NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2021
|
1.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The
accompanying unaudited interim consolidated financial statements of NuZee, Inc. (together with its subsidiaries, referred to herein
as the “Company”, “we” or “NuZee”) have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”), and rules of the Securities and Exchange Commission (the
“SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained
in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020 as filed with the SEC on December 28,
2020. In the opinion of management, all adjustments, consisting of recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial
statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the
annual report on Form 10-K have been omitted.
Principles
of Consolidation
The
Company prepares its financial statements on the accrual basis of accounting. The accompanying consolidated financial statements
include the accounts of the Company, its wholly owned subsidiaries and its former majority owned subsidiary (which was sold as
of September 28, 2020, as described below), which has a fiscal year end of September 30. All significant intercompany accounts,
balances and transactions have been eliminated upon consolidation.
On
September 28, 2020, the Company entered into a Stock Transfer Agreement with Eguchi Holdings Co., Ltd. (“EHCL”), pursuant
to which the Company sold to EHCL for an aggregate sale price of approximately $34,000 all of its equity interests in its former
majority-owned subsidiary, NuZee JAPAN Co., Ltd. (“NuZee JP”), representing 70% of the outstanding equity interests
of NuZee JP.
The
Company has two wholly owned international subsidiaries in NuZee KOREA Ltd. (“NuZee KR”) and NuZee Investment Co.,
Ltd. (“NuZee INV”).
Stock
Split
On
October 28, 2019, we completed a l-for-3 reverse stock split, which became effective on November 12, 2019. All share and per share
information included in these financial statements and notes thereto give effect to the reverse stock split.
Earnings
per Share
Basic
earnings per common share is equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting
period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants and other commitments
to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings
of the Company. As of March 31, 2021 and March 31, 2020, the total number of common stock equivalents was 7,435,702 and 1,705,000,
respectively, comprised of stock options and warrants as of March 31, 2021 and entirely of stock options as of March 31, 2020.
The Company incurred a net loss for the three and six months ended March 31, 2021 and 2020, respectively, and therefore basic
and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive.
Capital
Resources
Since
its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting
management and technical staff, acquiring operating assets and raising capital. The Company has generated limited revenues from
its principal operations, and there is no assurance of future revenues.
As
of March 31, 2021, the Company had cash of $15,035,026. However, the Company has not attained profitable operations since inception.
Major
Customers
In
the six months ended March 31, 2021 and 2020, revenue was primarily derived from major customers disclosed below.
Six
months ended March 31, 2021:
C ustomer Name
|
|
Sales Amount
|
|
|
% of Total Revenue Accounts
|
|
|
Receivable Amount
|
|
|
% of Total Accounts Receivable
|
|
Customer WP
|
|
$
|
261,799
|
|
|
|
28
|
%
|
|
$
|
111,975
|
|
|
|
43
|
%
|
Six
months ended March 31, 2020:
C ustomer Name
|
|
Sales Amount
|
|
|
% of Total Revenue Accounts
|
|
|
Receivable Amount
|
|
|
% of Total Accounts Receivable
|
|
Customer K
|
|
$
|
284,099
|
|
|
|
30
|
%
|
|
$
|
206,905
|
|
|
|
63
|
%
|
Customer WP
|
|
$
|
247,520
|
|
|
|
26
|
%
|
|
$
|
115,471
|
|
|
|
35
|
%
|
Customer J
|
|
$
|
151,925
|
|
|
|
16
|
%
|
|
$
|
21,302
|
|
|
|
6
|
%
|
Lease
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease
liabilities on the consolidated balance sheet and disclosing key information about leasing arrangements, specifically differentiating
between different types of leases. The Company implemented ASU No. 2016-02 on October 1, 2019.
The
Company does a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC
842. The Company has one significant long-term operating lease for office and manufacturing space in Plano, Texas. The leased
property in Plano, Texas, has a remaining lease term through June of 2024. The lease has an option to extend beyond the stated
termination date, but exercise of this option is not probable. The Company did not apply the recognition requirements of ASC 842
to operating leases with a remaining lease term of 12 months or less.
