| STOCK BASED COMPENSATION | NOTE
4 – STOCK BASED COMPENSATION Stock
Options In
May 8, 2006, the Company approved the 2006 Equity Incentive Plan ("2006 Plan") for the benefit of our directors, officers,
employees and consultants, and which reserved 400,000 shares of our common stock for such persons pursuant to the 2006 Plan. The
2006 Plan has a term of 10 years and no option shall be exercisable more than 10 years after the date of grant, or such lesser
period of time as is set forth in the award agreement. If for any reason other than death or disability, an Optionee of the 2006
Plan who at time of the grant of an Option under the 2006 Plan was an employee ceases to be an employee (such event being called
a "Termination"), options held at the date of Termination (to the extent then exercisable) may be exercised in whole
or in part at any time within three months of the date of such Termination; provided, however, that if such exercise of the option
would result in liability for the optionee under Section 16(b) of the Securities Exchange Act of 1934, then such three-month period
automatically shall be extended until the tenth day following the last date upon which optionee has any liability under Section
16(b) (but in no event after the expiration date of such Option). There are 40,000 options outstanding under this plan at April
30, 2016. On
July 14, 2014, the Company's board of directors approved the 2014 Employee Stock Plan ("2014 Plan") and authorized 10,000,000
shares of its common stock that shall be set aside and reserved for issuance pursuant to the 2014 Plan, subject to adjustments
as may be required in accordance with the terms of the 2014 Plan. The 2014 Plan was subsequently approved by the Company's stockholders
on November 11, 2014. The 2014 Plan has a term of 10 years and no option shall be exercisable more than 10 years after the date
of grant, or such lesser period of time as is set forth in the award agreement. If for any reason other than death or disability,
an optionee of the 2014 Plan who at time of the grant of an option under the 2014 Plan was an employee ceases to be an employee
(such event being called a "Termination"), options held at the date of Termination (to the extent then exercisable)
may be exercised in whole or in part at any time within three months of the date of such Termination; provided, however, that
if such exercise of the option would result in liability for the optionee under Section 16(b) of the Securities Exchange Act of
1934, then such three-month period automatically shall be extended until the tenth day following the last date upon which optionee
has any liability under Section 16(b) (but in no event after the expiration date of such option). Stock
Options to Consultants Effective
July 14, 2014, the Company granted 4,150,000 stock options to purchase common stock to consultants pursuant to the 2014 Plan and
shall vest pursuant to the vesting provision contained in each of the stock option agreements. The exercise price of the stock
options is $0.05 per share. Of
the 4,150,000 stock options, 1,100,000 vested immediately on the grant date of July 14, 2014 and the remaining 3,050,000 vest
over a period of three to four years based upon the specific consulting agreements. The Company valued the stock options in accordance
with ASC 505, Stock Compensation – Non Employees, by using the Black Scholes Pricing Model. The
1,100,000 stock options that vested immediately on the grant date of July 14, 2014 were valued at $55,000 and expensed to consulting
expense. In January 2015, 300,000 of the vested stock options were exercised leaving a balance of 800,000 unexercised vested stock
options at July 31, 2015. The
remaining 3,050,000 unvested stock options are being re-measured by the Company each reporting period and the resulting fair value
is used to determine the new remaining consulting expense to be recorded over the vesting period of three to four years. Effective
in December 2014, 1,050,000 of the unvested stock options were canceled due to the termination of the underlying consulting agreements.
