Quarterly report pursuant to Section 13 or 15(d)

5. SHAREHOLDERS' EQUITY

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5. SHAREHOLDERS' EQUITY
 9 Months Ended
May. 31, 2015
Shareholders Equity  
SHAREHOLDERS' EQUITY

The Company maintains the 2014 Incentive Plan (the “2014 Incentive Plan”), which was approved by shareholders in January 2014 and became effective April 12, 2014. Executives, eligible employees, consultants and non-employee directors are eligible to receive options and stock grants pursuant to the 2014 Incentive Plan. Pursuant to the 2014 Incentive Plan, options to purchase shares of stock and restricted stock awards can be granted with exercise prices, vesting conditions and other performance criteria determined by the Compensation Committee of the board of directors (the “Board”). The Company has reserved 1.6 million shares of common stock for issuance under the 2014 Incentive Plan. The Company began awarding options under the 2014 Incentive Plan during January 2015. Prior to the effective date of the 2014 Incentive Plan, the Company granted stock awards to eligible participants under its 2004 Incentive Plan (the “2004 Equity Plan”), which expired April 11, 2014. No additional awards may be granted pursuant to the 2004 Equity Plan; however, awards outstanding as of April 11, 2014, will continue to vest and expire and may be exercised in accordance with the terms of the 2004 Equity Plan.

 

The following table summarizes the combined stock option activity for the 2004 Equity Plan and 2014 Incentive Plan for the nine months ended May 31, 2015:

 

    Number of Options     Weighted-Average Exercise Price     Weighted-Average Remaining Contractual Term     Approximate Aggregate Instrinsic Value  
Oustanding at beginning of period     315,000     $ 5.76              
Granted     26,000       4.17              
Exercised     -       -              
Forfeited or expired     (12,500 )     7.21              
Outstanding at May 31, 2015     328,500     $ 4.99       6.42     $ 82,270  
                                 
Options exercisable at May 31, 2015     235,833     $ 4.83       5.56     $ 97,117  

 

The following table summarizes the combined activity and value of non-vested options under the 2004 Equity Plan and 2014 Incentive Plan as of and for the nine months ended May 31, 2015:

 

    Number of Options     Weighted-Average Grant Date Fair Value  
Non-vested options oustanding at beginning of period     99,167     $ 4.85  
Granted     26,000       2.78  
Vested     (32,500 )     4.19  
Forfeited     -       -  
Non-vested options outstanding at May 31, 2015     92,667     $ 4.29  

 

The Company calculated the fair value of the options granted during January 2015 at approximately $72,000, using the Black Scholes option pricing model with the following variables: weighted average exercise price of $4.17 (which was the closing sale price of common stock on the date of grant); estimated option lives of 10 years; weighted average risk free interest rate of 1.77%; weighted average stock price volatility of 57.45%; and an estimated forfeiture rate of 0%.

 

All non-vested options are expected to vest. The total fair value of options vested during the nine months ended May 31, 2015 and May 31, 2014 was $136,300 and $76,800, respectively.

 

Stock-based compensation expense was $53,700 and $68,800 for the three months ended May 31, 2015 and 2014, respectively. Stock-based compensation expense was $186,300 and $183,100 for the nine months ended May 31, 2015 and 2014, respectively.

 

At May 31, 2015, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $220,900, which options have a weighted average life of less than three years. The Company has not recorded any excess tax benefits to additional paid-in capital.