Kartoon Studios, Inc. Quarterly report pursuant to sections 13 or 15(d)

Quarterly report pursuant to sections 13 or 15(d)

10. Stock Options

10. Stock Options

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Note 10: Stock Options

The Company has adopted the provisions of ASC 718 – Compensation which requires companies to measure the cost of employee services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest.

On December 29, 2008, the Company adopted the Pacific Entertainment Corporation 2008 Stock Option Plan (the “Plan”), which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons. The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors. The number of shares of the Company’s common stock initially reserved for issuance under the Plan was 11 million. On September 2, 2011, the shareholders holding a majority of the Company’s outstanding common stock adopted an amendment to the Company’s 2008 Stock Option Plan to increase the number of shares of common stock issuable under the plan to 50 million.

As of June 30, 2013, options to purchase up to 8,370,000 shares of the Company’s common stock previously issued in 2009 through 2012 expired or were cancelled.

On May 15, 2013, Stock Option Grant Notices were issued to each of five officers to purchase up to 750,000 shares of common stock, vesting on the grant date, at an exercise price of $0.20 per share. The options have expiration dates five years from the grant date.

On May 15, 2013, options to purchase up to 250,000 shares of common stock were issued to an employee, vesting on the date of grant, at an exercise price of $0.20 per share. The options have an expiration date five years from the date of the grant notice.

On May 15, 2013, pursuant to amendments to employment agreements with Messrs. Moeller, Meader, Larry Balaban and Howard Balaban, Stock Option Grant Notices previously granted to each employee to purchase up to two million shares of common stock expiring on January 20, 2014 were cancelled effective immediately.

The following schedule summarizes the changes in the Company’s stock option plan for the six months ended June 30, 2013:

					Weighted				Weighted
	Options Outstanding				Average				Average
	Number		Exercise		Remaining		Aggregate		Exercise
	of		Price		Contractual		Intrinsic		Price
	Shares		per Share		Life		Value		per Share

Balance at December 31, 2012		15,845,000	$	0.06-0.55	3.55 years			-	$	0.42
Options Granted		4,000,000		0.20	5.00 years			-		0.20
Options Exercised		-		-		-		-		-
Options Expired		(8,370,000)		0.34-0.55		-		-		0.44
Balance at June 30, 2013		11,475,000	$	0.06-0.55	5.49 years			-	$	0.32

Exercisable June 30, 2013		10,175,000	$	0.06-0.55	5.28 years			-	$	0.31

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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