[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[ ]
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TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF
1934
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Nevada
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20-8753132
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[X]
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(Do
not check if a smaller reporting company)
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Emerging growth company | [ ] |
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20
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Item 1. Financial
Statements
|
|
May 31, 2017
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February 28, 2017
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ASSETS
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(Unaudited)
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(Audited)
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Current
Assets:
|
|
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Cash
and cash equivalents
|
$152,211
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$782,707
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Account
receivable
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23,300
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-
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Prepaid
expenses
|
40,535
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20,856
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Total Current Assets
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216,046
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803,563
|
|
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Equipment
|
|
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(net
of accumulated depreciation of $287,900
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|
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and
$265,234, respectively)
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391,969
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414,635
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Refundable
deposits
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43,600
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43,600
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TOTAL ASSETS
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$651,615
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$1,261,798
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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LIABILITIES
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Current
Liabilities:
|
|
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Accounts
payable
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$668,866
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$572,195
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Accrued
expense
|
251,567
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179,680
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Deferred
research & development reimbursement
|
64,989
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177,517
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Convertible
note payable (net of debt discount of $6,315 and $10,914,
respectively)
|
993,685
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989,086
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Accrued
interest payable
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41,095
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15,890
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Accrued
dividends on Series B Preferred Stock
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15,638
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15,638
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Total Current Liabilities
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2,035,840
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1,950,006
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|
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Warrant
liability
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145,330
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2,106,972
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Total Liabilities
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2,181,170
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4,056,978
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STOCKHOLDERS'
DEFICIT
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|
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Series
A convertible preferred stock ($0.0001 par value; 1,000,000 shares
authorized; 874,257 shares issued and outstanding as of May 31,
2017 and February 28, 2017)
|
87
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87
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Series
A-2 convertible preferred stock ($0.0001 par value; 1,000,000
shares authorized; 70,541 shares issued and outstanding as of May
31, 2017 and February 28, 2017)
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7
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7
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Series
B convertible preferred stock ($0.0001 par value; 1,000 shares
authorized; 217 and 213 shares issued and outstanding as of May 31,
2017 and February 28, 2017, respectively)
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-
|
-
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Common
stock ($0.0001 par value; 150,000,000 shares authorized; 4,807,942
and 4,707,942 shares issued and outstanding as of May 31, 2017 and
February 28, 2017, respectively)
|
481
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471
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Additional
paid-in-capital
|
25,064,862
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23,523,140
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Accumulated
deficit
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(26,594,992)
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(26,318,885)
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Total stockholders' deficit
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(1,529,555)
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(2,795,180)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$651,615
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$1,261,798
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For the three months ended
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May 31, 2017
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May 31, 2016
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Research
collaboration revenue
|
$23,300
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$-
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Total
Revenue
|
23,300
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-
|
|
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Operating
Expenses
|
|
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General
& administrative
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570,605
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555,681
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Research
& development
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189,444
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271,123
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Total
Operating Expenses
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760,049
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826,804
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Other
Expenses (income)
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Interest
expense
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29,804
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304,646
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Other
income, net
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(66)
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(267)
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Change
in fair value of warrant liability
|
(490,380)
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34,492
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Change
in fair value of put option embedded in notes payable
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-
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53,999
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Settlement
expense
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-
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115
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Total
Other Expenses (Income)
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(460,642)
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392,985
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Net Loss
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$(276,107)
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$(1,219,789)
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Loss attributable to common shareholders and loss per common
share:
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Net
loss
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(276,107)
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(1,219,789)
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Deemed
dividend on Series B Preferred Stock issuance
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-
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(708,303)
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Accrued
dividend on Series B Preferred Stock
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(23,457)
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(73,442)
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Loss attributable to common shareholders
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$(299,564)
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$(2,001,534)
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Net
loss per share, basic and diluted
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$(0.06)
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$(1.08)
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Weighted
average of shares outstanding, basic and diluted
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4,774,669
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1,847,140
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For the three months ended
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May 31,
2017
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May 31,
2016
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Cash
Flows from Operating Activities:
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Net
loss
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$(276,107)
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$(1,219,789)
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Adjustments
to reconcile net loss to net
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cash
used in operating activities:
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Depreciation
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22,666
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23,766
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Share-based
compensation
|
70,470
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119,086
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Accretion
of debt discount included in interest expense
|
4,599
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279,593
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Change
in fair value of warrant liability
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(490,380)
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34,492
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Change
in fair value of put option embedded in notes payable
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-
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53,999
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Net
changes in assets and liabilities:
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Prepaid
expenses
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(19,679)
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(971)
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Accounts
receivable
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(23,300)
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-
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Accounts
payable and accrued expenses
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168,558
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266,299
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Deferred
research and development reimbursement
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(112,528)
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-
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Interest
payable
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25,205
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24,000
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Net Cash used in Operating Activities
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(630,496)
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(419,525)
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Cash
Flows from Financing Activities:
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Proceeds
from issuance of debt, net of debt issuance costs
|
-
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122,790
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Proceeds
from issuance of common stock and warrants, net of offering
costs
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-
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126,487
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Payment
of short-term debt
