Quarterly report pursuant to Section 13 or 15(d)

Warrants

v3.23.1
Warrants
9 Months Ended
Mar. 31, 2023
Warrants [Abstract]  
Warrants

10. Warrants

 

The following is a summary of the Company’s outstanding common stock purchase warrants.

 

During the fiscal year ended June 30, 2022, holders of the Company’s B Preferred converted 1,740 shares of B Preferred into 8,700,000 shares of its common stock, along with 8,700,000 warrants issued to those holders with an adjusted exercise price of $0.14364 as of March 31, 2023 ($0.2919 per share – June 30, 2022).  Said warrants are subject to further exercise price adjustments resulting from certain financing activities and equity transactions which could increase or decrease the exercise price in in the future.

 

During the fiscal year ended June 30, 2022, 4,000,000 warrants were issued to the holder of outstanding convertible notes with an initial exercise price of $0.25 per share, and 878,260 warrants issued to the placement agent with an initial exercise price of $0.25 per share. The Company valued these warrants using the Black Scholes model utilizing a 143.39% volatility and a risk-free rate of 1.25%.

 

During the fiscal year ended June 30, 2022, the Company entered into a warrant agreement with one of the Company’s Directors issuing 100,000 warrants at a strike price of $0.2626 having a term of five years. The Company valued these warrants using the Black Scholes model utilizing a 151.07% volatility and a risk-free rate of 0.79%.

 

During the nine months ended March 31, 2023, the Company entered into an Agreement For Shareholder Lock-Up And Acquisition of Warrants (the “Lock-Up Agreement”), with Mr. Folkson, issuing warrants at a strike price of $0.30 having a term of one year. The Company valued these warrants using the Black Scholes model utilizing a 103.60% volatility and a risk-free rate of 4.30%.

 

During the nine months ended March 31, 2023, holders of the Company’s B Preferred converted 1,310 shares of B Preferred into 6,550,00 shares of its common stock, along with 6,550,000 warrants issued to those holders with an adjusted exercise price of $0.14364 as of March 31, 2023. Said warrants are subject to further exercise price adjustments resulting from certain financing activities and equity transactions which could increase or decrease the exercise price in in the future.

 

During the nine months ended March 31, 2023, 2,800,000 warrants were issued to the holder of an outstanding promissory note with an initial exercise price of $0.225 per share, 280,000 warrants were concurrently issued to the Placement Agent with an initial exercise price of $0.225, and a further 119,260 warrants were issued to the Placement Agent with initial exercise price of $0.27 per share. The Company valued these warrants using the Black Scholes model utilizing a 122.42% volatility and a risk-free rate of 3.91%. On October 4, 2022, the Company and the Placement Agent entered into an Addendum to amend their Letter of Engagement to cancel compensatory warrants to purchase 280,000 shares of common stock of the Company and to cancel returnable compensatory warrants to purchase 700,000 shares of Common Stock of the Company for a one time cash payment of $35,000 and the issuance of 500,000 shares of Common Stock in full satisfaction of compensation earned.

 

During the nine months ended March 31, 2023 the Company issued a cumulative 10,480,000 first warrants to the holder of outstanding promissory notes, 10,640,000 second warrants (which warrants are cancelable in full should the notes be repaid in full on or before maturity), 2,949,000 placement agent warrants, 182,000 placement agent warrants (which warrants are cancelable in full should the notes be repaid in full on or before maturity) and 333,230 warrants to JH Darbie. The warrants were issued at initial exercise prices between $0.08 and $0.12 per share and valued on issuance dates with the Black Scholes model utilizing a volatility from 111.36% and 112.33% and a risk-free rate from 3.41% and 4.18%.

  

During the nine months ended March 31, 2023, the Company issued an aggregate of 3,231,697 shares of its common stock for the cashless exercise of 4,050,000 stock purchase warrants.

 

During the nine months ended March 31, 2023, the Company entered into a warrant agreement with one of the Company’s Directors for the issuance of 100,000 warrants at a strike price of $0.125 having a term of five years. The Company valued these warrants using the Black Scholes model utilizing a 121.75% volatility and a risk-free rate of 4.06%.

 

During the nine months ended March 31, 2023 the Company issued 1,871,800 warrants to various subscribers under its Tier 2 offering pursuant to Regulation A (also known as “Regulation A+”) pursuant to which the Company is offering up to 5,000,000 units at a price of $0.50 per unit, each unit consisting of 4 shares of common stock and 4 common stock purchase warrants (“Unit”) for exercise at at a strike price per Share equal to 125% of the price per share of common stock, or $0.15625 per share with a term of 2 years. The Company valued these warrants using the Black Scholes model on each closing date utilizing a volatility between 106.15% and 111.39% and a risk-free rate ranging from 4.21% and 4.61%.

