issued that were accounted for as derivative liabilities, we determine the fair value of the conversion feature of the convertible notes at issuance, based upon a Binomial lattice model calculation. We record the full value of the derivative as a liability at issuance with an offset to valuation discount, which would be amortized over the life of the Notes. During the period there were no new issuances.

During the nine months ended June 30, 2019, the Company converted $55,000 in principal of convertible promissory notes, plus accrued interest of $2,750. Due to the conversion of these notes and the change in fair value of the remaining notes, the Company recorded a fair value loss on conversion of debt in the amount of $33,829 in the statement of operations for the nine months ended June 30, 2019. At June 30, 2019, the fair value of the derivative liability was $2,720,833.

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation of the derivative are as follows:

Risk free interest rate	Between 1.71% and 2.18%
Stock volatility factor	Between 48.0% and 140.0%
Months to Maturity	1 - 4 years
Expected dividend yield	None

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6. NOTE PAYABLE-RELATED PARTY

9 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

6.   NOTE PAYABLE-RELATED PARTY

On August 5, 2014 the Company issued a 10% unsecured promissory note (the “Note”) to a related party in the aggregate principal amount of up to $80,000, plus accrued interest on any advanced principal funds. The principal use of the proceeds from any advance under the Note are intended to assist in the purchase of materials, and services for the solar PV systems that we sell and install. Consideration advanced under the Note matures twenty-four (24) months from each advance. During the nine months ended received payment in the amount of $24,300. The balance as of June 30, 2019 was $7,200, plus accrued interest of $12,541.

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7. REVENUE FROM CONTRACTS WITH CUSTOMERS

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

7.    REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). The cost of uninstalled materials or equipment will generally be excluded from our recognition of profit, unless specifically produced or manufactured for a project, because such costs are not considered to be a measure of progress.

The following table represents a disaggregation of revenue by customer type from contracts with customers for the nine months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019		2018
Commercial	$	1,091,691	$	502,108
Residential		50,525		-
Management fees		17,250		22,000
	$	1,159,466	$	524,108

Contract assets represents revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represents billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion. The contract asset for the nine months ending June 30, 2019 and the year ended September 30, 2018 was $0 and $6,919, respectively. The contract liability for the nine months ended June 30, 2019 and the year ended September 30, 2018 was $213,288 and $141,688, respectively.

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8. SUBSEQUENT EVENTS

9 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events [Text Block]

8.    SUBSEQUENT EVENTS

Management has evaluated subsequent events as of the financial statement date according to the requirements of ASC TOPIC 855 and has no subsequent events to report.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, revenue recognition, the deferred tax valuation allowance, the fair value of stock options, and derivative liabilities. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents include cash in banks and money markets with an original maturity of three months or less.

Revenue [Policy Text Block]

Revenue Recognition

We recognize revenue when services are performed, and at the time of shipment of products, if evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

Revisions in cost and profit estimates during the contract are reflected in the accounting period in which the facts, which require the revision, become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Contract receivables are recorded on contracts for amounts currently due based upon progress billings, as well as any retentions, which are collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract. General and administrative expenses are charged to operations as incurred and are not allocated to contract costs.

Receivable [Policy Text Block]

Contract Receivable

The Company bills its customers in accordance with contractual agreements. The agreements generally require billing to be on a progressive basis as work is completed. Credit is extended based on evaluation of clients’ financial condition and collateral is not required. The Company maintains an allowance for doubtful accounts for estimated losses that may arise if any customer is unable to make required payments. Management performs a quantitative and qualitative review of the receivables past due from customers monthly. The Company records an allowance against uncollectible items for each customer after all reasonable means of collection have been exhausted, and the potential for recovery is considered remote. The contract receivable balance was $247,491 and $99,907 at June 30, 2019 and September 30, 2018, respectively.

Guarantees, Indemnifications and Warranties Policies [Policy Text Block]

Project Warranties

Customers in our target market of California who purchase solar energy systems are covered by a warranty of up to 10 years in duration for material defects and workmanship. In addition, we provide a pass-through of the major components such as module mounting, inverter and solar panel manufacturers’ warranties to our customers, which generally range from 10 to 25 years. The Company has a limited history of project installations and will access potential warranty costs, and other allowances, based on our experience in servicing warranty claims as they may arise in the future. During the nine months ended June 30, 2019, the Company did not experience costs related to warranty claims.

Share-based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

Share-based Payment applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Binomial lattice model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. This has not had a material impact on our results of operations.

Earnings Per Share, Policy [Policy Text Block]

Net Earnings (Loss) per Share Calculations

Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).  

For the nine months ended June 30, 2019, the Company calculated the dilutive impact of the convertible debt of $201,024, which is convertible into shares of common stock. The convertible debt was not included in the calculation of net income (loss) per share, because their impact was antidilutive.  

For the nine months ended June 30, 2018, the Company calculated the dilutive impact of the convertible debt of $272,913, which is convertible into shares of common stock. The convertible debt was not included in the calculation of net loss per share, because their impact was antidilutive.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2019, the balances reported for cash, prepaid expenses, accounts payable, accrued expenses approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2019:

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative Liability	$	2,720,833	$	-	$	-	$	2,720,833
Total Liabilities measured at fair value	$	2,720,833	$	-	$	-	$	2,720,833

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

Balance as of September 30, 2018	$	4,154,333
Net Gain on change in derivative liability		(1,433,500	)
Ending balance as of June 30, 2019	$	2,720,833

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company has evaluated the impact of the adoption of ASU 2016-15 on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2019:

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative Liability	$	2,720,833	$	-	$	-	$	2,720,833
Total Liabilities measured at fair value	$	2,720,833	$	-	$	-	$	2,720,833

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

Balance as of September 30, 2018	$	4,154,333
Net Gain on change in derivative liability		(1,433,500	)
Ending balance as of June 30, 2019	$	2,720,833

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5. CONVERTIBLE PROMISSORY NOTES (Tables)

9 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of Debt [Table Text Block]

As of June 30, 2019, the outstanding convertible promissory notes are summarized as follows:

Convertible Promissory Notes	$	201,024
Less current portion		35,144
Total long-term liabilities	$	165,880

Schedule of Maturities of Long-term Debt [Table Text Block]

Maturities of long-term debt for the next four years are as follows:

Period Ended
June 30,
2020	$	35,144
2021		15,880
2022		60,000
2023		90,000
	$	201,024

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation of the derivative are as follows:

Risk free interest rate	Between 1.71% and 2.18%
Stock volatility factor	Between 48.0% and 140.0%
Months to Maturity	1 - 4 years
Expected dividend yield	None

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7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue [Table Text Block]

The following table represents a disaggregation of revenue by customer type from contracts with customers for the nine months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019		2018
Commercial	$	1,091,691	$	502,108
Residential		50,525		-
Management fees		17,250		22,000
	$	1,159,466	$	524,108

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1. Basis of Presentation (Details) - USD ($)	3 Months Ended						9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018	Sep. 30, 2017
Disclosure Text Block [Abstract]
Net Income (Loss) Attributable to Parent	$ (460,440)	$ 482,365	$ 1,406,086	$ (6,271,642)	$ (459,206)	$ (66,544)	$ 1,428,013	$ (6,797,392)
Derivative, Gain (Loss) on Derivative, Net	(434,387)			(6,226,878)			1,433,500	(6,356,104)
Net Cash Provided by (Used in) Operating Activities							45,812	(54,468)
Working Capital Deficiency	2,955,021						2,955,021
Stockholders' Equity Attributable to Parent	$ (3,118,093)	$ (2,657,653)	$ (3,192,196)	$ (7,547,529)	$ (1,275,887)	$ (936,301)	$ (3,118,093)	$ (7,547,529)	$ (4,637,683)	$ (1,044,224)

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Receivables, Long-term Contracts or Programs	$ 247,491		$ 99,907
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities	$ 201,024	$ 272,913
Minimum [Member]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Product Warranty, Term	10 years
Maximum [Member]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Product Warranty, Term	25 years

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis	Jun. 30, 2019 USD ($)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative Liability	$ 2,720,833
Total Liabilties measured at fair value	2,720,833
Fair Value, Inputs, Level 1 [Member]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative Liability	0
Total Liabilties measured at fair value	0
Fair Value, Inputs, Level 2 [Member]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative Liability	0
Total Liabilties measured at fair value	0
Fair Value, Inputs, Level 3 [Member]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative Liability	2,720,833
Total Liabilties measured at fair value	$ 2,720,833

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation	9 Months Ended
	Jun. 30, 2019 USD ($)
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Abstract]
Balance	$ 4,154,333
Net Gain on change in derivative liability	(1,433,500)
Balance	$ 2,720,833

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3. CAPITAL STOCK (Details) - USD ($)	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
3. CAPITAL STOCK (Details) [Line Items]
Debt Conversion, Converted Instrument, Shares Issued (in Shares)	133,780,925
Debt Conversion, Original Debt, Amount	$ 91,579	$ 294,087
Gain (Loss) on Extinguishment of Debt	33,829
Conversion of Convertible Notes [Member]
3. CAPITAL STOCK (Details) [Line Items]
Gain (Loss) on Extinguishment of Debt	33,829
Conversion of Convertible Notes [Member] | Principal [Member]
3. CAPITAL STOCK (Details) [Line Items]
Debt Conversion, Original Debt, Amount	55,000
Conversion of Convertible Notes [Member] | Interest [Member]
3. CAPITAL STOCK (Details) [Line Items]
Debt Conversion, Original Debt, Amount	$ 2,750
Series A Preferred Stock [Member]
3. CAPITAL STOCK (Details) [Line Items]
Preferred Stock, Shares Issued (in Shares)	5,000		5,000
Preferred Stock, Shares Outstanding (in Shares)	5,000		5,000
Stock Issued During Period, Value, Issued for Services	$ 50

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4. STOCK OPTIONS (Details)	Jun. 30, 2019 shares
Share-based Payment Arrangement [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	0

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5. CONVERTIBLE PROMISSORY NOTES (Details) - USD ($)						2 Months Ended	9 Months Ended		19 Months Ended
	Aug. 06, 2018	May 07, 2018	May 10, 2017	Oct. 20, 2015	Nov. 20, 2014	Sep. 18, 2017	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2016	Sep. 30, 2018
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Convertible Notes Payable, Current							$ 12,000			$ 12,000
Proceeds from Convertible Debt							0	$ 117,000
Convertible Debt, Current							35,144			31,736
Amortization of Debt Discount (Premium)							$ 36,309	37,095
Debt Conversion, Converted Instrument, Shares Issued (in Shares)							133,780,925
Debt Conversion, Original Debt, Amount							$ 91,579	$ 294,087
Gain (Loss) on Extinguishment of Debt							33,829
Derivative Liability, Current							2,720,833			$ 4,154,333
May 2018 Note[Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Convertible Notes Payable, Current							0
Debt Instrument, Interest Rate, Stated Percentage		10.00%
Debt Instrument, Convertible, Terms of Conversion Feature		The Note may be converted into shares of the Company’s common stock at a variable conversion price of 65% of the lowest two-dollar volume weighted average price (“VWAP”) occurring during the fifteen (15) trading days prior to conversion.
Debt Instrument, Face Amount		$ 25,000
Amortization of Debt Discount (Premium)							$ 12,148
Debt Instrument, Maturity Date		Feb. 15, 2019
Debt Conversion, Converted Instrument, Shares Issued (in Shares)							52,990,411
Gain (Loss) on Extinguishment of Debt							$ 13,151
Aug 2018 Note [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage							10.00%
Debt Instrument, Convertible, Terms of Conversion Feature	The Note may be converted into shares of the Company’s common stock at a variable conversion price of 65% of the lowest two-dollar volume weighted average price (“VWAP”) occurring during the fifteen (15) trading days prior to conversion.
Debt Instrument, Face Amount							$ 30,000
Amortization of Debt Discount (Premium)							$ 24,149
Debt Instrument, Maturity Date	May 15, 2019
Debt Conversion, Converted Instrument, Shares Issued (in Shares)							80,790,514
Gain (Loss) on Extinguishment of Debt							$ 20,678
Notes Payable							0
Convertible Debt [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Convertible Notes Payable, Current							115,000
Debt Instrument, Interest Rate, Stated Percentage			10.00%
Debt Instrument, Convertible, Terms of Conversion Feature			The May Note may be converted by the lender into shares of common stock of the Company at the lesser of $.01 per share or (b) fifty percent (50%) of the lowest trade price of common stock recorded on any trade day after the effective date, or (c) the lowest effective price per share granted to any person or entity
Debt Instrument, Face Amount			$ 150,000
Proceeds from Convertible Debt			$ 25,000			$ 90,000
Convertible Debt, Current							50,880
Debt Instrument, Maturity Date, Description			The May Note matured twelve months from each tranche. Within thirty (30) days prior to the maturity date, the Lender may extend the maturity date to sixty (60) months
Amortization of Debt Discount (Premium)							12
Convertible Debt [Member] | Director [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Convertible Notes Payable, Current							$ 12,000
Debt Instrument, Maturity Date							Oct. 01, 2015
Debt Instrument, Convertible, Conversion Price (in Dollars per share)							$ 0.0045
Interest Payable							$ 1,200
Convertible Debt [Member] | Convertible Note Payable One [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Instrument, Periodic Payment				$ 10,000
Debt Instrument, Frequency of Periodic Payment				per month
Convertible Notes Payable, Current				$ 143,033
Debt Instrument, Interest Rate, Stated Percentage				12.00%
Debt Instrument, Convertible, Terms of Conversion Feature				conversion price of 60% of the lowest volume weighted average price (“VWAP”) occurring during the twenty trading days preceding any conversion date by Holder
Repayments of Convertible Debt							35,144
Interest Costs Capitalized							22,111
Convertible Debt [Member] | Convertible Note Payable Two [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					10.00%
Debt Instrument, Convertible, Terms of Conversion Feature					The November Note may be converted by the lender into shares of common stock of the Company at the lesser of $.0125 per share or (b) fifty percent (50%) of the lowest trade prices following issuance of the November Note or (c) the lowest effective price per share granted to any person or entity
Debt Instrument, Face Amount					$ 400,000
Debt Instrument, Term					18 months
Proceeds from Convertible Debt					$ 50,000				$ 350,000
Principal [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Conversion, Original Debt, Amount							55,000
Principal [Member] | May 2018 Note[Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Conversion, Original Debt, Amount							25,000
Principal [Member] | Aug 2018 Note [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Conversion, Original Debt, Amount							30,000
Interest [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Conversion, Original Debt, Amount							2,750
Interest [Member] | May 2018 Note[Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Conversion, Original Debt, Amount							1,250
Interest [Member] | Aug 2018 Note [Member]
5. CONVERTIBLE PROMISSORY NOTES (Details) [Line Items]
Debt Conversion, Original Debt, Amount							$ 1,500

