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12. EQUITY

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

12. EQUITY

Authorized Capital Stock

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.

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 six months ended March 31, 2018:

A supplier converted accounts payable totaling $48,300 into 230,000 shares of common stock.

The Company issued 329,240 shares of common stock to two Names Executive Officers employees and three consultants and for services during 2017 and 2018. The Company expensed $70,640 during the six months ended March 31, 2018.

Warrants to Purchase Common Stock

The following warrants were issued during the six months ended March 31, 2018:

On December 15, 2017, the Company received $250,000 and issued a senior convertible exchangeable debenture with a principal amount of $300,000 and a five year common stock purchase warrant to purchase 1,200,000 shares of common stock in a private placement dated December 12, 2017 to an accredited investor pursuant to a Securities Purchase Agreement dated August 14, 2017. See Note 10 for additional details. The initial exercise price of the warrants described above is $0.25 per share, also subject to certain adjustments.

On March 2, 2018, the Company received gross proceeds of $280,000 in exchange for issuing a senior convertible redeemable debenture with a principal amount of $336,000 and a five year warrant to purchase 1,344,000 shares of common stock in a private placement dated February 28, 2018 to an accredited investor pursuant to a Securities Purchase Agreement dated August 14, 2017 See Note 10 for additional details. The initial exercise price of the warrants described above is $0.25 per share, also subject to certain adjustments.

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. See Note 10 and 11 for additional details.

In addition, effective as of January 31, 2018, Erickson was issued a warrant to purchase up to 855,000 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. See Note 10 and 11 for additional details.

During the six months ended March 31, 2108, The Company issued placement agent warrants related to the issuance of senior convertible redeemable debentures and Series D Preferred Stock to purchase up to 473,400 shares of common stock for a period of five years. The initial exercise price of the warrants described above is $0.25 per share, also subject to certain adjustments.

A summary of the warrants outstanding as of March 31, 2018 were as follows:

		March 31, 2018
						Weighted
						Average
						Exercise
		Shares				Price
Outstanding at beginning of period			6,900,356			$	0.428
Issued			4,937,066				0.250
Exercised			-				-
Forfeited			-				-
Expired			-				-
Outstanding at end of period			11,837,422			$	0.354
Exerciseable at end of period			11,837,422

A summary of the status of the warrants outstanding as of March 31, 2018 is presented below:

					March 31, 2018
					Weighted				Weighted								Weighted
					Average				Average								Average
	Number of				Remaining				Exercise				Shares				Exercise
	Warrants				Life ( In Years)				Price				Exerciseable				Price
		10,159,682				3.98			$	0.250				10,159,682			$	0.250
		734,725				3.24				0.700				734,725				0.700
		936,348				3.62				1.000				936,348				1.000
		6,667				0.75				30.000				6,667				30.000
		11,837,422				3.65			$	0.354				11,837,422			$	0.354

The significant weighted average assumptions relating to the valuation of the Company’s warrants for the six months ended March 31, 2018 were as follows:

Assumptions

Dividend yield	0%
Expected life	2-5 years
Expected volatility	125%
Risk free interest rate	2.14%-2.65%

There were vested warrants of 11,837,422 as of March 31, 2018 with an aggregate intrinsic value of $0.