3. COMMON STOCK PURCHASE WARRANTS

3 Months Ended

May 31, 2014

Notes to Financial Statements

COMMON STOCK PURCHASE WARRANTS

NOTE 3:   COMMON STOCK PURCHASE WARRANTS

Common Stock

During the three month period ended May 31, 2014, 50,000 shares of restricted stock were issued by the Company to an employee. The shares vest over a two year period, with 17,000 shares vested upon issue. The remaining shares vest 17,000 and 16,000 after one and two years, respectively. The value recorded in the accompanying consolidated financial statements was based on the estimated fair value of the stock on the date of the grant.

During the quarter ended May 31, 2013, the Company did not issue any shares of common stock.   

Warrants

The Company has determined the estimated value of warrants granted using the Black-Scholes option pricing model. The amount of the expense charged to operations for warrants was $88,175 for the three months ended May 31, 2014 and $85,711 for the three months ended May 31, 2013.  All outstanding warrants are expected to be vested in December 2015.

A summary of warrant activity for the three months ended May 31, 2014 is as follows:

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price
Outstanding at February 28, 2014		8,407,221		0.21
Granted		-		-
Exercised		-		-
Forfeited		-		0.21
Outstanding at May 31, 2014		8,407,221		0.21
Vested at May 31, 2014		5,464,694		0.21
Exercisable at May 31, 2014		5,464,694		0.21

The following table summarizes significant ranges of outstanding warrants as of May 31, 2014:

		Warrants Outstanding				Warrants Exercisable
			Weighted	Weighted			Weighted
			Average	Average			Average
Exercise Price		Number	Remaining	Exercise		Number	Exercise
		Outstanding	Life (Years)	Price		Outstanding	Price
$	0.21	8,407,221	6.54	$	0.21	5,464,694	$	0.21