Quarterly report pursuant to Section 13 or 15(d)

Subsequent Events

Subsequent Events
9 Months Ended
May 31, 2019
Notes to Financial Statements  
Note 9: Subsequent Events

The Company granted 215,000 incentive stock options to employees with a weighted average grant-date exercise price of $0.45, which vest over a service period of 48 months. The stock options were valued using the Black-Scholes option-pricing model.


The Company issued 163,888 shares of common stock as repayment of $65,000 in principal from the March 2019 convertible notes at a weighted average effective conversion rate of $0.3966.


The Company entered into a $325,000 promissory note to one of its majority shareholders, effective June 4, 2019, with no maturity date and carrying a coupon rate of 5% per annum. In as much as after discussing the aforementioned promissory note with the Company’s counsel, management does not believe the aforementioned loan violates the Sarbanes Oxley Act (the “Act”). However, since the recipient is one of the majority shareholders it could be construed as a violation of the Act, therefore the Company is pursuing remedies to cure this uncertainty by repurchasing shares of common stock in satisfaction of the aforementioned loan.


On June 7, 2019, and June 10, 2019, the Company received notices from two of its institutional investors that the Company was in default due to missed principal and interest payments under the terms of the Notes. On June 27, 2019, the Company reported that is has informed its convertible note holders that it will cease honoring conversion requests of the 2018 and 2019 Notes forcing a voluntary default of these instruments. The Company is pursuing a renegotiation and amendment of these instruments in an effort to avoid litigation. The Company is requesting to amend the terms of the notes to remove the conversion features and revise the cash amortization schedule to be more in alignment with the Company’s improving cash flow, among other items.


On June 3, 2019, one of its institutional investors filed claim in the United States District Court, Southern District of New York seeking preliminary injunctive relief against the Company to immediately deliver one million shares of the Company’s common stock and to honor all future conversion requests duly submitted in accordance with the terms of the notes. The Company has been served on July 10, 2019. The claim will be heard by the court on July 24, 2019.


On July 9, 2019, the Company’s board of Directors authorized the repurchase of up to 10 million shares of our outstanding common shares as market conditions warrant over a period of 18 months.


Management has evaluated subsequent events pursuant to the issuance of the interim unaudited consolidated financial statements and has determined that other than listed above, no other subsequent events exist through the date of this filing.