Note 8 - Stockholders' Equity

12 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

8 . STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At

July 1, 2014,

the Company had

200

shares of Series B redeemable convertible Preferred stock outstanding with a par value of

$0.01

per share, convertible at the option of the holder at

$2.00

per share, with dividends accrued and payable at

2.5%

per quarter. The Series B Preferred stock is mandatorily redeemable at

$100

per share by the Company

three

years after issuance and accordingly was classified as a liability. The

200

shares have reached their maturity date, but due to the cash constraints of the Company have

not

been redeemed.

During the years ended

June 30, 2018

and

2017,

the Company declared dividends of

$2,000

and

$2,000

respectively. At

June 30, 2018,

accrued dividends payable are

$14,000.

The dividends are classified as a component of operations as the Series B Preferred stock is presented as a liability in these financial statements.

Common stock:

Holders of common stock are entitled to

one

vote per share on all matters to be voted on by common stockholders. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights of any outstanding preferred stock have been satisfied. Common stock has

no

preemptive, redemption or conversion rights. The rights of holders of common stock are subject to, and

may

be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company

may

designate in the future.

Centerpoint holds

704,309

shares of the Company’s common stock. These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any beneficial interest.

During the year ended

June 30, 2017,

the Company issued

205,499

shares of the Company’s common stock at prices ranging from

$0.75

to

$1.02

per share for services valued at

$158,636,

in the aggregate, to consultants and employees.

During the year ended

June 30, 2017,

the Company issued

10,000

shares of the Company’s restricted common stock upon receipt of its subscription receivable of

$7,500

for the exercise of

10,000

warrants.

During the year ended

June 30, 2017,

the Company entered into multiple subscription agreements to sell units for

$0.75

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$1.00

per share with varying expiry dates ranging from

December 31, 2017

through

June 30, 2018

and pursuant thereto, the Company issued

561,890

units for total proceeds of

$421,413,

net proceeds of

$390,773

after commissions. The Company allocated the proceeds from the

561,890

shares and the

280,949

warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$11,701

was allocated to the warrants and

$409,712

was allocated to the shares, and both were recorded as additional paid in capital.

During the year ended

June 30, 2017,

the Company sold

30,467

shares of the Company’s common stock for

$0.75

per share for total proceeds of

$22,850.

During the year ended

June 30, 2017,

two

consultants elected to convert

$140,502

of deferred compensation into

184,542

shares of the Company’s common stock at a conversion rates ranging from

$0.75

to

$0.84

per share. The Company also issued

79,614

warrants to purchase common shares of the Company for

$1.00

per share with expiry dates of

December 31, 2018

in conjunction with

one

of the conversions.

During the year ended

June 30, 2017,

Smith elected to convert deferred compensation and accounts payable of

$75,000

and

$62,067,

respectively, into

182,758

units at

$0.75

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$1.00

per share until

March 31, 2018.

During the year ended

June 30, 2018,

the Company issued

57,790

shares of the Company’s common stock at prices ranging from

$0.52

to

$0.91

per share for services valued at

$42,583,

in the aggregate, to

two

consultants and an employee.

During the year ended

June 30, 2018,

the Company entered into subscription agreements to sell units for

$0.75

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$1.00

per share with expiry dates of

June 30, 2018

and pursuant thereto, the Company issued

267,331

units for total proceeds of

$200,496,

net proceeds of

$185,621

after commissions. The Company allocated the proceeds from the

267,331

shares and the

133,666

warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$6,152

was allocated to the warrants and

$194,344

was allocated to the shares, and both were recorded as additional paid in capital.

During the year ended

June 30, 2018,

the Company entered into subscription agreements to sell units for

$0.50

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$0.75

per share with expiry dates of

September 30, 2018

and pursuant thereto, the Company issued

300,000

units for total proceeds of

$150,000.

The Company allocated the proceeds from the

300,000

shares and the

150,000

warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$4,991

was allocated to the warrants and

$145,009

was allocated to the shares, and both were recorded as additional paid in capital.

During the year ended

June 30, 2018,

the Company entered into

two

subscription agreements to exercise certain warrants with expiry dates on or before

March 31, 2018

and

June 30, 2018,

into restricted shares of the Company’s common stock at a reduced exercise price of

$0.50

for the period from

March 1, 2018

to

March 31, 2018

and

May 18, 2018

through

June 15, 2018,

respectively. At

March 31, 2018

the Company exercised its right to extend the

first

offering an additional

15

days to

April 15, 2018

and therefore any warrants which would have expired on

March 31, 2018

were automatically extended to

April 15, 2018.

On

June 15, 2018

the Company exercised its right to extend the

second

offering an additional

15

days to

June 30, 2018.

As the

$0.50

exercise price was a reduction from the original exercise price of

$1.00,

and due to the limited time in which the warrant holders had to subscribe, the reduction in the offering price was accounted for as an inducement and a conversion inducement of

$10,784

was recorded. As a result of the offering,

135,681

warrants were exercised and

135,681

shares of the Company’s restricted common stock were issued resulting in cash proceeds of

$67,841

for the year ended

June 30, 2018.

