NOTE 10 – COMMON STOCK OPTIONS

The Company has determined the estimated value of the options granted to employees and non-employees in exchange for services and financing expenses using the Black-Scholes pricing model and the following assumptions: stock price at valuation, $1.20-10.11; expected term of five years, exercise price of $1.50-10.11, a risk free interest rate of 0.68-2.60 percent, a dividend yield of 0 percent and volatility of 81-277 percent.

On March 9, 2012, the Company granted 566,667 options to board members and executives. The Company calculated a fair value of $1.89 per option. Of the 566,667 options issued, 141,667 vested upon issuance and the remaining 425,000 vest in 25 percent tranches on each anniversary.  For the years ended September 30, 2014, 2013 and 2012, 425,000, 283,333 and 141,667 options have vested, respectively, resulting in compensation expense of $268,078, $328,354 and $358,367, respectively. 

On April 30, 2013, the Company granted 116,667 options to a board member. The Company calculated a fair value of $4.59 per option. Of the 116,667 options issued, 29,167 vested upon issuance and the remaining 87,500 vest in 33 percent tranches on the next three anniversary dates. For the years ended September 30, 2014, 2013, and 2012 58,333, 29,167 and 0 options have vested, respectively, resulting in compensation expense of $133,690, $189,852, and $0, respectively.

On May 17, 2013, the Company granted 116,667 options to a board member. The Company calculated a fair value of $4.50 per option. Of the 116,667 options issued, 29,167 vested upon issuance and the remaining 87,500 vest in 33 percent tranches on the next three anniversary dates. For the years ended September 30, 2014, 2013, and 2012, 58,333, 29,167 and 0 options have vested, respectively, resulting in compensation expense of $131,165, $180,156, and $0, respectively.

On February 3, 2014, the Company granted 500,000 options, with an exercise price of $10.11 per share, to employees as part of its 2014 stock option plan. The Company calculated a fair value of $1,954,384 for the options. Of the 500,000 options issued, 125,000 vested upon issuance and the remaining 375,000 vest in 25 percent tranches on each anniversary of grant. For the years ended September 30, 2014, 2013 and 2012, 125,000, 0 and 0 options have vested, respectively, resulting in compensation expense of $814,327, $0 and $0, respectively.

On July 24, 2014, the Company granted 355,000 options, with an exercise price of $8.39 per share, to employees as part of its 2014 stock option plan. The Company calculated a fair value of $1,661,682 for the options. Of the 355,000 options issued, 88,750 vested upon issuance and the remaining 266,250 vest in 25 percent tranches on each anniversary of grant. For the years ended September 30, 2014, 2013 and 2012, 88,750, 0 and 0 options have vested, respectively, resulting in compensation expense of $610,436, $0 and $0, respectively.

On September 5, 2014, the Company granted 60,000 options, with an exercise price of $7.77 per share, to an employee as part of its 2014 stock option plan. The Company calculated a fair value of $250,683 for the options. Of the 60,000 options issued, 15,000 vested upon issuance and the remaining 45,000 vest in 25 percent tranches on each anniversary of grant. For the years ended September 30, 2014, 2013 and 2012, 15,000, 0 and 0 options have vested, respectively, resulting in compensation expenses of $86,957, $0 and $0, respectively.

During the year ended September 30, 2014, the Company recognized $2,074,487 of expense related to vested options that were granted both in the current year and in prior years. Unamortized option expense as of September 30, 2014, 2013 and 2012 for all options outstanding amounted to approximately $3,161,447, $1,112,000 and $737,496, respectively.

Below is a table summarizing the options issued and outstanding as of September 30, 2014:

As of September 30, 2013, the outstanding options have an intrinsic value of approximately $5.6 million.