Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.20.4
Stockholders' Equity
9 Months Ended
Jan. 31, 2021
Equity [Abstract]  
Stockholders' Equity

NOTE 8 — STOCKHOLDERS’ EQUITY

 

As of January 31, 2021, 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, 127 shares are designated as Series G Preferred Stock, 106,894 shares are designated as Series H Preferred Stock, and 921,666 shares are designated as Series I 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.

 

Series G Convertible Preferred Stock

 

During the nine months ended January 31, 2021, the Company issued an aggregate of 20,357 shares of the Company’s common stock in exchange for the conversion of 57 shares of Series G Preferred Stock. As of January 31, 2021, all Series G Preferred Stock had converted and there were no shares of Series G Preferred Stock outstanding.

 

Series H Convertible Preferred Stock

 

Northern Panther Merger Agreement

 

On August 10, 2020, the Company entered into the Merger Agreement with Acquisition Corp., NPRC and the Stockholder Representative named therein, pursuant to which the Company agreed to issue (i) 581,053 shares of the Company’s common stock, and (ii) 106,894 shares of the Company’s Series H Preferred Stock in exchange for all the issued and outstanding shares of NPRC with NPRC becoming a wholly owned subsidiary of the Company. The Merger closed on August 11, 2020 (see Note 4).

 

On August 11, 2020, the Company filed a Certificate of Designations, Preferences and Rights of the Series H Preferred Stock with the Secretary of State of the State of Nevada amending its Articles of Incorporation to establish the Series H Preferred Stock and the number, relative rights, preferences and limitations thereof. Pursuant to the Certificate of Designations, 106,894 shares of preferred stock have been designated as Series H Preferred Stock.

 

The Series H Preferred Stock was convertible into common stock on a 1 for 10 basis upon the receipt of the approval by the requisite vote of the Company’s stockholders at the Company’s 2020 annual meeting, which was held on November 9, 2020. The Company’s stockholders approved such conversion on November 9, 2020. On November 13, 2020, the Company issued an aggregate of 1,068,940 shares of the Company’s common stock in exchange for the conversion of all 106,894 outstanding shares of Series H Preferred Stock.

 

In connection with the Merger, Luke Norman Consulting Ltd. received a finder’s fee equal to the quotient of (a) 5% of the purchase value for the Merger and (b) the 30-day Volume Weighted Average Price (“VWAP”) of a share of the Company’s common stock as reported on the Nasdaq Capital Market prior to the execution Merger Agreement, which was paid in 82,500 shares of restricted common stock on August 11, 2020.

 

Total consideration given consist of the shares of common stock and common stock equivalents of 1,650,000 shares, valued at the Volume Weighted Average Price for the 30-day period immediately prior to the date of the Merger Agreement of $7.6612 per share of common stock, or $12,640,980.

 

Series I Convertible Preferred Stock

 

Securities Purchase Agreement

 

In connection with the Merger, on August 10, 2020, the Company entered into a securities purchase agreement (the “SPA”) with certain investors, pursuant to which the Company sold to such investors in a private placement (i) an aggregate of 921,666 shares of the Company’s Series I Convertible Preferred Stock, par value $0.001 per share (the “Series I Preferred Stock”) and (ii) warrants to purchase an aggregate of 921,666 shares of common stock at an exercise price of $6.00 per share for aggregate consideration of $5,530,004.

 

On August 11, 2020, the Company filed a Certificate of Designation of Rights, Powers, Preferences, Privileges and Restrictions of the Series I Preferred Stock (the “Series I Certificate of Designation”) with the Secretary of State of the State of Nevada amending its Articles of Incorporation to establish the Series I Preferred Stock and the number, relative rights, powers, preferences, privileges and restrictions thereof. Pursuant to the Series I Certificate of Designations, 921,666 shares of preferred stock have been designated as Series I Preferred Stock. The Series I Preferred Stock has substantially the same terms as the Series H Preferred Stock, except that each share of Series I Preferred Stock is convertible into one share of common stock. The Warrants are exercisable in whole or in part at any time, from time to time following the initial exercise date, and terminate five years following the issuance. The sale of the Series I Preferred Stock and warrants under the SPA closed on August 11, 2020. The conversion of the Series I Preferred Stock and the warrants into common stock was subject to the Company’s stockholders’ approval, which was received on November 9, 2020. On November 17, 2020, the Company issued an aggregate of 921,666 shares of the Company’s common stock in exchange for the conversion of all 921,666 outstanding shares of Series I Preferred Stock.

 

The fair value of the Series I Preferred Stock and warrants if converted on the date of issuance was greater than the value allocated to the Series I Preferred Stock and warrants. As a result, the Company recorded a BCF of approximately $5.5 million that the Company recognized as deemed dividend to the holders of Series I Preferred Stock 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 I Preferred Stock and warrants. The Company accounted for the deemed dividend resulting from the issuance of Series I Preferred Stock and warrants using the relative fair value method.

 

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

 

On April 30, 2020, the Company granted four former directors of the Company an aggregate of 1,875 shares of restricted stock for board services 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.

 

On July 31, 2020, the Company granted four former directors of the Company an aggregate of 1,875 shares of restricted stock for board services 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 $15,244, or $8.13 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued in August 2020.

 

On August 11, 2020, the Company issued 82,500 shares of restricted common stock to a consultant for finder’s fee related to the Merger. The 82,500 shares of common stock had a fair value of $786,225, or $9.53 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

 

On September 16, 2020, the Company and David Rector, the Company’s former Chief Operating Officer, agreed by mutual understanding that Mr. Rector’s employment as an officer and employee of the Company would terminate, effective as of October 31, 2020 (the “Separation Date”). In connection with Mr. Rector’s departure, the Company entered into a General Release and Severance Agreement with Mr. Rector (the “Separation Agreement”), pursuant to which Mr. Rector provided certain transition services to the Company from the Separation Date until December 31, 2020. Pursuant to the Separation Agreement, Mr. Rector received (i) a prorated annual bonus for the 2020 calendar year and through the Separation Date equal to $150,000 (the “Prorated Bonus”), which was paid in the number of fully vested shares of restricted common stock of the Company equal to the Prorated Bonus determined based on the common stock’s fair market value on the date of grant, and subject to the terms and conditions of the Company’s 2020 Stock Incentive Plan (the “2020 Plan”) and the Company’s standard form Restricted Stock Award Agreement; and (ii) any equity awards granted to Mr. Rector by the Company pursuant to its 2014 Equity Incentive Plan (the “2014 Plan”), 2017 Equity Incentive Plan (the “2017 Plan”), or 2020 Plan (the 2014 Plan, 2017 Plan, and 2020 Plan are collectively referred to herein as, the “Equity Plans”) during the term of Mr. Rector’s employment, were 100% vested and retained by Mr. Rector, notwithstanding any terms in an award agreement or plan document regarding forfeiture of such awards under the Equity Plans upon termination of employment provided that the foregoing did not in any way extend the awards beyond their original term. The $150,000 bonus was paid in 18,502 shares of restricted common stock and had a fair value of $150,000, or $8.11 per share, based on the quoted trading price on the date of grant, which were fully vested and expensed immediately. Additionally, the Company recognized stock-based compensation of $77,250 due to the accelerated vesting of the 7,500 restricted stock units granted on September 18, 2019. Accordingly, the Company issued 7,500 shares in November 2020 in connection with the vested 7,500 restricted stock units.

 

On September 17, 2020, the Compensation Committee of the Board awarded five directors of the Company an aggregate of 12,500 shares of restricted common stock. The shares of restricted common stock vested immediately on the date of grant. The total 12,500 shares of restricted common stock had a fair value of $140,125, or $11.21 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued in November 2020.

 

On September 17, 2020, the Company issued 30,107 shares of restricted common stock to Edward Karr, then Chief Executive Officer, and now Executive Chairman, as bonus in connection with the consummation of the acquisition by the Company of the NPRC (see Note 4). The Company agreed to pay Mr. Karr a bonus in the amount of $450,000 payable as follows: (i) 75% or $337,500 of the bonus payable in fully vested shares of restricted common stock and (ii) the remaining 25% or $112,500 in cash which was paid in October 2020. The $337,500 bonus was paid in 30,107 shares of restricted common stock and had a fair value of $337,500, or $11.21 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

 

On October 31, 2020, the Company granted four former directors of the Company an aggregate of 1,875 shares of restricted common stock for board services. The shares of restricted common stock vested immediately on the date of grant. The total 1,875 shares of restricted common stock had a fair value of $15,206, or $8.11 per share of common stock, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued in November 2020.

 

On October 31, 2020, the Company paid its former Chief Financial Officer for accounting services rendered from February 2020 to September 2020 by issuing 1,857 shares of restricted common stock at an average price of $7.08 per share of common stock based on the quoted trading prices on the date of grants. In connection with this issuance, the Company recorded stock-based accounting fees of $13,145 during the nine months ended January 31, 2021. The restricted common stock issued to the former Chief Financial Officer were fully vested at the date of issuance.

 

On November 9, 2020, the Company issued an aggregate of 188 shares of restricted common stock for director services rendered from November 1 to November 9, 2020. The total 188 shares of restricted common stock had a fair value of $1,598, or $8.50 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.

 

On December 8, 2020, the Company entered into a one-year consulting agreements for investor relation services under which it was required to pay for services either in cash or shares of the Company’s common stock. On December 8, 2020, the Company issued 5,009 shares at a fair value of $56,250 or $11.23 per share of common stock based on the quoted trading prices on the date of grant. The Company recognized stock-based compensation of $9,375 during the nine months ended January 31, 2021 and recorded prepaid stock-based expense of $46,875 at January 31, 2021 to be amortized over the term of the consulting agreement.

 

On December 9, 2020, the Company granted an aggregate of 304,464 restricted stock units to three officers, and one employee of the Company for services rendered. The restricted stock units vested 25% on the date of issuance and 25% vest on each of the first, second and third anniversaries of the date of grant. The 304,464 restricted stock units had a fair value of $3,413,041 or $11.21 per share of common stock based on the quoted trading price on the date of grant and will be expensed over the vesting period.

 

On December 9, 2020, the Company granted an aggregate of 13,392 restricted stock units to three directors of the Company for services rendered. The 13,392 restricted stock units had a fair value of $150,124 or $11.21 per share of common stock based on the quoted trading price on the date of grant. The restricted stock units fully vested and expensed immediately.

 

Total stock compensation expense for awards issued for services of $1,145,595 and $27,596 was expensed for the three months ended January 31, 2021 and 2020, respectively. Total stock compensation expense for awards issued for services of $1,243,063 and $138,322 was expensed for the nine months ended January 31, 2021 and 2020, respectively. A balance of $2,675,071 remains to be expensed over future vesting periods related to unvested restricted stock units issued for services.

 

Common Stock issued for exercise of Stock Warrants

 

In October 2020, the Company issued 10,000 shares of common stock for the exercise of stock warrants and received proceeds of $70,000.

 

In November and December 2020, the Company issued an aggregate of 168,571 shares of common stock for the exercise of stock warrants and received proceeds of $1,179,997.

 

In December 2020, the Company issued 33,858 shares of common stock for the cashless exercise of 109,688 stock warrants.

 

Common Stock to be issued for cash

 

On January 28, 2021, the Company entered the Purchase Agreement with the Purchasers and such transaction closed on February 1, 2021. Pursuant to the Purchase Agreement, the Company issued and sold to the Purchasers (i) in the Offering an aggregate of 914,136 shares of the Company’s common stock at a price of $10.54 per share and (ii) in a concurrent private placement warrants to purchase an aggregate of 457,068 shares of common stock at an exercise price of $14.50 per share for aggregate gross proceeds from the Offering of approximately $9.6 million (see Note 11). As of January 31, 2021, certain of these investors completed and funded their subscription agreements, consequently, the Company recorded 794,136 common stock to be issued valued at par value of $794 and additional paid in capital of $8,370,373 as of January 31, 2021 until which time the Company could administratively issue the shares.

 

Equity Incentive Plan

 

In August 2017, the Board approved the Company’s 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 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 2020 Plan was approved by a vote of stockholders at the 2019 annual meeting. With the approval and effectivity of the 2020 Plan, no further grants will be made under the 2017 Plan. On August 31, 2020, the Board approved and adopted, subject to stockholder approval, an amendment (the “2020 Plan Amendment”) to the 2020 Plan. The 2020 Plan Amendment increased the number of shares of common stock available for issuance pursuant to awards under the 2020 Plan by an additional 836,385, to a total of 1,167,095 shares of the Company’s common stock. The 2020 Plan Amendment was approved by the Company’s stockholders on November 9, 2020.

