Nevada
|
90-0273142
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. Employer Identification No.)
|
|
|
500
Union Street, Suite 810, Seattle, Washington
USA
|
98101
|
(Address of principal executive offices)
|
(Zip Code)
|
|
206-903-1351
|
|
|
(Registrant's telephone number, including area
code)
|
|
|
|
|
|
N/A
|
|
|
(Former name, address, and fiscal year, if changed since last
report)
|
|
Large
accelerated filer
|
☐
|
Accelerated
filer
|
☐
|
Non-accelerated
filer (Do not check if a smaller reporting company)
|
☐
|
Smaller
reporting company
|
☒
|
Emerging
growth company
|
☐
|
|
|
TABLE OF CONTENTS
|
|
|
Page
|
PART 1
|
|
|
|
|
|
ITEM 1.
|
Description of Business
|
3
|
|
|
|
ITEM 1A.
|
Risk Factors
|
7
|
|
|
|
ITEM 1B
|
Unresolved Staff Comments
|
16
|
|
|
|
ITEM 2.
|
Properties
|
16
|
|
|
|
ITEM 3.
|
Legal Proceedings
|
17
|
|
|
|
ITEM
4.
|
Other
Information
|
17
|
|
|
|
PART II
|
|
|
|
|
|
ITEM 5.
|
Market for Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
18
|
|
|
|
ITEM 6.
|
Selected Financial Data
|
22
|
|
|
|
ITEM 7.
|
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
22
|
|
|
|
ITEM 7A.
|
Quantitative and Qualitative Disclosures About Market
Risk
|
27
|
|
|
|
ITEM 8.
|
Financial Statements and Supplementary Data
|
27
|
|
|
|
ITEM 9.
|
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
27
|
|
|
|
ITEM 9A.
|
Controls and Procedures
|
27
|
|
|
|
ITEM 9B.
|
Other Information
|
28
|
|
|
|
PART III
|
|
|
|
|
|
ITEM 10.
|
Directors, Executive Officers and Corporate Governance
|
29
|
|
|
|
ITEM 11.
|
Executive Compensation
|
32
|
|
|
|
ITEM 12.
|
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
40
|
|
|
|
ITEM 13.
|
Certain Relationships and Related Transactions, and Director
Independence
|
43
|
|
|
|
ITEM 14.
|
Principal Accounting Fees and Services
|
45
|
|
|
|
PART IV
|
|
|
|
|
|
ITEM 15.
|
Exhibits, Financial Statement Schedules
|
47
|
|
|
|
|
SIGNATURES
|
78
|
●
|
any of our existing patents will continue to be held valid, if
challenged;
|
●
|
patents will be issued for any of our pending
applications;
|
●
|
any claims allowed from existing or pending patents will have
sufficient scope or strength to protect us;
|
●
|
our patents will be issued in the primary countries where our
products are sold in order to protect our rights
and potential commercial advantage;
or
|
●
|
any of our products or technologies will not infringe on the
patents of other companies.
|
●
|
our
inability to recruit and retain adequate numbers of effective sales
and marketing personnel;
|
●
|
the
lack of complementary products to be offered by sales personnel,
which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
|
●
|
unforeseen
costs and expenses associated with creating an independent sales
and marketing organization.
|
|
●
|
the
availability of suitable candidates;
|
|
●
|
higher
than anticipated acquisition costs and expenses;
|
|
●
|
competition
from other companies for the purchase of available
candidates;
|
|
●
|
our
ability to value those candidates accurately and negotiate
favorable terms for those acquisitions;
|
|
●
|
the
availability of funds to finance acquisitions and obtaining any
consents necessary under our credit facility;
|
|
●
|
the
ability to establish new informational, operational and financial
systems to meet the needs of our business;
|
|
●
|
the
ability to achieve anticipated synergies, including with respect to
complementary products or services; and
|
|
●
|
the
availability of management resources to oversee the integration and
operation of the acquired businesses.
|
|
●
|
Announcements by us regarding liquidity, significant acquisitions,
equity investments and divestitures, strategic relationships, addition or loss of
significant customers and contracts, capital expenditure
commitments and
litigation;
|
|
●
|
Issuance of convertible or equity securities and related warrants
for general or merger and acquisition purposes;
|
|
●
|
Issuance or repayment of debt, accounts payable or convertible debt
for general or merger and acquisition purposes;
|
|
●
|
Sale of a significant number of shares of our common stock by
stockholders;
|
|
●
|
General market and economic conditions;
|
|
●
|
Quarterly variations in our operating results;
|
|
●
|
Investor and public relation activities;
|
|
●
|
Announcements of technological innovations;
|
|
●
|
New product introductions by us or our competitors;
|
|
●
●
|
Competitive activities;
Low
liquidity; and
|
|
●
|
Additions or departures of key personnel.
|
Period Ended
|
High
|
Low
|
Year Ending September 30, 2021
|
|
|
Through
December 27, 2020
|
$2.95
|
$1.10
|
|
|
|
Year Ending September 30, 2020
|
|
|
September
30, 2020
|
$3.45
|
$1.71
|
June
30, 2020
|
$2.65
|
$0.81
|
March
31, 2020
|
$2.90
|
$0.90
|
December
31, 2019
|
$1.95
|
$0.92
|
|
|
|
Year Ending September 30, 2019
|
|
|
September
30, 2019
|
$1.70
|
$1.20
|
June
30, 2019
|
$2.00
|
$1.26
|
March
31, 2019
|
$2.97
|
$0.90
|
December
31, 2018
|
$4.44
|
$0.85
|
|
(a)
|
(b)
|
(c)
|
|
|
|
Number of securities
|
|
|
|
remaining available
|
|
Number of securities
|
Weighted-average
|
for future issuance
|
|
to be issued upon
|
exercise price of
|
under equity compensation
|
|
exercise of outstanding
|
outstanding options,
|
plan (excluding securities
|
Plan Category
|
options, warrants and rights
|
warrants and rights
|
reflected in column (a))
|
Equity
compensation plan
|
|
|
|
approved
by shareholders
|
78,333
|
$1.161
|
78,333
|
Equity
compensation plans
|
|
|
|
not
approved by shareholders
|
4,726,667
|
1.161
|
(4,805,000)
|
Total
|
4,805,000
|
$1.161
|
(4,726,667)
|
|
Years Ended
September 30,
|
||||
|
2020
|
2019
|
2017
|
2016
|
2015
|
|
|
|
|
|
|
STATEMENT OF
OPERATIONS DATA:
|
|
|
|
|
|
Net
revenue
|
$122
|
$1,805
|
$4,874
|
$6,024
|
$6,291
|
Cost of goods
sold
|
70
|
1,378
|
3,966
|
5,036
|
5,274
|
Gross
profit
|
52
|
427
|
908
|
988
|
1,017
|
Research and
development expenses
|
2,034
|
1,258
|
79
|
326
|
363
|
General and
administrative expenses
|
4,844
|
4,182
|
3,088
|
3,355
|
2,984
|
Impairment of
goodwill
|
-
|
-
|
984
|
-
|
-
|
Operating
loss
|
(6,826)
|
(5,013)
|
(3,243)
|
(2,693)
|
(2,330)
|
Other income
(expense)
|
(6,737)
|
(2,599)
|
(658)
|
947
|
(271)
|
Net
loss
|
(13,563)
|
(7,612)
|
(3,901)
|
(1,746)
|
(2,601)
|
Income tax
expense
|
-
|
-
|
-
|
-
|
30
|
Net
loss
|
$(13,563)
|
$(7,612)
|
$(3,901)
|
$(1,746)
|
$(2,631)
|
Net loss per
share
|
$(0.62)
|
$(0.42)
|
$(1.01)
|
$(1.22)
|
$(2.33)
|
Weighted average
number of shares
|
21,791,058
|
18,053,848
|
3,844,840
|
1,428,763
|
1,131,622
|
|
Years Ended
December 31,
|
|||
|
2020
|
2019
|
$
Variance
|
%
Variance
|
|
|
|
|
|
Revenue
|
$122
|
$1,805
|
$(1,683)
|
-93.2%
|
Cost of
sales
|
70
|
1,378
|
(1,308)
|
94.9%
|
Gross
profit
|
52
|
427
|
(375)
|
-87.8%
|
Research and
development expenses
|
2,034
|
1,258
|
776
|
-61.7%
|
Selling, general
and administrative expenses
|
4,844
|
4,182
|
662
|
-15.8%
|
Operating
loss
|
(6,826)
|
(5,013)
|
(1,813)
|
-10.3%
|
Other (expense)
income:
|
|
|
|
|
Interest
expense
|
(6,094)
|
(2,945)
|
(3,149)
|
-106.9%
|
Other income
(expense)
|
65
|
(10)
|
75
|
750.0%
|
(Loss) gain on debt
settlements
|
(708)
|
356
|
(1,064)
|
-298.9%
|
Total other income
(expense)
|
(6,737)
|
(2,599)
|
(4,138)
|
-159.2%
|
(Loss) before
income taxes
|
(13,563)
|
(7,612)
|
(5,951)
|
-78.2%
|
Income taxes -
current (benefit)
|
-
|
-
|
-
|
0.0%
|
Net
(loss)
|
$(13,563)
|
$(7,612)
|
$(5,951)
|
-78.2%
|
|
|
Less
Than
|
|
|
Greater
Than
|
Contractual Cash
Obligations (1)
|
Total
|
1
Year
|
1-3
Years
|
3-5
Years
|
5
Years
|
Operating
leases
|
$137,521
|
$113,553
|
$23,968
|
$-
|
$-
|
Convertible notes
payable
|
7,894,566
|
7,894,566
|
-
|
-
|
-
|
|
$8,032,087
|
$8,008,119
|
$23,968
|
$-
|
$-
|
The
following table sets forth certain information about our current
directors and executive officers:
|
Name
|
Age
|
Director/ Executive Officer
|
Directors-
|
|
|
Ronald
P. Erickson
|
76
|
Chairman
and Interim Chief Financial Officer (1)
|
Phillip
A. Bosua
|
46
|
Chief
Executive Officer and Director
|
Jon
Pepper
|
69
|
Director
(2)
|
Ichiro
Takesako
|
61
|
Director
|
William
A. Owens
|
80
|
Director
(3)
|
(1)
Chairman of the Nominating and Corporate Governance
Committee.
|
(2)
Chairman of the Audit Committee.
|
June 2008:
|
appointed
as General Manager of Sales and Marketing Department of Micro
Technology Division
|
April 2009:
|
appointed
as General Manager of Overseas Business Department of Micro
Technology Division, in charge
of M&A activity of certain business segment and assets of Aviza
Technology, Inc.
|
July 2010:
|
appointed
as Executive Director of SPP Process Technology Systems, 100% owned
subsidiary of Sumitomo
Precision Products then, stationed in Newport,
Wales
|
August 2011:
|
appointed
as General Manager, Corporate Strategic Planning
Group
|
January 2013:
|
appointed as Chief Executive Officer of M2M Technologies, Inc., a
company invested by Sumitomo
Precision products
|
April 2013:
|
appointed
as General Manager of Business Development Department, in parallel
of CEO of M2M Technologies, Inc.
|
April 2014:
|
relieved
from General Manager of Business Development Department and is
responsible for M2M Technologies
Inc. as its CEO
|
April 2017:
|
appointed
as President and Chief Executive Officer of At Signal Inc., an
internet data company
|
|
●
|
Had any petition under the federal bankruptcy laws or any state
insolvency law filed by or against, or had a receiver, fiscal
agent, or similar officer appointed by a court for the business or
property of such person, or any partnership in which he was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;
|
|
●
|
Been convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
●
|
Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
|
|
◦
|
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such
activity;
|
|
|
|
|
◦
|
Engaging in any type of business practice; or
|
|
|
|
|
◦
|
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities
laws;
|
|
●
|
Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or
state authority barring, suspending, or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in (i) above, or to be associated with persons engaged in
any such activity;
|
|
|
|
|
●
|
Been found by a court of competent jurisdiction in a civil action
or by the SEC to have violated any federal or state securities law,
where the judgment in such civil action or finding by the SEC has
not been subsequently reversed, suspended, or vacated;
or
|
|
|
|
|
●
|
Been found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any
federal commodities law, where the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended, or vacated.
|
|
|
|
|
Nominations
and
|
Audit
|
|
Compensation
|
|
Corporate
Governance
|
Jon
Pepper (Chairman)
|
|
William
A. Owens (Chairman)
|
|
Ron
Erickson (Chairman)
|
William
A. Owens
|
|
Jon
Pepper
|
|
Phillip
A. Bosua
|
Ichiro
Takesako
|
|
Ichiro
Takesako
|
|
William
A. Owens
|
|
|
|
|
Jon
Pepper
|
|
●
|
a member of the Compensation Committee or equivalent of any other
entity, one of whose executive officers served as one of our
directors or was an immediate family member of a director, or
served on our Compensation Committee; or
|
|
|
|
|
●
|
a director of any other entity, one of whose executive officers or
their immediate family member served on our Compensation
Committee.
|
|
|
|
|
●
|
to attract and retain highly qualified individuals capable of
making significant contributions to our long-term
success;
|
|
|
|
|
●
|
to motivate and reward named executive officers whose knowledge,
skills, and performance are critical to our success;
|
|
|
|
|
●
|
to closely align the interests of our named executive officers and
other key employees with those of its shareholders;
and
|
|
|
|
|
●
|
to utilize incentive based compensation to reinforce performance
objectives and reward superior performance.
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
Stock
|
Option
|
Other
|
|
|
|
|
|
Salary
|
Bonus
|
Awards
|
Awards
|
Compensation
|
Total
|
|
Name
|
|
Principal
Position
|
($)
|
($)
|
($)
(3)
|
($)
|
($)
|
($)
|
|
Salary-
|
|
|
|
|
|
|
|
|
|
Ronald P. Erickson
(1)
|
|
Chairman of the
Board and Interim Chief Financial Officer
|
9/30/20
|
$243,333
|
$-
|
$190,000
|
$394,000
|
$-
|
$827,333
|
|
9/30/19
|
$188,750
|
$-
|
$102,000
|
$-
|
$-
|
$290,750
|
||
|
|
|
|
|
|
|
|
||
Phillip A. Bosua
(2)
|
|
Chief Executive
Officer
|
9/30/20
|
$288,333
|
$-
|
$285,000
|
$394,000
|
$-
|
$967,333
|
|
9/30/19
|
$233,750
|
$-
|
$-
|
$-
|
$-
|
$233,750
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
Option
Awards;
|
|
|
|
|
|
Estimated
Future Payouts Under
|
Estimated
Future Payouts Under
|
Stock
Awards;
|
Number
of
|
|
|
||||
|
|
|
Non-Equity
Incentive Plan
|
Equity
Incentive Plan
|
Number
of
|
Securities
|
Exercise
or
|
Grant
Date
|
||||
|
|
|
Awards
|
Awards
|
Shares
of
|
Underlying
|
Base Price
of
|
Fair Value
of
|
||||
|
|
Grant
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
Stock or
Units
|
Options
|
Option
Awards
|
Stock
and
|
Name
|
|
Date
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
(#)
|
(#)
|
(#)
|
($/Sh)
(3)
|
Option
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald P. Erickson
(1)
|
|
11/4/19
|
$-
|
$-
|
$-
|
-
|
-
|
-
|
-
|
1,200,000
|
$1.100
|
$-
|
|
|
7/2/20
|
$-
|
$-
|
$-
|
-
|
-
|
-
|
-
|
1,500,000
|
$0.100
|
0.788
|
Phillip A. Bosua
(2)
|
|
11/4/19
|
$-
|
$-
|
$-
|
-
|
-
|
-
|
-
|
1,200,000
|
$1.100
|
$-
|
|
|
7/2/20
|
$-
|
$-
|
$-
|
-
|
-
|
-
|
-
|
1,500,000
|
$0.100
|
0.788
|
|
Option
Awards
|
|||
|
Number
of
|
Number
of
|
|
|
|
Securities
|
Securities
|
|
|
|
Underlying
|
Underlying
|
|
|
|
Unexercised
|
Unexercised
|
Option
|
|
|
Options
|
Options
|
Exercise
|
Option
|
|
Exercisable
|
Unexerciseable
|
Price
|
Expiration
|
Name
|
(#)
|
(#)
|
($)
(3)
|
Date
|
|
|
|
|
|
Ronald P. Erickson
(1)
|
-
|
1,200,000
|
$1.10
|
11/4/24
|
|
500,000
|
1,000,000
|
$0.10
|
7/2/25
|
Phillip A. Bosua
(2)
|
-
|
1,200,000
|
$1.10
|
11/4/24
|
|
500,000
|
1,000,000
|
$0.10
|
7/2/25
|
|
|
Early
|
Not For
Good
|
Change
in
|
|
Executive
|
For
Cause
|
or
Normal
|
Cause
|
Control
|
Disability
|
Payments
Upon
|
Termination
|
Retirement
|
Termination
|
Termination
|
or
Death
|
Separation
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
Compensation:
|
|
|
|
|
|
Base salary
(1)
|
$-
|
$-
|
$215,000
|
$215,000
|
$-
|
Performance-based
incentive
|
|
|
|
|
|
compensation
(2)
|
$-
|
$-
|
$-
|
$-
|
$-
|
Stock
options
|
$-
|
$-
|
$2,202,000
|
$2,202,000
|
$-
|
|
|
|
|
|
|
Benefits and
Perquisites:
|
|
|
|
|
|
Health and welfare
benefits (3)
|
$-
|
$-
|
$26,388
|
$26,388
|
$-
|
Accrued vacation
pay
|
$-
|
$-
|
$72,769
|
$72,769
|
$-
|
|
|
|
|
|
|
Total
|
$-
|
$-
|
$2,516,157
|
$2,516,157
|
$-
|
|
|
Early
|
Not For
Good
|
Change
in
|
|
Executive
|
For
Cause
|
or
Normal
|
Cause
|
Control
|
Disability
|
Payments
Upon
|
Termination
|
Retirement
|
Termination
|
Termination
|
or
Death
|
Separation
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
Compensation:
|
|
|
|
|
|
Base salary
(1)
|
$-
|
$-
|
$260,000
|
$260,000
|
$-
|
Performance-based
incentive
|
|
|
|
|
|
compensation
(2)
|
$-
|
$-
|
$-
|
$-
|
$-
|
Stock
options
|
$-
|
$-
|
$2,202,000
|
$2,202,000
|
$-
|
|
|
|
|
|
|
Benefits and
Perquisites:
|
|
|
|
|
|
Health and welfare
benefits (3)
|
$-
|
$-
|
$22,572
|
$22,572
|
$-
|
Accrued vacation
pay
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
Total
|
$-
|
$-
|
$2,484,572
|
$2,484,572
|
$-
|
|
Stock
|
Option
|
Other
|
|
Name
|
Awards
|
Awards
(4)
|
Compensation
|
Total
|
Jon Pepper
(1)
|
$76,000
|
$52,815
|
$-
|
$128,815
|
Ichiro Takesako
(2)
|
76,000
|
52,815
|
-
|
128,815
|
William A. Owens
(3)
|
76,000
|
-
|
-
|
76,000
|
|
|
|
|
|
Total
|
$228,000
|
$105,630
|
$-
|
$333,630
|
|
●
|
each director and nominee for director;
|
|
|
|
|
●
|
each person known by us to own beneficially 5% or more of our
common stock;
|
|
|
|
|
●
|
each executive officer named in the summary compensation table
elsewhere in this report;
and
|
|
|
|
|
●
|
all of our current directors and executive officers as a
group.
|
|
Shares
Beneficially Owned
|
|
|
Amount
|
Percentage
|
Directors and
Officers-
|
|
|
Ronald P. Erickson
(1)
|
8,089,015
|
25.7%
|
Phillip A. Bosua
(2)
|
3,567,500
|
14.1%
|
Jon Pepper
(3)
|
278,000
|
1.1%
|
Ichiro Takesako
(4)
|
190,000
|
*
|
William A. Owens
(5)
|
690,000
|
2.8%
|
Total Directors and
Officers (5 in total)
|
12,814,515
|
51.7%
|
|
Shares
Beneficially Owned
|
|
|
Amount
|
Percentage
|
Greater Than 5%
Ownership
|
|
|
|
|
|
Clayton A. Struve
(1)
|
20,758,075
|
46.7%
|
|
Blocker at
4.99%
|
|
|
|
|
Ronald P. Erickson
(2)
|
8,089,015
|
25.7%
|
|
|
|
Phillip
A. Bosua (3)
|
3,567,500
|
14.1%
|
|
|
|
Dale Broadrick
(4)
|
2,726,036
|
10.5%
|
|
●
|
Disclosing
such transactions in reports where required;
|
|
●
|
Disclosing
in any and all filings with the SEC, where required;
|
|
●
|
Obtaining
disinterested director’s consent; and
|
|
●
|
Obtaining
shareholder consent where required.
|
|
Year
Ended
|
Year
Ended
|
|
September 30,
2020
|
September 30,
2019
|
Audit
fees
|
$178,325
|
$53,620
|
Audit related
fees
|
48,150
|
26,000
|
Tax
fees
|
14,150
|
7,500
|
All other
fees
|
14,615
|
7,800
|
|
|
|
|
$255,240
|
$94,920
|
Title of Document
|
|
Page
|
Report
of BPM LLP
|
|
F-1
|
Consolidated Balance Sheets as of September 30, 2020 and
2019
|
|
F-2
|
|
|
|
Consolidated Statements of Operations for the years ended September
30, 2020 and 2019
|
|
F-3
|
|
|
|
Consolidated Statements of Changes in Stockholders' (Deficit) for
the years ended September 30, 2020 and 2019
|
|
F-4
|
|
|
|
Consolidated Statements of Cash Flows for the years ended September
30, 2020 and 2019
|
|
F-5
|
|
|
|
Notes to the Consolidated Financial Statements
|
|
F-6
|
(b)
|
Exhibits
|
Exhibit
No.
|
Description
|
Restatement
of the Articles of Incorporation dated September 13, 2013
(incorporated by reference to the Company’s Current Report on
Form 8-K/A2, filed September 17, 2013)
|
|
|
|
Amended
and Restated Bylaws (incorporated by reference to the
Company’s Form 8-K, filed August 17, 2012)
|
|
|
|
Certificate
of Amendment to the Restatement of the Articles of Incorporation
dated June 11, 2015 (incorporated by reference to the
Company’s Current Report on Form 8-K, filed June 17,
2015)
|
|
|
|
Certificate
of Designations, Preferences and Rights of Series C Convertible
Preferred Stock (incorporated by reference to the Company’s
Current Report on Form 8-K, filed August 11, 2016)
|
|
|
|
Form
of Series C Convertible Preferred Stock 2016 (incorporated by
reference to the Company’s Registration Statement on Form
S-1, filed September 1, 2016)
|
|
|
|
Certificate
of Correction and Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock (incorporated by
reference to the Company’s Amended Current Report on Form
8-K/A, filed January 9, 2017)
|
|
|
|
Certificate
of Designations, Preferences and Rights of Series D Convertible
Preferred Stock (incorporated by reference to the Company’s
Current Report on Form 8-K, filed on February 10,
2017)
|
|
|
|
Amended
and Restated Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock. (incorporated by reference to
the Company’s Current Report on Form 8-K, filed May 5,
2017)
|
|
|
|
Second
Amended and Restated Certificate of Designations, Preferences and
Rights of Series D Convertible Preferred Stock (incorporated by
reference to the Company’s Current Report on Form 8-K, filed
July 19, 2018)
|
|
|
|
Articles
of Merger (incorporated by reference to the Company’s Current
Report on Form 8-K, filed May 3, 2018)
|
|
|
|
Second
Amended and Restated Certificate of Designations, Preferences and
Rights of Series D Convertible Preferred Stock (incorporated by
reference to the Company’s Current Report on Form 8-K, filed
July 20, 2018)
|
|
|
|
Certificate
of Designation of Series F Preferred Stock (incorporated by
reference to the Company’s Current Report on Form 8-K, filed
August 3, 2018)
|
|
|
|
2011
Stock Incentive Plan (incorporated by reference to the
Company’s Definitive Proxy Statement on Schedule 14A, filed
January 11, 2013)
|
|
|
|
Form of
Preferred Stock and Warrant Purchase Agreement by and between
Visualant, Incorporated and Clayton A. Struve (incorporated by
reference to the Company’s Current Report on Form 8-K, filed
May 5, 2017)
|
|
|
|
Securities Purchase Agreement dated August 14, 2017 by and between
Visualant, Incorporated and accredited investor (incorporated by
reference to the Company’s Current Report on Form
8-K, filed August 18,
2017)
|
Senior
Secured Convertible Redeemable Debenture dated December 12, 2017 by
and between Visualant, Incorporated and accredited investor.
(incorporated by reference to the Company’s Current Report on
Form 8-K, filed December 22, 2017)
|
|
|
|
Senior
Secured Convertible Redeemable Debenture dated February 28, 2018 by
and between Visualant, Incorporated and accredited investor.
(incorporated by reference to the Company’s Current Report on
Form 8-K, filed March 7, 2018)
|
|
|
|
Note
and Account Payable Conversion Agreement dated January 31, 2018 by
and between Visualant, Incorporated and J3E2A2Z LP (incorporated by
reference to the Company’s Current Report on Form 8-K, filed
March 21, 2018)
|
|
|
|
Employment
Agreement dated April 10, 2018 by and between Visualant,
Incorporated and Phillip A. Bosua. (incorporated by reference to
the Company’s Annual Report on Form 10-K, filed December 21,
2018)
|
|
|
|
Amended
Employment Agreement dated April 10, 2018 by and between Visualant,
Incorporated and Ronald P. Erickson. (incorporated by reference to
the Company’s Annual Report on Form 10-K, filed December 21,
2018)
|
|
|
|
Agreement
and Plan of Merger, dated as of April 10, 2018, by and among
Visualant, Incorporated, 500 Union Corporation, and RAAI Lighting,
Inc. (incorporated by reference to the Company’s Annual
Report on Form 10-K, filed December 21, 2018)
|
|
|
|
Certificate
of Merger, dated as of April 10, 2018, by 500 Union Corporation
(incorporated by reference to the Company’s Current Report on
Form 8-K, filed April 17, 2018)
|
|
|
|
Form of
Securities Purchase Agreement (incorporated by reference to the
Company’s Current Report on Form 8-K, filed March 6,
2019)
|
|
|
|
Form of
Subscription Agreement, Subordinated Convertible Note, Common Stock
Purchase Warrant, Subordination and Registration Rights Agreement
(incorporated by reference to the Company’s Current Report on
Form 8-K, filed March 6, 2019)
|
|
|
|
Amendment 3 dated May 12, 2020 to Convertible Redeemable Promissory
Note dated January 31, 2018 by and between Know Labs, Inc. and
J3E2A2Z LP. (incorporated by reference to the Company’s
Current Report on Form 8-K, filed May 13, 2020)
|
|
|
|
Amendment 3 dated May 12, 2020 to Convertible Redeemable Promissory
Note dated January 31, 2018 by and between Know Labs, Inc. and
J3E2A2Z LP. (incorporated by reference to the Company’s
Current Report on Form 8-K, filed May 13, 2020)
|
|
|
|
|
|
Amendment 3 dated May 11, 2020 to Senior Secured Convertible
Redeemable Note dated August 14, 2017 by and between Know Labs, Inc. and
Clayton A. Struve. (incorporated by reference to the
Company’s Current Report on Form 8-K, filed May 15,
2020)
|
|
|
|
Amendment 3 dated May 11, 2020 to Senior Secured Convertible
Redeemable Note dated December 12, 2017 by and between Know Labs, Inc.
and Clayton A. Struve. (incorporated by reference to the
Company’s Current Report on Form 8-K, filed May 15,
2020)
|
Amendment 2 dated May 11, 2020 to Senior Secured Convertible
Redeemable Note dated February 28, 2018 by and between Know Labs, Inc.
and Clayton A. Struve. (incorporated by reference to the
Company’s Current Report on Form 8-K, filed May 15,
2020)
|
|
|
|
Code of Ethics dated November 2018 (incorporated by reference to the Company’s
Current Report on Form 8-K, filed November 27,
2018)
|
|
|
|
Letter dated October 4, 2019 from SD Mayer and
Associates, LLP. (incorporated by reference to the
Company’s Current Report on Form 8-K, filed October 8,
2019)
|
|
|
|
Subsidiaries
of the Registrant. Filed
herewith.
