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RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
12 Months Ended
May 31, 2021
Prior Period Adjustment [Abstract]  
Error Correction [Text Block]

NOTE 11:    RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS


Subsequent to the issuance of our Form 10-K annual report, for the fiscal year ended May 31, 2021, which was filed on August 27, 2021, the Company determined that errors were included in the report as described below. As a result, this Form 10-K/A includes restated financial statements for the fiscal years ended May 31, 2021 and 2020.


While reviewing the Company’s methodology used to calculate and report non-cash stock-based compensation expense, the Company discovered the errors listed below. The Company notified its independent registered accounting firm (“Auditors”) of the errors. Together, the Company and their Auditors have determined that these restatements correct the previously reported errors.


Our non-cash stock based compensation expenses calculation applied forfeiture adjustments to both vested and unvested outstanding options, including those for which the employee had provided the requisite service, which resulted in an understatement of stock compensation expense. Additionally, our calculation expensed the option at vesting dates versus pro rata over the period the requisite service was provided.


Stock-based compensation expense shown on the statement of operations is a non-cash expense, and impacts accumulated deficit and additional paid-in capital on the balance sheet. However, this does not impact the Company’s cash, revenues or other aspects of ongoing operations.


The cumulative effect of this error on the Company's accumulated deficit as of May 31, 2019 was to increase the accumulated deficit by $836,232 from ($19,586,678) as originally filed, to ($20,422,910) and to increase the additional paid in capital by $836,232 from $22,830,006 as originally filed, to $23,666,238.


The restatements for the years ended May 31, 2021 and 2020 resulted in no changes in the provision for income taxes.


The effect of the restatement on the consolidated balance sheet at May 31, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Shareholders' Equity:

 

 

 

 

 

 

 

 

                 

Additional paid-in-capital

$

36,685,176

 

$

2,151,567

 

$

38,836,743

Accumulated deficit

 

(28,394,768)

   

(2,151,567)

   

(30,546,335)

Other Equity accounts

 

936,615

 

 

-

 

 

936,615

Total Shareholders' Equity

$

9,227,023

 

$

-

 

$

9,227,023


The effect of the restatement on the consolidated balance sheet at May 31, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Shareholders' Equity:

 

 

 

 

 

 

 

 

                 

Additional paid-in-capital

$

35,213,707

 

$

1,174,349

 

$

36,388,056

Accumulated deficit

 

(21,925,732)

   

(1,174,349)

   

(23,100,081)

Other Equity accounts

 

925,078

 

 

-

 

 

925,078

Total Shareholders' Equity

$

14,213,053

 

$

-

 

$

14,213,053


The effect of the restatement on the consolidated balance sheet at May 31, 2019 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Shareholders' Equity:

 

 

 

 

 

 

 

 

                 

Additional paid-in-capital

$

22,830,006

 

$

836,232

 

$

23,666,238

Accumulated deficit

 

(19,586,678)

   

(836,232)

   

(20,422,910)

Other Equity accounts

 

737,642

 

 

-

 

 

737,642

Total Shareholders' Equity

$

3,980,970

 

$

-

 

$

3,980,970


The effect of the restatement on the consolidated statement of operations for the year ended May 31, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

6,702,046

 

$

130,696

 

$

6,832,742

Gross Profit

 

496,981

   

(130,696)

   

366,285

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

4,608,950

 

 

785,575

 

 

5,394,525

Research and development

 

2,410,506

 

 

60,947

 

 

2,471,453

Total operating expense

 

7,019,456

 

 

846,522

 

 

7,865,978

 

 

 

 

 

 

 

 

 

Loss from operations

 

(6,522,475)

   

(977,218)

   

(7,499,693)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(6,455,979)

 

 

(977,218)

 

 

(7,433,197)

 

 

 

 

 

 

 

 

 

Net loss

$

(6,469,036)

 

$

(977,218)

 

$

(7,446,254)

                 

Basic net loss per common share

$

(0.54)

 

$

(0.08)

 

$

(0.62)

                 

Diluted net loss per common share

$

(0.54)

 

$

(0.08)

 

$

(0.62)

                 

Comprehensive loss

$

(6,477,151)

 

$

(977,218)

 

$

(7,454,369)


The effect of the restatement on the consolidated statement of operations for the year ended May 31, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

4,910,935

 

$

43,549

 

$

4,954,484

Gross Profit

 

1,781,776

   

(43,549)

   

1,738,227

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

2,274,415

 

 

272,207

 

 

2,546,622

Research and development

 

1,910,209

 

 

22,361

 

 

1,932,570

Total operating expense

 

4,184,624

 

 

294,568

 

 

4,479,192

                 

Loss from operations

 

(2,402,848)

 

 

(338,117)

 

 

(2,740,965)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(2,331,664)

 

 

(338,117)

 

 

(2,669,781)

 

 

 