 

Certain warrants in the below table include dilution protection for the warrant holders, which could cause the exercise price to be adjusted either higher or lower as a result of various financing events and stock transactions.  The result of the warrant exercise price downward adjustment on modification date is treated as a deemed dividend and fully amortized on the transaction date. In addition to the reduction in exercise price, with certain wararnts there is a corresponding increase to the number of warrants to the holder on a prorated basis. Under certain conditions, such as the successful retirement of a convertible note through repayment, it is possible for the exercise price of these warrants to increase and for the number of warrants outstanding to decrease.

 

The aggregate intrinsic value of the warrants as of March 31, 2023 is $1,713,260. The aggregate intrinsic value of the warrants as of June 30, 2022 was $11,650.

 

Exercise Price     June 30,
2022
    Issued     Repricing     Exercised     Others     Cancelled     Expired     Redeemed     March 31,
2023
 
$ 0.03333               119,260       42,355,472                                                         42,474,732  
$ 0.0500               300,000                                      
 
              300,000  
$ 0.0800               379,000       (379,000 )                                             -  
$ 0.1000               12,868,000       (12,868,000 )                            
 
              -  
$ 0.1200               333,230       (333,230 )                                             -  
$ 0.1250               3,400,000                                      
 
              3,400,000  
$ 0.1333                       1,507,049                                               1,507,049  
$ 0.1436                       29,226,191                                               29,226,191  
$ 0.1500       500,000                                               (500,000 )             -  
$ 0.1563               1,871,800                                                       1,871,800  
$ 0.2000       2,250,000                                                               2,250,000  
$ 0.2250               2,800,000               (2,800,000 )                                     -  
$ 0.2500       4,878,260               (878,260 )     (1,250,000 )     (2,750,000 )                             -  
$ 0.2626       100,000                                                               100,000  
$ 0.2700                                                                       -  
$ 0.2919       10,950,000               (9,700,000 )     (1,250,000 )                    
 
              -  
$ 0.3000                                                                       -  
$ 0.3000       400,000       7,132,000       (6,732,000 )                             (400,000 )             400,000  
$ 0.5000       500,000                                                               500,000  
          19,578,260       29,203,290       42,198,222       (5,300,000 )     (2,750,000 )     -       (900,000 )     -       82,029,772  

 

Returnable Warrants

 

A cumulative total of 18,956,523 Returnable Warrants issued in conjunction with a financing agreement dated as of September 23, 2022, and a MFN agreement entered into concurrently on September 23, 2022 (ref: Note 8 above) may only be exercised in the event that the Company were to default on certain debt obligations. The Returnable Warrants have an initial exercise price of $0.30 per share, subject to customary adjustments (including price-based anti-dilution adjustments) and may be exercised at any time after an Event of Default until the five-year anniversary of such date. The Returnable Warrants include a cashless exercise provision as set forth therein. The exercise of the Returnable Warrants are subject to a beneficial ownership limitation of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. In the event of the Company’s failure to timely deliver shares of Common Stock upon exercise of the Returnable Warrants, the Company would be obligated to pay a “Buy-In” amount pursuant to the terms of the Returnable Warrants.

 

During the three months ended September 30, 2022, 7,000,000 returnable warrants issued to the holder of a certain Promissory Note dated September 23, 2022, were initially valued using the Black Scholes model with a volatility of 121.88% and a risk-free rate of 3.91% resulting in contingent expenses to be recorded as additional financing costs in the cumulative amount of $642,140, which amount will be recorded in a future reporting period, only in the event the Company defaults on certain debt obligations. 

 

On December 29, 2022, upon an event of default as defined under the MFN agreement, 5,434,785 returnable warrants issued to each of the Purchasers under the MFN Agreement, and 1,086,957 returnable warrants issued to the Placement Agent, were triggered and valued using the Black Scholes model with a volatility of 124.14% and a risk-free rate of 3.94% resulting in financing expenses recorded as additional financing costs in the cumulative amount of $1,085,780.  In February, the Company issued 3,800,000 shares of its common stock in exchange for the return of 10,869,566 returnable warrants. The warrants issued to the Placement Agent remained available for exercise.

 

During the three months ended March 31, 2023, the Company issued a cumulative 10,640,000 returnable warrants to the Purchasers of certain convertible notes and 182,000 returnable warrants to the Placement Agent. Any expense related to such warrants will be recorded in a future reporting period and only in the event the Company defaults on certain debt obligations. These returnable warrants initially valued using the Black Scholes model with a volatility of  between 111.36% and 112.33% and a risk-free rate of between 3.41% and 4.18% resulting in contingent expenses to be recorded as additional financing costs in the cumulative amount of $703,440, which amount will be recorded in a future reporting period, only in the event the Company defaults on certain debt obligations.