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-
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(39,241)
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Net Cash provided by Financing Activities
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-
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210,036
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Net
decrease in cash and cash equivalents
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(630,496)
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(209,489)
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Cash
and cash equivalents:
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Cash
at the beginning of the period
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782,707
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363,783
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Cash at the end of the period
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$152,211
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$154,294
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Supplemental
Disclosure of Non-cash Financing Activities:
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Warrant
liability associated with note payable
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$-
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$15,225
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Deemed
dividend related to Series B Preferred Stock BCF adjustment for
conversion price adjustment
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$-
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$708,303
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Series
B Preferred PIK dividend
|
$23,457
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$72,476
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Series
B Preferred Stock accrued dividends
|
$23,457
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$73,442
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Reclassification
between warrant liability and additional
paid-in-capital
|
$1,471,262
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$-
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Issuance
of common stock and warrants as payment of accounts
payable
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$-
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$32,000
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Financing
of insurance premium through notes payable
|
$-
|
$158,400
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Warrants
issued to placement agents
|
$-
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$15,400
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May 31,
2017
|
May 31,
2016
|
Expected
volatility
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129.0%
|
100.0%
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Expected
dividend yield
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0.00%
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0.00%
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Risk-free
interest rate
|
1.95%
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1.65%
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Expected
term
|
6.01
years
|
6.00
years
|
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Options
|
Weighted
average exercise
price
|
Aggregate
intrinsic value
|
Weighted
average remaining
contractual life (years)
|
Outstanding
at February 28, 2017
|
966,474
|
$5.71
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$-
|
8.87
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Granted:
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55,000
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$3.00
|
-
|
-
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Expired
and forfeited:
|
(39,999)
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$8.25
|
-
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-
|
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Outstanding
and expected to vest at May 31, 2017
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981,475
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$5.46
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$-
|
8.72
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Exercisable
at May 31, 2017
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350,477
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$9.96
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$-
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7.95
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Exercisable
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Unexercisable
|
||||
Number of Options
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Exercise Price
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Weighted Average Remaining Life (years)
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Number of Options
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Exercise Price
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Weighted Average Remaining Life (years)
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160,555
|
$2.00
|
9.11
|
319,445
|
$2.00
|
9.11
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16,668
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$2.19
|
8.99
|
83,332
|
$2.19
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8.99
|
-
|
$3.00
|
-
|
176,000
|
$3.00
|
9.68
|
30,000
|
$3.55
|
8.68
|
-
|
$8.10
|
-
|
1,068
|
$8.10
|
7.67
|
-
|
$8.25
|
-
|
40,001
|
$8.25
|
8.01
|
40,000
|
$10.20
|
8.05
|
41,434
|
$10.20
|
4.61
|
-
|
$10.50
|
-
|
3,334
|
$11.25
|
7.97
|
3,333
|
$11.25
|
7.97
|
11,112
|
$16.50
|
7.38
|
8,888
|
$16.50
|
7.38
|
8,068
|
$22.50
|
7.67
|
-
|
$22.50
|
-
|
38,237
|
$48.75
|
5.85
|
-
|
$48.75
|
-
|
350,477
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$9.96
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7.95
|
630,998
|
$2.95
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9.15
|
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Warrants
|
Weighted
average exercise
price
|
Aggregate
intrinsic
value
|
Weighted
average remaining contractual life (years)
|
|
|
|
|
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Outstanding
at February 28, 2017
|
2,698,694
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$5.11
|
$-
|
4.21
|
Granted:
|
37,500
|
3.00
|
-
|
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Cancelled/Expired/Exercised
|
(4,671)
|
31.50
|
-
|
|
Outstanding
at May 31, 2017
|
2,731,523
|
$5.04
|
$-
|
3.98
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Exercise
Prices
|
Number
of shares
|
Weighted average
remaining life (years)
|
Exercisable
number of shares
|
$2.00
|
164,888
|
2.39
|
164,888
|
$2.20
|
43,636
|
3.70
|
43,636
|
$3.00
|
2,152,908
|
0.11
|
2,152,908
|
$8.25
|
9,134
|
3.24
|
9,134
|
$10.50
|
126,978
|
2.85
|
126,978
|
$15.00
|
556
|
3.00
|
556
|
$18.75
|
695
|
3.00
|
695
|
$22.50
|
209,754
|
1.13
|
209,754
|
$31.50
|
21,241
|
1.32
|
21,241
|
$37.50
|
1,733
|
0.62
|
1,733
|
|
2,731,523
|
3.98
|
2,731,523
|
|
Convertible Note
Payable
|
Discount
|
Voluntary Exchange Feature
|
Debt,
Net
|
February
28, 2017 balance
|
$1,000,000
|
$(10,914)
|
$-
|
$989,086
|
Amortization
of debt discount
|
-
|
4,599
|
-
|
4,599
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May
31, 2017 balance
|
$1,000,000
|
$(6,315)
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$-
|
$993,685
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●
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Level 1: Observable inputs such as quoted prices in active markets
for identical instruments
|
●
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Level 2: Quoted prices for similar instruments that are directly or
indirectly observable in the market
|
●
|
Level 3: Significant unobservable inputs supported by little or no
market activity. Financial instruments whose values are
determined using pricing models, discounted cash flow
methodologies, or similar techniques, for which determination of
fair value requires significant judgment or
estimation.
|
|
Promissory Note Warrants
|
Series B Warrant
|
PPM Warrants
|
Total
|
Fair
value at February 28, 2017
|
$157,204
|
$35,690
|
$1,914,078
|
$2,106,972
|
Change
in fair value
|
(37,366)
|
(10,198)
|
(442,816)
|
(490,380)
|
Reclassification
of warrant liability to equity
|
-
|
-
|
(1,471,262)
|
(1,471,262)
|
Fair
value at May 31, 2017
|
$119,838
|
$25,492
|
$-
|
$145,330
|
|
Estimated
Useful Lives
|
May 31,
2017
|
February 28,
2017
|
Research
equipment
|
7 years
|
$601,720
|
$601,720
|
Computer
equipment
|
5 years
|
78,149
|
78,149
|
|
679,869
|
679,869
|
|
Accumulated
depreciation and amortization
|
|
(287,900)
|
(265,234)
|
Equipment, net
|
|
$391,969
|
$414,635
|
|
May 31,
2017
|
May 31,
2016
|
Stock
options
|
981,475
|
526,976
|
Warrants
|
2,731,523
|
967,934
|
Preferred
stock
|
1,361,837
|
1,906,404
|
Convertible
debt
|
520,548
|
-
|
Total
|
5,595,383
|
3,401,314
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Item
1. Legal Proceedings
|
Item 1A. Risk
Factors
|
Item 4. Mine Safety
Disclosures
|
(b)
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Exhibits
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Exhibit No.
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|
Description
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31.1
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Certification of the Principal Executive and Financial
Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
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32.1
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Certification of the Principal Executive and Financial
Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase
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*
|
Pursuant to Rule 406T of Regulation S-T, these interactive data
files are deemed note filed or part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933 or Section 18 of the Securities Exchange Act of 1934 and
otherwise are not subject to liability.
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||
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|
METASTAT, INC.
|
||
|
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|
Date: July 17, 2017
|
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By:
|
/s/ Douglas A. Hamilton
|
|
|
|
|
Douglas A. Hamilton
President, Chief Executive Officer and Director
(Principal Executive and Financial Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of MetaStat,
Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchanged Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
|
|
d)
|
disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
a)
|
all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
b)
|
any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant’s internal control over financial
reporting.
|
|
/s/ Douglas A. Hamilton
|
|
|
Douglas A. Hamilton
President, Chief Executive Officer and Director
(Principal Executive and Financial Officer)
|
|
/s/ Douglas A. Hamilton
|
|
|
Douglas A. Hamilton
President, Chief Executive Officer and Director
(Principal Executive and Financial Officer)
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
May 31, 2017 |
Jul. 14, 2017 |
|
Document And Entity Information | ||
Entity Registrant Name | MetaStat, Inc. | |
Entity Central Index Key | 0001404943 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-28 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,225,573 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2018 | |
Trading symbol | MTST |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Income Statement [Abstract] | ||
Research collaboration revenue | $ 23,300 | $ 0 |
Total revenue | 23,300 | 0 |
OPERATING EXPENSES | ||
General & administrative | 570,605 | 555,681 |
Research & development | 189,444 | 271,123 |
Total Operating Expenses | 760,049 | 826,804 |
OTHER EXPENSES (INCOME) | ||
Interest expense | 29,804 | 304,646 |
Other income, net | (66) | (267) |
Change in fair value of warrant liability | (490,380) | 34,492 |
Change in fair value of put option embedded in notes payable | 0 | 53,999 |
Settlement expense | 0 | 115 |
Total Other Expenses (Income) | (460,642) | 392,985 |
NET LOSS | (276,107) | (1,219,789) |
Net loss | (276,107) | (1,219,789) |
Deemed dividend on Series B Preferred Stock issuance | 0 | (708,303) |
Accrued dividends on Series B Preferred Stock | (23,457) | (73,442) |
Loss attributable to common shareholders | $ (299,564) | $ (2,001,534) |
Net loss per share, basic and diluted | $ (0.06) | $ (1.08) |
Weighted average of shares outstanding | 4,774,669 | 1,847,140 |
DESCRIPTION OF BUSINESS AND GOING CONCERN |
3 Months Ended |
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May 31, 2017 | |
Description Of Business And Going Concern | |
DESCRIPTION OF BUSINESS AND GOING CONCERN | MetaStat, Inc. (“we,” “us,” “our,” the “Company,” or “MetaStat”) is a pre-commercial biotechnology company focused on discovering and developing personalized therapeutic (Rx) and diagnostic (Dx) treatment solutions for cancer patients. Our Mena isoform “driver-based” diagnostic biomarkers also serve as novel therapeutic targets for anti-metastatic drugs. MetaStat is developing therapeutic product candidates and paired companion diagnostics based on a novel approach that makes the Mena isoform protein a drugable target. Our core expertise includes an understanding of the mechanisms and pathways that drive tumor cell invasion and metastasis, as well as drug resistance to certain targeted therapies and cytotoxic chemotherapies. MetaStat’s head office, research laboratories, and state-of-the-art CLIA-certified diagnostic laboratory are located in Boston, MA. The Company was incorporated on March 28, 2007 under the laws of the State of Nevada.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MetaStat Biomedical, Inc., a Delaware corporation and all significant intercompany balances have been eliminated by consolidation.
