Stock Options And Warrants

3 Months Ended

Sep. 30, 2017

Stock Options And Warrants

Stock Options and Warrants

9.    STOCK OPTIONS AND WARRANTS

Stock Options

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. Pursuant to the now terminated plan, the Company was authorized to issue 5,000,000 shares of common stock. The plan was administered by the Company’s Board of Directors (the “Board”), and options granted under the plan could be either incentive options or nonqualified options. Each option was 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 expired on the date specified in the option agreement, which date was 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 was 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 was to be specified by the Board at the time the option is 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 was to be no less than the par value of shares of common stock. The plan provided specific language as to the termination of options granted thereunder.

The Company used the historical industry index to calculate volatility, since the Company’s stock history did not represent the expected future volatility of the Company’s common stock. During the three months ended September 30, 2017, the Company issued options to purchase 11,800,000 shares of common stock. The fair value of options granted during the quarter ended September 30, 2017, was determined using the Black Scholes method with the following assumptions:

	Quarter Ended
	September 30, 2017
Risk free interest rate		5.00	%
Stock volatility factor		397	%
Weighted average expected option life		5 years
Expected dividend yield		none

A summary of the Company’s stock option activity and related information follows:

	Three Months ended September 30, 2017				Three Months ended September 30, 2016
			Weighted				Weighted
			average				average
			exercise				exercise
	Options		price		Options		price
Outstanding -beginning of period		123,000,000	$	0.013		123,000,000	$	0.013
Granted		11,800,000	$	0.016		—	$	—
Exercised		—	$	—		—	$	—
Forfeited		—	$	—		—	$	—
Outstanding - end of period		134,800,000	$	0.013		123,000,000	$	0.013
Exercisable at the end of the period		103,905,571	$	0.013		66,671,233	$	0.012
Weighted average fair value of
options granted during the year			$	190,000			$	—

As of September 30, 2017, the intrinsic value of the stock options was $5,582,350, and stock option expense for the three months ended September 30, 2017 was $132,824.

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, as of September 30, 2017 was as follows:

				Weighted
				Average
		Number of		remaining
Exercise		options		contractual
prices		outstanding		life (years)
$	0.050		1,800,000		4.97
$	0.015		35,000,000		4.90
$	0.013		60,000,000		4.35
$	0.013		15,000,000		4.47
$	0.010		10,000,000		4.84
$	0.053		12,500,000		1.87
$	0.004		500,000		4.04
			134,800,000

Warrants

During the periods ended September 30, 2017 and 2016, the Company issued no warrants for services, and no warrants were outstanding.