COMMON STOCK OPTIONS

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Note 13 - COMMON STOCK OPTIONS

On February 11, 2011, the Company adopted its 2011 Equity Incentive Plan (“the Plan”) under which 6,475,750 shares of common stock are reserved for issuance under options or other equity interests as set forth in the Plan. Under the Plan, options are available for issuance to employees, officers, directors, consultants and advisors. The Plan provides that the Board of Directors will determine the exercise price and vesting terms of each option on the date of grant. Options granted under the Plan generally expire ten years from the date of grant.

In connection the Merger, the Company exchanged issued and outstanding stock options in FPI for stock options in FPM with substantially the same terms.  Pursuant to the Merger, the shares of FPI were modified for the exchange ratio of 3 for 2 whereby the exchange ratio was applied to the original exercise price of the option and the common shares underlying the option.  In connection with this modification to the terms of the stock options, the Company recorded a one-time charge of $1,351,452 to stock option expense.

In May 2011, prior to the Merger, the Company granted Johan (Thijs) Spoor, the Company’s CEO, options to purchase 400,000, shares of common stock in the Company at $0.75 per share (aggregate fair value of $200,763). Mr. Spoor’s options will vest annually over four (4) years.  These options were adjusted for the exchange ratio and post merger the options are exercisable into 600,000 shares of common stock at $0.50 (aggregate fair value of $671,520) per share with one-quarter vesting annually.

Additionally, in May 2011, the Company issued 450,000 shares of common stock as a cashless exercise of 900,000 Stock Options.  Immediately following the Merger, FPM issued 161,250 shares of common stock in the cashless exercise of 215,000 (pre-merger FluoroPharma, Inc. options) options issued to a director of the Company.

The following is a summary of all common stock option activity during the two years ended June 30, 2011:

	Shares Under			Weighted Average
	Options Outstanding			Exercise Price
Outstanding at December 31, 2009		2,983,000		$	0.61
Options granted		460,000			0.75
Options forfeited		-			-
Options exercised		-			-
Outstanding at December 31, 2010		4,616,000		$	0.47
Options granted		600,000			0.50
Options forfeited		-
Options exercised		(1,115,000	)	$	0.47
Outstanding at June 30, 2011		4,101,000		$	0.41

			Weighted Average Exercise
	Options Exercisable		Price per Share
Exercisable at December 31, 2010		3,101,000	$	0.57
Exercisable at June 30, 2011		2,736,000	$	0.62

The following represents additional information related to common stock options outstanding and exercisable at June 30, 2011:

		Outstanding						Exercisable
				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Exercise Price		Number of		Contract Life		Exercise		Number of		Exercise
Price		Shares		in Years		Price		Shares		Price
$	0.13		315,000		2.29	$	0.13		315,000	$	0.13
$	0.17		885,000		7.10	$	0.17		630,000	$	0.17
$	0.50		1,680,000		5.70	$	0.50		570,000	$	0.50
$	0.67		318,000		1.51	$	0.67		318,000	$	0.67
$	0.95		573,000		5.36	$	0.95		573,000	$	0.95
$	1.17		165,000		7.05	$	1.17		165,000	$	1.17
$	1.33		165,000		7.35	$	1.33		165,000	$	1.33
			4,101,000		5.74	$	0.54		2,736,000	$	0.58

The weighted average remaining contractual term for fully vested share options (exercisable, above) and options expected to vest (outstanding, above) is 1.07 and 8.15 years.  The aggregate intrinsic value of all of the Company’s options is $2,083,000.

During the six months ended June 30, 2011, 737,500 shares were exercised pursuant to the Merger in exchange for shares of common stock of FPM.

A summary of the status of the Company’s non-vested stock options as of June 30, 2011 and changes is presented below:

Non-vested Stock Options	Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2010		1,890,000	$	1.15
Options granted		600,000		1.11
Options vested		(1,125,000)		1.18
Options forfeited		-		-
Non-vested at June 30, 2011		1,365,000	$	1.13

As of June 30, 2011, there was approximately $1,297,730 of unrecognized compensation cost related to non-vested options. Weighted average period of non-vested stock options was 8.74 years as of June 30, 2011.

The Company used the Black-Scholes option price calculation to value the options granted in 2011 in connection with the merger transaction, using the following assumptions: risk-free rate of 3.90%; volatility of 117%; average term of five (5) years and exercise price of options granted. See Note 3, Summary of Significant Accounting Policies, “Accounting for Share Based Payments.”