10 - Stock Options and Warrants

9 Months Ended

Sep. 30, 2011

Stockholders' Equity Note Disclosure [Text Block]

10 — Stock Options and Warrants

2004 Stock Option Plan - Effective January 1, 2004, the Company’s Board of Directors adopted the 2004 Stock Option Plan for Directors, Officers, and Employees of and Consultants to InterMetro Communications, Inc. (the “2004 Plan”).  A total of 5,730,222 shares of the Company’s common stock had been reserved for issuance under the 2004 Plan. Upon shareholder ratification of the 2004 Plan pursuant to the definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on March 6, 2007, the Company froze any further grants of stock options under the 2004 Plan. Any shares reserved for issuance under the 2004 Plan that were not needed for outstanding options granted under that plan were cancelled and returned to treasury shares. 

As of September 30, 2011, the Company has granted a total of 5,714,819 stock options under the 2004 Plan to the officers, directors, and employees, and consultants of the Company, of which 308,077 expired in September 2007 and an additional 523,734 expired during the year ended December 31, 2008.  In the three months ended March 31, 2008, the Company issued 1,143,165 shares of common stock on the cashless exercise of 1,232,320 stock purchase options.  The remaining 3,650,688 are fully vested at September 30, 2011 and were originally granted with exercise prices ranging from $0.04 to $0.97 per share.  On November 15, 2010, in order to provide continued economic incentive to option holders, most of whose options were issued at prices that were “out of the money”, the Board of Directors authorized a re-pricing of all the stock options under the 2004 Plan to $0.01, the closing price of the Company’s common stock on that day. The incremental compensation cost computed using the Black-Scholes option pricing model was $14,000 which was charged to expense on that date.

Omnibus Stock and Incentive Plan – Effective January 19, 2007, our Board of Directors approved the 2007 Omnibus Stock and Incentive Plan (the “2007 Plan”) for directors, officers, employees, and consultants. Our shareholders ratified the 2007 Plan pursuant to the Schedule 14C Information Statement filed with the Securities and Exchange Commission which was declared effective on May 10, 2007.   Any employee or director of, or consultant for, us or any of the Company’s subsidiaries or other affiliates will be eligible to receive awards under the 2007 Plan. The Company has reserved 12,552,181 shares of common stock for awards under the 2007 Plan. The 2007 Plan specifically prohibits the re-pricing of any stock options awarded under this plan.

In November 2007, InterMetro granted 2,350,000 stock options to purchase shares of common stock under the 2007 Plan at an average exercise price of $0.25 per share to employees and directors. 1,095,000 of the shares granted were immediately vested at date of grant.  In October 2008, InterMetro granted 600,000 stock options to purchase shares of common stock under the 2007 Plan at an average exercise price of $0.25 per share to employees and directors. 30% vested at date of grant with the remaining vesting 1/12 per subsequent quarter over the succeeding 3 years expiring 5 years from date of grant.  No options to purchase shares of common stock were granted under the 2007 plan during the nine months ended September 30, 2011.  As of September 30, 2011 none of the Company’s outstanding stock options under the 2007 Plan have been exercised.

The following presents a summary of activity under the Company’s 2004 and 2007 Plans for the nine months ended September 30, 2011 (unaudited):

	Number of Shares		Price per Share		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options outstanding at December 31, 2010		6,600,688	$	—	$	0.12		5.16	$	182,534
Granted		—		—		—
Exercised		—		—		—
Forfeited/expired		—		—		—
Options outstanding at September 30, 2011		6,600,688	$		$	0.12		4.41	$	146,028
Options vested and expected to vest in the future at September 30, 2011		6,600,688	$		$	0.12		4.41	$	146,028
Options exercisable at September 30, 2011		6,600,688	$		$	0.12		4.41	$	146,028

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last day of the nine month period ended September 30, 2011 and the exercises price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2011. This amount changes based on the fair market value of the Company’s stock.  As of September 30, 2011, 9,602,181 shares remain available for grant.

Additional information with respect to the outstanding options at September 30, 2011 is as follows:

		Options Outstanding						Options Exercisable
Exercise Prices		Number of Shares		Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$	0.01		1,478,748		2.25	$	0.01		1,478,748	$	0.01
	0.01		154,039		2.50		0.01		154,039		0.01
	0.01		431,307		2.75		0.01		431,307		0.01
	0.01		123,231		3.25		0.01		123,231		0.01
	0.01		277,269		4.00		0.01		277,269		0.01
	0.25		2,950,000		6.00		0.25		2,950,000		0.25
	0.01		338,884		4.00		0.01		338,884		0.01
	0.01		643,880		4.25		0.01		643,880		0.01
	0.01		110,907		4.25		0.01		110,907		0.01
	0.01		92,423		4.50		0.01		92,423		0.01
			6,600,688						6,600,688

As of September 30, 2011, there was no unrecognized compensation cost related to unvested share based compensation arrangements granted under the 2004 and 2007 option plans.

Warrants – Historically, the Company has issued warrants to providers of equipment financing.  For a detailed description of the warrants issued in connection with equipment financing arrangements, see Note 4.

On April 30, 2008, the Company negotiated a revolving line of credit, which, as amended in September 2008, November 2008, May 2009, January 2010, September 2010, December 2010, March 31, 2011, June 30, 2011 and September 30, 2011 allows the Company to borrow up to $2.4 million.  Warrants to purchase 14,600,000 shares of the Company’s common stock with exercise prices ranging from $0.01 to $0.05 per share have been granted through September 30, 2011 in connection with securing and amending this credit facility. In August 2011 the lender exercised a put to sell back to the Company 766,497 warrants for $100,000 resulting in an outstanding balance of 13,833,503 warrants at September 30, 2011.  See Note 11 for a detail of the warrants issued in connection with this credit facility.

The Company has issued warrants to its secured note holders in connection with the execution of the loan agreements and subsequent amendments.  Warrants to purchase and aggregate of 4,302,500 and 1,920,000 shares of the Company’s common stock with exercise prices ranging from $0.01 to $0.50 were outstanding with these note holders as of September 30, 2011 and 2010, respectively.  See Note 7 for further details of these warrants.

In February 2011 a shareholder exercised warrants to purchase 1,232,305 shares of the Company’s common stock for $9,858. Pursuant to a vendor settlement, in August 2011 the Company issued a warrant to purchase 145,000 shares with a Black-Scholes fair market value of $2,000.