STOCK-BASED COMPENSATION

9 Months Ended

Feb. 28, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

7. STOCK-BASED COMPENSATION

The Company accounted for its stock based compensation in accordance with the fair value recognition provisions of FASB ASC Topic 718, “Compensation – Stock Compensation”. 

A. Options 

The Company issued options to purchase an aggregate of 4,100,000 shares of the Company’s common stock in the year ended May 31, 2016, 2,100,000 of which were granted outside of the 2004 Stock Option and Restricted Stock Plan (the “2004 Plan”). There were no options granted during the three or nine months ended February 28, 2017. 

Compensation based stock option activity for qualified and unqualified stock options are summarized as follows: 

			Weighted
			Average
	Shares		Exercise Price
Outstanding at May 31, 2015		1,012,500	$	1.20
Granted		4,100,000		0.94
Exercised		-		-
Expired or cancelled		-		-
Outstanding at May 31, 2016		5,112,500	$	0.99
Granted		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding at February 28, 2017		5,112,500	$	0.99

The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable at February 28, 2017: 

				Weighted-		Weighted-
				Average		Average
Range of		Outstanding		Remaining Life		Exercise		Number
exercise prices:		Options		In Years		Price		Exercisable
$	0.60		2,300,000		4.72	$	0.60		2,300,000
$	1.00		700,000		1.63	$	1.00		700,000
$	1.20		1,562,500		7.83	$	1.20		1,562,500
$	2.00		550,000		5.33	$	2.00		550,000
			5,112,500		5.32	$	0.99		5,112,500

The compensation expense attributed to the issuance of the options will be recognized as they vested/earned. These stock options are exercisable for three to ten years from the grant date. 

The employee stock option plan stock options are exercisable for ten years from the grant date and vest over various terms from the grant date to three years. 

B. Warrants

The issuance of warrants to purchase shares of the Company's common stock including those attributed to debt issuances are summarized as follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at May 31, 2015		3,937,986		$	1.45
Granted		1,288,001			1.78
Exercised		-			-
Expired or cancelled		-			-
Outstanding at May 31, 2016		5,225,987		$	1.53
Granted		-			-
Exercised		-			-
Expired or cancelled		(147,833	)		3.43
Outstanding at February 28, 2017		5,078,153		$	1.57

Issuances of warrants to purchase shares of the Company's common stock were as follows: 

		Outstanding and exercisable
				Weighted-		Weighted-
Range of				average		average
exercise		Number		remaining life		exercise		Number
prices		outstanding		in years		price		exercisable
$	1.00		283,000		1.72	$	1.00		283,000
$	1.20		2,956,822		2.44		1.20		2,956,822
$	2.00		1,838,331		1.32		2.00		1,838,331
			5,078,153		1.99	$	1.57		5,078,153

FY 2016 (Year Ended May 31, 2016): 

a As discussed in Note 8, in addition to common stock, the Company also issued warrants to purchase 833,334 shares of the Company's common stock under the PPO.

b In November 2015, a warrant to purchase 250,000 shares of the Company's common stock at $1.00 per share was issued to a vendor as a bonus payment for services rendered in connection with a software development agreement. The warrant issued was valued using the Black Scholes option pricing model under the following assumptions: stock price $ 1.00; strike price $ 1.00; expected volatility 87.54%; risk free interest rate 1.21%; dividend rate 0%; and expected term 3 years. The value of the warrant totaling $139,928 was charged as research and development.

c In November 2015, a warrant to purchase 33,000 shares of the Company's common stock at $1.00 per share was issued to a consultant for services rendered under a consulting contract. The warrant issued was valued using the Black Scholes option pricing model under the following assumptions: stock price $ 1.00; strike price $1.00; expected volatility 87.54%; risk free interest rate 1.21%; dividend rate 0%; and expected term 3 years. The value of the warrant totaling $18,471 was charged as consulting fees. See Note 11.

d On April 28, 2016, the Company entered into an asset purchase agreement pursuant to which the Company purchased intangible assets in exchange for 166,667 shares of the Company's common stock and a warrant to purchase 166,667 shares of the Company's common stock at $2.00 per share. The warrant issued was valued using the Black Scholes option pricing model under the following assumptions: stock price $ 0.75; strike price $2.00; expected volatility 293%; risk free interest rate .93%; dividend rate 0%; and expected term 3 years. The value of the warrant totaling $124,000 was included in the cost of the intangible which was fully impaired as of May 31, 2016.

FY 2017 (Year Ended May 31, 2017): 

There were no warrants granted during the three or nine months ended February 28, 2017. 

The expense attributed to the issuances of the warrants was recognized as they vested/earned. These warrants are exercisable for three years from the grant date.