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EQUITY | 12 Months Ended
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Sep. 30, 2022
SIMPLE AGREEMENTS FOR FUTURE EQUITY |
EQUITY | 9. EQUITY Authorized Capital Stock The Company’s authorized capital stock currently consists of 205,000,000 shares, consisting of 200,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which 1,785,715 shares have been designated as series C convertible preferred stock, 1,016,014 shares have been designated as series D convertible preferred stock, and 500 shares have been designated as series F preferred stock. Series C Convertible Preferred Stock and Warrants On August 5, 2016, the Company closed a Series C Preferred Stock and Warrant Purchase Agreement with Clayton A. Struve, an accredited investor for the purchase of $1,250,000 of preferred stock with a conversion price of $0.70 per share. The preferred stock has a yield of 8% and an ownership blocker of 4.99%. In addition, Mr. Struve received a five-year warrant to acquire 1,785,714 shares of common stock at $0.70 per share. On August 14, 2017, the price of the Series C Stock were adjusted to $0.25 per share pursuant to the documents governing such instruments. On September 30, 2022 and 2021 there are 1,785,715 Series C Preferred shares outstanding. On May 3, 2022, the Company approved the Extension of Warrant Agreement with Clayton Struve, extending the exercise dates to August 4, 2024. As of September 30, 2022 and 2021, there were 1,785,715 shares of series C convertible preferred stock outstanding. Series D Convertible Preferred Stock As of September 30, 2022 and 2021, the Company has $750,000 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. As of September 30, 2022 and 2021, there were 1,016,014 shares of series D convertible preferred stock outstanding. Series F Preferred Stock On August 1, 2018, the Company filed with the State of Nevada a Certificate of Designation establishing the Designations, Preferences, Limitations and Relative Rights of Series F Preferred Stock. The Designation authorized 500 shares of Series F Preferred Stock. The Series F Preferred Stock shall only be issued to the current Board of Directors on the date of the Designation’s filing and is not convertible into common stock. As set forth in the Designation, the Series F Preferred Stock has no rights to dividends or liquidation preference and carries rights to vote 100,000 shares of common stock per share of Series F upon a Trigger Event, as defined in the Designation. A Trigger Event includes certain unsolicited bids, tender offers, proxy contests, and significant share purchases, all as described in the Designation. Unless and until a Trigger Event, the Series F shall have no right to vote. The Series F Preferred Stock shall remain issued and outstanding until the date which is 731 days after the issuance of Series F Preferred Stock (“Explosion Date”), unless a Trigger Event occurs, in which case the Explosion Date shall be extended by 183 days. As of September 30, 2022 and 2021, there are no Series F shares outstanding. Securities Subject to Price Adjustments If in the future, if the Company sells its common stock at a price below $0.25 per share, the conversion price of our outstanding shares of series C convertible preferred stock and series D convertible preferred stock would adjust below $0.25 per share pursuant to the documents governing such instruments. In addition, the conversion price of the convertible promissory notes referred to above and the exercise price of certain outstanding warrants to purchase 10,154,381 shares of common stock would adjust below $0.25 per share pursuant to the documents governing such instruments. Warrants totaling 4,439,707 would adjust below $1.20 per share and warrants totaling 4,465,294 would adjust below $2.40 per share, in each case pursuant to the documents governing such instruments. Common Stock 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. Year Ended September 30, 2022 The Company issued 7,672,860 shares of common stock related to the automatic conversion of convertible notes and interest from a private placement to accredited investors in 2021. The convertible notes and interest were automatically converted to common stock at $2.00 per share on the one-year anniversary in March 2022. The Company issued 1,045,724 shares of common stock related to warrant exercises and received $838,487. The Company issued 26,293 shares related to the exercise of stock option grants and received $26,887. The Company issued 104,634 shares each to three directors and three consultants at $1.749 per share. On September 20, 2022, the Company completed a public offering of our common stock pursuant to which the Company sold 4,140,000 shares of common stock, at a purchase price of $2.00 per share, for total gross proceeds of $8,280,000. After deducting underwriting commissions and other offering expenses, the Company received net proceeds of $7,424,679. Year Ended September 30, 2021 The Company issued 6,091,960 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 3,676,542 shares of common stock at an average price of 0.582 per share related to the exercise of warrants. The Company issued 16,875 shares related to the exercise of stock option grants at $1.38 per share. The Company issued 97,000 shares related to services. The shares were valued at the fair market value of $202,820. The Company issued 480,600 shares of common stock at an average price of $2.00 per share, or $961,200, related to the conversion of Particle SAFEs into the Company’s common stock. Warrants to Purchase Common Stock Year Ended September 30, 2022 The Company issued 389,800 warrants to purchase common stock to three directors and four consultants at $1.899 per share. The warrants expire five years from the date of issuance. On May 3, 2022, the Company signed an extension of warrant agreement with Clayton Struve, extending the exercise dates as follows:
Warrant No./Class | Issue Date | No. Warrant Shares | Exercise Price | Original Expiration Date | Amended Expiration Date
Clayton A. Struve Warrant | 08-14-2017 | 1,440,000 | 0.25 | 08-13-2023 | 08-13-2024
Clayton A. Struve Warrant | 12-12-2017 | 1,200,000 | 0.25 | 12-11-2023 | 12-11-2024
Clayton A. Struve Warrant | 08-04-2016 | 1,785,715 | $0.25 | 08-04-2023 | 08-04-2024
Clayton A. Struve Warrant | 02-28-2018 | 1,344,000 | $0.25 | 02-28-2023 | 02-28-2024
The Company recorded interest expense of $244,260 during the year ended September 30, 2022 related to the extension of the warrants. Warrants to purchase 122,018 shares of common stock at $0.918 per share expired. On September 20, 2022, pursuant to the Underwriting Agreement, the Company issued a common stock purchase warrant to Boustead Securities, LLC for the purchase of 289,800 shares of common stock at an exercise price of $2.40, subject to adjustments. The Warrant is exercisable at any time and from time to time, in whole or in part, until September 15, 2027 and may be exercised on a cashless basis. The Warrant also includes customary anti-dilution provisions and immediate piggyback registration rights with respect to the registration of the shares underlying the Warrant. The Warrant and the shares of common stock underlying the Warrant were registered as a part of the Registration Statements. The Company issued 1,045,724 shares of common stock related to warrant exercises and received $838,487. Year Ended September 30, 2021 The Company issued warrants to Ronald P. Erickson for 2,000,000 shares of common stock. The five year warrant is immediately vested and exercisable on a cash or cashless basis at $1.53 per share and was valued using a Black-Scholes model at $1,811,691. The Company issued warrants to five directors and consultants for 269,510 shares of common stock. The five year warrant is convertible at $1.918 per share and was valued using a Black-Scholes model at $735,745. The Convertible Notes issued during the year ended September 30, 2021 are initially convertible into 7,104,500 shares of Common Stock, subject to certain adjustments, and the Warrants are initially exercisable for 3,552,250 shares of Common Stock. The Company issued 3,676,542 shares of common stock at an average price of $0.582 per share related to the exercise of warrants. Warrants to exercise 384,359 shares of common stock were forfeited at an average of $1.155 per share. The Company also issued a five year warrant to Boustead Securities LLC for 43,254 shares of the Company’s common stock related to the conversion of Particle Simple Agreements for Future Equity into the Company’s common shares. The warrant is exercisable at $2.40 per share. The warrant was valued at $1.641 per share or $70,980. Warrants to purchase 384,359 shares of common stock were forfeited at an average of $1.155 per share. A summary of the warrants outstanding as of September 30, 2022 were as follows:
|  | September 30, 2022 |
|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  |  |  |  | Exercise |
|  | Shares |  |  | Price |
Outstanding at beginning of period |  |  | 22,564,255 |  |  | $ | 0.998 |
Issued |  |  | 389,800 |  |  |  | 2.271 |
Exercised |  |  | (1,045,724 | ) |  |  | (0.835 | )
Forfeited |  |  | - |  |  |  | - |
Expired |  |  | (122,018 | ) |  |  | (0.918 | )
Outstanding at end of period |  |  | 21,786,313 |  |  | $ | 1.029 |
Exerciseable at end of period |  |  | 21,786,313 |  |  |  |  |
The following table summarizes information about warrants outstanding and exercisable as of September 30, 2022:
|  |  | September 30, 2022 |
|  |  | Weighted |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  | Average |  |  | Average |  |  |  |  |  | Average |
Number of |  |  | Remaining |  |  | Exercise |  |  | Shares |  |  | Exercise |
Warrants |  |  | Life ( In Years) |  |  | Price |  |  | Exerciseable |  |  | Price |
| 10,569,381 |  |  |  | 1.26 |  |  | $ | 0.250 |  |  |  | 10,569,381 |  |  | $ | 0.250 |
| 6,512,207 |  |  |  | 2.35 |  |  | 1.20-1.85 |  |  |  | 6,512,207 |  |  | 1.20-1.85 |
| 4,694,725 |  |  |  | 3.61 |  |  | 2.00-3.00 |  |  |  | 4,694,725 |  |  | 2.00-3.00 |
| 10,000 |  |  |  | 0.75 |  |  |  | 4.080 |  |  |  | 10,000 |  |  |  | 4.080 |
| 21,786,313 |  |  |  | 2.85 |  |  | $ | 1.029 |  |  |  | 21,786,313 |  |  | $ | 1.029 |
The significant weighted average assumptions relating to the valuation of the Company’s warrants for the year ended September 30, 2022 were as follows:
Dividend yield | 0%
Expected life | 3-5 years
Expected volatility | 104%
Risk free interest rate | 2.96%
There were vested and in the money warrants of 21,786,313 with an aggregate intrinsic value of $24,047,814.

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