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Note 7 - Options

3 Months Ended

Dec. 31, 2015

Note 7 – Options

In March 2014, we issued non-qualified options to purchase 2,916,000 shares of our common stock for services rendered to a director of the Company. The options have a term of 10 years, are exercisable at $0.0067 per share and vested when they were issued.

The fair value of the options, estimated at the date of grant using the Black-Scholes option pricing model was pricing model was $9,078. The options have been expensed as equity based compensation. The following assumptions were used in the Black-Scholes option pricing model:

Expected life (in years)	10
Volatility (based on a comparable companies)	123	%
Risk Free interest rate	2.73	%
Dividend yield (on common stock)	-

In May 2014, we issued non-qualified options to purchase 4,500,000 shares of our common stock to certain officers of the Company. The options are exercisable at $0.20 per share and have graded vesting over 4 years.

The fair value of the options, estimated at the date of grant using the Black-Scholes option pricing model was $4,415,649. The following assumptions were used in the Black-Scholes option pricing model:

Expected life (in years)	10
Volatility (based on a comparable companies)	123	%
Risk Free interest rate	2.56	%
Dividend yield (on common stock)	-

As per guidance in the ASC Topic 718, Compensation - Stock Compensation (“ASC 718”), we are amortizing the fair value of the options on a straight line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards (graded vesting attribution method).

The estimated future expense related to existing stock options is a follows:

Years ending September 30,
2016	$	602,713
2017		407,886
2018		86,961
	$	1,097,660

The following is a summary of outstanding stock options issued to employees and directors as of December 31, 2015:

	Number of Options	Exercise price per share		Average remaining term in years	Aggregate intrinsic value at date of grant
Outstanding October 1, 2014	7,416,000	$	0.0067 -0.20		-
Issued	-	$	-	-	-
Cancelled	-	$	-	-	-
Outstanding September 30, 2015	7,416,000	$	0.0067 - 0.20	8.57		$	-
Issued	-
Cancelled	-
Outstanding December 31, 2015	7,416,000
Exercisable	4,666,000	$	0.0067 - 0.20	8.27		$	-

The following is a summary of outstanding stock options issued to non-employees, excluding directors, as of December 31, 2015:

	Number of Options	Exercise price per share		Average remaining term in years	Aggregate intrinsic value at date of grant
Outstanding October 1, 2014	375,000	$	0.0067	-	$	-
Issued	-	$	-
Cancelled	-	$	-	-
Outstanding September 30, 2015	375,000	$	0.0067	-	$	-
Issued	-
Cancelled	-
Outstanding December 31, 2015	375,000
Exercisable	375,000	$	0.0067	7.79	$	-

Total equity based compensation for the three months ended December 31, 2015 and 2014 was $280,053 and $657,988, respectively.

- Definition

The entire disclosure for a company's election to apply the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items; (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected: (i) information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures and (ii) the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (d) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (e) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (f) for investments that would have been accounted for under the equity method if the entity had not chosen to apply the fair value option, the information required for such investments, if material either individually or in the aggregate; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) a description of how interest and dividends are measured and where they are reported in the income statement; (c) for loans and other receivables held as assets: (i) the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk and (ii) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (d) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk, (ii) qualitative information about the reasons for those changes, and (iii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

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