NOTE 7 - EQUITY

Amendment to Articles of Incorporation or Bylaws

On December 3, 2020, the Company held a special meeting of stockholders and approved an amendment of the Company’s articles of incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.001, (“Common Stock”) from 18,750,000 to 750,000,000.

Preferred shares

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

During the six months ended February 28, 2021, there were no issuances of preferred stock.

Common Shares

The Company has authorized 750,000,000 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.

On October 9, 2020, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc., as representative of the underwriters described in the Underwriting Agreement (the “Underwriter”), pursuant to which the Company issued and sold, in a firm commitment underwritten public offering by the Company (the “Public Offering”), 8,800,000 units (the “Units”), with each Unit consisting of one share of Common Stock and one warrant to purchase one share of Common Stock at an exercise price equal to $0.75 per share of Common Stock that expires on October 14, 2025 (referred to individually as a “Warrant” and collectively as the “Warrants”). Each Unit was offered to the public at an offering price of $0.75 per Unit.

In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option (the “Overallotment Option”) to purchase up to (i) 1,320,000 additional shares of Common Stock and/or (ii) additional Warrants to purchase up to 1,320,000 additional shares of Common Stock, solely to cover over-allotments. The Overallotment Option was exercised in full on October 9, 2020.

On October 14, 2020, the Public Offering closed, and the Company issued and sold (i) 10,120,000 shares of Common Stock (which includes 1,320,000 shares of Common Stock sold pursuant to the exercise of the Overallotment Option) and (ii) Warrants to purchase 10,120,000 shares of Common Stock (which includes Warrants to purchase 1,320,000 shares of Common Stock sold pursuant to the exercise of the Overallotment Option), pursuant to the Registration Statement and the Underwriting Agreement. The net proceeds to the Company, after deducting the underwriting discount and commissions and offering expenses payable by the Company, were $6,578,553.

During the three months ended February 28, 2021, the Company issued 7,101,525 shares of common stock for the exercise of warrants for proceeds of $5,326,144.

Stock based compensation 

During the six months ended February 28, 2021, the Company recorded $21,000 of stock compensation expense for four members of the Company’s Board of Directors. The unamortized value of the stock-based compensation as of February 28, 2021 is $12,833.

Warrants

A summary of activity during the six months ended February 28, 2021 follows:

The intrinsic value of the warrants as of February 28, 2021 is $3,290,138. All of the outstanding warrants are exercisable as of February 28, 2021.

Stock Options

Amended and Restated 2018 Equity Incentive Plan

On September 1, 2020, the Amendment and Restated 2018 Equity Plan (the “Plan”) was increased to permit the issuance of an additional 748,738 shares of common stock. On December 3, 2020, the Company held a special meeting of stockholders and approved an amendment to increase the number of shares of Common Stock reserved for issuance by 2,000,000 shares and to extend the term of the Plan. As of February 28, 2021, the Plan permits the Company to issue up to 3,548,738 shares of common stock awards of which 1,186,904 is available to be issued.

On November 30, 2020, the Company appointed a new director and granted 120,000 options of the Company’s common stock vesting monthly over a four-year period for his service on the Board at exercise price of $0.6035, expiring ten years after grant date. The director will be eligible for equity award grants on the same terms as other non-employee members of the Board. The Company intends to pay the director an annual cash retainer payable in quarterly installments. The Company expects the compensation to be $15,000 to $20,000 per year for the first year and $20,000 to $30,000 for the second year and thereafter, subject to formal approval by the Board.

On February 12, 2021, the Company granted an option to the Company’s president to purchase 834,500 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 50% shall vest on the one-year anniversary of the grant date and 50% shall vest on the two-year anniversary of the grant date, subject to our president’s continued service to the Company.

On February 12, 2021, the Company granted an option to the Company’s directors to purchase a total of 705,500 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 50% shall vest on the one-year anniversary of the grant date and 50% shall vest on the two-year anniversary of the grant date, subject to our directors’ continued service to the Company.

On February 12, 2021, the Company granted an option to the Company’s employees to purchase a total of 420,000 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 25% shall vest on the one-year anniversary of the vesting commencement date, and 1/48th of the shares subject to the option shall vest each month thereafter on the same day of the month as the vesting commencement date.

During the six months ended February 28, 2021, $371,817 was expensed, of which $308,516 was to related parties, and as of February 28, 2021, $4,886,651 remains unamortized, of which $4,194,717 is with related parties. The intrinsic value of the 2,361,834 options outstanding as of February 28, 2021 is $148,380.

The following is a summary of stock option activity during the six months ended February 28, 2021: