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9. STOCK OPTIONS

12 Months Ended

Sep. 30, 2018

9. STOCK OPTIONS

9. STOCK OPTIONS

During July 2016, the Company issued 320,000 options to an employee. The right to exercise these options shall vest and become exercisable on December 31, 2021. The exercise price is $0.88 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.

During January 2017, the Company issued 84,000 options to employees. The right to exercise these options shall vest and become exercisable on January 2018. The exercise price is $0.40-$0.51 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.

During July 2017, the Company issued 2,170,000 options to employees and 430,000 options to non-employees. The right to exercise these options shall vest and become exercisable on January 2018. The exercise price is $0.51-$0.56 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.

During June 2018, the Company issued 400,000 options to an employee. The right to excise these options shall vest and become exercisable on July 2019 over a period of 5 years. The exercise price is $1.32 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.

During August 2018, the Company issued 150,000 options to employees and 600,000 options to non-employees. The right to excise these options shall vest and become exercisable on September 2019 over a period of 5 years. The exercise price is $1.20 per share for the non-employee options and $1.32 per share for the employee options. The options will expire ten years from the grant date for non-employee and 6.5 years for employee, unless terminated earlier as provided by the option agreements.

The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model using the assumptions noted as follows: expected volatility was based on a representative peer group of small public companies in their industry segment as the Company has a limited stock history. The expected term of options granted was determined using the simplified method under SAB 107 and represents the mid-point between the vesting term and the contractual term. The risk-free rate is calculated using the U.S. Treasury yield curve, and is based on the expected term of the option.

The Black-Scholes option pricing model was used with the following weighted average assumptions for options granted during the twelve months ended September 30, 2018 and 2017, respectively:

For employees		September 30, 2018		September 30, 2017
Risk-free interest rate		2.58% - 2.61%		1.43% - 1.75%
Expected option life		6.5 years		5.5 - 6.5 years
Expected volatility		94.2% - 95.1%		97.6% - 99.1%
Expected dividend yield		0.00%		0.00%
Exercise price		$1.32		$0.40 - $0.56

For non-employees		September 30, 2018		September 30, 2017
Risk-free interest rate		2.27 – 2.82%		2.27%
Expected option life		10 years		10 years
Expected volatility		115.70% - 120.6%		115.70%
Expected dividend yield		0.00%		0.00%
Exercise price		$1.20		$0.51

The Company is expensing these stock option awards on a straight-line basis over the requisite service period. The Company recognized stock option expense of $838,779 and $138,098 for the years ended September 30, 2018 and 2017. Unamortized option expense as of September 30, 2018, for all options outstanding amounted to approximately $2,250,000. These costs are expected to be recognized over a weighted-average period of 3 years.

The following table summarizes stock option activity for the year ended September 30, 2018.

				Weighted		Weighted
				Average		Average
		Number of		Exercise		Remaining		Aggregate
		Shares		Price		Contractual Life (years)		Intrinsic Value
Outstanding at September 30, 2017		3,064,500		$ 0.58		9.6		17,425
Granted		1,150,000		1.27
Exercised		-		-
Expired		-		-
Forfeited		(272,500)		0.47
Outstanding at September 30, 2018		3,942,000		$ 0.78		8.9		4,407,160

Exercisable at September 30, 2018		632,000		$ 0.51		7.9		860,960

The following table summarizes stock option activity for the year ended September 30, 2017.

				Weighted		Weighted
				Average		Average
		Number of		Exercise		Remaining		Aggregate
		Shares		Price		Contractual Life (years)		Intrinsic Value
Outstanding at September 30, 2016		573,000		$ 0.70
Granted		2,684,000		0.54
Exercised		-		-
Expired		(192,500)		0.48
Forfeited		-		-
Outstanding at September 30, 2017		3,064,500		$ 0.58		9.6		17,425

Exercisable at September 30, 2017		180,500		$ 0.48		8.4		17,425

A summary of the status of the Company’s unvested shares as of September 30, 2018 and 2017, are presented below:

		Number of
		Nonvested Shares
Nonvested shares at September 30, 2016		378,000
Granted		2,684,000
Exercised		-
Forfeited		(120,000)
Vested		(58,000)
Nonvested shares at September 30, 2017		2,884,000
Granted		1,150,000
Exercised		-
Forfeited		(240,000)
Vested		(484,000)
Nonvested shares at September 30, 2018		3,310,000