NOTE 5 – STOCK OPTIONS AND WARRANTS

Stock Options

As of January 31, 2019, the Company had 96,450,000 outstanding stock options to its directors and officers (collectively, “Employee Options”) and consultants (“Non-Employee Options”).

During the nine months ended January 31, 2019 and 2018, the Company granted 0 and 10,750,000 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 nine months ended January 31, 2019 and 2018, the Company granted Non-Employee Options of 1,200,000 and 5,400,000, respectively.

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 the nine months ended January 31, 2019 and 2018, the Company used a calculated volatility for each grant. The Company currently lacks adequate information about the exercise behavior. The Company has determined the expected term assumption using the simplified method provided for under ASC 718. This method 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. Effective August 1, 2018 the Company adopted ASU 2018-07 early using the modified retrospective transition approach. The Company determined that there was no transition adjustment upon adoption of ASU 2018-07. The Company issued 1,200,000 stock options to a non-employee during the nine months ended January 31, 2019. The value of these options was determined as of the grant date using the Black-Scholes-Merton option-pricing model, and compensation expense is being recognized over the service period.

A summary of the Company’s stock option activity and related information for the nine months ended January 31, 2019 are shown below:

A summary of the activity for unvested stock options during the nine months ended January 31, 2019 is as follows:

The Company recorded approximately $51,000 and $220,000 of stock-based compensation related to the issuance of Employee Options in exchange for services during the three months ended January 31, 2019 and 2018, respectively and approximately $205,000 and $612,000 during the nine months ended January 31, 2018 and 2018, respectively. At January 31, 2019, there remained $0 of unrecognized compensation expense related to unvested Employee Options granted to officers and directors.

The Company recorded approximately $21,000 and $57,000 of stock-based compensation related to the issuance of Non-Employee Options in exchange for services during the three months ended January 31, 2019 and 2018, respectively, and approximately $78,000 and $154,000 during the nine months ended January 31, 2019 and 2018, respectively. At January 31, 2019, there remained approximately $24,000 of unrecognized compensation expense related to unvested Non-Employee Options granted to consultants, to be recognized as expense over a weighted-average period of the remaining five months. The non-vested Non-Employee Options vest at 100,000 shares per month and are expected to be fully vested on June 30, 2019.

The following table summarizes ranges of outstanding stock options by exercise price at January 31, 2019:

As of January 31, 2019, the aggregate intrinsic value of outstanding options was $0. This represents options whose exercise price was less than the closing fair market value of the Company’s common stock on January 31, 2019 of approximately $0.042 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.

Effective May 24, 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 833,333 shares of common stock based upon a Block Trade pursuant to the amended engagement agreement with the Company’s placement agent dated December 15, 2016. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.03 per share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of these warrants to be approximately $20,000. The warrants have a cashless exercise feature.

Effective July 26, 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 2,000,000 shares of common stock based upon a Block Trade pursuant to the amended engagement agreement with the Company’s placement agent dated December 15, 2016. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.03 per share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of these warrants to be approximately $39,000. The warrants have a cashless exercise feature.

Effective May 30, 2018, 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 1,388,889 shares of common stock based upon a Block Trade pursuant to the engagement agreement with the Company’s placement agent dated February 22, 2018. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.02 per share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of these warrants to be approximately $19,000. The warrants have a cashless exercise feature.

Effective June 28, 2018, 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 1,923,077 shares of common stock based upon a Block Trade pursuant to the engagement agreement with the Company’s placement agent dated February 22, 2018. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.03 per share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of these warrants to be approximately $38,000. The warrants have a cashless exercise feature.

Effective November 1, 2018, 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 2,272,727 shares of common stock based upon a Block Trade pursuant to the engagement agreement with the Company’s placement agent dated February 22, 2018. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.01 per share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of these warrants to be approximately $19,000. The warrants have a cashless exercise feature.

A summary of the Company’s warrant activity and related information for the nine months ended January 31, 2019 are shown below:

The following table summarizes additional information concerning warrants outstanding and exercisable at January 31, 2019: