Note 12. Stock Options

3 Months Ended

Jun. 30, 2012

Note 12. Stock Options

On July 8, 2011, the Board of Directors approved the ZYTO Corp 2011 Equity Incentive Plan (“the 2011 Plan”). On December 6, 2011, the stockholders also approved the 2011 Plan.

The 2011 Plan permits the granting of equity awards to purchase up to 5,000,000 shares of common stock. Persons eligible to participate in the 2011 Plan include members of the Board of Directors, our consultants, all of our employees, and our subsidiary, as determined by our Board of Directors.

As of June 30, 2012, there were 3,036,342 shares available for issuance under the 2011 Plan.

On April 2, 2012 we granted options to acquire 100,000 shares of common stock to an employee, valued at $3,899. These options are exercisable at $0.04 per share, based on the closing price of our common stock on the date of issue. These options vest yearly over three years starting April 2, 2013, and expire on April 2, 2022.

On June 1, 2012, we granted stock options to acquire 30,000 shares of common stock to a member of our scientific advisory board for service valued at $640. These options are exercisable at $0.02 a share, based on the closing price of our common stock on the date of issue. These options vest on June 1, 2014, and expire June 1, 2024.

The grant-date fair value of the options above was based on the grant-date closing market price per share and on the following weighted-average assumptions: risk free interest rate of 0.93%, expected dividend yield of 0%, expected volatility of 166.99% and an expected life of 6 years from the respective date of issuance.

A summary of the status of stock options at June 30, 2012, and changes during the six months then ended, is presented in the following table:

				Weighted
			Weighted	Average
	Shares		Average	Remaining		Aggregate
	Under Option		Exercise	Contractual		Intrinsic
	or Warrant		Price	Life		Value
Outstanding at December 31, 2011	1,954,998	$	0.03	9.63	$	-
Granted or issued	130,000		0.04	9.80		-
Forfeited	121,340		0.03	-		-
Outstanding at June 30, 2012	1,963,658		0.03	9.18		-

Exercisable at June 30, 2012	-		-	-		-

The fair value of stock options is estimated on the date of grant or issuance using the Black-Scholes option pricing model. The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding prior to exercise. The expected volatility is based on the historical price volatility of our common stock. The risk-free interest rate represents the U.S. Treasury constant maturities rate for the expected life of the related stock options. The dividend yield represents anticipated cash dividends to be paid over the expected life of the stock options. The intrinsic values are based on a June 30, 2012, closing price of $0.03 per share.

Generally accepted accounting principles for stock options require the recognition of the cost of services received in exchange for an award of equity instruments in the financial statements, is measured based on the grant date fair value of the award, and requires the compensation expense to be recognized over the period during which an employee or other service provider is required to provide service in exchange for the award (the vesting period). No income tax benefit has been recognized for share-based compensation arrangements and no share-based compensation cost has been capitalized in the accompanying condensed consolidated balance sheets at June 30, 2012 and December 31, 2011.

As of June 30, 2012, there was $30,211 of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of approximately 1.98 years. For the three months ended June 30, 2012, we recorded compensation expense related to stock options of $3,580 as a general and administrative expense in our condensed consolidated statement of operations. For the six months ended June 30, 2012, we recorded compensation expense related to stock options of $12,405 as a general and administrative expense in our condensed consolidated statement of operations. There was no compensation expense related to stock options for the three and six months ended June 30, 2011.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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+ Details

ZYTO CORP 10-Q/A