STOCK OPTIONS

9 Months Ended

Nov. 30, 2015

Stock Options

STOCK OPTIONS

On June 22, 2015, our stockholders approved amending our Amended and Restated 2012 Omnibus Securities and Incentive Plan (the “2012 Incentive Plan”) to increase the number of authorized shares of common stock reserved for issuance under the 2012 Incentive Plan to a number not to exceed fifteen percent (15%) of the issued and outstanding shares of common stock on an as converted primary basis (the “As Converted Primary Shares”) on a rolling basis. For calculation purposes, the As Converted Primary Shares shall include all shares of common stock and all shares of common stock issuable upon the conversion of outstanding preferred stock and other convertible securities, but shall not include any shares of common stock issuable upon the exercise of options, warrants and other convertible securities issued pursuant to the 2012 Incentive Plan. The number of authorized shares of common stock reserved for issuance under the 2012 Incentive Plan shall automatically be increased concurrently with the Company’s issuance of fully paid and non- assessable shares of As Converted Primary Shares. Shares shall be deemed to have been issued under the 2012 Incentive Plan solely to the extent actually issued and delivered pursuant to an award under the 2012 Incentive Plan. 

During the nine months ended November 30, 2015, the Company issued options to purchase 6,667 shares of common stock at $11.25 per share to a consultant. The options vest upon achieving certain performance-based milestones and expire on March 1, 2025. The Company will measure the fair value of these options with vesting contingent on achieving certain performance-based milestones and recognize the compensation expense when vesting becomes probable.  The fair value will be measured using a Black-Scholes model. During the nine months ended November 30, 2015, 3,334 of these options vested based on achieving certain milestones and the Company recognized $14,918 in stock-based compensation in connection with these options.

During the nine months ended November 30, 2015, the Company issued options to purchase 80,004 shares of common stock at $8.25 per share to non-executive members of its Board. The options vest in three equal installments on each of May 18, 2016, May 18, 2017, and May 18, 2018 and expire on May 18, 2025. These options had a total fair value of $388,000 as calculated using the Black-Scholes model.  During the three and nine months ended November 30, 2015, the Company recognized $58,428 and $126,514 of compensation expense related to these options.

On June 30, 2015, the Company issued options to purchase an aggregate of 5,001 shares of common stock at $8.25 per share to employees. The options vest over time through September 2017.

During the nine months ended November 30, 2015, the Company issued options to purchase 60,000 shares of common stock at $8.25 per share to our Chief Executive Officer. Certain of these options vest upon achieving certain performance-based or market-based milestones and expire on June 17, 2025. The fair value of these options on the grant date was $221,100. The Company will recognize the compensation expense when vesting becomes probable.  During the nine months ended November 30, 2015, 10,000 of these options vested immediately and the Company recognized $34,100 in stock-based compensation in connection with these options. During the three and nine months ended November 30, 2015, 10,000 of these options vested upon achieving a performance based milestone and the Company recognized $34,100 in stock-based compensation in connection with these options.  Additionally, the Company recognized $2,593 and $5,186 during the three and nine months ended November 30, 2015 in connection with 10,000 options with market-based vesting conditions.

During the nine months ended November 30, 2015, the Company issued options to purchase 26,667 shares of common stock at $8.25 per share to our former Chief Executive Officer and Chief Medical Officer. The options vested immediately. These options had a total fair value of $44,267 as calculated using the Black-Scholes model. For the nine months ended November 30, 2015, the Company recognized $44,267 of stock-based compensation for these options. The Company also modified the expiration date of certain vested option previously granted to our former Chief Executive Officer and Chief Medical Officer, which resulted in an additional compensation expense of $22,150 being recorded during the nine months ended November 30, 2015.  During the nine months ended November 30, 2015, the Company issued options to purchase 10,000 shares of common stock at $8.25 per share to a consultant. The options vest upon achieving certain performance-based milestones and expire on June 17, 2025. The Company will measure the fair value of these options with vesting contingent on achieving certain performance-based milestones and recognize the compensation expense when vesting becomes probable.  The fair value will be measured using a Black-Scholes model.

The weighted average inputs to the Black-Scholes model used to value the stock options granted during the nine months ended November 30, 2015 are as follows:

Expected volatility	113.47 - 123.55%
Expected dividend yield	0.00%
Risk-free interest rate	0.67% - 2.32%
Expected Term	6.30 years

During the nine months ended November 30, 2015, 534 options previously issued to a member of the Company’s Scientific and Clinical Advisory Board were mutually cancelled by the parties.  The member will continue to serve on the Company’s Scientific and Clinical Advisory Board without any equity compensation.

