SHARE BASED COMPENSATION

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 15 - SHARE BASED COMPENSATION

Stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as expense over the service providers’ requisite service period (generally the vesting period of the award). The Company estimates the fair value of stock for service granted using the Black-Scholes Option Pricing Model since the requisite service period and expected term of the contractual obligations with third parties is two years. Key assumptions used to estimate the fair value of stock options include the exercise price of the award, the fair value of the Company’s common stock on the date of grant, the expected option term, the risk free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on the Company’s common stock.

The following weighted average assumptions were used in estimating the fair value of the share-based payment arrangements to the above mentioned service providers:

	December 31, 2012
Annual dividends		0
Expected volatility		40% - 75%
Risk-free interest rate		0.75	%
Expected life		2 years

Since there is insufficient stock price history that is at least equal to the expected or contractual terms of the Company’s share-based payments, the Company has calculated volatility using the historical volatility of similar public entities in the Company’s industry. In making this determination and identifying a similar public company, the Company considered the industry, stage, life cycle, size and financial leverage of such other entities. This resulted in an expected volatility of 40% to 75%. The expected life of two years is based on the contractual requisite service period. The risk free interest rate is the rate on the U.S. Treasury securities 2-year constant maturity with a remaining term equal to the expected option term. The expected volatility is derived from an industry-based index, in accordance with the calculated value method.

The Company is required to estimate the number of forfeitures expected to occur and record expense based upon the number of awards expected to vest. The Company expects all remaining awards issued will be fully vested over the expected life of the awards. There were no forfeitures during the years ended December 31, 2012 and 2011.

We apply ASC 718, Compensation-Stock Compensation, to account for our service providers’ share-based payments. We issued Common stock to various service providers in connection with the Reverse Merger, and in connection with ongoing services associated with being a public company, including investors’ communications and public relations.

In accordance with ASC 718, we determine whether a share payment should be classified and accounted for as a liability award or equity award. All grants of share-based payments to the service providers classified as equity awards are recognized in the financial statements based on their grant date fair value which is calculated using an option pricing model. We have elected to recognize compensation expense using the straight-line method for all equity awards granted with graded vesting based on service conditions provided that the amount of compensation cost recognized at any date is at least equal to the portion of the grant-date value of the options that are vested at that date. To the extent the required vesting conditions are not met resulting in the forfeiture of the share-based awards, previously recognized compensation expense relating to those awards are reversed. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Share-based compensation expenses amounted to $486,533 and $399,800 for the years ended December 31, 2012 and 2011, respectively.

A summary of share-based compensation activity for the years ended December 31, 2012 and 2011 is as follows:

	Number of Share		Weighted Average Fair Value		Prepaid Amount
Share-based compensation outstanding at January 1, 2011		910,644	$	0.22	$	166,333
Granted		180,000	$	4.00	$	720,000
Cancelled		—		—		—
Forfeited/Amortized		—		—	$	(399,800	)
Share-based compensation outstanding at January 1, 2012		1,090,644	$	0.84	$	486,533
Granted		—		—		—
Cancelled		—		—		—
Forfeited/Amortized		—		—	$	(486,533	)
Share-based compensation outstanding at December 31, 2012		1,090,644	$	0.84		—

On December 28, 2011, the Company issued 180,000 shares of common stock to one service provider. The service period is from April 11, 2011 to October 10, 2012. The shares were recorded at their market value of $720,000 and are being amortized over the service period. For the years ended December 31, 2012 and 2011, $420,000 and $300,000 were amortized to general and administrative expense, respectively.