Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
9 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION

NOTE 7 – STOCK-BASED COMPENSATION

 

On May 1, 2018, 500,000 stock options, with an exercise price of $0.065 per share were granted to an employee. The stock options vested on May 1, 2018. The stock options are exercisable for approximately 7.5 years from the date of grant of May 1, 2018 to December 31, 2025. These stock options were awarded from the Company’s 2014 Omnibus Incentive Plan.

 

On June 1, 2018, 67.5 million stock options, with an exercise price of $0.075 per share were granted to employees, directors and contractors. 18.5 million of the stock options vested on June 1, 2018, 24 million will vest on June 1, 2019 and 25 million will vest on June 1, 2020 provided the holder continues to serve as an employee or a director on the vesting date. The stock options are exercisable for approximately 7.5 years from the date of grant of June 1, 2018 to December 31, 2025. 49 million of these stock options were awarded from the Company’s 2018 Omnibus Incentive Plan and 18.5 million stock options were inducement awards.

 

The fair value of the stock-options were determined using the Black Scholes valuation model with the following key assumptions:

 

Date of Grant May 1, 2018 June 1, 2018
Number of  Stock Options Granted 500,000 67,500,000
Stock Price $0.065 $0.075
Exercise Price $0.065 $0.075
Expected Life of Options 4.25 years 4.25 years
Risk Free Rate 2.74% 2.675%
Volatility 145.21% 145.21%

 

The Company used the historical volatility of its stock for the period June 2014 through June 1, 2018 for the Black Scholes computation. The Company has no historical data regarding the expected life of the options and therefore used the simplified method of calculating the expected life. The risk free rate was calculated using the U.S. Treasury constant maturity rates similar to the expected life of the options, as published by the Federal Reserve. The Company has no plans to declare any future dividends.

 

On January 1, 2017, 33.5 million stock options were granted to 6 employees and 2 directors of the Company. The CEO was not included in the award. The stock options vested 50% on January 1, 2017 and the remaining 50% vested on January 1, 2018, provided that the option holder continues to serve as an employee or director on the vesting date. The stock options are exercisable for seven years from the original grant date of January 1, 2017, until January 1, 2024.

 

The following table summarizes the Company’s stock option activity during the three months ended June 30, 2018:

 

    Number
of Options
  Weighted
Average
Exercise Price
  Weighted Average
Remaining
Contractual Term
(In years)
  Average Intrinsic
Value
Outstanding at September 30, 2017     35,500,000       0.033              
Granted     68,000,000       0.075              
Exercised     —         —                
Cancelled     —         —                
Outstanding at June 30, 2018     103,500,000     $ 0.0605       5.71     $5.1 million
Vested and expected to vest     103,500,000     $ 0.0605       5.71     $5.1 million
Exercisable at June 30, 2018     54,500,000     $ 0.0475       4.17     $3.4 million

 

The intrinsic value of the options outstanding as of June 30, 2018 was $5.1 million.  As of June 30, 2018 there was $3.1 million of unrecognized stock-based compensation.

Stock-based compensation cost is measured at the grant date, using the estimated fair value of the award, and is recognized over the required vesting period. The Company recognized $1,371,150 and $1,464,534 in stock based compensation during the three and nine months ended June 30, 2018 and $93,381 and $560,287 in stock-based compensation during the three and nine months ended June 30, 2017, respectively. A portion of these costs, $585,858 and $613,733 were capitalized to unproved properties for the three and nine months ended June 30, 2018 and $27,875 and $167,250 was capitalized to unproved properties for the three months and nine months ended June 30, 2017 and the remainder were recorded as general and administrative expenses.