Series A Preferred Stock

On February 15, 2016, the Company and Mr. Solomita entered into Amendment No. 1, which amends the Employment Agreement. Amendment No. 1 provides that the Company shall issue 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 Amendment No. 1. Amendment No. 1 effectively provides Mr. Solomita with a “change of control” provision over the Company in the event that his currently-held 55% 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 Amendment No. 1, the Company created “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% 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:

Common Stock

During the year ended February 28, 2018:

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

During the year ended February 28, 2017:

The shares issued to investors were not registered under the Securities Act of 1933, as amended (the “Act”), in reliance upon the private offering safe harbor provision of Rule 506 Regulation D.

January 2018 Private Placement (the “Private Placement”)

On January 9, 2018, the Company commenced a Private Placement Offering with the issuance of one unit 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 warrant and standard an anti-dilution protection clause 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 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, a warrant was exercised for 31,250 common shares for total proceeds of $375,000.

At 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 March 31, 2019 became exercisable.

Equity Incentive Plan

On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of warrants, stock options, stock appreciation rights and restricted stock units to employees, directors and consultants of the Company. A total of 3,000,000 shares of common stock are reserved for issuance under the Plan with an automatic share reserve increase, as defined in the Plan, effective March 1, 2018. The Plan is administered by the Board of Directors who designates eligible participants to be included under the Plan, the number of awards granted, the share price pursuant to the awards and the vesting conditions and period. The awards, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant and a life not exceeding 10 years from the grant date. However, where a participant, at the time of the grant, owns stock representing more than 10% of the voting power of the Company, the life of the options shall not exceed 5 years.

Stock Options

On October 19, 2017, the Company’s former Chief Financial Officer resigned, resulting in the forfeiture of all vested and unvested warrants, being 100,000 vested and 450,000 unvested warrants, respectively. All requisite services were rendered for stock-based compensation expense amounting to $505,986, until the date of termination. The warrants were granted on April 3, 2017 with an exercise price of $5.25 and had an aggregate fair value of $2,524,995, as determined by a Black-Scholes model.

On November 8, 2017, the Company issued to its Chief Financial Officer, under the Equity Incentive Plan, a warrant to purchase up to 200,000 shares of common stock at an exercise price $13.89 per share, which vests in one third increments over a period of three years, commencing on November 8, 2018, and having a contractual life of 10 years. This warrant had a grant date fair value of $1,928,840 as determined by a Black-Scholes model and is being recognized over the vesting period. In addition, the Company issued to its Chief Financial Officer a warrant to purchase up to 80,000 additional shares of common stock at an exercise price of $13.89 that will vest when certain milestones are achieved. This warrant has a grant date fair value of $771,536 as determined by a Black-Scholes model and will be recognized in earnings when it is probable that the milestones will be achieved.

The grant date fair value of the warrants was determined by a Black-Scholes model with the following assumptions:

During the year ended February 28, 2018, the Company issued three warrants to two employees, not covered under the Plan, to purchase up to 530,000 shares of common stock, in aggregate, at an exercise price of $5.25 per share. The warrants to purchase up to an aggregate of 100,000 and 380,000 shares of common stock, respectively, each vest quarterly in equal amounts over 24 and 48 months, respectively, beginning on July 24, 2017 and June 13, 2017, respectively, and each have a contractual life of 10 years. These warrants collectively have a grant date fair value of $4,786,142 as determined by a Black-Scholes model and are being recognized over the vesting period. In addition, a warrant to purchase up to 50,000 additional shares of our common stock will vest when certain milestones are achieved. This warrant had a grant date fair value of $479,885 as determined by a Black-Scholes model and amortization will commence when it is probable that the milestones will be achieved.

The grant date fair value of the warrants was determined by a Black-Scholes model with the following assumptions:

During the year ended February 28, 2018, the Company issued three warrants to three employees, under the Plan, to purchase up to 950,000 shares of common stock, in aggregate, at exercise prices ranging from $12.00 to $13.49 per share. The warrants to purchase up to an aggregate of 950,000 shares of common stock vest 200,000 and 100,000 warrants immediately, respectively, and, the balance, monthly in equal amounts over 60 and 24 months, respectively, beginning September 14, 2017 and October 16, 2017, respectively, and each have a contractual life of 10 years. These warrants collectively have a grant date fair value of $10,412,575, in aggregate, as determined by a Black-Scholes model and will be amortized over the vesting period.

The grant date fair value of the warrants was determined by a Black-Scholes model with the following assumptions:

During the year ended February 28, 2018, the Company amended the terms of warrants to purchase up to 702,452 shares of our common stock which were originally issued on December 1, 2015 to three employees. The amendment extended the expiry date of the warrants to November 30, 2025 from November 30, 2017. As a result of the modification, the Company recognized additional stock-based compensation expense of $63,677.

During the year ended February 28, 2018, the Company issued, as part of the Private Placement warrants to purchase 171,917 shares of the Company’s common stock at an exercise price of $12.00 per share to certain investors upon the sale of 687,667 common shares.

During the year ended February 28, 2017, the Company issued warrants to purchase 75,000 shares of the Company’s common stock at an exercise price of $3.00 per share for services. The total fair value of the warrants granted was determined to be $1,398,288. In addition, the Company issued warrants to purchase 637,670 shares of the Company’s common stock at an exercise price of $6.00 per share to certain investors upon the sale of 1,275,340 common shares.

The expense recognized in the financial statements amounted to $6,281,319 and $135,670 for the years ended February 28, 2018 and 2017, respectively, and are included in operating expenses. As at February 28, 2018 and 2017, the unamortized balance of these costs was $14,753,072 and $394,523, respectively. The aggregate intrinsic value of the warrants outstanding as at February 28, 2018 and 2017 was $10,949,472 and $5,921,500, respectively, calculated as the difference between the closing market price of $12.26 and $5.50 and the exercise price of the Company’s warrants as at February 28, 2018 and 2017.

The table below summarizes the Company’s warrant activities:

During the year ended February 28, 2018, 115,034 shares of the Company’s common stock were issued as a result of a cashless exercise of 122,919 warrants with an exercise price of $0.80 and a fair value of $0.55. In addition, the Company issued 355,020 shares of its common stock upon the exercise of warrants at exercise prices ranging from $0.80 to $12.00 per share, resulting in proceeds of $1,642,016.

The following table summarizes information concerning outstanding and exercisable warrants as at February 28, 2018:

Restricted Stock Units

During the year ended February 28, 2018, the Company issued, under the Equity Incentive Plan, four restricted stock unit awards to directors of the Company to earn up to 34,102 shares of common stock, in aggregate. The restricted stock units vest upon completion of services, on May 31, 2018. These restricted stock units have a grant date fair value of $443,326, based on the closing market price of the Company’s common stock on the date of grant, reduced by the present value of the estimated future dividends during the vesting period in which the restricted stock rights holder will not participate. The weighted average grant date fair value of the restricted stock units was $13.00 and no dividends are expected during the vesting period.

Recognition of these costs amounted to $265,994 for the year ended February 28, 2018 and are included in operating expenses. As at February 28, 2018, the unamortized balance of these costs was $177,332.