10. SHAREHOLDERS' EQUITY

12 Months Ended

Sep. 30, 2019

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. As described in Note 18, in October 2019, the Company designated 5,000,000 of these shares as 8% Series A Cumulative Convertible Preferred Stock and subsequently completed an offering and issued 500,000 shares. Our 8% Series A Cumulative Convertible Preferred Stock ranks senior to our common stock for liquidation or dividend provisions and are entitled to receive cumulative cash dividends at an annual rate of 8% payable monthly in arrears for the prior month.

Common Stock – We are authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were 27,720,356 and 8,123,928 shares of common stock issued and outstanding at September 30, 2019 and 2018, respectively.

Common stock transactions:

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 selling agent 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 secondary 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 selling agent 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.

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 were 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 are 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 were amortized and expensed as professional services over the service period ending November 2018.

Stock option transactions:

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 for the fiscal year ended September 30, 2019.

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 for the fiscal year ended September 30, 2019.

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 for the fiscal year ended September 30, 2019.

Fiscal 2018:

On May 14, 2018 we granted an aggregate of 50,000 common stock options to an employee. The options vested 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 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 vested 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 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 vested immediately, have an exercise price of $3.34 per share and a term of ten years. We recorded an expense for the options of $80,150 for the fiscal year ended September 30, 2018.

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, 2019 and 2018:

	2019	2018
Exercise price	$5.41 – $7.50	$3.34 - $5.27
Risk free interest rate	2.41% - 2.47%	2.77% - 2.96%
Volatility	89.60% - 90.68%	57.76% - 64.74%
Expected term	10 years	7 - 10 years
Dividend yield	None	None

Warrant transactions:

Fiscal 2019:

On October 2, 2018 in relation to the secondary offering, we issued to the selling agent 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 offering, we issued to the selling agent 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.

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.

The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the years September 30, 2019 and 2018:

	2019	2018
Exercise price	$4.375 - $7.50	$7.50
Risk free interest rate	2.15% - 2.90%	2.06%
Volatility	70.61% - 75.03%	43.12%
Expected term	5 years	5 years
Dividend yield	None	None