Stock Options And Warrants

6 Months Ended

Jun. 30, 2018

Stock Options And Warrants

Stock Options and Warrants

10.  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 could issue 5,000,000 shares of common stock. The plan was administered by the Company’s Board of Directors, 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.

On August 1, 2017, we granted non-qualified stock options to purchase up to 10,000,000 shares of our common stock to Jill Giles, at a price of $0.01 per share. The stock options vest equally over a period of 36 months and expire August 1, 2022.

On September 18, 2017, we granted non-qualified stock options to purchase up to 1,800,000 shares of our common stock to three key employees, at a price of $0.05 per share. The stock options vest equally over a period of 36 months and expire September 18, 2022.

On January 3, 2018, we granted non-qualified stock options to purchase up to 20,000,000 shares of our common stock to three key employees, at a price of $0.04 per share. The stock options vest equally over a period of 36 months and expire January 3, 2023.

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. The fair value of options granted during the six months ended June 30, 2018 and year ended December 31, 2017, were determined using the Black Scholes method with the following assumptions:

	Six months ended			Year ended
	June 30, 2018			December 31, 2017
Risk free interest rate		5.00	%		5.00	%
Stock volatility factor		397	%		397	%
Weighted average expected option life		5 years			5 years
Expected dividend yield		none			none

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

	Six Months ended June 30, 2018				Six Months ended June 30, 2017
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding -beginning of period		134,800,000	$	0.013		123,000,000	$	0.013
Granted		20,000,000	$	0.040		—	$	—
Exercised		—	$	—		—	$	—
Forfeited		—	$	—		—	$	—
Outstanding - end of period		154,800,000	$	0.017		123,000,000	$	0.013
Exercisable at the end of the period		125,738,995	$	0.013		94,095,890	$	0.012
Weighted average fair value of
options granted during the year			$	800,000			$	—

As of June 30, 2018 and December 31, 2017, the intrinsic value of the stock options was approximately $1,783,750 and $3,632,450, respectively. Stock option expense for the six months ended June 30, 2018 and 2017 was $285,976 and $248,937, respectively.

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 June 30, 2018 was as follows:

		Number of		Weighted Average
Exercise		options		remaining contractual
prices		outstanding		life (years)
$	0.05		1,800,000		4.22
$	0.04		20,000,000		4.52
$	0.02		35,000,000		4.16
$	0.01		60,000,000		3.6
$	0.01		15,000,000		3.72
$	0.01		10,000,000		4.09
$	0.005		12,500,000		1.12
$	0.004		500,000		3.29
			154,800,000

Warrants

During the six months ended June 30, 2018 and 2017, the Company issued no warrants for services, and no warrants were outstanding.