NOTE 6 - EQUITY

Preferred shares

The Company has authorized 6,250,000 shares of preferred stock with a par value of $0.001 per share.

During the nine months ended May 31, 2020, there were no issuances of preferred stock.

Common Shares

The Company has authorized 18,750,000 shares of common stock with a par value of $0.001 per share. Each share of common stock entitles the holder to one vote, in person or proxy, on any matter on which an action of the stockholders of the Company is sought.

During the nine months ended May 31, 2020, the Company issued 386,238 shares of common stock as follows:

On December 2, 2019, 6,250 shares of common stock previously issued to a director of the Company were cancelled upon the resignation of the director from the Company. As a result, the Company reversed an expense of $2,500 which was recorded in prior quarter.

During the nine months ended May 31, 2020, the Company recorded $31,500 of stock compensation expense for four members of the Company’s Board of Directors. The unamortized value of the stock-based compensation as of May 31, 2020 is $44,333.

Equity Distribution

On April 13, 2020, the Company entered into an Equity Distribution Agreement with Maxim Group LLC (the “Agent”) to create an at-the-market equity program under which it may sell up to an aggregate of $1,475,000 of shares of the Company’s common stock (the “Shares”) from time to time through the Agent, as sales agent, subject to any applicable limits when using Form S-3. The Agent will be entitled to compensation at a commission rate of 2.0% of the gross sales price per sold share of common stock.

Warrants

A summary of activity during the nine months ended May 31, 2020 follows:

The intrinsic value of the warrants as of May 31, 2020 is $0. All of the outstanding warrants are exercisable as of May 31, 2020.

Stock Options

2018 Equity Incentive Plan

On December 2, 2019, 22,250 shares of common stock previously granted to a director of the Company in the form of a stock option were cancelled upon the resignation of the director from the board of directors.

On December 6, 2019, the Company granted 10,000 shares of common stock to a director of the Company in the form of a stock option valued at $24,401. The exercise price per share is $2.65 and the stock options expire on December 6, 2029. The shares vest 1/24th monthly over a period of two years from the grant date.

On December 6, 2019, the Company granted 40,000 shares of common stock to a director of the Company in the form of a stock option valued at $97,606. The exercise price per share is $2.65 and the stock options expire on December 6, 2029. The shares vest 1/48th monthly over a period of four years from the grant date.

On January 1, 2020, the Company granted 24,000 shares of common stock to a consultant in the form of a stock option valued at $67,976 in connection with the Company further amending and restating the consultant’s a prior amended and restated Consulting Agreement dated as of August 17, 2018. The exercise price per share is $2.12 and the stock options expire on December 13, 2029. The shares vest 1/48th monthly over a period of four years, beginning on January 31, 2020 and on the last day of each month thereafter.

The Company utilizes the Black-Scholes model to value the stock options. The Company utilized the following assumptions:

During the nine months ended May 31, 2020, $294,898 was expensed, and as of May 31, 2020, $449,833 remains unamortized. The intrinsic value of the 281,834 options as of May 31, 2020 is $0, and the weighted average value of the remaining life of the options is 9.15 years.

The following is a summary of stock option activity during the nine months ended May 31, 2020:

The following table summarizes information relating to exercisable stock options as of May 31, 2020:

NOTE 5 - EQUITY

Preferred shares

The Company has authorized 6,250,000 shares of preferred stock with a par value of $0.001.

During the year ended August 31, 2019 and 2018, there were no issuance of preferred stock.

Common Shares

The Company has authorized 18,750,000 common stock with a par value of $0.001 per share. Each common stock entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

During the year ended August 31, 2019, the Company issued 1,603,348 shares of common stock as follows,

During the year ended August 31, 2018, the Company issued 334,360 shares of common stock as follows,

Stock Payable

During the year ended August 31, 2019, the Company recorded stock payable of 72,660 shares of common stock to NEOMED as follows:

Warrants

In connection with the common stock sold pursuant to subscription agreements in fiscal year 2019, 2018 and 2017, each individual investor received warrants to purchase additional shares of common stock.

For each unit purchased in the Company’s Series A offering, Series B offering, Series C offering and Series D offering, each investor will receive one Series A, Series B, Series C and Series D Common Stock Purchase Warrant, respectively, to purchase one share of the Company’s common stock for a period of five years from the date of the subscription agreement at a price per share from $8.00 to $14.00, depending on the subscription round. For each unit purchased in the Company’s Series E offering, each investor will receive one Series E Common Stock Purchase Warrant to purchase one-half (1/2) share of the Company’s common stock for a period of three years from the date of the subscription agreement at a price per share of $16.00.