The
impact of ASU No. 2016-02 (“Leases (Topic 842)” on our consolidated balance sheet beginning October 1, 2020, through
the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases are as follows:
|
|
October 1, 2020
|
|
ROU Asset
|
|
$
|
652,197
|
|
Lease Liability
|
|
$
|
659,391
|
|
During
the prior year analysis of leases, we determined to renew the office and manufacturing space in Vista, CA through January 31,
2022, which was previously scheduled to be vacated at June 30, 2020. Additionally, the Korean office and manufacturing space lease
was extended through June 2022 and an apartment lease was signed through June 2022. Accordingly, we have added ROU assets and
lease liabilities related to those leases at June 30, 2020.
The
direct-leased property in Vista, California has a remaining lease term through January of 2022. The leased properties in both
Korea and Vista, California have options to extend beyond the stated termination date, but exercise of these options are not probable.
The sub-leased property in Vista, California, is leased month-to-month and has been calculated as a ROU Asset co-terminus with
the direct-leased property.
In
September 2020, we entered into an 18-month sublease effective October 1, 2020 reducing our space and term in Plano, Texas. Accordingly,
this lease has been added to our right-of-use asset balance at September 30, 2020. This lease is for the Company’s principal
executive office located at 1401 Capital Avenue, Suite B, Plano, Texas 75074.
Effective
September 1, 2020, we converted our month-to-month sublease in Vista, California to a 17-month sublease ending January 31, 2022
which is co-terminus with our direct lease in Vista. The month-to-month sublease was recognized as a right-of-use asset in our
June 30, 2020 analysis. The terms of the 17-month lease are similar to the terms used to value the right-of-use asset at June
30, 2020.
As
of March 31, 2021, our operating leases had a weighted average remaining lease term of 2.1 years and a weighted-average discount
rate of 5%. Other information related to our operating leases is as follows:
ROU Asset – October 1, 2020
|
|
$
|
652,197
|
|
Amortization during the period
|
|
|
(130,214
|
)
|
ROU Asset –March 31, 2021
|
|
$
|
521,983
|
|
|
|
|
|
|
Lease Liability – October 1, 2020
|
|
$
|
659,391
|
|
Amortization during the period
|
|
|
(127,811
|
)
|
Lease Liability – March 31, 2021
|
|
$
|
531,580
|
|
Lease Liability – Short-Term
|
|
$
|
227,979
|
|
Lease Liability – Long-Term
|
|
|
303,601
|
|
Lease Liability – Total
|
|
$
|
531,580
|
|
The
table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining
years to the lease liabilities recorded on the Consolidated Balance Sheet as of March 31, 2021:
Amounts
due within 12 months of March 31,
2022
|
|
$
|
255,678
|
|
2023
|
|
|
151,812
|
|
2024
|
|
|
128,928
|
|
2025
|
|
|
32,468
|
|
2026
|
|
|
-
|
|
Total Minimum Lease Payments
|
|
|
568,886
|
|
Less Effect of Discounting
|
|
|
(37,306
|
)
|
Present Value of Future Minimum Lease Payments
|
|
|
531,580
|
|
Less Current Portion of Operating Lease Obligations
|
|
|
(227,979
|
)
|
Long-Term Operating Lease Obligations
|
|
$
|
303,601
|
|
On
October 9, 2019, the Company entered into a lease agreement with Alliance Funding Group which provided for a sale lease back on
certain packing equipment. The terms of this agreement require us to pay $2,987 per month for the next 60 months. As part of this
agreement, Alliance Funding Group provided our equipment supplier with $124,540 for the purchase of this equipment. This transaction
was accounted for as a financing lease. As of March 31, 2021, our financing lease had a remaining lease term of 3.25 years and
a discount rate of 12.75%. The interest expense on finance lease liabilities for the six months ended March 31, 2021 was $6,100.
The
following summarizes ROU assets under finance leases at March 31, 2021:
ROU asset-finance lease at September 30, 2020
|
|
$
|
105,825
|
|
Impairment
|
|
|
(105,825
|
)
|
ROU asset-finance lease at March 31, 2021
|
|
$
|
-
|
|
The
table below summarizes future minimum finance lease payments at March 31, 2021 for the 12 months ended March 31:
2022
|
|
$
|
33,113
|
|
2023
|
|
|
33,113
|
|
2024
|
|
|
33,113
|
|
2025
|
|
|
11,038
|
|
2026
|
|
|
-
|
|
Total Minimum Lease Payments
|
|
|
110,377
|
|
Amount representing interest
|
|
|
(20,836
|
)
|
Present Value of Minimum Lease Payments
|
|
|
89,541
|
|
Current Portion of Finance Lease Obligations
|
|
|
(26,123
|
)
|
Finance Lease Obligations, Less Current Portion
|
|
$
|
63,418
|
|
The
Company leases office space with terms ranging from month to month to 61 months. Rent expense included in general and administrative
expense for the six months ended March 31, 2021 and 2020 was $168,050 and $168,620, respectively.
Cash
and non cash activities associated with the leases for the six months ended March 31, 2021 are as follows:
Operating cash outflows from operating leases:
|
|
$
|
143,234
|
|
Operating cash outflows from finance lease:
|
|
$
|
6,100
|
|
Financing cash outflows from finance lease:
|
|
$
|
10,457
|
|
In
September 2020, we subleased the space at 1700 Capital Avenue in Plano, Texas, effective October 1, 2020 under favorable terms
that are co-terminus with the original lease ending June 30, 2024. In the six months ended March 31, 2021, we received revenue
of $53,647 pursuant to the sublease, which is included in Other income on our consolidated statement of operations. Future minimum
lease payments to be received under that sublease as of March 31, 2021, for the 12 months ended March 31:
2022
|
|
$
|
121,492
|
|
2023
|
|
|
125,104
|
|
2024
|
|
|
128,881
|
|
2025
|
|
|
32,459
|
|
2026
|
|
|
—
|
|
Total
|
|
|
407,936
|
|
Loans
On
April 1, 2019, NuZee purchased a delivery van from Ford Motor Credit for $41,627. The Company paid $3,500 as a down payment and
financed $38,127 for 60 months at a rate of 2.9%. The loan is secured by the van. The outstanding balance on the loan at March
31, 2021 and September 30, 2020, amounted to $24,192 and $27,916, respectively.
On
February 15, 2019 NuZee KR entered into equipment financing for production equipment with ShinHan Bank for $60,563. On June 28,
2019 NuZee KR purchased additional equipment and increased the loan with ShinHan Bank by $86,518. The loan is secured by our production
equipment at NuZee KR. The financing bears a term of 36 months at a rate of 4.33% per annum. Principal payments began in July
of 2019. The outstanding balance on this loan at March 31, 2021 and September 30, 2020, amounted to $62,754 and $85,001, respectively.
The
loan payments required for the next five remaining fiscal years are as follows:
|
|
Ford Motor Credit
|
|
|
ShinHan Bank
|
|
|
Total
|
|
2021 (April – September 2021)
|
|
$
|
3,777
|
|
|
$
|
39,746
|
|
|
|
|
|
2022 (October 2021 – March 2022)
|
|
|
3,832
|
|
|
|
10,460
|
|
|
|
|
|
Total Current Portion
|
|
$
|
7,609
|
|
|
$
|
50,206
|
|
|
$
|
57,815
|
|
2022 (April – September 2022)
|
|
$
|
3,888
|
|
|
$
|
12,548
|
|
|
|
|
|
2023
|
|
|
7,947
|
|
|
|
-
|
|
|
|
|
|
2024
|
|
|
4,748
|
|
|
|
-
|
|
|
|
|
|
2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Total LT Portion
|
|
$
|
16,583
|
|
|
$
|
12,548
|
|
|
$
|
29,131
|
|
Grand Total
|
|
$
|
24,192
|
|
|
$
|
62,754
|
|
|
$
|
86,946
|
|
Revenue
Recognition
We
determine revenue recognition through the following steps in accordance with FASB Accounting Standards Update No. 2014-09 (Topic
606) “Revenue from Contracts with Customers”, which we adopted as of October 1, 2018 on a modified retrospective basis:
|
●
|
identification
of the contract, or contracts, with a customer;
|
|
●
|
identification
of the performance obligations in the contract;
|
|
●
|
determination
of the transaction price;
|
|
●
|
allocation
of the transaction price to the performance obligations in the contract; and
|
|
●
|
recognition
of revenue when, or as, we satisfy a performance obligation.
|
Revenue
is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for those goods or services. The adoption of Topic 606 did not have a material
impact on our consolidated financial statements.
Foreign
Currency Translation
The
financial position and results of operations of each of the Company’s foreign subsidiaries are measured using the foreign
subsidiary’s local currency as the functional currency. Revenues and expenses of each such subsidiary have been translated
into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates
of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate
component of stockholders’ equity unless there is a sale or complete liquidation of the underlying foreign investment. Foreign
currency translation adjustments comprising accumulated other comprehensive income (loss) amounted to $5,480 and $(69,719) for
the six months ended March 31, 2021 and 2020, respectively.