These interim unaudited financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States and should be read in conjunction with the Company’s audited consolidated financial statements and related footnotes for the year ended February 28, 2017, included in the Company’s Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on May 30, 2017. These unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of May 31, 2017 and its results of operations and cash flows for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. These interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses of approximately $26.6 million as of May 31, 2017, has negative working capital and has not generated positive cash flows from operations. The continuation of the Company as a going concern is dependent upon continued financial support from its shareholders, the ability of the Company to obtain necessary equity and/or debt financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company cannot make any assurances that additional financings will be available to it and, if available, completed on a timely basis, on acceptable terms or at all. If the Company is unable to complete a debt or equity offering, or otherwise obtain sufficient financing when and if needed, it would negatively impact its business and operations and could also lead to the reduction or suspension of the Company’s operations and ultimately force the Company to cease operations. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Subsequent to May 31, 2017, the Company completed a private placement for gross proceeds of approximately $2.14 million (See Note 12).
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CAPITAL STOCK |
3 Months Ended |
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May 31, 2017 | |
Equity [Abstract] | |
CAPITAL STOCK | The Company has authorized 160,000,000 shares of capital stock, par value $0.0001 per share, of which 150,000,000 are shares of common stock and 10,000,000 are shares of “blank-check” preferred stock.
Our board of directors (the “Board”) is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights, which could adversely affect the voting power or other rights of the holders of common stock. The preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of the Company.
Common Stock
The holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally available funds; however, the current policy of our Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution.
Series A Convertible Preferred Stock
Pursuant to the Certificate of Designation of Rights and Preferences of the Series A Preferred Stock (the “Series A Preferred Stock” or “Series A Preferred”), the terms of the Series A Preferred Stock are as follows:
Ranking
The Series A Preferred Stock will rank (i) senior to our common stock, (ii) pari passu with our Series A-2 Preferred Stock (as defined below) and (iii) junior to our Series B Preferred Stock (as defined below) with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company.
Dividends
The Series A Preferred Stock is not entitled to any dividends.
Liquidation Rights
In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series A Preferred Stock an amount equal to the fair market value as determined in good faith by the Board.
Voluntary Conversion; Anti-Dilution Adjustments
Each fifteen (15) shares of Series A Preferred Stock shall be convertible into one share of common stock (the “Series A Conversion Ratio”). The Series A Conversion Ratio is subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of the common stock, or mergers or reorganizations.
Voting Rights
The Series A Preferred Stock has no voting rights. The common stock into which the Series A Preferred Stock is convertible shall, upon issuance, have all of the same voting rights as other issued and outstanding common stock, and none of the rights of the Series A Preferred Stock.
Series A-2 Convertible Preferred Stock
Pursuant to the Certificate of Designation of Rights and Preferences of the Series A-2 Convertible Preferred Stock (the “Series A-2 Preferred Stock” or “Series A-2 Preferred”), the terms of the Series A-2 Preferred Stock are as follows:
Ranking
The Series A-2 Preferred will rank (i) senior to our common stock, (ii) pari passu with our Series A Preferred Stock, and (iii) junior to our Series B Preferred Stock (as defined below) with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company.
Dividends
The Series A-2 Preferred is not entitled to any dividends.
Liquidation Rights
In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Series A-2 Preferred shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series A-2 Preferred an amount of cash, securities or other property to which such holder would be entitled to receive with respect to each such share of Preferred Stock if such shares had been converted to common stock immediately prior to such liquidation, dissolution or winding-up of the Company.
Voluntary Conversion; Anti-Dilution Adjustments
Each share of Series A-2 Preferred shall, at any time, and from time to time, at the option of the holder, be convertible into ten (10) shares of common stock (the “Series A-2 Conversion Ratio”). The Series A-2 Conversion Ratio is subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of common stock, or mergers or reorganizations.
Conversion Restrictions
The holders of the Series A-2 Preferred may not convert their shares of Series A-2 Preferred into shares of common stock if the resulting conversion would cause such holder and its affiliates to beneficially own (as determined in accordance with Section 13(d) of the Exchange Act, and the rules thereunder) in excess of 4.99% or 9.99% of the common stock outstanding, when aggregated with all other shares of common stock owned by such holder and its affiliates at such time; provided, however, that such holder may elect to waive these conversion restrictions.
Voting Rights
The Series A-2 Preferred has no voting rights. The common stock into which the Series A-2 Preferred is convertible shall, upon issuance, have all of the same voting rights as other issued and outstanding common stock, and none of the rights of the Series A-2 Preferred.
Series B Convertible Preferred Stock
Pursuant to the Certificate of Designation of Rights and Preferences of the Series B Preferred Stock (the “Series B Preferred Stock” or “Series B Preferred”), the terms of the Series B Preferred Stock are as follows:
Ranking
The Series B Preferred Stock will rank senior to our Series A Preferred Stock, Series A-2 Preferred Stock and common stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company.
Stated Value
Each shares of Series B Preferred Stock will have a stated value of $5,500, subject to adjustment for stock splits, combinations and similar events (the “Stated Value”).
Dividends
Cumulative dividends on the Series B Preferred Stock accrue at the rate of 8% of the Stated Value per annum, payable quarterly on March 31, June 30, September 30, and December 31 of each year, from and after the date of the initial issuance. Dividends are payable in kind in additional shares of Series B Preferred Stock valued at the Stated Value or in cash at the sole option of the Company. At May 31, 2017 and February 28, 2017, the dividends payable to the holders of the Series B Preferred Stock amounted to approximately $16,000 and $16,000, respectively. During the three months ended May 31, 2017 and May 31, 2016, the Company issued 4.2648 and 13.1771 shares of Series B Preferred Stock, respectively, for payment of dividends amounting to approximately $23,000 and $72,000, respectively.
Liquidation Rights
If the Company voluntarily or involuntarily liquidates, dissolves or winds up its affairs, each holder of the Series B Preferred Stock will be entitled to receive out of the Company’s assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, but before any distribution of assets is made on the Series A Preferred Stock or common stock or any of the Company’s shares of stock ranking junior as to such a distribution to the Series B Preferred Stock, a liquidating distribution in the amount of the Stated Value of all such holder’s Series B Preferred Stock plus all accrued and unpaid dividends thereon. At May 31, 2017 and February 28, 2017, the value of the liquidation preference of the Series B Preferred Stock aggregated to approximately $1.2 million and $1.19 million, respectively.
Conversion; Anti-Dilution Adjustments
Each share of Series B Preferred Stock will be convertible at the holder’s option into common stock in an amount equal to the Stated Value plus accrued and unpaid dividends thereon through the conversion date divided by the then applicable conversion price. The initial conversion price was $8.25 per share (the “Series B Conversion Price”) and is subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of common stock, or mergers or reorganizations, as well as “full ratchet” anti-dilution adjustments for future issuances of other Company securities (subject to certain standard carve-outs) at prices less than the applicable Series B Conversion Price.
The issuance of shares of common stock pursuant to the 2016 Unit Private Placement (as defined in Note 3) triggered the full ratchet anti-dilution price protection provision of the Series B Preferred Stock. Accordingly, the Series B Conversion Price was adjusted from $8.25 to $2.00 per share.
