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)
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
☐
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|
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TABLE OF CONTENTS
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Page Number
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|
|
|
PART I
|
FINANCIAL INFORMATION
|
|
|
|
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3
|
||
|
|
|
|
3
|
|
|
|
|
|
4
|
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|
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5
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|
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6
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7
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23
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||
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31
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||
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32
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||
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PART
II
|
OTHER
INFORMATION
|
|
|
|
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33
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||
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44
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||
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45
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||
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48
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|
December
31,
2020
|
September
30,
2020
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and cash
equivalents
|
$2,927,234
|
$4,298,179
|
Total current
assets
|
2,927,234
|
4,298,179
|
|
|
|
PROPERTY AND
EQUIPMENT, NET
|
117,004
|
128,671
|
|
|
|
OTHER
ASSETS
|
|
|
Intangible
assets
|
57,781
|
101,114
|
Other
assets
|
25,181
|
25,180
|
Operating lease
right of use asset
|
96,672
|
129,003
|
|
|
|
TOTAL
ASSETS
|
$3,223,872
|
$4,682,147
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts payable -
trade
|
$573,224
|
$487,810
|
Accounts payable -
related parties
|
7,559
|
5,687
|
Accrued
expenses
|
480,403
|
401,178
|
Accrued expenses -
related parties
|
613,641
|
591,600
|
Convertible notes
payable
|
5,044,558
|
3,967,578
|
Note
payable
|
226,170
|
226,170
|
Simple Agreements
for Future Equity
|
840,000
|
785,000
|
Current portion of
operating lease right of use liability
|
84,537
|
108,779
|
Total current
liabilities
|
7,870,092
|
6,573,802
|
|
|
|
NON-CURRENT
LIABILITIES:
|
|
|
Operating lease
right of use liability, net of current portion
|
14,602
|
23,256
|
Total non-current
liabilities
|
14,602
|
23,256
|
|
|
|
COMMITMENTS AND
CONTINGENCIES (Note 14)
|
-
|
-
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
Preferred stock -
$0.001 par value, 5,000,000 shares authorized, 0 shares issued
and
|
|
|
outstanding at
12/31/2020 and 9/30/2020 respectively
|
-
|
-
|
Series C
Convertible Preferred stock - $0.001 par value, 1,785,715 shares
authorized,
|
|
|
1,785,715 shares
issued and outstanding at 12/31/2020 and 9/30/2020,
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 12/31/2020 and 9/30/2020,
respectively
|
1,015
|
1,015
|
Common stock -
$0.001 par value, 100,000,000 shares authorized, 25,370,224 and
24,804,874
|
|
|
shares issued and
outstanding at 12/31/2020 and 9/30/2020, respectively
|
25,372
|
24,807
|
Additional paid in
capital
|
56,576,613
|
54,023,758
|
Accumulated
deficit
|
(61,265,612)
|
(55,966,281)
|
Total stockholders'
deficit
|
(4,660,822)
|
(1,914,911)
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
$3,223,872
|
$4,682,147
|
|
Three Months
Ended,
|
|
|
December 31,
2020
|
December 31,
2019
|
|
|
|
REVENUE
|
$-
|
$117,393
|
COST OF
SALES
|
-
|
65,935
|
GROSS
PROFIT
|
-
|
51,458
|
RESEARCH AND
DEVELOPMENT EXPENSES
|
966,861
|
491,138
|
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
|
2,598,732
|
920,551
|
OPERATING
LOSS
|
(3,565,593)
|
(1,360,231)
|
|
|
|
OTHER INCOME
(EXPENSE):
|
|
|
Interest
expense
|
(1,733,738)
|
(1,679,490)
|
Other
income
|
-
|
24,708
|
Total other
(expense), net
|
(1,733,738)
|
(1,654,782)
|
|
|
|
LOSS BEFORE INCOME
TAXES
|
(5,299,331)
|
(3,015,013)
|
|
|
|
Income tax
expense
|
-
|
-
|
|
|
|
NET
LOSS
|
$(5,299,331)
|
$(3,015,013)
|
|
|
|
Basic and diluted
loss per share
|
$(0.21)
|
$(0.16)
|
|
|
|
Weighted average
shares of common stock outstanding- basic and diluted
|
25,208,726
|
18,409,902
|
|
Series C
Convertible
|
Series D
Convertible
|
|
Additional
|
|
Total
|
|||
|
Preferred
Stock
|
Preferred
Stock
|
Common
Stock
|
Paid
in
|
Accumulated
|
Stockholders'
|
|||
|
Shares
|
$
|
Shares
|
$
|
Shares
|
$
|
Capital
|
Deficit
|
Deficit
|
Balance as of October 1,
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
|
-
|
-
|
-
|
-
|
-
|
-
|
175,442
|
-
|
175,442
|
Stock option
exercise
|
-
|
-
|
-
|
-
|
73,191
|
73
|
(73)
|
-
|
-
|
Beneficial conversion
feature
|
-
|
-
|
-
|
-
|
-
|
-
|
330,082
|
-
|
330,082
|
Issuance of warrants to debt
holders
|
-
|
-
|
-
|
-
|
-
|
-
|
168,270
|
-
|
168,270
|
Issuance of warrants for services
related to debt offering
|
-
|
-
|
-
|
-
|
-
|
-
|
160,427
|
-
|
160,427
|
Issuance of common stock for
exercise of warrants
|
-
|
-
|
-
|
-
|
28,688
|
29
|
(29)
|
-
|
-
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,015,013)
|
(3,015,013)
|
Balance as of December 31,
2019
|
1,785,715
|
1,790
|
1,016,004
|
1,015
|
18,468,057
|
18,468
|
39,919,298
|
(45,418,653)
|
(5,478,082)
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 1,
2020
|
1,785,715
|
1,790
|
1,016,004
|
1,015
|
24,804,874
|
24,807
|
54,023,758
|
(55,966,281)
|
(1,914,911)
|
Stock compensation expense -
employee options
|
-
|
-
|
-
|
-
|
-
|
-
|
175,442
|
-
|
175,442
|
Conversion of debt offering and
accrued interest (Note 9 and 11)
|
-
|
-
|
-
|
-
|
561,600
|
562
|
561,038
|
-
|
561,600
|
Issuance of warrant for services to
related party
|
-
|
-
|
-
|
-
|
-
|
-
|
1,811,691
|
-
|
1,811,691
|
Issuance of common stock for
exercise of warrants
|
-
|
-
|
-
|
-
|
3,750
|
4
|
4,684
|
-
|
4,688
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,299,331)
|
(5,299,331)
|
Balance as of December 31,
2020
|
1,785,715
|
$1,790
|
1,016,004
|
$1,015
|
25,370,224
|
$25,372
|
$56,576,613
|
$(61,265,612)
|
$(4,660,822)
|
|
Three Months
Ended,
|
|
|
December
31,
2020
|
December
31,
2019
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(5,299,331)
|
$(3,015,013)
|
Adjustments to
reconcile net loss to net cash (used in)
|
|
|
operating
activities
|
|
|
Depreciation and
amortization
|
64,633
|
60,316
|
Stock based
compensation- warrants
|
1,811,691
|
-
|
Stock based
compensation- stock option grants
|
175,442
|
399,897
|
Amortization of
debt discount
|
1,596,980
|
1,567,047
|
Right of use,
net
|
(565)
|
458
|
Provision on loss
on accounts receivable
|
-
|
40,000
|
Changes in
operating assets and liabilities:
|
|
|
Accounts
receivable
|
-
|
23,049
|
Prepaid
expenses
|
-
|
1,243
|
Inventory
|
-
|
7,103
|
Accounts payable -
trade and accrued expenses
|
230,150
|
91,575
|
NET CASH
(USED IN) OPERATING ACTIVITIES
|
(1,421,000)
|
(824,325)
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Purchase of
research and development equipment
|
(9,633)
|
(15,357)
|
NET CASH (USED IN)
INVESTING ACTIVITIES:
|
(9,633)
|
(15,357)
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
Proceeds from
convertible notes payable
|
-
|
520,000
|
Proceeds from
Simple Agreements for Future Equity
|
55,000
|
-
|
Payments for
issuance costs from notes payable
|
-
|
(78,845)
|
Proceeds from
issuance of common stock for warrant exercise
|
4,688
|
-
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
59,688
|
441,155
|
|
|
|
NET DECREASE IN
CASH AND CASH EQUIVALENTS
|
(1,370,945)
|
(398,527)
|
|
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
4,298,179
|
1,900,836
|
|
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
$2,927,234
|
$1,502,309
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
Interest
paid
|
$-
|
$-
|
Taxes
paid
|
$-
|
$-
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
Beneficial
conversion feature
|
$-
|
$330,082
|
Issuance of
warrants to debt holders
|
$-
|
$168,270
|
Issuance of
warrants for services related to debt offering
|
$-
|
$160,427
|
Cashless warrant
exercise (fair value)
|
$-
|
$7,172
|
Cashless stock
options exercise (fair value)
|
$-
|
$18,298
|
Conversion of debt
offering
|
$520,000
|
$-
|
Conversion of
accrued interest
|
$41,599
|
$-
|
Balance
as of October 1, 2019
|
$-
|
Proceeds
from issuance of SAFE
|
785,000
|
Fair
value adjustment
|
-
|
Balance
as of September 30, 2020
|
$785,000
|
Proceeds
from issuance of SAFE
|
55,000
|
Fair
value adjustment
|
-
|
Balance
as of December 31, 2020
|
$840,000
|
|
Estimated
|
December
31,
|
September
30,
|
KNWN-
|
Useful Lives
|
2020
|
2020
|
Machinery
and equipment
|
2-3
years
|
$361,020
|
$355,272
|
Leasehold
improvements
|
5
years
|
3,612
|
3,612
|
Furniture
and fixtures
|
5
years
|
26,855
|
26,855
|
Software
and websites
|
|
-
|
-
|
Less:
accumulated depreciation
|
|
(278,044)
|
(257,068)
|
|
$113,443
|
$128,671
|
|
Estimated
|
December 31,
|
September 30,
|
|
Useful Lives
|
2020
|
2020
|
|
|
|
|
Technology
|
3
years
|
$520,000
|
$520,000
|
Less:
accumulated amortization
|
|
(462,219)
|
(418,886)
|
Intangible
assets, net
|
|
$57,781
|
$101,114
|
Year
|
$
|
2021
|
$87,463
|
2022
|
17,917
|
Imputed
interest
|
(6,241)
|
Total
lease liability
|
$99,139
|
|
December 31, 2020
|
September 30, 2020
|
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
|
4,242,490
|
Q1
2020 Convertible notes
|
520,000
|
520,000
|
Q2
2020 Convertible notes
|
195,000
|
195,000
|
Q3
2020 Convertible notes
|
4,924,500
|
4,924,500
|
Boustead
fee refund (originally booked as contra debt)
|
50,000
|
50,000
|
Less
conversions of 2019 and 2020 notes
|
(4,762,490)
|
(4,242,490)
|
Less
debt discount - BCF
|
(1,237,832)
|
(2,127,894)
|
Less
debt discount - warrants
|
(595,743)
|
(1,025,512)
|
Less
debt discount - warrants issued for services
|
(546,433)
|
(823,582)
|
|
$5,044,558
|
$3,967,578
|
8.
