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Equity Transactions
6 Months Ended
Dec. 31, 2021
Equity Transactions  
Equity Transactions

Note 8 - Equity Transactions

On September 9, 2021, the Company entered into a COVID-19 License Agreement to use, promote, offer for sale, import, export, sell and distribute drugs that treat Covid-19 infections, using TheraCour’s proprietary as well as patented technology and intellectual property. Pursuant to such license agreement, the Board of Directors authorized the issuance of 100,000 fully vested shares of the Company’s Series A preferred stock as a license milestone payment and recorded an expense of $0 and $935,088 for the three and six months ended December 31, 2021.

On September 14, 2021, the Board of Directors and Dr. Anil Diwan, President and Chairman of the Board agreed to the extension of Dr. Diwan’s employment agreement for a period of one year from July 1, 2021 through June 30, 2022 under the same general terms and conditions. The Company granted Dr. Diwan an award of 10,204 shares of the Company’s Series A preferred stock. The shares shall be vested in quarterly installments of 2,551 shares on September 30, 2021, December 31, 2021, March 31, 2022 and June 30, 2022 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series A preferred stock of $27,246 and $54,492 for the three and six months ended December 31, 2021, respectively. The balance of $54,490 will be recognized as the remaining 5,102 shares vest and service is rendered for the year ended June 30, 2022.

For the three and six months ended December 31, 2021, the Company’s Board of Directors authorized the issuance of 387 and 774, respectively of fully vested shares of its Series A preferred stock for employee compensation. The Company recorded expense of $6,121 and $11,765, respectively for the three and six months ended December 31, 2021 related to these issuances.

The fair value of the Series A preferred stock was the following for the dates indicated:

Date

    

Shares

    

Value

7/31/2021

10,333

$

111,012

8/31/2021

129

 

1,718

9/30/2021

100,129

 

936,984

10/31/2021

129

 

2,166

11/30/2021

129

 

1,895

12/31/2021

129

 

2,060

110,978

$

1,055,835

There is currently no market for the shares of Series A preferred stock and they can only be converted into shares of common stock upon a change of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A preferred stock granted to various employees and others on the date of grant. The conversion of the shares is triggered by a change of control. The valuations of the Series A Convertible preferred stock at each issuance used the following inputs:

a.The common stock price for the six months ended December 31, 2021 was in the range $3.50 to $7.86.
b.The conversion value is based on an assumption, for calculation purposes only, of a change in control in 3.5 years from the date of issuance.
c.32.2% discount for lack of marketability (based upon a call put analysis): 144.7% to 149.1% historical volatility, 0.57% to 0.51% risk free rate applied to the converted common stock.

During the six months ended December 31, 2021, the Scientific Advisory Board was granted in August 2021 fully vested warrants to purchase 572 shares of common stock with an exercise price of $4.65 per share expiring in August 2025 and in November 2021 fully vested warrants to purchase 572 shares of common stock with an exercise price of $5.92 per share expiring in November 2025. The fair value of the warrants was $1,644 for the three months ended December 31, 2021 and $2,996 for the six months ended December 31, 2021 and was recorded as consulting expense.

The Company estimated the fair value of the warrants granted to the Scientific Advisory Board on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:

Expected life (year)

    

4

 

Expected volatility

 

86.0-91.4

%

Expected annual rate of quarterly dividends

 

0.00

%

Risk-free rate(s)

 

0.615-1.065

%

For the three and six months ended December 31, 2021, the Company’s Board of Directors authorized the issuance of 5,993 and 12,502, respectively, fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded expense of $27,000 and $54,000, respectively, for the three and six months ended December 31, 2021, which is reflective of the fair value on the dates of issuance.

For the three and six months ended December 31, 2021, the Company’s Board of Directors authorized the issuance of 3,288 and 6,812, respectively, fully vested shares of its common stock with a restrictive legend for director services. The Company recorded an expense of $15,000 and $30,000 for the three and six months ended December 31, 2021, which is reflective of the fair value on the dates of issuance.