As a result, the consulting expense for the remaining 2,000,000 unvested stock options was $273,514 for the year ended April 30,
2016 and $157,952 for the period from July 14, 2014 to April 30, 2015. The
Company used the following assumptions in estimating fair value:
Stock
Price (re-measurement date of April 30, 2016) $ 0.52
Exercise
Price $ 0.05
Expected
Remaining Term 8.46
years
Volatility 240 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.008 % Stock
Options to Employees On
February 24, 2015, pursuant to the terms of the 2014 Employee Stock Plan the Company issued to its employees, options to purchase
up to 2,900,000 shares of common stock at an exercise price of $0.30 per share. The options vest over a period of 4 years, with
580,000 options vesting immediately. All of these options expire on February 23, 2025. In
addition, on February 24, 2015, the Company granted Jerome Vainisi, the CompanyÂ’s acting Chief Executive Officer, an option
to purchase up to 3,000,000 shares of common stock at an exercise price of $0.30 per share. These vest over a two-year period,
with 250,000 options vesting immediately and the remaining 2,750,000 options vesting in eight equal quarterly installments of
343,750 options. Effective December 11, 2015, Mr. Vainisi notified the Company that he would not finalize his employment agreement
and is no longer the CompanyÂ’s Chief Executive Officer. As a result, he retained all vested options and the unvested
options would be forfeited. At January 31, 2016, 1,281,250 (250,000 that vested immediately and 1,031,250 that vested as per above)
of the options were vested and the remaining 1,718,750 were forfeited. In accordance with the CompanyÂ’s 2014 Employee
Stock Plan, Mr. Vainisi has 90 days from the separation date of December 11, 2015, or March 10, 2016 to exercise the vested options
or they expire. Mr. Vainisi did not exercise his 1,281,250 vested option on March 10, 2016 and they expired. As
a result, a total of 5,900,000 stock options were granted on February 24, 2015. Of the 5,900,000 stock options, 830,000 vested
immediately on the grant date of February 24, 2015 and the remaining 5,070,000 would vest over a period of two to four years based
upon the specific agreement. As discussed above, 1,718,750 of Mr. VainisiÂ’s unvested options were forfeited on December
11, 2015 and 1,281,250 of Mr. VainisiÂ’s vested options expired on March 10, 2016. As a result, 2,070,000 unvested
options are outstanding at April 30, 2016. The
Company valued the 2,070,000 unvested stock options in accordance with ASC 718, Stock Compensation, using the Black Scholes Pricing
Model to estimate fair value. The Company used the 'simplified method' for estimating the ‘remaining expected contractual
term' because it does not have sufficient information to make more accurate estimates of the remaining expected term or employee
exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies). The 830,000 stock options that vested immediately (including 250,000
for Mr. Vainisi) on the grant date were valued at $390,100 and recorded to stock based compensation expense. Effective September
30, 2015, 10,000 of the vested stock options were exercised at $0.30 per share resulting in $3,000 of proceeds to the Company –
See Note 5 – Common Stock. The remaining 2,070,000 unvested stock options
(excluding Mr. Vainisi) had a fair value of $1,090,400 on the grant date and are being amortized ratably over the vesting periods.
Mr. VainisiÂ’s remaining 1,090,250 vested options that expired were included in stock based compensation expense through
the expiration date of March 10, 2016. For the year ended April 30, 2016, the Company recorded $643,504 in stock based compensation
expense. The
Company used the following assumptions in estimating fair value:
Stock
Price (grant date) $ 0.47
Exercise
Price $ 0.30
Expected
Remaining Term 5
years
Volatility 246 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.11 % The following table summarizes employee and consultant stock
option activity of the Company for the year ended April 30, 2016:
Employee and Consultant Stock Options Outstanding
Weighted
Weighted Average
Average Remaining Aggregate
Number of Exercise Contractual Intrinsic
Options Price Life (Years) Value
Outstanding, April 30, 2015 8,740,000 $ 0.22 9.60 $ 616,000
Exercised September 30, 2015 (10,000 ) $ 0.30 — —
Forfeited December 11, 2015 (1,718,750 ) $ 0.30 — —
Expired March 10, 2016 (1,281,250 ) $ 0.30 — —
Outstanding, April 30, 2016 5,730,000 $ 0.18 8.48 $ 1,951,800
Exercisable, April 30, 2016 2,425,000 $ 0.18 8.48 $ 830,950 Stock
Warrants Effective
July 14, 2014, the Company granted 2,000,000 warrants to purchase common stock, exercisable at $0.01 per share, to a consultant
for services to be provided over a one-year period. The warrant vested immediately and have an exercise period of one year. The
Company valued the stock warrant in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes
Pricing Model to determine the fair value. The fair value for these stock warrants was $81,624, which was being amortized to consulting
expense over the term of the agreement. The
Company used the following assumptions in estimating fair value:
Stock
Price (grant date) $ 0.05
Exercise
Price $ 0.01
Expected
Remaining Term 0.5
years
Volatility 161 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.11 % On
January 1, 2015 the Company executed a rescission agreement with the Consultant terminating the consulting agreement and canceling
the warrant issuance, effective retroactively to July 14, 2014. Therefore, the Company reversed $24,376 of consulting expense
related to this agreement. Effective
August 28, 2015, the Company granted 1,400,000 warrants to purchase common stock, exercisable at $0.35 per share, to a consultant
for services to be provided over a one-year period. Additionally, the Company issued 400,000 shares of stock to the Consultant
as compensation for the services. Of the 1,400,000 stock warrants, 700,000 vested immediately on the grant date of August 28,
2015 and the remaining 700,000 vest six (6) months from the grant date on February 28, 2016. The warrant has an exercise period
of thirty (30) months through August 28, 2018. The Company valued the stock warrant in accordance with ASC 505-50, Equity Based
Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. According
to ASC 505-50, a measurement date was reached at the date of grant, or August 28, 2015 for the 700,000 warrants which vested on
the grant date. For the 700,000 warrants that vest in six (6) months, the fair value was re-valued at each reporting date
until the vesting date of February 28, 2016. The
700,000 stock warrants that vested immediately on the grant date were valued at $289,867, recorded to prepaid expense and will
be amortized ratably to consulting expense over the twelve (12) month service period. The Company recorded $195,362 of consulting
expense for the 700,000 vested stock warrants for the year ended April 30, 2016. As a result, the prepaid balance is $94,505 at
April 30, 2016. The
Company used the following assumptions in estimating fair value:
Stock
Price (grant date) $ 0.42
Exercise
Price $ 0.35
Expected
Remaining Term 2.33
years
Volatility 317 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.30 % The
remaining 700,000 unvested stock warrants had a fair value of $289,867 on the grant date and will also be amortized ratably to
consulting expense over the twelve (12) month service period, however these warrants were re-valued through the vesting date of
February 28, 2016, and the adjusted valuation, less the amounts amortized through the vesting date, have been amortized over the
remaining service period of six (6) months. As a result of the final re-measurement at February 28, 2016, the valuation was adjusted
to $680,821 and the Company has recorded $458,855 of consulting expense for these stock options for the year ended April 30, 2016.
As a result, the prepaid expense balance is $221,966 at April 30, 2016. The
Company used the following assumptions in estimating fair value:
Stock
Price (re-measurement date of February 28, 2016) $ 1.00
Exercise
Price $ 0.35
Expected
Remaining Term 1.83
years
Volatility 293 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.32 % In
relation to the 400,000 shares issued on the grant date, the Company valued the stock based upon the quoted market price of
$0.42 on the date of grant, or $168,000. The $168,000 is being amortized to consulting expense over the one-month term of the
consulting agreement. During the year ended April 30, 2016, the Company recorded $113,227 of consulting expense and the
remaining unamortized amount of $54,773 is recorded as prepaid consulting – current in the accompanying financial
statements at April 30, 2016. See Note 5 – Common Stock. Effective September 30, 2015, 100,000 stock warrants were
exercised at $0.01 per share resulting in $1,000 of proceeds to the Company – See Note 5 – Common Stock. In November 2015, the Company commenced a $500,000 private
placement offering 50 units at $10,000 per unit. Each unit represents 33,333 shares of common stock at $0.30 per share and a one-year
warrant to purchase 16,667 shares of common stock at an exercise price of $0.50 per share. From November 2, 2015 through February
16, 2016, the Company received $499,450 of proceeds from the offering representing 1,664,840 shares of stock and 832,426 warrants. The $499,450 of proceeds from the issuance of the units was
allocated between the shares of common stock and the warrants based on their relative fair values on the date of issuance. The
fair value for the warrants was determined utilizing the Black Scholes Pricing Model based upon the various issuance dates of the
warrants during the period. As a result, the Company allocated $343,910 to the shares of stock and $155,540 to the warrants.
The value allocated to the warrants was classified as additional paid in capital in the accompanying financial statements.