|
SIMPLE AGREEMENTS FOR FUTURE EQUITY
|
|
December 31, 2020
|
|
|
|
Weighted
|
|
|
Average
|
|
|
Exercise
|
|
Shares
|
Price
|
Outstanding
at beginning of period
|
20,016,367
|
$0.556
|
Issued
|
2,000,000
|
1.530
|
Exercised
|
-
|
-
|
Forfeited
|
-
|
-
|
Expired
|
-
|
-
|
Outstanding
at end of period
|
22,016,367
|
$0.644
|
Exerciseable
at end of period
|
22,016,367
|
|
|
December 31, 2020
|
|||
|
Weighted
|
Weighted
|
|
Weighted
|
|
Average
|
Average
|
|
Average
|
Number of
|
Remaining
|
Exercise
|
Shares
|
Exercise
|
Warrants
|
Life ( In Years)
|
Price
|
Exerciseable
|
Price
|
13,133,286
|
1.52
|
$0.250
|
13,133,286
|
$0.250
|
714,286
|
0.58
|
0.700
|
714,286
|
0.700
|
882,159
|
0.87
|
1.000
|
882,159
|
1.000
|
7,191,636
|
4.25
|
1.20-1.50
|
7,191,636
|
1.20-1.50
|
95,000
|
3.94
|
2.00-4.08
|
95,000
|
2.34-4.08
|
|
|
|
|
|
22,016,367
|
3.27
|
$0.644
|
22,016,367
|
$0.644
|
Dividend yield
|
0%
|
Expected life
|
3 years
|
Expected volatility
|
140%
|
Risk free interest rate
|
0.4%
|
10.
|
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
|
Granted
|
8,135,745
|
1.525
|
12,407,090
|
Exercised
|
(3,750)
|
(1.250)
|
(4,688)
|
Forfeitures
|
-
|
-
|
-
|
Outstanding as of
December 31, 2020
|
12,936,995
|
$1.390
|
$17,982,952
|
|
|
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
|
2.45
|
$0.250
|
129,375
|
$0.250
|
1.10-1.25
|
3,076,250
|
3.89
|
1.05
|
340,729
|
1.104
|
1.28-1.52
|
9,495,745
|
3.89
|
1.50
|
773,646
|
1.310
|
1.79-2.25
|
135,000
|
3.01
|
2.13
|
71,875
|
2.145
|
|
12,936,995
|
3.84
|
$1.390
|
1,315,625
|
$1.294
|
|
|
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
|
4.51
|
$0.10
|
1,000,000
|
$0.10
|
0.80
|
200,000
|
4.77
|
$0.80
|
-
|
-
|
|
|
|
|
|
|
|
5,300,000
|
4.52
|
$4.52
|
1,000,000
|
$0.10
|
11.
|
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
|
|
|
|
Segment
|
|
|
|
Gross
|
Operating
|
Segment
|
Segment
|
Revenue
|
Margin
|
Profit (Loss)
|
Assets
|
Three
Months Ended December 31, 2020
|
|
|
|
|
Development
of the Bio-RFID™” and “ChromaID™”
technologies
|
$-
|
$-
|
$(3,190)
|
$3,158
|
Particle,
Inc. technology
|
-
|
-
|
(375)
|
66
|
TransTech
distribution business
|
-
|
-
|
-
|
-
|
Total
segments
|
$-
|
$-
|
$(3,565)
|
$3,224
|
|
|
|
|
|
Three
Months Ended December 31, 2019
|
|
|
|
|
Development
of the Bio-RFID™” and “ChromaID™”
technologies
|
$-
|
$-
|
$(1,393)
|
$2,077
|
TransTech
distribution business
|
117
|
51
|
32
|
18
|
Total
segments
|
$117
|
$51
|
$(1,361)
|
$2,095
|
Warrant
No./Class
|
Issue
Date
|
No. Warrant
Shares
|
Exercise
Price
|
Original
Expiration Date
|
Amended
Expiration Date
|
Clayton
Struve Warrant
Series
C Warrant W98
|
08-04-2016
|
1,785,715
|
$0.25
|
08-04-2021
|
08-04-2023
|
Clayton
Struve Warrant
Series
F Warrant F-1
|
11-14-2016
|
187,500
|
$0.25
|
11-13-2021
|
11-13-2023
|
Clayton
Struve Warrant
Series
F Warrant F-2
|
12-19-2016
|
187,500
|
$0.25
|
12-18-2021
|
12-18-2023
|
|
Three Months
Ended December 31,
|
|||
|
2020
|
2019
|
$
Variance
|
%
Variance
|
|
|
|
|
|
Revenue
|
$-
|
$117
|
$(117)
|
-100.0%
|
Cost of
sales
|
-
|
66
|
(66)
|
100.0%
|
Gross
profit
|
-
|
51
|
(51)
|
-100.0%
|
Research and
development expenses
|
967
|
491
|
476
|
-96.9%
|
Selling, general
and administrative expenses
|
2,598
|
921
|
1,677
|
-182.1%
|
Operating
loss
|
(3,565)
|
(1,361)
|
(2,204)
|
-161.9%
|
Other (expense)
income:
|
|
|
|
|
Interest
expense
|
(1,734)
|
(1,679)
|
(55)
|
-3.3%
|
Other income
(expense)
|
-
|
25
|
(25)
|
-100.0%
|
Total other income
(expense)
|
(1,734)
|
(1,654)
|
(80)
|
-4.8%
|
(Loss) before
income taxes
|
(5,299)
|
(3,015)
|
(2,284)
|
-75.8%
|
Income taxes -
current (benefit)
|
-
|
-
|
-
|
0.0%
|
Net
(loss)
|
$(5,299)
|
$(3,015)
|
$(2,284)
|
-75.8%
|
|
|
Less
Than
|
|
|
Greater
Than
|
Contractual Cash
Obligations (1)
|
Total
|
1
Year
|
1-3
Years
|
3-5
Years
|
5
Years
|
Operating
leases
|
$99,038
|
$84,437
|
$14,601
|
$-
|
$-
|
Convertible notes
payable
|
7,424,566
|
7,424,566
|
-
|
-
|
-
|
|
$7,523,604
|
$7,509,003
|
$14,601
|
$-
|
$-
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
●
|
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.
|
ITEM 6.