For the three and nine months ended November 30, 2014, the Company issued options to purchase 40,000 shares of common stock at $16.50 per share to members of its management team. The options vest upon certain milestones being achieved as follows: (i) 13,334 stock options shall fully vest two years following the date of issuance; (ii) of the remaining 26,667 stock options, one-third shall vest once the Company’s CLIA laboratory is operational, one-third shall vest upon the Company’s first commercial sale, and one-third shall vest upon the Company achieving $25 million in sales for the prior twelve month period.  These options had a total fair value of $368,002 as calculated using the Black-Scholes model. Assumptions used in the Black-Scholes model included: (1) a discount rate of 1.66%; (2) an expected term of 5.33 years; (3) an expected volatility of 116%; and (4) zero expected dividends.  The Company has recognized $8,393 in stock compensation expense in connection with the tranche with time-vesting condition of these options during the three and nine months ended November 30, 2014. During the three and nine months November 30, 2015, the Company recognized $16,030 and $48,087 in stock option expense in connection with the tranche with time-vesting conditions. Additionally, the Company also recognized $80,000 in stock option expense during the three months ended November 30, 2015 upon meeting the first milestone.

For the three and nine months ended November 31, 2014, a total of 14,667 non-employee performance-based stock options vested with a value of $232,000.  These options vested based on the completion of a trial and subsequent publication of results on June 3, 2014. The Company recognized $232,000 in stock option expense for the three and nine months ended November 30, 2014.

For the three and nine months ended November 30, 2014, an aggregate of 6,000 employee performance-based stock options vested with a value of $127,000. These options vested once certain milestones were completed by the employees, which included the completion of the research plan, lab setup, essential hires and investor presentation for the therapeutics program.  The Company recognized $127,000 in stock option expense for the three and nine months ended November 30, 2014.

For the three and nine months ended November 30, 2014, 6,667 stock options issued to certain members of our Board with an exercise price equal to $48.75 were cancelled in an effort to reduce the fully-diluted share count and increase number of available stock options. The Company determined that the transaction was not considered to be a modification of these stock-based awards. All stock-based compensation related to these options were recognized in the fiscal year ended February 28, 2014 and have not been reversed.

For the three and nine months ended November 30, 2015, the Company recognized $204,494 and $456,662, respectively, of compensation expense related to stock options, of which $141,541 and $369,478, respectively, was recognized in general and administrative expenses and $62,953 and $87,184, respectively, in research and development expenses.

For the three and nine months ended November 30, 2014, the Company recognized $8,394 and $367,394 of compensation expense related to stock options, of which $8,394 and $239,394 were recognized in general and administrative expenses and $0 and $128,000 in research and development expenses.

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, 2015		187,342	$	23.70	$	20,670		8.29
Granted		188,335		8.36		-		-
Exercised		-		-		-		-
Forfeited		534		8.10		-		-
Expired		3,667		10.20		-		-
Outstanding and expected to vest at November 30, 2015		371,476	$	16.08	$	-		7.94
Exercisable at November 30, 2015		173,700	$	21.00	$	-		6.52

The following table breaks down exercisable and unexercisable common stock options by exercise price as of November 30, 2015:

Exercisable						Unexercisable
Number of Options		Exercise Price		Weighted Average Remaining Life (years)		Number of Options		Exercise Price		Weighted Average Remaining Life (years)
	1,068	$	8.10		9.17		-	$	8.10		-
	48,335	$	8.25		4.86		133,333	$	8.25		9.50
	52,434	$	10.20		6.11		-	$	10.20		-
	3,334	$	11.25		9.47		3,333	$	11.25		9.47
	8,890	$	16.50		8.88		31,110	$	16.50		8.88
	14,735	$	22.50		8.66		30,000	$	22.50		8.05
	44,904	$	48.75		7.35		-	$	48.75		-
	173,700	$	21.00		6.52		197,776	$	11.76		9.19

As of November 30, 2015, we had approximately $357,000 of unrecognized compensation related to employee and consultant stock options that are expected to vest over a weighted average period of 1.6 years and, approximately $272,200 of unrecognized compensation related to employee stock options whose recognition is dependent on certain milestones to be achieved.  Additionally, there were 43,333 stock options with a performance vesting condition that were granted to consultants which will be measured and recognized when vesting becomes probable.