Notes to Condensed Consolidated Financial
Statements
October 31, 2016 and 2015
(Unaudited)
Note 1: Basis of Presentation and Summary
of Significant Accounting Policies
Organization and Nature of Business
Dataram Corporation (“Dataram”
or the “Company”) is an independent manufacturer and reseller of memory products and provider of performance solutions.
The Company provides customized memory solutions for original equipment manufacturers (OEMs) and compatible memory for leading
brands including Cisco, Dell, Fujitsu, HP, IBM, Lenovo and Oracle as well as a line of memory products for Intel and AMD motherboard
based servers. Dataram manufactures its memory in-house to meet three key criteria - quality, compatibility, and selection
- and tests its memory for performance and OEM compatibility as part of the production process. The Company has memory designed
for over 50,000 systems and products that range from energy-efficient DDR4 modules to legacy SDR offerings. The Company is
a CMTL Premier Participant and ISO 9001 (2008 Certified). Its products are fully compliant with JEDEC Specifications.
Dataram’s customers include a global
network of distributors, resellers, retailers, OEM customers and end users.
Dataram competes with several large independent
memory manufacturers and OEMs. The primary raw material used in producing memory boards is dynamic random access memory (DRAM)
chips. The purchase cost of DRAMs is the largest single component of the total cost of a finished memory board. Consequently, average
selling prices for computer memory boards are significantly dependent on the pricing and availability of DRAM chips.
Liquidity and Going Concern
The Company's condensed
consolidated financial statements are prepared using the accrual method of accounting in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) and have been prepared assuming that the Company will continue
as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business.
For the fiscal year ended April 30, 2016, the Company incurred losses of approximately $1,221,000. The Company also incurred losses
of approximately $1,186,000 in fiscal 2017’s first six months ended October 31, 2016.
If current and projected
revenue growth does not meet estimates, the Company may need to raise additional capital through debt and/or equity transactions
and further reduce certain overhead costs. The Company may require up to $1,000,000 of additional working capital over the next
twelve months to support operations. The Company cannot provide assurance that it will obtain any required financing or such financing
will be available to it on favorable terms.
Based on the above,
there is substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts
of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Basis of Presentation
The condensed consolidated financial statements
have been prepared in accordance with GAAP for interim financial statements and with Form 10-Q and Article 10 of Regulation S-X
of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and
footnotes required by GAAP for annual financial statements. The condensed consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain
all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as
of October 31, 2016 and the results of operations and cash flows for the periods presented. The results of operations for the three
and six months ended October 31, 2016 are not necessarily indicative of the operating results for the full fiscal year or for any
future period.
These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s
Annual Report on Form 10-K for the year ended April 30, 2016. The Company’s accounting policies are described in the Notes
to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended April 30, 2016, and updated, as necessary,
in this Quarterly Report on Form 10-Q.
On July 6, 2016, the Company filed a certificate
of amendment to its Articles of Incorporation with the Nevada Secretary of State in order to effectuate a reverse stock split of
the Company’s issued and outstanding common stock, par value $0.001 per share on a one (1) for three (3) basis, effective
on July 8, 2016. The accompanying condensed consolidated financial statements and notes thereto give retrospective effect of the
reverse stock split for all periods presented.
Use of Estimates
The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
including deferred tax asset valuation allowances and certain other reserves and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates
and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in
the period they are determined to be necessary. Some of the more significant estimates made by management include allowance for
doubtful accounts and sales returns, reserve for inventory obsolescence, deferred income tax asset and related valuation allowance
,
fair value of certain financial instruments, impairment assessment of carrying value of goodwill and other intangible assets
and other operating allowances and accruals. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when title passes upon
shipment of goods to customers. The Company’s revenue earning activities involve delivering or producing goods. The following
criteria are met before revenue is recognized: persuasive evidence of an arrangement exists, shipment has occurred, selling price
is fixed or determinable and collection is reasonably assured. The Company does experience a minimal level of sales returns and
allowances for which the Company accrues a reserve at the time of sale. Estimated warranty costs are accrued by management upon
product shipment based on an estimate of future warranty claims. Such amounts were not material for the three and six months ended
October 31, 2016 and 2015.
