Stock Options

As of July 31, 2015, the Company had outstanding stock options held by its directors, officers and an employee that were issued pursuant to compensation and director agreements.

The Company has adopted the provisions of ASC 718, “Compensation-Stock,” which requires the measurement and recognition of compensation expense for all stock-based awards made to employees.

The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the following 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 periods ended July 31, 2015 and 2014, the Company used a calculated volatility for each grant. The Company lacks adequate information about the exercise behavior at this time 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 fifth years for an average of two and two third 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. No amounts relating to employee stock-based compensation have been capitalized.

Presented below is the Company’s stock option activity for employees and directors:

The weighted average fair value of the outstanding stock options during the periods ended July 31, 2015 and 2014 are $0.10 and $0, respectively.

A summary of the activity for unvested employee stock options during the periods ended July 31, 2015 is presented below:

The Company recorded approximately $145,000 and $0 of non-cash charges related to the vesting of stock options to certain directors and employees in exchange for services during the periods ended July 31, 2015 and 2014, respectively.

At July 31, 2015, there remained approximately $387,000 (subject to change in the future based on vesting date fair value) of unrecognized compensation expense related to unvested employee stock options to be recognized as expense over a weighted-average period of one year.

The following table summarizes ranges of outstanding stock options at July 31, 2015:

The aggregate intrinsic value of outstanding options as of July 31, 2015 was approximately $158,000. This represents options whose exercise price was less than the closing fair market value of the Company’s common stock on July 31, 2015 of approximately $0.12 per share.

Warrants (As Restated)

The Company issued certain cashless warrants in connection with its entry into the Consultant Agreement during the year ended April 30, 2015.  The Company accounted for the cashless warrants as a derivative liability, as disclosed in the Original Filing. However, upon further analysis, the Company determined that the cashless warrants should have been accounted for as equity in accordance with U.S. GAAP. Additionally, the Company determined that the Consultant Agreement, issuance of shares of common stock to the consultant pursuant to the Consultant Agreement and the issuance of certain cash warrants and the cashless warrants to the consultant should have been recorded as a prepaid asset and amortized over the term of the Consultant Agreement in accordance with U.S. GAAP in the Original Filing.

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 were 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, as amended. 

A summary of the Company’s warrant activity and related information for the periods ended July 31, 2015 are shown below:

There were no cashless exercises of warrants as of July 31, 2015 and 2014.

The following table summarizes additional information concerning warrants outstanding and exercisable at July 31, 2015: