NOTE 6 – STOCK OPTIONS AND WARRANTS

2021 Equity Incentive Plan

Effective June 30, 2021, the Company implemented the 2021 Equity Incentive Plan (“2021 Equity Plan”) as approved by the Company’s stockholders. The 2021 Equity Plan is administered by the Compensation Committee of the Board and has 166,667 shares authorized under this plan. The 2021 Equity Plan can issue various types of awards, as follows: stock options, stock appreciation rights, restricted stock, restricted stock units, and cash or other stock-based awards. The 2021 Equity Plan is available to be issued to employees, directors, consultants, and other individuals who provide services to the Company. An incentive stock options (“ISOs”) can only be granted to employees and shall not exceed 10-years (5-years in the case of ISOs granted to any 10% shareholder). As of July 31, 2025, there are 152,594 shares remaining available under the 2021 Equity Plan.

2022 Equity Incentive Plan

Effective December 28, 2022, the Company implemented the 2022 Equity Incentive Plan (“2022 Equity Plan”) as approved by the Company’s stockholders. The 2022 Equity Plan is administered by the Compensation Committee of the Board and has 2,750,000 shares available under this plan. The 2022 Equity Plan can issue various types of awards, as follows: stock options, stock appreciation rights, restricted stock, restricted stock units, and cash or other stock-based awards. The 2022 Equity Plan is available to be issued to employees, directors, consultants, and other individuals who provide services to the Company. An incentive stock options (“ISOs”) can only be granted to employees and shall not exceed 10-years (5-years in the case of ISOs granted to any 10% shareholder). As of July 31, 2025, there are 1,595,040 shares remaining available under the 2022 Equity Plan.

Stock Options

A summary of the Company’s stock option activity and related information for the three months ended July 31, 2025, are shown below:

The Company recorded $60,492 and $222,677 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 July 31, 2025 and 2024, respectively. As of July 31, 2025, there remained $175,562 of unrecognized compensation expense related to unvested Employee Options granted to officers and directors.

The aggregate intrinsic value of vested outstanding options as of July 31, 2025 was $0.

Warrants

Series B Preferred Warrant

On May 10, 2023, the Company entered into a Securities Purchase Agreement (the “Private Placement Agreement”) with certain accredited investors (the “Investors”), pursuant to which it agreed to sell to the Investors warrants to acquire up to an aggregate of 8,750,000 shares of Common Stock, collectively, the (“Series B Preferred Warrant or Warrants”), with an exercise price of $4.00 per share (subject to adjustment), for a period of five years from the date of issuance. 

The Warrants were determined to be subject to liability classification as they are considered to be indexed to the Company’s own stock but fail to meet the requirements for equity classification in accordance with ASC 815. As such, the Company recorded the Warrants as a liability at fair value with subsequent changes in fair value recognized in earnings. The Company utilized the Black-Scholes-Merton Model to calculate the value of the Warrants issued on May 10, 2023.

During the three months ended July 31, 2025 and 2024, the Company recorded a gain of approximately $216,000 and $2,084,000, respectively, related to the change in fair value of the warrant liability which is recorded in other income on the unaudited condensed consolidated statements of operations. The fair value of the Warrants of $122,000 was estimated at July 31, 2025, utilizing the Black-Scholes-Merton Model using the fair value of our common stock of $1.02 and the following weighted average assumptions: dividend yield 0%; remaining term of 2.78 years; equity volatility of 40.0%; and a risk-free interest rate of 3.83%.

Settlement Warrants

In connection with the Settlement Agreement, as defined on Note 8 – Commitments and Contingencies, on May 16, 2025, the Company issued warrants (“First Warrant Issuance”) to purchase 343,183 shares of the Company’s common stock with an exercise price of $4.00 per share and a term of five years from the issuance date. On July 29, 2025, the Company issued additional warrants (“Additional Warrants”, and collectively with the First Warrant Issuance, the “Settlement Warrants”) to purchase 313,067 shares of the Company’s common stock with an exercise price of $4.00 per share and a term of five years from the issuance date.

The Settlement Warrants were determined to be subject to liability classification. As such, the Company recorded the Settlement Warrants as a liability upon issuance at their fair value with subsequent changes in fair value recognized in earnings.

The Company utilized the Black-Scholes-Merton Model to calculate the value of the Settlement Warrants issued during the three months ended July 31, 2025.

The fair value of the First Warrant Issuance of approximately $199,000 was estimated at May 16, 2025 (the date of issuance) using the fair value of our common stock of $1.06 on the issuance date as well as the following input assumptions: expected dividend yield of 0%; expected term of 5.0 years; equity volatility of 97.0%; and a risk-free interest rate of 4.1%.

The fair value of the Additional Warrants of approximately $164,000 was estimated at July 29, 2025 (the date of issuance) using the fair value of our common stock of $1.02 on the issuance date as well as the following input assumptions: expected dividend yield of 0%; expected term of 5.0 years; equity volatility of 94.0%; and a risk-free interest rate of 3.9%.

During the three months ended July 31, 2025, the Company recorded a gain on legal settlement of $106,000, which represents the difference between the estimated fair value of the Settlement Warrants recognized during the year ended April 30, 2025 totaling $469,000 and their issuance date fair values totaling $363,000. See Note 8 – Commitment and Contingencies – Legal Proceedings.

During the three months ended July 31, 2025, the Company recorded a gain of $27,000 related to the change in fair value of the warrant liability associated with the Settlement Warrants which is recorded in other income (expense) on the unaudited condensed consolidated statements of operations. The fair value of the Settlement Warrants of $336,000 was estimated at July 31, 2025 utilizing the Black-Scholes-Merton Model using the fair value of our common stock of $1.02 and was based on the following weighted average assumptions: expected dividend yield of 0%; expected term of 4.89 years; equity volatility of 93.5%; and a risk-free interest rate of 4.0%.

A summary of the Company’s warrant activity and related information for the three months ended July 31, 2025, are shown below: