Stock Options and Warrants

12 Months Ended

Oct. 31, 2013

Stock Options And Warrants

Stock Options and Warrants

9. Stock Options and Warrants

Common Stock Options

On February 14, 2012 the Board of Directors authorized the formation of the 2012 Employee Benefit Plan which is authorized to grant up to 120,000 shares of common stock or options to purchase common stock to eligible employees, directors, officers, consultants or advisors. Eligibility is determined by the Board of Directors. During the fiscal year ended October 31, 2013, the Company issued 16,000 shares of common stock under the Benefit Plan to legal counsel for services rendered in the aggregate sum of $20,000. Under the 2012 Plan, there are still 44,500 options or shares available to be issued. See Note 8 – “Common Stock.”

The following table summarizes information about options granted under the Company’s equity compensation plans and otherwise to employees, directors and consultants of the Company. Generally, options vest on an annual pro rata basis over various periods of time and are exercisable, upon proper notice, in whole or in part at any time upon vesting. Typically, unvested options terminate when an employee leaves the Company. The options granted have contractual lives ranging from three to ten years.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at October 31, 2011		6,000		$	45.00		2.1	$	—
Granted		—			—
Exercised		—			—
Expired		(400	)		80.00
Canceled		—			—
Outstanding at October 31, 2012		5,600			40.00		1.2	$	—
Granted		—			—
Exercised		—			—
Expired		(1,200	)		145.83
Canceled		—			—
Outstanding at October 31, 2013		4,400		$	13.35		0.4	$	—

The values of the consideration received were based on the values of the options granted. The values of the options were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions for grants made in 2013 and 2012.

	2013	2012
Risk-free interest rate	—	—	%
Expected dividend yield	—	—
Expected stock price volatility	—	—
Expected life in years	—	—

Summary information about the Company’s options outstanding at October 31, 2013 is set forth in the table below. Options outstanding at October 31, 2013 expire between February 2014 and January 2016.

Range of Exercise Prices		Options Outstanding October 31, 2013		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Options Exercisable October 31, 2013		Weighted Average Exercise Price
$	7.69		4,000		0.3	$	7.69		4,000	$	7.69
$	70.00		400		2.2	$	70.00		400	$	70.00
TOTAL:			4,400						4,400

There were no unvested stock options as of October 31, 2013. See also Note 14 – “Subsequent Events.”

Common Stock Warrants

The Company accounts for stock-based compensation awards to non-employees based upon fair values at the grant dates. The consideration received for the issuance of stock purchase warrants (“warrants”) is based on the fair value of the warrants or of the goods or services received for the warrants issued, whichever is more reliably measurable.

When the value of the services is based on the fair value of the warrants, the value is calculated using the Black-Scholes Option Pricing Model. The fair value of the options or warrants is expensed as the services are provided.

As of October 31, 2013, of 146,667 warrants outstanding at the end of fiscal year 2012, 66,667 warrants were surrendered and cancelled and 40,000 warrants were exercised. During the fiscal year ended October 31, 2013, the Company granted warrants as follows:

On June 4, 2013, as partial consideration for his purchase of 50,000 shares of common stock for $25,000, a major stockholder received three-year warrants to purchase an additional 50,000 shares of common stock at $0.50 per share and another 100,000 shares of common stock at $1.00 per share.

On August 7, 2013, the above major stockholder received a six-month warrant to purchase 10,000 shares of common stock at $1.00 per share as consideration for a $10,000 purchase of stock at $0.50 per share.

On October 17, 2013, the Company issued six-month warrants to purchase an additional 10,000 shares of common stock to the same stockholder for $1.00 per share for a similar $10,000 purchase of common stock.

On August 13, 2013, a major stockholder received six-month warrants to purchase 30,000 shares of common stock at $1.00 per share as partial consideration for a $30,000 purchase of common stock at $0.50 per share.

The following table summarizes the information relating to warrants granted to non-employees as of October 31, 2013 and 2012 and changes during the years then ended. Warrants outstanding at October 31, 2013 expire between February 2014 and June 2016.

See also Note 13 – “Subsequent Events.”

	Number of Warrants			Weighted Average Exercise Price
Outstanding at October 31, 2011		10,000		$	5.00
Granted		413,334			1.00
Exercised		—			—
Cancelled		(266,667	)		1.50
Expired		(10,000	)		5.00
Outstanding at October 31, 2012		146,667			1.00
Granted		200,000			0.88
Exercised		(40,000	)		1.00
Cancelled		(66,667	)		1.50
Expired		—			—
Outstanding at October 31, 2013		240,000		$	0.90

The values of the consideration received were based on the values of the warrants granted. The values of the warrants were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions for grants made in 2013 and 2012:

	2013			2012
Risk-free interest rate		0.71	%		0.72	%
Expected dividend yield		—			—
Expected stock price volatility		1.42			1.89
Expected life in years		2.0 years			1.7 years

Summary information about the Company’s warrants outstanding at October 31, 2013 is as follows:

Range of Exercise Prices	Warrants October 31, 2013		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Warrants Exercisable October 31, 2013		Weighted Average Exercise Price
$0.50		50,000		2.6	$	0.50		50,000	$	0.50
$1.00		190,000		1.8	$	1.00		190,000	$	1.00
TOTAL:		240,000						240,000