NOTE 10 — RELATED PARTY TRANSACTIONS

On February 26, 2018, the Company issued a secured convertible promissory note and warrants for $0.5 million that was payable to a member of the Board of Directors. On April 3, 2018, the Company issued a second convertible promissory note and warrants for $0.5 million to this same member of the Board of Directors. This second promissory note replaced a note with similar terms that was issued on January 25, 2018. On February 16, 2019, this board member resigned in connection with the Series AA Financing discussed in Note 6.

During the fiscal quarter ended March 31, 2018, the Company issued warrants in connection with the Fiscal 2018 Notes whereby the fair value of the warrants was accounted for as a debt discount as discussed in Note 5. In January 2019, the Company modified one of the outstanding warrants held by the same member of the Board of Directors discussed above. The modification resulted in an increase in the number of shares subject to the warrant from 0.5 million shares to approximately 1.2 million shares, and a decrease in the exercise price from $0.52 per share to $0.18 per share. The Company measured the fair value of this warrant immediately before and immediately after the modification and recognized the change in fair value of approximately $138,000 as an additional debt discount. Upon conversion of the related Fiscal 2018 Note on January 30, 2019, the debt discount was fully accreted to interest expense.

As discussed in Note 13, on July 23, 2019 the New Investors agreed to purchase an aggregate of approximately 69.0 million shares at an issuance price of $0.29 per share for gross proceeds of $20.0 million. This purchase was made pursuant to the terms of the call option that was issued in connection with the Series AA financing discussed in Note 6. After this purchase, the New Investors owned an aggregate of 64% of the Company’s outstanding shares of Common Stock.

For the fiscal year ended June 30, 2018, the Company incurred investor relation expenses of $33,000 and general and administrative expenses of $68,000 for services performed by related parties.