Net Loss per Share
Basic net loss per share is computed by dividing
the net loss available to common stock holders by the weighted average number of shares of common stock issued and outstanding
during the period. The calculation of diluted loss per share for the three and months ended October 31, 2016 and 2015 includes
only the weighted average number of shares of common stock outstanding. The denominator excludes the dilutive effect of common
shares issuable upon exercise or conversion of stock options, warrants, convertible notes and Series A, Series B and Series D preferred
shares as their effect would be anti-dilutive.
Anti-dilutive securities consisted of the following
at October 31:
|
|
2016
|
|
2015
|
Common stock equivalent of convertible notes
|
|
|
—
|
|
|
|
100,000
|
|
Common stock equivalent of convertible notes – related parties
|
|
|
9,070
|
|
|
|
9,070
|
|
Series A preferred shares
|
|
|
—
|
|
|
|
946,069
|
|
Series B preferred shares
|
|
|
326,107
|
|
|
|
—
|
|
Series D preferred shares
|
|
|
369,853
|
|
|
|
—
|
|
Warrants
|
|
|
133,667
|
|
|
|
1,119,425
|
|
Common shares reserved for series A preferred share dividends
|
|
|
—
|
|
|
|
15,595
|
|
Stock options
|
|
|
2,778
|
|
|
|
111,916
|
|
Total
|
|
|
841,475
|
|
|
|
2,302,075
|
|
Recently Issued Accounting Pronouncements
On November 17, 2016, the FASB issued
Accounting Standards Update (ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, providing specific guidance on
the cash flow classification and presentation of changes in restricted cash and restricted cash equivalents. The amendments
in ASU 2016-18 require that a statement of cash flows (SCF) explain the change during the period in the total of cash, cash equivalents,
and amounts generally described as restricted cash or restricted cash equivalents (collectively “CASH”). Therefore,
amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents
when reconciling the beginning-of-period and end-of-period total amounts shown on the SCF. The amendments in ASU 2016-18 are effective
for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
Early adoption is permitted, including adoption in an interim period.
The Company is currently evaluating the impact of
this accounting standard on its condensed consolidated financial statements.
On August 26,
2016, the FASB issued Accounting Standards Update (ASU) 2016-15, Classification of Certain Cash Receipts and Cash Payments, seeking
to eliminate diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement
of cash flows. The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities, including both
business entities and not-for-profit entities that are required to present a statement of cash flows under FASB Accounting Standards
Codification (FASB ASC) 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities
for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted,
including adoption in an interim period.
The Company is currently evaluating the impact of this accounting standard on its
condensed consolidated financial statements.
Note 2: Related Party Transactions
The Company purchased inventories for resale
from Sheerr Memory, LLC (“Sheerr Memory”). Sheerr Memory’s owner (“Mr. Sheerr”) was employed by the
Company as an advisor until August 31, 2016. For the six months ended October 31, 2016 the Company purchased approximately $40,000
of inventories and during the three month period ended October 31, 2016 the Company purchased approximately $21,000 of inventories.
In the three and six month prior year periods ended October 31, 2015, the Company purchased approximately $165,000 of inventories
and $289,000 of inventories, respectively, from Sheerr Memory. Accounts payable of nil and approximately $11,000 in the Company’s
condensed consolidated balance sheets as of October 31, 2016 and April 30, 2016 respectively, was payable to Sheerr Memory. Sheerr
Memory offers the Company trade terms of net 30 days and all invoices were settled in the normal course of business. No interest
is paid.
The Company purchased inventories for resale
from Keystone Memory Group (“Keystone Memory”). Keystone Memory’s owner is a relative of Mr. Sheerr. During the
three and six month period ended October 31, 2016 the Company purchased approximately $81,000 of inventories and $501,000 of inventories,
respectively. In the three and six month prior year periods ended October 31, 2015, the Company purchased approximately $25,000
of inventories and $658,000 of inventories, respectively, from Keystone Memory. Accounts payable of nil and approximately $190,000
in the Company’s condensed consolidated balance sheets as of October 31, 2016 and April 30, 2016 respectively was payable
to Keystone Memory. Keystone Memory offers the Company trade terms of net due and all invoices are settled in the normal course
of business. No interest is paid.
