Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
6 Months Ended
Mar. 31, 2019
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, with an exercise price of $0.0278 per share, 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 the issue date. 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. 

 

On January 2, 2019 the Company issued 1 million stock options to a former employee and contractor. 50% of the stock options vested on the issue date and the remainder will vest in July 2019. The stock options were valued at approximately $35,000 to be recognized over the service period of seven months. The stock options are exercisable until December 31, 2025.

 

The fair value of the stock-options granted during 2018 and 2019 were determined using the Black Scholes valuation model with the following key assumptions: 

 

Date of Grant   May 1, 2018     June 1, 2018     January 2, 2019  
Number of Stock Options Granted     500,000       67,500,000       1,000,000  
Stock Price   $ 0.065     $ 0.075     $ 0.045  
Exercise Price   $ 0.065     $ 0.075     $ 0.045  
Expected Life of Options     4.25 years       4.25 years       3.75 years  
Risk Free Rate     2.74 %     2.675 %     2.51 %
Volatility     145.21 %     145.21 %     126.37 %

 

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 Company used the historical volatility of its stock for the prior year to value the stock options granted in 2019. 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 six months ended March 31, 2019:

 

    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     1,000,000                        
Exercised                            
Cancelled                            
Outstanding at March 31, 2019     104,500,000     $ 0.0604       2.82       $1.5 million  
Vested and expected to vest     104,500,000     $ 0.0604       2.82       $1.5 million  
Exercisable at March 31, 2019     55,000,000     $ 0.0475       2.82       $1.5 million  

 

There was approximately $1.5 million of intrinsic value for the options outstanding as of March 31, 2019.  As of March 31, 2019, there was $1.9 million of unrecognized stock-based compensation to be recognized over a weighted average period of 2.82 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 $409,103 and zero in stock based compensation during the three  months ended March 31, 2019 and March 31, 2018, respectively. A portion of these costs, $223,247 and zero were capitalized to unproved properties for the three months ended March 31, 2019 and March 31, 2018, respectively, with the remainder recorded as general and administrative expenses for each respective period. The Company recognized $802,553 and $93,381 in stock based compensation for six months ended March 31, 2019 and 2018, respectively. A portion of these costs $541,905, and $27,875 were capitalized to unproved properties for the six months ended March 31, 2019 and 2018, respectively.