STOCKHOLDERS' EQUITY

12 Months Ended

Aug. 31, 2019

STOCKHOLDERS EQUITY [Text Block]

5. STOCKHOLDERS’ EQUITY

Effective September 13, 2019, the Company effected a reverse stock split on the basis of 5:1. As such, the Company’s authorized capital was decreased from 100,000,000 shares of common stock, par value $0.001 to 20,000,000 shares of common stock, par value $0.001 and all shares of common stock issued and outstanding were decreased on the basis of one new share for each five old shares. These consolidated financial statements give retroactive effect to such reverse stock split and all share and per share amounts have been adjusted accordingly.

[a] Common stock issued and authorized

The Company is authorized to issue up to 20,000,000 shares of common stock, par value $0.001 per share.

[b] Stock option plans

The Company has a stock option plan, namely the 2015 Stock Option Plan (the “Plan”), under which up to 530,000 shares of common stock, has been reserved for issuance. A total of 240,000 common shares remain eligible for issuance under the Plan. The options generally vest over a range of periods from the date of grant, some are immediate, and others are 12 or 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the common shares underlying them are returned to the reserve. The options generally have a contractual term of five years.

Stock-Based Payment Award Activity

A summary of option activity under the Plan as of August 31, 2019 and 2018, and changes during the years ended are presented below:

				Weighted
			Weighted	Average	Aggregate
			Average	Remaining	Intrinsic
			Exercise Price	Contractual	Value
Options	Shares		$	Term	$
Outstanding at September 1, 2017	361,250		1.95	4.07	—
Granted	30,000		2.00	4.28	—
Forfeited	(30,000	)	2.00	4.27	—
Expired	(35,000	)	2.00	—	—
Outstanding at August 31, 2018	326,250		1.95	3.49	—
Granted	30,000		1.52	4.82	—
Forfeited	(40,000	)	2.00	3.06	—
Expired	(26,250	)	2.00	—	—
Outstanding at August 31, 2019	290,000		1.94	2.96	—
Exercisable at August 31, 2019	260,000		1.94	2.77	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money at August 31, 2019.

The following table summarizes information regarding the non-vested stock purchase options outstanding as of August 31, 2019:

			Weighted
			Average
			Grant Date
	Number of Options		Fair Value
			$
Non-vested options at September 1, 2017	273,333		0.35
Granted	30,000		0.40
Forfeited	(20,000	)	0.35
Vested	(160,416	)	0.35
Non-vested options at August 31, 2018	122,917		0.35
Granted	30,000		0.35
Forfeited	(6,663	)	0.34
Vested	(116,254	)	0.42
Non-vested options at August 31, 2019	30,000		0.38

[b] Stock option plans (cont’d.)

As of August 31, 2019, there was $42,658 of total unrecognized compensation cost related to non-vested share-based compensation awards. The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.1 years.

During the year ended August 31, 2019, the total stock-based compensation expense of $41,675 (2018: $54,452) is reported in the statement of comprehensive income as follows:

	2019	2018
	$	$
Stock-based compensation
General and administrative	25,847	32,954
Sales and marketing	7,535	7,930
Research and development	8,293	13,568
Total stock-based compensation	41,675	54,452

Valuation Assumptions

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

	2019	2018
	$	$
Expected term of stock options (years)	3.02	3.02
Expected volatility	75.3%	93.3%
Risk-free interest rate	1.7%	1.9%
Dividend yields	—	—
Weighted average grant date fair value	$0.40	$0.40

Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the options is based on US Treasury bill rates in effect at the time of grant.

[c] Employee Stock Purchase Plan

The Company’s 2011 Employee Stock Purchase Plan (the “Plan”) became effective on February 22, 2011. Under the Plan, employees of the Company are able to contribute up to 5% of their annual salary into a pool which is matched equally by the Company. Independent directors are able to contribute a maximum of $12,500 each for a combined maximum annual purchase of $25,000. The maximum annual combined contributions will be $400,000. All purchases are made through the Toronto Stock Exchange by a third-party plan agent. The third-party plan agent will also be responsible for the administration of the Plan on behalf of the Company and the participants.

During the year ended August 31, 2019, the Company recognized compensation expense of $61,629 (2018: $58,102) in salaries and wages on the consolidated statement of comprehensive income in respect of the Plan, representing the Company’s employee matching of cash contributions to the plan. The shares were purchased on the open market at an average price of $1.16 (2018: $1.15) . The shares are held in trust by the Company for a period of one year from the date of purchase.

[d] Warrants

A summary of common stock warrants outstanding as of August 31, 2019, and changes during the year then ended is presented below:

	Number of			Aggregate
	Common	Exercise	Date	Intrinsic
	Shares	Price	of	Value
	Issuable	$	Expiry	$
Outstanding at August 31, 2017	202,000	1.50	October 20, 2017	—
Expired	(202,000)	1.50
Outstanding at August 31, 2018 and August 31, 2019	—	—		—