Common Stock Options and Warrants

3 Months Ended

Apr. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 4 - Common Stock Options and Warrants    

The Company's 2012 Stock Option Plan adopted by the Board of Directors on September 17, 2012 states that the exercise price of each option will be granted at an amount that equals the fair market value at the date of grant. All options vest at a time determined at the discretion of the Company's Board of Directors. All options expire if not exercised within 10 years from the date of grant, unless stated otherwise by the Board of Directors upon issuance.

The Company records stock-based compensation expense ratably over the vesting period for the fair value of options granted under the Company's 2012 Stock Option Plan. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.

On March 25, 2013 the Company issued stock options to purchase 4,000,000 shares of common stock to an individual providing contract CFO services to the Company, half of which vested upon issuance and twenty five percent will vest in each of the subsequent two years of service to the Company.  The options were priced at $0.02 per share and will expire five years from the date of issuance.  The fair value of the option grant was estimated on the date of grant utilizing the Black-Scholes option pricing model.  The fair value of these options was determined to be $79,498 Based on the following assumptions: expected life of the options of 5 years, expected volatility of 243.9%, risk-free interest rate of 0.80% and no dividend yield.  These options will be expensed over their vesting schedule.

On March 25, 2013 the Company issued stock options to purchase 500,000 shares of common stock to an individual providing contract accounting services to the Company, half of which vested upon issuance and the other half will vest after one year of service to the Company.  The options were priced at $0.02 per share and will expire five years from the date of issuance.  The fair value of the options granted is estimated using the market price at the end of each quarter. The fair value of these options as of the date of grant was determined to be $9,937. On the date of grant, utilizing the Black-Scholes model, the following assumptions were used: expected life of the options of 5 years, expected volatility of 243.9%, risk-free interest rate of 0.80% and no dividend yield.  These options will be expensed over their vesting schedule.

Options	Number of Shares	Weighted Average Exercise Price
Outstanding at January 31, 2014	14,750,000	$0.12
Issued	-	-
Exercised	-	-
Expired/Cancelled	-	-
Outstanding at April 30, 2014	14,750,000	$0.12
Exercisable at April 30, 2014	13,750,000	$0.13

The following table summarizes information about stock options at April 30, 2014:

Range of Prices	Weighted Average Number Outstanding	Contractual Life	Weighted Average Exercise Price	Weighted Average Number Exercisable	Weighted Average Exercise Price
$0.02	4,500,000	3.91 yrs	$0.02	2,250,000	$0.02
$0.05	2,000,000	2.06 yrs	$0.05	2,000,000	$0.05
$0.06	5,650,000	1.68 yrs	$0.06	3,150,000	$0.06
$0.08	500,000	0.73 yrs	$0.08	500,000	$0.08
$0.30	100,000	0.73 yrs	$0.30	100,000	$0.30
$0.60	2,000,000	1.60 yrs	$0.60	2,000,000	$0.60

Warrants	Number of Shares	Weighted Average Exercise Price
Outstanding at January 31, 2014	18,064,000	$0.08
Issued	-	-
Exercised	-	-
Expired/Cancelled	-	-
Outstanding at April 30, 2014	18,064,000	$0.08
Exercisable at April 30, 2014	18,064,000	$0.08

On April 30, 2014, the Company had the following outstanding warrants:

Exercise Price	Number of Shares	Remaining Contractual Life	Exercise Price Times Number of Shares	Weighted Average Exercise  Price
$0.02	12,814,000	2.82 yrs	$256,280	$0.02
$0.05	1,000,000	1.14 yrs	$50,000	$0.05
$0.25	4,250,000	2.09 yrs	$1,000,000	$0.25
	18,064,000

Fair Value Considerations:

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

Level 1 valuations:	Quoted prices in active markets for identical assets and liabilities.
Level 2 valuations:	Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.
Level 3 valuations:	Significant inputs to valuation model are unobservable.

We classify assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. We measure all our stock options issued to contractors that are required to be measured at fair value on a recurring basis using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  On March 25, 2013, options to purchase 4,500,000 shares of common stock were issued to contractors, which require fair value measurement for the unvested options on a quarterly basis.

The options were revalued again using the Black-Scholes option pricing model for the quarter ended April 30, 2014 based on the following assumptions: expected life of the options of 4.00 years, expected volatility of 209.6%, risk-free interest rate of 1.69% and a stock price of $0.019 per share.  Based on these assumptions, the Company calculated that the value for the unvested options had increased by $7,613 during the quarter which was recorded as a stock option expense in the quarter ended April 30, 2014.