The Series B Preferred Stock is subject to automatic conversion (the “Mandatory Conversion”) at such time when the Company’s common stock has been listed on a national stock exchange such as the NASDAQ, New York Stock Exchange or NYSE MKT; provided, that, on the Mandatory Conversion date, a registration statement providing for the resale of the shares of common stock underlying the Series B Preferred Stock is effective. In the event of a Mandatory Conversion, each share of Series B Preferred Stock will convert into the number of shares of common stock equal to the Stated Value plus accrued and unpaid dividends divided by the applicable Series B Conversion Price.
Voting Rights
The holders of the Series B Preferred Stock shall be entitled to the number of votes equal to the number of shares of common stock into which such Series B Preferred Stock could be converted for purposes of determining the shares entitled to vote at any regular, annual or special meeting of stockholders of the Company, and shall have voting rights and powers equal to the voting rights and powers of the common stock (voting together with the common stock as a single class).
Most Favored Nation
For a period of up to 30 months after March 31, 2015, if the Company issues any New Securities (as defined below) in a private placement or public offering (a “Subsequent Financing”), the holders of Series B Preferred Stock may exchange all of the Series B Preferred Stock at their Stated Value plus all Series A Warrants (as defined below) issued to the Series B Preferred Stock holders for the securities issued in the Subsequent Financing on the same terms of such Subsequent Financing. This right expires upon the earlier of (i) September 30, 2017 and (ii) the consummation of a bona fide underwritten public offering in which the Company receives aggregate gross proceeds of at least $5,000,000. “New Securities” means shares of the common stock, any other securities, options, warrants or other rights where upon exercise or conversion the purchaser or recipient receives shares of the common stock, or other securities with similar rights to the common stock, subject to certain standard carve-outs.
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EQUITY ISSUANCES |
3 Months Ended |
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May 31, 2017 | |
Equity [Abstract] | |
EQUITY ISSUANCES | Common stock financing – the 2016 Unit Private Placement
During the three months ended May 31, 2016, the Company entered into a subscription agreement pursuant to a private placement (the “2016 Unit Private Placement”) with a number of accredited investors pursuant to which the Company issued an aggregate of 20 units consisting of an aggregate of 100,000 shares of common stock and five-year warrants to purchase 50,000 shares of common stock at a purchase price of $3.00 per share (the “Warrants”) for an aggregate purchase price of $200,000. After deducting placement agent fees and other offering expenses, including legal expenses, net proceeds amounted to approximately $126,000. Additionally, the Company issued an aggregate of 10,000 placement agent warrants in substantially the same form as the Warrants.
Registration Rights Agreement
Pursuant to a registration rights agreement entered into by the parties, the Company agreed to file a registration statement with the SEC providing for the resale of the shares of common stock and the shares of common stock underlying the Warrants issued pursuant to the 2016 Unit Private Placement on or before the date which is forty-five (45) days after the date of the final closing of the 2016 Unit Private Placement. The Company will use its commercially reasonable efforts to cause the registration statement to become effective within one hundred fifty (150) days from the filing date. The Company has received a waiver from a majority of the 2016 Unit Private Placement investors extending the filing date of the registration statement to no later than December 15, 2016. The Company filed the Registration Statement on Form S-1 with the SEC on December 14, 2016, which was declared effective by the SEC on January 5, 2017.
Deemed Dividend due to Conversion Price Adjustment
During the three months ended May 31, 2016, as a result of the adjustment of the Series B Conversion Price from $8.25 to $2.00 per share due to the 2016 Unit Private Placement, the Company recorded a non-cash deemed dividend, amounting to approximately $708,000. The expense was measured at the intrinsic value of the beneficial conversion feature for each issuance of Series B Preferred Stock in the Series B Preferred private placement and was limited to the amount of Series B Preferred Stock allocated proceeds less previously recognized beneficial conversion features.
Issuances of common stock for services
During the three months ended May 31, 2016, the Company issued an aggregate of 25,000 shares of common stock to a consultant for services that vested over a two-month term and to settle $32,000 of accounts payable. The fair value of the shares amounted to approximately $46,000 on the grant date, of which approximately $14,000 was recognized into general and administrative expense during the three months ended May 31, 2016.
During the three months ended May 31, 2017, the Company issued an aggregate of 100,000 shares of common stock to members of its Board that vested immediately. The fair value of the shares amounted to approximately $130,000 on the grant date, which was recognized into general and administrative expense during the three months ended May 31, 2017.
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STOCK OPTIONS |
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STOCK OPTIONS | During the three months ended May 31, 2016, the Company issued options to purchase 50,000 shares of common stock at $2.19 per share to a non-executive member of its Board. These 50,000 options vest in three equal installments on each of May 26, 2017, May 26, 2018, and May 26, 2019 and expire on May 26, 2026. These options had a total fair value of approximately $87,000 as calculated using the Black-Scholes model.
During the three months ended May 31, 2016, the Company issued options to purchase 50,000 shares of common stock at $2.19 per share to a non-executive member of its Board for performing other services. These 50,000 options vest upon achieving a certain milestone and expire on May 26, 2026. These options will be measured and recognized when vesting becomes probable.
During the three months ended May 31, 2017, the Company issued options to purchase an aggregate 55,000 shares of common stock at 3.00 per share to its President and Chief Executive Officer and a member of its management team. These options expire on April 4, 2027. 18,334 of these options vest on the first anniversary date of April 4, 2018, and then 36,666 of these options vest in equal monthly installments over a twenty-four-month period. These options had a total fair value of approximately $60,000 as calculated using the Black-Scholes model.
During the three months ended May 31, 2017, an aggregate of 39,999 unvested options to purchase shares of common stock at 8.25 per share to certain members of the Company’s Board were terminated upon resignation from the board. The Company recognized a credit of approximately $146,000 for the true-up of forfeitures related to these unvested options during the three months ended May 31, 2017.
The weighted average inputs to the Black-Scholes model used to value the stock options granted during the three months ended May 31, 2017 and 2016 are as follows:
For the three months ended May 31, 2016, the Company recognized approximately $105,000 of compensation expense related to stock options, of which approximately $88,000 was recognized in general and administrative expenses and approximately $17,000 in research and development expenses.
For the three months ended May 31, 2017, the Company recognized a credit of approximately $96,000 of compensation expense related to stock options, of which a credit of approximately $113,000 was recognized in general and administrative expenses and expense of approximately $16,000 in research and development expenses.
The following table summarizes common stock options issued and outstanding as of May 31, 2017:
The following table breaks down exercisable and unexercisable common stock options by exercise price as of May 31, 2017:
As of May 31, 2017, we had approximately $172,000 of unrecognized compensation related to employee and consultant stock options that are expected to vest over a weighted average period of 1.15 years and, approximately $500,000 of unrecognized compensation related to employee stock options whose recognition is dependent on certain milestones to be achieved. Additionally, there were 173,333 stock options with a performance vesting condition that were granted to consultants which will be measured and recognized when vesting becomes probable.
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WARRANTS |
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WARRANTS | For the three months ended May 31, 2016, the Company issued warrants to purchase an aggregate of 9,092 shares of common stock in connection with the issuance of the OID Notes pursuant to the March 2016 OID Note Purchase Agreements dated between March 3 and 15, 2016, referenced in Note 6. These warrants were initially exercisable at $8.25 per share and expire between March 3 and 15, 2021. These warrants vested immediately. These warrants contained an anti-dilution price protection provision, which required the warrants to be recorded as derivative warrant liability. Such clause will lapse upon completion of a Qualified Offering, as defined in the warrant agreement. These warrants were recorded as a debt discount based on their fair value.
For the three months ended May 31, 2016, the Company issued warrants to purchase an aggregate of 50,000 shares of common stock in connection with the issuance of common stock pursuant to the 2016 Unit Private Placement referenced in Note 3. These warrants are exercisable at $3.00 per share and expire on May 26, 2021. These warrants vested immediately. These warrants do not contain any provision that would require liability treatment, therefore they were classified as equity in the Condensed Consolidated Balance Sheet.
For the three months ended May 31, 2017, the Company issued warrants to purchase an aggregate of 37,500 shares of common stock to a consultant for advisory services. These warrants are exercisable at $3.00 per share and expire between March 31, 2021 and May 31, 2021. These warrants vested immediately. The fair value of these warrants was determined to be approximately $37,000, as calculated using the Black-Scholes model. Average assumptions used in the Black-Scholes model included: (1) a discount rate of 1.83%; (2) an expected term of 5.0 years; (3) an expected volatility of 131%; and (4) zero expected dividends. For the three months ended May 31, 2017, the Company recognized approximately $37,000 of stock-based compensation for these warrants.
For the three months ended May 31, 2017, the Company reclassified approximately $1.5 million of derivative warrant liability to equity in connection with the lapse of a price protection provision, that had resulted in these instruments being classified as a derivative warrant liability at issuance. The fair value of these warrants was determined to be approximately $1.5 million, as calculated using the Black-Scholes model. Average assumptions used in the Black-Scholes model included: (1) a discount rate of 1.81%; (2) an expected term of 4.46 years; (3) an expected volatility of 124%; and (4) zero expected dividends
The following table summarizes common stock purchase warrants issued and outstanding:
Warrants exercisable at May 31, 2017 are:
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NOTE PAYABLE |
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NOTE PAYABLE | Promissory Note
On July 31, 2015, the Company entered into a note purchase agreement, which was subsequently amended, whereby it issued and sold a non-convertible promissory note in the principal amount of $1.2 million (the “Promissory Note”) and a warrant to purchase 43,636 shares of the Company’s common stock. Effective October 21, 2016, $600,000 principal amount of the Promissory Note plus $48,000 of accrued and unpaid interest was exchanged into the securities issued in a private placement. In January 2017, the remaining unpaid principal balance and accrued interest were exchanged into a convertible note (see Convertible Note below).
During the three months ended May 31, 2016, the Company recognized approximately $138,000 of interest expense related to the Promissory Note, as amended, including amortization of debt discount of approximately $114,000 and accrued interest expense of $24,000. Additionally, the Company recognized a loss of approximately $29,000 in the three months ended May 31, 2016 due to the change in estimated fair value of a bifurcated derivative liability related to an exchange provision in the Promissory Note.
OID Notes
In February 2016, the Company entered into an OID note purchase agreement dated February 12, 2016 (the “February 2016 OID Note Purchase Agreement”). Pursuant to the February 2016 OID Note Purchase Agreement, the Company received an aggregate purchase price of $500,000 and issued OID promissory Notes (the “OID Notes”) in the aggregate principal amount of $600,000 and warrants (the “OID Warrants”) to purchase an aggregate of 36,367 shares of the Company’s common stock.
The Company entered into OID note purchase agreements between March 4 and 15, 2016 (the “March 2016 OID Note Purchase Agreements”) with various accredited investors. Pursuant to the March 2016 OID Note Purchase Agreements, the Company issued OID Notes with an aggregate purchase price of $125,000 and OID Warrants to purchase 9,902 shares of the Company’s common stock. The OID Notes issued in March 2016 have a principal amount equal to $150,000 or 120% of the purchase price.
Pursuant to the March 2016 closings of the OID Note private placement, the principal amount was first allocated to the fair value of the OID Warrants in the amount of approximately $15,000, next to the value of the original issuance discount in the amount of $25,000, then to the fair value of a bifurcated derivative liability related to an exchange provision in the OID Notes in the amount of approximately $33,000, and lastly to the debt discount related to offering costs of approximately $2,000 with the difference of approximately $75,000 representing the initial carrying value of the OID Notes issued in March 2016.
The OID Notes were subsequently amended in August 2016, extending the maturity date of the OID Notes in exchange for among other, (i) an increased principal amount of the OID Notes by 10% to $825,000 in the aggregate from $750,000 in the aggregate, and (ii) the issuance of an aggregate of 45,459 common stock purchase warrants with an exercise price of $2.00 per share and a term of five years.
In October 2016, $553,000 principal amount of OID Notes were exchanged into the securities issued in a private placement. Accordingly, the Company recorded a loss on extinguishment of approximately $555,000. Additionally, the Company repaid $8,000 of OID Notes.
In November 2016, the Company exercised its sole option to further extend the maturity date to its outstanding OID Note in the aggregate of $264,000 principal amount of OID Note. In consideration for the extension, the Company increased the principal amount of the OID Note by 10% or to $26,400 to $290,400 in the aggregate. In January 2017, the remaining outstanding OID Note was exchanged into a convertible note (see Convertible Note below).
During the three months ended May 31, 2016, the Company recognized approximately $166,000 of interest expense related to the OID Notes, including amortization of debt discount. Additionally, the Company recognized a loss of approximately $25,000 in the three months ended May 31, 2016 due to the change in estimated fair value of a bifurcated derivative liability related to an exchange provision in the OID Notes.
Convertible Note
On January 17, 2017, the Company entered into an exchange agreement, pursuant to which the Company issued a new convertible promissory note in the principal amount of $1,000,000 (the “Convertible Note”) in exchange (the “Debt Exchange”) for the cancellation of (i) $600,000 principal amount of the Promissory Note plus $96,000 of accrued and unpaid interest thereon, and (ii) $290,400 principal amount of the OID Note.
During the three months ended May 31, 2017, the Company recognized approximately $30,000 of interest expense related to the Convertible Note, including amortization of debt discount of approximately $5,000 and accrued interest expense of approximately $25,000.
The following table summarizes the notes payable:
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FAIR VALUE MEASUREMENTS |
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FAIR VALUE MEASUREMENTS | In accordance with ASC 820, Fair Value Measurements, financial instruments were measured at fair value using a three-level hierarchy which maximizes use of observable inputs and minimizes use of unobservable inputs:
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. At May 31, 2017 and February 28, 2017, the warrant liability balances were classified as Level 3 instruments.
Derivative Warrant Liability
At May 31, 2017 and February 28, 2017, the warrant liability balances of approximately $0.15 million and $2.1 million, respectively, were classified as Level 3 instruments.
The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative warrant liability:
In connection with the initial closing of the Series B Preferred private placement on December 31, 2014, the Company issued a warrant to purchase an aggregate of 30,334 shares of common stock (the “Series B Warrant”), originally exercisable at $8.25 per share and expiring on March 31, 2020. The Series B Warrant contains a full-ratchet anti-dilution price protection provision that requires liability treatment and the exercise price of the Series B Warrant was adjusted to $2.00 during the year ended February 28, 2017. The fair value of the Series B Warrant at May 31, 2017 and February 28, 2017 was determined to be approximately $25,000 and $36,000, respectively, as calculated using the Monte Carlo simulation. The Monte Carlo simulation as of May 31, 2017 and February 28, 2017 used the following assumptions: (1) a stock price of $1.15 and $1.50, respectively; (2) a risk-free rate of 1.41% and 1.50%, respectively; (3) an expected volatility of 129% and 131%, respectively; and (4) a fundraising event to occur on June 30, 2017 and May 31, 2017, respectively, that would result in the issuance of additional common stock.