On October 31, 2013, the Company entered into
an agreement with Mr. Sheerr to leaseback the equipment and furniture that was sold to Mr. Sheerr on October 31, 2013 for $500,000.
The lease is for a term of 60 months and the Company is obligated to pay approximately $7,500 per month for the term of the lease.
The Company has an option to extend the lease for an additional two year period. The transactions described have been accounted
for as a sale-leaseback transaction. Accordingly, the Company recognized a gain on the sale of assets of approximately $103,000,
which is the amount of the gain on sale in excess of present value of the future lease payments and will recognize the remaining
deferred gain of approximately $358,000 in proportion to the related gross rental charged to expense over the term of the lease,
60 months. The current portion of approximately $72,000 deferred gain was reflected in accrued liabilities and the long-term portion
of approximately $72,000 is reflected in other liabilities – long-term in the condensed consolidated balance sheet as of
October 31, 2016. As of April 30, 2016, the current portion of $72,000 deferred gain is reflected in accrued liabilities and the
long-term portion of approximately $107,000 is reflected in other liabilities – long-term in the condensed consolidated balance
sheet as of April 30, 2016.
Note 3: Note Payable – Revolving Credit
Line
The Company’s financing agreement
(the “Financing Agreement”) with Rosenthal & Rosenthal, Inc. provides for a revolving loan with a maximum borrowing
capacity of $3,500,000. The Financing Agreement renewal date was August 31, 2016 and will renew from year to year unless such Financing
Agreement is terminated as set forth in the loan agreement. The amount outstanding under the Financing Agreement bears interest
at a rate of the Prime Rate (as defined in the Financing Agreement) plus 3.25% (the “Effective Rate”) or on Over-advances
(as defined in the Financing Agreement), if any, at a rate of the Effective Rate plus 3%. The Financing Agreement contains other
financial and restrictive covenants, including, among others, covenants limiting the Company’s ability to incur indebtedness,
guarantee obligations, sell assets, make loans, enter into mergers and acquisition transactions and declare or make dividends.
Borrowings under the Financing Agreement are collateralized by substantially all the assets of the Company. The Financing Agreement
provides for advances against eligible accounts receivable and inventory balances based on prescribed formulas of raw materials
and finished goods. There was approximately $131,000 of additional availability as of October 31, 2016.
Note 4: Stockholder’s Equity
Series B preferred shares
For the six months ended October 31,
2016, holders of Series B Preferred Stock (the “Series B Preferred Stock”) converted 282,643 shares of Series B Preferred
Stock into 1,884,286 shares of common stock. The converted value for each share Series B Preferred Stock is approximately $12.20
or an aggregate of $3,448,244 and resulted in an offsetting increase to Additional Paid in Capital in the October 31, 2016 consolidated
balance sheet. As of October 31, 2016, there were 48,916 shares of Series B Preferred Stock outstanding convertible into approximately
326,107 shares of common stock.
Series D preferred shares
On August 3, 2016, the Company entered into
separate securities purchase agreements with accredited investors for the issuance and sale of the Company’s newly designated
0% Series D Convertible Preferred Stock (the “Series D Preferred Stock”) which are convertible into shares of the Company’s
common stock, par value $0.001 per share. The Series D Preferred Stock is governed by a Certificate of Designations, Preferences
and Rights of the 0% Series D Convertible Preferred Stock. Each share of Series D Preferred Stock was sold at a per share purchase
price of $136.00 and converts into 100 shares of common stock, subject to adjustment for dividends and stock splits. On August
5, 2016, the Company closed the private placement and sold 3,699 shares of Series D Preferred Stock convertible into an aggregate
of approximately 369,900 shares of common stock with gross proceeds to the Company of $503,000.
