EQUITY

3 Months Ended

Jan. 31, 2024

EQUITY

EQUITY

NOTE 12 - EQUITY

Preferred Stock

The Company has 20,000,000 shares of $0.00001 par value preferred stock authorized.

As of January 31, 2024, and October 31, 2023, 1,000 Series B preferred shares of par value $0.00001 were designated and outstanding and 19,999,000 shares of preferred stock remained undesignated.

Common Stock

As of January 31, 2024, and October 31, 2023, 250,000,000 shares of common stock, par value $0.00001 per share, were authorized, of which 36,615,932 and 36,162,932 shares were issued and outstanding, respectively.

Corporate Action regarding Common Stock and Common Stock Transactions

During the three months ended January 31, 2024, no shares were issued for services. During the three months ended January 31, 2023, 4,277 shares of restricted common stock, with a value of $10,000, were issued to a consultant in connection with investor relations and press release services rendered to the Company.

Option Extension

On June 29, 2021, the Company agreed to extend the exercise period of certain stock options granted to Anthony Brian Goodman, the Company’s Chief Executive Officer, Weiting Feng, the Company’s Chief Operating Officer, and an external consultant of the Company (collectively the “Optionees”), which options would have expired on June 30, 2021. The Company extended the expiration date of the options granted to the Optionees until December 31, 2022, which covered options to purchase 466,667 shares of common stock previously granted to the external consultant at an exercise price of $0.06 per share, options to purchase 5,400,000 shares of common stock previously granted to Anthony Brian Goodman at an exercise price of $0.066 per share, and options to purchase 1,400,000 shares of common stock previously granted to Weiting Feng at an exercise price of $0.06 per share.

On December 1, 2022, Mr. Goodman, exercised options to purchase 5,400,000 shares of common stock in a cashless exercise pursuant to which 151,017 shares of common stock were surrendered to the Company to pay for the aggregate exercise price of the options ($356,400) and 5,248,983 shares of common stock were issued. These shares were issued pursuant to the terms of the Company’s 2018 Equity Incentive Plan.

On December 1, 2022, Ms. Feng, exercised options to purchase 1,400,000 shares of common stock in a cashless exercise pursuant to which 35,594 shares of common stock were surrendered to the Company to pay for the aggregate exercise price of the options ($84,000) and 1,364,406 shares of common stock were issued. These shares were issued pursuant to the terms of the Company’s 2018 Equity Incentive Plan.

On June 8, 2023, the Company agreed to extend the exercise period of certain stock options granted to two external consultants of the Company, which options would have expired on June 18, 2023. The Company extended the expiration date of the options granted to the consultants by one year, which covered options to purchase 100,000 shares of common stock at an exercise price of $1.74 per share for each consultant. The Company recorded a total of $90,230 of expenses due to the option extension.

2018 Equity Incentive Plan

On January 3, 2018, the Company adopted a stock option plan: the 2018 Equity Incentive Plan. The fair value of stock options was measured using the Black-Scholes option pricing model. The Black-Scholes valuation model takes into consideration the share price of the Company, the exercise price of the option, the amount of time before the option expires, and the volatility of share price. Compensation expense is charged to operations through the vesting period. The amount of cost is calculated based on the accounting standard ASU 2018-07. All option awards described below were granted under the 2018 Equity Incentive Plan:

During the three months ended January 31, 2024, no options were exercised, granted, expired, or forfeited.

The total compensation cost related to stock options granted was $61,679 and $132,525, for the three months ended January 31, 2024, and 2023, respectively.

The following table represents stock option activity for the three months ended January 31, 2024:

Options	Number Outstanding		Weighted Average Exercise Price
Options Outstanding as of October 31, 2023		1,010,000	$	3.14
Options expired		-	$
Options exercised		-	$
Options Outstanding as of January 31, 2024		1,010,000	$	3.14
Options Exercisable as of January 31, 2024		920,000	$	2.93

2022 Equity Incentive Plan

On May 5, 2022, the Company’s Board of Directors and majority stockholders approved the adoption of the Company’s 2022 Equity Incentive Plan (the “2022 Plan”). The 2022 Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to limitations provided by federal or state securities laws, to receive (i) incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) restricted stock units, (v) stock awards; (vi) shares in performance of services; (vii) other stock-based awards; or (viii) any combination of the foregoing. In making such determinations, the Board of Directors may take into account the nature of the services rendered by such person, his or her present and potential contribution to the Company’s success, and such other factors as the Board of Directors of the Company in its discretion shall deem relevant. The 2022 Plan became effective on June 29, 2022.

