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

3 Months Ended

Mar. 31, 2013

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 March 31, 2013, options to purchase up to 120,000 shares of the Company’s common stock previously issued in 2009 through 2012 expired due to the termination of employees.

The following schedule summarizes the changes in the Company’s stock option plan for the three months ended March 31, 2013:

Weighted

Options Outstanding

Average

Number

Exercise

Remaining

Aggregate

Exercise

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

–

Options Exercised

–

Options Expired

(120,000)

0.34-0.55

–

0.44

Balance at March 31, 2013

15,725,000

0.06-0.55

3.30 years

–

0.42

Exercisable March 31, 2013

13,925,000

0.06-0.55

2.92 years

–

0.41

- 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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