Stock Options

As of April 30, 2017, the Company had outstanding stock options to its directors, officers, an employee (collectively, “Employee Options”) and consultants (“Non-Employee Options”).

During the years ended April 30, 2017 and 2016, the Company granted 9,250,000 and 15,600,000 Employee Options, respectively.

The fair value of the Employee Options at the date of grant was estimated using the Black-Scholes-Merton option-pricing model, based on the following weighted average assumptions:

During the years ended April 30, 2017 and 2016, the Company granted Non-Employee Options of 14,300,000 and zero, respectively. The Non-Employee Options granted during the year ended April 30, 2017 consist of 600,000 guaranteed options and 12,500,000 non-guaranteed performance based options.

The fair value of the Non-Employee Options was estimated using the Black-Scholes-Merton option-pricing model, based on the following weighted average assumptions:

The Company’s computation of expected volatility is based on the historical daily volatility of its publicly traded stock. For stock option grants issued during years ended April 30, 2017 and 2016, the Company used a calculated volatility for each grant. The Company lacks adequate information about the exercise behavior now and has determined the expected term assumption under the simplified method provided for under ASC 718, which averages the contractual term of the Company’s stock options of five years with the average vesting term of two and one half years for an average of three years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the U.S. Treasury rates in effect at the time of the grant for instruments with a similar expected life.

Non-Employee Option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period, the value of these options, as calculated using the Black-Scholes-Merton option-pricing model, is determined, and compensation expense recognized or recovered during the period is adjusted accordingly. As a result, the amount of the future compensation expense is subject to adjustment until the Common Stock options are fully vested. 

A summary of the Company’s stock option activity and related information for the two years ended April 30, 2017 are shown below:

A summary of the activity for unvested stock options during the years ended April 30, 2017 and 2016 is as follows:

The Company recorded approximately $557,322 and $789,000 of stock based compensation related to the issuance of Employee Options to certain officers, directors and employees in exchange for services during the years ended April 30, 2017 and 2016, respectively. At April 30, 2017, there remained approximately $515,022 of unrecognized compensation expense related to unvested Employee Options granted to employees and directors, to be recognized as expense over a weighted-average period of the remaining eight months. The non-vested options vest at 750,000 shares per month and are expected to be fully vested on December 31, 2017.

The Company recorded $40,078 and zero of stock based compensation related to the issuance of Non-Employee Options in exchange for services during the years ended April 30, 2017 and 2016, respectively. The non-vested Non-Employee Options that are guaranteed vest at 100,000 shares per month and are expected to be fully vested on December 31, 2017.

The following table summarizes ranges of outstanding stock options by exercise price at April 30, 2017:

The aggregate intrinsic value of outstanding options as of April 30, 2017 was approximately $238,000. This represents options whose exercise price was less than the closing fair market value of the Company’s common stock on April 30, 2017 of approximately $0.078 per share.

Warrants

The warrants issued by the Company are classified as equity. The fair value of the warrants was recorded as additional-paid-in-capital, and no further adjustments are made.

For stock warrants paid in consideration of services rendered by non-employees, the Company recognizes consulting expense in accordance with the requirements of ASC 505-50 and ASC 505.

On January 21, 2014, the Company began the implementation of its “Warrant Conversion Program.” The program consists of offering every holder of Class A warrants the ability to exercise their Class A warrants, with an exercise price of $0.075 per share, into shares of common stock and an equal number of new Class D warrants, with an exercise price of $0.25 per warrant share. As of April 30, 2017, 18,755,200 Class A warrants had been converted for total cash proceeds of $1,380,720 and conversion of $25,920 of debt to an officer. The Company has also offered holders of its Class B warrants, with a conversion price of $0.12 per share, with the same terms. As of April 30, 2017, 2,318,000 Class B warrants had been exercised for total cash proceeds of $278,160. An aggregate of 18,755,200 Class D Warrants have been issued in under this program at an exercise price of $0.25 per share.

On September 1, 2014, the Company granted 854,308 Class D Warrants to purchase common stock as part of the Warrant Conversion Program. All 18,755,200 Class D Warrants expired on December 31, 2016. None were exercised.

On March 23, 2015, the Company granted 10,000,000 cashless warrants to acquire stock at an exercise price of $0.11 per share, which expire on March 23, 2020. These warrants were classified as equity. The fair value was determined to be $914,270 and the Company recorded a non-cash expense of zero and $791,506 for the years ended April 30, 2017 and 2016, respectively.

On March 23, 2015, the Company granted 5,000,000 warrants to acquire stock at an exercise price of $0.11 per share. The warrants expired on December 31, 2015 without the warrants being exercised. These warrants were classified as equity. The Company determined the fair value to be $131,490 and recorded a non-cash expense of zero and $113,834 for the years ended April 30, 2017 and 2016, respectively.

On January 7, 2016, the Company entered a Stock and Warrant Purchase Agreements with two investors and closed a private placement to them. Pursuant to the Stock and Warrant Purchase Agreements, the Company sold to the investors, in equal amounts, an aggregate of 17,000,000 shares of its unregistered common stock. It also sold to the investors, in equal amounts, unregistered warrants to purchase an additional total of 17,000,000 shares of its unregistered common stock, for $1,020,000 in aggregate gross proceeds. The terms of the Stock and Warrant Purchase Agreements for these warrants state the exercise price is $0.12 per share. The expiration date of these warrants is January 7, 2021. Using the Black Scholes warrant pricing model, the Company determined the aggregate value of these warrants to be approximately $967,000. These warrants have a cashless exercise feature.

Effective January 1, 2017, the Company issued a Common Stock purchase warrant to the placement agent of the Company’s at-the-market and block trade offerings. The Company issued a warrant to purchase 769,231 shares based upon a block trade pursuant to the amended engagement agreement dated December 15, 2016 with the Company’s placement agent. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.07 per share. Using the Black-Scholes-Merton warrant pricing model, the Company determined the aggregate value of these warrants to be approximately $40,000. The warrants have a cashless exercise feature.

Effective April 4, 2017, the Company issued a Common Stock purchase warrant to the placement agent of the Company’s at-the-market and block trade offerings. The Company issued a warrant to purchase 869,565 shares based upon a block trade pursuant to the amended engagement agreement dated March 21, 2017 with the Company’s placement agent. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.05 per share. Using the Black-Scholes-Merton warrant pricing model, the Company determined the aggregate value of these warrants to be approximately $40,000. The warrants have a cashless exercise feature.

A summary of the Company’s warrant activity and related information for the two years ended April 30, 2017 are shown below:

The following table summarizes additional information concerning warrants outstanding and exercisable at April 30, 2017: