Common and Preferred Stock

At the Company’s annual stockholders meeting held on October 28, 2015, stockholders approved to amend the Company’s Articles of Incorporation to increase the number of shares of Common Stock authorized for issuance from 180,000,000 to 500,000,000 shares.

As of June 30, 2016, the Company is authorized to issue 515,000,000 shares of stock, of which 500,000,000 are Common Stock; the remaining 15,000,000 shares, with a par value of $0.001 per shares are blank-check preferred stock which the Board is expressly authorized to issue without stockholder approval, for one or more series of preferred stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

As of June 30, 2016, 107,467,409 shares of Common Stock were issued and outstanding. No shares of preferred stock were issued or outstanding.

On August 20, 2015, the Board approved an award of 750,000 shares of the Company's restricted Common Stock to Dr. Smith in connection with her appointment as Chairman of the Company's Board. These shares, which are fully vested, were valued at $0.055 per share, the closing price of the shares on the day of grant, and were valued in aggregate at $41,250. The issuance of the shares was processed on October 30, 2015.

On January 15, 2016, the Company engaged Dian Griesel International (DGI) for a 12 month long consulting agreement to provide public and investor relations services. The fee for the services is $5,000 per month, plus out-of-pocket expenses. As an origination fee for the agreement, the Board approved the issuance of 300,000 shares of common stock to Ms. Griesel on January 15, 2016. The aggregate value of these shares on the date of grant was $6,900. The agreement with DGI was cancelled in May, 2016.

On April 5, 2016, the Board granted shares of Common Stock to Board members as follows: 1,000,000 shares to our Chairman, Dr. Smith, 500,000 shares to the Chairman of our Audit Committee, Mr. Harris and 250,000 shares to each of our remaining directors, Messrs. Pappajohn, Follman, McAdoo, Sassine and Votruba. Mr. Votruba’s shares are assigned to RSJ PE, the organization which he represents. These shares, which are fully vested, were valued at $0.0255 per share, the closing price of the shares on the day of grant, and were valued in aggregate at $68,900.

Also on April 5, 2016, the Board granted 1,000,000 shares of Common Stock to each of the two officers of the Company, George Carpenter, CEO and Paul Buck CFO. The shares vest as follows: 50% vested on the date of grant and the remaining 50% vest pro rata over twelve months starting on the date of grant. These shares were valued at $0.0255 per share, the closing price of the shares on the date of grant, and were valued in aggregate at $51,000.

Stock-Option Plans

On August 3, 2006, CNS California adopted the CNS California 2006 Stock Incentive Plan (the “2006 Plan”). The 2006 Plan provides for the issuance of awards in the form of restricted shares, stock options (which may constitute incentive stock options (ISO) or non-statutory stock options (NSO), stock appreciation rights and stock unit grants to eligible employees, directors and consultants and is administered by the Board. A total of 667,667 shares of stock were ultimately reserved for issuance under the 2006 Plan. As of June 30, 2016, 70,825 options were exercised and there were 501,924 options and 6,132 restricted shares outstanding under the amended 2006 Plan with a residual 87,786 shares which will not be issued as the 2006 Plan has been frozen. The outstanding options have exercise prices to purchase shares of Common Stock ranging from $3.60 to $32.70.

On March 22, 2012, our Board approved the MYnd Analytics, Inc. 2012 Omnibus Incentive Compensation Plan (the “2012 Plan”), reserved 333,334 shares of stock for issuance and on December 10, 2012, the Board approved the amendment of the 2012 Plan to increase the shares authorized for issuance from 333,334 shares to 5,500,000 shares. On March 26, 2013, the Board further approved the amendment of the 2012 Plan to increase the shares authorized for issuance from 5,500,000 shares to 15,000,000 shares. The 2012 Plan, as amended, was approved by our stockholders at the 2013 annual meeting held on May 23, 2013.

On April 5, 2016, the Board approved a further amendment of the 2012 Plan to increase the Common Stock authorized for issuance from 15,000,000 shares to 40,000,000 shares. This amendment to the 2012 Plan will require approval by our stockholders at the next Annual Meeting.

On January 8, 2015, the Board granted an option to purchase 250,000 shares of its Common Stock pursuant to the 2012 Plan, at an exercise price of $0.25 per share to a consultant. The option vesting is contingent upon the achievement of agreed upon goals.

On August 20, 2015, the Board approved an award of options to purchase 250,000 shares of the Company’s common stock for each of the Company's directors, for an aggregate grant of 1,750,000 options. The options are exercisable at a price per share of $0.055, the closing price of the Company's common stock on the date of grant, and will vest pro-rata over 36 months.

