Stockholders' Equity | 8. Stock Options In connection with the employment agreement signed with the Chief Financial Officer on April 11, 2016, Jonathan Adams was granted options to acquire 3 million shares exercisable at $0.06 per share, the closing price on that date. These Options Group A shall become vested and exercisable (i) as to 1 million shares on April 11, 2017, (ii) as to 1 million shares on April 11, 2018, and (iii) as to 1 million shares on April 11, 2019. The fair market value of the stock options is estimated using the Black Scholes valuation model and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the historical volatilities of 3 comparable companies of the daily closing price of their respective common stock; the expected term of options granted is based on the average time outstanding method; and the risk free interest rate is based on the US Treasury bonds issued with similar life terms to the expected life of the grant. The following key assumptions were used in the valuation model to value stock option grants for each respective period: Valuation Date 4/11/2016 4/11/2016 4/11/2016 Stock Price $ 0.06 $ 0.06 $ 0.06 Exercise Price $ 0.06 $ 0.06 $ 0.06 Term (expected term for options) 1.00 2.00 3.00 Volatility 56.49 % 58.45 % 97.82 % Annual Rate of Quarterly Dividends 0.00 % 0.00 % 0.00 % Discount Rate - Bond Equivalent Yield 0.53 % 0.70 % 0.85 % Call Option Value ($Millions) $ 0.01 $ 0.02 $ 0.04 Fair Value $ 13,467 $ 19,523 $ 36,489 The Company issued stock options to consultants and board of directors for services provided to the company. The following key assumptions were used in the valuation model to value stock option grants for each respective period: Valuation Date 11/16/2016 12/18/2016 03/14/2017 05/02/2017 Stock Price $ 0.25 $ 0.21 $ 0.22 $ 0.23 Exercise Price $ 0.25 $ 0.21 $ 0.22 $ 0.23 Term (expected term for options) 2.000 2.000 2.000 2.000 Volatility 43.12 % 43.12 % 40.02 % 36.76 % Annual Rate of Quarterly Dividends 0.00 % 0.00 % 0.00 % 0.00 % Discount Rate - Bond Equivalent Yield 1.02 % 1.15 % 1.40 % 1.27 % Call Option Value ($Millions) $ 0.06 $ 0.05 $ 0.05 $ 0.05 Fair Value $ 30,919 $ 15,646 $ 5,143 $ 4,951 Stock option transactions under the Company’s plans for the years ended June 30, 2017 and 2016 are summarized below: Weighted Weighed- Average Aggregate Average Remaining Intrinsic Shares Exercise Contractual Value Options (Thousands) Price Term (Thousands) Outstanding at July 1, 2015 — — — — Granted 3,000 0.06 2 — Exercised — — — — Forfeited — — — — Outstanding at June 30, 2016 3,000 0.06 2 — Granted 1,000 0.24 2 — Exercised — — — — Forfeited — — — — Outstanding at June 30, 2017 4,000 0.10 2 — The compensation expense for the year ended June 30, 2017 includes $35,392 related to the stock options described above. The Legal and Professional fee for the year ended June 30, 2017 includes $56,660 related to the stock options described above. Offerings of Common Stock and Warrants In September 2016, the Company sold and issued an aggregate of 49,999 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $5,000. The purchase price for the common stock was $0.10 per share. In October 2016, the Company sold and issued an aggregate of 225,000 shares of common stock and warrants to purchase 112,500 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $45,000. The purchase price for the common stock and warrants was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance. In November 2016, the Company sold and issued an aggregate of 250,000 shares of common stock and warrants to purchase 125,000 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $50,000. The purchase price for the common stock and warrants was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance. In December 2017, the Company sold and issued an aggregate of 100,000 shares of common stock and warrants to purchase 50,000 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $20,000. The purchase price for the common stock and warrants was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance. In January 2017, the Company, entered into a common stock purchase agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”) which provides that, on the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s common stock over the 30-month term of the Purchase Agreement. On execution of the Purchase Agreement, the Company agreed to sell to Aspire Capital 1,000,000 shares of common stock and warrants to purchase 500,000 shares of common stock for proceeds of $200,000. The Warrant Shares will each have a five-year term and will be exercisable at $0.50 per share. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the “Registration Rights Agreement”), in which the Company agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended (the “Securities Act”), registering the sale of the shares of the Company’s common stock that have been and may be issued to Aspire Capital under the Purchase Agreement. Under the Purchase agreement, after the Securities and Exchange Commission (the “SEC”) has declared effective the registration statement referred to above, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 100,000 shares of the Company’s common stock per business day, up to $12.0 million of the Company’s common stock in the aggregate at a per share price (the “Purchase Price”) equal to the lesser of: the lowest sale price of the Company’s common stock on the purchase date; or the arithmetic average of the three (3) lowest closing sale prices for the Company’s common stock during the twelve (12) consecutive trading days ending on the trading day immediately preceding the purchase date. In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount equal to 100,000 shares and the closing sale price of our stock is equal to or greater than $0.30 per share, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of the Company’s common stock traded on its principal market on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of shares the Company may determine. The purchase price per share pursuant to such VWAP Purchase Notice is generally 95% of the volume-weighted average price for the Company’s common stock traded on its principal market on the VWAP Purchase Date. The Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s) used to compute the Purchase Price. The Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed. The Purchase Agreement provides that the Company and Aspire Capital shall not affect any sales under the Purchase Agreement on any purchase date where the closing sale price of the Company’s common stock is less than $0.10. There are no trading volume requirements or restrictions under the Purchase Agreement, and the Company will control the timing and amount of sales of the Company’s common stock to Aspire Capital. Aspire Capital has no right to require any sales by the Company, but is obligated to make purchases from the Company as directed by the Company in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, the Company issued to Aspire Capital 2,400,000 shares of the Company’s common stock (the “Commitment Shares”). The Purchase Agreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of the Company’s common stock during any time prior to the termination of the Purchase Agreement. Any proceeds that the Company receives under the Purchase Agreement are expected to be used for working capital and general corporate purposes. In March 2017, the Company sold and issued an aggregate of 500,000 shares of common stock and warrants to purchase 250,000 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $100,000. The purchase price for the common stock and warrants was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance. In May 2017, the Company sold and issued an aggregate of 240,000 shares of common stock and warrants to purchase 120,000 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $60,000. The purchase price for the common stock and warrants was $0.25 per unit. The warrants are exercisable at an exercise price of $0.75 at any time from date of issuance until 5 years from the date of issuance. The following table summarizes the warrants that have been issued: Aggregate Number of Warrants Issued Exercise Price Issue Date Expiration Date 5,000,000 $ 0.50 April 2013 April 2018 112,500 $ 0.50 October 2016 October 2021 125,000 $ 0.50 November 2016 November 2021 50,000 $ 0.50 December 2016 December 2021 500,000 $ 0.50 January 2017 January 2022 250,000 $ 0.50 March 2017 March 2022 120,000 $ 0.75 May 2017 May 2022 |