issue of options to consultant, page-50

When options are granted to an employee companies use the Black Scholes model to work out the cost to them for accounting purposes.

To calculate the cost to Unilife the following assumptions about the options need to be made:
1 they are long call options
2 the strike price is $1.055
3 they expire on 30 Jan 2015
4 volatility is 40%
5 date of valuation 15 Jan 2010
6 share price on valuation date $1.055
Using the Black Scholes model, the value of this option is 36.6 cent.

In other words it will cost Unilife (on 15 Jan 2010) $2,194,553 to provide the parcel of 6,000,000 to the consultant.

I understand the options are provided to the consultant in lieu of pay for future work. If all the vesting targets are met in the next 12 months, which seems highly likely to me, it will have cost the company $2.2M to engage him for the period.

Serrata