In connection with the issuance of the Promissory Note on July 31, 2015, the Company issued a warrant to purchase an aggregate of 43,636 shares of common stock, originally exercisable at $8.25 per share and expiring on July 31, 2020. This warrant contains a full-ratchet anti-dilution price protection provision that requires liability treatment and the exercise price of this warrant was adjusted to $2.00 during the year ended February 28, 2017. The fair value of the warrant at May 31, 2017 and February 28, 2017 was determined to be approximately $38,000 and $51,000, respectively, as calculated using the Monte Carlo simulation. The Monte Carlo simulation as of May 31, 2017 and February 28, 2017 used the following assumptions: (1) stock price of $1.15 and $1.50, respectively; (2) a risk-free rate of 1.47% and 1.57%, respectively; (3) an expected volatility of 129% and 131%, respectively; and (4) a fundraising event to occur on June 30, 2017 and May 31, 2017, respectively, that would result in the issuance of additional common stock.
In connection with the amendment of the Promissory Note on February 12, 2016, the Company issued a warrant to purchase an aggregate of 43,636 shares of common stock, initially exercisable at $8.25 per share and expiring on February 11, 2021. This warrant contains a ratchet anti-dilution price protection provision that requires liability treatment and the exercise price of this warrant was adjusted to $2.20 during the year ended February 28, 2017. The fair value of the warrant at May 31, 2017 and February 28, 2017 was determined to be approximately $40,000 and $51,000, respectively, as calculated using the Monte Carlo simulation. The Monte Carlo simulation as of May 31, 2017 and February 28, 2017 used the following assumptions: (1) stock price of $1.15 and $1.50, respectively; (2) a risk-free rate of 1.55% and 1.68%, respectively; (3) an expected volatility of 129% and 131%, respectively; and (4) a fundraising event to occur on June 30, 2017 and May 31, 2017, respectively, that would result in the issuance of additional common stock.
In connection with the issuance of OID Notes in February 2016, the Company issued warrants to purchase an aggregate of 36,367 shares of common stock. These warrants were issued between February 12 and 22, 2016, were initially exercisable at $8.25 per share and expire between February 11 and 21, 2021. These warrants contain a full-ratchet anti-dilution price protection provision that requires liability treatment and the exercise price of these warrants were adjusted to $2.00 during the year ended February 28, 2017. The fair value of these warrants at May 31, 2017 and February 28, 2017 was determined to be approximately $34,000 and $44,000, respectively, as calculated using the Monte Carlo simulation. The Monte Carlo simulation as of May 31, 2017 and February 28, 2017 used the following weighted-average assumptions: (1) stock price of $1.15 and $1.50, respectively; (2) a risk-free rate of 1.55% and 1.68%, respectively; (3) an expected volatility of 129% and 131%, respectively; and (4) a fundraising event to occur on June 30, 2017 and May 31, 2017, respectively, that would result in the issuance of additional common stock.
In connection with the issuance of OID Notes in March 2016, the Company issued warrants to purchase an aggregate of 9,092 shares of common stock. These warrants were issued between March 4 and 15, 2016, were initially exercisable at $8.25 per share and expire between March 4 and 15, 2021. These warrants contain a full-ratchet anti-dilution price protection provision that requires liability treatment and the exercise price of these warrants were adjusted to $2.00 during the year ended February 28, 2017. The fair value of these warrants at May 31, 2017 and February 28, 2017 was determined to be approximately $8,000 and approximately $11,000, respectively, as calculated using the Monte Carlo simulation. The Monte Carlo simulation as of May 31, 2017, and February 28, 2017 used the following weighted-average assumptions: (1) stock price of $1.15 and $1.50, respectively; (2) a risk-free rate of 1.56% and 1.69%, respectively; (3) an expected volatility of 129% and 131%, respectively; and (4) a fundraising event to occur on June 30, 2017 and May 31, 2017, respectively, that would result in the issuance of additional common stock.
In connection with the private placement of common stock and warrants that closed in October 2016, the Company issued warrants to purchase an aggregate of 1,617,506 shares of common stock (the “PPM Warrants”). These PPM Warrants were issued between August 31, 2016 and October 30, 2016, are exercisable at $3.00 per share and expire between August 30, 2021 and October 29, 2021. These warrants contain a full-ratchet anti-dilution price protection provision that requires liability treatment. The fair value of these warrants at February 28, 2017 was determined to be approximately $1.9 million, as calculated using the Monte Carlo simulation. The Monte Carlo simulation as of February 28, 2017 used the following weighted-average assumptions: (1) stock price of $1.50; (2) a risk-free rate of 1.66%; (3) an expected volatility of 131%; and (4) a fundraising event to occur on May 31, 2017, that would result in the issuance of additional common stock. The price protection provision expired on April 30, 2017, and the Company reclassified approximately $1.5 million of derivative warrant liability to equity, as referenced in Note 5.
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EQUIPMENT |
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EQUIPMENT | Equipment consists of the following:
Depreciation and amortization expense was approximately $23,000 and approximately $24,000 for the three months ended May 31, 2017 and May 31, 2016, respectively. Depreciation of equipment utilized in research and development activities is included in research and development expenses and amounted to approximately $19,000 and $20,000 for the three months ended May 31, 2017 and May 31, 2016, respectively. All other depreciation is included in general and administrative expense and amounted to approximately $4,000 and approximately $4,000 for the three months ended May 31, 2017 and May 31, 2016, respectively.
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LICENSE AGREEMENTS AND COMMITMENTS |
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May 31, 2017 | |
Research and Development [Abstract] | |
LICENSE AGREEMENTS AND COMMITMENTS | License Agreements
Pursuant to the License Agreement, we are required to make annual license maintenance fee payments beginning August 26, 2011. We have satisfied all license maintenance payments due through May 31, 2017. We are required to make payments of $100,000 in 2017 and every year the license is in effect thereafter. These annual license maintenance fee payments will be credited to running royalties due on net sales earned in the same calendar year, if any. We are in compliance with the License Agreement.
Pursuant to the Second License Agreement, as amended, we are required to make annual license maintenance fee payments beginning on January 3, 2013. We are required to make maintenance payments of $5,000 in 2018, $60,000, in 2019 and 2020, and $100,000 in 2021 and every year the license is in effect thereafter. These annual license maintenance fee payments will be credited to running royalties due on net sales earned in the same calendar year, if any. The license maintenance payment of $5,000 for 2017 is currently outstanding, pending invoice. As such, we are in compliance with the Second License Agreement.
Pursuant to the Alternative Splicing Diagnostic License Agreement and the Alternative Splicing Therapeutic License Agreement, we are required to make annual license maintenance fee payments for each license beginning on January 1, 2015. We have satisfied all license maintenance payments due through May 31, 2017. We are required to make additional payments of $37,500 in 2018, and $50,000 in 2019 and every year each license is in effect thereafter. We are in compliance with the Alternative Splicing License Agreements.
Pursuant to the Antibody License Agreement, we are required to make license maintenance fee payments beginning on January 1, 2015. We have satisfied all license maintenance payments due through May 31, 2017. We are required to make additional payments of $15,000 in 2018 and $20,000 in 2019 and every year the license is in effect thereafter. These annual license maintenance fee payments will be credited to running royalties due on net sales earned in the same calendar year, if any. We are in compliance with the Antibody License Agreement.
