Stockholders’ Equity

3 Months Ended

Jan. 31, 2024

Equity [Abstract]

Stockholders’ Equity

Note 7 – Stockholders’ Equity

Series B Convertible Preferred Stock

The Company issued 900,000 shares of the Series B Preferred Stock as consideration for the acquisition of the GoFire Purchased Assets. The Series B Preferred Stock carries no voting rights except: (i) with respect to the ability of the holders of a majority of the then outstanding Series B Preferred Stock (the “Majority Holders”), to nominate a director to the Company’s board of directors, and (ii) that the vote of the Majority Holders is necessary for effecting any amendment to the Company’s Certificate of Incorporation or Certificate of Designation that affects the Series B Preferred Stock. The Series B Preferred Stock is redeemable at the option of the Company at a redemption price of $15 per share, subject to potential downward adjustments based on the trading price of the Common Stock. Subject to additional limitations in the GoFire APA, the Series B Preferred Stock holds seniority over the Common Stock and each other class of series of securities now existing or hereafter authorized with respect to dividend rights, the distribution of assets upon liquidation, and dissolution and redemption rights. Upon a liquidation and winding up of the Company, the holders of Series B Preferred Stock are entitled to a liquidation preference of $15 per share (the “Liquidation Preference”), though the redemption may be adjusted downward based on the trading price of the Common Stock at the time of liquidation. The holders of Series B Preferred Stock are entitled to receive a dividend equal to 2% of the Liquidation Preference, accruing from the Closing Date and payable on the eighteen-month anniversary of the Closing Date. No preemptive rights are granted to the holders of Series B Preferred Stock. The Majority Holders have the ability to cause a voluntary conversion of the Series B Preferred Stock into Common Stock at a conversion rate of 0.3968 shares of Common Stock per share of Series B Preferred Stock which may only occur on or after the following dates 18-month, 24 month, 36, month, 48 months, and 60 month anniversary of the original issuance date; and only up to 180,000 shares of Series B Preferred Stock on each of these dates. All shares of Series B Preferred Stock will automatically convert to Common Stock upon the occurrence of a Change of Control (as defined in the GoFire APA).

Reverse Stock Split

On January 22, 2024, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to affect a 1-for-21 reverse stock split (the “2024 Reverse Stock Split”) of the shares of the Common Stock. The 2024 Reverse Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market. No fractional shares were issued in connection with the 2024 Reverse Stock Split. Any fractional shares of our Common Stock that would have otherwise resulted from the 2024 Reverse Stock Split were rounded up to the nearest whole number. In connection with the 2024 Reverse Stock Split, the Board approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or exercisable into shares of the Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity compensation rights. All historical share and per-share amounts reflected throughout the accompanying consolidated financial statements and other financial information in this Report have been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of the Common Stock was not affected by the 2024 Reverse Stock Split.

Common Stock

During the three months ended January 31, 2024, the Company issued 52,949 shares of common stock for rounding of shares related to the Reverse Split.

During the three months ended January 31, 2024, the Company issued 16,667 shares of common stock to a FINRA member broker-dealer in connection with the termination of its relationship with such broker dealer. The fair value was $62,000 based on the closing price of the common stock on the termination date and recorded as stock-based compensation.

Stock Options

Summary of stock options information is as follows:

									Weighted
	Aggregate			Aggregate			Exercise Price		Average
	Number			Exercise Price			Range		Exercise Price
Outstanding, October 31, 2023		449,106		$	14,081,408		$	10.08-602.28	$	31.36
Granted		8,811			78,038			2.81-11.76		8.86
Exercised		—			—			—		—
Cancelled, forfeited, or expired		(154,762	)		(3,206,669	)		20.72		20.72
Outstanding, January 31, 2024		303,155		$	10,952,777		$	10.08-602.28	$	36.13
Exercisable, January 31, 2024		163,204		$	8,732,962		$	12.87-602.28	$	53.51

During the three months ended January 31, 2024, and 2023, the Company recognized $309,958 and $1,435,787, respectively of stock option expense related to outstanding stock options. On January 31, 2024, the Company had $3,594,567 of unrecognized expenses related to options. The weighted average remaining contractual life is approximately 8.76 years for stock options outstanding on January 31, 2024. The aggregate intrinsic value of these outstanding options as of January 31, 2024, was $0. Compensation expense related to performance-based options is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for service- and performance-based awards that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. If vesting occurs prior to the end of the requisite service period, expense is accelerated and fully recognized through the vesting date.

On January 19, 2024, non-qualified stock options exercisable for up to 5,953 shares of Common Stock were awarded to one board member of the Company. These stock options have a ten-year term from the grant date, with the shares fully vesting on May 30, 2024. The fair value of the options on the grant date was $70,007 using a Black-Scholes option pricing model with the following assumptions: stock price $11.76 per share (based on the quoted trading price on the date of grant), a computed volatility of 280.34%, expected term of 10 years, and a risk-free interest rate of 3.69%. This board member resigned on January 25, 2024.

On January 29, 2024, non-qualified stock options exercisable for up to 2,858 shares of Common Stock were awarded to one employee of the Company. These stock options have a ten-year term from the grant date, with the shares fully vesting on January 29, 2028. The fair value of the options on the grant date was $8,018 using a Black-Scholes option pricing model with the following assumptions: stock price $2.81 per share (based on the quoted trading price on the date of grant), a computed volatility of 255.35%, expected term of 10 years, and a risk-free interest rate of 4.08%. This employee resigned on February 28, 2024.

Warrants

Warrant information as of the periods indicated is as follows:

									Weighted
	Aggregate			Aggregate			Exercise Price		Average
	Number			Exercise Price			Range		Exercise Price
Outstanding, October 31, 2023		242,548		$	13,946,006		$	12.39-126	$	57.51
Granted		—			—			—		—
Exercised		—			—			—		—
Cancelled, forfeited, or expired		(36,912	)		(544,025	)		12.39-15.33		14.74
Outstanding, January 31, 2024		205,636		$	13,404,980		$	39.00-126.00	$	65.19
Exercisable, January 31, 2024		205,636		$	13,404,980		$	39.00-126.00	$	65.19

The weighted average remaining contractual life is approximately 2.97 years for Common Stock warrants outstanding as of January 31, 2024. As of January 31, 2024, there was no intrinsic value of outstanding stock warrants.