SHARE-BASED COMPENSATION

3 Months Ended

Jun. 30, 2012

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

11. SHARE-BASED COMPENSATION

The Company records stock-based compensation expense related to stock options and stock incentive plans in accordance with ASC 718, “Compensation – Stock Compensation.” The Company adopted a stock incentive plan in February 2011 and a stock incentive plan in March 2012. The options granted in 2011 and for the six months ended June 30, 2012 generally vest quarterly over a two to three year period beginning on the grant date. Options granted under the plans are incentive stock options and non-qualified stock options under the U.S. Internal Revenue Code. The contractual term of the options is ten years. During the six months ended June 30, 2012, the Company granted 396,346 stock options under the 2012 stock option plan. During the six months ended June 30, 2012 stock options for 40,000 shares were forfeited.

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions in the following table. The expected volatility is based on the daily historical volatility of comparative companies, measured over the expected term of the option. The risk-free rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term closest to the expected term of the option. Total stock-based compensation expense related to stock options included in general and administrative expense was $191,539 and $138,424 for the six months ended June 30, 2012 and 2011, respectively.

The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future. The following assumptions were used to determine the fair value of the options at date of issuance on June 30, 2012:

Expected volatility (%)	46.93%
Risk-free interest rate (%)	0.19% - 0.51%
Expected term (in years)	3
Dividend yield	0%

As of June 30, 2012, there was $413,708 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 3 years. The Company’s current practice is to issue new shares to satisfy option exercises. Compensation expense for all stock-based compensation awards is recognized using the straight-line method.

The following table summarizes the Company’s stock option activity and related information for the six months ended June 30, 2012:

	Options		Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate Intrinsic Value

Balance, January 1, 2012		1,191,850	$	2.00		9.30		779,098
Granted		396,346		1.90		-		-
Exercised		-		-		-		-
Forfeited or expired		(40,000)		-		-		-
Outstanding, June 30, 2012		1,548,196		1.98		8.91		-
Exercisable, June 30, 2012		893,888		1.98		8.68		-

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the fair value of the Company’s stock on the last day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their option on that day. This amount changes based on the fair market value of the Company’s stock.

As of June 30, 2012 there were no options in the money as the exercise price exceeded the fair value of the stock on that date.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

+ References+ Details

AirTouch Communications, Inc. 10-Q/A