Note 10 - Stock-based Awards

9 Months Ended

Jun. 30, 2018

Notes

Note 10 - Stock-based Awards:

NOTE 10 – STOCK-BASED AWARDS:

During the three months ended June 30, 2018, 200,000 stock options with an exercise price of $0.10 and a five-year term where granted to new directors.  All of the awarded stock options vested immediately.  The fair value of all of the options that were granted and vested during the three months ended June 30, 2018 was $16,000 ($0.08 per option). 

During the three months ended June 30, 2017, no stock options were granted; however 62,500 options that were granted on March 15, 2017 vested per the quarterly vesting schedule.  The fair value of the options that vested during the three months ended June 30, 2017 was $15,000.

During the nine months ended June 30, 2018, 1,800,000 stock options with an average weighted exercise price of $0.16 and a five-year term where granted to employees and directors.  All of the awarded stock options vested immediately.  The fair value of all of the options that vested during the nine months ended June 30, 2018 was $223,000, including the fair value ($15,000) of 62,500 options that were granted on March 15, 2017 and vested on December 15, 2017. 

During the nine months ended June 30, 2017, 250,000 stock options with an exercise price of $0.33 and a three-year term where granted to a consultant.  The awarded stock options vested quarterly with 25% of the options vesting each quarter beginning on March 15, 2017.  The fair value of the options that vested during the nine months ended June 30, 2017 was $30,000.

The cost of options granted to employees is recorded as salaries and benefits, and the cost of options granted to directors and consultants is recorded as other general and administrative expenses.  The total compensation cost of options vested under the plan, charged against operations, is included in the consolidated statements of operations as follows:

		Three months ended June 30,				Nine months ended June 30,
		2018		2017		2018		2017
Salaries and benefits	$	-	$	-	$	120,000	$	-
Other general and administrative expenses		16,000		15,000		103,000		30,000
Total	$	16,000	$	15,000	$	223,000	$	30,000

The value of the options granted during the three months and nine months ended June 30, 2018 was estimated on the date of grant with a Black-Scholes option-pricing model using the assumptions noted in the following table:

	Options Granted on	Options Granted on
	June 21, 2018	February 2, 2018
Expected volatility	134.5%	121.6%
Stock price on date of grant	$0.10	$0.17
Expected dividends	-	-
Expected term (in years)	3	3
Risk-free rate	2.65%	2.33%
Expected forfeiture rate	0%	0%

The following is a summary of our options issued under the Amended 2005 Equity Incentive Plan and the 2015 Stock and Incentive Plan:

		Options		Weighted  Average  Exercise Price
Outstanding at September 30, 2017			2,233,334	$	0.41
	Granted		1,800,000		0.16
	Expired		(853,334)		(0.43)
Outstanding and exercisable at June 30, 2018			3,180,000	$	0.26
Weighted average fair value of options granted during the three months ended June 30, 2018				$	0.08
Average remaining contractual term of options outstanding and exercisable at June 30, 2018 (years)					3.74

The aggregate of options exercisable as of June 30, 2018 had an intrinsic value of $4,000, based on the closing price of $0.12 per share of our common stock on June 30, 2018.