Transaction
gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations as incurred.
Inventories
Inventory,
consisting principally of raw materials, work in process and finished goods held for production and sale, is stated at the lower
of cost or net realizable value, cost being determined using the weighted average cost method. The Company reviews inventory levels
at least quarterly and records a valuation allowance when appropriate. At March 31, 2021 and September 30, 2020, the carrying
value of inventory of $241,291 and $245,370 respectively, reflected on the consolidated balance sheets is net of this adjustment.
|
|
March 31, 2021
|
|
|
September 30, 2020
|
|
Raw materials
|
|
$
|
189,514
|
|
|
$
|
176,231
|
|
Finished goods
|
|
|
51,777
|
|
|
|
69,139
|
|
Less – Inventory reserve
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
241,291
|
|
|
$
|
245,370
|
|
Joint
Venture
On
January 9, 2020, a joint venture agreement was signed between Industrial Marino, S.A. de C.V. (50%) and NuZee, Inc. (50%) forming
NuZee LATIN AMERICA (NLA), S.A. de C.V. NLA was formed pursuant to the laws of Mexico, with corporate domicile in Mazatlan, Mexico.
As part of the capitalization of NLA, NuZee contributed two co-packing machines to the joint venture. These machines had an aggregate
carrying cost of $313,012. NuZee received $110,000 in cash for this contribution and recorded an investment in NLA of $160,000
and a loss of $43,012 on the contribution of the machines to NLA.
The
Company accounts for NLA using the equity method of accounting since the management of day to day operations at NLA ultimately
lies with the Company’s joint venture partner as the operations of NLA are based in its partners facilities and our partner
appoints the Chairman of the joint Board. As of March 31, 2021, the only activity in NLA was the contribution of two machines
as described above and other start up related activities. $3,975 of a loss was recognized under the equity method of accounting
during the six months ended March 31, 2021.
|
2.
|
GEOGRAPHIC
CONCENTRATION
|
The
Company is organized in three geographical segments. The Company co-packs product for customers and produces and sells its products
directly in North America and Korea. The Company has investor relations operations in Japan as a majority of our shareholders
are based in Japan. In March of 2021, the Company wrote off $840,391 of assets in North America as these assets were deemed to
be no longer useful for the current business operations. $105,825 of the impairment was related to the ROU asset and $734,566
was to property and equipment. This write off is included in operating expenses on our consolidated statement of operations
for the three months and six months ended March 31, 2021. These assets are co-packing equipment that have limited capabilities
compared with other equipment the Company is currently utilizing. Since we have yet to utilize this equipment since it was delivered,
we have determined their usefulness to our future operations is limited. Information about the Company’s geographic operations
are as follows:
Geographic Concentrations
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Net Revenue:
|
|
|
|
|
|
|
North America
|
|
$
|
658,338
|
|
|
$
|
636,687
|
|
Japan
|
|
|
-
|
|
|
|
234,014
|
|
South Korea
|
|
|
273,713
|
|
|
|
68,899
|
|
|
|
$
|
932,051
|
|
|
$
|
939,600
|
|
Property and equipment, net:
|
|
As of
March 31, 2021
|
|
|
As of
September 30, 2020
|
|
North America
|
|
$
|
616,868
|
|
|
$
|
1,422,575
|
|
Japan
|
|
|
2,577
|
|
|
|
2,813
|
|
South Korea
|
|
|
262,530
|
|
|
|
242,960
|
|
|
|
$
|
881,975
|
|
|
$
|
1,668,348
|
|
3.
RELATED PARTY TRANSACTIONS
For
the six months ended March 31, 2021, we sold $15,998 of materials to NLA.
4.
ISSUANCE OF EQUITY SECURITIES
During
the six months ended March 31, 2021, the Company sold (i) 72,955 shares of common stock to Triton Funds LP in a registered public
offering for aggregate net proceeds of $534,494 pursuant to a Common Stock Purchase Agreement dated as of October 26, 2020 and
a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-248531),
and (ii) 256,338 shares of common stock at $9.14 per share for aggregate net proceeds of $2,149,486 pursuant to Securities Act
registration exemptions under Regulation S and/or Section 4(a)(2) of the Securities Act. In addition, as further described below,
during the six months ended March 31, 2021, the Company sold pursuant to an Underwriting Agreement dated as of March 19, 2021
and a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-248531)
(i) 2,777,777 units (“Units”) in an underwritten registered public offering for aggregate net proceeds of $11,017,304
which includes the proceeds from the underwriter’s full exercise of their overallotment option with respect to the warrant
component of the Units, as further described below, with each Unit consisting of (a) one share of our common stock, (b) one Series
A warrant (each, a “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share
of our common stock with an initial exercise price of $4.50 per whole share, and (c) one Series B warrant (each, a “Series
B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”)
to purchase one-half share of our common stock with an initial exercise price of $5.85 per whole share, and (ii) 416,666 Series
A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option
with respect to such warrants. During the six months ended March 31, 2021, 6,000 shares were issued upon the exercise of stock
options. As part of this exercise, the Company received $9,180 in proceeds.
