Quarterly report pursuant to Section 13 or 15(d)

5. SHAREHOLDERS' EQUITY

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5. SHAREHOLDERS' EQUITY
 6 Months Ended
Feb. 28, 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 six months ended February 28, 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     -       -              
Outstanding at February 28, 2015     341,000     $ 5.07       6.43       -  
                                 
Options exercisable at February 28, 2015     248,333     $ 4.95       5.52       -  

 

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 six months ended February 28, 2015:

 

    Number of Options     Weighted-Average Grant Date Fair Value  
      99,167     $ 4.85  
Granted     26,000       2.78  
Vested     (32,500 )     4.19  
Forfeited     -       -  
      92,667     $ 3.90  

 

The Company calculated the fair value of the options at approximately $72,000, using the Black Scholes Model with the following variables: weighted average exercise price of $4.17 (which was the closing sale price of common stock on the date 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 three and six months ended February 28, 2015 and February 28, 2014 was $136,300 and $76,800, respectively.

 

Stock-based compensation expense was $63,800 and $59,500 for the three months ended February 28, 2015 and 2014, respectively. Stock-based compensation expense was $132,600 and $114,300 for the six months ended February 28, 2015 and 2014, respectively.

 

At February 28, 2015, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $262,700, which have a weighted average life of less than three years. The Company has not recorded any excess tax benefits to additional paid-in capital.