STOCK OPTIONS

3 Months Ended

May 31, 2014

Stock Options

STOCK OPTIONS

During the three months ended May 31, 2013, the Company issued options to purchase 300,000 shares of common stock at $3.25 per share to members of its management team and its Board of Directors. The options vest in four equal installments on each of May 31, 2013, August 31, 2013, November 30, 2013 and February 28, 2014 and expire on April 5, 2023. These options have a total fair value of $632,794 as calculated using the Black-Scholes model. Assumptions used in the Black-Scholes model included: (1) a discount rate of 0.68%; (2) an expected term of 5.25 years; (3) an expected volatility of 129%; and (4) zero expected dividends.   The Company recognized $158,199 and $0 in stock option expense for the three months ended May 31, 2013 and May 31, 2014, respectively.

During the three months ended May 31, 2013, the Company issued options to purchase 523,500 shares of common stock at $3.25 per share to members of its scientific advisory board and clinical advisory board and a consultant. The options vest in four equal installments on each of May 31, 2013, August 31, 2013, November 30, 2013 and February 28, 2014 and expire on April 5, 2023. Compensation expense related to these non-employee options was measured and recognized at each vesting date.  The aggregated fair value of the vested options on the first measurement date amounted to $310,814 as calculated using the Black-Scholes model. Assumptions used in the Black-Scholes model included: (1) a discount rate of 2.16%; (2) an expected term of 9.85 years; (3) an expected volatility of 128%; and (4) zero expected dividends.  The Company recognized $310,814 and $0 in stock option expense for the three months ended May 31, 2013 and May 31, 2014, respectively.

The following table summarizes common stock options issued and outstanding:

	Options		Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual life (years)
Outstanding at February 28, 2014		2,680,000	$	1.70	$	599,025		8.78
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Expired		-		-		-		-
Outstanding and expected to vest at May 31, 2014		2,680,000	$	1.70	$	428,690		8.53
Exercisable at May 31, 2014		1,820,000	$	1.89	$	428,690		8.28

As of May 31, 2014, 896,500 options are exercisable at $0.68 per share with a weighted average life of 7.61 years, 823,500 options are exercisable at $3.25 with a weighted average life of 8.85 years, and 100,000 options are exercisable at $1.50 with a weighted average life of 9.55 years. Additionally, 220,000 options with an exercise price of $0.68 and a weighted average life of 7.61 years have yet to vest and 640,000 options with an exercise price of $1.50 and a weighted average life of 9.55 years have yet to vest.

As of May 31, 2014, we had $270,274 of unrecognized compensation related to employee stock options whose recognition is dependent on certain milestones to be achieved.  Additionally, there were 670,000 stock options with a performance vesting condition that were granted to consultants which will be measured and recognized when vesting becomes probable.