Bonus Shares
Bonus shares (the “Bonus Shares”)
are an award to an eligible person of shares for services to be rendered or for past services already rendered to the Company.
The Board of Directors of the Company (the “Board”) will determine the number of shares to be awarded to the eligible
individual, in accordance with any restrictions thereon. These restrictions may be based upon completion of a specified number
of years of service with the Company or upon satisfaction of performance goals based on performance factors. Payment for the Bonus
Shares may be made in the form of cash, whole shares, or a combination thereof, based on the fair market value of the shares on
the date of payment, as determined in the sole discretion of the Board.
Between May 1, 2016 and October 31, 2016 the
Company awarded 188,333 restricted shares of the Company’s common stock to employees, executive officers and directors. The
Company’s condensed consolidated statements of operations for the six months ended October 31, 2016 includes approximately
$429,000 of stock-based compensation expense. These stock grants have been classified as equity instruments and, as such, a corresponding
increase has been reflected in additional paid-in capital in the accompanying consolidated balance sheets.
Warrants
At October 31, 2016 the Company had 133,667
warrants outstanding with exercise prices between $7.50 and $10.50. A summary of warrant activity for the three months ended October
31, 2016 is as follows:
|
|
Shares
|
|
Weighted
average
exercise
price
|
|
Weighted
average
remaining
contractual life years
|
|
Aggregate
intrinsic
value (1)
|
|
|
|
|
|
|
|
|
|
Balance May 1, 2016
|
|
|
|
207,625
|
|
|
$
|
19.74
|
|
|
|
1.24
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
|
(73,958
|
)
|
|
$
|
40.68
|
|
|
|
|
|
|
|
|
|
Balance October 31, 2016
|
|
|
|
133,667
|
|
|
$
|
8.15
|
|
|
|
2.07
|
|
|
|
—
|
|
|
(1)
|
This amount represents the difference between the conversion price and $1.03, the closing price
of Dataram common stock on October 31, 2016 as reported on the NASDAQ Stock Market, for all in-the-money warrants outstanding.
|
Note 5: Commitments and Contingencies
Leases
Future minimum lease payments under non-cancelable
operating leases (with initial or remaining lease terms in excess of one year) as of October 31, 2016 are as follows:
|
|
Total
|
Year ending April 30:
|
|
|
|
|
|
2017 (Remaining)
|
|
|
|
131,000
|
|
2018
|
|
|
|
173,000
|
|
2019
|
|
|
|
130,000
|
|
2020
|
|
|
|
86,000
|
|
Total
|
|
|
$
|
520,000
|
|
Legal Proceedings
Effective as of the close of business on December
17, 2014, the Company terminated its agreement with MPP Associates, Inc., pursuant to which Marc P. Palker had been providing CFO
services to the Company. On April 8, 2015, MPP Associates, Inc. and Mr. Palker filed a complaint,
MPP Associates, Inc. and Marc
Palker v. Dataram Corporation, Jon Isaac, David Moylan, Michael Markulec and Richard Butler
, in the Superior Court of the State
of New Jersey, Essex County, Docket No. ESX-L-002413-15.
Effective as of the close of business on January
22, 2015, the Company terminated the employment agreement with John H. Freeman, its former Chief Executive Officer. On April 9,
2015, Mr. Freeman filed a complaint,
John Freeman v. Dataram Corporation, David A. Moylan, Jon Isaac, and John Does 1-5
,
in the Superior Court of the State of New Jersey, Essex County, Docket No. ESX-L-002471-15.
Similarly,
on April 10, 2015, the Company filed an action against Mr. Freeman, Mr. Palker and MPP Associates, Inc.,
Dataram Corporation
v. John Freeman, Marc Palker and MPP Associates, Inc.
, in the Superior Court of the State of New Jersey, Mercer County, Docket
No. ESX-L-000886-15.
The aforementioned three State Court actions described have been
consolidated in Essex County.
On March
9, 2015, Marc Palker filed a complaint against the Company with the U.S. Department of Labor, Occupational Safety and Health Administration,
alleging a violation of the Sarbanes-Oxley Act of 2002.
