Note 7 - Common Stock, Warrants and Preferred Stock

9 Months Ended

Jun. 30, 2020

Notes

Note 7 - Common Stock, Warrants and Preferred Stock:

NOTE 7 – COMMON STOCK, WARRANTS AND PREFERRED STOCK:

Common Shares - Private Placement

On October 23, 2019, the Company closed a private placement offering of 7,500,000 Units of the Company at a price of US$0.08 per Unit, for total proceeds to the Company of $600,000. Each Unit consisted of one share of common stock of the Company and one-half common share purchase Class J Warrant (each whole such warrant a “Warrant”), with each Warrant exercisable to acquire an additional share of common stock of the Company at a price of US$0.12 per share until the Warrant expiration date of October 15, 2024.

As a result, 7,500,000 shares of common stock of the Company and 3,750,000 Warrants were issued and 3,750,000 shares of common stock were reserved for issuance pursuant to Warrant exercises. A director of the Company, William Matlack, participated in the Offering and subscribed for 7,125,000 Units. The Warrants comprised in Mr. Matlack’s Units contain a voluntary restriction on exercise preventing Mr. Matlack from completing any Warrant exercise if such exercise would cause him to beneficially own or control 20% or more of the issued and outstanding common shares of the Company.

The fair value of warrants was determined with a Black-Scholes option-pricing model to be $266,500. The assumptions used to calculate fair values are noted in the following table:

	Series J Warrants Issued October 23, 2019
Expected volatility	149.30%
Stock price on date of grant	$0.08
Exercise price	$0.12
Expected dividends	-
Expected term (in years)	5
Risk-free rate	1.58%
Expected forfeiture rate	0%

The fair value of the warrants was charged to additional paid-in capital as a deemed dividend, due to the warrants being issued with common shares and being immediately exercisable.

Warrants

During the nine-month period ended June 30, 2020, there were 3,750,000 Series J Warrants issued pursuant to the private placement offering and 4,000,000 Series K Warrants issued pursuant solely to extension of the Senior unsecured note payable, with 3,265,500 Series F Warrants canceled in connection with the extension. Additionally, there were 3,367,441 Series H Warrants issued pursuant to PM&G’s participation in a private placement in July 2019 that had not been issued or included in the September 30, 2019 warrants outstanding. On January 31, 2020, 8,000,000 Series B Warrants expired. As a result of these issuances and expirations, there were 45,541,908 and 45,689,967 warrants outstanding as of June 30, 2020 and September 30, 2019, respectively. The warrants expire from April 30, 2021 through October 15, 2024. The weighted average exercise price was $0.17 and $0.21 as of June 30, 2020 and September 30, 2019, respectively.