NOTE 8 — STOCKHOLDERS’ EQUITY

As of April 30, 2020, authorized capital stock consisted of 200,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of “blank check” preferred stock, par value $0.001 per share, of which 1,300,000 shares are designated as Series A Convertible Preferred Stock, 400,000 shares are designated as Series B Convertible Preferred Stock, 45,002 shares are designated as Series C Convertible Preferred Stock, 7,402 shares are designated as Series D Convertible Preferred Stock, 2,500 shares are designated as Series E Convertible Preferred Stock, 1,250 shares are designated as Series F Preferred Stock and 127 shares are designated as Series G Preferred Stock. The Company’s Board has the authority, without further action by the stockholders, to issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock. As of July 13, 2020, there were 2,919,867 shares of common stock issued and outstanding, and no shares of preferred stock outstanding.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders and there are no cumulative rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably any dividends that may be declared from time to time by the Board out of funds legally available for that purpose. The Company does not anticipate paying any cash dividends on its common stock in the foreseeable future but intends to retain its capital resources for reinvestment in its business. In the event of liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable, and any shares of common stock to be issued upon an offering will be fully paid and nonassessable upon issuance. To the extent that additional shares of our common stock may be issued in the future, the relative interests of the then existing stockholders may be diluted.

Series F Convertible Preferred Stock

On June 20, 2019, the Company sold, under the terms of a securities purchase agreement (the “Purchase Agreement”) dated June 19, 2019, 1,250 Series F Preferred units for an aggregate purchase price of $2,500,000, or $2,000 per unit. Each unit consisted of one (1) share of 0% Series F Preferred Stock and 87 Class X Warrants on a registered basis and 175 Class A Warrants on an unregistered basis. The Series F Preferred Stock contains no redemption feature. The Company sold a total of 1,250 shares of Series F Preferred Stock, 219,375 Class A Warrants and 109,750 Class X Warrants under the Purchase Agreement. Each share of Series F Preferred Stock, at the option of the holder at any time, was convertible into the number of shares of common stock of the Company determined by dividing the $2,000 (the stated value per share of the Series F Preferred Stock) by a conversion price of $11.40 per share (approximately 219,375 shares of common stock), subject to adjustment. Each Class X Warrant was exercisable to acquire one share of the Company’s common stock and one Class Y Warrant at an exercise price of $11.40, for a period of six (6) months from the date of issuance. Class X Warrants expired on December 19, 2019. Each Class Y Warrant was exercisable to acquire one share of the Company’s common stock at an exercise price of $11.40 per share, commencing six (6) months from the date of issuance (the “Initial Exercise Date”) and would have expired on a date that is the five (5) year anniversary of the Initial Exercise Date. No Class X Warrant was exercised prior to its expiration and, as such, no Class Y Warrants were issued. Each Class A Warrant is exercisable to acquire one share of the Company’s common stock at an exercise price of $11.40 per share, commencing six (6) months from the date of issuance and will expire on a date that is the five (5) year anniversary of the date of issuance. The Company incurred $98,799 in offering costs for this placement.

The fair value of the Series F Preferred Stock and warrants if converted on the date of issuance was greater than the value allocated to the Series F Preferred Stock and warrants. As a result, the Company recorded a BCF of approximately $2.0 million that the Company recognized as deemed dividend to the preferred stockholders and accordingly, an adjustment to net loss to arrive at net loss available to common stockholders and a corresponding increase in additional paid in capital upon issuance of the Series F Preferred Stock and warrants. The Company accounted for the deemed dividend resulting from the issuance of Series F Preferred Stock and warrants using the relative fair value method (see Note 2).

The Purchase Agreement includes customary representations, warranties and covenants by the Company and provides for indemnification of the purchasers against certain liabilities, including liabilities incurred as a result of or relating to any breach of the representations, warranties, covenants or agreements made by the Company in the Purchase Agreement. The Company assessed the classification of these warrants and determined that such instruments met the criteria for equity classification under the guidance in ASC 815.

