I think the problem is with your $1.2M valuation. You have a company with $2m in preferences or debt which is first in line before any common stockholder, and most likely their liquid assets are less than $2m, and they have negative net income. That makes the common stock effectively worthless at this time.<p>Also, if you keep reading;<p><pre><code>  Once our valuation rises and the cost becomes prohibitive, we’ll move to an
  extended exercise period model instead, where you will have 10 years to
  purchase your options. By that time we’ll either have had an exit (in which
  case you can do a cashless exercise), or we will have arranged some other
  form of liquidity.</code></pre>