Quarterly report pursuant to Section 13 or 15(d)

COMMON STOCK/PAID IN CAPITAL

v3.19.2
COMMON STOCK/PAID IN CAPITAL
9 Months Ended
Jun. 30, 2019
Stockholders' Equity Note [Abstract]  
COMMON STOCK/PAID IN CAPITAL

NOTE 7 – COMMON STOCK/PAID IN CAPITAL

 

As discussed in Note 5, between June and November 2016, the Company issued 27.9 million warrants in conjunction with the Bridge Financing Notes. The warrants have an exercise price of $0.03 and a term of the earlier of three years or upon a change of control. Based upon the allocation of proceeds between the convertible notes payable and the warrants, approximately $452,422 was allocated to the warrants. During June through August 2017, the maturity date of all of the Bridge Financing Notes was extended to January 15, 2018, in exchange for the issuance of 25% additional warrants. The warrants have an exercise price of $0.03 and the same expiration date (three years from original transaction) as the original warrants. On January 15, 2018, the maturity date of the Bridge Financing Notes was extended to April 16, 2018, in exchange for the issuance of 10% additional warrants (see Note 5 for status of notes). The warrants have an exercise price of $0.10 per share and the same expiration date (three years from original transaction) as the original warrants. Through June 30, 2019, approximately 3.3 million warrants have been exercised, approximately 4.0 million have expired and approximately 30.5 million remain outstanding.

 

The fair value of the warrants was determined using the Black Scholes valuation model with the following key assumptions:

 

Warrants Issue Date   June 2016     July 2016     August 2016     November 2016     June 2017     July 2017     August 2017     January 2018  
Warrants Outstanding   7.6
million
    10.0
million
    3.3
million
    1.7
million
    1.9
million
    2.5
million
    1.25
million
    2.3
million
 
Stock Price (1)   $ 0.054     $ 0.040     $ 0.032     $ 0.029     $ 0.025     $ 0.019     $ 0.016     $ 0.11  
Exercise Price   $ 0.03     $ 0.03     $ 0.03     $ 0.03     $ 0.03     $ 0.03     $ 0.03     $ 0.10  
Term (2)     3 years       3 years       3 years       3 years       2 years       2 years       2 years       1.5 years  
Risk Free Rate     .87 %     .80 %     .88 %     1.28 %     1.35 %     1.35 %     1.33 %     1.89 %
Volatility     135 %     138 %     137 %     131 %     135 %     136 %     135 %     163 %

 

(1) Fair market value on the date of agreement.

(2) Average term.

 

Below is a summary of warrants issued in conjunction with convertible notes which were paid in full as of September 30, 2018. The warrants are outstanding at June 30, 2019.

 

          Warrants Outstanding       Warrants Exercisable  
  Exercise Price       Number Outstanding      

Remaining Contractual

Life (Yrs)

     

Weighted Average

Exercise Price

     

Number

Exercisable

     

Weighted Average

Exercise Price

 
$ 0.10       550,000       2.50     $ 0.10       550,000     $ 0.10  
$ 0.10       1,100,000       2.71     $ 0.10       1,100,000     $ 0.10  
$ 0.10       1,100,000       3.30     $ 0.10       1,100,000     $ 0.10  
$ 0.10       1,100,000       3.46     $ 0.10       1,100,000     $ 0.10  

 

During the nine months ended June 30, 2019, the Company issued approximately 19.3 million shares of common stock and approximately 9.7 million warrants to accredited investors in a private placement. The funds were received in the prior fiscal year and included as a liability because the transaction did not close until the current fiscal year and it was moved to equity during  the quarter ended December 31, 2018. Based upon the allocation of proceeds between the common stock and the warrants, approximately $259,000 was allocated to the warrants.

 

The fair value of the warrants was determined using the Black Scholes valuation model with the following key assumptions:

    December 2018  
Number of Warrants Issued     9,662,500  
Stock Price   $ 0.044  
Exercise Price   $ 0.09  
Term     3 years  
Risk Free Rate     2.46 %
Volatility     149 %

 

As discussed in Note 5, as of March 6, 2019, the Company had borrowed a total of $10.0 million under the Term Loan Facility and issued to Delek GOM warrants to purchase approximately 238 million shares of common Stock and Delek GOM fully exercised the warrants through a Loan Reduction Exercise and was issued approximately 238 million shares of common stock. Upon receiving the proceeds, the Company allocated the proceeds between debt and warrants on a relative fair value basis, recording a debt discount of approximately $5.1 million. The exercise of the warrants through the extinguishment of the loan was accounted for as a standard warrant exercise and an extinguishment of debt including a recognition of a loss in the amount of the debt discount of approximately $5.1 million. On April 19, 2019, the Company borrowed $1.0 million under the Term Loan Facility and issued to Delek warrants to purchase 23,809,524 shares of stock. the Company allocated the proceeds between debt and warrants on a relative fair value basis, recording a debt discount of approximately $0.5 million. As of June 30, 2019, the warrants have not been exercised and the term loan is still outstanding.

 

As disclosed in Note 5, the Company issued warrants to purchase an aggregate of 50 million shares of common stock at an exercise price of $0.04 per share in conjunction with the issuance of the Convertible Debentures. Such warrants expire on the fifth anniversary of issuance. The fair value of the warrants was determined utilizing a Geometric Brownian Motion Stock Path Based Monte Carlo Simulation.