NOTE 4 - EQUITY

Preferred shares

The Company has authorized 416,667 shares of preferred stock with a par value of $0.001 per share.

During the year ended December 31, 2022, the four months ended December 31, 2021, and the year ended August 31, 2021, there were no shares of preferred stock issued or outstanding.

Common Shares

Amendment to Articles of Incorporation or Bylaws

The Company has authorized 50,000,000 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 May 13, 2022, the Company entered into a purchase agreement and a registration rights agreement (together, the “Lincoln Park Agreements”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) providing for the purchase by Lincoln Park of up to $20,000 worth of the Company’s Common Stock, over the thirty-six (36) month term of the Lincoln Park Agreements. The Company issued to Lincoln Park 19,532 shares of its Common Stock as commitment shares in consideration for entering into the Lincoln Park Agreements and received no funds in exchange for such commitment shares, valued at $97. Upon initiation of the Lincoln Park Agreements, the Company recorded $381 as an expense within general and administrative expenses as the Company has not yet determined whether any portion of the equity line will be utilized.

During the four months ended December 31, 2021, the Company issued 1,184,959 shares of common stock at an average price of $15.90 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, 2021, the Company issued 1,302,363 shares of common stock as follows:

Warrants

A summary of activity of the warrants during the year ended December 31, 2022, four months ended December 31, 2021, and year ended August 31, 2021 follows:

The intrinsic value of the warrants as of December 31, 2022 and 2021 is $0, and $0, respectively. All of the outstanding warrants are exercisable as of December 31, 2022.

2018 Equity Incentive Plan

On August 17, 2018, the Board of Directors of the Company approved the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan initially permitted the Company to issue up to 25,000 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.

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 133,334 shares and to extend the term of the 2018 Plan.

On September 1, 2021, the 2018 Plan was increased to permit the issuance of an additional 244,940 shares of common stock.

As of December 31, 2022, the 2018 Plan permits the Company to issue up to an aggregate of 622,526 shares of common stock for grant of which 309,417 shares are available to be issued.

On January 6, 2023, the 2018 Plan was increased to permit the issuance of an additional 428,353 shares of common stock, which increased the number of shares available for issuance pursuant to the 2018 Plan to a new total of 737,770 shares.

Options granted during the year ended December 31, 2022

On February 15, 2022, 17,177 shares of Common Stock were returned to the 2018 Plan and on February 18, 2022, the number of shares of Common Stock reserved for issuance under the 2018 Plan increased by 141,003 shares. Such additional shares were registered on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission on April 7, 2022. On May 15, 2022, and July 20, 2022, an additional 6,077 and 1,584 shares, respectively, were returned to the 2018 Plan.

In June 2022, the Company granted options to certain directors of the Company to purchase an aggregate of 4,002 shares of the Company’s Common Stock with an exercise price of $4.89 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 June 24, 2022.

Options granted during the four months ended December 31, 2021

On December 1, 2021, the Company granted 52,988 options with an exercise price of $9.45, with a term of ten (10) years to exercise from the grant date, to employees, directors, and consultants of the Company, of which 17,187 were issued to related parties. Options issued to non-employees vest as to 33% of shares subject to the option on the one-year anniversary of the 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 as to 25% of shares subject to the option 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 90,334 shares of the Company’s common stock, with an exercise price of $9.45, with a term of ten (10) years to exercise from the grant date, under the 2018 Plan. Commencing on the grant date, options issued 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 8,000 options of the Company’s common stock vesting monthly over a four-year period for his service on the Board at exercise price of $9.05, expiring ten years after the 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 55,634 shares of the Company’s common stock with an exercise price of $39.90 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 47,036 shares of the Company’s common stock with an exercise price of $39.90 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 28,001 shares of the Company’s common stock with an exercise price of $39.90 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 38,340 shares of the Company’s common stock with an exercise price of $22.80 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 2,000 shares of the Company’s common stock with an exercise price of $22.80 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 4,669 shares of the Company’s common stock with an exercise price of $15.00 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.

Valuation

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

During the year ended December 31, 2022, the Company granted 4,002 options valued at $18. During the year ended December 31, 2022, the Company recognized stock-based compensation expense of $2,458, of which $2,216 was for related parties, and as of December 31, 2022, $1,748 remains unamortized, of which $1,219 is for related parties. The intrinsic value of the 313,109 options outstanding as of December 31, 2022, is $0.

During the four months ended December 31, 2021, the Company granted 143,322 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 for related parties. The intrinsic value of the 333,945 options outstanding as of December 31, 2021, is $0.

During the year ended August 31, 2021, the Company granted 183,680 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 190,623 options outstanding as of August 31, 2021, is $37.

The following is a summary of stock option activity during the year ended December 31, 2022, the four months ended December 31, 2021, and the year ended August 31, 2021: