Stock Options and Warrants

9 Months Ended

Nov. 30, 2012

Notes to Financial Statements

Stock Options and Warrants

NOTE 3: STOCK OPTIONS AND WARRANTS

Stock Options - Under the 2003 Stock Incentive Plan, option prices must be at least 100% of the fair market value of the common stock at time of grant.  For qualified employees, except under certain circumstances specified in the plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after date of grant, with the balance becoming exercisable in cumulative installments over a three year period during the term of the option, and terminating at a stipulated period of time after an employee's termination of employment.

On November 8, 2012, the Company’s Board of Directors granted 810,718 options to officers at an exercise price of $0.61.  These options vest as follows: 33.33% on the date of grant, 33.33% one year from the date of grant and 33.33% two years from the date of grant.  The options expire ten years from the date of grant.

In exchange for the newly issued options, the officers surrendered their outstanding options and these were cancelled.  The surrendered options were set to expire at various dates from 2014 to 2021 and had an average strike price of $.96.