XML 41 R12.htm IDEA: XBRL DOCUMENT

Stock Based Compensation

9 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Stock Based Compensation

NOTE 6: STOCK BASED COMPENSATION

The Company adopted ASC 718, “Share Based Payments.” which requires companies to expense the value of employee stock options and similar awards.

During the three months ended November 30, 2019, the Company granted options to acquire 7,500 shares to employees exercisable at $2.10 and options for 100,000 shares to an officer with an exercise price of $2.65. The options granted to employees vest over three years and expire in ten years. The options granted to the officer vested upon grant and expire in ten years. All of the options granted by the Company during the three months ended November 30, 2019 had a combined weighted average grant date fair value of $0.32 per share.

During the nine months ended November 30, 2019, the Company granted options to acquire 17,500 shares to employees exercisable at prices ranging from $2.10 to $2.65, options to acquire 20,000 shares to the non-employee members of the board of directors with an exercise price of $2.65 and options for 200,000 shares to an officer and director exercisable at prices of ranging from $2.45 to $2.65. The options granted to employees and directors vest over three years and expire in ten years. The options granted to the officer vested upon grant and expire in ten years. All of the options granted by the Company during the nine months ended November 30, 2019 had a combined weighted average grant date fair value of $0.34 per share.

The weighted-average fair value of options are estimated on the date of grant using the Black-Scholes options-pricing model. The weighted-average Black-Scholes assumptions are as follows:

	Nine Months Ended November 30, 2019
Expected Life	1-8 years
Risk free interest rate	1.58% - 2.05%
Expected volatility	27.46% - 32.24%
Expected dividend yield	0%

In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

For the three and nine months ended November 30, 2019 and 2018, net income and earnings per share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 approximated $38,000 and $7,000 in additional compensation expense during the three months ended November 30, 2019 and 2018, respectively. The impact of applying ASC 718 approximated $82,000 and $23,000 in additional compensation expense during the nine months ended November 30, 2019 and 2018, respectively. Such amounts are included in general and administrative expenses on the statement of operations. The expense for stock-based compensation is a non-cash expense item.