STOCK OPTIONS AND WARRANTS

9 Months Ended

Mar. 31, 2012

STOCK OPTIONS AND WARRANTS

Note 5.      STOCK OPTIONS AND WARRANTS

On July 10, 2003, the Company adopted the Warp 9, Inc. Stock Option Plan for Directors, Executive Officers, and Employees of and Key Consultants to the Company.  This Plan, may issue 25,000,000 shares of common stock.   Options granted under the Plan could be either Incentive Options or Nonqualified Options, and are administered by the Company’s Board of Directors.  Each option may be exercisable in full or in installment and at such time as designated by the Board.  Notwithstanding any other provision of the Plan or of any Option Agreement, each option are to expire on the date specified in the Option Agreement, which date are to be no later than the tenth anniversary of the date on which the option was granted (fifth anniversary in the case of an Incentive Option granted to a greater-than-10% stockholder).  The purchase price per share of the Common Stock under each Incentive Option is to be no less than the Fair Market Value of the Common Stock on the date the option was granted (110% of the Fair Market Value in the case of a greater-than-10% stockholder). The purchase price per share of the Common Stock under each Nonqualified Option were to be specified by the Board at the time the Option was granted, and could be less than, equal to or greater than the Fair Market Value of the shares of Common Stock on the date such Nonqualified Option was granted, but were to be no less than 85% of the Fair Market Value of the Common Stock on the date of grant.  The Plan provides specific language as to the termination of options granted.

WARP 9, INC. AND SUBSIDIARY

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

MARCH 31, 2012

On October 12, 2011, the Company granted 3,000,000 employee qualified (incentive) stock options, and 500,000 non-qualified stock options at a strike price of $0.004. The options vest 1/48th monthly and expire October 12, 2021.

A summary of the Company’s stock option activity for the three months ending March 31, 2012, and related information follows:

	March 31, 2012
	Options			Weighted average exercise price
Outstanding -beginning of period		3,588,000		$	0.01
Granted		-			-
Exercised		-			-
Forfeited		(10,000	)		0.40
Outstanding - end of period		3,578,000		$	0.01
Exercisable at the end of period		437,628		$	0.03
Weighted average fair value of
options granted during the year				$	14,000

The Black Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

The weighted average remaining contractual life of options outstanding issued under the plan as of

March 31, 2012 was as follows:

Exercise prices		Number of options outstanding		Weighted Average remaining contractual life (years)
$	0.350		20,000		1.75
$	0.050		50,000		2.56
$	0.050		8,000		6.33
$	0.004		3,500,000		9.54
			3,578,000