Stock Options

The Company granted stock options to its directors, officers and an employee during the years ended April 30, 2016, 2015 and 2014, based on 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-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, 2016, 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 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.

Presented below is the Company’s stock option activity for officers, directors and employees.

A summary of the Company’s stock option activity and related information for the three years ended April 30, 2016 are shown below:

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

The Company recorded approximately $789,000, $5,237,000 and $0 of non-cash charges related to the issuance of stock options to certain officers, directors and employees in exchange for services during the years ended April 30, 2016, 2015 and 2014, respectively. At April 30, 2016, there remained approximately $512,000 of unrecognized compensation expense related to unvested stock options granted to employees and directors, to be recognized as expense over a weighted-average period of one year. The non-vested options vest at 1,300,000 per month and are expected to be fully vested on December 31, 2016.

The following table summarizes ranges of outstanding stock options by exercise price at April 30, 2016:

The aggregate intrinsic value of outstanding options as of April 30, 2016 was approximately $85,800. This represents options whose exercise price was less than the closing fair market value of the Company’s common stock on April 30, 2016 of approximately $0.069 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, as amended.

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, 2016, 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 begun to offer holders of its Class B warrants, with a conversion price of $0.12 per share, with the same terms. As of April 30, 2016, 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 connection with this program.

On September 1, 2014 the Company granted 854,308 Class D Warrants to purchase common stock as part of the Warrant Conversion Program. This resulted in an expense of $100,000 under a consulting agreement to facilitate the Warrant Conversion Program. This expense is included in general and administrative expense in the consolidated statements of operations.

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 accounted for using the equity method and resulted in a non-cash expense of $791,506 and $122,764 for the years ended April 30, 2016 and 2015, 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 accounted for using the equity method and resulted in a non-cash expense of $113,834 and$17,656 for the years ended April 30, 2016 and 2015, respectively.

On December 31, 2015, warrants to purchase 5,000,000 shares of unregistered common stock of the Company expired. The warrant agreement was dated March 23, 2015 and the terms stated the exercise price of warrants was $0.11 per share.

On January 7, 2016, the Company entered into 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, and 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 and 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.

A summary of the Company’s warrant activity and related information for the three years ended April 30, 2016 are shown below:

The following table summarizes additional information concerning warrants outstanding and exercisable at April 30, 2016: