Share-Based Payments

6 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Share-Based Payments

10. 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 December 31, 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 $8,594 and $16,972 for the three and six months ended December 31, 2011.  There were no such expenses for the three and six months ended December 31, 2010.  No shares actually vested.  As of December 31, 2011, there was $114,037 in total unrecognized share-based compensation costs.

Stock Options

The following table summarizes the Company’s stock option activity for the six months ended December 31, 2011:

	Number of Options
Outstanding at June 30, 2011		0
Granted		5,086,875
Exercised		0
Forfeited and cancelled		0
Outstanding at December 31, 2011		5,086,875

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 December 31, 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 an expiration  of 10 years and vest over a period of 3 or 4 years.  The fair value of the options granted during the three and six months ended December 31, 2011 (none were granted in 2010) was estimated based on the following weighted average assumptions:

	Three Months Ended December 31, 2011			Six Months Ended December 31, 2011
Expected volatility		60	%		60	%
Risk-free interest rate		1.17	%		1.20	%
Expected dividend yield		0			0
Expected life (in years)		6.25			6.25
Estimated fair value per option granted	$	3.55		$	3.87

The total compensation expense of $1,481 and $3,412 were included in the accompanying Statement of Operations in general and administrative expenses for the three and six months ended December 31, 2011.  There were no such expenses for the three and six months ended December 31, 2010.  No shares actually vested during the periods and the grants provide for vesting annually in arrears over the next four years.  As of December 31, 2011, there was approximately $17,640 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 for the three and six months ended December 31, 2011 of approximately $348 and $1,865 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 for the three and six months ended December 31, 2011 of approximately $413 and $1,055, respectively, as a result of the foregoing grants.

On November 16, 2011, the Compensation Committee, pursuant to such program, granted to 24 employees an aggregate of 294,375 non-qualified stock options.  Of this total, 144,375 were issued with an exercise price of $5.50 per share and a fair market value of $3.10 per option, and 150,000 were issued with an exercise price of $2.50 per share and a fair market value of $3.99 per option.  The options vest over three to four years.  The Company has taken a compensation charge in the second quarter of approximately $79 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 non-callable 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, accounted for as a cost of raising equity.

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, accounted for as an expense to general and administrative expenses on the Consolidated Statement of Operations for the six months ended December 31, 2011.

In connection with the December 23, 2011 acquisition of a 65% interest in TIPPT Media, Inc., the Company has agreed to issue a warrant to TIPPT, LLC for 1 million shares of the Company’s common stock to be purchased at an exercise price equal to 115% of the 20-day trading average of the Company’s common stock if certain performance conditions are met within four months of December 23, 2011.  The Company deems it probable that these performance conditions will be met.  The shares of common stock exercisable under the warrant were valued at $2,378 using the Black Scholes valuation model.  The Company recorded the value of these shares of common stock to intangible assets and current liabilities and will reclassify the liability to equity upon meeting the performance conditions.  The warrant value will be marked to market until the warrants are earned.  At December 31, 2011, the Company recorded a mark to market valuation increase of $324 recorded in general and administrative expenses on the Consolidat Statement of Operations.