|
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, Form of Amended and
Restated Registration Rights Agreement. and Form of Series F Warrant to Purchase
Common Stock 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 and related notes and
warrants 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 September 30, 2016 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 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)
|
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)
|
|
|
|
|
Date: February 16, 2021
|
By:
|
/s/ Phillip A
Bosua
|
|
|
|
Phillip A. Bosua
|
|
|
|
Chief Executive Officer, and Director
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date: February 16, 2021
|
By:
|
/s/ Ronald
P. Erickson
|
|
|
|
Ronald P. Erickson
|
|
|
|
Interim Chief Financial Officer, and Treasurer
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Feb. 16, 2021 |
|
Cover [Abstract] | ||
Entity Registrant Name | KNOW LABS, INC. | |
Entity Central Index Key | 0001074828 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
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 Common Stock, Shares Outstanding | 26,301,354 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2020 |
Sep. 30, 2020 |
---|---|---|
STOCKHOLDERS' DEFICIT | ||
Preferred stock par value | $ .001 | $ .001 |
Preferred stock shares authorized | 5,000,000 | 5,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ .001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 25,370,224 | 24,804,874 |
Common stock shares outstanding | 25,370,224 | 24,804,874 |
Series C Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock par value | $ .001 | $ 0.001 |
Preferred stock shares authorized | 1,785,715 | 1,785,715 |
Preferred stock shares issued | 1,785,715 | 1,785,715 |
Preferred stock shares outstanding | 1,785,715 | 1,785,715 |
Series D Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 1,016,014 | 1,016,014 |
Preferred stock shares issued | 1,016,004 | 1,016,004 |
Preferred stock shares outstanding | 1,016,004 | 1,016,004 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Statement [Abstract] | ||
REVENUE | $ 0 | $ 117,393 |
COST OF SALES | 0 | 65,935 |
GROSS PROFIT | 0 | 51,458 |
RESEARCH AND DEVELOPMENT EXPENSES | 966,861 | 491,138 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 2,598,732 | 920,551 |
OPERATING LOSS | (3,565,593) | (1,360,231) |
OTHER INCOME (EXPENSE): | ||
Interest expense | (1,733,738) | (1,679,490) |
Other income | 0 | 24,708 |
Total other (expense), net | (1,733,738) | (1,654,782) |
LOSS BEFORE INCOME TAXES | (5,299,331) | (3,015,013) |
Income tax expense | 0 | 0 |
NET LOSS | $ (5,299,331) | $ (3,015,013) |
Basic and diluted loss per share | $ (0.21) | $ (0.16) |
Weighted average shares of common stock outstanding- basic and diluted | 25,208,726 | 18,409,902 |
1. ORGANIZATION |
3 Months Ended |
---|---|
Dec. 31, 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.
Particle, Inc. was incorporated April 30, 2020 and to date has engaged in activities consisting primarily of research and development on threaded light bulbs that have a warm white light that can inactivate germs, including bacteria and viruses. On June 1, 2020, the Company approved and ratified entry into an intercompany Patent License Agreement dated May 21, 2020 with Particle. Pursuant to the Agreement, Particle received an exclusive non-transferrable license to use certain patents and trademarks of the Company, 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. As of December 31, 2020 the operations of Particle have generated no sales and operations are just commencing. The first product, the Particle bulb can be used in households, businesses and other facilities to inactivating bacteria and viruses. Through internal preliminary testing, Particle personnel has confirmed the bulb’s efficacy in inactivating common germs such as E. coli and Staphylococcus. A world renowned, CDC-regulated biosafety level-4 laboratory is currently testing the Particle bulb’s ability to inactivate SARS-CoV-2, the virus that causes COVID-19.
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 June 30, 2020.
|
2. GOING CONCERN |
3 Months Ended |
---|---|
Dec. 31, 2020 | |
Exercise Price 13.500 | |
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 $5,299,331, $13,562,641 and $7,612,316 for the three months ended December 31, 2020 and the years ended September 30, 2020 and 2019, respectively. Net cash used in operating activities was $1,421,000, $3,913,803 and $3,104,035 the three months ended December 31, 2020 and 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 December 31, 2020, the Company’s accumulated deficit was $61,265,612. 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 July 31, 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 |
3 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 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 December 31, 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 December 31, 2020, the Company had uninsured deposits in the amount of $2,677,234.
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 2-5 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 $966,861, $2,033,726 and $1,257,872 for the three months ended December 31, 2020 and 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 three months ended December 31, 2020 and 2019 were $118,750 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 1 – Quoted prices in active markets for identical assets and liabilities;
Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, 2020 and September 30, 2020 are based upon the short-term nature of the assets and liabilities.
The Company has a money market account which is considered a level 1 asset. The balance as of December 31, 2020 and September 30, 2020 was $2,853,419 and $4,252,959, 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 8). 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 December 31, 2020 and September 30, 2020.
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 December 31, 2020, the Company had 25,370,224 shares of common stock issued and outstanding. As of December 31, 2020, there were options outstanding for the purchase of 12,936,955 common shares (including unearned stock option grants totaling 10,625,745 shares related to performance targets), warrants for the purchase of 22,016,367 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 14,189,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,169,500 common shares at the current price of $1.20 per share) reserved and are issuable upon conversion of convertible debentures of $7,424,566. All of which could potentially dilute future earnings per share but are excluded from the December 31, 2020 calculation of net loss per share because their impact is antidilutive.
As of December 31, 2019, there were options outstanding for the purchase of 4,812,668 common shares (including unearned stock option grants totaling 2,680,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 18,044,490 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 13,782,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,762,515 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,017,581. All of which could potentially dilute future earnings per share.
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 three months ended December 31, 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
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.
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4. FIXED ASSETS |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FIXED ASSETS | Property and equipment as of December 31, 2020 and September 30, 2020 was comprised of the following:
Total depreciation expense was $21,300 and $16,983 for the three months ended December 31, 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.
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5. INTANGIBLE ASSETS |
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Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | Intangible assets as of December 31, 2020 and September 30, 2020 consisted of the following:
Total amortization expense was $43,333 for the three months ended December 31, 2020 and 2019.
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.
