Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
12 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [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 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.

  

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 vested 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. Forty-nine 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. Fifty percent of the stock options vested on the issue date and the remainder vested 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.

  

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 $1,629,333 and $1,857,531 in stock-based compensation expense for the years ended September 30, 2019 and 2018, respectively. A portion of these costs allocable to the Company’s exploration activities, $884,839 and $820,877 were capitalized to unproved properties and the remainder was recorded as general and administrative expenses, for the years ended September 30, 2019 and 2018, respectively.

  

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, 2019 and 2018 were based on the following assumptions at the date of grant as follows:

  

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 following table summarizes the Company’s stock option activity during the year ended September 30, 2019:

 

    Number
of Options
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Term
(In years)
 
Outstanding at September 30, 2018     103,500,000     $ 0.0605          
Granted     1,000,000       0.0450          
Exercised                    
Cancelled                    
Outstanding at September 30, 2019     104,500,000     $ 0.0604       5.13  
Vested and expected to vest     104,500,000     $ 0.0604       5.13  
Exercisable at September 30, 2019     79,500,000     $ 0.0552       5.13  

  

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, 2019, there was $1.1 million of unrecognized stock-based compensation cost related to the stock option grants expected to be amortized over a weighted average period of nine months.