Annual report pursuant to Section 13 and 15(d)

EQUITY

v3.20.2
EQUITY
12 Months Ended
Aug. 31, 2020
Equity [Abstract]  
EQUITY

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 years ended August 31, 2020 and 2019, 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, 2020, the Company issued 1,644,221 shares of common stock as follows:

 

 

61,297 shares of common stock were issued for the exercise of an option for an exclusive worldwide license to develop and commercialize products comprising or containing the compound NEO1940 (see Note 7)

 

11,363 shares of common stock were issued for the settlement of stock payable of $100,000

 

7,373 shares of common stock were issued for additional issuance of Series D per the terms of the subscription agreements.

 

1,564,188 shares of common stock were issued for cash of $1,977,691, of which 45,834 shares were issued to our officers and directors for $55,000 and 1,518,354 shares were sold in connection with the Company's at -the-market equity program for proceeds net of offering costs of $1,922,691. The agent of the program was entitled to compensation at a commission rate of 2.0% of the gross sales price per sold share of common stock.

 

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 during the year ended August 31, 2020.

 

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

 

 

The Company received cash of $1,257,905 for 209,635 units at a price of $6.00 per unit (a “Series D Unit”) pursuant to the Company’s Series D offering. Each Series D Unit consists of: (i) one (1) share of common stock; and (ii) one (1) Series D Common Stock Purchase Warrant to purchase one (1) share of common stock at a price of $14.00 per share, for a period of 5 years from the issue date.

 

The Company received cash of $417,732 for 54,940 units at a price of $7.60 per unit (a “Series E Unit”) pursuant to the Company’s Series E Offering. Each Series E Unit consists of: (i) one (1) share of common stock; and (ii) one (1) Series E Common Stock Purchase Warrant to purchase one-half (1/2) share of common stock at a price of $16.00 per share for a period of 3 years from the issue date.

 

On March 15, 2019, the Board approved the issuance of 25,000 shares of our common stock valued at $240,000 to Blackrock Ventures, Ltd., a Company owned by a former director, in exchange for its prior services to the Company.

 

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. The offering price to the public was $6.15 per unit. In addition, the Company granted the Underwriters a 45-day option to purchase up to 195,121 additional shares of common stock, or warrants, or any combination thereof, to cover over-allotments, if any. Simultaneously with the closing of the offering the Company sold 191,102 warrants at $0.01 per warrant for cash proceeds of $1,911 upon the partial exercise of the underwriters’ over-allotment option. The Company received gross proceeds of approximately $8,001,911, before deducting underwriting discounts and commissions of eight percent (8%) of the gross proceeds and estimated offering expenses.

 

The Company issued 12,950 shares and 6,490 warrants for price protection provision related to the Series E units. The company recorded the issuance at par value of $0.001, adjusting to additional paid in capital of $13.

 

10 shares were issued in related to a reconciliation of the reverse stock split.

 

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:

 

 

61,297 shares, valued at $539,417, for the exercise of an option for an exclusive worldwide license to develop and commercialize products comprising or containing the compound NEO1940. The worldwide license has been capitalized as an intangible asset

 

11,363 shares for settlement of accrued liability of $100,000

 

The stock payable was fully settled when the shares were issued during the year ended August 31, 2020.

 

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, 2020 and 2019, a derivative liability of $0 and $29,501 has been recorded.

 

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 years ended August 31, 2020 and 2019 follows:

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Number of

 

 

Weighted Average

 

 

Average

 

 

 

shares

 

 

Exercise Price

 

 

Life (years)

 

Outstanding, August 31, 2018

 

 

495,306

 

 

$ 10.40

 

 

 

4.23

 

Granted

 

 

1,839,631

 

 

 

7.51

 

 

 

4.85

 

Forfeited

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

Outstanding, August 31, 2019

 

 

2,334,937

 

 

$ 8.12

 

 

 

4.30

 

Granted

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

Outstanding, August 31, 2020

 

 

2,334,937

 

 

$ 8.12

 

 

 

3.30

 

 

The intrinsic value of the warrants as of August 31, 2020 and 2019 is $0. All of the outstanding warrants are exercisable as of August 31, 2020.

 

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. As of September 1, 2020, the 2018 Plan permits the Company to issue up to 1,548,738 shares of common stock.

 

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.

 

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 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:

 

 

 

Year Ended

 

 

Year Ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2020

 

 

2019

 

Expected term

 

5 years

 

 

5 years

 

Expected average volatility

 

 

155 %

 

 

158 %

Expected dividend yield

 

 

 

 

 

 

Risk-free interest rate

 

1.67

 %

 

 

1.40 %

 

During the year ended August 31, 2020, $335,766 was expensed, and as of August 31, 2020, $408,965 remained unamortized. During the year ended August 31, 2019, $133,110 was expensed, and as of August 31, 2019, $637,865 remains unamortized.

 

The following is a summary of stock option activity during the years ended August 31, 2020 and 2019:

 

 

 

 

Options Outstanding

 

 

Weighted Average

 

 

 

Number of

 

 

Weighted Average

 

 

Remaining life

 

 

 

Options

 

 

Exercise Price

 

 

(years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, August 31, 2018

 

 

50,000

 

 

$ 10.80

 

 

$ 9.97

 

Granted

 

 

184,000

 

 

 

2.01

 

 

 

10.00

 

Exercised

 

 

 

 

 

 

 

 

 

Forfeited/canceled

 

 

 

 

 

 

 

 

 

Outstanding, August 31, 2019

 

 

234,000

 

 

$ 3.88

 

 

$ 9.78

 

Granted

 

 

74,000

 

 

 

2.48

 

 

 

10.00

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

Forfeited/canceled

 

 

(26,166 )

 

 

3.31

 

 

 

9.58

 

Outstanding, August 31, 2020

 

 

281,834

 

 

$ 3.57

 

 

$ 8.90

 

 

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

Options Outstanding

 

 

Options Exercisable

 

Number of

 

 

Weighted Average Remaining

 

 

Weighted Average

 

 

Number of

 

 

Weighted Average

 

Options

 

 

Contractual life (in years)

 

 

Exercise Price

 

 

Shares

 

 

Exercise Price

 

 

46,084

 

 

 

7.97

 

 

$ 10.80

 

 

 

31,999

 

 

$ 10.80

 

 

2,500

 

 

 

8.88

 

 

$ 3.12

 

 

 

2,500

 

 

$ 3.12

 

 

159,250

 

 

 

9.00

 

 

$ 1.99

 

 

 

103,006

 

 

$ 1.99

 

 

50,000

 

 

 

9.27

 

 

$ 2.65

 

 

 

10,000

 

 

$ 2.65

 

 

24,000

 

 

 

9.29

 

 

$ 2.12

 

 

 

4,000

 

 

$ 2.12

 

 

281,834

 

 

 

8.90

 

 

 

3.57

 

 

 

151,505

 

 

 

3.92

 

 

The intrinsic value of the 281,834 options outstanding as of August 31, 2020 was $0. The intrinsic value of the 234,000 options as of August 31, 2019 is $0.