|
|
|
|
Audit
Committee Charter dated November 2018 (incorporated by reference to
the Company’s Current Report on Form 8-K, filed November 27,
2018)
|
|
|
|
Compensation
Committee Charter dated November 2018 (incorporated by reference to
the Company’s Current Report on Form 8-K, filed November 27,
2018)
|
|
|
|
Nominations
and Corporate Governance Committee Charter dated November 2018
(incorporated by reference to the Company’s Current Report on
Form 8-K, filed November 27, 2018)
|
KNOW LABS, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
September
30,
2020
|
September
30,
2019
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and cash
equivalents
|
$4,298,179
|
$1,900,836
|
Accounts
receivable, net of allowance of $0 and $40,000,
respectively
|
-
|
63,049
|
Prepaid
expenses
|
-
|
6,435
|
Inventories,
net
|
-
|
7,103
|
Total current
assets
|
4,298,179
|
1,977,423
|
|
|
|
PROPERTY AND
EQUIPMENT, NET
|
128,671
|
130,472
|
|
|
|
OTHER
ASSETS
|
|
|
Intangible
assets
|
101,114
|
274,446
|
Other
assets
|
25,180
|
13,766
|
Operating lease
right of use asset
|
129,003
|
243,526
|
|
|
|
TOTAL
ASSETS
|
$4,682,147
|
$2,639,633
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts payable -
trade
|
$487,810
|
$810,943
|
Accounts payable -
related parties
|
5,687
|
7,048
|
Accrued
expenses
|
401,178
|
460,055
|
Accrued expenses -
related parties
|
591,600
|
458,500
|
Convertible notes
payable
|
3,967,578
|
3,954,241
|
Note
payable
|
226,170
|
-
|
Simple Agreements
for Future Equity
|
785,000
|
-
|
Current portion of
operating lease right of use liability
|
108,779
|
124,523
|
Total current
liabilities
|
6,573,802
|
5,815,310
|
|
|
|
NON-CURRENT
LIABILITIES:
|
|
|
Operating lease
right of use liability, net of current portion
|
23,256
|
121,613
|
Total non-current
liabilities
|
23,256
|
121,613
|
|
|
|
COMMITMENTS AND
CONTINGENCIES (Note 14)
|
-
|
-
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
|
Preferred stock -
$0.001 par value, 5,000,000 shares authorized, 0 shares issued
and
|
|
|
outstanding at
9/30/2020 and 9/30/2019 respectively
|
-
|
-
|
Series C
Convertible Preferred stock - $0.001 par value, 1,785,715 shares
authorized,
|
|
|
1,785,715 shares
issued and outstanding at 9/30/2020 and 9/30/2019,
respectively
|
1,790
|
1,790
|
Series D
Convertible Preferred stock - $0.001 par value, 1,016,014 shares
authorized,
|
|
|
1,016,004 shares
issued and outstanding at 9/30/2020 and 9/30/2019,
respectively
|
1,015
|
1,015
|
Common stock -
$0.001 par value, 100,000,000 shares authorized, 24,804,874 and
18,366,178
|
|
|
shares issued and
outstanding at 9/30/2020 and 9/30/2019, respectively
|
24,807
|
18,366
|
Additional paid in
capital
|
54,023,758
|
39,085,179
|
Accumulated
deficit
|
(55,966,281)
|
(42,403,640)
|
Total stockholders'
equity (deficit)
|
(1,914,911)
|
(3,297,290)
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$4,682,147
|
$2,639,633
|
KNOW LABS, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Years
Ended,
|
|
|
September
30,
2020
|
September
30,
2019
|
|
|
|
REVENUE
|
$121,939
|
$1,804,960
|
COST OF
SALES
|
69,726
|
1,378,413
|
GROSS
PROFIT
|
52,213
|
426,547
|
RESEARCH AND
DEVELOPMENT EXPENSES
|
2,033,726
|
1,257,872
|
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
|
4,844,415
|
4,181,687
|
OPERATING
LOSS
|
(6,825,928)
|
(5,013,012)
|
|
|
|
OTHER INCOME
(EXPENSE):
|
|
|
Interest
expense
|
(6,094,682)
|
(2,945,312)
|
Other
income
|
65,769
|
(9,561)
|
(Loss) gain on debt
settlements
|
(707,800)
|
355,569
|
Total other
(expense), net
|
(6,736,713)
|
(2,599,304)
|
|
|
|
LOSS BEFORE INCOME
TAXES
|
(13,562,641)
|
(7,612,316)
|
|
|
|
Income tax
expense
|
-
|
-
|
|
|
|
NET
LOSS
|
$(13,562,641)
|
$(7,612,316)
|
|
|
|
Basic and diluted
loss per share
|
$(0.62)
|
$(0.42)
|
|
|
|
Weighted average
shares of common stock outstanding- basic and diluted
|
21,791,058
|
18,053,848
|
KNOW LABS, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
(DEFICIT)
|
|
Series A
Convertible
|
Series C
Convertible
|
Series D
Convertible
|
|
|
Additional
|
|
Total
|
|||
|
Preferred
Stock
|
Preferred
Stock
|
Preferred
Stock
|
Common
Stock
|
Paid
in
|
Accumulated
|
Stockholders'
|
||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
(Deficit)
|
Balance as of October 1,
2018
|
20,000
|
$11
|
1,785,715
|
$1,790
|
1,016,004
|
$1,015
|
17,531,522
|
$17,531
|
$32,163,386
|
$(34,791,324)
|
$(2,607,591)
|
Stock compensation expense -
employee options
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,141,674
|
-
|
1,141,674
|
Issuance of common stock for
services
|
-
|
-
|
-
|
-
|
-
|
-
|
245,000
|
245
|
348,655
|
-
|
348,900
|
Conversion of Series A Preferred
Stock
|
(20,000)
|
(11)
|
-
|
-
|
-
|
-
|
80,000
|
80
|
(69)
|
-
|
-
|
Beneficial conversion feature (Note
10)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,857,960
|
-
|
2,857,960
|
Issuance of warrants to debt
holders (Note 10)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,384,530
|
-
|
1,384,530
|
Issuance of warrants for services
related to debt offering (Note 10)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,072,095
|
-
|
1,072,095
|
Stock based compensation- warrant
issuances
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
117,458
|
-
|
117,458
|
Issuance of common stock for
warrant exercise
|
-
|
-
|
-
|
-
|
-
|
-
|
509,656
|
510
|
(510)
|
-
|
(0)
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,612,316)
|
(7,612,316)
|
Balance as of September 30,
2019
|
-
|
-
|
1,785,715
|
1,790
|
1,016,004
|
1,015
|
18,366,178
|
18,366
|
39,085,179
|
(42,403,640)
|
(3,297,290)
|
Stock compensation expense -
employee options
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,702,085
|
-
|
1,702,085
|
Stock option
exercise
|
-
|
-
|
-
|
-
|
-
|
-
|
73,191
|
73
|
(73)
|
-
|
-
|
Conversion of debt offering and
accrued interest (Note 10)
|
-
|
-
|
-
|
-
|
-
|
-
|
4,581,917
|
4,585
|
4,591,952
|
-
|
4,596,537
|
Beneficial conversion feature (Note
10)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,766,074
|
-
|
3,766,074
|
Issuance of warrants to debt
holders (Note 10)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,824,998
|
-
|
1,824,998
|
Issuance of warrants for services
related to debt offering (Note 10)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
975,326
|
-
|
975,326
|
Issuance of common stock for
services
|
-
|
-
|
-
|
-
|
-
|
-
|
550,000
|
550
|
1,044,450
|
-
|
1,045,000
|
Issuance of common stock for
exercise of warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
733,588
|
733
|
84,267
|
-
|
85,000
|
Issuance of shares related to
Settlement and Mutual Release and Subscription
Agreements
|
-
|
-
|
-
|
-
|
-
|
-
|
500,000
|
500
|
949,500
|
-
|
950,000
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(13,562,641)
|
(13,562,641)
|
|
-
|
$-
|
1,785,715
|
$1,790
|
1,016,004
|
$1,015
|
24,804,874
|
$24,807
|
$54,023,758
|
$(55,966,281)
|
$(1,914,911)
|
KNOW LABS, INCORPORATED AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Years
Ended,
|
|
|
September
30,
2020
|
September
30,
2019
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(13,562,641)
|
$(7,612,316)
|
Adjustments to
reconcile net loss to net cash (used in)
|
|
|
operating
activities
|
|
|
Depreciation and
amortization
|
242,987
|
259,347
|
Issuance of capital
stock for services and expenses
|
1,045,000
|
348,900
|
Stock based
compensation- warrants
|
-
|
117,458
|
Stock based
compensation- stock option grants
|
1,702,085
|
1,141,674
|
Amortization of
debt discount
|
5,662,690
|
2,771,270
|
Right of use,
net
|
422
|
2,610
|
Loss on sale of
assets
|
4,663
|
32,777
|
(Gain) on debt
settlement
|
(117,200)
|
(355,000)
|
Loss related to
issuance of shares for debt settlement
|
825,000
|
-
|
Changes in
operating assets and liabilities:
|
|
|
Accounts
receivable
|
63,049
|
257,489
|
Prepaid
expenses
|
6,435
|
13,705
|
Inventory
|
7,103
|
196,479
|
Other
assets
|
(11,414)
|
(6,596)
|
Accounts payable -
trade and accrued expenses
|
218,018
|
(215,873)
|
Deferred
revenue
|
-
|
(55,959)
|
NET CASH
(USED IN) OPERATING ACTIVITIES
|
(3,913,803)
|
(3,104,035)
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Purchase of
research and development equipment
|
(70,134)
|
(79,932)
|
NET CASH (USED IN)
INVESTING ACTIVITIES:
|
(70,134)
|
(79,932)
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
Proceeds from notes
payable
|
226,170
|
-
|
Repayments on line
of credit
|
-
|
(92,094)
|
Proceeds from
convertible notes payable
|
5,639,500
|
4,242,490
|
Proceeds from
Simple Agreements for Future Equity
|
785,000
|
-
|
Payments for
issuance costs from notes payable
|
(479,965)
|
-
|
Proceeds from
issuance of common stock for warrant exercise
|
85,575
|
-
|
Proeeds from
issuance of shares related to debt settlement
|
125,000
|
-
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
6,381,280
|
4,150,396
|
|
|
|
NET INCREASE IN
CASH AND CASH EQUIVALENTS
|
2,397,343
|
966,429
|
|
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
1,900,836
|
934,407
|
|
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
$4,298,179
|
$1,900,836
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
Interest
paid
|
$-
|
$22,521
|
Taxes
paid
|
$1,922
|
$-
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
Beneficial
conversion feature
|
$3,766,074
|
$2,857,960
|
Issuance of
warrants to debt holders
|
$1,824,998
|
$1,384,530
|
Issuance of
warrants for services related to debt offering
|
$975,326
|
$1,072,095
|
Cashless warrant
exercise (fair value)
|
$111,554
|
$127,414
|
Cashless stock
options exercise (fair value)
|
$18,298
|
$-
|
Conversion of debt
offering
|
$4,245,448
|
$-
|
Conversion of
accrued interest
|
$351,089
|
$-
|
|
|
1.
|
ORGANIZATION
|
2.
|
GOING CONCERN
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS |
Level 1
– Quoted prices in active markets for identical assets and
liabilities;
|
Level 2
– Inputs other than level one inputs that are either directly
or indirectly observable; and.
|
Balance
as of October 1, 2019
|
$-
|
Proceeds
from issuance of SAFE
|
785,000
|
Fair
value adjustment
|
-
|
Balance
as of September 30, 2020
|
$785,000
|
|
Estimated
|
|
|
|
Useful Lives
|
September 30, 2020
|
September 30, 2019
|
Machinery
and equipment
|
2-10
years
|
$355,271
|
$412,238
|
Leasehold
improvements
|
2-3
years
|
3,612
|
3,612
|
Furniture
and fixtures
|
2-3
years
|
26,855
|
58,051
|
Software
and websites
|
3-
7 years
|
-
|
35,830
|
Less:
accumulated depreciation
|
|
(257,067)
|
(379,259)
|
|
$128,671
|
$130,472
|
|
Estimated
|
September 30,
|
September 30,
|
|
Useful Lives
|
2020
|
2019
|
|
|
|
|
Technology
|
3
years
|
$520,000
|
$520,000
|
Less:
accumulated amortization
|
|
(418,886)
|
(245,554)
|
Intangible
assets, net
|
|
$101,114
|
$274,446
|
Year
|
$
|
2021
|
$113,553
|
2022
|
23,968
|
Imputed
interest
|
(5,486)
|
Total
lease liability
|
$132,035
|
|
September 30,
2020
|
September 30,
2019
|
Convertible
note- Clayton A. Struve
|
$1,071,000
|
$1,071,000
|
Convertible
note- Ronald P. Erickson and affiliates
|
1,184,066
|
1,184,066
|
2019
Convertible notes
|
4,242,490
|
4,242,515
|
Q1
2020 Convertible notes
|
520,000
|
-
|
Q2
2020 Convertible notes
|
195,000
|
-
|
Q3
2020 Convertible notes
|
4,924,500
|
-
|
Bousted
fee refund (originally booked as contra debt)
|
50,000
|
-
|
Less
conversions of 2019 notes
|
(4,242,490)
|
-
|
Less
debt discount - BCF
|
(2,127,894)
|
(1,273,692)
|
Less
debt discount - warrants
|
(1,025,512)
|
(616,719)
|
Less
debt discount - warrants issued for services
|
(823,582)
|
(652,919)
|
|
$3,967,578
|
$3,954,251
|
11.
|
SIMPLE AGREEMENTS FOR FUTURE EQUITY
|
|
September 30,
2020
|
|
|
|
Weighted
|
|
|
Average
|
|
|
Exercise
|
|
Shares
|
Price
|
Outstanding
at beginning of period
|
17,747,090
|
$0.455
|
Issued
|
3,510,425
|
1.216
|
Exercised
|
(733,588)
|
(0.952)
|
Forfeited
|
(507,560)
|
(1.120)
|
Expired
|
-
|
-
|
Outstanding
at end of period
|
20,016,367
|
$0.556
|
Exerciseable
at end of period
|
20,016,367
|
|
|
September 30, 2020
|
|||
|
Weighted
|
Weighted
|
|
Weighted
|
|
Average
|
Average
|
|
Average
|
Number of
|
Remaining
|
Exercise
|
Shares
|
Exercise
|
Warrants
|
Life ( In Years)
|
Price
|
Exerciseable
|
Price
|
13,133,286
|
1.76
|
$0.250
|
13,133,286
|
$0.250
|
714,286
|
0.83
|
0.700
|
714,286
|
0.700
|
882,159
|
1.12
|
1.000
|
882,159
|
1.000
|
5,191,636
|
4.12
|
1.20-1.50
|
5,191,636
|
1.20-1.50
|
95,000
|
4.19
|
2.00-4.08
|
95,000
|
2.34-4.08
|
|
|
|
|
|
20,016,367
|
3.04
|
$0.556
|
20,016,367
|
$0.556
|
|
|
|
|
|
Assumptions
|
|
Dividend
yield
|
0%
|
Expected
life
|
5 years
|
Expected
volatility
|
176%-177%
|
Risk
free interest rate
|
1.51%-1.71%
|
13.
|
STOCK INCENTIVE PLANS
|
|
|
Weighted
Average
|
|
|
Options
|
Exercise
Price
|
$
|
Outstanding as of
September 30, 2018
|
2,182,668
|
$1.698
|
$3,706,519
|
Granted
|
2,870,000
|
2.615
|
7,504,850
|
Exercised
|
-
|
-
|
-
|
Forfeitures
|
(520,000)
|
(3.906)
|
(2,031,000)
|
Outstanding as of
September 30, 2019
|
4,532,668
|
2.025
|
9,180,369
|
Granted
|
3,085,000
|
1.142
|
3,522,400
|
Exercised
|
(73,191)
|
(0.250)
|
(18,298)
|
Forfeitures
|
(2,739,477)
|
(2.593)
|
(7,103,921)
|
Outstanding as of
September 30, 2020
|
4,805,000
|
$1.161
|
$5,580,550
|
|
|
|
|
|
|
Weighted
|
Weighted
|
|
Weighted
|
|
|
Average
|
Average
|
|
Average
|
Range of
|
Number
|
Remaining Life
|
Exercise Price
|
Number
|
Exercise Price
|
Exercise Prices
|
Outstanding
|
In Years
|
Outstanding
|
Exerciseable
|
Exerciseable
|
$0.25
|
230,000
|
2.71
|
$0.250
|
129,375
|
$0.250
|
1.10-1.25
|
2,940,000
|
4.10
|
1.10
|
306,250
|
1.103
|
1.28-1.52
|
1,500,000
|
4.10
|
1.33
|
695,313
|
1.310
|
1.79-2.25
|
135,000
|
3.75
|
1.37
|
66,250
|
1.961
|
|
4,805,000
|
3.67
|
$1.161
|
1,197,188
|
$1.158
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Average
|
Weighted
|
|
Average
|
Range of
|
Number
|
Remaining Life
|
Average
|
Number
|
Exercise Price
|
Exercise Prices
|
Outstanding
|
In Years
|
Exercise Price
|
Exerciseable
|
Exerciseable
|
$0.10
|
5,100,000
|
4.76
|
$0.10
|
1,116,170
|
$0.10
|
0.80
|
150,000
|
5.00
|
$0.80
|
-
|
-
|
|
|
|
|
|
|
|
5,250,000
|
4.77
|
$0.12
|
1,116,170
|
$0.10
|
14.
|
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
|
|
2020
|
2019
|
U.S. operations
loss carry forward at statutory rate of 21%
|
$6,536,413
|
$6,763,238
|
Deferred tax assets
related to timing differences-accruals
|
1,746,486
|
192,897
|
Total
|
8,282,899
|
6,956,135
|
Less Valuation
Allowance
|
(8,248,637)
|
(6,956,135)
|
|
|
|
Other
|
(34,263)
|
-
|
Deferred tax
liabilities
|
(34,263)
|
-
|
|
|
|
Net Deferred Tax
Assets
|
-
|
-
|
Change in Valuation
allowance
|
$(1,292,502)
|
$(813,996)
|
|
2020
|
2019
|
Federal Statutory
Rate
|
21.0%
|
21.0%
|
State
Taxes
|
0.9%
|
0.0%
|
Meals
|
0.0%
|
0.0%
|
Warrants Int.
Exp.
|
-8.8%
|
0.0%
|
PY
True-up
|
-3.8%
|
0.0%
|
Increase in Income
Taxes Resulting from:
|
|
|
Change
in Valuation allowance
|
-9.3%
|
-21.0%
|
Effective Tax
Rate
|
0.0%
|
0.0%
|
|
|
|
Segment
|
|
|
|
Gross
|
Operating
|
Segment
|
Segment
|
Revenue
|
Margin
|
Profit (Loss)
|
Assets
|
Year
Ended September 30, 2020
|
|
|
|
|
Development
of the Bio-RFID™” and “ChromaID™”
technologies
|
$-
|
$-
|
$(5,481)
|
$4,360
|
Particle,
Inc. technology
|
-
|
-
|
(1,280)
|
322
|
TransTech
distribution business
|
122
|
70
|
(65)
|
-
|
Total
segments
|
$122
|
$70
|
$(6,826)
|
$4,682
|
|
|
|
|
|
Year
Ended September 30, 2019
|
|
|
|
|
Development
of the Bio-RFID™” and “ChromaID™”
technologies
|
$-
|
$-
|
$(4,935)
|
$2,882
|
TransTech
distribution business
|
1,805
|
427
|
(78)
|
58
|
Total
segments
|
$1,805
|
$427
|
$(5,013)
|
$2,940
|
|
|
|
|
Date: December 29, 2020
|
By:
|
/s/ Phillip A
Bosua
|
|
|
|
Phillip A. Bosua
|
|
|
|
Chief Executive Officer, and Director
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date: December 29, 2020
|
By:
|
/s/ Ronald
P. Erickson
|
|
|
|
Ronald P. Erickson
|
|
|
|
Interim Chief Financial Officer, and Treasurer
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
/s/ Phillip A. Bosua |
Chief Executive Officer
and Director |
December 29,
2020 |
Phillip A.
Bosua |
(Principal Executive
Officer) |
|
/s/ Ronald P. Erickson |
Chairman of the Board
and Interim Chief Financial Officer and Director |
December 29,
2020 |
Ronald P. Erickson
|
(Principal
Financial/Accounting Officer)
|
|
|
|
|
/s/ Jon Pepper
|
Director
|
December 29, 2020
|
Jon Pepper
|
|
|
|
|
|
/s/ Ichiro Takesako
|
Director
|
December 29, 2020
|
Ichiro Takesako
|
|
|
/s/ William A. Owens
|
Director
|
December 29, 2020
|
William A. Owens
|
|
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2020 |
Dec. 27, 2020 |
Mar. 31, 2020 |
|
Document And Entity Information | |||
Entity Registrant Name | KNOW LABS, INC. | ||
Entity Central Index Key | 0001074828 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 000-30262 | ||
Entity Public Float | $ 13,419,023 | ||
Entity Common Stock, Shares Outstanding | 25,730,224 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Statement [Abstract] | ||
REVENUE | $ 121,939 | $ 1,804,960 |
COST OF SALES | 69,726 | 1,378,413 |
GROSS PROFIT | 52,213 | 426,547 |
RESEARCH AND DEVELOPMENT EXPENSES | 2,033,726 | 1,257,872 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 4,844,415 | 4,181,687 |
OPERATING LOSS | (6,825,928) | (5,013,012) |
OTHER INCOME (EXPENSE): | ||
Interest expense | (6,094,682) | (2,945,312) |
Other income | 65,769 | (9,561) |
(Loss) gain on debt settlements | (707,800) | 355,569 |
Total other (expense), net | (6,736,713) | (2,599,304) |
LOSS BEFORE INCOME TAXES | (13,562,641) | (7,612,316) |
Income taxes - current provision | 0 | 0 |
NET LOSS | $ (13,562,641) | $ (7,612,316) |
Basic and diluted loss per share | $ (0.62) | $ (0.42) |
Weighted average shares of common stock outstanding - basic and diluted | 21,791,058 | 18,053,848 |
1. ORGANIZATION |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | Know Labs, Inc. (the “Company”) was incorporated under the laws of the State of Nevada in 1998. The Company has authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share.
The Company is focused on the development, marketing and sales of proprietary technologies which are capable of uniquely identifying or authenticating almost any substance or material using electromagnetic energy to record, detect, and identify the unique “signature” of the substance or material. The Company call these our “Bio-RFID™” and “ChromaID™” technologies.
Historically, the Company focused on the development of our proprietary ChromaID technology. Using light from low-cost LEDs (light emitting diodes) the ChromaID technology maps the color of substances, fluids and materials. With the Company’s proprietary processes we can authenticate and identify based upon the color that is present. The color is both visible to the Company as humans but also outside of the humanly visible color spectrum in the near infra-red and near ultra-violet and beyond. The Company’s ChromaID scanner sees what we like to call “Nature’s Color Fingerprint.” Everything in nature has a unique color identifier and with ChromaID the Company can see, and identify, and authenticate based upon the color that is present. The Company’s ChromaID scanner is capable of uniquely identifying and authenticating almost any substance or liquid using light to record, detect and identify its unique color signature. Today the Company is focused upon extensions and new inventions that are derived from and extend beyond the Company’s ChromaID technology. The Company calls this new technology “Bio-RFID.” The rapid advances made with the Company’s Bio-RFID technology in our laboratory have caused us to move quickly into the commercialization phase as the Company works to create revenue generating products for the marketplace. Today, the sole focus of the Company is on its Bio-RFID technology and its commercialization.
On April 30, 2020, the Company approved and ratified the incorporation of Particle, Inc., a Nevada corporation. The Company is the sole shareholder as of the date of incorporation. Particle is now a direct, majority owned subsidiary of the Company. Particle shall utilize the same corporate offices as the Company and shall focus on the development and commercialization of our extensive intellectual property relating to electromagnetic energy outside of the medical diagnostic arena which remains the parent company’s singular focus with its Bio-RFID technology and its initial application , the non-invasive measurement of blood glucose
On June 1, 2020, the Company approved and ratified entry into an intercompany Patent License Agreement dated May 21, 2020 with our majority owned subsidiary, Particle. Pursuant to the Agreement, Particle shall receive an exclusive non-transferrable license to use certain of our patents and trademarks, in exchange the Company shall receive: (i) a one-time fee of $250,000 upon a successful financing of Particle, and (ii) a quarterly royalty payment equal to the greater of 5% of the Gross Sales, net of returns, from Particle or $5,000.
In 2010, the Company acquired TransTech Systems, Inc. as an adjunct to our business. Operating as an independent subsidiary, TransTech was a distributor of products for employee and personnel identification and authentication. TransTech historically provided substantially all of the Company’s revenues. The financial results from our TransTech subsidiary had been diminishing as vendors of their products increasingly moved to the Internet and direct sales to their customers. TransTech closed on June 30, 2020. |
2. GOING CONCERN |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Going Concern | |
GOING CONCERN | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $13,562,641 and $7,612,316 for the years ended September 30, 2020 and 2019, respectively. Net cash used in operating activities was $3,913,803 and $3,104,035 for the years ended September 30, 2020 and 2019, respectively.
The Company anticipates that it will record losses from operations for the foreseeable future. As of September 30, 2020, the Company’s accumulated deficit was $55,966,281. The Company has limited capital resources. These conditions raise substantial doubt about our ability to continue as a going concern. The audit report prepared by the Company’s independent registered public accounting firm relating to our consolidated financial statements for the year ended September 30, 2020 includes an explanatory paragraph expressing the substantial doubt about the Company’s ability to continue as a going concern.
The Company believes that its cash on hand will be sufficient to fund our operations until September 30, 2021. The Company may need additional financing to implement our business plan and to service our ongoing operations and pay our current debts. There can be no assurance that we will be able to secure any needed funding, or that if such funding is available, the terms or conditions would be acceptable to us. If we are unable to obtain additional financing when it is needed, we will need to restructure our operations, and divest all or a portion of our business. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to the Company’s then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, the Company may be required to delay, scale back, eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected. |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS |
12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||
Accounting Policies [Abstract] | |||||||||||
SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS | Basis of Presentation – The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. The preparation of these unaudited condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Principles of Consolidation – The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, TransTech Systems, Inc. and RAAI Lighting, Inc., and majority-owned subsidiary, Particle, Inc. Inter-Company items and transactions have been eliminated in consolidation. The ownership of Particle not owned by the Company at September 30, 2020 is not material and thus no non-controlling interest is recognized.
Cash and Cash Equivalents – The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. At September 30, 2020, the Company had uninsured deposits in the amount of $4,048,719.
Accounts Receivable and Revenue – The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires the application of the five-step-principles-based-accounting-model for revenue recognition. These steps include (1) a legally enforceable contract, written or unwritten is identified; (2) performance obligations in the contracts are identified; (3) the transaction price reflecting variable consideration, if any, is identified; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when the control of goods is transferred to the customer at a particular time or over time. For TransTech, the Company extends thirty day terms to some customers. Accounts receivable were reviewed periodically for collectability.
TransTech Systems Inc. sold products directly to customers. the products were typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale did not require customer acceptance. We accounted for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts had a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue was measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expected to be entitled to receive in exchange for those goods. The Company shut down TransTech on June 30, 2020.
Allowance for Doubtful Accounts - We maintain an allowance for uncollectible accounts receivable. It is our practice to regularly review and revise, when deemed necessary, our estimates of uncollectible accounts receivable, which are based primarily on actual historical return rates. We record estimated uncollectible accounts receivable as selling, general and administrative expense. As of September 30, 2020 and 2019, there was a reserve for sales returns of $0 and $40,000, respectively, which is minimal based upon our historical experience. The Company shut down TransTech on June 30, 2020.
Inventories – Inventories consisted primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale and are stated at the lower of cost or market on the first-in, first-out (“FIFO”) method. Inventories are considered available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received by TransTech. The Company records a provision for excess and obsolete inventory whenever an impairment has been identified. There is a $0 and $28,000 reserve for impaired inventory as of September 30, 2020 and 2019, respectively.
Equipment – Equipment consists of machinery, leasehold improvements, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 2-10 years, except for leasehold improvements which are depreciated over 5 years.
Long-Lived Assets – The Company reviews its long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results.
Intangible Assets – Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable. If the life is not determinable, amortization is not recorded. We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable. When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets.
Research and Development Expenses – Research and development expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials, supplies and facilities used in producing prototypes.
The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. The Company incurred expenses of $2,033,726 and $1,257,872 for the years ended September 30, 2020 and 2019, respectively, on development activities.
Advertising – Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising and marketing costs for the years ended September 30, 2020 and 2019 were $230,844 and $0, respectively.
Fair Value Measurements and Financial Instruments – ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2020 and 2019 are based upon the short-term nature of the assets and liabilities.
The Company has a money market account which is considered a level 1 asset. The balance as of September 30, 2020 and 2019 was $4,252,959 and $1,901,278, respectively.
The following table represents a roll-forward of the fair value of the Simple Agreement for Future Equity (“SAFE”) for which fair value is determined by Level 3 inputs:
Fair value of the SAFE on issuance was determined to be equal to the proceeds received (see Note 11). There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented.
Derivative Financial Instruments –Pursuant to ASC 815 “Derivatives and Hedging”, the Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company then determines if embedded derivative must bifurcated and separately accounted for. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of September 30, 2020 and 2019.
Stock Based Compensation - The Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options and warrants to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit.
Convertible Securities – Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first.
Net Loss per Share – Under the provisions of ASC 260, “Earnings Per Share,” basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. As of September 30, 2020, there were options outstanding for the purchase of 4,805,000 common shares (including unearned stock option grants totaling 2,630,000 shares related to performance targets), warrants for the purchase of 20,016,367 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,894,566. All of which could potentially dilute future earnings per share but excluded from the September 30, 2020 calculation of net loss per share because their impact is antidilutive.
As of September 30, 2019, there were options outstanding for the purchase of 4,532,668 common shares (including unearned stock option grants totaling 2,410,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 17,747,090 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 13,262,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,242,490 common shares at the current price of $1.00 per share) that are issuable upon conversion of convertible debentures of $6,497,581. Issuance of more shares could potentially dilute future earnings per share but are excluded from the September 30, 2019 calculation of net loss per share because their impact is antidilutive.
Comprehensive loss – Comprehensive loss is defined as the change in equity of a business during a period from non-owner sources. There were no differences between net loss for the years ended September 30, 2020 and 2019 and comprehensive loss for those periods.
Dividend Policy – The Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are now classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.
The Company adopted the new standard on October 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Consequently, the Company did not update financial information or provide disclosures required under the new standard for dates and periods prior to October 1, 2019. The Company elected the package of practical expedients and did not reassess prior conclusions on whether contracts are or contain a lease, lease classification, and initial direct costs. In addition, the Company adopted the lessee practical expedient to combine lease and non-lease components for all asset classes and elected to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendment is meant to simplify the accounting for convertible instruments by removing certain separation models in subtopic 470-20 for convertible instruments. The amendment also changed the method used to calculate dilutes EPS for convertible instruments and for instruments that may be settled in cash. The amendment is effective for years beginning after December 15, 2021, including interim periods for those fiscal years. We are currently evaluating the impact of adoption this standard on the Company’s consolidated financial statements and related disclosures.
Based on the Company’s review of accounting standard updates issued since the filing of the 2020 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
4. ACCOUNTS RECEIVABLE |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |
ACCOUNTS RECEIVABLE | Accounts receivable were $0 and $63,049, net of allowance, as of September 30, 2020 and 2019, respectively. The Company has a total allowance for bad debt in the amount of $0 and $40,000 as of September 30, 2020 and 2019, respectively. The decrease is due to the shutdown of TransTech on June 30, 2020. |
5. INVENTORIES |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | Inventories were $0 and $7,103 as of September 30, 2020 and 2019, respectively. Inventories consisted primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale related to our TransTech business which shut down on June 30, 2020. There was a $0 and $28,000 reserve for impaired inventory as of September 30, 2020 and 2019, respectively. |
6. FIXED ASSETS |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FIXED ASSETS | Property and equipment as of September 30, 2020 and 2019 was comprised of the following:
Total depreciation expense was $69,655 and $86,016 for the year ended September 30, 2020 and 2019, respectively. All equipment is used for selling, general and administrative purposes and accordingly all depreciation is classified in selling, general and administrative expenses.
The Company retired assets at TransTech with a net book value of $4,358 as of June 30, 2020. TransTech was shut down on June 30, 2020. |
7. INTANGIBLE ASSETS |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | Intangible assets as of September 30, 2020 and 2019 consisted of the following:
Total amortization expense was $173,332 and $173,331 for the years ended September 30, 2020 and 2019, respectively.
Merger with RAAI Lighting, Inc.
On April 10, 2018, the Company entered into an Agreement and Plan of Merger with 500 Union Corporation, a Delaware corporation and a wholly owned subsidiary of the Company, and RAAI Lighting, Inc., a Delaware corporation. Pursuant to the Merger Agreement, the Company acquired all the outstanding shares of RAAI’s capital stock through a merger of Merger Sub with and into RAAI (the “Merger”), with RAAI surviving the Merger as a wholly owned subsidiary of the Company.
The fair value of the intellectual property associated with the assets acquired was $520,000 estimated by using a discounted cash flow approach based on future economic benefits. In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the forecasted results. |
8. ACCOUNTS PAYABLE |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Accounts Payable [Abstract] | |
ACCOUNTS PAYABLE | Accounts payable were $487,810 and $810,943 as of September 30, 2020 and 2019, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases and technology development, external audit, legal and other expenses incurred by the Company. |
9. LEASES |
12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||
Leases [Abstract] | ||||||||||||
LEASES | The Company has entered into operating leases for office and development facilities. These leases have terms which range from two to three years and include options to renew. These operating leases are listed as separate line items on the Company's September 30, 2020 and September 30, 2019 Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's September 30, 2020 and 2019 Consolidated Balance Sheets. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately $250,000 on October 1, 2018. Operating lease right-of-use assets and liabilities commencing after October 1, 2018 are recognized at commencement date based on the present value of lease payments over the lease term. During the year ended September 30, 2020 and 2019, the Company had one lease expire and recognized the rent payments as an expense in the current period. As of September 30, 2020 and 2019, total right-of-use assets and operating lease liabilities for remaining long term lease was approximately $132,000 and $246,000, respectively. In the year ended September 30, 2020 and 2019, the Company recognized approximately $136,718 and $133,996, respectively in total lease costs for the leases.
Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.
Information related to the Company's operating right-of-use assets and related lease liabilities as of and for the year ended September 30, 2020 was as follows:
Weighted-average remaining lease term 1.3 years Weighted-average discount rate 7%
The minimum future lease payments as of September 30, 2020 are as follows:
|
10. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | Convertible notes payable as of September 30, 2020 and 2019 consisted of the following:
Convertible Promissory Notes with Clayton A. Struve
The Company owes Clayton A. Struve $1,071,000 under convertible promissory or OID notes. The Company recorded accrued interest of $71,562 and $62,171 as of September 30, 2020 and 2019, respectively. On May 8, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to September 30, 2019. On November 26, 2019, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to June 30, 2020. Mr. Struve also invested $1,000,000 in the May 2019 Debt Offering. On May 11, 2020, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2020. On December 23, 2020, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to March 31, 2021.
Convertible Redeemable Promissory Notes with Ronald P. Erickson and J3E2A2Z
On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants were valued at $110,545. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. The Company recorded accrued interest of $73,964 as of September 30, 2019. On May 8, 2019, the Company signed Amendment 1 to the convertible redeemable promissory notes, extending the due dates to September 30, 2019 and increasing the interest rate to 6%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. On May 11, 2020, the Company signed Amendment 3 to the convertible promissory or OID notes, extending the due dates to September 30, 2020. On December 8, 2020, the Company signed Amendment 4 to the convertible promissory or OID notes, extending the due dates to March 31, 2021.
Convertible Debt Offering which Closed May 28, 2019
On May 28, 2019, the Company closed additional rounds of a debt offering and received gross proceeds of $4,242,515 in exchange for issuing Subordinated Convertible Notes (the “Convertible Notes”) and Warrants (the “Warrants”) in a private placement to 54 accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The Convertible Notes will be automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020.
The Convertible Notes had an original principal amount of $4,242,515 and bear annual interest of 8%. Both the principal amount and the interest are payable on a payment-in-kind basis in shares of Common Stock of the Company (the “Common Stock”).
The Warrants were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion.
The Convertible Notes are initially convertible into 4,242,515 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 2,121,258 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments.
In connection with the debt offering, the placement agent for the Convertible Notes and the Warrants received a cash fee of $361,401 and warrants to purchase 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. The placement agent has also received a $25,000 advisory fee. The warrants issued for these services had a fair value of $1,072,095 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $361,401 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes.
As part of the Purchase Agreement, the Company entered into a Registration Rights Agreement, which grants the investors “demand” and “piggyback” registration rights to register the shares of Common Stock issuable upon the conversion of the Convertible Notes and the exercise of the Warrants with the Securities and Exchange Commission for resale or other disposition. In addition, the Convertible Notes are subordinated to certain senior debt of the Company pursuant to a Subordination Agreement executed by the investors.
The Convertible Notes and Warrants were issued in transactions that were not registered under the Securities Act of 1933, as amended (the “Act”) in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Act and/or Rule 506 of SEC Regulation D under the Act.
In accordance to ASC 470-20-30, Debt with Conversion and Other Options, the guidance therein applies to both convertible debt and other similar instruments, including convertible preferred shares. The guidance states that “the allocation of proceeds shall be based on the relative fair values of the two instruments at time of issuance. When warrants are issued in conjunction with a debt instrument as consideration in purchase transactions, the amounts attributable to each class of instrument issued shall be determined separately, based on values at the time of issuance. The debt discount or premium shall be determined by comparing the value attributed to the debt instrument with the face amount thereof.
In conjunction with the issuance of Convertible Notes and the Warrants, the Company recorded a debt discount of $2,857,960 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes. Intrinsic value of the beneficial conversion feature was calculated at the commitment date as the difference between the conversion price and the fair value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. In accordance to ASC 470-20-30, if the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature shall be limited to the amount of the proceeds allocated to the convertible instrument.
The Warrants were indexed to our own stock and no down round provision was identified. The Warrants were not subject to ASC 718. Therefore, the Company concluded that based upon the conversion features, the Warrants should not be accounted for as derivative liabilities. The fair value of the Warrants was $1,384,530 and was recorded as Debt Discount (with an offset to APIC) on the date of issuance and amortized over the one-year term of the notes.
During the year ended September 30, 2020, the Company issued 4,581,917 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020.
Convertible Debt Offering during the year ended September 30, 2020
During the year ended September 30, 2020, the Company closed additional rounds of a debt offering and received gross proceeds of $5,639,500 in exchange for issuing Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents.
The Convertible Notes are initially convertible into 5,639,500 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 2,819,750 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments.
The fair value of the Warrants issued to debt holders was $1,824,998 on the date of issuance and will be amortized over the one-year term of the Convertible Notes.
In connection with the debt offering, the placement agent for the Convertible Notes and the Warrants received a cash fee of $529,965 and warrants to purchase 615,675 shares of the Company’s common stock, all based on 6.3-8%% of gross proceeds to the Company. The warrants issued for these services had a fair value of $1,016,797 at the date of issuance. The fair value of the warrants was recorded as debt discount (with an offset to APIC) and will be amortized over the one-year term of the Convertible Notes. The $529,965 cash fee was recorded as issuance costs and will be amortized over the one-year term of the related Convertible Notes.
The Company recorded a debt discount of $3,766,074 associated with a beneficial conversion feature on the debt, which is being accreted using the effective interest method over the one-year term of the Convertible Notes.
During the year ended September 30, 2020, amortization related to the 2019 and 2020 debt offerings of $5,662,690 of the beneficial conversion feature, warrants issued to debt holders and placement agent was recognized as interest expense in the consolidated statements of operations.
Convertible notes payable as of September 30, 2020 and 2019 are summarized below:
Note Payable
On April 30, 2020, the Company received $226,170 under the Paycheck Protection Program of the U.S. Small Business Administration’s 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). During the year ended September 30, 2020, the Company recorded interest expense of $960. The Company is utilizing the funds in accordance with the legal requirements and expects this loan to be forgiven. Until the loan is legally forgiven, the loan balance will outstanding. The Company expects to start the application for the loan forgiveness during the three months ended December 31, 2020. |
11. SIMPLE AGREEMENTS FOR FUTURE EQUITY |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
SIMPLE AGREEMENTS FOR FUTURE EQUITY | In July 2020, Particle entered into Simple Agreements for Future Equity (“SAFE”) with twenty two accredited investors pursuant to which Particle received $785,000 in cash in exchange for the providing the investor the right to receive shares of the Particle stock. The Company expects to issue 981,250 shares of the Particle stock that was initially valued at $0.80 per share. The Company paid $47,100 in broker fees which were expensed as business development expenses. The SAFE contained a number of conversion and redemption provisions, including settlement upon liquidity or dissolution events. The final price and shares are not known until settlement upon liquidity or dissolution events conditions are achieved. The Company elected the fair value option of accounting for the SAFE. |
12. EQUITY |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY | Authorized Capital Stock
The Company authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share.
Authorized Capital Stock
The Company authorized 105,000,000 shares of capital stock, of which 100,000,000 are shares of voting common stock, par value $0.001 per share, and 5,000,000 are shares preferred stock, par value $0.001 per share.
As of September 30, 2020, the Company had 24,804,874 shares of common stock issued and outstanding, held by 123 stockholders of record. The number of stockholders, including beneficial owners holding shares through nominee names, is approximately 2,300. Each share of common stock entitles its holder to one vote on each matter submitted to the stockholders for a vote, and no cumulative voting for directors is permitted. Stockholders do not have any preemptive rights to acquire additional securities issued by the Company. As of September 30, 2020, there were options outstanding for the purchase of 4,805,000 common shares (including unearned stock option grants totaling 2,630,000 shares related to performance targets), warrants for the purchase of 20,016,367 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,894,566. All of which could potentially dilute future earnings per share.
Voting Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $0.001.
Series A Preferred Stock
There are 23,334 shares of Series A Preferred shares authorized. Series A Preferred is entitled to the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred held by such holder are then convertible as of the applicable record date. The Series A Preferred was not be redeemable without the consent of the holder.
On January 29, 2019, a holder of Series A Preferred Stock converted 20,000 shares into 80,000 shares of common stock. There are no Series A Preferred Stock outstanding as of January 29, 2019.
On December 14, 2020, the Company cancelled the Certificate of Designations for the Series A Preferred Stock.
Series C and D Preferred Stock and Warrants
On August 5, 2016, the Company closed a Series C Preferred Stock and Warrant Purchase Agreement with Clayton A. Struve, an accredited investor for the purchase of $1,250,000 of preferred stock with a conversion price of $0.70 per share. The preferred stock has a yield of 8% and an ownership blocker of 4.99%. In addition, Mr. Struve received a five-year warrant to acquire 1,785,714 shares of common stock at $0.70 per share. On August 14, 2017, the price of the Series C Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. On September 30, 2020 and September 30, 2019 there are 1,785,715 Series C Preferred shares outstanding.
As of September 30, 2020, and September 30, 2019, the Company has 1,016,014 of Series D Preferred Stock outstanding with Clayton A. Struve, an accredited investor. On August 14, 2017, the price of the Series D Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments.
The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% The Series D Preferred Stock is convertible into shares of common stock at a price of $0.25 per share or by multiplying the number of Series D Preferred Stock shares by the stated value and dividing by the conversion price then in effect, subject to certain diluted events, and has the right to vote the number of shares of common stock the Series D Preferred Stock would be issuable on conversion, subject to a 4.99% blocker. The Preferred Series D has an annual yield of 8% if and when dividends are declared.
Series F Preferred Stock
On August 1, 2018, the Company filed with the State of Nevada a Certificate of Designation establishing the Designations, Preferences, Limitations and Relative Rights of Series F Preferred Stock. The Designation authorized 500 shares of Series F Preferred Stock. The Series F Preferred Stock shall only be issued to the current Board of Directors on the date of the Designation’s filing and is not convertible into common stock. As set forth in the Designation, the Series F Preferred Stock has no rights to dividends or liquidation preference and carries rights to vote 100,000 shares of common stock per share of Series F upon a Trigger Event, as defined in the Designation. A Trigger Event includes certain unsolicited bids, tender offers, proxy contests, and significant share purchases, all as described in the Designation. Unless and until a Trigger Event, the Series F shall have no right to vote. The Series F Preferred Stock shall remain issued and outstanding until the date which is 731 days after the issuance of Series F Preferred Stock (“Explosion Date”), unless a Trigger Event occurs, in which case the Explosion Date shall be extended by 183 days. As of September 30, 2020 and September 30, 2019, there are no Series F shares outstanding.
Securities Subject to Price Adjustments
In the future, if the Company sells its common stock at a price below $0.25 per share, the exercise price of 8,108,356 outstanding shares of Series C and D Preferred Stock that adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of Convertible Notes Payable of $7,894,566 or 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and the exercise price of additional outstanding warrants to purchase 12,588,286 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. Warrants totaling 5,191,636 would adjust below $1.20 per share pursuant to the documents governing such instruments.
Common Stock
All of the offerings and sales described below were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities, the offerings and sales were made to a limited number of persons, all of whom were accredited investors and transfer was restricted by the company in accordance with the requirements of Regulation D and the Securities Act. All issuances to accredited and non-accredited investors were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D, including limiting the number of non-accredited investors to no more than 35 investors who have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of an investment in our securities.
