Compensation Related Costs, Share Based Payments

3 Months Ended

Nov. 30, 2012

Disclosure Text Block Supplement [Abstract]

Shareholders' Equity and Share-based Payments [Text Block]

Note 6. Stock Options

The Company has one stock option plan called The 2006 Employee Stock and Option Plan (the "Plan"). As of November 30, 2012, an aggregate of 5,000,000 shares of common stock may be granted under this plan as determined by the Board of Directors. The stock options may be granted to directors, officers, employees, consultants and advisors of the Company.  Options granted under the Plan are non-qualified stock options and have exercise prices and vesting terms established by the Board of Directors at the time of each grant.  Vesting terms of the outstanding options range from immediate to two years from the grant date anniversary or upon consummation of employment.  The terms of the options range from five to ten years from the date of grant.

For the nine months ended November 30, 2012, the Company granted stock options to an officer/director allowing for the purchase of up to an aggregate of 600,000 shares of common stock.  The stock option agreement has a term of 10 years and the options vest as follows: 200,000 on March 19, 2012, 100,000 on March 19, 2013, 100,000 on March 19, 2014, 100,000 on March 19, 2015 and 100,000 on March 19, 2016.  The fair value of the Company’s stock options have been estimated using the Black-Scholes pricing model, which requires assumptions as to expected dividends, the options expected life, volatility and risk-free interest rate at the time of the grant.  The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite vesting periods of each tranche in the Company’s consolidated statements of operations.

For stock options granted during the nine months ended November 30, 2012, we utilized the following key assumptions in computing fair value using the Black-Scholes option-pricing model:

	March 19,
	2012
Weighted-average volatility	115%
Expected dividends	None
Expected term (in years)	5
Weighted-average risk-free interest rate	1.20%
Weighted-average fair value of options granted	$0.32

The total fair value of the stock options granted by the Company for the nine months ended November 30, 2012 was $194,580.

During the three months ended November 30, 2012, 650,000 stock options were canceled with 600,000 due to the resignation of an Officer/Director and 50,000 due to the expiration of options issued to an advisor.  The Company reversed $28,151 of stock compensation expense previously recognized in the current year due to the cancelation of these options. 

During the nine months ended November 30, 2012, the Company cancelled a total of 850,000 stock options and reversed $37,650 of stock option expense previously recognized in the current year.  Total stock compensation expense for all option grants was ($9,502) and $3,065,042 for the three months ended November 30, 2012 and 2011, respectively, and $120,807 and $3,213,607 for the nine months ended November 30, 2012 and 2011, respectively.  This expense is included in selling, general and administrative expense. As of November 30, 2012, the Company has not recorded any tax benefit from this non-cash expense due to the Company having a full valuation allowance against its deferred tax assets.  The compensation expense impacted the three months ended November 30, 2012 and 2011 basic earnings (loss) per common share by $0.0003 and $(0.11), respectively, and the nine months ended November 30, 2012 and 2011 basic (loss) per common share by $(0.004) and $(0.11), respectively.  There is no unrecognized compensation expense at November 30, 2012.

The following table summarizes information about the Company’s stock options:

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contract Life (years)		Aggregate Intrinsic Value (1)
Outstanding - February 29, 2012	4,170,000	$  1.313		-	-
Granted	600,000	1.000		-	-
Canceled or expired	(850,000)	1.293		-	-
Exercised	-	-		-	-
Outstanding – November 30, 2012	3,920,000	$  1.269		7.19	-
Exercisable at November 30, 2012	3,820,000	$  1.254		7.30	-

(1)The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price.