Quarterly report pursuant to Section 13 or 15(d)

Registered Direct Equity Offering

Registered Direct Equity Offering
6 Months Ended
Nov. 30, 2016
Registered Direct Equity Offering

Note 11 – Registered Direct Equity Offering

In September 2016, the Company entered into Securities Purchase Agreements with certain institutional investors for the sale of 13,333,334 shares of common stock at a purchase price of $0.75 per share in a registered direct equity offering (the “Registered Offering”), pursuant to a registration statement on Form S-3. The investors in this Registered Offering also received warrants to purchase 6,666,667 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the offering of approximately $9 million after placement fees of 8% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 1,066,667 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.

A summary of the cash proceeds of the offering is shown below:


Gross proceeds from sale of common stock

   $ 10,000,000   

Placement agent fees and expenses





Total net proceeds

   $ 8,990,000   




As fully described in Note 5 above, the investor warrants and the placement agent warrants issued in conjunction with the Registered Offering are required to be accounted for in accordance with ASC 480 and ASC 815.

A summary of the ASC 480 allocation of the proceeds of the offering is as follows:


Allocated to common stock and additional paid in capital

   $ 6,334,417   

Allocated to warrant liabilities





Total net proceeds

   $ 8,990,000   




Closing costs included 1,066,667 warrants valued at $819,200 for placement agent fees. Based upon the estimated fair value of the stock and warrants in the units, the Company allocated $241,986 to financing expense and $577,214 as stock issuance costs.