On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants. The stock option grant had an exercise price of $0.25 per share.
During the year ended September 30, 2020, the Company issued 550,000 shares of restricted common stock for services. The shares were issued were valued at $1.90 per share, the market price of our common stock, or $1,045,000.
During the year ended September 30, 2020, the Company issued 4,581,917 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on February 15, 2020.
During the year ended September 30, 2020, the Company issued 733,588 shares of common stock at $0.889 per share related to the exercise of warrants.
On July 1, 2020, the Company entered into a Settlement Agreement and General Mutual Release with a shareholder of the Company. On July 6, 2020, the shareholder paid $125,000 us and we issued 500,000 shares of common stock. We accrued for the loss on debt settlement of $825,000 as of June 30, 2020 which represents the difference between the fair market value of the stock and $125,000 paid by the shareholder.
The following equity issuances occurred during the year ended September 30, 2019:
During the year ended September 30, 2019, the Company issued 509,656 shares of common stock at $0.25 per share to consultants and investors related to the cashless exercise of warrants.
During the year ended September 30, 2019, the Company issued 145,000 shares of common stock for services provided by two consultants. The common stock was valued at the daily trading price of totaling $246,900 or $1.703 per share.
On January 2, 2019, the Company issued 100,000 shares of common stock for services provided to Ronald P. Erickson. The shares were valued at $102,000 or $1.02 per share.
On January 29, 2019, a holder of Series A Preferred Stock converted 20,000 shares into 80,000 shares of common stock.
Warrants to Purchase Common Stock
The following warrant transactions occurred during the year ended September 30, 2020:
During the year ended September 30, 2020, the Company issued 733,588 shares of common stock at $0.952 per share and cancelled warrants to purchase 507,560 shares of common stock at $$1.120 per share to related to the exercise of warrants.
During the year ended September 30, 2020, the Company issued 75,000 shares of common stock at $1.95 per share. The warrant was valued at $1.770 per share.
Convertible Debt Offering Warrants
The Warrants issued for the 2020 convertible Debt Offering were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion.
Warrants issued in connection with 2020 convertible debt offering are initially exercisable for 2,819,750 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments.
In connection with the 2020 convertible debt offering, the placement agent for the Convertible Notes and the Warrants received warrants to 615,675 shares of the Company’s common stock, all based on 8% of gross proceeds to the Company.
The following warrants were issued during the year ended September 30, 2019:
The Company cancelled warrants to purchase 70,011 shares of common stock at $3.08 per share to consultants and investors related to the cashless exercise of warrants or expiration of warrants.
The Company issued warrants to purchase 70,000 shares of common stock at $1.61 to $2.72 per share to three consultants. The warrants were valued at $30,325 or $1.989 per share. The warrants expire during the first quarter of 2024.
The Company increased warrants by 120,000 shares at $0.25 per shares related to the June 28, 2019 exercise of warrants by a holder of Series A Preferred Stock.
Private Placement Warrants
The Warrants issued for the private placements discussed above were granted on a 1:0.5 basis (one-half Warrant for each full share of Common Stock into which the Convertible Notes are convertible). The Warrants have a five-year term and an exercise price equal to 120% of the per share conversion price of the Qualified Financing or other mandatory conversion.
Warrants are initially exercisable for 2,121,258 shares of Common Stock at an exercise price of $1.20 per share of Common Stock, also subject to certain adjustments.
In connection with the private placement, the placement agent for the Convertible Notes and the Warrants received warrants to purchase 542,102 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company.
A summary of the warrants outstanding as of September 30, 2020 were as follows:
The following table summarizes information about warrants outstanding and exercisable as of September 30, 2020:
The significant weighted average assumptions relating to the valuation of the Company’s warrants for the year ended September 30, 2020 were as follows:
There were vested and in the money warrants of 19,996,367 with an aggregate intrinsic value of $35,329,983. |
13. STOCK INCENTIVE PLAN |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK INCENTIVE PLAN | Know Labs, Inc.
On January 23, 2019, the Board approved an amendment to its 2011 Stock Incentive Plan increasing the number of shares of common stock reserved under the Incentive Plan from 2,200,000 to 2,500,000 to common shares. On May 22, 2019, the Compensation Committee approved an amendment to its 2011 Stock Incentive Plan increasing the number of shares of common stock reserved under the Incentive Plan from 2,500,000 to 3,000,000 to common shares. See Note 18 for increase in option pool subsequent to September 30, 2020.
Determining Fair Value under ASC 718
The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.
Stock Option Activity
The Company had the following stock option transactions during the year ended September 30, 2020:
During the year ended September 30, 2020, the Company granted stock option grants to executives, directors and consultants for 3,085,000 shares with a weighted average exercise price of $1.142 per share. The grants expire in five years and generally vest quarterly over four years. Stock option grants totaling 2,630,000 shares of common stock are performance stock option grants and are not vested until the performance is achieved.
During the year ended September 30, 2020, executives and employees voluntarily cancelled stock option grants for 2,739,477 shares with a weighted average exercise price of $2.593 per share.
On November 9, 2019, a former employee exercised stock option grants on a cashless basis. The former employee received 73,191 shares of common stock for vested stock option grants totaling 93,750 shares. The stock option grant had an exercise price of $0.25 per share.
There are currently 4,805,000 (including unearned stock option grants totaling 2,630,000 shares related to performance targets) options to purchase common stock at an average exercise price of $1.161 per share outstanding as of September 30, 2020 under the 2011 Stock Incentive Plan. The Company recorded $868,314 and $1,141,674 of compensation expense, net of related tax effects, relative to stock options for the years ended September 30, 2020 and 2019 and in accordance with ASC 718. As of September 30, 2020, there is approximately $361,947, net of forfeitures, of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately 3.67 years.
The Company had the following stock option transactions during the year ended September 30, 2019:
On October 31, 2018, the Board awarded stock option grants to two directors to acquire 50,000 shares each of the Company’s common stock. The grants had an exercise price of $3.03 per share and expire on October 31, 2023. The grants vested immediately.
On October 31, 2018, the Board awarded Phillip A. Bosua a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants had an exercise price of $3.03 per share and expire on October 31, 2023.
On October 31, 2018, the Board awarded Ronald P Erickson a stock option grant to acquire 1,000,000 shares of the Company’s common which vests upon the Company’s successful listing of its Common Stock on NASDAQ or the New York Stock Exchange (including the NYSE American Market). The grant had an exercise price of $3.03 per share and expires on October 31, 2023.
On March 26, 2019, the Board awarded two employees stock option grants totaling 260,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grant had an exercise price of $1.50 per share and expires on March 26, 2024.
During April 2019, the Board awarded stock option grants to two employees and a consultant to acquire 185,000 shares of the Company’s common stock. The grants had an exercise price from $1.39 per share to $1.90 per share and expire during April 2024. Grants totaling 10,000 common shares vested immediately and grants totaling 50,000 vests quarterly over three years. Grants totaling 125,000 common shares vest quarterly over four years, with no vesting during the first six months.
On April 15, 2019, the Board awarded an employee was granted a stock option grant to acquire 50,000 shares of the Company’s common which vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration. The grants had an exercise price of $1.50 per share and expire on April 15, 2024.
During July and August of 2019, the Board awarded stock option grants to four consultants to acquire 275,000 shares of the Company’s common stock. The grants have an exercise price from $1.34 per share to $1.40 per share and expire during July and August 2024. Grants totaling 10,000 common shares vested immediately and grants totaling 50,000 vest quarterly over three years. Grants totaling 15,000 common shares vest monthly over six months. A grant of 100,000 shares of common stock vests quarterly over four years, with no vesting during the first six months. A grant for 100,000 shares of common stock vests quarterly over four years, with no vesting during the first six months. A grant for 100,000 shares of common stock vests upon approval of the Company’s blood glucose measurement technology by the U.S. Food and Drug Administration.
During the year ended September 30, 2019, the Board four employees a stock option grants to acquire 125,000 shares of the Company’s Common stock for each $1,000,000 raised by the Company in revenue generated in a planned Kickstarter campaign at a price range for $1.50 to $3.03 per share. During the year ended September 30, 2019, the Company recently decided that it would not undertake a Kickstarter campaign. Options are expected to be cancelled or have alternative Company milestones.
During the year ended September 2019, stock option grants for 520,000 shares of common stock with an exercise price ranging from $3.03 to $4.20 per share were forfeited. Stock option activity for the years ended September 30, 2020 and 2019 was as follows:
The following table summarizes information about stock options outstanding and exercisable as of September 30, 2020:
There were in the money stock option grants of 4,805,000 shares as of September 30, 2020 with an aggregate intrinsic value of $5,446,854.
Particle, Inc.
On May 21, 2020, Particle approved a 2020 Stock Incentive Plan and reserved 8,000,000 shares under the Plan. The Plan requires vesting annually over four years, with no vesting in the first two quarters.
During July 2020, Particle approved stock option grants to non-executive employees and consultants totaling 2,250,000 shares at an average of $0.147 per share. The stock option grants vest annually over four years, with no vesting in the first two quarters.
On July 2, 2020, Particle approved stock option grants for 1,500,000 shares at $0.10 per share to both Phillip A. Bosua and Ronald P. Erickson. The stock option grants vest (i) 33.3% upon issuance; (ii) 33.3% after the first sale; and (iii) 33.4% after one million in sales are achieved. The 500,000 vests stock option grants for both Mr. Bosua and Erickson were valued at $0.788 per share or $394,000.
The Company recorded $833,771 and $0 of compensation expense, net of related tax effects, relative to stock options for the years ended September 30, 2020 and 2019 and in accordance with ASC 718. As of September 30, 2020, there is approximately $840,729, net of forfeitures, of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately 3.77 years.
The following table summarizes information about Particle stock options outstanding and exercisable as of September 30, 2020:
There were in the money stock option grants of 1,116,170 shares as of September 30, 2020 with an aggregate intrinsic value of $758,996. |
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson
See Notes 10, 13 and 15 for related party transactions with Ronald P. Erickson.
On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of the Company for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The warrants were valued at $110,545. Because the note is immediately convertible, the warrants and beneficial conversion were expensed as interest. The Company recorded accrued interest of $73,964 as of September 30, 2019. On May 8, 2019, the Company signed Amendment 1 to the convertible redeemable promissory notes, extending the due dates to September 30, 2019 and increasing the interest rate to 6%. On November 26, 2019, the Company signed Amendment 2 to the convertible promissory or OID notes, extending the due dates to March 31, 2020. On May 11, 2020, the Company signed Amendment 3 to the convertible promissory or OID notes, extending the due dates to September 30, 2020. On December 8, 2020, the Company signed Amendment 4 to the convertible promissory or OID notes, extending the due dates to March 31, 2021.
On January 2, 2019, Mr. Erickson was issued 100,000 shares of restricted common stock at the grant date market value of $1.02 per share.
On October 4, 2019, Ronald P. Erickson voluntarily cancelted a stock option grant for 1,000,000 shares with an exercise price of $3.03 per share. The grant was related to performance and was not vested.
On November 4, 2019, the Company granted a stock option grant to Ronald P. Erickson for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2024 and vests upon uplisting to the NASDAQ or NYSE exchanges.
On January 1, 2020, the Company issued 100,000 shares of restricted common stock to Ronald P. Erickson. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $190,000.
On June 1, 2020, Mr. Erickson received a salary of $10,000 per month for work on Particle, Inc.
Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $597,177 and $487,932 as of September 30, 2020 and 2019, respectively.
On July 2, 2020, Particle issued a stock option grant for 1,500,000 shares at $0.10 per share to Ronald P. Erickson. The stock option grant vests (i) 33.3% upon issuance; (ii) 33.3% after the first sale; and (iii) 33.4% after one million in sales are achieved.
Related Party Transaction with Phillip A. Bosua
On October 4, 2019, Philip A. Bosua voluntarily cancelled a stock option grant for 1,000,000 shares with an exercise price of $3.03 per share. The grants was related to performance and was not vested.
On November 4, 2019, the Company granted a stock option grant to Philip A. Bosua for 1,200,000 shares with an exercise price of $1.10 per share. The performance grant expires November 4, 2024 and vests upon FDA approval of the UBAND blood glucose monitor.
On January 1, 2020, the Company issued 150,000 shares of restricted common stock to Phillip A. Bosua. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $285,000.
On June 1, 2020, Mr. Bosua received a salary of $10,000 per month for work on Particle, Inc.
On July 2, 2020, Particle issued a stock option grant for 1,500,000 shares at $0.10 per share to Philip A. Bosua. The stock option grant vests (i) 33.3% upon issuance; (ii) 33.3% after the first sale; and (iii) 33.4% after one million in sales are achieved.
Stock Issuances and Cancellations to Named Executive Officers and Directors
During the year ended September 30, 2019, two directors voluntarily forfeited stock option grants for 100,000 shares of common stock at $3.03 per share.
On November 4, 2019, the Company granted stock option grants to two directors totaling 105,000 shares with an exercise price of $1.10 per share. The stock option grants expire in five years. The stock option grants vested immediately.
On January 1, 2020, the Company issued 120,000 shares of restricted common stock to three directors. The shares were issued in accordance with the 2011 Stock Incentive Plan and were valued at $1.90 per share, the market price of the Company’s common stock, or $228,000. |
15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS | Legal Proceedings
The Company may from time to time become a party to various legal proceedings arising in the ordinary course of our business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to our business.
Employment Agreement with Phillip A. Bosua, Chief Executive Officer
Phillip A. Bosua was appointed our Chief Executive Officer on April 10, 2018. Previously, Mr. Bosua served as the Company’s Chief Product Officer since August 2017. The Company entered into a Consulting Agreement with Mr. Bosua’s company, Blaze Clinical on July 7, 2017. From September 2012 to February 2015, Mr. Bosua was the founder and Chief Executive Officer of LIFX Inc. (where he developed and marketed an innovative “smart” light bulb) and from August 2015 until February 2016 was Vice President Consumer Products at Soraa (which markets specialty LED light bulbs). From February 2016 to July 2017, Mr. Bosua was the founder and CEO of RAAI, Inc. (where he continued the development of his smart lighting technology). From May 2008 to February 2013 he was the Founder and CEO of LimeMouse Apps, a leading developer of applications for the Apple App Store.
On April 10, 2018, the Company entered into an Employment Agreement with Mr. Bosua reflecting his appointment as Chief Executive Officer. The Employment Agreement is for an initial term of 12 months (subject to earlier termination) and will be automatically extended for additional 12-month terms unless either party notifies the other party of its intention to terminate the Employment Agreement with at least ninety (90) days prior to the end of the Initial Term or renewal term. Mr. Bosua was paid a base salary of $225,000 per year, received 500,000 shares of common stock valued at $0.33 per share and may be entitled to bonuses and equity awards at the discretion of the Board or a committee of the Board. The Employment Agreement provides for severance pay equal to 12 months of base salary if Mr. Bosua is terminated without “cause” or voluntarily terminates his employment for “good reason.” From March 5, 2019 to May 1, 2020, the annual compensation was $240,000, and from May 5, 2020 to September 30, 2020, the annual compensation was $260,000. The Compensation Committee and the Board of Particle, Inc. compensated Phillip A. Bosua with an annual salary of $120,000 from June 1, 2020.
