STOCKHOLDERS' EQUITY:

Series B Preferred stock:

Since

July 1, 2014,

the Company has

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, 2020

and

2019,

the Company declared dividends of

$2,000

and

$2,000,

respectively. At

March 31, 2021,

accrued dividends payable are

$19,500.

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

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

nine

months ended

March 31, 2021,

the Company entered into subscription agreements, under

three

different offerings, 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

share of the Company's restricted common stock for

$0.75

per share with an expiry date of

December 31, 2021,

and pursuant thereto, the Company issued

3,700,000

units for total proceeds of

$1,850,000,

net proceeds of

$1,690,000

after commissions of

$160,000.

The Company allocated the proceeds from the

3,700,000

shares and the

3,700,000

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,

$113,239

was allocated to the warrants and

$1,736,761

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

During the

nine

months ended

March 31, 2021,

300,000

share of the Company's restricted company stock were sold to an investor for

$300,000.

During the

nine

months ended

March 31, 2021,

Smith elected to convert deferred compensation and accounts payable of

$127,660

and

$40,491,

respectively, into an aggregate

336,305

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

share of the Company's restricted common stock for

$0.75

per share until

December 31, 2024.

During the

nine

months ended

March 31, 2021,

the Company issued

36,000

units to Smith for salary of

$18,000,

with each unit consisting of

one

share of the Company's restricted common stock and

one

warrant to purchase

one

share of the Company's restricted common stock for

$0.75

per share with an expiry date of

December 31, 2024.

During the

nine

months ended

March 31, 2021,

5,000

warrants were exercised to purchase

5,000

shares of the Company's common stock at

$0.75

per share for total proceeds of

$3,750.

Warrants:

As of

March 31, 2021,

the Company had approximately

24.7

million warrants outstanding, with exercise prices from

$0.60

$1.50

and expiring on various dates through

June 30, 2025.

The weighted-average exercise price for the outstanding warrants is

$0.73,

and the weighted-average remaining contractual life as of

March 31, 2021

2.8

years.

During the

nine

months ended

March 31, 2021,

the Company entered into subscription agreements, under

three

different offerings, 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

share of the Company's restricted common stock for

$0.75

per share with an expiry date of

December 31, 2021,

and pursuant thereto, the Company issued

3,700,000

units for total proceeds of

$1,850,000,

net proceeds of

$1,690,000

after commissions of

$160,000.

The Company allocated the proceeds from the

3,700,000

shares and the

3,700,000

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,

$113,239

was allocated to the warrants and

$1,736,761

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

During the

nine

months ended

March 31, 2021,

the Company issued

50,000

warrants to a consultant to purchase

50,000

shares of the Company's restricted common stock at an exercise price of

$0.90

per share and an expiration date of

December 31, 2021.

The warrants were in exchange for services expensed at

$2,500.

During the

nine

months ended

March 31, 2021,

Smith elected to convert deferred compensation and accounts payable of

$127,660

and

$40,491,

respectively, into an aggregate

336,305

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

share of the Company's restricted common stock for

$0.75

per share until

December 31, 2024.

During the

nine

months ended

March 31, 2021,

the Company agreed to extend the expiration dates of

4,497,924

warrants owned by certain individuals which were scheduled to expire at various dates from

December 31, 2020

through

December 31, 2021.

The Company recorded non-cash compensation of

$25,506

and interest expense of

$187,139

related to the modification of the warrants.

During the

nine

months ended

March 31, 2021,

warrants to purchase

164,251

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

$0.75

$2.00

expired.

During the

nine

months ended

March 31, 2021,

5,000

warrants were exercised to purchase

5,000

shares of the Company's common stock at

$0.75

per share for total proceeds of

$3,750.

During the

nine

months ended

March 31, 2021,

the Company issued warrants to brokers as commissions to purchase

322,000

shares of the Company's common stock at an exercise price of

$0.75

per share and an expiration of

December 31, 2022.

As the issuance was both a reduction and addition to additional paid in capital there was

impact to the financial statements.

During the

nine

months ended

March 31, 2021,

the Company issued

36,000

units to Smith for salary of

$18,000,

with each unit consisting of

one

share of the Company's restricted common stock and

one

warrant to purchase

one

share of the Company's restricted common stock for

$0.75

per share with an expiry date of

December 31, 2024.

Stock options:

The Company's

2006

Consolidated Incentive Plan, as amended during the

nine

months ended

March 31, 2021 (

the

“2006

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

36,000,000

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

option

may

be exercisable for more than

ten

years.

During the

nine

months ended

March 31, 2021,

the Company approved the modification of existing stock options held by

two

former consultants, which extended certain expiration dates. The modifications resulted in incremental non-cash compensation of

$8,775.

The Company recorded compensation expense related to employee stock options of

$1,017,700

and

nil

for the

three

months ended

March 31, 2021

and

2020,

respectively and

$1,017,700

and

$99,500

for the

nine

months ended

March 31, 2021

and

2020,

respectively. The Company granted

960,000

and

390,000

options during the

nine

months ended

March 31, 2021

and

2020,

respectively.

The fair value of the options granted during the

nine

months ended

March 31, 2021

and

2020

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

	Weighted Average, March 31, 2021			Range, March 31, 2021			Weighted Average, March 31, 2020			Range, March 31, 2020
Volatility		65	%	58%	-	65%		68	%	68%	-	70%
Dividend yield		-			—			—			—
Risk-free interest rate		0.79	%	0.47%	-	0.82%		1.75%		1.74%	-	1.75%
Expected term (years)		5.8		5.0	to	5.9		5.0		5.0	to	5.2

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

nine

months ended

March 31, 2021

is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2020		9,511,600	$	0.74		4.5	$	-
Granted		960,000		1.10
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at March 31, 2021		10,471,600	$	0.77		3.9	$	10,252,975
Exercisable at March 31, 2021		10,471,600	$	0.77		3.9	$	10,252,975

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

March 31, 2021:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2020		-		$	-
Granted		960,000			1.06
Vested		(960,000	)		(1.06	)
Nonvested at March 31, 2021		—		$	—

The total fair value of stock options that vested during the

nine

months ended

March 31, 2021

and

2020

was

$1,017,700

and

$99,500,

respectively. As of

March 31, 2021,

the Company had

unrecognized compensation cost related to stock options.

Stock-based employee compensation charges in operating expenses in the Company's financial statements for the

three

and

nine

months ended

March 31, 2021

and

2020

are as follows:

	Three months ended March 31, 2021		Three months ended March 31, 2020		Nine months ended March 31, 2021		Nine months ended March 31, 2020
General and administrative:
Change in fair value from modification of option terms	$	-	$	-	$	8,775	$	-
Change in fair value from modification of warrant terms		-		-		25,506		-
Fair value of stock options expensed		816,050		-		816,050		92,000
Total	$	816,050	$	-	$	850,331	$	92,000

Research and development:
Fair value of stock options expensed	$	201,650	$	-	$	201,650	$	7,500
Total	$	201,650	$	-	$	201,650	$	7,500