On
January 11, 2021, the Compensation Committee (the “Committee”) of the Company’s Board of Directors granted to
Shanoop Kothari, the Company’s Chief Financial Officer, in connection with the Committee’s determination of Mr. Kothari’s
annual compensation, an award of 152,215 restricted shares (the “Restricted Shares”) of the Company’s common
stock under the NuZee, Inc. 2019 Stock Incentive Plan. The Restricted Shares vest as follows: (i) 50,739 Restricted Shares vested
immediately (35,739 net shares were issued to Mr. Kothari following the forfeiture of 15,000 vested shares to cover taxes); (ii)
50,739 Restricted Shares will vest on March 31, 2021; and (iii) 50,737 Restricted Shares vest on March 31, 2022.
On
March 11, 2021, we terminated our At Market Issuance Sales Agreement, dated September 1, 2020 (the “ATM Agreement”),
with B. Riley Securities, Inc. (f/k/a/ B. Riley FBR, Inc.) and The Benchmark Company, LLC (collectively, the “Agents”),
pursuant to which we could from time to time offer and sell up to an aggregate of $50.0 million of shares of our common stock
through the Agents in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act of 1933, as amended
(the “Securities Act”). We did not sell any shares of common stock under the ATM Agreement. The Company’s consolidated
statement of cash flows for the six months ended March 31, 2021 includes stock issuance expenses of $477,605 in connection with
the terminated ATM Agreement.
5.
STOCK OPTIONS AND WARRANTS
Options
During
the six months ended March 31, 2021, the Company issued 15,000 options to independent contractors and 1,141,615 options to independent
Board members. The right to exercise these options shall vest and become exercisable over a period of 3 years for independent contractors
and for independent board members, 1/3 of options vested immediately with the balance over a period of 2 years. The exercise price ranged
from $5.10 - $16.79 per share. The options will expire ten years from the grant date, unless terminated earlier as provided by the option
agreements.
The
fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model using the assumptions
noted as follows: expected volatility was based on the Company’s historical stock performance. The expected term of options granted
was determined using the contractual term. The risk-free rate is calculated using the U.S. Treasury yield curve and is based on the expected
term of the option.
The
Black-Scholes option pricing model was used with the following weighted average assumptions for options granted during the six months
ended March 31, 2021:
For
non-employees and independent Board members
|
|
March
31, 2021
|
|
Risk-free
interest rate
|
|
|
0.81
– 1.56
|
%
|
Expected
option life
|
|
|
10
years
|
|
Expected
volatility
|
|
|
303
- 311
|
%
|
Expected
dividend yield
|
|
|
0.00
|
%
|
Exercise
price
|
|
$
|
5.10
- $16.79
|
|
For
the six months ended March 31, 2021, 167,495 options were forfeited because of the termination of employment and conclusion of Board
appointment. For the six months ended March 31, 2021, 6,000 shares were issued upon the exercise of stock options.
The
following table summarizes stock option activity for six months ended March 31, 2021:
|
|
Number
of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life (years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at September 30, 2020
|
|
|
1,620,667
|
|
|
$
|
5.74
|
|
|
|
7.3
|
|
|
$
|
19,112,118
|
|
Granted
|
|
|
1,156,615
|
|
|
|
8.24
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(6,000
|
)
|
|
|
1.53
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(167,495
|
)
|
|
|
13.49
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2021
|
|
|
2,603,787
|
|
|
$
|
6.06
|
|
|
|
8.0
|
|
|
$
|
1,606,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at March 31, 2021
|
|
|
1,386,726
|
|
|
$
|
6.50
|
|
|
|
8.0
|
|
|
$
|
953,361
|
|
The
Company is expensing these stock option awards on a straight-line basis over the requisite service period. The Company recognized stock
option expenses of $6,496,304 for the six months ended March 31, 2021. Unamortized option expense as of March 31, 2021, for all options
outstanding amounted to $5,257,928. These costs are expected to be recognized over a weighted- average period of 1.4 years. The Company
recognized stock option expenses of $3,183,351 for the six months ended March 31, 2020.