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6. LEASES |
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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 December 31, 2020 and September 30, 2020 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 December 31, 2020 and September 30, 2020 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 three months ended December 31, 2020 and September 30, 2020, the Company had one lease expire and recognized the rent payments as an expense in the current period. As of December 31, 2020 and September 30, 2020, total right-of-use assets and operating lease liabilities for remaining long term lease was approximately $99,000 and $132,000, respectively. In the three months ended December 31, 2020 and the year ended September 30, 2020, the Company recognized approximately $37,612 and $136,718, 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 period ended December 31, 2020 was as follows:
Cash paid for ROU operating lease liability $34,813 Weighted-average remaining lease term 1.2 years Weighted-average discount rate 7%
The minimum future lease payments as of December 31, 2020 are as follows:
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7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE | Convertible notes payable as of December 31, 2020 and September 30, 2020 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 $73,452 and $71,562 as of December 31, 2020 and September 30, 2020, respectively. On December 23, 2020, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to March 31, 2021. Mr. Struve also invested $1,000,000 in the May 2019 Debt Offering.
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 $163,109 and $145,202 as of December 31, 2020 and September 30, 2020, respectively. 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
Beginning in 2019, the Company entered into series of debt offerings with similar and consistent terms. The Company issued Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. The notes are convertible into one share of common stock for each dollar invested in a Convertible Note Payable and automatically convert to common stock after one year. The convertible notes contain terms and conditions which are deemed to be a Beneficial Conversion Feature (BCF). Warrants are issued to purchase common stock with an exercise price of $1.20 per share and the number of warrants are equal to 50% of the convertible note balance. The Company compensates the placement agent with a cash fee and warrants. Through December 31, 2020, the Company has raised approximately $10 million through this offerings, of which $0 and $520,000 were raised in the three months ended December 31, 2020 and 2019.
The Convertible Notes are initially convertible into 520,000 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 260,000 shares of Common Stock.
The fair value of the Warrants issued to debt holders was $168,270 on the date of issuance and were 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 $78,845 and warrants to purchase 71,400 shares of the Company’s common stock, all based on 8-10% of gross proceeds to the Company. The warrants issued for these services had a fair value of $160,427 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 $78,845 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 $330,082 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 three months ended December 31, 2020, 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 2020. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on October 17, 2020.
During the three months ended December 31, 2020, amortization related to the 2020 debt offerings of $1,596,980 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 December 31, 2020 and September 30, 2020 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). As of December 31, 2020 and September 30, 2020, the Company recorded interest expense of $1,530 and $960, respectively. 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 March 31, 2021.
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8. SIMPLE AGREEMENTS FOR FUTURE EQUITY |
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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.
In October 2020, 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 68,750 shares of the Particle stock that was initially valued at $0.80 per share. The Company paid $4,125 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.
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9. EQUITY |
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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.
As of December 31, 2020, the Company had 25,370,224 shares of common stock issued and outstanding, held by 125 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 December 31, 2020, there were options outstanding for the purchase of 12,936,995 common shares (including unearned stock option grants totaling 10,625,745 shares related to performance targets), warrants for the purchase of 22,016,367 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 14,189,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,169,500 common shares at the current price of $1.20 per share) reserved and are issuable upon conversion of convertible debentures of $7,424,566. All of which could potentially dilute future earnings per share but are excluded from the December 31, 2020 calculation of net loss per share because their impact is antidilutive.
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 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 December 31, 2020 and September 30, 2020 there are 1,785,715 Series C Preferred shares outstanding.
As of December 31, 2020 and September 30, 2020, 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 December 31, 2020 and September 30, 2020, 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.
The following equity issuances occurred during the three months ended December 31, 2020:
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 2020. The Convertible Notes and interested were automatically converted to Common Stock at $1.00 per share on the one year anniversary starting on October 17, 2020.
The Company issued 3,750 shares of common stock at $1.25 per share related to the exercise of warrants.
Warrants to Purchase Common Stock
The following warrant transactions occurred during the three months ended December 31, 2020:
On December 15, 2020, the Company issued a fully vested warrant to Ronald P. Erickson for 2,000,000 shares of common stock. The five year warrant is convertible at $1.53 per share and was valued using a Black-Scholes model at $1,811,691.
A summary of the warrants outstanding as of December 31, 2020 were as follows:
The following table summarizes information about warrants outstanding and exercisable as of December 31, 2020:
The significant weighted average assumptions relating to the valuation of the Company’s warrants issued during the three months ended December 31, 2020 were as follows:
There were vested warrants of 22,016,367 with an aggregate intrinsic value of $36,904,487.
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10. STOCK INCENTIVE PLANS |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK INCENTIVE PLANS | 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. 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.
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 three months ended December 31, 2020:
A consultant exercised a stock option for 3,750 shares of common stock for a vested stock option grant. The stock option grant had an exercise price of $1.25 per share.
The Compensation committee issued a stock option grant to an employee 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 two stock option grants to Ronald P. Erickson one for 1,865,675 shares and one for 1,865,675 shares at an exercise price of $1.53 per share. The stock option grants expire in five years. The stock option grants vest when earned based on certain performance criteria.
On December 15, 2020, the Company issued two stock option grants to Phillip A. Bosua one for 2,132,195 shares and one for 2,132,200 shares at an exercise price of $1.53 per share. The stock option grants expire in five years. The stock option grants vest when earned based on certain performance criteria.
There are currently 12,936,995 (including unearned stock option grants totaling 10,625,745 shares related to performance targets) options to purchase common stock at an average exercise price of $1.390 per share outstanding as of December 31, 2020 under the 2011 Stock Incentive Plan. The Company recorded $119,483 and 175,442 of compensation expense, net of related tax effects, relative to stock options for the three months ended December 31, 2020 and 2019 and in accordance with ASC 718. As of December 31, 2020, there is approximately $505,996, 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 3.84 years.
Stock option activity for the three months ended December 31, 2020 and the years ended September 30, 2020 and 2019 were as follows:
The following table summarizes information about stock options outstanding and exercisable as of December 31, 2020:
There were in the money stock option grants of 12,936,995 shares as of December 31, 2020 with an aggregate intrinsic value of $11,794,416.
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 the three months ended September 30, 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 vested stock option grants for both Mr. Bosua and Erickson were valued at $0.788 per share or $394,000.
During November 2020, Particle approved a stock option grant to a consultant totaling 50,000 shares at an average of $0.80 per share. The stock option grant vests quarterly over four years, with no vesting in the first two quarters.