XML

5. CONVERTIBLE PROMISSORY NOTES (Details) - Schedule of Debt	Jun. 30, 2019 USD ($)
Schedule of Debt [Abstract]
Convertible Promissory Notes	$ 201,024
Less current portion	35,144
Total long-term liabilities	$ 165,880

XML

5. CONVERTIBLE PROMISSORY NOTES (Details) - Schedule of Maturities of Long-term Debt	Jun. 30, 2019 USD ($)
Schedule of Maturities of Long-term Debt [Abstract]
2020	$ 35,144
2021	15,880
2022	60,000
2023	90,000
	$ 201,024

XML

5. CONVERTIBLE PROMISSORY NOTES (Details) - Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques	Jun. 30, 2019
Measurement Input, Risk Free Interest Rate [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	0.0171
Measurement Input, Risk Free Interest Rate [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	0.0218
Measurement Input, Price Volatility [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	0.480
Measurement Input, Price Volatility [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	1.400
Measurement Input, Expected Term [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	1
Measurement Input, Expected Term [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	4
Measurement Input, Expected Dividend Rate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurement Input	0

XML

6. NOTE PAYABLE-RELATED PARTY (Details) - Loans Payable [Member]	9 Months Ended
	Jun. 30, 2019 USD ($)
6. NOTE PAYABLE-RELATED PARTY (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Debt Instrument, Face Amount	$ 80,000
Debt Instrument, Maturity Date, Description	the Note matures twenty-four (24) months from each advance
Repayments of Related Party Debt	$ 24,300
Notes Payable, Related Parties, Current	7,200
Interest Payable, Current	$ 12,541

XML

7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Revenue from Contract with Customer [Abstract]
Contract with Customer, Asset, Net, Current	$ 0	$ 6,919
Contract with Customer, Liability, Current	$ 213,288	$ 141,688

XML

7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - Disaggregation of Revenue - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue	$ 296,237	$ 393,011	$ 1,159,466	$ 524,108
Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue			1,091,691	502,108
Residential [Member]
Disaggregation of Revenue [Line Items]
Revenue			50,525	0
Management Fees [Member]
Disaggregation of Revenue [Line Items]
Revenue			$ 17,250	$ 22,000