Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Stockholders' Equity

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Note 9 - Stockholders' Equity
9 Months Ended
May 31, 2017
Notes  
Note 9 - Stockholders' Equity

NOTE 9 – STOCKHOLDERS' EQUITY

 

Preferred Stock

 

The authorized preferred stock is 10,000,000 shares with a par value of $0.001. As of May 31, 2017 and August 31, 2016, the Company has no shares of preferred stock issued or outstanding.

 

Common Stock

 

The authorized common stock is 265,000,000 shares with a par value of $0.001. As of May 31, 2017 and August 31, 2016, 58,280,739 and 48,300,162 shares were issued and outstanding, respectively.

 

During the nine months ended May 31, 2017, the Company sold 1,766,250 shares of its common stock to investors in exchange for cash of $3,009,897.

 

Share-based Compensation

 

The Company recorded stock compensation expense of $522,226 and $60,100 for the nine month periods ended May 31, 2017 and 2016, respectively, in connection with the issuance of shares of common stock and options to purchase common stock.

 

During the nine month period ended May 31, 2017, the Company issued 163,770 shares of common stock to consultants in exchange for $211,531 of services rendered and $169,955 of prepaid services, for a total of $381,486. The $211,531 of services rendered is included in stock compensation expense on the condensed consolidated statements of operations for the nine month period ended May 31, 2017. The $169,955 of prepaid services is included in prepaid expenses and other current assets on the condensed consolidated balance sheet as of May 31, 2017

 

Stock Options

 

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted during the nine months ended May 31, 2017 and 2016:

 

 

 

May 31, 2017

 

 

May 31, 2016

Expected term (years)

 

 

1-4

 

 

4

Expected volatility

 

 

60%

 

 

 

60%

Weighted-average volatility

 

 

60%

 

 

60%

Risk-free interest rate

 

 

0.85%-1.57%

 

 

1.20%

Dividend yield

 

 

0%

 

 

0%

Expected forfeiture rate

 

 

33%

 

 

33%

 

The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on management's analysis of historical volatility for comparable companies. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

 

During the nine months ended May 31, 2017 and 2016, the Company issued 2,940,000 and 520,000 stock options, respectively, pursuant to the Company’s 2016 Stock Incentive Plan, which was adopted on February 9, 2016. A summary of the Company’s stock option activity during the nine month period ended May 31, 2017 is presented below:

 

Weighted

Weighted

Average

Average

Remaining

Aggregate

No. of

Exercise

Contractual

Intrinsic

Options

Price

Term

Value

Balance Outstanding, August 31, 2016

    2,039,000 

   $      0.57

 5.41 years

   $  2,283,680

Granted

    2,940,000 

   $      2.36

9.75 years

                        -

Exercised

       (57,500)

   $      1.07

                -

                        -

Forfeited

      (226,500)

   $      1.12

                -

                        -

Balance Outstanding, May 31, 2017

    4,695,000 

   $      1.66

7.91 years

   $  2,544,265

Exercisable, May 31, 2017

    1,493,576 

   $      0.46

 4.13 years

   $  2,593,725

 

The weighted-average grant-date fair value of options granted during the nine months ended May 31, 2017 and 2016, was $0.96 and $0.46, respectively. The weighted-average grant-date fair value of options forfeited during the nine months ended May 31, 2017 was $0.51.

 

During the nine months ended May 31, 2017, the Company issued 40,000 shares of common stock in exchange for $44,000, pursuant to stock option exercises. In addition, the Company issued 10,557 shares of common stock pursuant to cashless exercises of 17,500 stock options.

 

A summary of the status of the Company’s non-vested options as of August 31, 2016, and changes during the nine month period ended May 31, 2017, is presented below:

 

Weighted

Average

No. of

Grant-Date

Options

Fair Value

Nonvested at August 31, 2016

        909,000 

$     221,227 

Granted

    2,940,000 

    1,887,590 

Vested

      (421,076)

     (205,076)

Forfeited

      (226,500)

        (76,817)

Nonvested at May 31, 2017

    3,201,424 

$ 1,826,924 

 

As of May 31, 2017, there was $1,826,924 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.9 years. The total fair value of shares vested during the nine month period May 31, 2017 is $310,859.  This amount is included in stock compensation expense on the consolidated statements of operations.