Ann: Letter to Shareholders, page-7

Not quite right. Being an option, it is just an entitlement to purchase at the exercise price before the expiration date so, on your point 3, if they expired in 6 months they wouldn't be worth much at all (unless you're confident the SP will climb above 30c by October). It's far better to have options with a long expiry.

It achieves three things:
1. A little cash flow now.

2. Reward early investors for holding (plus fulfilling the promise in the IPO prospectus).

3. Provide further cash flow over the next couple of years. Once the patent situation firms up and deals start to be negotiated in more detail the SP will increase accordingly and options will start to be exercised, bringing in cash. Meanwhile, the cashflow demands will also increase as the business moves into its next phase.

It's a way of ensuring the cash is going to be there to support growth when the need arises, and that the greatest benefit goes to those who took the greatest risk by investing early.