Singularity Future Technology Ltd. Stock Compensation Disclosure
Note 9. STOCK OPTIONS
The issuance of the Company’s options is exempted from registration under the Securities Act of 1933, as amended (the “Act”). The Common Stock underlying the Company’s options granted may be sold in compliance with Rule 144 of the Act. Each option may be exercised to purchase one share of the common stock of the Company, no par value per share (the “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 10,000 options granted in 2013 is 10 years and the exercise price is $2.01. The fair value 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 amortized stock option expense of $0 and $3,880 for the years ended June 30, 2018 and 2017.
Pursuant to the Company’s 2014 Stock Incentive Plan, effective on July 26, 2016, the Company granted options to purchase 150,000 shares of Common Stock to two employees with a one-year vesting period, one half of which vested on October 26, 2016, and the other half 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 Common Stock on July 26, 2016. The grant date fair value of such options was $0.77 per share. The fair value 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, $ 9,665 and 106,315 were recorded as general and administrative expenses related to these options for the years ended June 30, 2018 and 2017. In February 2017, 75,000 of these options were exercised by the two employees of the Company.
A summary of the options is presented in the table below:
| Shares | Weighted Average Exercise Price | |||||||
| Options outstanding, as of June 30, 2017 | 141,000 | $ | 3.81 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Cancelled, forfeited or expired | (56,000 | ) | 7.75 | |||||
| Options outstanding, as of June 30, 2018 | 85,000 | $ | 1.21 | |||||
| Options exercisable, as of June 30, 2018 | 85,000 | $ | 1.21 | |||||
Following is a summary of the status of options outstanding and exercisable at June 30, 2018:
| Outstanding Options | Exercisable Options | |||||||||||||||||
| Exercise Price | Number | Average Remaining Contractual Life | Average Exercise Price | Number | Average Remaining Contractual Life | |||||||||||||
| $ | 2.01 | 10,000 | 4.59 years | $ | 2.01 | 10,000 | 4.59 years | |||||||||||
| $ | 1.10 | 75,000 | 3.07 years | $ | 1.10 | 75,000 | 3.07 years | |||||||||||
| 85,000 | 85,000 | |||||||||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.