Employment Agreement with Ronald P. Erickson, Chairman of the Board and Interim Chief Financial Officer
On April 10, 2018, the Company entered into an Amended Employment Agreement for Ronald P. Erickson which amends the Employment Agreement dated July 1, 2017. The Agreement expires March 21, 2019. automatically be extended for additional one (1) year periods unless either Party delivers written notice of such Party’s intention to terminate this Agreement at least ninety (90) days prior to the end of the Initial Term or renewal term.
Mr. Erickson’s annual compensation was $180,000. Mr. Erickson is also entitled to receive an annual bonus and equity awards compensation as approved by the Board. The bonus should be paid no later than 30 days following earning of the bonus. From October 1, 2018 to March 4, 2019, from March 5, 2019 to May 1, 2020, the annual compensation was $195,000, and from May 5, 2020 to September 30, 2020, the annual compensation was $215,000. The Compensation Committee and the Board of Particle Inc. compensated Ronald P. Erickson with an annual salary of $120,000 from June 1, 2020.
Mr. Erickson will be entitled to participate in all group employment benefits that are offered by the Company to its senior executives and management employees from time to time, subject to the terms and conditions of such benefit plans, including any eligibility requirements.
If the Company terminates Mr. Erickson’s employment at any time prior to the expiration of the Term without Cause, as defined in the Employment Agreement, or if Mr. Erickson terminates his employment at any time for “Good Reason” or due to a “Disability”, Mr. Erickson will be entitled to receive (i) his Base Salary amount for one year; and (ii) medical benefits for eighteen months.
Properties and Operating Leases
The Company is obligated under the following leases for its various facilities.
Corporate Offices
On April 13, 2017, the Company leased its executive office located at 500 Union Street, Suite 810, Seattle, Washington, USA, 98101. The Company leases 943 square feet and the net monthly payment is $2,672. The monthly payment increases approximately 3% each year and the lease expires on May 31, 2022.
Lab Facilities and Executive Offices
On February 1, 2019, the Company leased its lab facilities and executive offices located at 915 E Pine Street, Suite 212, Seattle, WA 98122. The Company leases 2,642 square feet and the net monthly payment is $8,256. The monthly payment increases approximately 3% on July 1, 2019 and annually thereafter. The lease expires on June 30, 2021 and can be extended.
On June 26, 2020, the Company leased temporary lab facilities located at 3131 Western Avenue, Suite A350, Seattle, WA 98121. The Company leased 5,707 square feet and the net monthly payment is $11,414. The lease was terminated August 31, 2020. |
16. INCOME TAXES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise from United States sources.
Pretax losses arising from United States operations were approximately $4,077,000 and $2,957,000 for the years ended September 30, 2020 and 2019.
The Company has net operating loss carryforwards of approximately $36,209,000 which expire in 2021-2038. Because it is not more likely than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, a corresponding valuation allowance of approximately $8,248,000 was established as of September 30, 2020. Additionally, under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances, including a change in control.
Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. There can be no assurance that the Company will be able to utilize any net operating loss carryforwards in the future. The Company is subject to possible tax examination for the years 2013 through 2020.
For the year ended September 30, 2020, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses, interest expense and warrants issued for services.
The principal components of the Company’s deferred tax assets at September 30, 2020 and 2019 are as follows:
A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended September 30, 2020 and 2019 are as follows:
As of September 30, 2020, there were no uncertain tax positions. Management does not anticipate any future adjustments in the next twelve months which would result in a material change to its tax position. For the years ended September 30, 2020 and 2019, the Company did not have any interest and penalties.
|
17. SEGMENT REPORTING |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | The management of the Company considers the business to have two operating segments (i) the development of the Bio-RFID™” and “ChromaID™” technologies; (ii) Particle, Inc. technology; and (iii) TransTech, a distributor of products for employee and personnel identification and authentication. TransTech has historically provided substantially all of the Company’s revenues. TransTech was shut down on June 30, 2020. Particle commenced operations in the three months ended June 30, 2020.
The reporting for the year ended September 30, 2020 and 2019 was as follows (in thousands):
During years ended September 30, 2020 and 2019, the Company incurred non-cash expenses of $2,990,072 and $1,867,379. |
18. SUBSEQUENT EVENTS |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued. Subsequent to September 30, 2020, there were the following material transactions that require disclosure:
Convertible Notes Dated October 17, 2019
The Company issued 561,600 shares of common stock related to the automatic conversion of Convertible Notes and interest from a private placement to accredited investors in 2019. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary.
2011 Stock Incentive Plan
On November 23, 2020, the Board of Directors increased the size of the stock available under the Stock Option Plan by 9,750,000 shares. This increase is based on an industry peer group study.
Convertible Redeemable Promissory Notes with Ronald P. Erickson and J3E2A2Z
On December 8, 2020, the Company signed Amendment 4 to the $1,184,066 convertible promissory or OID notes, extending the due dates to March 31, 2021.
Convertible Promissory Notes with Clayton A. Struve
On December 23, 2020, the Company signed Amendments to the $1,071,000 convertible promissory or OID notes, extending the due dates to March 31, 2021.
Stock Option Exercises and Issuances
A consultant exercised a stock option grants on a cashless basis. The consultant received 3,750 shares of common stock for vested stock option grants and forfeited 11,250 shares. The stock option grant had an exercise price of $1.25 per share.
The compensation committee of Particle, Inc. issued a stock option grant to a consultant for 50,000 shares of Particle common stock. The stock option grant had an exercise price at $0.80 per share. The grant vests annually over four years after a six month cliff vesting period.
The Compensation committee issued a stock option grant to a consultant for 140,000 shares at an exercise price of $1.24 per share. The stock option grant expires in five years. The stock option grant vests quarterly over four years after a six month cliff vesting period.
On December 15, 2020, the Company issued 30,000 shares each to three directors shares at an exercise price of $1.53 per share.
On December 15, 2020, the Company issued 20,000 warrants to purchase common stock each to three directors shares at $1.53 per share. The warrants expire on December 15, 2025.
On December 15, 2020, the Company issued a warrant for to purchase common stock for 2,000,000 shares to Ronald P. Erickson at $1.53 per share. The warrants were issued for the extension of loans and deferral of other expenses. The warrant expires on December 15, 2025.
On December 15, 2020, the Company stock option grant to Ronald P. Erickson for 1,865,675 shares at an exercise price of $1.53 per share. The stock option grant expires in five years. The stock option grants vest when earned based on certain performance criteria.
On December 15, 2020, the Company stock option grant to Phillip A. Bosua for 2,132,195 shares at an exercise price of $1.53 per share. The stock option grant expires in five years. The stock option grants vest when earned based on certain performance criteria.
Simple Agreement for Future Equity
Particle entered into Simple Agreements for Future Equity (“SAFE”) with two accredited investors pursuant to which Particle received $55,000 in cash in exchange for the providing the investor the right to receive shares of the Particle stock. The Company expects to issue 44,000 shares of the Particle stock that was initially valued at $0.80 per share. The Company paid $1,800 in broker fees which were expensed as business development expenses. |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) |
12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||
Accounting Policies [Abstract] | |||||||||||
BASIS OF PRESENTATION | The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. The preparation of these unaudited condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). |
||||||||||
PRINCIPLES OF CONSOLIDATION | The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, TransTech Systems, Inc. and RAAI Lighting, Inc., and majority-owned subsidiary, Particle, Inc. Inter-Company items and transactions have been eliminated in consolidation. The ownership of Particle not owned by the Company at September 30, 2020 is not material and thus no non-controlling interest is recognized. |
||||||||||
CASH AND CASH EQUIVALENTS | The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. At September 30, 2020, the Company had uninsured deposits in the amount of $4,048,719. |
||||||||||
ACCOUNTS RECEIVABLE AND REVENUE | The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires the application of the five-step-principles-based-accounting-model for revenue recognition. These steps include (1) a legally enforceable contract, written or unwritten is identified; (2) performance obligations in the contracts are identified; (3) the transaction price reflecting variable consideration, if any, is identified; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when the control of goods is transferred to the customer at a particular time or over time. For TransTech, the Company extends thirty day terms to some customers. Accounts receivable were reviewed periodically for collectability.
TransTech Systems Inc. sold products directly to customers. the products were typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale did not require customer acceptance. We accounted for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable. The majority of our contracts had a single performance obligation to transfer products and are short term in nature, usually less than one year. Our revenue was measured based on the consideration specified in the contract with each customer in exchange for transferring products that is generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expected to be entitled to receive in exchange for those goods. The Company shut down TransTech on June 30, 2020. |
||||||||||
ALLOWANCE FOR DOUBTFUL ACCOUNTS | We maintain an allowance for uncollectible accounts receivable. It is our practice to regularly review and revise, when deemed necessary, our estimates of uncollectible accounts receivable, which are based primarily on actual historical return rates. We record estimated uncollectible accounts receivable as selling, general and administrative expense. As of September 30, 2020 and 2019, there was a reserve for sales returns of $0 and $40,000, respectively, which is minimal based upon our historical experience. The Company shut down TransTech on June 30, 2020. |
||||||||||
INVENTORIES | Inventories consisted primarily of printers and consumable supplies, including ribbons and cards, badge accessories, capture devices, and access control components held for resale and are stated at the lower of cost or market on the first-in, first-out (“FIFO”) method. Inventories are considered available for resale when drop shipped and invoiced directly to a customer from a vendor, or when physically received by TransTech. The Company records a provision for excess and obsolete inventory whenever an impairment has been identified. There is a $0 and $28,000 reserve for impaired inventory as of September 30, 2020 and 2019, respectively. |
||||||||||
EQUIPMENT | Equipment consists of machinery, leasehold improvements, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 2-10 years, except for leasehold improvements which are depreciated over 5 years. |
||||||||||
LONG-LIVED ASSETS | The Company reviews its long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results. |
||||||||||
INTANGIBLE ASSETS | Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable. If the life is not determinable, amortization is not recorded. We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable. When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets. |
||||||||||
RESEARCH, DEVELOPMENT, AND ENGINEERING EXPENSES | Research and development expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials, supplies and facilities used in producing prototypes.
The Company’s current research and development efforts are primarily focused on improving our Bio-RFID technology, extending its capacity and developing new and unique applications for this technology. As part of this effort, the Company conducts on-going laboratory testing to ensure that application methods are compatible with the end-user and regulatory requirements, and that they can be implemented in a cost-effective manner. The Company also is actively involved in identifying new applications. The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications. The Company engages third party experts as required to supplement our internal team. The Company believes that continued development of new and enhanced technologies is essential to our future success. The Company incurred expenses of $2,033,726 and $1,257,872 for the years ended September 30, 2020 and 2019, respectively, on development activities. |
||||||||||
Advertising | Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising and marketing costs for the years ended September 30, 2020 and 2019 were $230,844 and $0, respectively. |
||||||||||
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS | ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2020 and 2019 are based upon the short-term nature of the assets and liabilities.
The Company has a money market account which is considered a level 1 asset. The balance as of September 30, 2020 and 2019 was $4,252,959 and $1,901,278, respectively.
The following table represents a roll-forward of the fair value of the Simple Agreement for Future Equity (“SAFE”) for which fair value is determined by Level 3 inputs:
Fair value of the SAFE on issuance was determined to be equal to the proceeds received (see Note 11). There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented. |
||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | Pursuant to ASC 815 “Derivatives and Hedging”, the Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company then determines if embedded derivative must bifurcated and separately accounted for. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
The Company determined that the conversion features for purposes of bifurcation within its currently outstanding convertible notes payable were immaterial and there was no derivative liability to be recorded as of September 30, 2020 and 2019. |
||||||||||
STOCK BASED COMPENSATION | The Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options and warrants to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. |
||||||||||
CONVERTIBLE SECURITIES | Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities. We will evaluate our contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to our inability to demonstrate we have sufficient shares authorized and unissued, shares will be allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would result in the instrument issued latest being reclassified first. |
||||||||||
NET LOSS PER SHARE | Under the provisions of ASC 260, “Earnings Per Share,” basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. As of September 30, 2020, there were options outstanding for the purchase of 4,805,000 common shares (including unearned stock option grants totaling 2,630,000 shares related to performance targets), warrants for the purchase of 20,016,367 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 14,659,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,639,500 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,894,566. All of which could potentially dilute future earnings per share but excluded from the September 30, 2020 calculation of net loss per share because their impact is antidilutive.
As of September 30, 2019, there were options outstanding for the purchase of 4,532,668 common shares (including unearned stock option grants totaling 2,410,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 17,747,090 common shares, and 8,108,356 shares of the Company’s common stock issuable upon the conversion of Series C and Series D Convertible Preferred Stock. In addition, the Company currently has 13,262,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,242,490 common shares at the current price of $1.00 per share) that are issuable upon conversion of convertible debentures of $6,497,581. Issuance of more shares could potentially dilute future earnings per share but are excluded from the September 30, 2019 calculation of net loss per share because their impact is antidilutive. |
||||||||||
Comprehensive loss | Comprehensive loss is defined as the change in equity of a business during a period from non-owner sources. There were no differences between net loss for the years ended September 30, 2020 and 2019 and comprehensive loss for those periods. |
||||||||||
DIVIDEND POLICY | The Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities. |
||||||||||
USE OF ESTIMATES | The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
||||||||||
RECENT ACCOUNTING PRONOUNCEMENTS | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are now classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.
The Company adopted the new standard on October 1, 2019 using the modified retrospective method and the transition relief guidance provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Consequently, the Company did not update financial information or provide disclosures required under the new standard for dates and periods prior to October 1, 2019. The Company elected the package of practical expedients and did not reassess prior conclusions on whether contracts are or contain a lease, lease classification, and initial direct costs. In addition, the Company adopted the lessee practical expedient to combine lease and non-lease components for all asset classes and elected to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendment is meant to simplify the accounting for convertible instruments by removing certain separation models in subtopic 470-20 for convertible instruments. The amendment also changed the method used to calculate dilutes EPS for convertible instruments and for instruments that may be settled in cash. The amendment is effective for years beginning after December 15, 2021, including interim periods for those fiscal years. We are currently evaluating the impact of adoption this standard on the Company’s consolidated financial statements and related disclosures.