The Company recorded $55,959 and $0 of compensation expense, net of related tax effects, relative to stock options for the three months ended December 31, 2020 and 2019 and in accordance with ASC 718. As of December 31, 2020, there is approximately $802,445, 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 4.52 years.
The following table summarizes information about Particle stock options outstanding and exercisable as of December 31, 2020:
There were in the money stock option grants of 1,000,000 shares as of December 31, 2020 with an aggregate intrinsic value of $673,585.
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11. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES |
3 Months Ended |
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Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES | Related Party Transactions with Ronald P. Erickson
See Notes 7, 9, 10 and 12 for related party transactions with Ronald P. Erickson.
Mr. Erickson and/or entities with which he is affiliated also have accrued compensation, travel and interest of approximately $619,218 and $597,177 as of December 31, 2020 and September 30, 2020, respectively.
On December 15, 2020, the Company issued a fully vested warrant to Ronald P. Erickson for 2,000,000 shares of common stock. The five year warrant is convertible at $1.53 per share and was valued using a Black-Scholes model at $1,811,691.
On December 15, 2020, the Company issued two stock option grants to Ronald P. Erickson, one for 1,865,675 shares and one for 1,865,675 shares at an exercise price of $1.53 per share. The stock option grants expire in five years. The stock option grants vest when earned based on certain performance criteria.
Related Party Transaction with Phillip A. Bosua
See Notes 10 and 12 for related party transactions with Phillip A. Bosua.
On December 15, 2020, the Company issued two stock option grant to Phillip A. Bosua, one for 2,132,195 shares and one for 2,132,200 shares at an exercise price of $1.53 per share. The stock option grants expire in five years. The stock option grants vest when earned based on certain performance criteria.
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12. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS |
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Dec. 31, 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
See the Employment Agreement for Phillip A. Bosua that was disclosed in Form 10-K filed with the SEC on December 29, 2020. Phillip A. Bosua.
Employment Agreement with Ronald P. Erickson, Chairman of the Board and Interim Chief Financial Officer
See the Employment Agreement for Ronald P. Erickson that was disclosed in Form 10-K filed with the SEC on December 29, 2020.
Properties and Operating Leases
See the Property Leases that were disclosed in Form 10-K filed with the SEC on December 29, 2020.
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13. SEGMENT REPORTING |
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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 closed on June 30, 2020. Particle commenced operations in the three months ended June 30, 2020.
The reporting for the three months ended December 31, 2020 and 2019 was as follows (in thousands):
During the three months ended December 31, 2020 and 2019, the Company incurred non-cash expenses of $3,648,181 and $2,067,718.
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14. SUBSEQUENT EVENTS |
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SUBSEQUENT EVENTS | The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued. Subsequent to December 31, 2020, there were the following material transactions that require disclosure:
Stock Option Exercises and Issuances
On January 14, 2021, the Company issued a warrant to purchase 50,000 shares of common stock to Financial Genetics LLC at $2.00 per share. The warrants were issued for investor relation services. The warrant expires on January 14, 2026.
On January 14, 2021, the Company issued a stock option grant to purchase 180,000 shares of common stock to an employee at $2.00 per share. The stock option grant expires in five years and vests quarterly over four years (none in the first six months).
On January 15, 2021, the Company issued 30,000 shares each to three directors shares at an exercise price of $2.00 per share.
On January 15, 2021, the Company issued 20,000 warrants to purchase common stock each to three directors shares at $2.00 per share. The warrants expire on January 15, 2026.
On February 4, 2021, the Company issued a stock option grant to purchase 200,000 shares of common stock to an employee at $2.04 per share. The stock option grant expires in five years and vests quarterly over four years (none in the first six months).
On February 9, 2021, the Company issued stock option grants to seven employees and two consultants for 1,350,000 shares at an exercise price of $2.35 per share. The stock option grants expire in five years. The stock option grants vest when earned based on certain performance criteria.
On February 4, 2021, Particle issued a stock option grant to purchase 500,000 shares of common stock to an employee at $0.80 per share. The stock option grant expires in five years and vests quarterly over four years (none in the first six months).
On February 9, 2021, Particle issued stock option grants to seven employees and one consultant to purchase 1,900,000 shares at an exercise price of $0.80 per share. The stock option grants expire in five years. The stock option grants vest when earned based on certain performance criteria.
On February 12, 2021, the Company issued 17,500 shares and received $21,000 related to the exercise of warrants.
On February 12, 2021, Particle entered into Simple Agreements for Future Equity (“SAFE”) with accredited investors pursuant to which Particle received $111,815 in cash in exchange for the providing the investor the right to receive shares of the Particle stock.
Transactions with Clayton A. Struve
On January 5, 2021, the Company extended the due date of the following warrants with Clayton A. Struve, a major investor in the Company:
On January 28, 2021, Clayton A. Struve exercised warrants on a cashless basis for 889,880 shares of common stock at $0.25 per share, including 187,500 and 187,500 that were just extended as discussed above.
Particle Test Results
The first product, the Particle bulb can be used in households, businesses and other facilities to inactivate bacteria and viruses. Through internal preliminary testing, Particle personnel has confirmed the bulb’s efficacy in inactivating common germs such as E. coli and Staphylococcus. A world renowned, CDC-regulated biosafety level-4 laboratory is currently testing the Particle bulb’s ability to inactivate SARS-CoV-2, the virus that causes COVID-19.
Appointment of Financial Expert
On February 12, 2021, the Audit Committee appointed William A. Owens as “audit committee financial expert” as defined by the Securities and Exchange Commission (“SEC”) and as adopted under the Sarbanes-Oxley Act of 2002.
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3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Policies) |
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Basis of Presentation | 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”).
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Principles of Consolidation | 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 December 31, 2020 is not material and thus no non-controlling interest is recognized.
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Cash and Cash Equivalents | 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 December 31, 2020, the Company had uninsured deposits in the amount of $2,677,234.
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Equipment | 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 2-5 years, except for leasehold improvements which are depreciated over 5 years.
