Note 12. Stock Incentive Plan

12 Months Ended

Dec. 31, 2013

Notes

Note 12. Stock Incentive Plan

NOTE 12.  STOCK INCENTIVE PLAN

The Company adopted the Apollo Solar Energy, Inc. Stock Incentive Plan pursuant to which the Company may issue up to 6,675,000 shares of the Company’s common stock.  The plan administrator has the authority, in its sole discretion, to determine the type or types of award including, but not limited to, Incentive Stock Options, Non Qualified Stock Options, Performance Options, Performance Stock Awards, and Restricted Stock Awards.

The exercise price of Incentive Stock Options cannot be less than the fair market value of the Common Stock on the date of grant.  The term of Options granted under the plan is established by the plan administrator, or if not established is 10 years.

During the year ended December 31, 2010, the Company issued 2,000,000 options to three employees.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award.

The key assumptions for the Black-Scholes valuation method include the expected life of the option, stock price volatility, a risk-free interest rate, and dividend yield. Many of these assumptions are judgmental and highly sensitive. Following is a table of the weighted-average Black-Scholes value of our stock option grants, and the key weighted-average assumptions used in the valuation calculations for the options granted.

Weighted-average Black-Scholes value
Black-Scholes Assumptions:
Expected lives	3 years
Expected volatility		40	%
Risk-free interest rate		2	%
Dividend yield		-

A summary of options under the Stock Incentive Plan as of December 31, 2013 and 2012, and changes during the years then ended is as following:

	Shares		Weighted Average Shares Exercise Price	Remaining Contractual Term	Average Intrinsic Value
Outstanding at January 1, 2012	2,080,000	$	3.43	1.75 years	810,010
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2012	2,080,000		3.43	0.75 years	-
Granted
Exercised
Forfeited or expired	(1,080,000)		3.40
Outstanding at December 31, 2013	1,000,000	$	3.50	-	-

A summary of the status of non-vested options as of December 31, 2013 and 2012 and changes during the years then ended is as follows:

				Weighted Average
	Shares			Exercise Price
Nonvested at January 1, 2012	1,241,667		$	3.49
Granted	-
Vested	(451,389	)	$	3.49
Forfeited or expired	(456,944)
Nonvested at December 31, 2012	333,334		$	3.50
Granted	-		$	-
Vested	(333,334)		$	3.50
Forfeited or expired	-			-
Nonvested at December 31, 2013	-		$	-

No options were exercised during the year ended December 31, 2013 and 2012. 456,944 options issued to our former CFO and COO was forfeited during the year ended December 31, 2012 as their employment agreements were terminated.