NOTE 4 - EQUITY

Preferred shares

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

During the four months ended December 31, 2021, and 2020, and during the years ended August 31, 2021, and 2020, there were no shares of preferred stock issued or outstanding.

Common Shares

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.

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.

During the four months ended December 31, 2021, the Company issued 17,774,310 shares of common stock at an average price of $1.06 per share in connection with the Company’s at-the-market equity program for proceeds, net of commission and fees, of $18,262. The agent of the program was entitled to compensation at a commission rate of 3.0% of the gross sales price per sold share of common stock.

During the year ended August 31, 2020, the Company issued 1,644,221 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. During the year ended August 31, 2020, the Company reversed an expense of $2 which was recorded during previous periods as the shares vested over time.

Warrants

A summary of activity of the warrants during the four months ended December 31, 2021, and the years ended August 31, 2021, and 2020 follows:

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 non-statutory 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.

The plan was increased to permit the issuance of 425,000 and 748,738 shares of common stock on June 19, 2020, and September 1, 2020, respectively.

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.

On September 1, 2021, the 2018 Plan was increased to permit the issuance of an additional 3,674,097 shares of common stock.

As of December 31, 2021, the Plan permits the Company to issue up to 7,222,835 shares of common stock awards of which 2,213,851 is available to be issued.

On February 15, 2022, 257,652 shares of common stock were returned to the option pool and on February 18, 2022, the number of shares of Common Stock reserved for issuance under the 2018 Plan increased by 2,115,051 shares to a total of 4,586,554 shares available to be issued.

Options granted during the four months ended December 31, 2021

On December 1, 2021, the Company granted 794,800 options with an exercise price of $0.63, with a term of ten (10) years to exercise from grant date, to employees, directors, and consultants of the Company, of which 257,800 were issued to related parties. Options issued to non-employees vest 33% of shares on the one-year anniversary of vesting commencement date, and the balance of the unvested shares shall vest ratably each month thereafter for a 24-month period, on the first day of each such month. Commencing on the grant date, options issued to employees vest 25% of shares on December 1, 2022, and the balance of the unvested shares shall vest ratably each month thereafter for a 36-month period, on the first day of each such month. 

On December 3, 2021, the Company granted an option to the Company’s principal executive officer to purchase 1,355,000 shares of the Company’s common stock, with an exercise price of $0.63, with a term of ten (10) years to exercise from grant date, under the Company’s 2018 Equity Incentive Plan. Commencing on the grant date, options issued and vest as follows: 25% of the shares subject to the option shall vest on December 3, 2022, and the balance of the unvested shares shall vest ratably each month thereafter for a 36-month period, on the third day of each such month.

Options granted during the year ended August 31, 2021

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.

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.

On March 5, 2021, the Company granted an option to the Company’s president to purchase a total of 575,100 shares of the Company’s common stock with an exercise price of $1.52 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.

On March 5, 2021, the Company granted an option to a director of the Company to purchase 30,000 shares of the Company’s common stock with an exercise price of $1.52 and vesting as follows: one third shall vest on the one-year anniversary of the vesting commencement date, one third shall vest on the two-year anniversary of the vesting commencement date and one third shall vest on the three-year anniversary of the vesting commencement date, subject to this director’s continued service to the Company.

On July 16, 2021, the Company granted options to certain directors of the Company to purchase a total of 70,000 shares of the Company’s common stock with an exercise price of $1.00 and vesting on the earlier of the one-year anniversary of the vesting commencement date or the date prior to the date of the Company’s annual meeting following the vesting commencement date. The vesting commencement date is July 16, 2021.

Option granted during the year ended August 31, 2020

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. 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 $98. 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.

Option forfeited during the year ended August 31, 2021

On July 20, 2021, a member of the Company’s Board of Directors (the “Participant”) ceased to be a service provider to the Company upon his death. Effective immediately, the Participant forfeited 177,750 unvested stock options. In accordance with the Company’s stock option plan, the Participant’s estate may exercise up to 23,750 vested stock options prior to July 20, 2022, at which time all unexercised options will be forfeited.

Valuation

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

During the four months ended December 31, 2021, the Company granted 2,149,800 options valued at $1,170. During the four months ended December 31, 2021, the Company recognized stock option expense of $934, of which $811 was to related parties, and as of December 31, 2021, $4,489 remains unamortized, of which $3,717 is with related parties. The intrinsic value of the 5,008,984 options outstanding as of December 31, 2021, is $0.

During the year ended August 31, 2021, the Company granted 2,755,100 options valued at $5,760. During the year ended August 31, 2021, the Company recognized stock option expense of $1,497, of which $1,340 was to related parties, and as of August 31, 2021, $4,263 remains unamortized, of which $3,664 is with related parties. The intrinsic value of the 2,859,184 options outstanding as of August 31, 2021, is $37.

During the year ended August 31, 2020, the Company granted 74,000 options valued at $190. During the year ended August 31, 2020, $336 was expensed, of which $289 was to related parties, and as of August 31, 2020, $409 remained unamortized, of which $318 is with related parties. The intrinsic value of the 281,834 options outstanding as of August 31, 2020, is $0.

The following is a summary of stock option activity during the four months ended December 31, 2021, and the years ended August 31, 2021, and 2020:

Restricted stock awards

The Company recorded stock-based compensation expense for members of our Board of Directors totaling $0 and $14, $34 and $42 during the four months ended December 31, 2021, and 2020, and the years ended August 31, 2021, and 2020, respectively. The stock-based compensation is related to restricted stock awards issued in 2017. The stock-based compensation was fully amortized as of August 31, 2021.