NOTE 9 – SHAREHOLDERS’ EQUITY

The Company’s authorized capital stock consists of 100,000,000 shares of common stock, with a par value of $0.01 per share, and 10,000,000 preferred shares with a par value of $0.001 per share.

All shares of common stock have equal voting rights and, when validly issued and outstanding, are entitled to one non-cumulative vote per share in all matters to be voted upon by shareholders. Shares of common stock have no pre-emptive, subscription, conversion or redemption rights and may be issued only as fully paid and non-assessable shares. Holders of common stock are entitled to equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by the Company’s Board of Directors (the “Board”) out of funds legally available. In the event of a liquidation, dissolution or winding up of the affairs of the Company, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding.

Following is an analysis of common stock issuances during the years ended August 31, 2022 and 2021:

August 31, 2022

In October 2021, the Company issued 41,231 shares of common stock related to Director fees earned and expensed during the year ended August 31, 2021.

During the year ended August 31, 2022, the Company issued 90,594 shares of common stock valued at $136,505, as payment for director fees. In addition, the Company recognized stock compensation and a corresponding charge to additional paid-in capital in the amount of $41,502 for director’s fees earned during the quarter ended August 31, 2022. The Company issued the related 26,833 shares of common stock in October 2022.

In January 2020, the Company entered into three separate consulting agreements for total consideration of 699,999 shares of common stock (233,333 per agreement). The common stock underlying the agreements had a total value of $448,000, based on the $0.64 quoted market price of the common stock on the agreement date. The right to receive the common stock is subject to ratable vesting over a 24-month period and at May 31, 2022, 699,999 shares had vested and 87,501 had been issued. The Company recognized $74,667 and $224,000 of compensation expense under these consulting agreements during the years ended August 31, 2022 and 2021, respectively, which is included in general and administrative expenses in the accompanying consolidated statements of operations. The consultants have requested that the Company hold the remaining shares issuable under the agreements in trust to allow the consultants to request their shares as they vest.

During the year ended August 31, 2022, the holders of 720,000 common stock options and 6,000 common stock warrants exercised the related instruments for total cash consideration of $239,700. The exercise price of the common stock options ranged from $0.30 to $0.45 per share and the exercise price of the common stock warrants were $0.20 per share.

During the year ended August 31, 2022, a total of 100,000 common stock options were exercised on a cashless basis into 77,330 shares of common stock. The common stock options had an exercise price of $0.45 per share.

August 31, 2021

In October 2020, the Company issued 61,936 shares of common stock to Directors as payment for accrued fees totaling $92,500 earned in June through August 2020.

During the year ended August 31, 2021, the Company issued 83,345 shares of common stock valued at $142,500, as payment for directors’ fees. In addition, the Company recognized stock compensation and a corresponding charge to additional paid-in capital in the amount of $47,500 for directors’ fees earned during the quarter ended August 31, 2021. The Company issued the related 41,233 shares of common stock in October 2021.

During the year ended August 31, 2021, the holders of 76,000 common stock warrants and 220,000 common stock options were exercised for total cash consideration of $81,300. The exercise price of the common stock warrants ranged from $0.10 to $0.35 per share and the exercise price of the common stock options ranged from $0.20 to $0.45 per share.

During the year ended August 31, 2021, a total of 200,000 common stock options were exercised on a cashless basis into 169,506 shares of common stock. The common stock options had exercise prices ranging from $0.22 to $0.45.

Options

The following table sets forth certain information as of August 31, 2022 and 2021 concerning common stock that may be issued upon the exercise of options not covered by the Amended 2008 Plan and pursuant to purchases of stock under the Amended 2008 Plan (All options are fully vested and exercisable at August 31, 2022 and 2021):

Schedule of options

Amended 2008 Stock Option Plan

In September 2008, the Board adopted the 2008 Stock Option Plan (the “2008 Plan”), which was approved by the Company’s shareholders and provided 2,000,000 shares available for grant. In 2011, 2012, and 2016, the Board adopted amendments to the 2008 Plan, approved by the shareholders, that increased the shares available for issuance under the 2008 Plan by a total of 7,000,000 shares (as amended, the “Amended 2008 Plan”). Accordingly, at August 31, 2022 and 2021, 9,000,000 shares were designated for issuance under the 2008 Plan, as amended. At August 31, 2022, a total of 5,625,000 shares of common stock remained available for future grants under the Amended 2008 Plan.

During the year ended August 31, 2022, the Company granted a total of 120,000 stock options, with a fair value of $250,768 on the date of grant, to a consultant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate between 0.25% and 2.33% (ii) estimated volatility between 197% and 202% (iii) dividend yield of 0.00% and (iv) expected life of all options of 5 years. The Company recognized the full $250,768 as compensation expense during the year ended August 31, 2022.

During the year ended August 31, 2021, the Company granted a total of 174,000 stock options, with a fair value of $353,497 on the date of grant, to a consultant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 0.27% (ii) estimated volatility of 205.58% (iii) dividend yield of 0.00% and (iv) expected life of all options of 5 years. The Company recognized the full $353,497 as compensation expense during the year ended August 31, 2021.

Warrants

Warrant activity for the years ended August 31, 2021 and 2020 was as follows: 

Schedule of warrants

During the year ended August 31, 2021, the Company granted a total of 10,000 stock warrants, with a fair value of $20,442 on the date of grant, to a consultant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 0.27% (ii) estimated volatility of 205.58% (iii) dividend yield of 0.00% and (iv) expected life of all options of 3 years. The Company recognized the full $20,442 as compensation expense during the year ended August 31, 2021.