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Compensation Related Costs, Retirement Benefits
3 Months Ended
Sep. 30, 2011
Compensation Related Costs, Retirement Benefits  
Deferred Compensation Arrangement with Individual Disclosure, Postretirement Benefits [Table Text Block]

Note 8.   Deferred Compensation

 

                The Company is a party to a Deferred Equity Compensation Agreement with its former CEO, Mark N. Schwartz (the “Agreement”), whereby the Company granted 225,000 phantom shares of its common stock to Mr. Schwartz for every month of employment for the period January 1, 2010 through September 30, 2011. Mr. Schwartz resigned as the Company’s CEO effective September 22, 2011. Under the agreement, a cash payment will be made equal to the price per share of the Company’s common stock times the number of phantom shares accrued at the earliest of certain events.

               

                The Company has accrued a total deferred compensation liability of $1,312,500 at September 30, 2011, which is the fair market value of 13,125,000 phantom shares granted as of September 30, 2011.  Due to the changes in the average price of the Company’s common stock at the end of the quarter (increase from $0.05 to $ 0.10), the Company recorded a net compensation expense of $690,000 for the period ended September 30, 2011. For the period ended September 30, 2010, the Company recorded a net compensation benefit of $378,000.  An increase in the Company’s common stock price would cause an increase in the deferred compensation, while a decrease in the Company’s stock price would cause a decrease in the deferred compensation liability. Expenses related to the Deferred Compensation arrangement with its former CEO are accounted for as part of Discontinued Operations.

 

                Under the terms of Mr. Schwartz’s original employment agreement, payment of the deferred compensation benefit would occur upon one of the following events: i) execution of a definitive agreement resulting in a change of control of the Company’s common stock; ii) termination of employment; iii) death of the CEO; or iv) no later than January 1, 2012. Upon one of these events, a cash payment over 24 months will be made to the CEO equal to the trading price per share of the Company’s common stock times the number of phantom stock shares accrued to date.  Mr. Schwartz and the Company modified the original Agreement on September 30, 2011,  whereby Mr. Schwartz has tentatively agreed to change event iv above to: suspend the requirement for a cash payment as of a date certain pursuant to the Agreement. Also, Mr. Schwartz agreed as of October 1, 2011 that no additional phantom shares will be granted to Mr. Schwartz under the Agreement.