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RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS | 12 Months Ended
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May 31, 2021
Prior Period Adjustment [Abstract] |
Error Correction [Text Block] | NOTE 11: RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS Subsequent to the issuance of our Form 10-K annual report, for the fiscal year ended May 31, 2021, which was filed on August 27, 2021, the Company determined that errors were included in the report as described below. As a result, this Form 10-K/A includes restated financial statements for the fiscal years ended May 31, 2021 and 2020. While reviewing the Company’s methodology used to calculate and report non-cash stock-based compensation expense, the Company discovered the errors listed below. The Company notified its independent registered accounting firm (“Auditors”) of the errors. Together, the Company and their Auditors have determined that these restatements correct the previously reported errors. Our non-cash stock based compensation expenses calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service, which resulted in an understatement of stock compensation expense. Additionally, our calculation expensed the option at vesting dates versus pro rata over the period the requisite service was provided. Stock-based compensation expense shown on the statement of operations is a non-cash expense, and impacts accumulated deficit and additional paid-in capital on the balance sheet. However, this does not impact the Company’s cash, revenues or other aspects of ongoing operations. The cumulative effect of this error on the Company's accumulated deficit as of May 31, 2019 was to increase the accumulated deficit by $836,232 from ($19,586,678) as originally filed, to ($20,422,910) and to increase the additional paid in capital by $836,232 from $22,830,006 as originally filed, to $23,666,238. The restatements for the years ended May 31, 2021 and 2020 resulted in no changes in the provision for income taxes. The effect of the restatement on the consolidated balance sheet at May 31, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Shareholders' Equity: |  |  |  |  |  |  |  |
Additional paid-in-capital | $ | 36,685,176 |  | $ | 2,151,567 |  | $ | 38,836,743
Accumulated deficit |  | (28,394,768) |  |  | (2,151,567) |  |  | (30,546,335)
Other Equity accounts |  | 936,615 |  |  | - |  |  | 936,615
Total Shareholders' Equity | $ | 9,227,023 |  | $ | - |  | $ | 9,227,023
The effect of the restatement on the consolidated balance sheet at May 31, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Shareholders' Equity: |  |  |  |  |  |  |  |
Additional paid-in-capital | $ | 35,213,707 |  | $ | 1,174,349 |  | $ | 36,388,056
Accumulated deficit |  | (21,925,732) |  |  | (1,174,349) |  |  | (23,100,081)
Other Equity accounts |  | 925,078 |  |  | - |  |  | 925,078
Total Shareholders' Equity | $ | 14,213,053 |  | $ | - |  | $ | 14,213,053
The effect of the restatement on the consolidated balance sheet at May 31, 2019 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Shareholders' Equity: |  |  |  |  |  |  |  |
Additional paid-in-capital | $ | 22,830,006 |  | $ | 836,232 |  | $ | 23,666,238
Accumulated deficit |  | (19,586,678) |  |  | (836,232) |  |  | (20,422,910)
Other Equity accounts |  | 737,642 |  |  | - |  |  | 737,642
Total Shareholders' Equity | $ | 3,980,970 |  | $ | - |  | $ | 3,980,970
The effect of the restatement on the consolidated statement of operations for the year ended May 31, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 6,702,046 |  | $ | 130,696 |  | $ | 6,832,742
Gross Profit |  | 496,981 |  |  | (130,696) |  |  | 366,285
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 4,608,950 |  |  | 785,575 |  |  | 5,394,525
Research and development |  | 2,410,506 |  |  | 60,947 |  |  | 2,471,453
Total operating expense |  | 7,019,456 |  |  | 846,522 |  |  | 7,865,978
Loss from operations |  | (6,522,475) |  |  | (977,218) |  |  | (7,499,693)
Loss before income taxes |  | (6,455,979) |  |  | (977,218) |  |  | (7,433,197)
Net loss | $ | (6,469,036) |  | $ | (977,218) |  | $ | (7,446,254)
Basic net loss per common share | $ | (0.54) |  | $ | (0.08) |  | $ | (0.62)
Diluted net loss per common share | $ | (0.54) |  | $ | (0.08) |  | $ | (0.62)
Comprehensive loss | $ | (6,477,151) |  | $ | (977,218) |  | $ | (7,454,369)
The effect of the restatement on the consolidated statement of operations for the year ended May 31, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 4,910,935 |  | $ | 43,549 |  | $ | 4,954,484
Gross Profit |  | 1,781,776 |  |  | (43,549) |  |  | 1,738,227
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 2,274,415 |  |  | 272,207 |  |  | 2,546,622
Research and development |  | 1,910,209 |  |  | 22,361 |  |  | 1,932,570