During the three months ended July 31, 2019, the Company issued an aggregate of 108,070 shares of the Company’s common stock in exchange for the conversion of 616 shares of the Company’s Series F Preferred Stock.

During the three months ended October 31, 2019, the Company issued an aggregate of 63,860 shares of the Company’s common stock in exchange for the conversion of 364 shares of the Company’s Series F Preferred Stock.

During the three months ended April 30, 2020, the Company issued an aggregate of 25,088 shares of the Company’s common stock in exchange for the conversion of 143 shares of the Company’s Series F Preferred Stock. After the conversion of these shares, there remained 127 shares of Series F Convertible Preferred Stock outstanding, which were exchanged for Series G Convertible Preferred Stock, as discussed below.

Series G Convertible Preferred Stock

On March 29, 2020, concurrent with the issuance of shares of common stock and warrants for cash, the Company entered into an exchange agreement with holders of shares of the Series F Preferred Stock pursuant to which the remaining 127 shares of the Company’s Series F Preferred Stock were exchanged for 127 shares of the Series G Preferred Stock at a stated value of $2,000 per share, the same as the Series F Convertible Preferred Stock. The Series G Preferred Stock had substantially the same terms as that of the Series F Preferred Stock except the conversion price of the Series G Preferred Stock was $5.60 per share, for a total of 45,357 common shares.

During April 2020, the Company issued an aggregate of 25,000 shares of the Company’s common stock in exchange for the conversion of 70 shares of Series G Preferred Stock.

As a result of the exchange, the Company recorded approximately $64,000 of deemed dividend to the preferred stockholders and accordingly, an adjustment to net loss to arrive at net loss available to common stockholders and a corresponding increase in additional paid in capital upon issuance of the Series G Preferred Stock. The Company accounted for the deemed dividend resulting from the exchange of Series F Preferred Stock into Series G Preferred Stock in accordance with ASC 470-50 and ASC 260-10-S99-2.

Common Stock Issued for Cash

On November 2, 2018, the Company entered into an ATM Agreement with H.C. Wainwright & Co., LLC (“Wainwright”) as sales manager. Under the terms of the ATM Agreement, the Company was entitled to sell, at its sole discretion and from time to time as it may choose, common stock of the Company through Wainwright, with such sales having an aggregate gross sales value of up to $1,000,000. Subject to the terms and conditions of the ATM Agreement, Wainwright used its commercially reasonable efforts to sell the shares of common stock from time to time, based upon the Company’s instructions. The Company has provided Wainwright with customary indemnification rights, and Wainwright was entitled to a commission at a fixed commission rate equal to 3.0% of the gross proceeds per share sold. The ATM program has expired.

For the year ended April 30, 2019, the Company has sold 29,006 shares of common stock and raised net proceeds of $219,796, net of issuance costs including legal cost related to the sale of shares of common stock of $79,031, through the ATM Agreement at prices per share averaging $10.30.

On April 1, 2020, the Company, issued 357,142 shares of common stock of the Company at a price of $5.60 per share, for gross proceeds of approximately $2.0 million before the deduction of placement agent fees and offering expenses. In relation to this offering, the Company entered into the advisory agreement, dated March 29, 2020 (the “Advisory Agreement”), with Palladium Capital Advisors (“Palladium”) pursuant to which a fixed fee of $135,000 in shares of common stock would be issued, to be valued at the closing price on the date of issuance. On March 30, 2020, pursuant to the Advisory Agreement, the Company issued 25,281 shares of its common stock to Palladium, based on the closing price as of March 30, 2020 of $5.34.

Common Stock Issued for Accrued Services

On May 6, 2019, the Company paid an accrued service liability to its former Chief Geologist in the amount of $12,500 by issuing 1,068 shares of common stock at a price of $11.70 per share of common stock based on the quoted trading price on the date of grant. In connection with this issuance, the Company reduced accrued salaries by $12,500 during the year ended April 30, 2020.

