8.	Stock Compensation

We have stock-based compensation plans under which outside directors, consultants, and employees are eligible to receive stock options and other equity-based awards. The stock option plans and a director stock option plan provide that officers, key employees, directors and consultants

may

be granted options to purchase up to

2,675,000

shares of our common stock at not less than

100

percent of the fair market value at the date of grant, unless the grantee is a

percent shareholder, in which case the price must not be less than

110

percent of the fair market value.

The Company’s former employee stock option plan (the “Prior Employee Plan”) expired during

May

2005.

As a result, no new options could be granted under the plan thereafter. This plan provided for the issuance of up to

825,000

shares of common stock. As of

January

31,

2013,

the Prior Employee Plan had

25,000

stock options outstanding. During

December

2005,

the Board of Directors approved and adopted the Company’s

2005

Equity Incentive Plan (the

“2005

Plan”) covering

450,000

shares of common stock. The

2005

Plan was approved by the Company’s shareholders at its annual shareholders’ meeting in

June

2006,

and subsequently amended at its annual shareholders’ meeting in

June

2008

to increase the number of shares issuable under the plan from

450,000

1,100,000

shares. In

July

2011,

the Company’s shareholders approved the

2011

Equity Incentive Plan (the

“2011”

Plan) covering

750,000

shares of common stock, as well as the shares that remained available for issuance under the

2005

Plan plus shares that were the subject of outstanding awards under the

2005

Plan, which again become available for grant under that plan. Thus, the

2011

Plan combines the

2011

Plan and the

2005

Plan. Under the

2011

Plan, we

may

grant stock options, stock appreciation rights, restricted stock, restricted stock units, and performance based awards to employees, consultants and directors. In addition, under the

2011

Plan, awards vest or become exercisable in installments determined by the compensation committee of our Board of Directors. The options granted under Prior Employee Plan expire as determined by the committee, but no later than

ten

years and

one

week after the date of grant

(five

years for

percent shareholders). The options granted under the

2011

and

2005

Plan expire as determined by the committee, but no later than

ten

years after the date of grant

(five

years for

percent shareholders).

August

17,

2016,

the Board adopted a resolution, subject to shareholder approval, to amend the Company’s

2011

Equity Incentive Plan (the

“2011

Plan”) to increase the number of shares of common stock issuable thereunder by an additional

500,000

shares. The Board proposes that the shareholders approve the amendment to the

2011

Plan to have sufficient available shares for grant of equity incentives to the Company’s employees, directors, and consultants.

During fiscal

2017,

396,189

stock options and

restricted stock units were granted. During fiscal

2016,

350,000

stock options were granted and

restricted stock units were granted. The fair value of the options granted under our stock option plans during the years ended

January

31,

2017

and

2016,

respectively, were estimated on the date of grant using the following weighted average assumptions:

	Years Ended January 31,
	2017			2016
Weighted average risk-free interest rate		2	%		2	%
Expected life (in years)		10			10
Expected stock volatility		152	%		152	%
Dividend yield		-			-
Expected forfeitures		-			-

Estimated expected forfeitures is

zero

as remaining stock options were granted to our CEO and Board of Directors and we do not expect future forfeitures.

The fair value of stock options is determined using the Black-Scholes-Merton valuation model for options with ratable term vesting. The Black-Scholes-Merton valuation model require the input of subjective assumptions including estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the common stock price over the expected term, and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related amount recognized as an expense on the consolidated statements of operations. We review our valuation assumptions at each grant date and, as a result, are likely to change our valuation assumptions used to value stock-based awards granted in future periods. The values derived from using either the Lattice Binomial model or Black-Scholes-Merton model are recognized as expense over the vesting period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. Actual results, and future changes in estimates,

may

materially differ from our current estimates.

The stock-based compensation expense recognized is summarized in the table below (in thousands except per share amounts):

	Years Ended
	January 31,
	2017		2016
Stock-based compensation expense	$	40	$	41
Impact on basic and diluted earnings per share	$	0.00	$	(0.00	)

The total compensation cost related to non-vested awards not yet recognized is approximately

$20,000,

which is expected to be expensed over a weighted average remaining life of

nine

months.

January

31,

2017

and

2016,

the stock awards outstanding had

intrinsic value based upon closing market price of

$0.07

and

$0.11

per share, respectively.

The following table summarizes information about stock awards outstanding at

January

31,

2017:

			Awards Outstanding						Options Exercisable
Range of Exercise/Grant Prices			Number Outstanding		Weighted-Ave. Remaining Contractual Life		Weighted-Ave. Exercise/Grant Price		Number Exercisable		Weighted-Ave. Exercise Price
$0.09				300,000		9.74	$	0.09		0	$	0.09
$0.14	-	$0.16		300,000		8.38	$	0.15		300,000	$	0.15
$0.40				385,000		5.50	$	0.40		385,000	$	0.40
$1.09				100,000		1.78	$	1.09		60,000	$	1.09
$4.53				15,000		1.08	$	4.53		15,000	$	4.53
				1,100,000						760,000

Transactions and other information related to stock options granted under these plans for the years ended

January

31,

2017

and

2016

are summarized below:

	Outstanding Options
				Weighted-Ave.
	Number of			Exercise
	Shares			Price
Balance, January 31, 2015		600,000		$	0.96
Options granted		350,000			0.15
Options canceled or expired		-			-
Options exercise		-			-
Balance, January 31, 2016		950,000		$	0.66
Options granted		396,189			0.10
Options canceled or expired		(246,189	)		1.06
Options exercise		-			-
Balance, January 31, 2017		1,100,000		$	0.37
Stock Options Exercisable at January 31, 2017		760,000		$	0.44

There were

760,000

stock options exercisable at

January

31,

2017

at a weighted-average exercise price of

$0.44.

Shares available under the plans for future grants at

January

31,

2017

were

323,535.