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SHAREHOLDERS' EQUITY

9 Months Ended

Jun. 30, 2021

Stockholders Equity Abstract

Note - 8 SHAREHOLDERS' EQUITY

NOTE 8 – SHAREHOLDERS’ EQUITY

Preferred Stock – The Company is 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 2,800,000 and 500,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at June 30, 2021 and September 30, 2020, respectively.

The total amount of dividends declared and paid were $560,281 and $100,050, respectively, for the three months ended June 30, 2021 and 2020. The total amount of dividends declared and paid were $1,220,610 and $266,800 for the nine months ended June 30, 2021 and 2020.

Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were 56,973,815 and 52,130,870 shares of common stock issued and outstanding at June 30, 2021 and September 30, 2020, respectively.

Preferred stock transactions:

In the three and nine months ended June 30, 2021:

On December 8, 2020, the Company completed a follow-on firm commitment underwritten public offering of 2,300,000 shares of its 8.0% Series A Cumulative Convertible Preferred Stock for aggregate gross proceeds of $17.25 million. The Company received approximately $15.8 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 150,502 shares of common stock with an exercise price of $3.74. The warrants were valued at $254,950 and expire on December 8, 2025.

In the three and nine months ended June 30, 2020:

On October 16, 2019, the Company completed a 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 net proceeds after deducting underwriting discounts and commissions. The Company also 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 were valued at $178,513 and expire on October 10, 2024.

Common stock transactions:

In the three and nine months ended June 30, 2021:

On June 8, 2021, the Company issued 25,000 shares of restricted stock awards in connection with a consulting arrangement with an industry professional. The Company recorded a total prepaid expense of $80,500 in conjunction with the issuance of shares and intends to amortize this over the term of the agreement.

On May 14, 2021, the Company issued 562,278 common shares in connection with the Earnout Shares as referenced in Note 6.

On April 9, 2021, the Company entered into an endorsement agreement with a professional athlete. A part of the endorsement agreement, the Company issued 40,000 common shares of restricted common stock. The Company recorded $143,600 prepaid expense and intends to amortize over the term of the agreement.

On April 19,2021, the Company issued 750,000 shares of restricted common stock to an executive officer, subject to a multi-year vesting schedule as noted below in Note 9.

In March 2021, the Company issued 180,000 shares of restricted common stock to a professional athlete to completely satisfy a $800,000 obligation due between July and December of 2021. The Company recorded a total prepaid expense of $649,800 in conjunction with the issuances of shares and intends to amortize this over the term of the athlete’s agreement.

In March 2021, the Company issued 27,000 of restricted stock awards to the Company’s board of directors. Two thousand of the shares vested at the time of the grant, while the balance vest one fourth on June 30, 2021, one fourth, on September 30, 2021, one fourth on December 31, 2021, and one fourth on March 31, 2022. The stock awards were valued at the fair market price of $118,800 upon issuance and will amortize over the individual vesting periods.

In March 2021, the Company issued 3,348,520 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.

In February 2021, as partial compensation pursuant to the terms of a Personal Services Agreement for the endorsement of the Company’s products, the Company issued 40,000 common shares. The Company recorded a total prepaid expense of $155,200 in conjunction with the issuance of shares.

In January 2021 the Company issued 167,500 of restricted stock awards to an aggregate of 15 employees. A majority vested immediately with the balance vesting by April 6, 2021. The stock awards were valued at the fair market price of $494,125 upon issuance and amortized over the individual vesting periods.

In October 2020 the Company issued 50,000 of restricted stock awards to an executive officer, subject to a multi-year vesting schedule with a minimum one year before the first tranche vests as noted below in Note 9.

In the three and nine months ended June 30, 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 at $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 selling agent 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, the Company 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, the Company 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.

Stock option transactions:

In the three and nine months ended June 30, 2021:

In June 2021, the Company entered into a consulting arrangement with an industry professional. As part of the agreement, the Company issued 50,000 options and recorded total prepaid expense of $125,250 and intends to amortize over the 12-month vesting term.

In April 2021, the Company issued 750,000 common stock options to an executive officer in conjunction with an Amended and Restated Executive Employment Agreement. The common stock options vest in three equal tranches, the first of which vests on January 1, 2022, the second on January 1, 2023 and the third on January 1, 2024, both under the Corporation’s 2021 Equity Compensation Plan. The Company has recorded an expense of $195,346 for the three months ended June 30, 2021 for these options.

In March 2021, the Company granted its board of directors an aggregate of 150,000 common stock options. The options vested immediately, have a strike price of $4.40 and a five-year term. The Company has recorded a total prepaid expense of $395,850 and intends to amortize the expense over the 12-month board term.

In January 2021, the Company granted an aggregate of 80,000 common stock options to three employees. The options vest in three equal tranches, the first on April 15, 2021, the second on April 15, 2022 and the third on April 14, 2023 and have an exercise price of $3.10 per share and a term of 10 years. The Company has recorded an expense of $35,247 and $102,215 for the three and nine months ended June 30, 2021, respectively, for these options.

In October 2020, the Company granted an aggregate of 350,000 common stock options to an executive officer. The options vest in three equal tranches, the first on October 1, 2021, the second on October 1, 2022 and the third on October 1, 2023, and have an exercise price of $3,50, $5.00, and $6.50 per share and a term of 5 years. The Company has recorded an expense for these options of $31,054 and $93,163 for the three and nine months ended June 30, 2021, respectively.

The expected volatility rate was estimated based on comparison to the volatility of a peer group of companies in similar industries. 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, the Company will adjust the estimated forfeiture rate to its 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 nine months ended June 30, 2021 and 2020:

		2021				2020
Weighted average exercise price		$	3.91			$	3.15
Risk free interest rate		0.16% - 0.85		%		0.69% - 1.64		%
Volatility		100.72% - 105.43		%		95.96% - 111.31		%
Expected term		2.5 - 6.2 years				5 - 10 years
Divident yield		None				None

Warrant transactions:

In the three and nine months ended June 30, 2021:

In December 2020 in relation to the follow-on firm commitment underwritten public offering of the 8.0% Series A Cumulative Convertible Preferred Stock, the Company issued to the representative of the underwriters warrants to purchase in aggregate 150,502 shares of common stock with an exercise price of $3.74. The warrants expire on December 8, 2025.

In the three and nine months ended June 30, 2020:

In October 2019 in relation to the firm commitment underwritten public offering of the 8.0% Series A Cumulative Convertible Preferred Stock, the Company 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 of 2020 in relation to the follow-on firm commitment underwritten public offering of the Company’s common stock, the Company 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.

The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the nine months ended June 30, 2021 and 2020:

		2021				2020
Weighted average exercise price		$	3.74			$1.25-$3.9125
Risk free interest rate			0.39	%		1.48%-1.63	%
Volatility			103.42	%		95.36%-96.85	%
Expected term		2.75 years				5 years
Divident yield		None				None