On April 5, 2016, the Board granted options to purchase 1,450,000 shares of the Company’s Common Stock under the 2012 Plan to staff members and options to purchase 200,000 shares of the Company’s Common Stock to our consultant, DCA. These options vest pro-rata over 12 months starting on the date of grant. The grants of options to staff and consultant are valued $0.0255 per share, which was the closing price on the OTC.QB of the Company’s Common Stock on the date of grant. The grant of these options is subject to shareholder approval of the expansion of the shares allocated for the 2012 Plan at the next Annual Meeting.

 As of June 30, 2016, under the 2012 Plan as amended, options to purchase 15,378,087 shares of Common Stock and 750,000 restricted shares remain outstanding. No options have been exercised under the 2012 Plan and 521,913 shares remain available for issuance.

Stock-based compensation expenses are generally recognized over the employees’ or service provider’s requisite service period, generally the vesting period of the award. Stock-based compensation expense included in the accompanying statements of operations for the three and nine months ended June 30, 2016 and 2015 is as follows:   

Total unrecognized stock-based compensation as of June 30, 2016, amounted to $145,443.

A summary of stock option activity is as follows: 

Following is a summary of the status of options outstanding at June 30, 2016:

Warrants to Purchase Common Stock

 The warrant activity for the period starting October 1, 2015, through June 30, 2016, is described as follows:

Following is a summary of the status of warrants outstanding at June 30, 2016:

(1) Pursuant to the Second Amended Note and Warrant Purchase Agreement between December 23, 2015, and June 30, 2016 the Company issued ten Notes (including the December 2015 Notes) to the eight purchasers thereof for an aggregate principal amount of $2,100,000, and issued ten corresponding Note Warrants to purchase an aggregate of 42,000,000 shares of the Company's Common Stock. The Note Warrants were issued to purchasers of Notes in an amount equal to 100% of the shares underlying their December 2015 Notes. Each Note Warrant is exercisable, in whole or in part, during the period beginning on the date of its issuance, and ending on the earlier of (i) December 31, 2020 and (ii) the date that is forty-five (45) days following the date on which the daily closing price of shares of the Company's Common Stock quoted on the OTCQB Venture Marketplace (or other bulletin board or exchange on which the Company's Common Stock is traded or listed) exceeds $0.25 for at least ten (10) consecutive trading days. In connection therewith, the Company will promptly notify the Note Warrant holders in the event that the daily closing price of the Company's shares of Common Stock exceeds $0.25 for at least ten (10) consecutive trading days. 2 million Note Warrants were issued to one accredited investor and 25.2 million Note Warrants were issued to Directors; for further detail refer to Note 6. Related Party Transactions.

(2) On June 10, 2016 we issued two warrants, pursuant to a Finder’s Fee Agreement with Maxim Group LLC, to purchase in aggregate 800,000 shares of Common Stock following the introduction of an accredited investor who entered into a Second Amended Note and Warrant Purchase Agreement in the principal amount of $200,000. The terms of these warrants are identical to the Note Warrants mentioned in (1) above. Pursuant to the Finder’s Fee Agreement, Maxim was also paid $20,000 for their efforts.

(3) On December 23, 2015, in consideration for the agreement to extend the maturity date of the Notes, the Company issued to holders of all Notes outstanding prior to the date of the Second Amended Note & Warrant Agreement, Extension Warrants to purchase an aggregate of 60,000,000 shares of Common Stock. Each such holder was issued an Extension Warrant to purchase Common Stock in an amount equal to 100% of the shares underlying each such holder's previously outstanding Notes. Extension Warrants to purchase 11,000,000 shares of Common Stock were issued to 10 accredited investors and Extension Warrants to purchase 49,000,000 shares of Common Stock were issued to Directors and Affiliates; for further detail refer to Note 6. Related Party Transactions.

On December 23, 2015, we valued the Extension Warrants to purchase 60,000,000 shares of Common Stock using the Black-Scholes model and determined their value to be $1,196,000, which was booked as an Extinguishment of Debt expense.

 The range of Black-Scholes option-pricing model assumption inputs for the nine months ended June 30, 2016, were as follows:

At June 30, 2016, there were warrants outstanding to purchase 103,431,521 shares of the Company’s Common Stock. The exercise prices of the outstanding warrants range from $0.04718 to $9.00 with a weighted average exercise price of $0.05. The warrants expire at various times starting 2016 through 2020.