Under the terms of the subscription agreements for the Company’s private placement offerings, following the closing date of such private offering until the earlier of (i) the date that the registration statement of the shares issued in such offering is declared effective by the SEC, or (ii) the date the shares otherwise become freely tradable, if the Company issues any common stock or common stock equivalent entitling the new investor to acquire common stock at a price below the purchase price for that particular prior subscription agreement, the Company will be required to issue the prior investor additional units, each consisting of one share of common stock and a warrant to purchase one share of common stock, equal to the difference between the units actually issued at such closing to the new investor, and the number of units we would have issued to the prior investor had the offering been completed at this new, lower price per share. Management reviewed the terms of the agreements and determined that in accordance with ASC 815, these cash subscription agreements entered into by the Company contain derivative features. As of August 31, 2019, a derivative liability of $29,501 has been recorded.

During the year ended August 31, 2018, the Company issued warrants with the purchase of the Series A and Series B units. For each share purchased, the investor received one Series A or Series B or Series C Common Stock Purchase Warrant to purchase one share of the Company’s common stock for a period of five years from the date of the share subscription with ranges of prices from $8.00 per share to $14.00 per share. A total of 254,389 warrants were issued during the year ended August 31, 2018.

On June 25, 2019, the Company sold an aggregate of 1,300,813 units with each unit consisting of one (1) share of the Company’s common stock, par value $0.001 per share and a warrant to purchase one (1) share of common stock at an exercise price equal to $6.4575 per share.

In relation to the offering described above, the Company also agreed to issue to the underwriters warrants to purchase total of 104,065 shares of Common Stock (8% of the shares of Common Stock sold in the offering). The underwriter’s warrants are exercisable at $6.765 per share of common stock and have a term of three years. The warrants were issued for services provided by the underwriters.

A summary of activity of the warrants during the year ended August 31, 2019 and 2018 follows:

The intrinsic value of the warrants as of August 31, 2019 is $0. All of the outstanding warrants are exercisable as of August 31, 2019.

The intrinsic value of the warrants as of August 31, 2018 was $585,691.

2018 Equity Incentive Plan

On August 17, 2018, the Board of Directors of the Company approved the Equity Incentive Plan (the “2018 Plan”). The 2018 Plan permits the Company to issue up to 375,000 shares of common stock upon exercise of options granted to selected employees, officers, directors, consultants and advisers. The options may be either “incentive stock options” (as such term is defined in the Internal Revenue Code of 1986) or nonstatutory stock options that are not intended to qualify as “incentive stock options”. Incentive stock options may be granted only to employees. The 2018 Plan is administered by the Board or, at the discretion of the Board, a Board committee. The administrator determines who will receive options and the terms of the options, including the exercise price, expiration date, vesting and the number of shares. The exercise price of each stock option may not be less than the fair market value of the Common Stock on the date of grant, although the exercise price of any incentive stock option granted to a 10% stockholder may not be less than 110% of the fair market value on the grant date. Options may be exercisable (“vest”) immediately or in increments based on time and/or performance criteria as determined by the administrator. The term of any option may not exceed 10 years (five years for any incentive stock option granted to a 10% stockholder), and unless otherwise determined by the administrator, each option must terminate no later than three months after the termination of the optionee’s employment (one year in the event of death or disability). Subject to a few minor exceptions, options may not be transferred other than by will or by the laws of descent and distribution. The 2018 Plan will expire on August 17, 2028.

On August 17, 2018, the Company granted options to directors and consultants to purchase an aggregate of 50,000 shares of our common stock at a price of $10.8 per share with a various vesting schedule. The options expire August 17, 2028, unless such director and consultants ceases his or her service as a director or consultant prior the exercise or expiration of the option.

On July 18, 2019, the Company granted options to a consultant to purchase 2,500 shares of our common stock at a price of $3.12 per share. The options are immediately vested and expire July 18, 2029.

On August 29, 2019, the Company granted options to officers and directors to purchase an aggregate of 181,500 shares of our common stock at a price of $1.99 per share with a various vesting schedule. The options expire August 29, 2029.

The Company utilizes the Black-Scholes model to value the stock options. The Company utilized the following assumptions:

During the year ended August 31, 2019, $133,110 was expensed, and as of August 31, 2019, $637,865 remains unamortized. During the year ended August 31, 2018, $107,169 was expensed, and as of August 31, 2018, $429,519 remained unamortized.

The following is a summary of stock option activity during the year ended August 31, 2019 and 2018:

The following table summarizes information relating to exercisable stock options as of August 31, 2019:

The intrinsic value of the 234,000 options as of August 31, 2019 is $0. The intrinsic value of the 50,000 options outstanding as of August 31, 2018 was $0.