2. EQUITY

Common Stock

The Company was formed in the state of Nevada on April 13, 2006. The Company has authorized capital of 800,000,000 shares of common stock with a par value of $0.001, and 50,000,000 shares of preferred stock with a par value of $0.001.

On September 18, 2017, the Company issued 900,000 shares of common stock in connection with the issuance of a convertible note with a principal amount of $180,000. The relative fair value of the stock of $51,503 was recognized as a discount to the note that is being amortized to interest expense over the life of the note.

On September 22, 2017, the company issued 900,000 shares of common stock and 300,000 warrants pursuant to a stock purchase agreement for cash of $60,300.

On November 10, 2017, the Company issued an aggregate of 1,400,000 shares of common stock to the holder of a related party 7% Convertible Promissory Note, to convert principal amount of $11,200.

On November 27, 2017, the Company issued an aggregate of 1,450,000 shares of common stock to the holder of a related party 7% Convertible Promissory Note, to convert principal amount of $11,600.

On November 10, 2017, the Company issued an aggregate of 1,550,000 shares of common stock to the holder of a 7% Convertible Promissory Note, dated November 14, 2016 to convert principal amount of $12,400.

For the six months ended February 28, 2017, the Company recognized option expense of $579,419 for options granted on July 26, 2017 to a nonemployee for services. As of February 28, 2018, $484,756 remains to be expensed over the remaining service period through July 26, 2019.

Warrants

During the quarter ended February 28, 2018, warrant activity included the following:

On September 18, 2017, the Company executed an $180,000 Convertible Debenture with an original issue discount of $60,000. In connection with the debenture, the Company issued the lender 300,000 common stock purchase warrants with a term of 3 years and an exercise price of $1.00. The relative fair value of the warrants of $16,996 was recognized as a discount to the debenture.

On May 22, 2017, the Company entered into an employment agreement with Marc Yahr to serve as President and Chief Executive Officer of the Company for a term of three years, unless earlier terminated pursuant to the terms of the Employment Agreement. Pursuant to the terms of the Employment Agreement, Mr. Yahr received a warrant to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share. The warrants were exercised in full on May 31, 2017; however, the 20,000,000 shares of the Company’s common stock were not issued to Mr. Yahr until June 10, 2017. The shares received upon the exercise of the warrants are subject to forfeiture and vest over a service period of three years. The fair value of the award was determined to be $10,998,105 which will be recognized as compensation expense over the three year service period. Warrant expense under this award for the six months ended February 28, 2018 totaled $1,818,626. As of February 28, 2018, $8,165,716 remains to be expensed over the remaining vesting period.

On January 22, 2018, the Company entered into a Sales Representation Agreement for a term of six months. Pursuant to the agreement the Company agreed to issue the nonemployee sales representative warrants to purchase 10,000 shares of common stock per month (an aggregate of 60,000 warrants) with an exercise price of $0.50, with a term of three years. The Warrants shall be exercisable at any time on or after the six (6) month anniversary of each Issuance Date, at his election, in whole or in part, by means of a “cashless exercise”. The fair value of this award was determined to be $60,618 of which $30,380 was recognized during the six months ended February 28, 2018.

On February 22, 2018, the Company entered into a Consulting Agreement for a term of one year. Pursuant to the agreement the Company agreed to issue the nonemployee consultant warrants to purchase 10,000 shares of common stock per month (an aggregate of 120,000 warrants) with an exercise price of $0.40, exercisable for cash only for a period of three years commencing six months form the issuance date. The fair value of this award was determined to be $113,943 of which $6,037 was recognized during the six months ended February 28, 2018.

The fair value of the warrants was estimated using the Black-Scholes option pricing model and the following range of assumptions:

	Grant Date	February 28, 2018
Risk-free interest rate at grant date	1.06% - 1.44%	1.06% - 1.49%
Expected stock price volatility	117% - 362%	117% - 362%
Expected dividend payout	-	-
Expected option in life-years	1 - 3 years	1 - 3 years