Note 9. SHARE-BASED COMPENSATION

The issuance of the Company’s Options is exempted from registration under of the Securities Act of 1933, as amended (the “Act”). The Common Stock underlying the Options granted may be sold in compliance with Rule 144 under the Act. Each option may be exercised to purchase one share of Common Stock. Payment for the options may be made in cash or by exchanging shares of Common Stock at their Fair Market Value. The Fair Market Value will be equal to the average of the highest and lowest registered sales prices of Company Stock on the date of exercise.

The term of the 56,000 options granted in 2009 is 10 years and the exercise price of the 56,000 options issued in 2009 is $7.75. The fair value of the 56,000 stock options was estimated using the Black-Scholes option-pricing model with the following assumptions: volatility of 173.84%, risk free interest rate of 3.02% and expected life of 5 years. The total fair value of the options was $413,107. In accordance with the vesting periods, the Company recorded no operating expense-stock compensation for the three months ended September 30, 2016 and 2015.

The term of the 10,000 options granted in 2013 is 10 years and the exercise price of the 10,000 options issued in 2013 is $2.01. The fair value of the 10,000 stock options was calculated at the grant date using the Black-Scholes option-pricing model with the following assumptions: volatility of 452.04%, risk free interest rate of 0.88% and expected life of 5 years. The total fair value of the options was $19,400. In accordance with the vesting periods, the Company recorded no operating expense-stock compensation for the three months ended September 30, 2016 and 2015.

Pursuant to the Company’s 2014 Stock Incentive Plan, effective on July 26, 2016, the Company granted 150,000 options to purchase an aggregate of 150,000 shares of the Company's common stock to two employees with a one-year vesting period, one half of which vested on October 26, 2016, and the other half vested on July 26, 2017. The exercise price of the 150,000 options is $1.10, which was equal to the share price of the Company’s ordinary shares on July 26, 2016. The grand date fair value of such options was $0.77 per share. The fair value of the 150,000 options was calculated using the Black-Scholes options pricing model with the following assumptions: volatility of 99.68%, risk free interest rate of 1.15%, and expected life of 5 years. The total fair value of the options was $115,979. In accordance with the vesting periods, $19,330 was recorded as part of operating expense-stock compensation for the 150,000 options for the three months ended September 30, 2016. The Company recorded no operating expense-stock compensation for the three months ended September 30, 2015.

A summary of the options is presented in the table below:

			Weighted Average
	Shares		Exercise Price

Options outstanding, as of June 30, 2016		66,000	$	6.88
Granted		150,000		1.10
Canceled, forfeited or expired		-	$	-

Options outstanding, as of September 30, 2016		216,000	$	2.87

Options exercisable, as of September 30, 2016		62,000	$	7.19

Following is a summary of the status of options outstanding and exercisable at September 30, 2016:

Outstanding Options					Exercisable Options
				Average					Average
				Remaining	Average Exercise				Remaining
Exercise Price		Number		Contractual Life	Price		Number		Contractual Life
$	7.75		56,000	1.63 years	$	7.75		56,000		1.63 years
$	2.01		10,000	6.64 years	$	2.01		6,000		6.64 years
$	1.10		150,000	4.82 years	$	-		-		-
			216,000					62,000

Following is a summary of the status of warrants outstanding and exercisable at September 30, 2016:

				Weighted		Average
				Average		Remaining
Warrants Outstanding		Warrants Exercisable		Exercise Price		Contractual Life
	139,032		139,032	$	9.30	1.63 years