David
Employment Agreement & Option Grant
On
December 29, 2017, the Company entered into an employment agreement (the “Employment Agreement”) with Christopher
David, the Company’s President and a member of the board of directors, effective January 1, 2018. The Employment Agreement
terminates on July 30, 2018, subject to the termination provisions contained in the Employment Agreement.
Pursuant
to the terms of the Employment Agreement, Mr. David agreed to serve as the Company’s President. In consideration thereof,
the Company agreed to (i) pay Mr. David a monthly salary of $8,000, and (ii) grant Mr. David a 5-year option (the “Option”)
to purchase 2,000,000 shares of the Company’s restricted common stock at an exercise price of $0.42 per share. The Option
vested on December 29, 2017.
Pursuant
to the terms of the Employment Agreement, the Company may terminate Mr. David at any time, with or without Cause (as defined below);
provided, however, that if the Company terminates Mr. David without Cause:
(a)
The Option shall be deemed fully vested effective as of December 29, 2017, and is not subject to revocation or return, and
(b)
The Company will continue to owe Mr. David his monthly salary through July 30, 2018.
“Cause”
means Mr. David must have (i) been willful, gross or persistent in his inattention to his duties or he committed acts which constitute
willful or gross misconduct and, after written notice of the same, has been given the opportunity to cure the same within 30 days
after such notice, and (ii) been found guilty of having committed a fraud against the Company.
On
December 29, 2017, the Company granted the Option to Mr. David pursuant to that certain Option to Purchase Common Stock (the “Option
Agreement”). The Option Agreement provides for the cashless exercise of all or a portion of the Option, or exercise through
payment of the exercise price in cash.
For
the three months ended November 30, 2017 compared to the three months ended November 30, 2016
Revenues
for the three months ended November 30, 2017 were $2,253,737, representing an increase of $435,598, or 24.0%, from $1,818,139
for the same period in 2016. The increase in revenue is principally due to the Company’s entry into new occupational therapy
service contracts in January 2017 and the acquisition of Apka Health, Inc. in April 2017.
Cost
of revenues for the three months ended November 30, 2017 were $1,407,693, representing an increase of $243,580, or 20.9%, from
$1,164,113 for the same period in 2016. The increase in cost of revenues is principally due to the increase in revenues. Cost
of revenues as a percentage of revenue was 62.5% for the three months ended November 30, 2017 and 64.0% for same period in 2016.
The decrease in cost of revenues as a percentage of revenue is principally due to slightly lower costs.
Operating
costs for the three months ended November 30, 2017 were $1,018,414, representing an increase of $427,249, or 72.3%, from $591,165
for the same period in 2016. The increase in operating costs is attributed to stock-based compensation of $142,665 for the three
months ended November 30, 2017 (there was no stock-based compensation for the same period in 2016), as well as an increase in
both operating payroll expenses and professional fees.
Interest
expense for the three months ended November 30, 2017 was $134,153, representing an increase of $17,065, or 14.6%, from $117,088
for the same period in 2016. The increase is due to interest during the three months ended November 30, 2017 related to payroll
withholdings originating in fiscal years 2014 and 2015.
Net
loss for the three months ended November 30, 2017 was $360,688, representing an increase of $317,439, or 734.0%, from $43,249
for the same period in 2016. The increase in net loss is due to the reasons described above.