A
summary of the status of the Company’s nonvested options as of March 31, 2021, is presented below:
Nonvested
options
|
|
Number
of nonvested shares
|
|
|
Weighted
average grant date fair value
|
|
Nonvested
shares at September 30, 2020
|
|
|
762,917
|
|
|
$
|
10.60
|
|
Granted
|
|
|
1,156,615
|
|
|
|
8.24
|
|
Forfeited
|
|
|
(131,662
|
)
|
|
|
11.85
|
|
Vested
|
|
|
(570,809
|
)
|
|
|
8.13
|
|
Nonvested
shares at March 31, 2021
|
|
|
1,217,061
|
|
|
|
9.38
|
|
Warrants
On
June 23, 2020, as part of our agreement with Benchmark Company, LLC the underwriter of the Company’s June 2020 registered public
offering of common stock, we issued 40,250 warrants to purchase our common stock at an exercise price of $9.00 a share. These warrants
are exercisable on December 23, 2020 and expire on June 18, 2025.
On
March 19, 2021, we entered into an underwriting agreement in connection with our registered public offering (the “Offering”)
of (i) 2,777,777 units (the “Units”), at a price to the public of $4.50 per Unit, with each Unit consisting of (a) one share
of our common stock, (b) one Series A Warrant, and (c) one Series B Warrant, and (ii) 416,666 Series A Warrants and 416,666 Series B
Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants.
Each
Series A Warrant entitles the registered holder to purchase one share of our common stock at an exercise price of $4.50 per share. Each
Series B Warrant entitles the registered holder thereof to purchase one-half of a share of our common stock at an exercise price of $5.85
per whole share. These warrants have a term of 5 years.
The
following table summarizes warrant activity for the six months ended March 31, 2021:
|
|
Number
of
Shares
Issuable
Upon
Exercise
of
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life (years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at September 30, 2020
|
|
|
40,250
|
|
|
$
|
9.00
|
|
|
|
4.7
|
|
|
$
|
321,598
|
|
Issued
|
|
|
4,791,665
|
|
|
|
4.95
|
|
|
|
5.0
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
March 31, 2021
|
|
|
4,831,915
|
|
|
$
|
4.98
|
|
|
|
5.0
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at March 31, 2021
|
|
|
4,831,915
|
|
|
$
|
4.98
|
|
|
|
5.0
|
|
|
$
|
-
|
|
6.
SUBSEQUENT EVENT
On
April 22, 2021, the Compensation Committee (the “Committee”) of the Company’s Board of Directors granted to Tracy Ging,
in connection with the appointment of Ms. Ging to the Board, an award of options to purchase 228,323 shares of our common stock at an
exercise price of $3.03. Fifty percent of the options (114,162) vested on April 22, 2021. The remainder of the options vest in installments
of 57,081 on April 22, 2022 and 57,080 on April 22, 2023.
On
May 3, 2021, the Committee granted to Tomoko Toyota, in connection with the appointment of Ms. Toyota as the Company’s new Chief
Marketing Officer, awards of (i) options to purchase 30,000 shares of our common stock at an exercise price of $3.13, which vest as to
one third on each anniversary of the grant date, and (ii) options to purchase 120,000 shares of our common stock at an exercise price
of $3.13, which vest over a three year period commencing October 1, 2021 based on the Company’s achievement of various performance
targets tied to adjusted gross sales in each of fiscal year 2022, fiscal year 2023 and fiscal year 2024.
On
May 10, 2021, the Committee granted to Jose Ramirez, in connection with the appointment of Mr. Ramirez as the Company’s new Chief
Sales Officer and Chief Supply Chain Officer, awards of (i) options to purchase 30,000 shares of our common stock at an exercise price
of $2.91, which vest as to one third on each anniversary of the grant date, and (ii) options to purchase 150,000 shares of our common
stock at an exercise price of $2.91, which vest over a three year period commencing on May 10, 2021 based on the Company’s achievement
of various performance targets tied to adjusted gross sales in the period from May 10, 2021 through September 30, 2021 and each of fiscal
year 2022, fiscal year 2023 and fiscal year 2024.