NOTE 5 – STOCK OPTIONS AND WARRANTS

Stock Options

As of January 31, 2020, the Company had 94,650,000 outstanding stock options to its directors and officers (collectively, “Employee Options”) and consultants (collectively, “Non-Employee Options”).

During the nine months ended January 31, 2020 and 2019, the Company granted 11,000,000 and zero Employee Options, respectively. During the nine months ended January 31, 2020, 25,000,000 options expired.

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:

The Company’s computation of expected volatility is based on the historical daily volatility of publicly traded Common Stock. For stock option grants issued during the nine months ended January 31, 2020 and 2019, the Company used a calculated volatility for each grant. The Company lacks adequate information about potential exercise behavior 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.

During the nine months ended January 31, 2020 and 2019, the Company granted 1,200,000 and 1,200,000 Non-Employee Options, respectively. During the three months ended January 31, 2020 and 2019, the Company granted zero and zero Non-Employee Options, respectively.

Non-Employee Option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. The value of the 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, 2020 are shown below:

A summary of the activity for unvested stock options during the nine months ended January 31, 2020 is as follows:

The Company recorded $74,025 and $51,153 of stock-based compensation related to the issuance of Employee Options to certain officers and directors in exchange for services during the three months ended January 31, 2020 and 2019, respectively, and $284,934 and $204,619 during the nine months ended January 31, 2020 and 2019, respectively. At January 31, 2020, there remained $194,758 of unrecognized compensation expense related to unvested Employee Options granted to officers and directors, to be recognized as expense over a weighted-average period of the remaining eleven months in the calendar year. The unvested options vest at 750,000 shares per month and are expected to be fully vested on December 31, 2020.

The Company recorded $10,411 and $21,331 of stock-based compensation related to the issuance of Non-Employee Options in exchange for services during the three months ended January 31, 2020 and 2019, respectively, and $24,237 and $78,054 during the nine months ended January 31, 2020 and 2019, respectively. At January 31, 2020, there remained $17,089 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 unvested Non-Employee Options vest at 100,000 shares per month and are expected to be fully vested on June 30, 2020.

The following table summarizes ranges of outstanding stock options by exercise price at January 31, 2020:

The aggregate intrinsic value of outstanding options as of January 31, 2020 was $125,970. This represents options whose exercise price was less than the closing fair market value of Common Stock on January 31, 2020 of approximately $0.056 per share.

Warrants

The warrants issued by the Company are equity-classified. 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.

The Company issued a Common Stock Purchase Warrant (“May 2018 Warrant”) to Aeon Capital, Inc. (“Aeon”) dated May 30, 2018 for a Block Trade pursuant to the Company’s engagement agreement with Aeon dated February 22, 2018 (“Engagement Agreement”). The May 2018 Warrant provides Aeon the right to purchase 1,388,889 shares of restricted Common Stock based upon this Block Trade. The Company classified the May 2018 Warrant as equity. The May 2018 Warrant has a term of five years with an exercise price of approximately $0.02 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of the May 2018 Warrant to be approximately $19,000. The May 2018 Warrant has a cashless exercise feature.

The Company issued a warrant to Aeon dated June 28, 2018 (“June 2018 Warrant”) for a Block Trade pursuant to the Engagement Agreement. The June 2018 Warrant provides Aeon with the right to purchase 1,923,077 shares of restricted Common Stock based upon a Block Trade. The Company classified the June 2018 Warrant as equity. The June 2018 Warrant has a term of five years with an exercise price of approximately $0.03 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of the June 2018 Warrant to be approximately $38,000. The June 2018 Warrant has a cashless exercise feature.

The Company issued a warrant to Aeon dated November 1, 2018 (“November 2018 Warrant”) for a Block Trade pursuant to the Engagement Agreement. The November 2018 Warrant provides Aeon with the right to purchase 2,272,727 shares of restricted Common Stock based upon a Block Trade. The Company classified the November 2018 Warrant as equity. The November 2018 Warrant has a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of the November 2018 Warrant to be approximately $19,000. The November 2018 Warrant has a cashless exercise feature.

The Company issued a Warrant to Aeon dated June 13, 2019 (“June 2019 Warrant”) for a Block Trade pursuant to the Engagement Agreement. The June 2019 Warrant provides Aeon with the right to purchase 1,388,889 shares of restricted Common Stock based upon a Block Trade. The Company classified the June 2019 Warrant as equity. The June 2019 Warrant has a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of the June 2019 Warrant to be approximately $9,000. The June 2019 Warrant has a cashless exercise feature.

The Company issued a Warrant to Aeon dated July 15, 2019 (“July 2019 Warrant”) for a Block Trade pursuant to the Engagement Agreement. The July 2019 Warrant provides Aeon with a right to purchase 1,944,444 shares of restricted Common Stock based upon a Block Trade. The Company classified the July 2019 Warrant as equity. The July 2019 Warrant has a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of the July 2019 Warrant to be approximately $12,000. The July 2019 Warrant has a cashless exercise feature.

The Company issued two Warrants to Aeon dated August 7, 2019 (“August 2019 Warrants”) for two Block Trades pursuant to the Engagement Agreement. The August 2019 Warrants provide Aeon with a right to purchase 3,500,000 shares of restricted Common Stock based upon two Block Trades. The Company classified the August 2019 Warrants as equity. The August 2019 Warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of the August 2019 Warrants to be approximately $12,000. The August 2019 Warrants have a cashless exercise feature.

A summary of the Company’s warrant activity and related information for the nine months ended January 31, 2020 are shown below:

The following table summarizes additional information concerning warrants outstanding and exercisable at January 31, 2020: