Note 9 - Equity Transactions

On July 11, 2018 the Board of Directors approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 shares of the Company’s Series A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June 30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series A preferred stock of $45,654 and $47,260 for the three months ended September 30, 2020 and 2019, respectively. The balance of $136,960 will be recognized as the remaining 8,750 shares vest and service is rendered for the year ended June 30, 2021.

On July 8, 2020 the Company entered into an Underwriting Agreement with Kingswood. Pursuant to the terms and conditions of the Underwriting Agreement, the Company agreed to issue and sell 1,369,863 shares of our common stock, par value $0.001 per share (the “Underwritten Shares”), at a price to the public of $7.30 per share. Pursuant to the Underwriting Agreement, the Company also granted the underwriter an option to purchase up to an additional 205,479 shares of common stock (together with the Underwritten Shares, the “Shares”) within 45 days after the date of the Underwriting Agreement to cover over-allotments, if any. The shares were issued pursuant to a prospectus supplement dated July 8, 2020 which was filed with the Securities and Exchange Commission on July 9, 2020 in connection with a takedown from the Company’s shelf registration statement on Form S-3, as amended (File No. 333-237370), which became effective on April 2, 2020 and the base prospectus dated April 2, 2020 contained in that registration statement. The offering was consummated on July 10, 2020, whereby the Company sold 1,369,863 shares of common stock and a fully exercised Underwriters’ overallotment of 205,479 additional shares at the public offering price of $7.30 per share. The net proceeds to the Company from the offering was approximately $10.4 million after placement agent fees and other estimated offering expenses.

The Company accounted for the proceeds of the Offering at July 10 2020 as follows:


Gross proceeds	$	11,499,997
Less: offering costs and expenses		(1,057,781)
Net proceeds from issuance of common stock	$	10,442,216

For the three months ended September 30, 2020, the Company’s Board of Directors authorized the issuance of 387 fully vested shares of its Series A preferred stock for employee compensation and recorded an expense of $7,444.

The fair value of the Series A Preferred stock was the following for the dates indicated:


Date	Shares	Value
7/31/2020	129		3,155
8/31/2020	129		2,391
9/30/2020	129		1,898
	387	$	7,444

There is currently no market for the shares of Series A preferred stock and they can only be converted into shares of common stock upon a change of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A preferred stock granted to various employees and others on the date of grant. The Series A preferred stock fair value is based on the greater of i) the converted value to common at a ratio of 1:3.5; or ii) the value of the voting rights since the Holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a change of control. The common stock price for the three months ended September 30, 2020 was in the range $3.61 to $9.97.

In August 2020, the Scientific Advisory Board (SAB) was granted fully vested warrants to purchase 572 shares of common stock with an exercise price of $6.86 per share expiring in August 2024. The fair value of the warrants was $1,986 and was recorded as consulting expense for the three months ended September 30, 2020.

The Company estimated the fair value of the warrants granted to the Scientific Advisory Board on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:


Expected life (year)	4

Expected volatility	91.4	%

Expected annual rate of quarterly dividends	0.00	%

Risk-free rate(s)	0.235	%

For the three months ended September 30, 2020, the Company’s Board of Directors authorized the issuance of 5,135 fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded an expense of $27,000 for the three months ended September 30, 2020, which was the fair value on the dates of issuance.

For the three months ended September 30, 2020, the Company’s Board of Directors authorized the issuance of 2,040 fully vested shares of its common stock with a restrictive legend for Director Services. The Company recorded an expense of $11,250 for the three months ended September 30, 2020, which was the fair value on the date of issuance.