Lease Agreements
On August 28, 2014, we entered into a lease agreement, subsequently amended (the “Boston Lease”) for our diagnostic laboratory and office space located at 27, Drydock Ave, 2nd Floor, Boston, MA 02210 (the “Boston Property”). We paid a $40,000 security deposit in connection with entering into the Boston Lease. Effective April 6, 2016, we entered into an amendment to the Boston Lease (the “Boston Lease Amendment”), whereby we extended the term by one year from September 1, 2016 to August 31, 2017. The basic rent payable under the Boston Lease Amendment is $17,164 per month plus additional monthly payments including tax payments and operational and service costs.
We have entered into a letter of intent to amend the lease agreement for the Boston Property and anticipate entering into definitive documentation for the second lease amendment (the “Second Boston Lease Amendment”) shortly. The Second Boston Lease Amendment is anticipated to extend the term (the “Second Extension Period”) for five years from September 1, 2017 through August 31, 2022. Monthly basic rent payments are anticipated to be $23,355 for the first year of the Second Extension Period, $24,056 for the second year of the Second Extension Period, $24,777 for the third year of the Second Extension Period, $25,521 for the fourth year of the Second Extension Period, and $26,286 for the fifth year of the Second Extension Period.
Effective March 1, 2015, we entered into a lease agreement for short-term office space in New York, NY. We paid a $2,100 security deposit in connection with entering into the lease. Effective December 1, 2015, we amended our lease agreement for the short-term office space in New York, NY. The term of the lease is month-to-month and may be terminated with twenty-one (21) days’ notice. The basic rent payment is $2,400 per month and we paid an additional $1,500 security deposit in connection with the amended lease.
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NET LOSS PER SHARE |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
NET LOSS PER SHARE | Basic net loss per common share is computed based on the weighted average number of common shares outstanding during the period. Restricted shares issued with vesting conditions that have not been met at the end of the period are excluded from the computation of the weighted average shares. As of May 31, 2017, and May 31, 2016, 11,536 and 11,536, respectively, restricted shares of common stock were excluded from the computation of the weighted average shares.
Diluted net loss per common share is calculated giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares generally consist of incremental shares issuable upon exercise of stock options and warrants and shares issuable from convertible securities, as well as nonvested restricted shares.
In computing diluted loss per share for the years ended May 31, 2017 and May 31, 2016, no effect has been given to the common shares issuable at the end of the period upon the conversion or exercise of the following securities as their inclusion would have been anti-dilutive:
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COLLABORATIVE AND OTHER RELATIONSHIPS |
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May 31, 2017 | |
Collaborative And Other Relationships | |
COLLABORATIVE AND OTHER RELATIONSHIPS | Research and Development Reimbursements
In connection with our business strategy, we may enter into research and development and other collaboration agreements. Depending on the arrangement, we may record payments as advances, funding receivables, payable balances or non-product income with our partners, based on the nature of the cost-sharing mechanism and activity within the collaboration.
On September 29, 2016, the Company entered into an amendment (the “MTA Amendment”) to a previously executed pilot materials transfer agreement (the “MTA” and together with the Amendment, the “Research Agreement”) with Celgene Corporation (“Celgene”), to conduct a mutually agreed upon pilot research project (the “Pilot Project”). The MTA Amendment provides for milestone payments to the Company of up to approximately $973,000. Under the terms of the Research Agreement, Celgene will provide certain proprietary materials to the Company and the Company will evaluate Celgene’s proprietary materials in the Company’s metastatic cell line and animal nonclinical models. The milestone schedule calls for Celgene to pay the Company approximately $487,000 upon execution of the MTA Amendment, which the Company has received, and the balance in accordance with the completion of three (3) milestones to Celgene’s reasonable satisfaction. The term of the Research Agreement is one (1) year, unless extended by the parties. Either party may terminate the Research Agreement with thirty (30) days prior written notice.
The Company recognizes the upfront payment as a deferred research and development reimbursement in the Consolidated Balance Sheet and will amortize the deferred research and development reimbursement as incurred over the term of the Research Agreement. For the three months ended May 31, 2017, the Company recorded approximately $133,000 in deferred research and development reimbursement, and, at May 31, 2017, the Company had a deferred research and development reimbursement amount of approximately $65,000.
The Company will recognize deferred research and development reimbursement for each subsequent milestone in the period in which the milestone is achieved. As of May 31, 2017, none of the milestones have been achieved.
Research Collaboration Revenue
We currently do not sell any products and do not have any product-related revenue. From time to time, we may enter into research and development collaboration arrangements, in which we are reimbursed for either all or a portion of the research and development costs incurred. We record these payments as revenue in the statement of operations. We recognize revenue upon delivery and acceptance of the test results or other deliverables.
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SUBSEQUENT EVENTS |
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May 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Celgene Research Agreement
On June 16, 2017, the Company received payment of approximately $243,000 from Celgene for satisfactory completion of the second milestone pursuant to the Research Agreement between the parties.
Private Placement
On June 23, 2017, pursuant to the initial closing of a private placement, the Company issued an aggregate of 359,348 shares of common stock and approximately 229,363.2 shares of Series A-2 Preferred, convertible into 2,293,632 shares of common stock and repriced an aggregate of 474,829 warrants, for an aggregate purchase price of approximately $2.14 million. After deducting placement agent fees and other offering expenses, the Company received net proceeds of approximately $2.0 million. Additionally, in connection with the private placement, the Company will issue an aggregate of 136,830 placement agent warrants with a term of five years, an exercise price equal to $1.27 per share, and a cashless exercise provision.
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DESCRIPTION OF BUSINESS AND GOING CONCERN (Policies) |
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May 31, 2017 | |
Description Of Business And Going Concern Policies | |
Basis of Presentation | The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MetaStat Biomedical, Inc., a Delaware corporation and all significant intercompany balances have been eliminated by consolidation.
These interim unaudited financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States and should be read in conjunction with the Company’s audited consolidated financial statements and related footnotes for the year ended February 28, 2017, included in the Company’s Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on May 30, 2017. These unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of May 31, 2017 and its results of operations and cash flows for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. These interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading. |
Going Concern | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses of approximately $26.6 million as of May 31, 2017, has negative working capital and has not generated positive cash flows from operations. The continuation of the Company as a going concern is dependent upon continued financial support from its shareholders, the ability of the Company to obtain necessary equity and/or debt financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company cannot make any assurances that additional financings will be available to it and, if available, completed on a timely basis, on acceptable terms or at all. If the Company is unable to complete a debt or equity offering, or otherwise obtain sufficient financing when and if needed, it would negatively impact its business and operations and could also lead to the reduction or suspension of the Company’s operations and ultimately force the Company to cease operations. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Subsequent to May 31, 2017, the Company completed a private placement for gross proceeds of approximately $2.14 million (See Note 12).
