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Stockholders' Equity

12 Months Ended

Feb. 28, 2019

Stockholders' Equity

Note 9. Stockholders' Equity

Series A Preferred Stock

On February 15, 2016, the Company and Mr. Solomita agreed to amend his employment. The amendment provides that the Company shall issue to Mr. Solomita one share of the Company’s Series A Preferred Stock in exchange for Mr. Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the amendment. The amendment effectively provides Mr. Solomita with a “change of control” provision over the Company in the event that his currently-held 55.0% of the issued and outstanding shares of common stock of the Company is diluted to less than a majority. In order to issue Mr. Solomita his one share of Series A Preferred Stock under the amendment, the Company created a “blank check” preferred stock. Subsequently, the board of directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock. Subsequently, the Company issued one share of Series A Preferred Stock to Mr. Solomita.

The one share of Series A Preferred Stock issued to Mr. Solomita holds a majority of the total voting power so long as Mr. Solomita holds not less than 7.5% of the issued and outstanding shares of common stock of the Company, assuring Mr. Solomita of control of the Company in the event that his currently-held 55.0% of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority.

Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which precludes the Company from taking certain actions without Mr. Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class:

(a)

amend the Articles of Incorporation or, unless approved by the Board of Directors, including by the Series A Director, amend the Company’s Bylaws;

(b)

change or modify the rights, preferences or other terms of the Series A Preferred Stock, or increase or decrease the number of authorized shares of Series A Preferred Stock;

(c)

reclassify or recapitalize any outstanding equity securities, or, unless approved by the Board of Directors, including by the Series A Director, authorize or issue, or undertake an obligation to authorize or issue, any equity securities or any debt securities convertible into or exercisable for any equity securities (other than the issuance of stock-options or securities under any employee option or benefit plan);

(d)

authorize or effect any transaction constituting a Deemed Liquidation (as defined in this subparagraph) under the Articles, or any other merger or consolidation of the Company;

(e)

increase or decrease the size of the Board of Directors as provided in the Bylaws of the Company or remove the Series A Director (unless approved by the Board of Directors, including the Series A Director);

(f)

declare or pay any dividends or make any other distribution with respect to any class or series of capital stock (unless approved by the Board of Directors, including the Series A Director);

(g)

redeem, repurchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any outstanding shares of capital stock (other than the repurchase of shares of common stock from employees, consultants or other service providers pursuant to agreements approved by the Board of Directors under which the Company has the option to repurchase such shares at no greater than original cost upon the occurrence of certain events, such as the termination of employment) (unless approved by the Board of Directors, including the Series A Director);

(h)

create or amend any stock option plan of the Company, if any (other than amendments that do not require approval of the stockholders under the terms of the plan or applicable law) or approve any new equity incentive plan;

(i)

replace the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the Series A Director);

(j)

transfer assets to any subsidiary or other affiliated entity (unless approved by the Board of Directors, including the Series A Director);

(k)

issue, or cause any subsidiary of the Company to issue, any indebtedness or debt security, other than trade accounts payable and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Series A Preferred Stock (unless approved by the Board of Directors, including the Series A Director);

(l)

modify or change the nature of the Company’s business;

(m)

acquire, or cause a Subsidiary of the Company to acquire, in any transaction or series of related transactions, the stock or any material assets of another person, or enter into any joint venture with any other person (unless approved by the Board of Directors, including the Series A Director); or

(n)

sell, transfer, license, lease or otherwise dispose of, in any transaction or series of related transactions, any material assets of the Company or any Subsidiary outside the ordinary course of business (unless approved by the Board of Directors, including the Series A Director).

Common Stock

For the year ended February 28, 2019		Number of shares				Amount
Balance, February 28, 2018			33,751,088			$	3,376
Cashless exercise of stock options			18,821				2
Issuance of shares upon vesting of restricted stock units			35,797				3
Balance, February 28, 2019			33,805,706			$	3,381

For the year ended February 28, 2018			Number of shares				Amount
Balance, February 28, 2017				31,451,973			$	3,146
Issuance of shares for cash				1,829,061				183
Cashless exercise of stock options				115,034				12
Issuance of shares upon exercise of warrants				355,020				35
Balance, February 28, 2018				33,751,088			$	3,376

During the year ended February 28, 2019:

(i)

the Company issued 18,821 shares of common stock upon the cashless exercise of 20,000 warrants.

(ii)

the Company issued 35,797 shares of common stock upon the vesting of restricted stock units.

During the year ended February 28, 2018:

(i)	the Company sold 1,123,266 shares of its common stock at an offering price of $5.25 per share, for gross proceeds of $5,897,188;

(ii)	the Company sold units consisting of 705,795 shares of its common stock and 171,917 warrants to acquire common stock at an offering price of $12.00 per share, for gross proceeds of $8,469,536;

(iii)	the Company issued 355,020 shares of common stock ranging from $0.80 to $12.00 per share upon the exercise of warrants, resulting in proceeds to the Company of $1,642,016; and

(iv)	the Company issued 115,034 shares upon cashless exercises of 122,919 warrants.

Share issuance costs for the private placements amounted to $314,243, in aggregate, and were recorded as a reduction of the gross proceeds received.

January 2018 Private Placement (the “Private Placement”)

On January 9, 2018, the Company commenced a Private Placement Offering whereby the Company would issue units for $12.00 per unit, with each unit consisting of one share of common stock and one warrant to purchase 0.25 shares of common stock at $12.00 per share exercisable sixty days from the date of closing of the private placement round in the event that the Company does not file the Resale Registration Statement or, prior to that date, if the holder elects to forego its registration rights. The warrant expires one year from the date of issuance.

The Purchase Agreement provides the unit holder with certain registration rights, including resale registration rights, with respect to the common stock issued in connection with the Private Placement, as well as shares issuable upon the exercise of the warrants, and standard anti-dilution protection for a period of ninety days, following the date of closing of the private placement round, which in the event the Company issues common stock for consideration of less than $12.00 per share, allows for an adjustment to the conversion ratio.

At the closing of round one of the Private Placement on January 11, 2018, the Company issued for an aggregate 617,667 common shares and warrants to purchase up to 154,416 shares of common stock, resulting in gross proceeds of $7,412,000. On January 22, 2018, warrants were exercised for 31,250 common shares for total proceeds of $375,000.

At the closing of round two of the Private Placement on January 30, 2018, the Company issued for an aggregate 70,000 common shares and warrants to purchase up to 17,500 shares of common stock, resulting in gross proceeds of $840,000. No warrants have been exercised.

In April 2018, as the Company did not file the Resale Registration Statements, the aforementioned warrants to purchase 140,666 common shares, with an exercise price of $12.00 per share and an expiration date of no later than January 30, 2019, became exercisable.