NOTE 6. STOCK OPTIONS

In February 2007, the Company’s Board of Directors adopted the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan allowed the Company to provide options as an incentive for employees and consultants. On May 11, 2011, the 2007 Plan was amended to increase the number available for issuance under the 2007 Plan from 2,313,317 to 4,889,829 shares of Series A common stock. In connection with the reverse merger on May 12, 2011, the Company canceled all of their outstanding stock options under the 2007 Plan effectively canceling the 2007 Plan. The Company simultaneously issued new options to the same employees under a new 2011 Equity Incentive Plan of IZEA Holdings, Inc. adopted on May 12, 2011. The cancellation and replacement of the stock options under the 2007 Plan are accounted for as a modification of the terms of the canceled award. There was no incremental difference required to be recorded in the financial statements since the fair value of the cancelled options exceeded the fair value of the options replaced at the date of cancellation and replacement.

The Board of Directors determines the price to be paid for the shares, the period within which each option may be exercised, and the terms and conditions of each option. The exercise price of the incentive stock options shall be equal to 100% of the fair market value per share of the Company’s common stock on the grant date. If an individual owns stock representing more than 10% of the outstanding shares, the price of each share shall be 110% of fair market value. The exercise price for nonqualified stock options may be less than fair market value of the stock, as determined by the Board of Directors. Unless otherwise determined by the Board of Directors at the time of grant, the right to purchase shares covered by any options under the 2011 Plan shall vest over the requisite service period as follows: one-fourth of options shall vest one year from the date of grant and the remaining options shall vest monthly, in equal increments over the remaining three-year period. The term of the options is up to 10 years.

A summary of option activity under the 2007 and 2011 Options Plans as of June 30, 2011 and for the six months then ended is presented below:

2007 Plan
Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Years)

Outstanding at December 31, 2010		69,970		$	1.1		2
Granted		3,788,620			0.03
Exercised		(14,822	)		0.03
Forfeited		(50,803	)		0.03
Canceled		(3,792,965	)		0.05

Outstanding at May 12, 2011 (date Plan was canceled)		–		$	–		–

2011 Plan
Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Years)

Outstanding at December 31, 2010		–		$	–		–
Granted		4,042,365			0.39		6.6
Exercised		–			–		–
Forfeited		–			–		–

Outstanding at June 30, 2011		4,042,365		$	0.39		6.6

Exercisable at June 30, 2011		1,924,991		$	0.39

The following table contains summarized information about nonvested 2007 stock options outstanding at May 12, 2011 and nonvested 2011 stock options outstanding at June 30, 2011:

2007 Plan
	Shares			Weighted Average Grant Date Fair Value

Nonvested at December 31, 2010		16,851		$	0.60
Granted		3,788,620			0.03
Vested		(1,895,797	)		0.01
Forfeited		(50,803	)		0.03
Canceled		(1,858,872	)		0.02

Nonvested at May 12, 2011 (date plan was cancelled)		–		$	–

2011 Plan
	Shares			Weighted Average Grant Date Fair Value

Nonvested at December 31, 2010		–		$	–
Granted		4,042,365			0.04
Vested		(1,924,991	)		0.02
Forfeited		–			–

Nonvested at June 30, 2011		2,117,374		$	0.05

Stock-based compensation expense recognized on awards outstanding during the six months ended June 30, 2010 and 2011 was not recorded since amounts were not significant to the financial statements.