Stock Options

12 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

STOCK OPTIONS

12. STOCK OPTIONS

On November 28, 2005, and as amended on December 4, 2013, the Board of Deep Well adopted the Deep Well Oil & Gas, Inc. Stock Option Plan (the “Plan’). The Plan was approved by the majority of shareholders at the February 24, 2010 general meeting of shareholders. The Plan, is administered by the Board, permits options to acquire shares of the Company’s common stock (the “Common Shares”) to be granted to directors, senior officers and employees of the Company and its subsidiaries, as well as certain consultants and other persons providing services to the Company or its subsidiaries.

The maximum number of shares, which may be reserved for issuance under the Plan, may not exceed 10% of the Company’s issued and outstanding Common Shares, subject to adjustment as contemplated by the Plan. The aggregate number of Common Shares with respect to which options may be vested to any one person (together with their associates) under the plan, together with all other incentive plans of the Company in any one year shall not exceed 2% of the total number of Common Shares outstanding, and in total may not exceed 6% of the total number of Common Shares outstanding.

Between June 8 to 10, 2018, five directors, two contractors and one employee of the Company, exercised a total of 3,150,000 option shares at an exercise price of $0.05 by way of a cashless exercise to acquire a total of 899,998 common shares of the Company, based upon the market value of the Company’s common stock of $0.07 per share on June 8, 2018, whereby 2,250,002 common shares were withheld by the Company to pay for the exercise price of the options. The stock certificates from the latest exercise of stock options are currently held in escrow upon final approval and release by Management of the Company.

On June 19, 2018, one director of the Company acquired 300,000 common shares of the Company upon exercising stock options, at an exercise price of $0.05 per common share for total gross proceeds to the Company of $15,000.

On October 28, 2018, 250,000 stock options previously granted on October 28, 2013 to a contractor for services in connection with the Farmout Agreement, expired unexercised.

On December 4, 2018, 450,000 stock options previously granted on December 4, 2013 to one director, expired unexercised.

On September 19, 2019, 6,780,000 stock options previously granted on September 19, 2014 to seven directors, two contractors and one employee expired unexercised.

For the year ended September 30, 2019, the Company recorded no share-based compensation expense related to stock options (September 30, 2018 – $Nil). As of September 30, 2019, there was no unrecognized compensation cost related to option awards. Compensation expense is based upon straight-line depreciation of the grant-date fair value over the vesting period of the underlying unit option.

	Shares Underlying Options Outstanding				Shares Underlying Options Exercisable
Range of Exercise Prices	Shares Underlying Options Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price	Shares Underlying Options Exercisable		Weighted Average Exercise Price
$0.23 at September 30, 2019	600,000	0.13	$	0.23	600,000	$	0.23

The aggregate intrinsic value of exercisable options as of September 30, 2019, was $Nil (September 30, 2018 - $Nil).

The following is a summary of stock option activity as at September 30, 2019:

	Number of Underlying Shares			Weighted Average Exercise Price		Weighted Average Fair Market Value
Balance, September 30, 2018		8,080,000		$	0.36	$	0.29
Expired, October 28, 2018		(250,000	)		0.30		0.30
Expired, December 4, 2018		(450,000	)		0.34		0.36
Expired, September 19, 2019		(6,780,000	)		0.38		0.30
Balance, September 30, 2019		600,000		$	0.23	$	0.18
Exercisable, September 30, 2019		600,000		$	0.23	$	0.18

A summary of stock options at September 30, 2019 and 2018 and changes during the periods then ended is presented below:

	September 30, 2019					September 30, 2018
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding balance at beginning of period		8,080,000		$	0.36		11,530,000		$	0.29
Exercised, June 8, 2018							(3,450,000	)		0.05
Expired, October 28, 2018		(250,000	)		0.30
Expired, December 4, 2018		(450,000	)		0.34
Expired, September 19, 2019		(6,780,000	)		0.38
Outstanding at end of period		600,000		$	0.23		8,080,000		$	0.36
Exercisable		600,000		$	0.23		8,080,000		$	0.36

There were no remaining unvested stock options outstanding as of September 30, 2019 (September 30, 2018 – Nil).

Measurement Uncertainty for Stock Options

The Company used the Black-Scholes pricing model (“Black-Scholes”) to value the stock options. This pricing model was developed for use in estimating the fair value of traded “European” options. The stock options that are granted to employees, directors and consultants are non-transferable and some vest over time, and are “American” options. This pricing model requires the input of subjective assumptions including expected share price volatility. The fair value estimate can vary materially as a result of changes in the assumptions, and therefore can materially affect the calculated fair value of the stock options. The following assumptions were used in the Black-Scholes pricing model to value the stock options:

Expected Term – Expected term of 5 years represents the period that the Company’s stock-based awards are expected to be outstanding.

Expected Volatility – Expected volatilities are based on historical volatility of the Company’s stock, adjusted where determined by management for unusual and non-representative stock price activity not expected to recur. The expected volatility used ranged from 102% to 122%.

Expected Dividend – The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company currently pays no dividends and does not expect to pay dividends in the foreseeable future.

Risk-Free Interest rate – The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The risk-free rate used ranged from 1.31% to 2.07%.