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Long-Lived Assets | 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.
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Intangible Assets | 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.
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Research and Development Expenses | 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 $966,861, $2,033,726 and $1,257,872 for the three months ended December 31, 2020 and the years ended September 30, 2020 and 2019, respectively, on development activities.
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Advertising | Advertising – Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising and marketing costs for the three months ended December 31, 2020 and 2019 were $118,750 and $0, respectively.
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Fair Value Measurements and Financial Instruments | 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 1 – Quoted prices in active markets for identical assets and liabilities;
Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, 2020 and September 30, 2020 are based upon the short-term nature of the assets and liabilities.
The Company has a money market account which is considered a level 1 asset. The balance as of December 31, 2020 and September 30, 2020 was $2,853,419 and $4,252,959, 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 8). There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented.
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Derivative Financial Instruments | 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 December 31, 2020 and September 30, 2020.
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Stock Based Compensation | 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.
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Convertible Securities | 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.
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Net Loss per Share | 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 December 31, 2020, the Company had 25,370,224 shares of common stock issued and outstanding. As of December 31, 2020, there were options outstanding for the purchase of 12,936,955 common shares (including unearned stock option grants totaling 10,625,745 shares related to performance targets), warrants for the purchase of 22,016,367 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 14,189,764 common shares (9,020,264 common shares at the current price of $0.25 per share and 5,169,500 common shares at the current price of $1.20 per share) reserved and are issuable upon conversion of convertible debentures of $7,424,566. All of which could potentially dilute future earnings per share but are excluded from the December 31, 2020 calculation of net loss per share because their impact is antidilutive.
As of December 31, 2019, there were options outstanding for the purchase of 4,812,668 common shares (including unearned stock option grants totaling 2,680,000 and excluding certain stock option grants for a cancelled kickstarter program), warrants for the purchase of 18,044,490 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 13,782,779 common shares (9,020,264 common shares at the current price of $0.25 per share and 4,762,515 common shares at the current price of $1.00 per share) and are issuable upon conversion of convertible debentures of $7,017,581. All of which could potentially dilute future earnings per share.
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Comprehensive Loss | 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 three months ended December 31, 2020 and 2019 and comprehensive loss for those periods.
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Dividend Policy | 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.
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Use of Estimates | 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.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements
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) |
3 Months Ended | |||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||
Significant Accounting Policies Adoption Of Accounting Standards | ||||||||||||||||||||||||||||||||||||
Fair value of the simple agreement for future equity |
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4. FIXED ASSETS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment |
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5. INTANGIBLE ASSETS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets |
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6. LEASES (Tables) |
3 Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||
Schedule of minimum future lease payments |
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7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of convertible notes |
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9. EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of warrant activity |
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Summary of the status of the warrants outstanding and exercisable |
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Weighted average assumptions relating to the valuation of the Company's warrants |
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10. STOCK INCENTIVE PLANS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option activity |
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Stock options outstanding and exercisable | The following table summarizes information about stock options outstanding and exercisable as of December 31, 2020:
The following table summarizes information about Particle stock options outstanding and exercisable as of December 31, 2020:
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13. SEGMENT REPORTING (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting |
|
14. SUBSEQUENT EVENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||
Subsequent Events [Abstract] | |||||||||||||||||||||||||
Schedule of subsequent events |
|
2. GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Exercise Price 13.500 | ||||
Net loss | $ (5,299,331) | $ (3,015,013) | $ (13,562,641) | $ (7,612,316) |
Net cash used in operating activities | (1,421,000) | $ (824,325) | (3,913,803) | $ (3,104,035) |
Accumulated deficit | $ (61,265,612) | $ (55,966,281) |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2020 |
|
Proceeds from issuance of SAFE | $ 55,000 | $ 0 | |
Simple Agreement for Future Equity ("SAFE") | |||
Balance, beginning | 785,000 | $ 0 | $ 0 |
Proceeds from issuance of SAFE | 55,000 | 785,000 | |
Fair value adjustment | 0 | 0 | |
Balance, ending | $ 840,000 | $ 785,000 |
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Uninsured deposits | $ 2,677,234 | |||
Research and development expense | 966,861 | $ 491,138 | $ 2,033,726 | $ 1,257,872 |
