XML 44 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
EMPLOYEE STOCK OPTIONS
 6 Months Ended
Jun. 30, 2012
EMPLOYEE STOCK OPTIONS  
EMPLOYEE STOCK OPTIONS

NOTE 6 – EMPLOYEE STOCK OPTIONS

 

Compensation expense charged against income for share-based awards during the three and six months ended June 30, 2012 was $154,348 and $445,234, respectively, with no comparable amounts for the three and six months ended June 30, 2011, and is 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. As of December 31, 2011, there were 1,375,000 shares eligible for issuance under the plan. On December 1, 2011, the Company granted 1,125,000 non-qualified stock options exercisable at $2.00 per share. The stock options vest at the rate of 20% each year over five years beginning one year from the date granted and expire ten years from the date granted.

 

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 used the simplified method for estimating the expected term for options granted in 2011. 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 weighted-average assumptions used to determine the fair value of options granted during the eight months ended December 31, 2011:

 

Risk free interest rate

0.97%

Expected life

6.5 years

Dividend yield

-

Volatility

32%

 

A summary of the stock option activity as of December 31, 2011, and changes during the eighth months then ended is as follows:

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

Shares

 

Price

 

Term

 

Value

Outstanding, April 30, 2011

-

 

 

 

 

 

 

Granted

1,125,000

 

 $      2.00

 

 

 

 

Outstanding, December 31, 2011

1,125,000

 

 $      2.00

 

9.9 Years

 

 $2,205,000

Exercisable, December 31, 2011

-

 

 

 

 

 

 

 

The weighted-average grant-date fair value of options granted during 2011 was $2.32 per share. Share-based compensation expense for the eight months ended December 31, 2011 was $95,897. As of December 31, 2011, there was approximately $2,463,620 of unrecognized compensation cost related to stock options that is expected be recognized over a weighted-average period of 2.9 years. The aggregate intrinsic value was determined based on the $4.00 market value of the Ring Energy, Inc. common stock on December 31, 2011.

 

A summary of the status of the stock options as of June 30, 2012 is as follows:

 

 

Options

Weighted-Average Exercise Price

Outstanding at December 31, 2011

1,125,000

$            2.00

Exercised

-

-

 

 

 

Outstanding at June 30, 2012

1,125,000

2.00

 

 

 

Exercisable at June 30, 2012

-

$                  -

 

As of June 30, 2012, there was approximately $1,440,189 of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of 2.96 years.  The aggregate intrinsic value of options expected to vest at June 30, 2012 was $2,632,500.  No options were exercisable as of June 30, 2012.  The intrinsic value calculations are based on a June 29, 2012 closing price of the Company’s common stock of $5.12.