On November 26, 2019, the Company paid an accrued service liability to its Chief Financial Officer in the amount of $14,403 and stock-based accounting fees of $3,881 by issuing 2,276 shares of restricted common stock at a price of $8.00 per share of common stock based on the quoted trading price on the date of grant. In connection with this issuance, the Company reduced accrued expenses by $14,403 and recorded stock-based accounting fees of $3,881 during the year ended April 30, 2020. The restricted common shares issued to this officer were fully vested at the date of issuance.

On February 1, 2020, the Company paid stock-based accounting fees to its Chief Financial Officer in the amount of $5,158 by issuing 639 shares of restricted common stock at a price of $8.10 per share of common stock based on the quoted trading price on the date of grant. In connection with this issuance, the Company recorded stock-based accounting fees of $5,158 during the year ended April 30, 2020. The restricted common shares issued to this officer were fully vested at the date of issuance.

Common Stock Issued for Salaries

Between May 2019 and June 2019, the Company issued an aggregate of 2,153 shares of common stock to satisfy a stock payable to its former Chief Geologist for services rendered between May 2019 and June 2019. The shares were valued at $25,000 using a share price ranging from $10.30 to $13.30 on the dates of grant.

Common Stock Issued, Restricted Stock Awards, and RSUs Granted for Services

On September 18, 2019, the Compensation Committee of the Board awarded Edward Karr, the Company’s Chief Executive Officer, President and Director, 20,000 performance-based restricted stock units (“RSUs”), David Rector, the Company’s Chief Operating Officer, 7,500 performance-based RSUs and an employee of the Company 5,000 performance-based RSUs pursuant to respective restricted stock unit award agreements. The RSUs will vest upon the earlier to occur of (i) a Change in Control (as defined in the 2020 Plan), or (ii) a material discovery of a mineral deposit, as determined by the Compensation Committee of the Board in its sole discretion. The total 32,500 RSUs had a fair value of $334,750 or $10.30 per share based on the quoted trading price on the date of grant and will be expensed upon the occurrence of the vesting term.

Additionally, on September 18, 2019, the Compensation Committee of the Board awarded five directors of the Company an aggregate of 25,000 shares of restricted stock pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant. The total 25,000 shares of restricted stock had a fair value of $257,500 or $10.30 per share based on the quoted trading price on the date of grant, which was expensed immediately.

On November 26, 2019, the Company issued 2,100 shares of restricted common stock to a consultant for investor relations-related services rendered. The 2,100 shares of common stock had a fair value of $18,297, or $8.70 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

On November 26, 2019, the Company issued 3,703 shares of restricted stock to a consultant for services to be rendered. The shares vest over a six-month period. The 3,703 shares of restricted stock had a fair value of $29,848, or $8.10 per share, based on quoted trading price on the date of grant and will be expensed over the vesting period.

On January 14, 2020, the Compensation Committee of the Board awarded an aggregate of 47,777 restricted common shares to Edward Karr, the Company’s Chief Executive Officer, and David Rector, the Company’s Chief Operating Officer as 2019 Executive Bonus Awards. The total 47,777 restricted common shares stock had a fair value of $396,520, or $8.30 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

On January 6, 2020, the Compensation Committee of the Board awarded four directors of the Company an aggregate of 1,875 shares of restricted stock pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant. The total 1,875 shares of restricted stock had a fair value of $17,438, or $9.30 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

On April 9, 2020, the Company issued 25,000 shares of restricted common stock to a consultant for investor relations-related services rendered. The 25,000 shares of common stock had a fair value of $123,750, or $4.95 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

On April 30, 2020, the Compensation Committee of the Board awarded four directors of the Company an aggregate of 1,875 shares of restricted stock pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant. The total 1,875 shares of restricted stock had a fair value of $9,581, or $5.11 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued on May 5, 2020, subsequent to the close of the fiscal year 2020.

A total of $497,528 and $880,623 was expensed for the year ended April 30, 2020 and 2019, respectively. A balance of $339,725 remains to be expensed over future vesting periods.