Advertising and marketing costs | 118,750 | $ 0 | ||
Money market accounts | $ 2,853,419 | $ 4,252,959 | ||
Minimum | ||||
Estimated useful lives of assets | 2 years | |||
Maximum | ||||
Estimated useful lives of assets | 5 years | |||
Leasehold Improvements | ||||
Estimated useful lives of assets | 5 years |
4. FIXED ASSETS (Details) - USD ($) |
Dec. 31, 2020 |
Sep. 30, 2020 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Machinery and equipment (2-3 years) | $ 361,020 | $ 355,272 |
Leasehold improvements (5 years) | 3,612 | 3,612 |
Furniture and fixtures (5 years) | 26,855 | 26,855 |
Software and websites | 0 | 0 |
Less: accumulated depreciation | (278,044) | (257,068) |
Property and equipment, net | $ 117,004 | $ 128,671 |
4. FIXED ASSETS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 21,300 | $ 16,983 |
5. INTANGIBLE ASSETS (Details) - Technology - USD ($) |
Dec. 31, 2020 |
Sep. 30, 2020 |
---|---|---|
Technology (3 years) | $ 520,000 | $ 520,000 |
Less: accumulated amortization | (462,219) | (418,886) |
Intangible assets, net | $ 57,781 | $ 101,114 |
5. INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Amortization expense | $ 43,333 | $ 43,333 |
6. LEASES (Details) - USD ($) |
Dec. 31, 2020 |
Sep. 30, 2020 |
---|---|---|
Leases [Abstract] | ||
2021 | $ 87,463 | |
2022 | 17,917 | |
Imputed interest | (6,241) | |
Total lease liability | $ 99,139 | $ 132,035 |
6. LEASES (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
|
Leases [Abstract] | ||
Right-of-use assets | $ 96,672 | $ 129,003 |
Operating lease liabilities | 99,139 | 132,035 |
Lease cost | 37,612 | $ 136,718 |
Cash paid for ROU operating lease liability | $ 34,813 | |
Weighted-average remaining lease term | 1 year 2 months 12 days | |
Weighted-average discount rate | 7.00% |
7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details) - USD ($) |
Dec. 31, 2020 |
Sep. 30, 2020 |
---|---|---|
less conversions | $ (4,762,490) | $ (4,242,490) |
less debt discount - beneficial conversion feature | (1,237,832) | (2,127,894) |
less debt discount - warrants | (595,743) | (1,025,512) |
less debt discount - warrants issued for services related to debt offering | (546,433) | (823,582) |
Convertible notes, net | 5,044,558 | 3,967,578 |
Convertible Note - Clayton A. Struve | ||
Convertible notes, gross | 1,071,000 | 1,071,000 |
Convertible Note - Ronald P. Erickson and Affiliates | ||
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 | 520,000 |
Q2 2020 Convertible Notes | ||
Convertible notes, gross | 195,000 | 195,000 |
Q3 2020 Convertible Notes | ||
Convertible notes, gross | 4,924,500 | 4,924,500 |
Bousted Fee Refund (Originally Booked as Contra Debt) | ||
Convertible notes, gross | $ 50,000 | $ 50,000 |
7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2020 |
|
Amortization of debt discount | $ 1,596,980 | $ 1,567,047 | |
Convertible Note - Clayton A. Struve | |||
Accrued interest | 73,452 | $ 71,562 | |
Convertible Note - Ronald P. Erickson and Affiliates | |||
Accrued interest | $ 163,109 | $ 145,202 |
9. EQUITY (Details) |
3 Months Ended |
---|---|
Dec. 31, 2020
$ / shares
shares
| |
Shares | |
Outstanding at beginning of period | 20,016,367 |
Issued | 2,000,000 |
Exercised | 0 |
Forfeited | 0 |
Expired | 0 |
Outstanding at end of period | 22,016,367 |
Exercisable at end of period | 22,016,367 |
Weighted Average Exercise Price: | |
Outstanding at beginning of period | $ / shares | $ .556 |
Issued | $ / shares | 1.530 |
Exercised | $ / shares | (.000) |
Forfeited | $ / shares | .000 |
Expired | $ / shares | (.000) |
Outstanding at end of period | $ / shares | $ .644 |
9. EQUITY (Details 2) - Warrants |
3 Months Ended |
---|---|
Dec. 31, 2020 | |
Dividend yield | 0.00% |
Expected life | 3 years |
Expected volatility | 140.00% |
Risk free interest rate | 0.40% |
9. EQUITY (Details Narrative) |
Dec. 31, 2020
USD ($)
shares
|
---|---|
Equity [Abstract] | |
Warrants vested | shares | 22,016,367 |
Intrinsic value | $ | $ 36,904,487 |
10. STOCK INCENTIVE PLANS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Options to purchase common stock under 2011 Stock Incentive Plan | 22,016,367 | |
Average exercise price under 2011 Stock Incentive Plan | $ 0.644 | |
Compensation expense | $ 119,483 | $ 175,442 |
Unrecognized compensation costs | $ 505,996 | |
Period for recognition | 3 years 10 months 2 days | |
Stock options granted | 12,936,955 | |
Aggregate intrinsic value | $ 11,794,416 | |
Particle, Inc. | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 5,300,000 | |
Compensation expense | $ 55,959 | $ 0 |
Unrecognized compensation costs | $ 802,445 | |
Period for recognition | 4 years 6 months 7 days | |
Stock options granted | 1,000,000 | |
Aggregate intrinsic value | $ 673,585 | |
2011 Stock Incentive Plan | ||
Options to purchase common stock under 2011 Stock Incentive Plan | 12,936,995 | |
Average exercise price under 2011 Stock Incentive Plan | $ 1.390 |
11. OTHER SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (Details narrative) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
|
Chief Executive Officer | ||
Accrued compensation, travel and interest | $ 619,218 | $ 597,177 |
13. SEGMENT REPORTING (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Revenue | $ 0 | $ 117 |
Gross margin | 0 | 51 |
Segment operating profit (loss) | (3,565) | (1,361) |
Segment assets | 3,224 | 2,095 |
Development of the Bio-RFID and ChromaID Technologies | ||
Revenue | 0 | 0 |
Gross margin | 0 | 0 |
Segment operating profit (loss) | (3,190) | (1,393) |
Segment assets | 3,158 | 2,077 |
Particle, Inc. Technology | ||
Revenue | 0 | |
Gross margin | 0 | |
Segment operating profit (loss) | (375) | |
Segment assets | 66 | |
TransTech Distribution Business | ||
Revenue | 0 | 117 |
Gross margin | 0 | 51 |
Segment operating profit (loss) | 0 | 32 |
Segment assets | $ 0 | $ 18 |
13. SEGMENT REPORTING (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Segment Reporting [Abstract] | ||
Non-cash expenses | $ 3,648,181 | $ 2,067,718 |
14. SUBSEQUENT EVENTS (Details) |
Jan. 05, 2021
$ / shares
shares
|
---|---|
Clayton Struve Warrant: Series C Warrant W98 | |
Issue date | Aug. 04, 2016 |
Number of warrant shares | shares | 1,785,715 |
Exercise price | $ / shares | $ .25 |
Original expiration date | Aug. 04, 2021 |
Amended expiration date | Aug. 04, 2023 |
Clayton Struve Warrant: Series F Warrant F-1 | |
Issue date | Nov. 14, 2016 |
Number of warrant shares | shares | 187,500 |
Exercise price | $ / shares | $ .25 |
Original expiration date | Nov. 13, 2021 |
Amended expiration date | Nov. 13, 2023 |
Clayton Struve Warrant: Series F Warrant F-2 | |
Issue date | Dec. 19, 2016 |
Number of warrant shares | shares | 187,500 |
Exercise price | $ / shares | $ .25 |
Original expiration date | Dec. 18, 2021 |
Amended expiration date | Dec. 18, 2023 |