XML 33 R17.htm IDEA: XBRL DOCUMENT

10. SHAREHOLDERS' EQUITY

12 Months Ended

Sep. 30, 2018

Shareholders Equity

SHAREHOLDERS' EQUITY

Preferred Stock – We are authorized to issue 50,000,000 shares of preferred stock, par value $0.001 per share. Our preferred stock does not have any preference, liquidation, or dividend provisions. No shares of preferred stock have been issued.

Common Stock – We are authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were 8,123,928 and 5,792,261 shares of common stock issued and outstanding at September 30, 2018 and 2017, respectively.

Common stock transactions:

Fiscal 2018:

On November 17, 2017, the Company completed an IPO of 2,000,000 shares of its common stock for aggregate gross proceeds of $12.0 million and net proceeds of $10.9 million.

In November 2017, we issued 6,667 shares of our common stock to an individual as part of a consulting agreement. The shares were valued at $37,002, based on the trading price upon issuance and expensed as contract compensation.

In January 2018, we issued 230,000 shares of our common stock, which were granted as restricted stock awards on October 1, 2016 to board members. The restricted stock awards vested on January 1, 2018. The shares were valued at fair market value upon issuance at $195,500 and amortized over the vesting period and expensed as stock compensation.

In March 2018, we issued 5,000 shares of our common stock to an investor relations firm for services. The shares were valued at $20,000, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending June 2018.

In May 2018, we issued 60,000 shares of our common stock to an investment banking firm for general financial advisory and investment banking services. The shares were valued at $303,000, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending April 2019.

In June 2018, we issued 25,000 shares of our common stock to a broker dealer for business advisory services. The shares were valued at $118,000, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending December 2019.

In July 2018 we issued 5,000 shares of our common stock to an investor relations firm for services. The shares were valued at $18,500, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending November 2018.

Fiscal year 2017:

Per terms in the Operating Agreement of BPU, the Company could redeem the 10% membership interest of Sigan for $110,000 at any time before April 13, 2017. On October 14, 2016, as amended in March 2017, Sigan entered into an agreement with the Company and transferred their 10% member interest for 129,412 shares of the Company’s common stock.

In October 2016 we issued 38,358 shares of our stock to six individuals and entities upon the cashless exercise of 70,067 placement agents warrants previously granted to T.R. Winston & Co LLC, a broker-dealer and member of FINRA, and its affiliates.

In November 2016 we issued Stone Street Partners, LLC, a related party, an aggregate of 76,000 shares of our common stock valued at $570,000 as compensation for services, which had been accrued and expensed at September 30, 2016. The stock was valued at the time based on the most recent equity financing from February 2016 which was priced at what is a post reverse split price of $7.50.

In November 2016 we issued 20,000 shares of our common stock valued at $17,000 to Best Buddies International, a related party, as a charitable contribution.

In January 2017 we issued 26,667 shares of our common stock to two individuals as part of consulting agreements. The shares were valued at $22,667, based on the valuation from the Company and expensed as salary compensation.

In January 2017, the Company acquired 51% ownership in IM1 in exchange for 583,000 shares of common stock, which was valued at $495,550.

In January 2017, the Company acquired 51% ownership in EE1 in exchange for 283,000 shares of common stock, which was valued at $240,550.

Effective April 28, 2017, Priel Maman entered into an agreement with the Company to transfer his 12% member interest in BPU for 155,294 shares of the Company’s common stock, valued at $132,000. The Company now owns 100% membership interest of BPU.

On June 6, 2017, pursuant to an agreement dated May 15, 2017, the Company converted the outstanding line of credit principal balance of $593,797, together with the accrued interest of $179,380 for a total conversion amount of $773,177 into common shares of the Company at a price of $3.95 per share. In this transaction, the Company issued 195,740 shares of common stock.

Effective June 30, 2017, the Company converted the $2,125,000 principal amount of Notes and all accrued interest of $127,500 into common shares of the Company at a price of $3.95 per share. In this transaction, the Company issued 570,254 shares of common stock.

On June 30, 2017, the Company entered into subscription agreements for 77,000 shares of common stock with two accredited investors in a private placement, which resulted in gross proceeds of $304,150 to the Company. In this transaction, $201,450 was received on June 30, 2017 and $102,700 was received July 5, 2017.

On June 30, 2017, the Company entered into an agreement with an investor relations firm and as part of the compensation issued 5,000 shares of the Company’s common stock for services. The shares were issued July 5, 2017 and valued at $19,750.

In July 2017, the Company entered into subscription agreements for 133,000 shares of common stock with two accredited investors in a private placement, which resulted in gross proceeds of $525,350 to the Company.

On August 1, 2017, the Company issued 1,500 shares of common stock upon exercise of options.

On August 24, 2017, the Company issued 19,100 shares of common stock to a vendor for services. The shares were valued at $75,445 and are included in deferred initial public offering costs as of September 30, 2017.

On September 8, 2017, the Company entered into a wholesale license agreement with Andre Carthen and issued 45,500 shares of common stock, valued at $179,725.

