6. STOCKHOLDERS' EQUITY

[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.

During the three and six months ended February 28, 2026, the Company did not issue any common stock (February 28, 2025 - Nil). During the three and six months ended February 28, 2026, the Company did not repurchase and cancel any common shares (February 28, 2025 - Nil).

[b] Stock option plans

Pursuant to the Company's 2015 Stock Option Plan (the "2015 Plan"), 530,000 shares of common stock have been reserved for issuance. A total of 481,870 common shares remain eligible for issuance under the 2015 Plan. On February 18, 2022 the Company received shareholder approval for the 2022 Stock Option Plan (the "2022 Plan") (together with the 2015 Plan, the "Plans"), whereby 1,000,000 common shares are reserved for issuance.  As of February 28, 2026, 401,500 common shares remain eligible for issuance under the 2022 Plan.

The options generally vest over a range of periods from the date of grant, some are immediate, and others vest over 24 months. Any options that do not vest as the result of a grantee leaving the Company are forfeited and the underlying common shares are returned to the reserve. The options generally have a contractual term of five years.

Stock-Based Payment Award Activity

A summary of stock option activity under the Plans as of February 28, 2026, and changes during the period were the following:

		Number of Options			Weighted Average Exercise Price			Weighted Average Contractual Term (Years)
Outstanding at August 31, 2024		715,710		$	1.31			2.37
Granted		-			-			-
Forfeited		(15,207	)	$	0.85			2.90
Expired		(154,503	)	$	1.33			0.70
Outstanding at August 31, 2025		546,000		$	1.32			1.71
Forfeited		(30,000	)	$	1.06			2.36
Outstanding at February 28, 2026		516,000		$	1.34			1.14
Exercisable at February 28, 2026		515,375		$	1.34			1.14

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 as of February 28, 2026. As of February 28, 2026 the aggregate intrinsic value of outstanding and exercisable options were both nil, (February 28, 2025 -Nil).

As of February 28, 2026, there was $353 (February 28, 2025 - $16,962) of total unrecognized compensation cost related to non-vested stock-based compensation awards. The unrecognized compensation cost is expected to be recognized over a weighted average period of 0.25 years (February 28, 2025 - 0.62 years).

During the three and six months ended February 28, 2026, the Company recorded $705 and $2,038 in non-cash stock-based compensation, respectively (February 28, 2025 - $10,759 and $18,903, respectively).

[c] Employee Stock Purchase Plan

The Company's 2011 Employee Stock Purchase Plan (the "ESPP") became effective on February 22, 2011. Under the ESPP, employees of the Company can contribute up to 5% of their annual salary into a pool which is matched equally by the Company in order to purchase the Company's common shares under certain terms. Directors can 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 TSXV by a third-party plan agent. The third-party plan agent is also responsible for the administration of the ESPP on behalf of the Company and the participants.

During the three and six months ended February 28, 2026, the Company recognized compensation expense of $10,455 and $21,978, respectively (February 28, 2025 - $14,467 and $32,210, respectively) in salaries and wages on the condensed consolidated statement of comprehensive loss in respect of the ESPP, representing the Company's employee matching of cash contributions to the ESPP. The shares were purchased on the open market at an average price of $0.67 over a six-month period (February 28, 2025 - $0.73). The shares are held in trust by the Company for a period of one year from the date of purchase. As of February 28, 2026, 122,277 shares were held in trust by the Company (February 28, 2025 - 654,975).

[d] Earnings Per Share

Net income (loss) per common share (basic) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Net income (loss) per common share (diluted) is calculated by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding common share equivalents. This method requires that the dilutive effect of outstanding options and warrants issued be calculated using the treasury stock method. Under the treasury stock method, all common share equivalents have been exercised at the beginning of the period (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of common shares during the period, but only if dilutive. The following table shows the computation of basic and diluted earnings per share for the three and six months ended February 28, 2026 and 2025:

		Three Months Ended February 28,						Six Months Ended February 28,
		2026			2025			2026			2025
Net loss	$	(566,310	)	$	(302,094	)	$	(482,658	)	$	(183,954	)
Weighted-average basic shares outstanding		9,637,410			9,637,410			9,637,410			9,637,410
Effect of dilutive stock-based awards		-			-			-			-
Weighted-average diluted shares		9,637,410			9,637,410			9,637,410			9,637,410
Basic and diluted earnings per share	$	(0.06	)	$	(0.03	)	$	(0.05	)	$	(0.02	)

515,375 stock options were excluded from the computation of diluted earnings per share for the three and six months ended February 28, 2026 (February 28, 2025 - 639,138) because their effect would have been antidilutive.