Note 8. Stockholders’ Equity

Common Stock

During the year ended July 31, 2017

During the year ended July 31, 2017, the Company issued 2,875 unregistered shares of the Company’s Common Stock to consultants in exchange for services provided by the consultants. The shares issued were valued using the stock price on the issuance date, ranging from $7.52 to $7.75. The Company recorded a non-cash expense of $22,051.

During the year ended July 31, 2017, the Company issued 25,072 shares of unregistered Common Stock pursuant to the LOI described in Note 9 – Commitments. Per the terms of the LOI, the Company was obligated to issue these shares on the one year anniversary of the LOI and upon the one year anniversary of receipt, by the Company, of a milestone payment from Adapt for the first commercial sale of the Company’s product, NARCAN® (naloxone hydrochloride) Nasal Spray, in the U.S. The shares issued in this transaction were valued using the stock price on the issuance dates ranging from $5.94 to $7.75 per share. The Company recorded the aggregate fair value of $168,376 as non-cash expense during the year ended July 31, 2017.

The Company made a reconciling adjustment to record the issuance of 6,228 shares of unregistered Common Stock that were issued in fiscal years prior to both 2017 and 2016. Of this total, 6,168 were issued in relation to a conversion of debt into shares of the Company’s common stock. The remaining 60 shares were issued in relation to the Company’s one-for-one hundred reverse stock split of its Common Stock (the “1:100 Reverse Stock Split”) that was effected in December 2014. The 6,228 shares are on a post-split basis and after recording this adjustment the number of shares of the Company’s common stock listed as outstanding on the accompanying Consolidated Statement of Stockholders' Equity (Deficit) reconciles to the actual number of shares outstanding as of July 31, 2017.

During the year ended July 31, 2016

During the year ended July 31, 2016, the Company issued 42,500 unregistered shares of the Company’s Common Stock to consultants in exchange for services provided by the consultants. The shares issued were valued using the stock price on the issuance date, ranging from $7.75 to $10.50. The Company recorded the aggregate fair value of $388,320 as non-cash expense during the year ended July 31, 2016.

During the year ended July 31, 2016, the Company issued 74,443 shares of unregistered Common Stock pursuant to the agreement described in Note 9 – Commitments. The shares issued were valued using the stock price on the issuance date, ranging from $7.75 to $9.90. The Company recorded the aggregate fair value of $644,037 as non-cash expense during the year ended July 31, 2016.

On November 19, 2015, the Company issued 14,327 shares of unregistered Common Stock upon the execution of a binding letter of intent to agree to negotiate and enter into an exclusive license agreement and collaboration agreement (“LOI”) with a pharmaceutical company with certain desirable proprietary information. The shares issued in this transaction were valued using the stock price at issuance date and amounted to $120,347. On March 8, 2016, the Company issued 3,582 shares of unregistered Common Stock related to the achievement of certain milestones (see below). The shares issued in this transaction were valued using the stock price at issuance date and amounted to $32,775. The Company recorded the aggregate fair value of $153,122 as non-cash expense during the year ended July 31, 2016. Pursuant to the LOI, the Company is obligated to issue up to an additional 92,634 shares of unregistered Common Stock upon the occurrence of various milestones.

On March 25, 2016, the Company issued 15,715 shares of unregistered Common Stock as a result of the cashless exercise of 30,000 options.

Stock Options

As required by the Stock Compensation Topic, ASC 718, the Company measures and recognizes compensation expense for all share based payment awards made to the officers and directors based on estimated fair values at the grant date and over the requisite service period.

During the year ended July 31, 2016, the Company granted a total of 1,507,500 options to the Company’s board of directors and officers. These options have exercise prices between $7.25 and $10.00 and terms ranging from 5 to 10 years, and are exercisable on a cashless basis. These options vest as follows: (i) 1,437,500 shares vested immediately; (ii) 23,334 shares vested on August 29, 2017 upon the uplisting of the Company to Nasdaq; (iii) 23,334 shares vested on December 13, 2016 upon the cumulative funding of the Company of or in excess of $5,000,000 by institutional investors commencing May 5, 2016; and (iv) 23,332 shares vest upon the first submission of a NDA to the FDA for one of the Company’s products by either the Company or a Company licensee.The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $10,642,786. During the year ended July 31, 2016, the Company recognized stock based compensation expense of $10,211,507 related to these options. The Company also recognized stock based compensation expense of $99,039 in connection with vested options granted in prior periods.

