Note 19: Stockholders’ Equity

At the Company's annual meeting of stockholders on November 28, 2023, the Company’s shareholders voted to increase the number of shares of authorized common stock from 187,500,000 shares to 350,000,000 shares. At February 29, 2024, the Company’s authorized capital stock consists of 345,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.

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 576 shares were issued due to rounding.

Common stock transactions for the nine months ended February 29, 2024

On December 6, 2023, 32,000,000 shares of common stock were issued at a price of $0.0345 per share in connection with the conversion of four convertible notes payable in the aggregate principal amount of $960,000 and interest in the amount of $144,000. No gain or loss was recorded on this transaction as the shares were issued according to the terms of the convertible notes.

On January 15, 2024, 32,132,135 shares of common stock were issued at a price of $0.0333 per share in connection with the conversion of four convertible notes payable in the aggregate principal amount of $1,070,000 . No gain or loss was recorded on this transaction as the shares were issued according to the terms of the convertible notes.

On January 30, 2024, the Board of Directors approved the issuance of 1,000,000 shares of common stock at a price of $0.0388 per share to the Company’s CEO pursuant to his employment agreement.

On February 22, 2023, the Company settled the amounts due under Debentures 3, 4, and 5 for a cash payment in the aggregate amount of $1,250,000 and the return of 13,174,402 shares of the Company’s common stock and the cancellation of 454,548 common stock warrants. At February 29, 2024, these shares have not been received for cancellation and are recorded as common stock receivable on the Company’s balance sheet. See note 17.

Common stock transactions for the nine months ended February 28, 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 15 for details). A loss in the amount of $4,547,660 was recorded in connection with the extinguishment of the Canaccord Debentures. 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 15 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. 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.

Other Warrant Transactions

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.

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 warrants 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 following table summarizes the significant terms of warrants outstanding at February 29, 2024. 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.

Stock Options

Stock options for the nine months ended February 29, 2024

On February 2, 2024, the Company issued stock options as follows:

The options were priced at the closing price of the Company’s common stock on the date of the grant.

The following table summarizes the significant terms of options outstanding at February 29, 2024.

Transactions involving options are summarized as follows.

Stock options for the nine months ended February 29, 2023

None.

The Company valued options using the Black-Scholes valuation model utilizing the following variables:

During the three and month months ended February 29, 2024, the Company charged $6,439 to stock based compensation expense, in connection with the vesting of stock options. There were no comparables charges during the three and nine months ended February 28, 2023. 

The aggregate intrinsic value of options outstanding and exercisable at February 29, 2024 and February 28, 2023 was $3,678 and $0, respectively. Aggregate intrinsic value represents the difference between the fair value of the Company’s stock on the last day of the fiscal period, which was $0.0495 as of February 29, 2024, and the exercise price multiplied by the number of options outstanding and exercisable.