Total operating expense |  | 4,184,624 |  |  | 294,568 |  |  | 4,479,192
Loss from operations |  | (2,402,848) |  |  | (338,117) |  |  | (2,740,965)
Loss before income taxes |  | (2,331,664) |  |  | (338,117) |  |  | (2,669,781)
Net loss | $ | (2,339,054) |  | $ | (338,117) |  | $ | (2,677,171)
Basic net loss per common share | $ | (0.23) |  | $ | (0.03) |  | $ | (0.26)
Diluted net loss per common share | $ | (0.23) |  | $ | (0.03) |  | $ | (0.26)
Comprehensive loss | $ | (2,342,364) |  | $ | (338,117) |  | $ | (2,680,481)
The effect of the restatement on the consolidated statement of cash flows for the year ended May 31, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss | $ | (6,469,036) |  | $ | (977,218) |  | $ | (7,446,254)
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock option expense |  | 377,391 |  |  | 977,218 |  |  | 1,354,609
Net cash used in operating activities |  | (5,251,748) |  |  | - |  |  | (5,251,748)
Cash and cash equivalents at end of year | $ | 4,199,311 |  | $ | - |  | $ | 4,199,311
The effect of the restatement on the consolidated statement of cash flows for the year ended May 31, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss | $ | (2,339,054) |  | $ | (338,117) |  | $ | (2,677,171)
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock option expense |  | 200,470 |  |  | 338,117 |  |  | 538,587
Net cash used in operating activities |  | (4,297,498) |  |  | - |  |  | (4,297,498)
Cash and cash equivalents at end of year | $ | 8,641,027 |  | $ | - |  | $ | 8,641,027
As a result of the restatement described above, the following adjustments are made to the previously filed quarterly results for the periods ended August 31, 2020, November 30, 2020 and February 28, 2021: The effect of the restatement on the consolidated balance sheet at August 31, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Shareholders' Equity: |  |  |  |  |  |  |  |
Additional paid-in-capital | $ | 35,231,415 |  | $ | 1,417,328 |  | $ | 36,648,743
Accumulated deficit |  | (23,575,147) |  |  | (1,417,328) |  |  | (24,992,475)
Other Equity accounts |  | 924,357 |  |  | - |  |  | 924,357
Total Shareholders' Equity | $ | 12,580,625 |  | $ | - |  | $ | 12,580,625
The effect of the restatement on the consolidated statement of operations for the three months ended August 31, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 960,930 |  | $ | 64,787 |  | $ | 1,025,717
Gross Profit |  | 182,876 |  |  | (64,787) |  |  | 118,089
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 1,164,564 |  |  | 141,380 |  |  | 1,305,944
Research and development |  | 674,693 |  |  | 36,812 |  |  | 711,505
Total operating expense |  | 1,839,257 |  |  | 178,192 |  |  | 2,017,449
Loss from operations |  | (1,656,381) |  |  | (242,979) |  |  | (1,899,360)
Loss before income taxes |  | (1,648,290) |  |  | (242,979) |  |  | (1,891,269)
Net loss | $ | (1,649,415) |  | $ | (242,979) |  | $ | (1,892,394)
Basic net loss per common share | $ | (0.14) |  | $ | (0.02) |  | $ | (0.16)
Diluted net loss per common share | $ | (0.14) |  | $ | (0.02) |  | $ | (0.16)
Comprehensive loss | $ | (1,651,136) |  | $ | (242,979) |  | $ | (1,894,115)
The effect of the restatement on the consolidated statement of cash flows for the three months ended August 31, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss | $ | (1,649,415) |  | $ | (242,979) |  | $ | (1,892,394)
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock option expense |  | 3,808 |  |  | 242,979 |  |  | 246,787
Net cash used in operating activities |  | (1,597,146) |  |  | - |  |  | (1,597,146)
Cash and cash equivalents at end of period | $ | 6,964,314 |  | $ | - |  | $ | 6,964,314
The effect of the restatement on the consolidated balance sheet at November 30, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Shareholders' Equity: |  |  |  |  |  |  |  |
Additional paid-in-capital | $ | 35,284,864 |  | $ | 1,650,262 |  | $ | 36,935,126
Accumulated deficit |  | (25,060,311) |  |  | (1,650,262) |  |  | (26,710,573)
Other Equity accounts |  | 924,228 |  |  | - |  |  | 924,228
Total Shareholders' Equity | $ | 11,148,781 |  | $ | - |  | $ | 11,148,781
The effect of the restatement on the consolidated statement of operations for the six months ended November 30, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 1,971,960 |  | $ | 117,564 |  | $ | 2,089,524
Gross Profit |  | 544,372 |  |  | (117,564) |  |  | 426,808
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 2,419,411 |  |  | 291,379 |  |  | 2,710,790
Research and development |  | 1,261,096 |  |  | 66,970 |  |  | 1,328,066
Total operating expense |  | 3,680,507 |  |  | 358,349 |  |  | 4,038,856
Loss from operations |  | (3,136,135) |  |  | (475,913) |  |  | (3,612,048)
Loss before income taxes |  | (3,120,061) |  |  | (475,913) |  |  | (3,595,974)
Net loss | $ | (3,134,579) |  | $ | (475,913) |  | $ | (3,610,492)
