NOTE 9 – STOCK-BASED COMPENSATION

Warrants issued for services

From time to time, the Company issues warrants to purchase its common stock. These warrants are valued using a Black-Scholes model and using the volatility, market price, exercise price, risk-free interest rate and dividend yield appropriate at the date the warrants were issued.

Simultaneous with the closing of the IPO, the Company issued to the underwriter and its affiliates warrants to purchase 57,200 shares of common stock (“IPO Underwriter Warrants”) at an exercise price of $8.75 per share with an expiration date of May 2, 2023. The shares underlying the IPO Underwriter Warrants were subject to a 180‑day lock-up that expired on October 29, 2018.

During the three months ended June 30, 2019, all of the outstanding warrants were fully vested and exercisable.

The fair value of these warrants was estimated as of the grant date using the Black-Scholes model with the following assumptions:


		Common Stock Warrants
		June 30, 2019
Expected term (in years)		5.0
Risk-free interest rate (%)		1.8-2.8%
Expected volatility (%)		50.3%-52.2%
Dividend yield (%)		0.0%

Warrant activity is summarized as follows:


		Weighted Average
	Shares	Exercise Price
Warrants outstanding at March 31, 2018	264,410	$	6.35
Granted	—		—
Exercised	—		—
Cancelled	—		—
Warrants outstanding at June 30, 2019	264,410	$	6.35

Stock Options

On March 21, 2018 the Board of Directors adopted the Jerash Holdings (US), Inc. 2018 Stock Incentive Plan (the “Plan”), pursuant to which the Company may grant various types of equity awards. 1,484,250 shares of common stock were reserved for issuance under the Plan. In addition, on July 19, 2019, the Board of Directors approved the amended and restatement of the Plan, which is being submitted to a vote of the Company's stockholders at its annual meeting of stockholders to be held in September 2019. If approved by the Company's stockholders, the amended and restated Plan would increase the number of shares reserved for issuance under the Plan by 300,000, to 1,784,250 shares, among other changes.

On April 9, 2018, the Board of Directors approved the issuance of 989,500 nonqualified stock options under the Plan in accordance with the Plan at an exercise price of $7.00 per share, and a term of five years. As of June 30, 2019, all of these outstanding stock options were fully vested and exercisable.

The fair value of these options granted on April 9, 2018 was estimated as of the grant date using the Black-Scholes model with the following assumptions:


	Stock Options
	June 30, 2019
Expected term (in years)	5.0
Risk-free interest rate (%)	2.6	%
Expected volatility (%)	50.3	%
Dividend yield (%)	0.0	%

On August 3, 2018, the Board of Directors granted the Company’s Chief Financial Officer and Head of U.S. Operations a total of 150,000 nonqualified stock options under the Plan in accordance with the Plan at an exercise price of $6.12 per share and a term of ten years. The options vest in three equal six-month installments, on August 3, 2018, February 3, 2019, and on August 3, 2019.

The fair value of the options granted on August 3, 2018 was estimated as of the grant date using the Black-Scholes model with the following assumptions:


	Stock Options
	June 30, 2019
Expected term (in years)	10.0
Risk-free interest rate (%)	2.95	%
Expected volatility (%)	50.3	%
Dividend yield (%)	0.0	%

Stock option activity is summarized as follows:


		Weighted Average
	Shares	Exercise Price
Stock option outstanding at March 31, 2019	1,139,500	$	6.88
Granted	—		—
Exercised	—		—
Cancelled	—		—
Stock options outstanding at June 30, 2019	1,139,500	$	6.88

There was $193,955 of unrecognized compensation costs at June 30, 2019 relating to unvested awards.