7.	Stock Compensation

We have stock-based compensation plans under which outside directors, consultants, and employees are eligible to receive stock options and other equity-based awards. The stock option plans and a director stock option plan provide that officers, key employees, directors and consultants may be granted options to purchase up to 2,675,000 shares of our common stock at not less than 100 percent of the fair market value at the date of grant, unless the grantee is a 10 percent shareholder, in which case the price must not be less than 110 percent of the fair market value.

The Company’s former employee stock option plan (the “Prior Employee Plan”) expired during May 2005. As a result, no new options could be granted under the plan thereafter. This plan provided for the issuance of up to 825,000 shares of common stock. As of January 31, 2013, the Prior Employee Plan had 25,000 stock options outstanding. During December 2005, the Board of Directors approved and adopted the Company’s 2005 Equity Incentive Plan (the “2005 Plan”) covering 450,000 shares of common stock. The 2005 Plan was approved by the Company’s shareholders at its annual shareholders’ meeting in June 2006, and subsequently amended at its annual shareholders’ meeting in June 2008 to increase the number of shares issuable under the plan from 450,000 to 1,100,000 shares. In July 2011, the Company’s shareholders approved the 2011 Equity Incentive Plan (the “2011” Plan) covering 750,000 shares of common stock, as well as the shares that remained available for issuance under the 2005 Plan plus shares that were the subject of outstanding awards under the 2005 Plan, which again become available for grant under that plan. Thus, the 2011 Plan combines the 2011 Plan and the 2005 Plan. Under the 2011 Plan, we may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and performance based awards to employees, consultants and directors. In addition, under the 2011 Plan, awards vest or become exercisable in installments determined by the compensation committee of our Board of Directors. The options granted under Prior Employee Plan expire as determined by the committee, but no later than ten years and one week after the date of grant (five years for 10 percent shareholders). The options granted under the 2011 and 2005 Plan expire as determined by the committee, but no later than ten years after the date of grant (five years for 10 percent shareholders).

During fiscal 2016, 350,000 stock options were granted and no restricted stock units were granted. The fair value of the 350,000 options granted under our stock option plans during the year ended

January 31, 2016 was estimated on the date of grant using the following weighted average assumptions:

	Year Ended January 31, 2016
Weighted average risk-free interest rate		2	%
Expected life (in years)		10
Expected stock volatility		152	%
Dividend yield		-
Expected forfeitures		-

Estimated expected forfeitures is 0 as remaining stock options were granted to our CEO and board of directors and we do not expect future forfeitures.

During fiscal 2015, no restricted stock shares or stock options were granted.

The fair value of stock options is determined using a Lattice Binomial model for options with performance-based vesting tied to our stock price and the Black-Scholes valuation model for options with ratable term vesting. Both the Lattice Binomial and Black-Scholes valuation model require the input of subjective assumptions including estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the common stock price over the expected term, and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related amount recognized as an expense on the consolidated statements of operations. We review our valuation assumptions at each grant date and, as a result, are likely to change our valuation assumptions used to value stock-based awards granted in future periods. The values derived from using either the Lattice Binomial or Black-Scholes model are recognized as expense over the vesting period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. Actual results, and future changes in estimates, may materially differ from our current estimates.

The stock-based compensation expense recognized is summarized in the table below (in thousands except per share amounts):

	Years Ended January 31,
	2016			2015
Stock-based compensation expense	$	41		$	48
Impact on basic and diluted earnings per share	$	(0.00	)	$	(0.00	)

The total compensation cost related to non-vested awards not yet recognized is approximately $17,000, which will be expensed over a weighted average remaining life of 5 months.

Transactions and other information related to restricted stock granted under these plans for the year ended January 31, 2016 and 2015 are summarized below:

	Outstanding Restricted Stock
	Number of Shares			Weighted-Ave Exercise Price
Balance, January 31, 2014		420,000		$	0.18
Restricted stock granted		-			-
Restricted stock forfeited		(30,000	)		0.18
Balance, January 31, 2015		390,000		$	0.18
Restricted stock granted		-			-
Restricted stock forfeited		(40,000	)		0.18
Restricted stock vested		(350,000	)		0.18
Balance, January 31, 2016		-		$	0.18

At January 31, 2016 and 2015, the stock awards outstanding had no intrinsic value based upon closing market price of $0.11 and $0.14 per share, respectively.

The following table summarizes information about stock awards outstanding at January 31, 2016:

		Awards Outstanding						Options Exercisable
Range of Exercise/Grant Prices		Number Outstanding		Weighted-Ave Remaining Contractual Life		Weighted-Ave Exercise/Grant Price		Number Exercisable		Weighted-Ave Exercise Price
$	0.14		250,000		9.38	$	0.14		0	$	0.14
$	0.16		100,000		9.34	$	0.16		0	$	0.16
$	0.40		465,000		6.70	$	0.40		465,000	$	0.40
$	1.09		100,000		2.78	$	1.09		60,000	$	1.09
$	4.53		15,000		2.08	$	4.53		15,000	$	4.53
$	10.43		20,000		0.38	$	10.43		20,000	$	10.43
			950,000				0.66		560,000		0.94

Transactions and other information related to stock options granted under these plans for the years ended January 31, 2016 and 2015 are summarized below:

	Outstanding Options
	Number of Shares			Weighted-Ave. Exercise Price
Balance, January 31, 2014		638,500		$	1.22
Options granted		-			-
Options canceled or expired		(38,500	)		5.32
Options exercise		-			-
Balance, January 31, 2015		600,000		$	0.96
Options granted		350,000			0.15
Options canceled or expired		-			-
Options exercise		-			-
Balance, January 31, 2016		950,000		$	0.66
Stock Options Exercisable at January 31, 2016		560,000		$	0.94

There were 560,000 stock options exercisable at January 31, 2016 at a weighted-average exercise price of $0.94. Shares available under the plans for future grants at January 31, 2016 were 129,724.