Stock Options

As of January 31, 2017, the Company had outstanding stock options held by its directors, officers, an employee, (“Employee Options”) and a consultant, (“Non-employee Options”) that were issued pursuant to compensation, director and consultant agreements.

During the nine months ended January 31, 2017 and 2016, the Company granted zero and 15,600,000 Employee Options, respectively.

The fair value of the Employee Options was estimated using the Black-Scholes-Merton option-pricing model, based on the following weighted average assumptions:

During the nine months ended January 31, 2017 and 2016, the Company granted 13,100,000 and zero Non-employee Options, respectively. The Non-employee Options granted during the nine months ended January 31, 2017 consist of 600,000 guaranteed options and 12,500,000 non-guaranteed performance based options.

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 three and nine months ended January 31, 2017 and 2016, the Company used a calculated volatility for each grant. For employee options, 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 a typical vesting term of one year. For Non-employee Options, the Company used the contract term of five years to estimate the expected term as guided under ASC 505. 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. At the end of each financial reporting period, the value of these options, as calculated using the Black-Scholes-Merton option-pricing model, is determined, and compensation expense recognized or recovered during the period is adjusted accordingly. During the three and nine months ended January 31, 2017, the values to account for the measurement on these vesting dates were approximately $0.04 and $0.04, respectively. As a result, the amount of the future compensation expense is subject to adjustment until the Common Stock options are fully vested.

A summary of the Company’s stock option activity and related information for the nine months ended January 31, 2017 are shown below:

The Company recorded $109,576 and $209,298 of stock-based compensation expense related to the issuance of employee options in exchange for services during the three months ended January 31, 2017 and 2016, respectively, and $438,302 and $499,836 during the nine months ended January 31, 2017 and 2016, respectively. As of January 31, 2017, and 2016, there remained zero and $801,169, respectively, of unrecognized compensation expense related to unvested Employee Options granted, to be recognized as expense over a weighted-average period of approximately one year. The non-vested Employee Options vested at 1,300,000 per month and were fully vested on December 31, 2016.

The Company recorded $6,190, $17,700, zero and zero of stock-based compensation expense related to the issuance of Non-employee Options in exchange for services during the three and nine months ended January 31, 2017 and 2016, respectively. The non-vested Non-employee Options that are guaranteed vest at 50,000 per month and are expected to be fully vested on April 30, 2017.

The following table summarizes ranges of outstanding stock options by exercise price at January 31, 2017:

The aggregate intrinsic value of outstanding options as of January 31, 2017 was $946,500. This represents options whose exercise price was less than the closing fair market value of the Common Stock on January 31, 2017 of $0.1145 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 December 31, 2016, Class D warrants to purchase 18,755,200 shares of unregistered Common Stock expired. The terms of the warrant agreements stated the exercise price of the warrants was $0.25 per share.

Effective January 1, 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 769,231 shares based upon a block trade pursuant to the amended engagement agreement dated December 15, 2016 with the Company’s placement agent. The Company classified these warrants as equity, and the warrants have a term of five years with an exercise price of approximately $0.07 per share. Using the Black-Scholes-Merton warrant pricing model, the Company determined the aggregate value of these warrants to be approximately $40,000. The warrants have a cashless exercise feature.

A summary of the Company’s warrant activity and related information for the three and nine months ended January 31, 2017 are shown below:

The following table summarizes additional information concerning warrants outstanding and exercisable at January 31, 2017: