Stock-Based Compensation

12 Months Ended

May 31, 2014

Stock-Based Compensation

Stock-Based Compensation

Note L-Stock-Based Compensation

On October 12, 2005, the board of directors adopted its 2005 Stock Incentive Plan (the "Plan") to allow the Company to make awards of stock options as part of the Company's compensation to key employees, non-employee directors, contractors and consultants. The Plan was approved by the stockholders on December 8, 2005. The aggregate number of shares of Common Stock issuable under all awards under the Plan is 35,000,000. No awards may be granted under the Plan after December 8, 2015. On July 9, 2012, the Company issued 22,600,000 shares to employees and a board member as additional compensation, reducing the number of shares of Common Stock issuable under all awards under the plan to 12,400,000.

On December 28, 2006, the compensation committee of the board of directors awarded 2,100,000 of incentive stock options to acquire common shares at an exercise price of $.04 per share, of which 450,000 shares vested immediately and the remaining 1,650,000 options vesting over the next three years ending in December 2009. As of May 31, 2010, the awarded options had been reduced to 1,800,000 due to changes in employment status, all of which expired in December 2011.

On June 30, 2009 the compensation committee of the board of directors awarded 10,000,000 of incentive stock options to acquire common shares at an exercise price of $.04 per share, of which 4,700,000 shares vested immediately and the remaining 5,300,000 options vesting over the next three years ending in June 2011. The term of the options is five years and expires in June 2014. No options were exercised subsequent to May 31, 2014. As of May 31, 2014, the awarded options had been reduced to 9,800,000 due to changes in employment status.

The following table summarizes option activity under the Plan for the fiscal year ended May 31, 2014.

	Weighted-Avg. Exercise Price		Number Of Shares Under Option		Weighted-Avg. Remaining Life (Years)		Aggregate Intrinsic Value
Balance at June 1, 2013	$	.04000		9,800,000
Options granted		—		—
Options exercised		—		—
Options canceled/expired		—		—
Balance, May 31, 2014	$	.04000		9,800,000
Exercisable at May 31, 2014	$	.04000		9,800,000		.08	$	—
Expected to vest	$	—		—		—	$	—

There were no options exercised in fiscal 2014 or 2013. All shares were vested as of May 31, 2012.

There is no unrecognized compensation expense related to non-vested awards at May 31, 2014 or May 31, 2013 as all awards are fully vested and the related compensation recognized previously.

The Company estimates the fair value of stock options using a Black-Scholes valuation model. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of the Company's stock, the risk-free interest rate and the company's dividend yield.