7. SHAREHOLDERS' EQUITY

3 Months Ended

Dec. 31, 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 2,800,000 and 500,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at December 31, 2020 and September 30, 2020, respectively.

The total amount of dividends declared and paid were $100,050 and $66,734, respectively, for the three months ended December 31, 2020 and December 31, 2019.

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 52,130,870 shares of common stock issued and outstanding at December 31, 2020 and September 30, 2020, respectively.

Preferred stock transactions:

In the three months ended December 31, 2020:

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 months ended December 31, 2019:

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 $103,801 and expire on October 10, 2024.

Common stock transactions:

During the first quarter of fiscal 2021 the Company issued 50,000 of restricted stock awards to an executive, subject to a multi-year vesting schedule with a minimum one year before the first tranche vests as noted below in Note 10. No common stock was issued in the three months ended December 31, 2020 and December 31, 2019.

Stock option transactions:

In the three months ended December 31, 2020:

In October 2020, we granted an aggregate of 350,000 common stock options to an executive. The options vest 1/3 on October 1, 2021, 1/3 on October 1, 2022 and 1/3 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. We have recorded an expense for the options of $31,054 for the three months ended December 31, 2020.

In the three months ended December 31, 2019:

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 these options of $71,540 and $190,776 for the three months ended December 31, 2020 and 2019, 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, 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 three months ended December 31, 2020 and 2019:

	2020			2019
Weighted average exercise price	$	5.11		$	3.15
Risk free interest rate		0.16	%		1.64	%
Volatility		100.72	%		95.96	%
Expected term		4 years			5 years
Dividend yield		None			None

Warrant transactions:

In the three months ended December 31, 2020:

In December 2020 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 150,502 shares of common stock with an exercise price of $3.74. The warrants expire on December 8, 2025.

In the three months ended December 31, 2019:

In October 2019 in relation to the 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.

The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the three months ended December 31, 2020 and 2019:

	2020			2019
Weighted average exercise price	$	3.74		$	3.9125
Risk free interest rate		0.39	%		1.48	%
Volatility		103.42	%		95.36	%
Expected term		2.75 years			5 years
Dividend yield		None			None