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10. SHAREHOLDERS' EQUITY

12 Months Ended

Sep. 30, 2020

Stockholders' Equity Attributable to Parent [Abstract]

SHAREHOLDERS' EQUITY

Preferred Stock – We are authorized to issue 50,000,000 shares of preferred stock, par value $0.001 per share. In October 2019, the Company designated 5,000,000 of these shares as 8.0% Series A Cumulative Convertible Preferred Stock. Our 8.0% Series A Cumulative Convertible Preferred Stock ranks senior to our common stock for liquidation or dividend provisions and holders are entitled to receive cumulative cash dividends at an annual rate of 8.0% payable monthly in arrears for the prior month. The Company reviewed ASC 480 – Distinguishing Liabilities from Equity in order to determine the appropriate accounting treatment for the preferred stock and determined that the preferred stock should be treated as equity. There were 500,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at September 30, 2020.

The total amount of dividends declared and paid were $366,850 and $0 for the years ended September 30, 2020 and 2019, respectively.

Common Stock – We are authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were 52,130,870 and 27,720,356 shares of common stock issued and outstanding at September 30, 2020 and 2019, respectively.

Preferred stock transactions:

Fiscal 2020:

On October 16, 2019, the Company completed a follow-on firm commitment underwritten public offering of 500,000 shares of its 8.0% Series A Cumulative Convertible Preferred Stock for aggregate gross proceeds of $5,000,000. The Company received approximately $4.5 million in gross proceeds after deducting underwriting discounts and commissions. The Company also issued to the selling agent warrants to purchase in aggregate 47,923 shares of common stock with an exercise price of $3.9125. The warrants were valued at $178,513 and expire on October 10, 2024.

Fiscal 2019:

No preferred stock was issued in fiscal 2019.

Common stock transactions:

Fiscal 2020:

On January 14, 2020, the Company completed a follow-on firm commitment underwritten public offering of 18,400,000 shares of its common stock for aggregate gross proceeds of $18,400,000. The Company received approximately $16.9 million in net proceeds after deducting underwriting discounts and commissions. The Company also issued to the representative of the underwriters warrants to purchase in aggregate 480,000 shares of common stock with an exercise price of $1.25. The warrants were valued at $345,600 and expire on January 14, 2025.

In February 2020, we issued 25,000 shares of our common stock to an investor relations firm for services. The shares were valued at $28,250, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending January 2021.

In February 2020, we issued 5,000 shares of our common stock to an employee. The shares were valued at $5,650, based on the trading price upon issuance, and was expensed as stock based compensation expense.

In June 2020, we issued 10,000 shares of our common stock, which were granted as restricted stock awards in June 2019 to an athletic sponsor. The restricted stock awards vested on June 30, 2020. The shares were valued at fair market value upon issuance at $56,200 and amortized upon vesting at June 30, 2020 and expensed as sponsorship expense.

In July 2020, we issued 60,000 shares of our common stock to an investment banking firm for general financial advisory services. The shares were valued at $114,600, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending June 2021.

In July 2020, we issued 700,000 shares of our common stock to a company as part of an athletic endorsement agreement. The shares were valued at fair market value upon issuance at $1,337,000 and are amortized per the contract ending December 2022 and expensed as sponsorship expense.

In August 2020, we issued 25,222 shares of our common stock upon cashless exercise of 37,344 placement warrants previously granted to an investment banking firm and its affiliates.

Fiscal 2019:

On October 2, 2018, the Company completed a secondary public offering of 1,971,428 shares of its common stock for aggregate gross proceeds of approximately $6.9 million. The Company received approximately $6.3 million in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The Company also issued to the representative of the underwriters warrants to purchase in aggregate 51,429 shares of common stock with an exercise price of $4.375. The warrants were valued at $86,092 and expire on September 28, 2023.

In January 2019, we issued 25,000 shares of our common stock to an investment banking firm for general financial advisory services. The shares were valued at $77,250, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending December 2019.

In January 2019, we issued 50,000 shares of our common stock to an investment banking firm for general advisory and investment bank services. The shares were valued at $212,500, based on the trading price upon issuance, and is being amortized and expensed as professional services over the service period ending April 2020.

In April 2019, we issued 15,250,000 shares or our common stock as consideration for the Mergers with Cure Based Development, of which 8,750,000 of the shares will vest over a five year period and are subject to a voting proxy agreement.