Common Stock Issued Pursuant to Share Exchange Agreement

On September 10, 2019, the Company, NumberCo and the NumberCo Shareholders, entered into the Share Exchange Agreement, pursuant to which, among other things, the Company agreed to issue to the NumberCo Shareholders 200,000 shares of the Company’s common stock in exchange for all of the issued and outstanding shares of NumberCo, with NumberCo becoming a wholly owned subsidiary of the Company. The 200,000 shares issued to the NumberCo Shareholders were valued at $2,020,000, or $10.10 per share, the fair value of the Company’s common stock based on the quoted trading price on the date of the Share Exchange Agreement (see Note 4).

Equity Incentive Plan

In August 2017, the Board approved the Company’s 2017 Equity Incentive Plan (the “2017 Plan”) including the reservation of 165,000 shares of common stock thereunder.

On August 6, 2019, the Board approved and adopted, subject to stockholder approval, the U.S. Gold Corp. 2020 Stock Incentive Plan (the “2020 Plan”). The 2020 Plan reserves 330,710 shares for future issuance to officers, directors, employees and contractors as directed from time to time by the Compensation Committee of the Board. The Board directed that the 2020 Plan be submitted to the Company’s stockholders for their approval at the 2019 Annual Meeting of Stockholders of the Company (the “Annual Meeting”), which was held on September 18, 2019. The 2020 Plan was approved by a vote of stockholders at the Annual Meeting. With the approval and effectivity of the 2020 Plan, no further grants will be made under the 2017 Plan.

Stock options issued for services

On November 26, 2019, the Company granted 5,000 options to purchase the Company’s common stock to the Company’s Chief Financial Officer. The options have a term of 10 years from the date of grant and are exercisable at an exercise price of $8.10. The options vest over 24 months at 208 options per month.

The Company used the Black-Scholes model to determine the fair value of stock options granted during the year ended April 30, 2020. In applying the Black-Scholes option pricing model to options granted, the Company used the following assumptions:

The following is a summary of the Company’s stock option activity during the years ended April 30, 2020 and 2019:

At April 30, 2020 and 2019, the aggregate intrinsic value of options outstanding and exercisable was $0 for each year.

Stock-based compensation for stock options recorded in the consolidated statements of operations totaled $196,046 and $328,082 for the years ended April 30, 2020 and 2019, respectively. A balance of $214,050 remains to be expensed over future vesting periods.

Stock Warrants

In relation to the issuance of the shares of Series F Convertible Preferred Stock in June 2019, the Company issued 219,375 Class A Warrants and 109,750 Class X Warrants. The fair value of the warrants was $2,022,712, as measured on the date of the issuance with a Black-Scholes pricing model using the assumptions noted in the following table:

Each Class A Warrant is exercisable to acquire one share of the Company’s common stock at an exercise price of $11.40 per share, commencing six (6) months from the date of issuance and will expire on a date that is the five (5) year anniversary of the date of issuance. Each Class X Warrant was exercisable to acquire one share of the Company’s common stock and one Class Y Warrant at an exercise price of $11.40, for a period of six (6) months from the date of issuance. Class X Warrants expired on December 19, 2019. Each Class Y Warrant was exercisable to acquire one share of the Company’s common stock at an exercise price of $11.40 per share, commencing on the Initial Exercise Date and would have expired on a date that is the five (5) year anniversary of the Initial Exercise Date. No Class X Warrant was exercised prior to its expiration, and, as such, no Class Y Warrants were issued.

Concurrent with the April 1, 2020 issuance of shares of common stock, the Company issued 357,142 warrants. The warrants are exercisable six months following the initial exercise date and terminate five years following issuance. The warrants have an exercise price of $7.00 per share and each warrant is exercisable to purchase one share of common stock. Generally, a holder of a warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number of shares of common stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”).

The fair value of the warrants was $1,613,765, as measured on the date of the issuance with a Black-Scholes pricing model using the assumptions noted in the following table:

The fair value of the warrant would be credited to Additional paid-in capital, and also represents a deemed dividend to those shareholders, which would be charged to Additional paid-in capital, therefore with no effect on that account.

A summary of the Company’s outstanding warrants to purchase shares of common stock as of April 30, 2020 and changes during the year then ended are presented below, restated to post-split:

As of April 30, 2020, the aggregate intrinsic value of warrants outstanding and exercisable was $0.