 

 

 

 

 

 

Net loss

$

(2,339,054)

 

$

(338,117)

 

$

(2,677,171)

                 

Basic net loss per common share

$

(0.23)

 

$

(0.03)

 

$

(0.26)

                 

Diluted net loss per common share

$

(0.23)

 

$

(0.03)

 

$

(0.26)

                 

Comprehensive loss

$

(2,342,364)

 

$

(338,117)

 

$

(2,680,481)


The effect of the restatement on the consolidated statement of cash flows for the year ended May 31, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

                 

Net loss

$

(6,469,036)

 

$

(977,218)

 

$

(7,446,254)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Stock option expense

 

377,391

 

 

977,218

 

 

1,354,609

Net cash used in operating activities

 

(5,251,748)

   

-

   

(5,251,748)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

$

4,199,311

 

$

-

 

$

4,199,311


The effect of the restatement on the consolidated statement of cash flows for the year ended May 31, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

                 

Net loss

$

(2,339,054)

 

$

(338,117)

 

$

(2,677,171)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Stock option expense

 

200,470

 

 

338,117

 

 

538,587

Net cash used in operating activities

 

(4,297,498)

   

-

   

(4,297,498)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

$

8,641,027

 

$

-

 

$

8,641,027


As a result of the restatement described above, the following adjustments are made to the previously filed quarterly results for the periods ended August 31, 2020, November 30, 2020 and February 28, 2021:


The effect of the restatement on the consolidated balance sheet at August 31, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Shareholders' Equity:

 

 

 

 

 

 

 

 

                 

Additional paid-in-capital

$

35,231,415

 

$

1,417,328

 

$

36,648,743

Accumulated deficit

 

(23,575,147)

   

(1,417,328)

   

(24,992,475)

Other Equity accounts

 

924,357

 

 

-

 

 

924,357

Total Shareholders' Equity

$

12,580,625

 

$

-

 

$

12,580,625


The effect of the restatement on the consolidated statement of operations for the three months ended August 31, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

960,930

 

$

64,787

 

$

1,025,717

Gross Profit

 

182,876

   

(64,787)

   

118,089

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

1,164,564

 

 

141,380

 

 

1,305,944

Research and development

 

674,693

 

 

36,812

 

 

711,505

Total operating expense

 

1,839,257

 

 

178,192

 

 

2,017,449

                 

Loss from operations

 

(1,656,381)

 

 

(242,979)

 

 

(1,899,360)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(1,648,290)

 

 

(242,979)

 

 

(1,891,269)

 

 

 

 

 

 

 

 

 

Net loss

$

(1,649,415)

 

$

(242,979)

 

$

(1,892,394)

                 

Basic net loss per common share

$

(0.14)

 

$

(0.02)

 

$

(0.16)

                 

Diluted net loss per common share

$

(0.14)

 

$

(0.02)

 

$

(0.16)

                 

Comprehensive loss

$

(1,651,136)

 

$

(242,979)

 

$

(1,894,115)


The effect of the restatement on the consolidated statement of cash flows for the three months ended August 31, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

                 

Net loss

$

(1,649,415)

 

$

(242,979)

 

$

(1,892,394)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Stock option expense

 

3,808

 

 

242,979

 

 

246,787

Net cash used in operating activities

 

(1,597,146)

   

-

   

(1,597,146)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

6,964,314

 

$

-

 

$

6,964,314


The effect of the restatement on the consolidated balance sheet at November 30, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Shareholders' Equity:

 

 

 

 

 

 

 

 

                 

Additional paid-in-capital

$

35,284,864

 

$

1,650,262

 

$

36,935,126

Accumulated deficit

 

(25,060,311)

   

(1,650,262)

   

(26,710,573)

Other Equity accounts

 

924,228

 

 

-

 

 

924,228

Total Shareholders' Equity

$

11,148,781

 

$

-

 

$

11,148,781


The effect of the restatement on the consolidated statement of operations for the six months ended November 30, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

1,971,960

 

$

117,564

 

$

2,089,524

Gross Profit

 

544,372

   

(117,564)

   

426,808

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

2,419,411

 

 

291,379

 

 

2,710,790

Research and development

 

1,261,096

 

 

66,970

 

 

1,328,066

Total operating expense

 

3,680,507

 

 

358,349

 

 

4,038,856

                 

Loss from operations

 

(3,136,135)

 

 

(475,913)

 

 

(3,612,048)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(3,120,061)

 

 

(475,913)

 

 

(3,595,974)

 

 

 

 

 

 

 

 

 

Net loss

$

(3,134,579)

 

$

(475,913)

 

$

(3,610,492)

                 

Basic net loss per common share

$

(0.27)

 

$

(0.04)

 

$

(0.31)

                 

Diluted net loss per common share

$

(0.27)

 

$

(0.04)

 

$

(0.31)

                 