 

Stock options

 

The following is a summary of the Company’s stock option activity during the periods ended January 31, 2021 and April 30, 2020:

 

    Number of
Options
    Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
Life
(Years)
 
Balance at April 30, 2020     100,000     $ 14.31       2.87  
Granted                  
Exercised                  
Forfeited                  
Cancelled     (5,000 )            
Balance at January 31, 2021     95,000       14.63       1.81  
                         
Options exercisable at end of period     93,750     $ 14.65          
Options expected to vest     1,250     $ 13.40          
Weighted average fair value of options granted during the period           $ -          

 

At January 31, 2021 and April 30, 2020, the aggregate intrinsic value of options outstanding and exercisable were de minimus for each period.

 

In September 2020, the Board approved the acceleration of the vesting terms of the 50,000 stock options granted to Edward Karr, Executive Chairman of the Company, and 25,000 stock options granted to David Rector, former Chief Operating Officer of the Company on December 21, 2017 and therefore the total 75,000 stock options are fully vested. Additionally, the Board of Directors of the Company approved to extend the exercise period of the stock options granted to Mr. Rector and three former directors, to December 21, 2022, the original termination date of the respective stock option agreements. The Company recognized stock-based compensation of $133,439 due to the accelerated vesting of the 75,000 fully vested stock options granted on December 21, 2017.

 

Stock-based compensation for stock options recorded in the unaudited consolidated statements of operations totaled $2,925 and $40,357 for the three months ended January 31, 2021 and 2020, respectively. Stock-based compensation for stock options recorded in the unaudited consolidated statements of operations totaled $191,836 and $144,785 for the nine months ended January 31, 2021 and 2020, respectively. A balance of $2,924 remains to be expensed over future vesting periods.

 

Stock Warrants

 

A summary of the Company’s outstanding warrants to purchase shares of common stock as of January 31, 2021 and changes during the nine months ended are presented below:

 

    Number of
Warrants
    Weighted Average
Exercise
Price
    Weighted Average
Remaining
Contractual
Life (Years)
 
Warrants with no Class designation:                        
Balance at April 30, 2020     527,378     $ 14.83       3.73  
Granted     921,666       6.00       5.00  
Exercised     (178,571 )     7.00       4.16  
Forfeited                  
Canceled                  
Balance at January 31, 2021     1,270,473       9.52       3.94  
Class A Warrants:                        
Balance at April 30, 2020     219,375       11.40       4.22  
Granted                  
Exercised     (109,688 )     11.40       3.47  
Forfeited                  
Canceled                  
Balance at January 31, 2021     109,687       11.40       3.47  
Total Warrants Outstanding at January 31, 2021     1,380,160     $ 9.67       3.90  
Warrants exercisable at end of period     1,380,160     $ 9.67          
Weighted average fair value of warrants granted during the period           $ 9.09          

 

As of January 31, 2021, the aggregate intrinsic value of warrants outstanding and exercisable was $5,311,612.

 

In October 2020, the Company issued 10,000 shares of common stock for the exercise of stock warrants and received proceeds of $70,000.

 

In November and December 2020, the Company issued an aggregate of 168,571 shares of common stock for the exercise of stock warrants and received proceeds of $1,179,997.

 

In December 2020, the Company issued 33,858 shares of common stock for the cashless exercise of 109,688 stock warrants.

 

Pursuant to the SPA, the Company issued 921,666 warrants which are exercisable in whole or in part at any time, from time to time following the initial exercise date, and terminate five years following the issuance. The fair value of the warrants was $5,530,004, as measured on the date of the issuance with a Black-Scholes pricing model using the assumptions noted in the following table:

 

    Warrants Issued
During the Nine
Months Ended
January 31, 2021
 
Expected volatility     169.0 %
Stock price on date of grant   $ 9.53  
Exercise price   $ 6.00  
Expected dividends     -  
Expected term (in years)     5.00  
Risk-free rate     0.27 %
Expected forfeiture rate     0 %

 

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