Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
3 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION

NOTE 8 – STOCK-BASED COMPENSATION

 

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 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.

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 grant date 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 granted during 2018 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.

The following table summarizes the Company’s stock option activity during the three months ended December 31, 2018:

 

    Number
of Options
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Term
(In years)
    Average Intrinsic
Value
 
Outstanding at September 30, 2018     103,500,000       0.0605                  
Granted     —         —                    
Exercised     —         —                    
Cancelled     —         —                    
Outstanding at December 31, 2018     103,500,000     $ 0.0605       3.07       $0.5 million  
Vested and expected to vest     103,500,000     $ 0.0605       3.07       $0.5 million  
Exercisable at December 31, 2018     54,500,000     $ 0.0475       3.07       $0.5 million  

 

There was approximately $0.5 million of intrinsic value for the options outstanding as of December 31, 2018.  As of December 31, 2018, there was $2.3 million of unrecognized stock-based compensation to be recognized over a weighted average period of 3.07 years.

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 $393,000 and $93,381 in stock based compensation during the three months ended December 31, 2018 and December 31, 2017, respectively. A portion of these costs, $318,658 and $27,875 were capitalized to unproved properties for the three months ended December 31, 2018 and December 31, 2017, respectively, with the remainder recorded as general and administrative expenses for each respective period.