The November 2015 offering was terminated at the end of February 2016. In March 2016, the Company commenced a $500,000 private placement
offering 50 units at $10,000 per unit. Each unit represents 33,333 shares of common stock at $0.30 per share and a one-year warrant
to purchase 16,667 shares of common stock at an exercise price of $0.50 per share. From March 3, 2016 through March 22, 2016, the
Company received $55,000 of proceeds from the offering representing 183,333 shares of stock and 91,667 warrants. The $55,000 of proceeds from the issuance of the units was
allocated between the shares of common stock and the warrants based on their relative fair values on the date of issuance. The
fair value for the warrants was determined utilizing the Black Scholes Pricing Model based upon the various issuance dates of the
warrants during the period. As a result, the Company allocated $40,317 to the shares of stock and $17,885 to the warrants.
The value allocated to the warrants was classified as additional paid in capital in the accompanying financial statements. As discussed above in Note 2 – Debt, in relation to
a convertible secured promissory note, the Company issued the lender two warrants, a Series A warrant with a three (3) year term
to acquire 250,000 shares of common stock of the Company at an exercise price of $1.02 per share and a Series B warrant with a
three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.19 per share. Effective April 27, 2016, the Company granted 300,000 warrants
to purchase common stock, exercisable at $0.01 per share, to a consultant for prior services provided. The warrant vested immediately
and has an exercise period of three years. The Company valued the stock warrant in accordance with ASC 505-50, Equity Based Payments
to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. The fair value for this stock warrant was
$149,508, which was recorded to consulting expense immediately. The Company used the following assumptions in estimating
fair value:
Stock
Price (grant date) $ 0.50
Exercise
Price $ 0.01
Expected
Remaining Term 3
years
Volatility 248 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.24 % Effective March 8, 2016, an investor that received warrants from
the conversion of debt (See Note 2 – Debt and Note 5 – Common Stock) elected to exercise 4,007 warrants at an exercise
price of $0.30 a share and the Company received $1,202 of cash proceeds. Effective March 22, 2016, an investor that received
warrants from the conversion of debt (See Note 2 – Debt and Note 5– Common Stock) elected to exercise 6,667 warrants
at an exercise price of $0.30 a share and the Company received $2,000 of cash proceeds. Effective
April 27, 2016, the Company granted 1,000,000 warrants to purchase common stock, exercisable at $0.01 per share, to a consultant
for prior services provided. The warrant vested immediately and has an exercise period of three years. The Company valued the
stock warrant in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to
determine the fair value. The fair value for this stock warrant was $498,359, which was recorded to consulting expense immediately. The
Company used the following assumptions in estimating fair value:
Stock
Price (grant date) $ 0.50
Exercise
Price $ 0.01
Expected
Remaining Term 3
years
Volatility 248 %
Annual
Rate of Quarterly Dividends 0.00 %
Risk
Free Interest Rate 0.24 % The
following table summarizes stock warrant activity of the Company for the year ended April 30, 2016:
Consultant
Stock Warrants Outstanding
Weighted
Weighted Average
Average Remaining Aggregate
Number
of Exercise Contractual Intrinsic
Warrants Price Life
(Years) Value
Outstanding, April
30, 2015 850,000 $ 0.01 4.82 $ 690,000
Issued August 28,
2015 1,400,000 $ 0.35 1.83 238,000
Exercised September
16, 2015 (100,000 ) $ 0.01 — —
Issued October 31,
2015 from conversion of debt 2,330,327 $ 0.30 0.50 510,324
Issued November 2,
2016 through February 16, 2016 832,426 $ 0.50 0.67 16,245
Issued March 3, 2016
through March 22, 2016 91,667 $ 0.50 0.84 1,833
Issued March 9, 2016 500,000 $ 0.46 2.85 30,000
Exercised March 8,
2016 (4,007 ) $ 0.30 — —
Exercised Mach 22,
2016 (6,667 ) $ 0.30 — —
Issued April 27, 2016 1,300,000 $ 0.01 2.99 663,000
Outstanding, April
30, 2016 7,193,746 $ 0.26 1.74 $ 1,842,306
Exercisable, April
30, 2016 7,193,746 $ 0.26 1.74 $ 1,842,306 |
