XML 31 R16.htm IDEA: XBRL DOCUMENT v3.24.4
Note 8 - Shareholders' Equity
 12 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Equity [Text Block]

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 5,000,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at September 30, 2024 and September 30, 2023.

 

The total amount of dividends declared were $4,004,001 and $4,002,005 for the years ended September 30, 2024 and September 30, 2023. The Company suspended payment of the dividend in August of 2023 and as such recorded an accrual of $667,000 for the dividends declared but not paid as of September 30, 2023. As of September 30, 2024, the Accrued liability for the dividends declared but not paid totaled $4,669,000 and continues to grow at approximately $1 million per quarter.

 

Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were 3,939,057 and 2,960,573 shares of common stock issued and outstanding at September 30, 2024 and 2023, respectively.

 

On March 2, 2023 Company entered into a purchase agreement (the "ELOC") with Keystone Capital Partners, LLC (“Keystone”), pursuant to which Keystone committed to purchase up to 281,934 of shares of our common stock. Upon the execution of the ELOC, The Company issued 2,616 shares of common stock as "Commitment Shares" to Keystone as consideration for its commitment to purchase shares of our common stock under the ELOC. An additional 6,104 Commitment Shares were issued 180 days after the date of the ELOC. The 281,934 shares of the Company's common stock were registered for resale and may be issued under the ELOC or sold by us to Keystone at our discretion from time to time over a 12 month period commencing April 1, 2023. The purchase price for the shares that the Company sold to Keystone under the ELOC fluctuated based on the price of the Company's common stock. Keystone purchased an aggregate of 180,955 shares (64,218 of which were purchased during the year ended September 30, 2024) under the ELOC, which expired in the first half of fiscal 2024.

 

Preferred stock transactions:

 

The Company had no preferred stock transactions in the year ended  September 30, 2024 and 2023.

 

Common stock transactions:

 

In the year ended September 30, 2024:

 

In September 2024, the Company issued 100,624 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes.

 

In August 2024, the Company issued 75,000 shares of common stock pursuant to the settlement agreement with Majik Medicine. 

 

In April 2024, the Company issued an aggregate of 714,229 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes.

 

In March 2024, the company issued 16,000 of restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and  March 31, 2025. The stock awards were valued at the fair market price of $13,760 and will amortize over the individual vesting periods.

 

In January 2024, the Company issued 64,218 shares under our ELOC.

 

In January 2024, the Company issued 19,818 shares as part of the final Earnout.

 

In the year ended September 30, 2023:

 

In September of 2023, the company issued 102,616 shares under the Purchase Agreement to Keystone.

 

In July of 2023 the Company issued 2,616 shares to Keystone pertaining to the commitment shares under the ELOC.

 

On May 3, 2023, the Company completed an underwritten public offering of 1,350,000 shares of its common stock at a public offering price of $2.10 per share. Gross proceeds from the offering before deducting underwriting discounts and commissions and offering expenses were approximately $2.8 million. Under the terms of an underwriting agreement, the Company granted the underwriter an option, exercisable for 45 days, to purchase up to an additional 202,500 shares of common stock. The net proceeds to the Company from the offering were approximately $2.5 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, and does not take into account the exercise by the underwriter of its option to purchase additional shares of common stock. The Company also issued the underwriter a warrant to purchase up to 40,500 shares of its common stock exercisable at $2.52 per share.

 

On April 24, 2023 the Company issued a total of 39,533 shares of common stock to account for rounding up of fractional shares related to the Reverse Stock Split.

 

In March 2, 2023, the Company entered into the ELOC with Keystone, pursuant to which Keystone has committed to purchase up to 281,934 of shares of our common stock. Upon the execution of the ELOC, The Company issued 2,616 shares of common stock as "Commitment Shares" to Keystone as consideration for its commitment to purchase shares of our common stock under the ELOC. Additional Commitment Shares (6,104) will be issued over 180 days from March 2, 2023. The 281,934 shares of the Company's common stock were registered for resale and may be issued under the ELOC or sold by us to Keystone at our discretion from time to time over a 12-month period commencing April 1, 2023, subject to a 75 day blackout period commencing April 30, 2023. The purchase price for the shares that the Company may sell to Keystone under the ELOC will fluctuate based on the price of the Company's common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.

 

In April 2023, the Company issued 8,889 shares to Keystone under the ELOC entered into in March of 2023.

 

On February 1, 2023, the Company entered into an Agreement for Advertising Placement with a360 Media, LLC (“a360”) in which a360 will provide professional media support and advertising placement in exchange for up to 134,681 shares of the Company’s common stock valued at $14.85 per share. A360 will receive the shares by providing the Company with a credit in the amount of $2,000,000 to be used for media support and advertising placement to the Company, of which $514,904 remains unutilized as of September 30,2023. The shares are 70% fully vested; 15% of the Shares shall vest upon each advertising placement accrue pro-rata as percentage of the total advertising placement; and 15% of the shares shall vest provided there are no restrictions in product categories that the Company is able to market with a360 while the Company utilizes the advertising placement. Any shares which do not vest within the term of the agreement shall be forfeited. The Advertising Placement must be used by the Company prior to December 30, 2023, unless otherwise agreed in writing by both parties.

 

In January of 2023, the Company issued 2,223 shares of common stock to Twenty Two Capital as the final obligation under the 2021 acquisition agreement upon the expiration of the indemnification period.

 

Stock option transactions:

 

In the year ended September 30, 2024:

 

The Company granted its board of directors an aggregate of 8,000 common stock options in April 2024. The options vested immediately, have a strike price of $0.86 and a five-year term. The Company has recorded a total prepaid expense of approximately $4,300 and intends to amortize the expense over the 12-month board term.

 

In the year ended September 30, 2023:

 

In February of 2023, the Company granted its board of directors an aggregate of 2,667 common stock options. The options vested immediately, have a strike price of $12.60 and a five-year term. The Company has recorded a total prepaid expense of $21,120 and intends to amortize the expense over the 12-month board term.

 

In January 2023, the Company issued 2,334 options to a group of employees. The stock options awards vested at issuance, had a strike price of $10.53, five-year term and a fair market value upon issuance of $15,225.

 

In December 2022, the Company issued 2,223 options to an employee. 1,667 options vest equally at each anniversary for the next 3 years, have a strike price of $11.25 and a five year term. The total expense of these options is $13,150 and will be amortized over the term of the vesting periods. 556 options vest based on meeting certain direct to consumer revenue requirements by the end of December 2024.

 

The Company has recorded an expense for these options of $11,974 for the twelve months ended September 30, 2024.

 

The expected volatility rate was estimated based on comparison to the volatility of a blend of the Company's own stock and 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 years ended September 30, 2024 and 2023:

 

  

2024

  

2023

 

Weighted average exercise price

 $0.54   10.35 - 12.60 

Risk free interest rate

  4%   3.93% - 4.71% 

Volatility

  107%   106.48% - 106.51% 

Expected term (in years)

  2.5   2.5 - 4 

Dividend yield

 

None

  

None

 

 

Warrant transactions:

 

The Company had no warrant transactions during the twelve months ended September 30, 2024.