Comprehensive loss

$

(3,137,829)

 

$

(475,913)

 

$

(3,613,742)


The effect of the restatement on the consolidated statement of operations for the three months ended November 30, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

1,011,030

 

$

52,777

 

$

1,063,807

Gross Profit

 

361,496

   

(52,777)

   

308,719

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

1,254,847

 

 

149,999

 

 

1,404,846

Research and development

 

586,403

 

 

30,158

 

 

616,561

Total operating expense

 

1,841,250

 

 

180,157

 

 

2,021,407

                 

Loss from operations

 

(1,479,754)

 

 

(232,934)

 

 

(1,712,688)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(1,471,771)

 

 

(232,934)

 

 

(1,704,705)

 

 

 

 

 

 

 

 

 

Net loss

$

(1,485,164)

 

$

(232,934)

 

$

(1,718,098)

                 

Basic net loss per common share

$

(0.13)

 

$

(0.02)

 

$

(0.15)

                 

Diluted net loss per common share

$

(0.13)

 

$

(0.02)

 

$

(0.15)

                 

Comprehensive loss

$

(1,486,694)

 

$

(232,934)

 

$

(1,719,628)


The effect of the restatement on the consolidated statement of cash flows for the six months ended November 30, 2020 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

                 

Net loss

$

(3,134,579)

 

$

(475,913)

 

$

(3,610,492)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Stock option expense

 

24,227

 

 

475,913

 

 

500,140

Net cash used in operating activities

 

(2,880,218)

   

-

   

(2,880,218)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

5,683,787

 

$

-

 

$

5,683,787


The effect of the restatement on the consolidated balance sheet at February 28, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Shareholders' Equity:

 

 

 

 

 

 

 

 

                 

Additional paid-in-capital

$

36,563,562

 

$

1,935,493

 

$

38,499,055

Accumulated deficit

 

(26,899,621)

   

(1,935,493)

   

(28,835,114)

Other Equity accounts

 

935,642

 

 

-

 

 

935,642

Total Shareholders' Equity

$

10,599,583

 

$

-

 

$

10,599,583


The effect of the restatement on the consolidated statement of operations for the nine months ended February 28, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

5,639,103

 

$

152,490

 

$

5,791,593

Gross Profit

 

505,867

   

(152,490)

   

353,377

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

3,697,804

 

 

540,933

 

 

4,238,737

Research and development

 

1,824,312

 

 

67,721

 

 

1,892,033

Total operating expense

 

5,522,116

 

 

608,654

 

 

6,130,770

                 

Loss from operations

 

(5,016,249)

 

 

(761,144)

 

 

(5,777,393)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(4,962,488)

 

 

(761,144)

 

 

(5,723,632)

 

 

 

 

 

 

 

 

 

Net loss

$

(4,973,889)

 

$

(761,144)

 

$

(5,735,033)

                 

Basic net loss per common share

$

(0.42)

 

$

(0.07)

 

$

(0.49)

                 

Diluted net loss per common share

$

(0.42)

 

$

(0.07)

 

$

(0.49)

                 

Comprehensive loss

$

(4,982,576)

 

$

(761,144)

 

$

(5,743,720)


The effect of the restatement on the consolidated statement of operations for the three months ended February 28, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cost of sales

$

3,667,143

 

$

34,926

 

$

3,702,069

Gross Loss

 

(38,505)

   

(34,926)

   

(73,431)

 

 

 

 

 

 

 

 

 

Operating Expenses:

               

Selling, general and administrative

 

1,278,393

 

 

249,554

 

 

1,527,947

Research and development

 

563,216

 

 

751

 

 

563,967

Total operating expense

 

1,841,609

 

 

250,305

 

 

2,091,914

                 

Loss from operations

 

(1,880,114)

 

 

(285,231)

 

 

(2,165,345)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(1,842,427)

 

 

(285,231)

 

 

(2,127,658)

 

 

 

 

 

 

 

 

 

Net loss

$

(1,839,310)

 

$

(285,231)

 

$

(2,124,541)

                 

Basic net loss per common share

$

(0.15)

 

$

(0.03)

 

$

(0.18)

                 

Diluted net loss per common share

$

(0.15)

 

$

(0.03)

 

$

(0.18)

                 

Comprehensive loss

$

(1,844,747)

 

$

(285,231)

 

$

(2,129,978)


The effect of the restatement on the consolidated statement of cash flows for the nine months ended February 28, 2021 is as follows:


 

As Previously

Reported

           
   

Adjustments

 

As Restated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

                 

Net loss

$

(4,973,889)

 

$

(761,144)

 

$

(5,735,033)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Stock option expense

 

261,176

 

 

761,144

 

 

1,022,320

Net cash used in operating activities

 

(4,244,064)

   

-

   

(4,244,064)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

5,272,565

 

$

-

 

$

5,272,565