Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.20.1
Stockholders' Equity
6 Months Ended
Feb. 29, 2020
Stockholders' Equity.  
Stockholders' Equity

Note 6: Stockholders’ Equity

Preferred Stock

As previously disclosed by the Company, in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company. The number of options granted were based upon the number of shares held at that time.  These options are nontransferable and forfeited upon the sale of the related founding shares of common stock.  Upon the occurrence of certain specified events, such founding shareholders could exercise each option to purchase one share of preferred stock of the Company for $0.0001 per share. The preferred stock that is the subject of such options does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of common stock on a one-for-one basis.The options became exercisable to purchase shares of preferred stock upon the Asset Sale in January 2020.  As of the date of this filing, options exercisable for up to 24,634,560 shares of preferred stock convertible into 24,634,560 shares of common stock are outstanding. The right to exercise the options terminates on December 31, 2023. As stated above, the amount of such options, and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common stock held by such founding shareholders at the time such options were issued. Accordingly, in order to confirm the original intent of the granting of up to 50,000,000 of such options to two of our founding shareholders, Scott W. Absher and Stephen Holmes, at some point in the future the Company intends to adopt a second grant of options, exercisable upon the occurrence of certain specified events, granting an additional 12,500,000 options to each of Scott W. Absher and Stephen Holmes whereby each option permits the holder to acquire one share of preferred stock of the Company for $0.0001 per share.  Each share of preferred stock will be convertible into common stock on a one-for-one basis.

Common Stock and Warrants

On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common shares and common share equivalents are presented retroactively to reflect the reverse split.

During the three and six months ended February 29, 2029, the Company issued the following common shares

·

185,768 shares of Common Stock were issued for the conversion of 2,187,000 of June 2018 Notes, December 2018 Notes, March 2019 Notes, and December 2019 Notes payable and $79,000 of related default interest payable.

·

21,750 shares of Common Stock valued at $200,000 was issued as an inducement to exchange $2.7 million of March 2019 Notes for $2.9 million of December 2019 Exchange Notes.

·

856 shares of Common Stock were issued to two directors for services valued at $7,000.

During the three and six months ended February 29, 2019

The following tables summarize our warrants outstanding as of February 29, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

average

 

Weighted

 

 

Number

 

remaining

 

average

 

 

of

 

life

 

exercise

 

 

shares

 

(years)

 

price

Warrants outstanding, August 31, 2019

    

107,409

    

4.3

    

$

83.21

Issued

 

53,273

 

4.0

 

 

40.00

(Cancelled)

 

(29,124)

 

3.8

 

$

40.00

Warrants outstanding, February 28, 2019

 

131,558

 

3.8

 

$

47.71

Warrants exercisable, February 28, 2019

 

131,558

 

3.8

 

$

47.71

 

The following tables summarize our warrants outstanding as of February 29, 2020:

 

 

 

 

 

 

 

 

 

    

 

    

Weighted average

 

    

 

 

 

 

 

life of

 

 

 

 

 

Warrants

 

outstanding

 

 

Exercise

 

 

Outstanding

 

warrants in years

 

 

Price

March 2019 Warrants (1)

 

41,430

 

4.0

 

$

40.00

Amended March 2019 Warrants (2)

 

66,288

 

4.0

 

 

40.00

March 2019 Services Warrants (3)

 

3,366

 

4.0

 

 

70.00

June 2018 Warrants (4)

 

12,552

 

3.8

 

 

40.00

June 2018 Services Warrants (5)

 

5,422

 

3.8

 

 

99.60

2017 PIPE Warrants

 

2,500

 

2.3

 

$

276.00

 

 

131,558

 

3.8

 

$

47.71


(1)

Warrants have full-ratchet price reset provisions.  Issuance of certain securities below the then exercise price will result in a reduction of the exercise price and an increase in the warrants outstanding and exercisable. In March 2020 these warrants were exchanged for common shares and are no longer outstanding as of the date of this report.

(2)

Warrants include 13,015 March 2019 warrants that were amended in December 2019 to modify the exercise price to a fixed exercise price of $40.00 per share from $70 per share and  an additional 53,273 warrants issued during the December 2019 Note exchange.

(3)

Warrants were issued for services rendered in March 2019.

(4)

Warrants were issued in conjunction with the June 2018 Note series and have price reset protection. The price was reset to $40 per share in December 2019. The difference in fair value of the change in exercise price of the June 2018 Warrants was valued using the binomial method and recorded to other expenses. Issuance of certain securities below the then exercise price will result in a reduction of the exercise price to the price or value of the shares issued or deemed to be issued.

(5)

Warrants were issued as compensation for services rendered in June 2018.

All warrants outstanding and exercise prices have been adjusted to reflect the 1:40 reverse split.