Grant and Vesting of Restricted Stock Units to Management, the Independent Directors and other Related Parties

Effective on September 16, 2022, the Compensation Committee and the Board of Directors approved the grant, effective on the same date, of an aggregate of 1,575,000 restricted stock units to the officers and directors of the Company listed below (the “RSU Recipients”), in consideration for services to be rendered by such officers and directors through October 2024 (the “RSUs”):

Recipient	Position with Company	Number of RSUs
Anthony Brian Goodman	President, Chief Executive Officer (Principal Executive Officer), Secretary, Treasurer, and Chairman of the Board of Directors		750,000
Weiting ‘Cathy’ Feng	Chief Operating Officer and Director of the Company		375,000
Murray G. Smith	Independent Director		150,000
Aaron Richard Johnston	Former Independent Director		150,000
Thomas E. McChesney	Independent Director		150,000
			1,575,000

The RSUs are subject to vesting, and vest to the RSU Recipients, to the extent and in the amounts set forth below, to the extent the following performance metrics are met by the Company as of the dates indicated (the “Performance Metrics” and the “Performance Metrics Schedule”), or earlier upon the occurrence of a change of control of the Company as described in the 2022 Equity Incentive Plan:

		Revenue Targets			Adjusted EBITDA Targets
Performance Period		Target Goal	RSUs Vested		Target Goal	RSUs Vested
Year ended October 31, 2022	$	21,875,000	*	$	3,250,000	*
Year ended October 31, 2023		$39,638,342 (which equals FY 2022 revenue x 1.1)	*		$3,879,197 (which equals FY 2022 Adjusted EBITDA x 1.1)	*
Year ended October 31, 2024		$48,591,457 (which equals FY 2023 revenue x 1.1)	*		$2,637,004 (which equals FY 2023 Adjusted EBITDA x 1.1)	*

* 1/6th of the total RSUs granted to each RSU Recipient above.

 For purposes of the calculations above, (a) “Adjusted EBITDA” means net income before interest, taxes, depreciation, amortization and stock-based compensation; (b) “Revenue” means annual revenue of the Company; and (c) ”FY 2022” means actual Revenue or EBITDA, as the case may be achieved during the 12 month period from November 1, 2021 to October 31, 2022, and “FY 2023” means actual Revenue or EBITDA as the case may be for the 12 month period from November 1, 2022 to October 31, 2023, in each case as set forth in the Company’s audited year-end financial statements (the “Target Definitions”). Both Revenue and EBITDA, and the determination of whether or not the applicable Revenue and EBITDA targets above have been met are to be determined based on the audited financial statements of the Company filed with the Securities and Exchange Commission in the Company’s Annual Reports on Form 10-K for the applicable year ends above, and determined on the date such Annual Reports on Form 10-K are filed publicly with the Securities and Exchange Commission (the “Dates of Determination”).

The Company also entered into a Restricted Stock Unit Grant Agreement and Award Agreement with each of the RSU Recipients above to evidence such grants of the RSUs.

The RSUs were granted pursuant to, and subject in all cases to, the terms of the Company’s 2022 Equity Incentive Plan.

Effective on November 1, 2022, in connection with Mr. Johnston’s resignation as a member of the Board of Directors on such date, the 100,000 RSUs which were to vest upon the Company meeting certain Adjusted EBITDA and revenue targets for 2023 and 2024, which were granted to him as a member of the Board of Directors, were terminated and forfeited. 

Effective on December 8, 2022, the Board of Directors, with the recommendation of the Compensation Committee of the Board of Directors, granted Philip Daniel Moyes, 100,000 RSUs, which vest, if at all, at the rate of 1/4^th of such RSUs upon the Company reaching the same EBITDA and revenue targets described in the table above for the years ended October 31, 2023 and 2024, or earlier upon the occurrence of a change of control of the Company as described in the 2022 Equity Incentive Plan.

Total revenues and EBITDA for the year ended October 31, 2023, were $44,174,052 and $2,397,276, respectively. As a result, the required revenue performance metrics were met by the Company for the year ended October 31, 2023, and the Adjusted EBITDA performance metrics were not met, and half of the RSUs subject to vesting for fiscal 2023 vested and were settled in shares of common stock, with the other half of the RSUs subject to vesting for fiscal 2023 being forfeited. Total expenses of $999,750 were recognized for the year ended October 31, 2023.

On January 17, 2024, the following RSUs of the officers and directors of the Company vested, and the same number of shares of common stock (one share of common stock for each vested RSU) were issued in connection therewith:

· Anthony Brian Goodman, Chief Executive Officer & Chairman of the Board - 125,000 RSUs vested;

· Feng Weiting, Chief Operating Officer – 62,500 RSUs vested;

· Murray G. Smith, Director – 25,000 RSUs vested;

· Thomas McChesney, Director – 25,000 RSUs vested; and

· Philip Daniel Moyes, Directors – 25,000 RSUs vested.

On December 8, 2022, the Company granted Mr. Brett Goodman 40,000 RSUs which vest at the rate of 1/2 of such RSUs on each of December 8, 2023, and 2024, subject to Mr. Brett Goodman’s continued service with the Company on such vesting dates. On April 3, 2023, the Company granted Mr. Brett Goodman 5,000 RSUs which vest at the rate of 1/2 of such RSUs on each of April 3, 2024, and 2025, subject to Mr. Brett Goodman’s continued service with the Company on such vesting dates. On December 8, 2023, 20,000 RSUs vested and 20,000 shares of common stock were issued to Mr. Brett Goodman on the same date to settle the vested RSUs.