In May 2019, the Company completed a follow-on public offering of 2,300,000 shares of its common stock for aggregate gross proceeds of $13.8 million. The Company received approximately $12.5 million in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The Company also issued to the representative of the underwriters warrants to purchase in aggregate 60,000 shares of common stock with an exercise price of $7.50. The warrants were valued at $223,500 and expire on May 15, 2024.

Stock option transactions:

Fiscal 2020:

In December 2019, we granted an aggregate of 280,000 common stock options to two executives. The options vest 1/3 on January 1, 2020, 1/3 on January 1, 2021 and 1/3 on January 1, 2022, have an exercise price of $3.15 per share and a term of five years. We have recorded an expense for the options of $405,396 for the fiscal year ended September 30, 2020.

In February 2020, we granted an aggregate of 30,000 common stock options to an employee. The options vest 1/3 at grant, 1/3 on February 7, 2021, and 1/3 on February 7, 2022, have an exercise price of $3.15 per share and a term of five years. We have recorded an expense for the options of $10,100 for the fiscal year ended September 30, 2020.

In May 2020, we granted per the annual board compensation plan, an aggregate of 80,000 common stock options to four independent directors and are expensed over the annual board term. The options vest immediately, have an exercise price of $1.57 per share and a term of ten years. We have recorded an expense for the options of $58,040 for the fiscal year ended September 30, 2020.

In September 2020, we granted an aggregate of 300,000 common stock options to an employee as part of a severance agreement. The options vest immediately, have an exercise price of $2.60 per share and a term of three years. We have recorded an expense for the options of $273,600 for the fiscal year ended September 30, 2020.

Fiscal 2019:

In August 2019 we granted per the annual board compensation plan, 20,000 common stock options to one non-management director. The options vest immediately, have an exercise price of $5.41 per share and a term of ten years. We have recorded an expense for the options of $83,920 and $0 for the fiscal years ended September 30, 2019 and 2020, respectively.

In May 2019 we granted per the annual board compensation plan, an aggregate of 120,000 common stock options to six independent directors. The options vest immediately, have an exercise price of $5.41 per share and a term of ten years. We have recorded an expense for the options of $562,440 and $0 for the fiscal years ended September 30, 2019 and 2020, respectively.

In May 2019 we granted an aggregate of 610,000 common stock options to twelve employees. The options vary in amounts issued and vesting tiers, which include no vesting with an exercise price of $6.40, vesting at May 15, 2020 with an exercise price of $7.00, vesting at May 15, 2021 with an exercise price of $7.50, and vesting at May 15, 2022 with an exercise price of $7.50. The options have a term of ten years. We have recorded an expense for the options of $1,642,530 and $1,095,018 for the fiscal years ended September 30, 2019 and 2020, respectively.

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, 2020 and 2019:

		2020				2019
Exercise price		$	1.57-3.15			$	5.41-7.50
Risk free interest rate			0.16-1.64	%			2.41-2.47	%
Volatility			95.96-111.31	%			89.60-90.68	%
Expected term			3-10 years				10 years
Dividend yield			None				None

Warrant transactions:

Fiscal 2020:

In October 2019 in relation to the follow-on firm commitment underwritten public offering of the 8.0% Series A Cumulative Convertible Preferred Stock, we issued to the representative of the underwriters warrants to purchase in aggregate 47,923 shares of common stock with an exercise price of $3.9125. The warrants expire on October 10, 2024.

In January 2020 in relation to the follow-on firm commitment underwritten public offering of the Company’s common stock, we issued to the representative of the underwriters warrants to purchase in aggregate 480,000 shares of common stock with an exercise price of $1.25. The warrants expire on January 14, 2025.

Fiscal 2019:

On October 2, 2018 in relation to the secondary public offering, we issued to the representative of the underwriters warrants to purchase in aggregate 51,429 shares of common stock with an exercise price of $4.375. The warrants expire on September 28, 2023.

In May 2019 in relation to the secondary public offering, we issued to the representative of the underwriters warrants to purchase in aggregate 60,000 shares of common stock with an exercise price of $7.50. The warrants expire on May 15, 2024.

The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the years ended September 30, 2020 and 2019:

		2020				2019
Exercise price		$	1.25-3.9125			$	4.375-7.50
Risk free interest rate			1.48-1.63	%			2.15-2.90	%
Volatility			95.36-96.85	%			70.61-75.03	%
Expected term			5 years				5 years
Dividend yield			None				None