Quarterly report pursuant to Section 13 or 15(d)

EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN

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EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN
 6 Months Ended
Jun. 30, 2013
EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN  
EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN

NOTE 6 – EMPLOYEE STOCK OPTIONS

 

Compensation expense charged against income for share-based awards during the three and six months ended June 30, 2013 was $885,958 and $1,701,721, respectively, as compared to $154,348 and $445,234, respectively, for the three and six months ended June 30, 2012.  These amounts are included in general and administrative expense in the accompanying financial statements.

 

In 2011, Stanford’s Board of Directors and stockholders approved and adopted a long-term incentive plan which allows for the issuance of up to 2,500,000 shares of common stock through the grant of qualified stock options, non-qualified stock options and restricted stock. In 2013, the stockholders approved an amendment to the long-term incentive plan, increasing the number of shares eligible under the plan to 5,000,000 shares.  As of June 30, 2013, there were 2,427,500 shares remaining eligible for issuance under the plan.

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model and using certain assumptions. The expected volatility is based on the historical price volatility of the Dow Jones U.S. Oil and Gas Index. The Company uses the simplified method for estimating the expected term for options granted. Under the simplified method, the expected term is equal to the midpoint between the vesting period and the contractual term of the stock option. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options. The dividend yield represents the Company’s anticipated cash dividend over the expected life of the stock options. The following are the assumptions used to determine the fair value of options granted during the six months ended June 30, 2013:

 

Expected volatility

 

128% - 138%

Weighted-average volatility

 

137%

Expected dividends

 

0

Expected term (in years)

 

6.5

Risk-free interest rate

 

0.76% - 1.49%

 

No options were granted during the six months ended June 30, 2012. 

 

A summary of the stock option activity as of June 30, 2013 and changes during the six months then ended is as follows:

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

Shares

 

Price

 

Term

 

Value

Outstanding, December 31, 2012

1,125,000

$

2.37

 

 

 

 

Granted

 

 

1,585,000

 

4.66

 

 

 

 

Forfeited

 

 

(137,500)

 

2.55

 

 

 

 

Exercised

 

 

(10,000)

 

2.00

 

 

 

 

Outstanding, June 30, 2013

2,562,500

$

3.78

 

9.0 Years

$

12,283,140

Exercisable, June 30, 2013

212,500

$

2.12

 

6.5 Years

$

1,411,500

 

The weighted-average grant-date fair value of options granted during 2013 was $4.20 per share. As of June 30, 2013, there was approximately $6,051,047 of unrecognized compensation cost related to stock options that is expected be recognized over a weighted-average period of 2.7 years. The aggregate intrinsic values were determined based on the $8.76 market value of the Company’s common stock on June 28, 2013.