STOCK OPTIONS AND WARRANTS

6 Months Ended

Feb. 28, 2019

8.STOCK OPTIONS AND WARRANTS

Stock Options

On July 15, 2014, the shareholders approved and adopted at the Annual General Meeting the Company's 2014 Stock Option Plan. On April 14, 2011, the shareholders approved and adopted at the Annual General Meeting to consolidate the Company's 2007 Equity compensation plan and the Company's 2010 Equity Compensation Plan into a new Company 2011 Stock Option Plan. The purpose of these Plans is to advance the interests of the Corporation, through the grant of Options, by providing an incentive mechanism to foster the interest of eligible persons in the success of the Corporation and its affiliates; encouraging eligible persons to remain with the Corporation or its affiliates; and attracting new Directors, Officers, Employees and Consultants.

On November 1, 2017, the Company granted 800,000 stock options to a director and consultant of the Company with an exercise price of $0.05, expiring November 2, 2022.

On May 11, 2018, the Company granted 535,000 stock options to a director and consultant of the Company with an exercise price of $0.06, expiring May 11, 2023.

On May 22, 2018, the Company granted 550,000 stock options to consultants of the Company with an exercise price of $0.07, expiring May 22, 2023.

For the six month period ended February 28, 2019, the Company recorded $Nil (February 28, 2018 - $31,237) stock based compensation expenses.

A summary of the changes in stock options for the three months ended November 30, 2018 is presented below:

				Options Outstanding
				Weighted Average
	Number of Shares			Exercise Price
Balance, August 31, 2017	7,295,000		$	0.07
Granted	1,885,000			0.06
Exercised	(610,000	)		0.05
Balance, August 31, 2018	8,570,000		$	0.07
Granted	-			-
Expired	(250,000	)		0.06
Balance, February 28, 2019	8,320,000		$	0.07

The fair value of options granted has been estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

	February 28, 2019	February 28, 2018
Expected volatility	-	204%
Risk-free interest rate	-	2.03%
Expected life	-	5.00 years
Dividend yield	-	0.00%
Estimated fair value per option	-	$0.04

The Company has the following options outstanding and exercisable.

February 28, 2019
	Options outstanding and exercisable
	Number	Remaining
Exercise prices	of shares	contractual life
$0.07	550,000	4.23 years
$0.06	535,000	4.20 years
$0.05	800,000	3.66 years
$0.10	500,000	3.18 years
$0.07	1,500,000	2.93 years
$0.07	1,535,000	2.90 years
$0.07	800,000	2.56 years
$0.05	1,100,000	1.65 years
$0.10	1,000,000	0.68 years

	8,320,000	2.89 years

August 31, 2018
	Options outstanding and exercisable
	Number	Remaining
Exercise prices	of shares	contractual life
$0.07	550,000	4.73 years
$0.06	535,000	4.70 years
$0.05	800,000	4.16 years
$0.10	500,000	3.67 years
$0.07	1,500,000	3.42 years
$0.07	1,535,000	3.39 years
$0.07	800,000	3.05 years
$0.05	1,100,000	2.15 years
$0.10	1,000,000	1.18 years
$0.06	250,000	0.18 years¹

	8,570,000	2.88 years

*The aggregate intrinsic value for options outstanding and exercisable as at February 28, 2019 was $Nil.

Warrants

During the year ended August 31, 2018, the Company issued 16,781,900 warrants attached to units in private placements and 922,690 broker warrants in connection with the private placements, see Note 7 for disclosure of the terms of the warrants. The fair value of the brokers warrants was $27,791, recorded as share issuance costs off-setting the gross proceeds of private placements in additional-paid-in-capital, and was calculated using the Black Scholes option pricing model, with the following weighted average assumptions: expected volatility 152%, risk-free interest rate: 2.10%, expected life: 2.43 years, dividend yield: 0.00%.

During the six month period ended February 28, 2019, the Company issued 2,225,000 warrants attached to units in private placements and 202,500 broker warrants in connection with the private placements. The fair value of the brokers warrants was $4,620, recorded as share issuance costs off-setting the gross proceeds of private placements in additional-paid-in-capital, and was calculated using the Black Scholes option pricing model, with the following weighted average assumptions: expected volatility 150%, risk-free interest rate: 2.89%, expected life: 3 years, dividend yield: 0.00%.

A summary of warrants as at February 28, 2019 and August 31, 2018 is as follows:

				Warrants Outstanding
				Weighted Average
	Number of warrants			Exercise Price
Balance, August 31, 2017	39,191,810		$	0.09
Expired Issued	(16,107,340) 17,704,590			0.12 0.06
Exercised	(50,000	)		0.07
Balance, August 31, 2018	40,739,060		$	0.06
Expired Issued	(9,444,071) 2,427,500			0.06 0.05
Balance, February 28, 2019	33,722,489		$	0.06

Number Outstanding¹	Exercise Price	Expiry Date
2,427,500	$0.050	September 21, 2021
4,800,000	$0.050	August 31, 2021
2,540,000	$0.075	May 25, 2020
1,891,590	$0.075	May 11, 2020
1,688,600	$0.060	January 12, 2020
4,184,400	$0.060	December 8, 2019
2,600,000	$0.060	November 1, 2019
3,253,333	$0.050 and $0.10 after 18 months	June 8, 2019
6,882,666	$0.050 and $0.10 after 18 months	May 20, 2019
3,454,400	$0.120	April 29, 2019
33,722,489

1.Each warrant entitles a holder to purchase one common share.