During the year ended July 31, 2017, the Company granted a total of 320,000 options to certain members of the Board, an officer and employees. These options had exercise prices between $9.00 and $10.00, terms ranging from 5 to 10 years, and are exercisable on a cashless basis. These options vest as follows: (i) 100,000 shares vest on the eighteenth month from the February 6, 2017 grant date, with the remaining 100,000 shares vesting over the next eighteen months; (ii) 85,000 shares vest over thirty-six months from the date of grant; (iii) 11,667 shares vested on August 29, 2017 upon the uplisting of the Company to Nasdaq; (iv) 11,667 shares vested on December 13, 2016 upon the cumulative funding of the Company of or in excess of $5,000,000 by institutional investors starting from November 4, 2016; and (v) 11,666 shares vest upon the first submission of an NDA to the FDA for one of Company’s products by Company itself or a Company licensee. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $2,464,566. During the year ended July 31, 2017, Company recognized stock based compensation expense of $981,494 related to these options. The Company also recognized stock based compensation expense of $295,645 in connection with vested options granted in periods prior to the year ended July 31, 2017.

The assumptions used in the valuation for all of the options granted for the years ended July 31, 2017 and 2016 are as follows:

	2017			2016
Market value of stock on measurement date	$	5.61 to 13.00		$	7.00 to 10.00
Risk-free interest rate		0.88-2.55	%		0.71-2.05	%
Dividend yield		0	%		0	%
Volatility factor		76-348	%		124-373	%
Term		2.28-10 years			3-10 years

Stock option activity for the years ended July 31, 2017 and 2016 are presented in the table below:

	Number of Options		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at July 31, 2015		3,157,500	$	9.42		7.58
Granted		1,507,500	$	7.38
Exercised		(30,000)	$	5.00
Outstanding at July 31, 2016		4,635,000	$	8.79		7.39	$	2,731,250
Granted		320,000	$	9.38
Expired		(5,000)	$	10.00
Forfeited		(1,180,000)	$	11.03
Outstanding at July 31, 2017		3,770,000	$	8.13		6.87	$	19,139,625
Exercisable at July 31, 2017		3,312,629	$	7.76		6.96	$	17,925,016

A summary of the status of the Company’s non-vested options as of July 31, 2017 and changes during the fiscal years ended July 31, 2017 and 2016 are presented below:

Non-vested options	Number of Options		Weighted Average Grant Date Fair Value

Non-vested at July 31, 2015		37,500	$	3.85
Granted		1,507,500	$	7.06
Vested		(1,454,167)	$	7.00
Non-vested at July 31, 2016		90,833	$	7.27
Granted		320,000	$	7.70
Vested		(70,962)	$	6.70
Non-vested at July 31, 2017		339,871	$	7.93

As of July 31, 2017, there was $1,622,019 of unrecognized compensation costs related to non-vested stock options.

Warrants

On March 13, 2017, the Company granted a warrant to purchase 45,000 shares of the Company’s Common Stock to Brad Miles, an advisor to the Company. The warrant is fully vested on the date of grant, has an exercise price of $10.00, an expiration date of three years from the date of grant, and may be exercised solely by payment of cash. The Company valued Mr. Miles’ warrant using the Black-Scholes option pricing model using the following criteria: (i) a per share stock price of $8.00, which represents the closing price of the Company’s Common Stock on March 13, 2017, (ii) a per share exercise price of $10.00, (iii) a term of three (3) years, (iv) volatility of 111%, (v) a dividend yield of zero, and (vi) a risk-free rate of 1.63%, which represents the yield on a three-year Treasury bond as of March 16, 2017. This resulted in an aggregate value of $229,360, which the Company expensed during the year ended July 31, 2017.

On March 31, 2017, Dr. Michael Sinclair, the Executive Chairman of the Board, and Dr. Roger Crystal, the Company’s Chief Executive Officer, each voluntarily entered into separate employment agreement acknowledgements whereby they elected to forfeit, unconditionally and irrevocably, 285,000 and 40,000 warrants of the Company, respectively, as related to unexercised warrants previously granted by the Company.

Warrant activity for the fiscal years ended July 31, 2017 and 2016 is presented in the table below:

	Number of Warrants		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at July 31, 2015		1,338,552	$	19.53		3.55	$	-
Expired		(123,167)	$	35.55		-		-
Outstanding at July 31, 2016		1,215,385	$	17.90		2.86		-
Granted		45,000	$	10.00			$	-
Expired		(166,585)	$	46.37		-		-
Forfeited		(325,000)	$	15.00
Outstanding at July 31, 2017		768,800	$	12.50		3.04	$	1,184,000
Exercisable at July 31, 2017		368,800	$	9.79		5.88	$	1,184,000