Annual report pursuant to section 13 and 15(d)

5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

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5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements  
NOTE 5 - STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

During the year ended December 31, 2010, the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan) under which the Company may grant options to purchase up to 5,000,000 shares of common stock. As of December 31, 2012, there were 578,400 options outstanding under the 2010 Plan.

 

During the year ended December 31, 2011, the Company adopted a non-qualified stock option plan entitled “2011 Non-Qualified Stock Plan” (2011 Plan) under which the Company may grant options to purchase 2,100,000 shares of common stock.  In December 2012, the 2011 Plan was amended and restated to increase the number of shares of common stock issuable under the 2011 Plan to 12,000,000 shares.  As of December 31, 2012, there were 7,130,000 options outstanding under the 2011 Plan.

 

Under the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options is typically three to four years and the options expire ten years from the date of grant.   

The following table summarizes the activity under the Stock Plans.

 

    Shares     Price per Share     Weighted Average Exercise Price  
Outstanding, December 31, 2010     78,400     $ 1.85     $ 1.85  
                         
Granted     1,921,237     0.10 to 0.25       0.13  
Exercised     -       -       -  
Options forfeited/cancelled     (421,237 )     -       0.25  
Outstanding, December 31, 2011     1,578,400     0.10 to 1.85       0.19  
                         
Granted     6,130,000     0.10 to 0.50       0.48  
Exercised     -       -       -  
Options forfeited/cancelled     -       -       -  
                         
Outstanding, December 31, 2012     7,708,400     $ 0.10 to 1.85     $ 0.42  

                    

 

The following table summarizes information about stock options that are vested or expected to vest at December 31, 2012:

 

  Vested  or  Expected  to Vest           Exercisable  Options      
            Weighted                     Weighted      
            Average   Weighted                 Weighted   Average      
          Exercise   Average             Average   Remaining    
    Number     Price   Remaining     Aggregate     Number     Exercise   Contractual     Aggregate
  Exercise   of     Per   Contractual     Intrinsic     of     Price   Life     Intrinsic
  Price   Options     Share   Life (Years)     Value     Options     Per Share   (Years)     Value
$ 0.10   1,800,000   $ 0.10   3.87   $ 576,000     1,306,250   $ 0.10   3.93   $ 418,000
  1.85   78,400     1.85   2.75     -     78,400     1.85   2.75     -
  0.50   5,830,000     0.50   5.13                   -     934,167     0.50   5.95                   -
$ 0.10-1.85   7,708,400   $ 0.42   4.81   $ 576,000     2,318,817   $ 0.32   4.71   $ 418,000

 

The weighted-average remaining contractual life for options exercisable at December 31, 2012 is 4.71 years. At December 31, 2012 the Company has 4,870,000 and 4,421,600 options available for grant under the 2011 Plan and 2010 Plan, respectively.

 

The intrinsic value for fully vested, exercisable options was $418,000 and $96,206 at December 31, 2012 and 2011, respectively.  No actual tax benefit was realized from stock option exercises during these periods.