Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

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

NOTE 10 – STOCK-BASED COMPENSATION

  

On January 1, 2017, 33.5 million stock options were granted to employees, officers and directors of the Company. The CEO was not included in the award. The stock options vested 50% on January 1, 2017 and 50% on January 1, 2018. The stock options are exercisable for seven years from the original grant date of January 1, 2017, until January 1, 2024.

  

In May 2018, 500,000 stock options were granted to an employee. In June 2018, 33.5 million stock options were granted to employees, officers and directors of the Company. The CEO was not included in the award. Approximately 33% of the stock options vested on June 1, 2018 and approximately 33% will vest on June 1, 2019 and 2020, respectively, provided that the option holder continues to serve as an employee or director on the vesting date. The stock options are exercisable from the original grant date until December 31, 2025.

  

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized over the vesting period. The Company recognized $1,857,531 and $653,669 in stock-based compensation expense for the years ended September 30, 2018 and 2017, respectively. A portion of these costs allocable to the Company’s exploration activities, $820,877 and $195,125 were capitalized to unproved properties and the remainder was recorded as general and administrative expenses, for the years ended September 30, 2018 and 2017, respectively.

  

The following table summarizes the Company’s stock option activity during the year ended September 30, 2018:

  

    Number of
Options
    Weighted Average Exercise Price     Weighted Average Remaining Contractual Term (Years)     Average Intrinsic Value  
Outstanding at beginning of period     35,500,000     $ 0.033                  
Granted     68,000,000       0.075                
Exercised                          
Cancelled                          
Outstanding at end of period     103,500,000     $ 0.0605       3.32     $ 1.2 million  
Vested and expected to vest     103,500,000     $ 0.0605       3.32     $ 1.2 million  
Exercisable at end of period     54,500,000     $ 0.0475           $ 1.3 million  

  

The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted. The weighted-average fair values of stock options granted for the years ended September 30, 2018 and 2017 were based on the following assumptions at the date of grant as follows:

  

    2018     2017  
Expected dividend yield     0 %     0 %
Expected stock price volatility     145.2 %     127.2 %
Risk-free interest rate     2.7 %     1.71 %
Expected life of options     7 years       4 years  
Weighted-average grant date fair value   $ 0.065     $ 0.022  

  

The Company used its historical stock trading price volatility for the last four years. 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.

  

As of September 30, 2018 there was $2.7 million of unrecognized stock-based compensation cost related to the stock option grants expected to be amortized over a weighted average period of three years.