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STOCK OPTIONS (Tables) |
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WARRANTS (Tables) |
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NOTE PAYABLE (Tables) |
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FAIR VALUE MEASUREMENTS (Tables) |
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May 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements |
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EQUIPMENT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment |
|
NET LOSS PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Anti-dilutive securities |
|
DESCRIPTION OF BUSINESS AND GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2017 |
Feb. 28, 2017 |
|
Description Of Business And Going Concern Policies | ||
Date of incorporation | Mar. 28, 2007 | |
State of incorporation | Nevada | |
Going Concern | ||
Accumulated deficit | $ (26,594,992) | $ (26,318,885) |
CAPITAL STOCK (Details Narrative) - USD ($) |
May 31, 2017 |
Feb. 28, 2017 |
---|---|---|
Par value of shares | $ .0001 | $ 0.0001 |
Authorized shares of common stock | 150,000,000 | 150,000,000 |
Series A Preferred Stock [Member] | ||
Authorized shares of preferred stock | 1,000,000 | 1,000,000 |
Stated value per share | $ .0001 | $ 0.0001 |
Series A-2 Preferred Stock [Member] | ||
Authorized shares of preferred stock | 1,000,000 | 1,000,000 |
Stated value per share | $ 0.0001 | $ 0.0001 |
Series B Preferred Stock [Member] | ||
Authorized shares of preferred stock | 1,000 | 1,000 |
Stated value per share | $ 0.0001 | $ 0.0001 |
Liquidation preference | $ 1,200,000 | $ 1,190,000 |
EQUITY ISSUANCES (Details Narrative) - shares |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Equity [Abstract] | ||
Common stock issued for services | 100,000 | 25,000 |
STOCK OPTIONS (Details) - Option [Member] |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Expected volatility | 129.00% | 100.00% |
Expected dividend yield | 0.00% | 0.00% |
Risk-free interest rate | 1.95% | 1.65% |
Expected Term | 6 years 4 days | 6 years |
STOCK OPTIONS (Details 1) - Option [Member] |
3 Months Ended |
---|---|
May 31, 2017
USD ($)
$ / shares
shares
| |
Options Outstanding | |
Outstanding at Beginning of Period | shares | 966,474 |
Granted | shares | 55,000 |
Forfeited | shares | (39,999) |
Outstanding and expected to vest at End of Period | shares | 981,475 |
Options exercisable | shares | 350,477 |
Weighted Average Exercise Price | |
Outstanding at Beginning of Period | $ / shares | $ 5.71 |
Granted | $ / shares | 3.00 |
Forfeited | $ / shares | 8.25 |
Outstanding and expected to vest at End of Period | $ / shares | 5.46 |
Exercisable at End of period | $ / shares | $ 9.96 |
Outstanding at Beginning of Period | $ | $ 0 |
Outstanding and expected to vest at End of Period | $ | 0 |
Exercisable at End of period | $ | $ 0 |
Weighted Average Remaining Contractual Term | |
Outstanding and expected to vest at Beginning of Period | 8 years 10 months 13 days |
Outstanding and expected to vest at End of Period | 8 years 8 months 19 days |
Exercisable at End of period | 7 years 11 months 12 days |
STOCK OPTIONS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Stock based compensation expense | $ 70,470 | $ 119,086 |
Option [Member] | ||
Stock based compensation expense | $ 96,000 | 105,000 |
Period for compensation expense recognition | 1 year 1 month 24 days | |
Research and Development Expense [Member] | ||
Stock based compensation expense | $ 16,000 | 17,000 |
General and Administrative Expense [Member] | ||
Stock based compensation expense | $ 113,000 | $ 88,000 |
WARRANTS (Details) - Stock Warrants [Member] |
3 Months Ended |
---|---|
May 31, 2017
USD ($)
$ / shares
shares
| |
Warrants Outstanding | |
Outstanding at Beginning of Period | shares | 2,698,694 |
Granted | shares | 37,500 |
Cancelled | shares | (4,671) |
Outstanding at End of Period | shares | 2,731,523 |
Weighted Average Exercise Price | |
Outstanding at Beginning of Period | $ / shares | $ 5.11 |
Granted | $ / shares | 3.00 |
Cancelled | $ / shares | 31.50 |
Outstanding at End of Period | $ / shares | $ 5.04 |
Average Intrensic Value | |
Outstanding at Beginning of Period | $ | $ 0 |
Outstanding at End of Period | $ | $ 0 |
Weighted Average Remaining Contractual Term | |
Outstanding at Beginning of Period | 4 years 2 months 16 days |
Outstanding at End of Period | 3 years 11 months 23 days |
NOTE PAYABLE (Details) |
3 Months Ended |
---|---|
May 31, 2017
USD ($)
| |
Note Payable | |
Note Payable, beginning of period | $ 1,000,000 |
Amortization of debt discount | 0 |
Note payable, end of period | 1,000,000 |
Discount [Member] | |
Note Payable | |
Note Payable, beginning of period | (10,914) |
Amortization of debt discount | 4,599 |
Note payable, end of period | (6,315) |
Voluntary Exchange Feature [Member] | |
Note Payable | |
Note Payable, beginning of period | 0 |
Amortization of debt discount | 0 |
Note payable, end of period | 0 |
NotePayable Net [Member] | |
Note Payable | |
Note Payable, beginning of period | 989,086 |
Amortization of debt discount | 4,599 |
Note payable, end of period | $ 993,685 |
NOTE PAYABLE (Details Narrative) |
3 Months Ended |
---|---|
May 31, 2017
USD ($)
| |
Amortization of debt discount | $ 0 |
Promissory Note | |
Note interest expense | 30,000 |
Amortization of debt discount | 5,000 |
Accrued interest | $ 25,000 |
FAIR VALUE MEASUREMENTS (Details) |
3 Months Ended |
---|---|
May 31, 2017
USD ($)
| |
Promissory Note | |
Fair value of Level 3 derivative warrant liability, beginning of period | $ 157,204 |
Change in fair value: | (37,366) |
Reclassification | 0 |
Fair value at end of period | 119,838 |
Additional Unit Private Placement Warrants | |
Fair value of Level 3 derivative warrant liability, beginning of period | 1,914,078 |
Change in fair value: | (442,816) |
Reclassification | (1,471,262) |
Fair value at end of period | 0 |
Series B Preferred Stock [Member] | Warrants [Member] | |
Fair value of Level 3 derivative warrant liability, beginning of period | 35,690 |
Change in fair value: | (10,198) |
Reclassification | 0 |
Fair value at end of period | 25,492 |
Warrants [Member] | |
Fair value of Level 3 derivative warrant liability, beginning of period | 2,106,972 |
Change in fair value: | (490,380) |
Reclassification | (1,471,262) |
Fair value at end of period | $ 145,330 |
EQUIPMENT (Details) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2017 |
Feb. 28, 2017 |
|
Equipment, gross | $ 679,869 | $ 679,869 |
Accumulated depreciation and amortization | (287,900) | (265,234) |
Equipment, net | $ 391,969 | 414,635 |
Research Equipment [Member] | ||
Estimated useful life | p7y | |
Equipment, gross | $ 601,720 | 601,720 |
Computer Equipment [Member] | ||
Estimated useful life | p5y | |
Equipment, gross | $ 78,149 | $ 78,149 |
EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Depreciation | $ 22,666 | $ 23,766 |
General and Administrative Expense [Member] | ||
Depreciation | 4,000 | 4,000 |
Research and Development Expense [Member] | ||
Depreciation | $ 19,000 | $ 20,000 |
NET LOSS PER SHARE (Details) - shares |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Anti-dilutive securities | 5,595,383 | 3,401,314 |
Stock Options [Member] | ||
Anti-dilutive securities | 981,475 | 526,976 |
Warrants [Member] | ||
Anti-dilutive securities | 2,731,523 | 967,934 |
Preferred Stock [Member] | ||
Anti-dilutive securities | 1,361,837 | 1,906,404 |
Convertible Debt [Member] | ||
Anti-dilutive securities | 520,548 | 0 |
NET LOSS PER SHARE (Details Narrative) - shares |
3 Months Ended | |
---|---|---|
May 31, 2017 |
May 31, 2016 |
|
Anti-dilutive securities | 5,595,383 | 3,401,314 |
Preferred Stock [Member] | ||
Anti-dilutive securities | 1,361,837 | 1,906,404 |
Warrants [Member] | ||
Anti-dilutive securities | 2,731,523 | 967,934 |
Stock Options [Member] | ||
Anti-dilutive securities | 981,475 | 526,976 |
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