COMMON STOCK OPTIONS

12 Months Ended

Dec. 31, 2012

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 were 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 with 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 of the shares 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 fully paid and non-assessable shares of restricted common stock in the cashless exercise of 215,000 (pre-merger FluoroPharma, Inc.) options to a director of the Company.  These shares of restricted stock are subject to the terms of the Plan and are unvested and outstanding as of December 31, 2012.  The shares shall vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the Plan, (ii) the successful completion of a Phase II clinical trial for any of the Company’s products, or (iii) the determination by the Board of Directors to provide for immediate vesting.  The weighted average grant-date fair value is $0.83 per share.

The following is a summary of all common stock option activity for the year ended December 31, 2012:

	Shares Under Options Outstanding		Weighted Average Exercise Price
Outstanding at December 31, 2011		4,167,584	$	0.62
Options granted		976,464	$	0.84
Options forfeited		(1,108,620)	$	0.39
Options exercised		-	$	-
Outstanding at December 31, 2012		4,035,428	$	0.66

	Options Exercisable		Weighted Average Exercise Price per Share
Exercisable at December 31, 2011		2,876,714	$	0.58
Exercisable at December 31, 2012		2,294,053	$	0.66

The weighted average fair value of options granted during the year ended December 31, 2012 was $0.53.

The weighted average remaining contractual term for exercisable and outstanding options is 5.99 and 7.21 years, respectively.  The aggregate intrinsic value of all of the Company’s exercisable and outstanding options is approximately $598,000 and $877,000, respectively.

As of December 31, 2012, there was approximately $1,100,000 of unrecognized compensation cost related to non-vested options. The unrecognized compensation expense is estimated to be recognized over a period of 2.13 years at December 31, 2012.

The Company used the Black-Scholes option pricing model to value the all option grants (see Note 2, Summary of Significant Accounting Policies, “Accounting for Share Based Payments”).