Based on the Company’s review of accounting standard updates issued since the filing of the 2020 Form 10-K, there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Tables) (USD $) |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||
Significant Accounting Policies Adoption Of Accounting Standards Tables | |||||||||
Fair value of the Simple Agreement for Future Equity |
|
6. FIXED ASSETS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment |
|
7. INTANGIBLE ASSETS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets |
|
9. LEASES (Tables) |
12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||
Leases [Abstract] | |||||||||||
Schedule of minimum future lease payments |
|
10. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of convertible notes |
|
12. EQUITY (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the warrants issued |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the status of the warrants outstanding |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average assumptions relating to the valuation of the Companys warrants |
|
13. STOCK INCENTIVE PLAN (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option activity |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options outstanding and exercisable |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Particle, Inc. technology | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options outstanding and exercisable |
|
16. INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of the Company's deferred tax assets |
|
||||||||||||||||||||||||||||||||||||||||||||
Schedule of effective tax rate reconciliation |
|
17. SEGMENT REPORTING (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting |
|
2. GOING CONCERN (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Going Concern | ||
Net loss | $ (13,562,641) | $ (7,612,316) |
Net cash used in operating activities | (3,913,803) | (3,104,035) |
Accumulated deficit | $ (55,966,281) | $ (42,403,640) |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Balance as of October 1, 2019 | $ 0 | |
Proceeds from issuance of SAFE | 785,000 | $ 0 |
Balance as of September 30, 2020 | 785,000 | 0 |
Simple Agreement for Future Equity (“SAFE”) | ||
Balance as of October 1, 2019 | 0 | |
Proceeds from issuance of SAFE | 785,000 | |
Fair value adjustment | 0 | |
Balance as of September 30, 2020 | $ 785,000 | $ 0 |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Uninsured deposits | $ 4,048,719 | |
Allowance for accounts receivable | 0 | $ 40,000 |
Reserve for impaired inventory | 0 | 28,000 |
Development expenses | 2,033,726 | 1,257,872 |
Money market account | $ 4,252,959 | $ 1,901,278 |
Leasehold Improvements | ||
Estimated useful lives of assets | 5 years | |
Minimum | ||
Estimated useful lives of assets | 2 years | |
Maximum | ||
Estimated useful lives of assets | 10 years |
4. ACCOUNTS RECEIVABLE (Details Narrative) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||
Accounts receivable, net of allowance | $ 0 | $ 63,049 |
Allowance for accounts receivable | $ 0 | $ 40,000 |
5. INVENTORIES (Details Narrative) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Inventory | $ 0 | $ 7,103 |
Reserve for impaired inventory | $ 0 | $ 28,000 |
6. FIXED ASSETS (Details) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Machinery and equipment (2-10 years) | $ 355,271 | $ 412,238 |
Leasehold improvements (2-3 years) | 3,612 | 3,612 |
Furniture and fixtures (2-3 years) | 26,855 | 58,051 |
Software and websites (3- 7 years) | 0 | 35,830 |
Less: accumulated depreciation | (257,067) | (379,259) |
Property and equipment, net | $ 128,671 | $ 130,472 |
6. FIXED ASSETS (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Property, Plant and Equipment [Abstract] | ||
Property and equipment, net | $ 128,671 | $ 130,472 |
Property and equipment, accumulated depreciation | 257,067 | 379,259 |
Depreciation expense | $ 69,655 | $ 86,016 |
7. INTANGIBLE ASSETS (Details) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Intangible assets, net | $ 101,114 | $ 274,446 |
Technology | ||
Intangible assets, gross | 520,000 | 520,000 |
Less: accumulated amortization | (418,886) | (245,554) |
Intangible assets, net | $ 101,114 | $ 274,446 |
7. INTANGIBLE ASSETS (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Amortization expense | $ 173,332 | $ 173,331 |
8. ACCOUNTS PAYABLE (Details Narrative) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Accounts Payable [Abstract] | ||
Accounts payable | $ 487,810 | $ 810,943 |
9. LEASES (Details) |
Sep. 30, 2020
USD ($)
|
---|---|
Leases [Abstract] | |
2021 | $ 113,553 |
2022 | 23,968 |
Imputed interest | (5,486) |
Total lease liability | $ 132,035 |
9. LEASES (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Right-of-use assets | $ 129,003 | $ 243,526 |
Operating lease liabilities | 132,035 | |
Lease cost | 136,718 | $ 133,996 |
Cash paid for ROU operating lease liability | $ 136,738 | |
Weighted-average remaining lease term | 1 year 3 months 18 days | |
Weighted-average discount rate | 7.00% |
10. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Convertible notes, gross | $ 12,187,056 | $ 6,497,556 |
less conversions | (4,242,490) | 0 |
less debt discount - beneficial conversion feature | (2,127,894) | (1,273,667) |
less debt discount - warrants | (1,025,512) | (616,729) |
less debt discount - warrants issued for services related to debt offering | (823,582) | (652,919) |
Convertible notes, net | 3,967,578 | 3,954,241 |
Convertible Redeemable Note - Clayton A. Struve | ||
Convertible notes, gross | 1,071,000 | 1,071,000 |
Convertible Redeemable Note - J3E2A2ZLP | ||
Convertible notes, gross | 1,184,066 | 1,184,066 |
2019 Convertible Notes | ||
Convertible notes, gross | 4,242,490 | 4,242,490 |
Q1 2020 Convertible notes | ||
Convertible notes, gross | 520,000 | 0 |
Q2 2020 Convertible notes | ||
Convertible notes, gross | 195,000 | 0 |
Q3 2020 Convertible notes | ||
Convertible notes, gross | 4,924,500 | 0 |
Bousted fee refund (originally booked as contra debt) | ||
Convertible notes, gross | $ 50,000 | $ 0 |
12. EQUITY (Details) - Warrants |
12 Months Ended |
---|---|
Sep. 30, 2020
$ / shares
shares
| |
Shares | |
Outstanding at beginning of period | 17,747,090 |
Issued | 3,510,425 |
Exercised | (733,588) |
Forfeited | (507,560) |
Expired | 0 |
Outstanding at end of period | 20,016,367 |
Exerciseable at end of period | 20,016,367 |
Weighted Average Exercise Price: | |
Outstanding at beginning of period | $ / shares | $ 0.455 |
Issued | $ / shares | 1.216 |
Exercised | $ / shares | (0.952) |
Forfeited | $ / shares | (1.120) |
Expired | $ / shares | (0.00) |
Outstanding at end of period | $ / shares | $ 0.556 |
12. EQUITY (Details 2) |
12 Months Ended |
---|---|
Sep. 30, 2020 | |
Dividend yield | 0.00% |
Expected life | 5 years |
Minimum | |
Expected volatility | 176.00% |
Risk free interest rate | 1.51% |
Maximum | |
Expected volatility | 177.00% |
Risk free interest rate | 1.71% |
13. STOCK INCENTIVE PLAN (Details) - Stock Options - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Shares: | ||
Outstanding at beginning of period | 4,532,668 | 2,182,668 |
Shares granted | 3,085,000 | 2,870,000 |
Shares exercised | (73,191) | 0 |
Shares forfeitures | (2,739,477) | (50,000) |
Outstanding at end of period | (2,739,477) | 4,532,668 |
Weighted Average Exercise Price: | ||
Outstanding at beginning of period | $ 2.025 | $ 1.698 |
Shares granted | 1.142 | 2.615 |
Shares exercised | (0.250) | 0.000 |
Shares forfeitures | (2.593) | (3.906) |
Outstanding at end of period | $ 1.161 | $ 2.025 |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value outstanding at beginning of period | $ 9,180,369 | $ 3,706,519 |
Aggregate intrinsic value granted | $ 3,522,400 | $ 7,504,850 |
Aggregate intrinsic value exercised | $ (18,298) | $ 0 |
Aggregate intrinsic value forefeitures | $ (7,103,921) | $ (2,031,000) |
Aggregate intrinsic value outstanding at end of period | $ 5,580,550 | $ 9,180,369 |
13. STOCK INCENTIVE PLAN (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Options to purchase common stock under 2011 Stock Incentive Plan | 20,016,367 | |
Compensation expense | $ 868,314 | $ 1,141,674 |
2011 Stock Incentive Plan | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 4,805,000 | |
Average exercise price under 2011 Stock Incentive Plan | $ 1.161 |
14. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details Narrative) - USD ($) |
Sep. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Chief Executive Officer | ||
Due to related party | $ 597,177 | $ 487,932 |
16. INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||
U.S. operations loss carry forward at statutory rate of 21% | $ 6,536,413 | $ 6,763,238 |
Deferred tax assets related to timing differences - accruals | 1,746,486 | 192,897 |
Total | 8,282,899 | 6,956,135 |
Less valuation allowance | (8,248,637) | (6,956,135) |
Other | 34,263 | 0 |
Deferred tax liabilities | 34,263 | 0 |
Net deferred tax assets | 0 | 0 |
Change in valuation allowance | $ (1,292,502) | $ (813,996) |
16. INCOME TAXES (Details 1) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 21.00% | 21.00% |
State Taxes | 0.90% | 0.00% |
Meals | 0.00% | 0.00% |
Warrants Int. Exp. | (8.80%) | 0.00% |
PY True-up | (3.80%) | 0.00% |
Increase in Income Taxes Resulting from: | ||
Change in valuation allowance | (9.30%) | (21.00%) |
Effective tax rate | 0.00% | 0.00% |
17. SEGMENT REPORTING (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenue | $ 121,939 | $ 1,804,960 |
Gross margin | 52,213 | 426,547 |
Segment net loss | (6,825,928) | (5,013,012) |
Segment assets | 4,682,147 | 2,639,633 |
Development of the Bio-RFID and ChromaID Technologies | ||
Revenue | 0 | 0 |
Gross margin | 0 | 0 |
Segment net loss | (5,481,000) | (4,935,000) |
Segment assets | 4,360,000 | 2,882,194 |
Particle, Inc. technology | ||
Revenue | 0 | 0 |
Gross margin | 0 | 0 |
Segment net loss | (1,280,000) | 0 |
Segment assets | 322,000 | 0 |
TransTech Distribution Business | ||
Revenue | 121,939 | 1,804,960 |
Gross margin | 52,213 | 426,547 |
Segment net loss | (65,000) | (78,000) |
Segment assets | $ 0 | $ 57,439 |
&PO
M=V]R:W-H965T >'ZBC:==0D*;K]7C6Y2 R;<=&
M:F:G9'9:F0-O.IWX3S?@R?-%59AF[(/QR\2?!$M9)=Z\5GRG'DG', QH5O 5
M H=@0V3(7]A!&\6RC<1E
M:\\JU2I/:T^UE.4V5RD+@1U$HT)O-NYLL%Q#
MAU6%K1] *7BVGH@D+MAMR=IX2@,0;<>C@0K+*HJ"-4#U!VQ_*-?GZ
M57+$KNMNF)C6#L-:$K4I*N@)HS\C\0U+W-3 9OBJ<0PI:WEM*IZ0$SK-5<6A
MC52@N.D/HBI&.06*VH+*#Q2B<1+BD/?QZQ+=207"2_W'!TIEJ,$ G!(O9.6X
MEAL84]ORYTC14/31V91<^/6L,VVJ,XYHNL&&W1U=MY-'<7,WFXG[R8.8_3I^
MV'G]XHU)G@@T3&S%'47:RN[H! R6B1@F48DU-QW *4F9_(8=Y)HKQ 8KR)O;HDL_V-<CXL(ET%/9]XD+1U4X/.@=1Q
MW+9N9K)',"0.V@M;N<#[7.!3
Z<(A=+X 8*;F?&Y2(.AXY"*.5>W>?>]>:^VI>
M@HBGD@N*L-I9V8_R-9/+'DLW"?_)&.";\IO"-']=O2B@"ZFG!G!
VH;K_/L<.K'I[(.SD7#*M@DSH"FFB;6 G990
M(P:T9WL1@R/ROBYH.OLQF;^C"R(&),0/DKMME:V@;-/@ &H(#H?-0ES E
Q^EG@/P:N;X1]D:A>HT6UHZM_)\ZY
M3!>$[NT1XA?/13-&U&/$S_Q.#_*P&^@$>A)OZP;")R,='VJ)'YT3)46M_VV<
MUR"MZ&(Q<]!NR
MOJO36B)H4@2R7FF*FKVUM@D( \=FX0J#VF Z!?)<9*AW>VLVE>D.8-%VW-$E
M8P?+>S+?F4[//FM:!RA7D.^;RM@QSTYE[ 9=,\Y%D;% '7!
X
M5(G\5&;K+_+S3HLWV?Z@T@>IFD$R\*>>[_OT3Q8[E>M"9ANYME,+FNK1D_M=
MO-YAM-^,QEAGQEU6QNE6KK/]'KO SCNH7-ZII-+RB3_R_4 <=&[F>%*ED9R>
M(H9=O]%Y#MX&J,B&RDC^?Q.W$%@<_EOJ_0J/:R?V9+G3LI9WIR(93KR%CW_S
MB2NGPZZ,BZ+"JL088+0H\0$B>7*GDTBN'F00CLW(799$.F<"N5YG>302T*Y,
M*V8!3]U1GHS3=5(1*;G2J=[$ZQB:S>Y3(DZ!?+4KG+LVJ[DVD&S-$@J?::
M*!12'0YY]C4&'NKD08;>V/>!( HVX:FB+XQ.R[A,0#(NS2K@K,QDEFHRE<8'
MJ6DV"):DSFJUC_$IHD&DNHZ@"$)2\3QCMS0#1NZK1!&T6],+&A3%4$B980I8
MAID,S9%QP9I:E(% ":-@+ED'!M?[ Y/*"H%RP!ZF9U<-!B%_F.<1)Q;](WI.QI/O$F2NLW#Z,OM.<9;
M15WV%E$-!US24$_'1%;& VIR U\(P#]6\**I/R,-?M1;[J03@A#%:_C3)WMX
M.KE45Y?AE0VWHMWB\F9=CN"5D)M]M" 1,'&K4:93K]P$#D.6&DU8/,D>#.+7
M IC"HZ'I#4K'TNQ5I 4G> DE-R#5)I50=<%)D*K;G-G>EG7'1:*A7,*@!99B
M[N!,)5R2 UV=$MN>)M>961X1LHLF<
#>-T04X9>XM1
MC77^(A[VQ-7CP\/=QX>;]Q_'7;R\_WCW_MW-^ZN[F[$8O;\6]S?O1O?BZ
F!U#DFBJDLHX7ZGCG6)NV
M*M%('#0+2\%GMU5,&O&L0VDP_>][$PCS+]R7=E40@MS=ETI5!N_#;3+0^);?
M6!X,)RMNF)YXZ>[
7PYGOTJ $X%?9C\ZVGZ97P#
M4##;)2[=4SUZ1XZS2.MT@8BU M8!V[/TCSJ%$\IUH4I@$D# ,YS(:!=J4 1*
M6J9+H'R&5*F1MRQ(I91BS5BM2@'Z@\($C"KJ,EY%J,"1%G&D5T+"(L]1AI,R
MJ^R&T$^HX/_FN7F4@21+'0!OGD$(%="]D6YXK$JKFN2B+R[,L\C'IQD,S;_"
M9X #>*PN&W9?RP257US)0NFT JF#GW$D;*+$0Q,.U86HE'@W.AZ$@\&@'_B;
MA+.03,AO!9#P9OMBO$M(PY8