NOTE 19 – STOCKHOLDERS’ EQUITY

The Company’s authorized capital stock consists of 187,500,000 shares of common stock, par value $0.0001, at May 31, 2023 and 2022, and 5,000,000 shares of preferred stock, par value $0.001 per share. The Company had 72,543,141 and 32,052,021 shares of common stock issued and outstanding as of May 31, 2023 and 2022, respectively.

On September 15, 2022, the Company effected a reverse stock split of its issued and outstanding common stock (“the “Reverse Split”) at a ratio of 1-for-4, whereby four shares of the Company’s common stock issued and outstanding were exchanged for one share. The number of shares of common stock issued and outstanding immediately before the Reverse Split was 290,070,272; the number of shares outstanding immediately after the reverse split was 72,517,570, a decrease of 217,552,702 shares. All share and per-share information in these financial statements have been adjusted to reflect the effects of the Reverse Split. As a result of the split, an additional 574 shares were issued due to rounding. The authorized Common Stock was also reduced as a result of the Reverse Split from 750,000,000 shares to 187,500,000 shares, and the authorized preferred stock was reduced from 20,000,000 shares to 5,000,000 shares. 

Year ended May 31, 2023:

Common Stock and Warrants Issued upon Conversion of Notes Payable:

On September 15, 2022, the Company issued 28,414,149 shares and three-year warrants to acquire 14,207,075 shares of common stock at a price of $0.40 per share as a result of the mandatory conversion provided in the amendments to the Canaccord Debentures. The conversion was for the total amount of $8,098,033, of which $7,965,278 was principal and $132,755 was accrued interest. (See note 16 for details). A loss in the amount of $4,547,660 was recorded in connection with the extinguishment of the Canaccord Debentures. The fair values of the warrants and conversion options included in the calculation of the loss on extinguishment of the Canaccord Debentures were $2,623,852 and $1,923,808, respectively. No gain or loss was recorded on the issuance of the shares because the conversion was made pursuant to the terms of the Restructured Canaccord Debenture Agreement.

On September 15, 2022, the Company issued 12,051,397 shares and three-year warrants to acquire 6,025,700 shares of common stock at a price of $0.40 per share as a result of the mandatory conversion provided in the amendments to the U.S. Convertible Debenture holders. The conversion was for the total amount of $3,434,647, of which $3,378,342 was principal and $56,305 was accrued interest. (See note 16 for details). A loss in the amount of $2,111,699 was recorded in connection with the extinguishment of the U.S. Convertible Debentures 1 and 2. The fair values of the warrants and conversion options included in the calculation of the loss on extinguishment of the U.S Convertible Debentures 1 and 2 were $1,117,606 and $994,093, respectively. No gain or loss was recorded on the issuance of the shares because the conversion was made pursuant to the terms of the Restructured U.S. Convertible Debentures 1 and 2 Agreements.

During the year ended May 31, 2023, the Company issued 12,500 shares with a fair value of $4,390 to an officer that were previously subscribed.

During the year ended May 31, 2023, the Company granted 12,500 to an officer; the fair value of these shares in the amount of $656 was charged to operations.

Other Warrant Transactions

On September 15, 2022, the Company amended $18,846,721 in outstanding debentures to reduce the conversion price of the debentures from $1.20 per unit to $0.40 per unit, increasing the warrants issuable upon conversion of such debentures from 3,400,652 to 6,801,298. As amended, each warrant issuable pursuant to the conversion of such debentures is exercisable for one share of the Company’s common stock at a price of $0.40 per share.

The amendments to the Canaccord Debentures and the U.S. Convertible Debenture were accounted for pursuant to Statement of Financial Accounting Standard ASC 820-10-35-37, Fair Value of Financial Instruments (“FAS 820”) and Statement of Financial Accounting Standards 815,  Accounting for Derivative Instruments and Hedging Activities (“FAS 815”).  The fair values of the warrants and conversion options were determined using a lattice model based on probability-weighted scenarios and future projections.  The following assumptions were used in valuing the Canaccord Debentures and the U.S. Convertible Debentures:

Year ended May 31, 2022:

Common Stock and Warrants Issued upon Conversion of Notes Payable:

On June 17, 2021, the Company issued 234,167 shares of common stock and three-year warrants to acquire 117,083 shares of common stock at a price of $1.10 (now $0.40 as a result of the amendment of the Canaccord Debentures) per share to Canaccord Genuity Corp., as nominee, in connection with the conversion of a portion of the Canaccord Debentures in the principal amount of $281,000. No gain or loss was recorded on this transaction because the conversion was made pursuant to the terms of the original agreement.

On February 4, 2022, the Company granted 12,500 shares of common stock to an employee effective February 14, 2022. The Company charged the value of these shares, which was $4,390, to common stock subscribed. Effective February 14, 2022, the Company granted an additional 12,500 shares of restricted common stock to the same officer, which vest on December 31, 2022 if the officer remains employed by the Company and charged the value of these shares, which was also $4,390, to common stock subscribed. During the year ended May 31, 2022, the Company issued 12,500 of these shares to the officer at the same value of $4,390. The remining 12,500 shares had not been issued as of May 31, 2022.

Warrants

The Company values warrants using the Black-Scholes valuation model utilizing the following variables. On March 31, 2021, the Company reduced the conversion price of the Canaccord Debentures from $3.20 per unit to $1.20 per unit, increasing the warrants issuable upon conversion of the Canaccord Debentures from 2,102,100 to 5,629,094. As amended, each warrant issuable pursuant to conversion of the Canaccord Debentures is exercisable for one share of the Company’s common stock at a price equal to $1.60 per share until March 31, 2024.

In April 2021, the Company amended $6,229,672 in outstanding debentures to reduce the conversion price of the debentures from $3.20 per unit to $1.20 per unit, increasing the warrants issuable upon conversion of such debentures from 973,387 to 2,595,697. As amended, each warrant issuable pursuant to conversion of such debentures is exercisable for one share of the Company’s common stock at a price equal to 137.5% of the conversion price (presently $1.65 per share) until July 14, 2024.

From December 1, 2021, through January 4, 2022, the Company issued $2,500,000 in debentures and issued 757,576 warrants in connection with these debentures. Each warrant allows the holder to purchase one share of the Company’s common stock at an exercise price of $1.65 per share for three years after its date of issuance.

The following table summarizes the significant terms of warrants outstanding at May 31, 2023. This table does not include the unit warrants. See Unit Warrants section below.

Transactions involving warrants are summarized as follows. This table does not include the unit warrants. See Unit Warrants section below.

Unit Warrants

In February and March 2018, in connection with the Westpark offering, the Company issued five-year warrants to purchase 51,310 of the Company’s units at an exercise price of $5.00 per unit. Each unit consists of four shares of common stock and one warrant to purchase a share of common stock for $3.00. These warrants expired in March of 2023.

Because the unit warrants are exercisable for Common Stock and warrants, they are not included in the warrant tables above.