Note 9 – Stockholders’ Equity



Preferred Stock



The Company has 5,000,000 shares designated as Class A Preferred Stock with a par value of $0.01 per share. There are 1,040,000 shares of Class A Preferred Stock – Series 1 authorized; 1,500,000 shares of Class A Preferred Stock – Series 2 authorized; 700,000 shares of Class A Preferred Stock – Series 3 authorized; and 548,000 shares of Class A Preferred Stock – Series 4 (the “Series 4 Preferred Stock”) authorized. There were no shares of Class A Preferred Stock of any series issued and outstanding at June 30, 2020 and September 30, 2019. The Company has 15,000 shares designated as Class B Preferred Stock with a par value of $0.50 per share. There were no shares of Class B Preferred Stock issued and outstanding at June 30, 2020 and September 30, 2019.



Common Stock Offering



On October 1, 2018, we completed an underwritten public offering of 7,142,857 shares of our common stock, at a public offering price of $1.40 per share. Net proceeds to the Company from this offering were $9.1 million after deducting underwriting discounts and commissions and costs paid by the Company. All of the shares sold in the offering were by the Company. The offering was made pursuant to the Company’s 2017 shelf registration statement on Form S-3 (File No. 333-221120).



Common Stock Purchase Warrants



In connection with the closing of the APP Acquisition, the Company issued warrants to purchase up to 2,585,379 shares of the Company's common stock to Torreya Capital, the Company's financial advisor (the “Financial Advisor Warrants”). The Financial Advisor Warrants have a five-year term expiring October 31, 2021, a cashless exercise feature and a strike price equal to $1.93 per share. The Financial Advisor Warrants vested upon issuance. During the three months ended June 30, 2020, one of the Financial Advisor Warrants to purchase 258,538 shares of the Company’s common stock was exercised using the cashless exercise feature, resulting in the issuance of 109,143 shares of common stock. As of June 30, 2020, an aggregate of 2,326,841 shares of common stock remain available for purchase under the Financial Advisor Warrants.



Aspire Capital Purchase Agreements    



On June 26, 2020, the Company entered into a common stock purchase agreement (the “2020 Purchase Agreement”) with Aspire Capital Fund, LLC (Aspire Capital) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right, from time to time in its sole discretion during the 36-month term of the 2020 Purchase Agreement, to direct Aspire Capital to purchase up to $23.9 million of the Company’s common stock in the aggregate. Concurrently with entering into the 2020 Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the “Registration Rights Agreement”), in which the Company agreed to prepare and file under the Securities Act of 1933 one or more prospectus supplement for the sale or potential sale of the shares of the Company’s common stock that have been and may be issued to Aspire Capital under the 2020 Purchase Agreement.



Under the 2020 Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 200,000 shares of the Company’s common stock per business day at a per share price (the “Purchase Price”) equal to the lesser of the lowest sale price of the Company’s common stock on the purchase date or the average of the three lowest closing sale prices for the Company’s common stock during the ten consecutive trading days ending on the trading day immediately preceding the purchase date.



In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount equal to 200,000 shares and the closing sale price of our common stock is equal to or greater than $0.50 per share, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of common stock equal to up to 30% of the aggregate shares of the common stock traded on its principal market on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of shares the Company may determine. The purchase price per share pursuant to such VWAP Purchase Notice is generally 97% of the volume-weighted average price for the Company’s common stock traded on its principal market on the VWAP Purchase Date.



In consideration for entering into the 2020 Purchase Agreement, concurrently with the execution of the 2020 Purchase Agreement, the Company issued to Aspire Capital 212,130 shares of the Company’s common stock. The shares of common stock issued as consideration were valued at $681,000, based on the closing price per share of the Company’s common stock on the date the shares were issued. This amount and related expenses of $50,000, which total approximately $731,000, were recorded as deferred costs.



Upon execution of the 2020 Purchase Agreement, the Company issued and sold 1,644,737 shares of common stock to Aspire Capital under the 2020 Purchase Agreement, resulting in proceeds to the Company of $5 million. As a result of this sale, we recorded approximately $153,000 of deferred costs to additional paid-in capital. The unamortized amount of deferred costs related to the 2020 Purchase Agreement of $578,000 at June 30, 2020 is included in other assets on the accompanying unaudited condensed consolidated balance sheet.



Effective June 26, 2020, upon the execution of the 2020 Purchase Agreement, the Company’s prior purchase agreement with Aspire Capital dated December 29, 2017 (the “2017 Purchase Agreement”) was terminated. Under the 2017 Purchase Agreement, the Company had the right, upon the terms and subject to the conditions and limitations set forth therein, from time to time in its sole discretion during the 36-month term of the 2017 Purchase Agreement, to direct Aspire Capital to purchase up to $15.0 million of the Company’s common stock in the aggregate. As of the date of termination of the 2017 Purchase Agreement, the Company had sold an aggregate of 6,214,343 shares of common stock to Aspire Capital resulting in proceeds to the Company of $15.0 million.



During the nine months ended June 30, 2020, we sold 2,497,333 shares of common stock to Aspire Capital under the 2017 Purchase Agreement resulting in proceeds to the Company of $8.4 million. As a result of these sales, we recorded approximately $238,000 of deferred costs to additional paid-in capital.



In consideration for entering into the 2017 Purchase Agreement, concurrently with the execution of the 2017 Purchase Agreement, the Company issued to Aspire Capital 304,457 shares of the Company’s common stock. The shares of common stock issued as consideration were valued at approximately $347,000, based on the closing price per share of the Company's common stock on the date the shares were issued. This amount and related expenses of approximately $78,000, which total approximately $425,000, were recorded as deferred costs. All deferred costs related to the 2017 Purchase Agreement have been amortized to additional paid-in capital as of June 30, 2020. The unamortized amount of deferred costs related to the 2017 Purchase Agreement of $238,000 at September 30, 2019 is included in other assets on the accompanying unaudited condensed consolidated balance sheet.