On June 26,
2015, Alethea Douglas, a former employee, filed a complaint against the Company with the U.S. Equal Employment Opportunity Commission,
alleging a claim for age discrimination in connection with the termination of her employment effective May 20, 2015.
A range of loss, if any, on the aforementioned
matters cannot be estimated at this point in time.
Note 6: Financial Information by Geographic
Location
The Company currently operates in one business
segment that develops, manufactures and markets a variety of memory systems for use with network servers and workstations which
are manufactured by various companies. Revenues for the three and six months ended October 31, 2016 and 2015 by geographic region
are as follows:
|
|
Three months
ended
October 31,
2016
|
|
Six months
ended
October 31,
2016
|
United States
|
|
$
|
3,432,000
|
|
|
$
|
6,694,000
|
|
Europe
|
|
|
840,000
|
|
|
|
1,983,000
|
|
Other (principally Asia Pacific Region)
|
|
|
407,000
|
|
|
|
917,000
|
|
Consolidated
|
|
$
|
4,679,000
|
|
|
$
|
9,594,000
|
|
|
|
Three months
ended
October 31,
2015
|
|
Six months
ended
October 31,
2015
|
United States
|
|
$
|
5,108,000
|
|
|
$
|
11,220,000
|
|
Europe
|
|
|
879,000
|
|
|
|
1,995,000
|
|
Other (principally Asia Pacific Region)
|
|
|
64,000
|
|
|
|
173,000
|
|
Consolidated
|
|
$
|
6,051,000
|
|
|
$
|
13,388,000
|
|
Note 7: Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company maintains its cash
in financial institutions. To the extent that such deposits exceed the maximum insurance levels, they are uninsured. The Company
performs ongoing evaluations of its customers’ financial condition, as well as general economic conditions and, generally,
requires no collateral from its customers. At October 31, 2016 amounts due from four customers totaled approximately 36%, 18%,
11% and 10%, of accounts receivable. At April 30, 2016, amounts due from one customer totaled approximately 15%.
In the fiscal quarter ended October 31, 2016
the Company had sales to one customer that totaled approximately 40% of revenues. For the six months ended October 31, 2016 sales
to one customer totaled approximately 33% of revenues. For the comparable prior year quarter ended October 31, 2015, the Company
had sales to three customers that were over 10% of revenues. These shipments were approximately 19%, 15% and 13% of total revenues,
respectively. For the six months ended October 31, 2015, the Company had sales to three customers that were over 10% of revenues.
These shipments were approximately 17%, 14% and 13% of total revenues, respectively.
Note 8: Entry into a Material Definitive
Agreement
On June 13, 2016, the Company
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with its wholly owned subsidiary,
Dataram Acquisition Sub, Inc. (“Acquisition Sub”), a Nevada corporation, U.S. Gold Corp., a Nevada corporation
and exploration stage company that owns certain mining leases and other mineral rights comprising the Copper King gold and
copper development project located in the Silver Crown Mining District of southeast Wyoming, and Copper King, LLC
(“Copper King”), a principal stockholder of U.S. Gold Corp (the “Merger”) and the Keystone Project,
located in Eureka County, Nevada. The closing of the Merger is subject to conditions as defined in the Merger Agreement.
Pursuant to the terms and conditions of the
Merger Agreement, at the closing of the Merger, U.S. Gold Corp.’s common stock, Series A Preferred Stock and Series B Preferred
Stock will be converted into the right to receive shares of the Company’s common stock or, at the election of any U.S. Gold
Corp. stockholder, shares of the Company’s newly designated 0% Series C Convertible Preferred Stock, par value $0.001 per
share, which are convertible into shares of common stock (the “Merger Consideration”). The Merger Consideration shall
be allocated as defined in the Merger Agreement.
On July 6, 2016, the Company filed a certificate
of amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada in order to effectuate a reverse
split of the Company’s issued and outstanding common stock on a 1 for 3 basis, which was effective with the State of Nevada
on July 8, 2016 and with The NASDAQ Stock Market at the open of trading on July 11, 2016. All share and per share amounts are reflective
of the reverse split.
On July 29, 2016, the Company, Acquisition
Sub, U.S. Gold Corp. and Copper King, amended and restated the Merger Agreement to reflect the reverse split of the Company’s
issued and outstanding common stock and to adjust certain aspects of the Merger Consideration and management consideration as defined
in the Merger Agreement, as amended.
On September 14, 2016, the Company, Acquisition
Sub, U.S. Gold Corp. and Copper King, amended and restated the Merger Agreement, as amended, to adjust certain aspects of the Merger
Consideration and revise other covenants of the Merger Agreement, as amended (the “Second Amended and Restated Agreement”).
The Second Amended and Restated Agreement among
other things:
|
·
|
Increased the number of shares issuable to holders of U.S. Gold’s Series C Preferred Stock issued in connection with U.S. Gold’s private placement (the “Financing”) to 18,181,817 from 16,666,667 shares and increase the maximum number of warrants to purchase the Company’s common stock issuable to the placement agent in the Financing to 400,000 warrants from 250,000 warrants;
|
|
·
|
Reduced the number of Escrow Shares (as defined in the Merger Agreement) to be delivered and held in escrow to secure any claims that may arise with respect to the representations, warranties, covenants or indemnification obligations of Copper King LLC to 10% of the Company Stockholder Consideration (as defined in the Merger Agreement) from 15%;
|
|
·
|
Removed the delivery of a new preliminary economic report (the “New Report”) showing a lower economic value for the Copper King Project than the previously delivered preliminary economic report as a trigger for the release of any Escrow Shares (as defined in the Merger Agreement);
|
|
·
|
Included a covenant for the delivery by U.S. Gold of a New Report within one year of the closing of the merger;
|
|
·
|
Included the requirement for the Company to register the Merger Consideration on a Form S-4;
|
|
·
|
Included a covenant that certain officers and directors of the Company shall be issued an aggregate of 820,000 shares of restricted stock pursuant to a shareholder approved equity incentive plan, subject to the execution of a two year lockup agreement; and
|
|
·
|
Revised the maximum number of shares the Company shall have outstanding at the closing of the merger, on a fully diluted basis, to 4,559,178 shares of common stock.
|
Note 9: Subsequent event
Between the quarter ended October 31,
2016 and the filing of this report, the holders of Series B Preferred Stock converted 48,916 Series B Preferred shares into 326,106
shares of common stock. The converted value for each Series B Preferred share is approximately $12.20 or $596,763.
On November 28, 2016, the Company, Acquisition
Sub, U.S. Gold Corp. and Copper King, amended and restated the Merger Agreement, as amended, to adjust certain aspects of the Merger
Consideration and revise other covenants of the Merger Agreement, as amended (the “Third Amended and Restated Agreement”).
The Third Amended and Restated Agreement among
other things:
|
·
|
Increased the Merger Consideration for U.S. Gold holders of record, in the aggregate and on an “as converted” and fully diluted basis, to 48,616,089 shares of common stock and equivalents from 46,241,868 shares of common stock and equivalents. This includes:
|
|
o
|
Reducing the number of shares issuable to holders of U.S. Gold’s Series C Preferred Stock issued in connection with U.S. Gold’s private placement (the “Financing”) to 18,094,362 from 18,181,817;
|
|
o
|
Increasing the maximum number of warrants to purchase the Company’s common stock issuable to the placement agent in the Financing to 1,809,436 five-year cashless warrants from 400,000 warrants;
|
|
o
|
Adding a provision to issue 925,833 five-year options which vest 1/24 each month over the 2 years from the original date of issue to the holders of options issued in connection with the closing of the Keystone Acquisition (as defined in the Merger Agreement);
|
|
·
|
Eliminated a covenant that certain officers and directors of the Company be issued an aggregate of 820,000 shares of restricted stock pursuant to a shareholder approved equity incentive plan, subject to the execution of a two year lockup agreement; and
|
|
·
|
Revised the maximum number of shares the Company shall have outstanding at the closing of the merger, on a
fully diluted basis, to 4,945,182 shares of common stock.
|