Sounds like 1 cent is the striking price of your option. If you exercise now, the difference between 1 cent and the current fair market value is your gain on paper and you have to pay tax (normal income tax and likely AMT). If the company is close to getting the follow-on round, the FMV is likely to be close to the valuation which the follow-on round is based on ($2). So your options are 1) exercise now and pay hefty tax. The upside is that, if the company does well, when it's eventually sold or goes IPO, the gain between $2 and whatever the price then will be taxed as long term capital gain (much lower rate); or 2) Hold off exercising the options. When the company goes IPO, you pay normal income tax + AMT (much higher) on the gain between 1 cent and the price then. If the company succeed, #1 is much better. If it doesn't, #2 is better.
So, do you have confidence in your company? If you do, how much $$ are you willing to bet? ;)