In conjunction with the warrant exercises,

3,441

shares of common stock were issued as commissions and recorded to additional paid in capital.

During the year ended

June 30, 2018,

a consultant elected to convert

$60,178

of deferred compensation into

120,356

units at

$0.50

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half a share of the Company’s restricted common stock. The

60,178

warrants to purchase common shares of the Company at

$0.75

per share have expiry dates of

September 30, 2018.

During the year ended

June 30, 2018,

Smith elected to convert deferred compensation, loan payable - affiliates and accounts payable of

$70,000,

$18,000

and

$65,540,

respectively, into an aggregate

307,080

units at

$0.50

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$0.75

per share until

December 31, 2020.

Warrants:

As of

June 30, 2018,

the Company had approximately

12.2

million warrants outstanding, with exercise prices from

$0.75

to

$3.00

and expiring on various dates through

December 31, 2022.

The weighted-average exercise price for the outstanding warrants is

$1.06,

and the weighted-average remaining contractual life as of

June 30, 2018

is

3.3

years.

During the year ended

June 30, 2018,

warrants to purchase

454,465

shares of common stock of the Company at prices between

$1.00

and

$2.50

per share expired.

During the year ended

June 30, 2018,

the Company entered into subscription agreements to sell units for

$0.75

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$1.00

per share with expiry dates of

June 30, 2018

and pursuant thereto, the Company issued

267,331

units for total proceeds of

$200,496,

net proceeds of

$185,621

after commissions. The Company allocated the proceeds from the

267,331

shares and the

133,666

warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$6,152

was allocated to the warrants and

$194,344

was allocated to the shares, and both were recorded as additional paid in capital. The Company also issued

89,485

warrants to purchase

89,485

shares of the Company’s restricted common shares with an exercise price of

$1.00

per share exercisable until

June 30, 2019

as commissions related to the above sale of Units.

During the year ended

June 30, 2018,

the Company entered into subscription agreements to sell units for

$0.50

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$0.75

per share with expiry dates of

September 30, 2018

and pursuant thereto, the Company issued

300,000

units for total proceeds of

$150,000.

The Company allocated the proceeds from the

300,000

shares and the

150,000

warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$4,991

was allocated to the warrants and

$145,009

was allocated to the shares, and both were recorded as additional paid in capital.

During the year ended

June 30, 2017,

the Company received an interest bearing, secured promissory note for

$40,000

from Bassani as consideration to purchase warrants to purchase

800,000

shares of the Company’s restricted common stock, which warrants are exercisable at

$1.00

and have expiry dates of

December 31, 2021 (

“Bassani Warrant”). The promissory note bears interest at

4%

per annum, was secured by a perfected security interest in the Bassani Warrant, and was payable on

November 15, 2017.

Effective

November 7, 2017

an addendum to the promissory note changed the principal of the note to

$41,513

(the original principal of

$40,000

plus accrued interest of

$1,513

), changed the maturity date of the note to

July 1, 2019

and the collateral was changed to Replacement Note

1

of Bassani’s

2015

Convertible Note (Note

7

) with a balance at

November 7, 2017

of

$130,000

which will be held by the Company.

During the year ended

June 30, 2018,

the Company received an interest bearing, secured promissory note for

$88,250

from Bassani as consideration to purchase warrants to purchase

1,765,000

shares of the Company’s restricted common stock, which warrants are exercisable at

$0.75

and have expiry dates of

December 31, 2020.

The warrants have a

90%

exercise bonus (Note

12

). The promissory note bears interest at

4%

per annum, is secured by Bassani’s Replacement Note

1

of Bassani’s

2015

Convertible Note (Note

7

) with a balance at

November 7, 2017

of

$130,000,

which will be held by the Company. The secured promissory note is payable on

July 1, 2020.

During the year ended

June 30, 2018,

the Company received

two

interest bearing, secured promissory notes with an aggregate principal amount of

$46,400

from

two

former employees as consideration to purchase warrants to purchase

928,000

shares of the Company’s restricted common stock, which warrants are exercisable at

$0.75

and have expiry dates of

December 31, 2020.

These warrants have a

90%

exercise bonus (Note

12

). The promissory notes bear interest at

4%

per annum, are secured by a perfected security interest in the warrants, and are payable on

July 1, 2020.

During the year ended

June 30, 2018,

the Company issued

670,000

warrants to Smith and

247,000

warrants to a former employee and a consultant to purchase in aggregate

917,000

shares of the Company’s restricted common stock, which warrants are exercisable at

$0.75

per share and have expiry dates of

December 31, 2020.

The warrants were in exchange for services expensed at

$45,850,

in aggregate (

$33,500

to Smith). These warrants have a

90%

exercise bonus (Note

12

). The Company also issued

50,000

warrants to

two

consultants for services valued at

$2,500,

exercisable at

$0.75

per share which expiry dates ranging from

October 1, 2020

to

December 31, 2023.