Basic net loss per common share | $ | (0.27) |  | $ | (0.04) |  | $ | (0.31)
Diluted net loss per common share | $ | (0.27) |  | $ | (0.04) |  | $ | (0.31)
Comprehensive loss | $ | (3,137,829) |  | $ | (475,913) |  | $ | (3,613,742)
The effect of the restatement on the consolidated statement of operations for the three months ended November 30, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 1,011,030 |  | $ | 52,777 |  | $ | 1,063,807
Gross Profit |  | 361,496 |  |  | (52,777) |  |  | 308,719
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 1,254,847 |  |  | 149,999 |  |  | 1,404,846
Research and development |  | 586,403 |  |  | 30,158 |  |  | 616,561
Total operating expense |  | 1,841,250 |  |  | 180,157 |  |  | 2,021,407
Loss from operations |  | (1,479,754) |  |  | (232,934) |  |  | (1,712,688)
Loss before income taxes |  | (1,471,771) |  |  | (232,934) |  |  | (1,704,705)
Net loss | $ | (1,485,164) |  | $ | (232,934) |  | $ | (1,718,098)
Basic net loss per common share | $ | (0.13) |  | $ | (0.02) |  | $ | (0.15)
Diluted net loss per common share | $ | (0.13) |  | $ | (0.02) |  | $ | (0.15)
Comprehensive loss | $ | (1,486,694) |  | $ | (232,934) |  | $ | (1,719,628)
The effect of the restatement on the consolidated statement of cash flows for the six months ended November 30, 2020 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss | $ | (3,134,579) |  | $ | (475,913) |  | $ | (3,610,492)
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock option expense |  | 24,227 |  |  | 475,913 |  |  | 500,140
Net cash used in operating activities |  | (2,880,218) |  |  | - |  |  | (2,880,218)
Cash and cash equivalents at end of period | $ | 5,683,787 |  | $ | - |  | $ | 5,683,787
The effect of the restatement on the consolidated balance sheet at February 28, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Shareholders' Equity: |  |  |  |  |  |  |  |
Additional paid-in-capital | $ | 36,563,562 |  | $ | 1,935,493 |  | $ | 38,499,055
Accumulated deficit |  | (26,899,621) |  |  | (1,935,493) |  |  | (28,835,114)
Other Equity accounts |  | 935,642 |  |  | - |  |  | 935,642
Total Shareholders' Equity | $ | 10,599,583 |  | $ | - |  | $ | 10,599,583
The effect of the restatement on the consolidated statement of operations for the nine months ended February 28, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 5,639,103 |  | $ | 152,490 |  | $ | 5,791,593
Gross Profit |  | 505,867 |  |  | (152,490) |  |  | 353,377
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 3,697,804 |  |  | 540,933 |  |  | 4,238,737
Research and development |  | 1,824,312 |  |  | 67,721 |  |  | 1,892,033
Total operating expense |  | 5,522,116 |  |  | 608,654 |  |  | 6,130,770
Loss from operations |  | (5,016,249) |  |  | (761,144) |  |  | (5,777,393)
Loss before income taxes |  | (4,962,488) |  |  | (761,144) |  |  | (5,723,632)
Net loss | $ | (4,973,889) |  | $ | (761,144) |  | $ | (5,735,033)
Basic net loss per common share | $ | (0.42) |  | $ | (0.07) |  | $ | (0.49)
Diluted net loss per common share | $ | (0.42) |  | $ | (0.07) |  | $ | (0.49)
Comprehensive loss | $ | (4,982,576) |  | $ | (761,144) |  | $ | (5,743,720)
The effect of the restatement on the consolidated statement of operations for the three months ended February 28, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cost of sales | $ | 3,667,143 |  | $ | 34,926 |  | $ | 3,702,069
Gross Loss |  | (38,505) |  |  | (34,926) |  |  | (73,431)
Operating Expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 1,278,393 |  |  | 249,554 |  |  | 1,527,947
Research and development |  | 563,216 |  |  | 751 |  |  | 563,967
Total operating expense |  | 1,841,609 |  |  | 250,305 |  |  | 2,091,914
Loss from operations |  | (1,880,114) |  |  | (285,231) |  |  | (2,165,345)
Loss before income taxes |  | (1,842,427) |  |  | (285,231) |  |  | (2,127,658)
Net loss | $ | (1,839,310) |  | $ | (285,231) |  | $ | (2,124,541)
Basic net loss per common share | $ | (0.15) |  | $ | (0.03) |  | $ | (0.18)
Diluted net loss per common share | $ | (0.15) |  | $ | (0.03) |  | $ | (0.18)
Comprehensive loss | $ | (1,844,747) |  | $ | (285,231) |  | $ | (2,129,978)
The effect of the restatement on the consolidated statement of cash flows for the nine months ended February 28, 2021 is as follows:
| As Previously Reported |  |  |  |  |  |
|  | Adjustments |  | As Restated
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss | $ | (4,973,889) |  | $ | (761,144) |  | $ | (5,735,033)
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock option expense |  | 261,176 |  |  | 761,144 |  |  | 1,022,320
Net cash used in operating activities |  | (4,244,064) |  |  | - |  |  | (4,244,064)
Cash and cash equivalents at end of period | $ | 5,272,565 |  | $ | - |  | $ | 5,272,565

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