This document summarizes stock-based compensation options for companies, including incentive stock options (ISOs), nonqualified stock options (NSOs), and restricted stock. ISOs provide tax benefits if stock is held for the required periods, while NSOs tax the option value as income at exercise. Restricted stock can allow employees to elect early taxation but requires upfront cash. The firm, MFA-Moody, Famiglietti & Andronico LLP, provides tax and accounting services to early-stage companies around stock-based compensation structures and valuations.

1. Stock-Based Compensation Copyright 2009. Moody, Famiglietti & Andronico, LLP. All Rights Reserved. Travis M. Drouin, CPA, CIA Partner MFA – Moody, Famiglietti & Andronico, LLP 1 Highwood Drive Tewksbury, MA 01876 978.557.5300 Direct 978.557.5335 [email_address] On Twitter @TravisDrouin www.mfa-cpa.com

7. Basic Tax Implications of ISOs Copyright 2010. MFA - Moody, Famiglietti & Andronico, LLP. All Rights Reserved. $20 $10 A PPRECIATION Purchase Price Tax Preference Item } } Date of Grant Date of Exercise Date of Sale All appreciation taxed as capital gains (if stock is held at least one year after exercise and two years after grant)

9. Basic Tax Implications of NSOs Copyright 2010. MFA - Moody, Famiglietti & Andronico, LLP. All Rights Reserved.

11. Basic Tax Implications of Restricted Stock Copyright 2010. MFA - Moody, Famiglietti & Andronico, LLP. All Rights Reserved.

14. Stock-Based Compensation Copyright 2009. Moody, Famiglietti & Andronico, LLP. All Rights Reserved. Thank you IRC Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.