During the year ended

June 30, 2018,

a consultant elected to convert

$60,178

of deferred compensation into

120,356

units at

$0.50

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half a share of the Company’s restricted common stock. The

60,178

warrants to purchase common shares of the Company at

$0.75

per share have expiry dates of

September 30, 2018.

During the year ended

June 30, 2018,

Smith elected to convert deferred compensation, loan payable - affiliates and accounts payable of

$70,000,

$18,000

and

$65,540,

respectively, into an aggregate

307,080

units at

$0.50

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$0.75

per share until

December 31, 2020.

During the year ended

June 30, 2018,

the Company agreed to extend the expiration dates of

5,773,706

warrants owned by certain individuals (including

5,329,869

owned by Bassani,

91,371

owned by Smith and

23,934

owned by Schafer) which were scheduled to expire at various dates ranging from

December 31, 2017

through

December 31, 2021.

The Company recorded non-cash compensation expense related to the modification of the warrants of

$296,852

(

$265,353,

$7,310

and

$1,197

for Bassani, Smith and Schafer, respectively).

Stock options:

The Company’s

2006

Consolidated Incentive Plan, as amended (the

“2006

Plan”), provides for the issuance of options (and/or other securities) to purchase up to

30,000,000

shares of the Company’s common stock. Terms of exercise and expiration of options/securities granted under the

2006

Plan

may

be established at the discretion of the Board of Directors, but

no

option

may

be exercisable for more than

ten

years.

During the year ended

June 30, 2017,

the Company approved the issuance of

100,000

shares in stock bonuses to an employee and a consultant with various vesting dates from

January 15, 2018

through

January 15, 2020.

In

February 2018,

the Board of Directors cancelled the stock bonuses previously approved. The Company recorded

$22,321

and

$37,105

of non-cash compensation related to the stock bonuses for the years ended

June 30, 2018

and

2017,

respectively.

During the year ended

June 30, 2018,

the Company approved the modification of existing stock options held by certain employees and consultants, which extended certain expiration dates. The modifications resulted in incremental non-cash compensation of

$349,656

(including

$119,350

and

$68,000

for Bassani and Schafer, respectively).

The Company recorded compensation expense related to employee stock options of

$1,369,350

and

$152,333

for the years ended

June 30, 2018

and

2017,

respectively. The Company granted

2,647,500

and

319,500

options during the year ended

June 30, 2018

and

2017,

respectively.

The fair value of the options granted during the year ended

June 30, 2018

and

2017

were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, June 30, 2018	Range, June 30, 2018			Weighted Average, June 30, 2017	Range, June 30, 2017
Volatility	74%	68%	-	75%	78%	73%	-	86%
Dividend yield	-		-		-		-
Risk-free interest rate	2.44%	1.75%	-	2.64%	1.17%	0.82%	-	1.44%
Expected term (years)	5	3	-	6	3.9	3	-	4

The expected volatility was based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected term of the stock options. The U.S. Treasury bill rate for the expected term of the stock options was utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are expected to be outstanding based upon management’s estimates.

A summary of option activity under the

2006

Plan for the

two

years ended

June 30, 2018

is as follows:

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2016		4,225,537		$	1.45		4.1	$	158,675
Granted		319,500			0.97
Exercised		-			-
Forfeited		-			-
Expired		-			-
Outstanding at June 30, 2017		4,545,037		$	1.42		2.9	$	176,575
Granted		2,647,500			0.76
Exercised		-			-
Forfeited		-			-
Expired		(365,312	)		2.35
Outstanding at June 30, 2018		6,827,225		$	1.11		3.8	$	-
Exercisable at June 30, 2018		6,827,225		$	1.11		3.8	$	-

The following table presents information relating to nonvested stock options as of

June 30, 2018:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2017		25,000		$	0.46
Granted		2,647,500			0.52
Vested		(2,672,500	)		0.51
Nonvested at June 30, 2018		-		$	-

The total fair value of stock options that vested during the year ended

June 30, 2018

and

2017

was

$1,376,250

and

$173,520

respectively. As of

June 30, 2018,

the Company had

no

unrecognized compensation cost related to stock options.

Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the years ended

June 30, 2018

and

2017

are as follows:

	Year ended June 30, 2018		Year ended June 30, 2017
General and administrative:
Fair value of stock/warrant bonuses expensed	$	8,723	$	15,021
Change in fair value from modification of option terms		243,761		166,031
Change in fair value from modification of warrant terms		163,956		-
Fair value of stock options expensed		782,135		129,081
Total	$	1,198,575	$	310,133
Research and development:
Fair value of stock bonus expensed	$	15,098	$	22,084
Change in fair value from modification of option terms		105,895		11,440
Change in fair value from modification of warrant terms		132,896		-
Fair value of stock options expensed		587,215		23,252
Total	$	841,104	$	56,776