The total compensation cost related to RSUs granted to related parties was $515,281 and $510,425 for the three months ended January 31, 2024, and 2023, respectively.

Grant or Vesting of Restricted Stock Units and Restricted Stocks to Employees and Consultants (Non-related Parties)

On October 27, 2022, the Company granted 600,000 RSUs to Mr. Aaron Richard Johnston, former member of the Board of Directors, for his consulting services to the Company. 300,000 RSUs vest, if at all, at the rate of 1/4th of such RSUs, upon the Company meeting certain (1) revenue and (2) Adjusted EBITDA targets, as of the end of fiscal 2023 and 2024, and upon the public disclosure of such operating results in the Company’s subsequently filed Annual Reports on Form 10-K, subject to Mr. Johnston’s continued service through the applicable vesting dates. 300,000 RSUs vest, if at all, upon the closing of a transaction (the “Transaction RSUs”) that, on a pro forma basis, doubles the Company’s revenues for the fiscal quarter prior to the closing of the acquisition (“Doubling Transaction”), provided that such RSUs shall be terminated and forfeited if such Doubling Transaction does not close prior to November 1, 2023, subject to Mr. Johnston’s continued service to the Company on such date. None of these RSUs have vested to date. On October 20, 2023, the Company modified the Transaction RSUs (300,000) to vest upon the closing of a transaction that, on a pro forma basis, as determined in good faith by the Board of Directors, doubles the Company’s revenues for the fiscal quarter prior to the closing of the Doubling Transaction, provided that such 300,000 Restricted Stock Units shall be forfeited immediately and not eligible for vesting if such Doubling Transaction does not close prior to May 1, 2024.

On November 8, 2022, the Company granted 300,000 RSUs to Mark Weir, the director of RKings. 25,000 RSUs shall vest each quarter until October 31, 2025, provided that the quarterly revenues of RKingsCompetition Ltd increase by 5% compared to the previous quarter. A total of 100,000 of these RSUs have vested through January 31, 2024.

On December 8, 2023, the Company issued 70,500 shares to employees and consultants to settle the vesting of RSUs. The RSUs were granted under the 2022 Equity Incentive Plan. On January 17, 2024, the Company issued 100,000 shares to employees and consultants to settle the vesting of RSUs.

During the three months ended January 31, 2024, no RSUs were granted to employees and consultants, 170,500 RSUs granted to employees and consultants vested, and 79,000 RSUs granted to employees and consultants were forfeited.

The total compensation cost related to the RSUs granted to employees and consultants was $193,991 and $175,445 for the three months ended January 31, 2024, and 2023, respectively.

On October 27, 2022, the Company granted 100,000 restricted shares of common stock to Aaron Richard Johnston, a former member of the Board of Directors and current consultant, for his consulting services to the Company. The restricted shares were issued on November 1, 2022, and vested at the rate of 50,000 shares of restricted common stock on November 1, 2022, and 50,000 shares of restricted common stock on February 1, 2023.

The total compensation cost related to the restricted shares of common stock vested to Mr. Johnston was $0 and $253,389 for the three months ended January 31, 2024, and 2023, respectively.

As of January 31, 2024, and October 31, 2023, the Company had 1,625,000 and 2,082,000 RSUs outstanding.

The following table represents RSU activity for the three months ended January 31, 2024:

RSUs	Number Outstanding
RSUs Outstanding as of October 31, 2023		2,082,000
RSUs issued		-
RSUs forfeited		(341,500	)
RSUs vested		(453,000	)
RSUs Outstanding as of January 31, 2024		1,287,500

Treasury Stock

On March 29, 2023, the Board approved the purchase of up to $2 million in shares of the Company’s common stock for the purpose of mitigation of significant overhang on the market for the Company’s common stock; attractive use of the Company’s capital to purchase stock at current prices; a more tax-efficient way of returning capital to stockholders compared to declaring cash dividends; and accretion to earnings per share.

On April 12, 2023, April 13, 2023, and April 14, 2023, the Company purchased shares of common stock as follows:

Date	Shares		Price per Share		Total Amount
April 12, 2023		6,868	$	2.1707	$	14,908
April 13, 2023		3,800	$	2.2858	$	8,686
April 14, 2023		3,926	$	2.2230	$	8,728
Totals		14,594			$	32,322

The treasury stock is carried at cost.

On June 16, 2023, the 14,594 treasury shares were cancelled, and the number of outstanding shares was reduced by the same amount. There are no commitments to purchase additional shares of common stock.

No shares of common stock were purchased during the quarter ended January 31, 2024, and the repurchase program expired on September 29, 2023.