NOTE 6   STOCK-BASED COMPENSATION

On September 30, 2015, the Board of Directors approved the 2015 Stock Option Plan (“the Plan”) authorizing the Company to grant stock option awards to certain officers, employees and consultants under the Plan, subject to shareholder approval at the Annual Meeting of Shareholders held on September 6, 2016.  The total number of shares of common stock of the Company, par value $0.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan was not to exceed 2,000,000 shares.

On June 29, 2016, the Board of Directors approved the amendment to the Plan authorizing the total number of shares of common stock authorized to be subject to awards granted under the Plan to be increased to 4,000,000 shares.  On September 6, 2016, at the Annual Shareholder Meeting, the Company’s shareholders approved the Plan as amended.

As of February 28, 2017, the Company had awarded 1,345,000 options to certain executives and key employees under the Plan.

Effective November 1, 2016, the Company entered into an employment agreement with Dr. Ma, the Company’s Chief Medical Officer.  The agreement calls for quarterly equity compensation in the form of shares of common stock of the Company.  The stock will be awarded on the day following the last working day of each quarter.  The number of shares issued each quarter shall be determined by dividing $15,000 by the closing bid price of the Company’s common stock as reported by the OTC Markets Inc. as of the last working day of such quarter (the “Closing Price”).   As of February 28, 2017, 10,870 shares of common stock were issued to Dr. Ma.

On October 21, 2015, the Board of Directors of the Company approved non-employee director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, beginning September 1, 2015.

The per share weighted average fair value of stock options granted during the fiscal year ended February 28, 2017 and February 29, 2016 was $0.21 and $0.19, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the fiscal year ended February 28, 2017 and February 29, 2016. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued:

The following table summarizes the status of the Company’s stock option plan:

Total stock-based compensation expense for stock option awards totaled $115,828 and $50,413 for the fiscal year ended February 28, 2017 and February 29, 2016, respectively.

The weighted-average grant-date fair value of options granted during fiscal years ended February 28, 2017 and February 29, 2016 was $122,656 and $219,116 respectively. The total intrinsic value of options exercised during fiscal years ended February 28, 2017 and February 29, 2016, was zero for both periods.

The following table presents information pertaining to options outstanding at February 28, 2017:

As of February 28, 2017, there was $0.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 17 months. The total fair value of vested options during the fiscal years ended February 28, 2017 and February 29, 2016, was $98,432 and zero, respectively.