On September 8, 2017, the Company entered into a wholesale license agreement with Nicholas Walker and issued 25,000 shares of common stock, valued at $98,750.

On September 30, 2017, the Company issued 7,593 shares in aggregate to 3 independent directors as board compensation. The shares were valued at $30,000 in aggregate.

Stock option transactions:

Fiscal year 2018:

On May 14, 2018 we granted an aggregate of 50,000 common stock options to an employee. The options vest 50% November 14, 2018 and 50% May 14, 2019. The options have an exercise price of $5.27 per share and a term of seven years. We have recorded an expense for the options of $38,950 for the fiscal year ended September 30, 2018.

On May 29, 2018 we granted an aggregate of 150,000 common stock options to an employee. The options vest 50% immediately and 50% January 1, 2019. The options have an exercise price of $4.78 per share and a term of ten years. We have recorded an expense for the options of $302,750 for the fiscal year ended September 30, 2018.

On August 16, 2018 we granted per the annual board compensation plan, an aggregate of 35,000 common stock options to five directors. The options vest immediately, have an exercise price of $3.34 per share and a term of ten years. We have recorded an expense for the options of $80,150 for the fiscal year ended September 30, 2018.

Fiscal year 2017:

On October 1, 2016 we granted an aggregate of 14,300 common stock options to two employees. The options vest 16% immediately, 42% January 1, 2017 and 42% January 1, 2018. The options have an exercise price of $7.50 per share and a term of five years. We have recorded an expense for the options of $576 for the year ended September 30, 2017.

On October 1, 2016 we granted an aggregate of 171,500 common stock options to two employees. The options vest ratably on January 1, 2018. The options have an exercise price of $7.50 per share and a term of six years. We have recorded an expense for the options of $19,208 for the year ended September 30, 2017.

On May 1, 2017 we granted an aggregate of 100,000 common stock options to one employee. The options vest 50% immediately and 50% on January 1, 2018. The options have an exercise price of $4.00 per share and a term of seven years. We have recorded an expense for the options of $17,469 for the year ended September 30, 2017.

On August 31, 2017 we granted an aggregate of 20,000 common stock options to one employee. The options vest ratably on August 31, 2018. The options have an exercise price of $4.00 per share and a term of seven years. We have recorded an expense for the options of $3,753 for the year ended September 30, 2017.

On September 8, 2017 we granted an aggregate of 7,500 common stock options to three consultants. The options vest ratably on October 1, 2018. The options have an exercise price of $4.00 per share and a term of five years. We have recorded an expense for the options of $897 for the year ended September 30, 2017.

The expected volatility rate was estimated based on comparison to the volatility of a peer group of companies in the similar industry. The expected term used was the full term of the contract for the issuances. The risk-free interest rate for periods within the contractual life of the option is based on U.S. Treasury securities. The pre-vesting forfeiture rate of zero is based upon the experience of the Company. As required under ASC 718, we will adjust the estimated forfeiture rate to our actual experience. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, and thereby materially impact our fair value determination.

The following table summarizes the inputs used for the Black-Scholes pricing model on the options issued in the years ended September 30, 2018 and 2017:

	2018	2017
Exercise price	$3.34 – $5.27	$4.00 - $7.50
Risk free interest rate	2.77% - 2.96%	1.14% - 2.13%
Volatility	57.76% - 64.74%	39.44% - 60.39%
Expected term	7 – 10 years	5 - 7 years
Dividend yield	None	None

Warrant transactions:

Fiscal 2018:

On November 17, 2017 in relation to the IPO, we issued to the selling agent warrants to purchase in aggregate 100,000 shares of common stock with an exercise price of $7.50. The warrants expire on October 27, 2022. The warrants were valued at $171,600 and recorded as paid in capital.

Fiscal 2017:

On September 8, 2017, the Company entered into a wholesale license agreement with Andre Carthen and as part of the agreement issued warrants to purchase 45,500 shares of common stock at a strike price of $4.00. The warrants were valued at $65,338.

On September 8, 2017, the Company entered into a wholesale license agreement with Nicholas Walker and as part of the agreement issued warrants to purchase 25,000 shares of common stock at a strike price of $4.00. The warrants were valued at $35,900.

On October 1, 2016, the board approved the strike price adjustment for certain placement agent warrants totaling 20,067 from a strike price of $8.75 to $5.00. On October 26, 2016, 38,358 shares of common stock were issued, upon a cashless exercise of the 20,067 warrants above and another 50,000 warrants, at a strike price of $2.75, which had been issued to a placement agent for prior services related to previous private placements of our securities.

On October 4, 2016 and October 24, 2016, we issued in aggregate, warrants exercisable into 141,676 shares of common stock with an exercise price of $7.80. The warrants expire on September 30, 2021. The warrants were issued in conjunction with the Company’s 8% convertible notes, described in Note 8.

The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the years September 30, 2018 and 2017:

	2018	2017
Exercise price	$7.50	$4.00 - $7.80
Risk free interest rate	2.06%	1.22% - 1.64%
Volatility	43.12%	39.41% - 54.49%
Expected term	5 years	5 years
Dividend yield	None	None