Share-Based Payments

3 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Share-Based Payments

Share-Based Payments

Equity Incentive Plan

The 2011 Executive Incentive Plan (the "Plan") of the Company was approved on February 21, 2011 by the written consent of the holder of a majority of the Company's outstanding common stock. The Plan provides the Company the ability to grant to any officer, director, employee, consultant or other person who provides services to the Company or any related entity, options, stock appreciation rights, restricted stock awards, dividend equivalents and other stock-based awards and performance awards, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. The Company reserved 30,000,000 shares of common stock for delivery under the Plan.  Pursuant to the Executive Incentive Plan and the employment agreements, between February 15, 2011 and September 30, 2011 the Compensation Committee of the Company’s Board of Directors authorized the grants of restricted stock and stock options described below.

Restricted Stock

The per share fair value of RSUs granted with service conditions was determined on the date of grant using the fair market value of the shares on that date and is recognized as an expense over the requisite service period.

	Date of Grant	Common Shares		Aggregate Fair Value on Date of Grant		Weighted Average Grant Date Fair Value
Fourteen (14) Executives	Various		8,540,000	$	141,896	$	16.62

The total compensation was $8,378 for the three months ended September 30, 2011.  There were no such expenses for the three months ended September 30, 2010.  No shares actually vested.  As of September 30, 2011, there was $122,746 in total unrecognized share-based compensation costs.

Stock Options

The following table presents a summary of the Company’s stock option activity for the three months ended September 30, 2011:

	Number of Options
Outstanding at June 30, 2011		0
Granted		4,792,500
Exercised		0
Forfeited and cancelled		0
Outstanding at September 30, 2011		4,792,500

The Company is accounting for these options at fair market value of the options on the date of grant, with the value being recognized over the requisite service period.  No shares were vested as of September 30, 2011.  The fair value of each option award is estimated using a Black-Scholes option valuation model.  Expected volatility is based on the historical volatility of the price of comparable companies’ stock.  The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option.  The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates.  Options generally have a life of 10 years and vest over a period of 3 or 4 years.  The fair value of the options granted during the quarter ended September 30, 2011 (none were granted in 2010) was estimated based on the following weighted average assumptions:

	Three Months Ended September 30, 2011
Expected volatility		60	%
Risk-free interest rate		1.23	%
Expected dividend yield		0
Expected life (in years)		6.13
Estimated fair value per option granted	$	4.17

The total compensation expense of $1,930 was included in the accompanying Statement of Operations in general and administrative expenses for the three months ended September 30, 2011.  There were no such expenses for the three months ended September 30, 2010.  No shares actually vested during the periods and the grants provide for vesting annually in arrears over the next four years.  As of September 30, 2011, there was approximately $16,700 of total unrecognized stock-based compensation cost.

On August 12, 2011, the Compensation Committee of the Board of Directors approved a stock option plan for non-management directors.  Each director is to receive 250,000 non-qualified stock options for common shares of the Company under the Executive Equity Incentive Plan.  The initial grant of 1,250,000 non-qualified stock options was made on August 26, 2011 with each option having an exercise price of $2.50 per share and a fair market value of $4.42.  One-fourth of the grant vested on the grant date and the balance will vest pro-rata annually in arrears over the next three years, so long as the director remains in office on the vesting date.  The Company has taken a compensation charge in the first quarter of approximately $1,517 as a result of the foregoing grants.

On August 26, 2011, the Compensation Committee adopted a Company-wide stock option program and granted to 32 employees an aggregate of 3,545,000 non-qualified stock options. Of this total, 510,000 were issued with an exercise price of $2.50 per share and a fair market value of $4.45 per option, 1,535,000 were issued with an exercise price of $2.50 per share and a fair market value of $4.42 per option, and 1,500,000 were issued with an exercise price of $5.00 per share and a fair market value of $3.63 per option. The options vest over three to four years. The Company has taken a compensation charge in the first quarter of approximately $413 as a result of the foregoing grants.

Warrants

In connection with the August 25, 2011 private placement offering, the following warrants were issued:

Tejas Securities Group, Inc., as partial compensation for placement fees, was issued 540,000 five-year warrants with an exercise price of $2.50 per warrant, and 385,000 three-year warrants with an exercise price of $4.00 per warrant.  Each of the warrants is exercisable for one share of the Company’s common stock.  The fair value of these warrants is $3,949.

Robert F.X. Sillerman was issued 2,560,000 three-year warrants with an exercise price of $4.00 per warrant.  Each of the warrants is exercisable for one share of the Company’s common stock.  The fair value of these warrants is $9,216.