Stock Based Compensation

3 Months Ended

Jun. 30, 2012

Stock Based Compensation

Stock Based Compensation

Note 6—Stock Based Compensation

Stock Grants

The Company has made stock grants to key members of its management. Mr. Avery, the Company’s President and Chief Executive Officer, received a stock grant award of 1,500,000 shares on August 17, 2010 with vesting occurring over a two-year period. As of June 30, 2012, 1,250,000 shares of Mr. Avery’s grant had vested and the remaining 250,000 shares will vest on August 17, 2012. Mr. Bloomfield, the Company’s Chief Financial Officer until September 6, 2011 and its current Vice President of Corporate Development, received a stock grant award of 500,000 shares on September 1, 2010, which also vests on a two-year schedule. As of June 30, 2012, 100,000 of Mr. Bloomfield’s shares had vested, 200,000 shares will vest on September 6, 2012, and the remaining 200,000 shares will vest on September 6, 2013. The stock grants of Mr. Avery and Mr. Bloomfield were deemed to have a nominal value in that the Company had only nominal assets and not begun commercial operations on the issue dates and so were valued at par value of $0.001 per share. For the quarter ended June 30, 2012 and 2011, the Company had recorded $169 and $0, respectively, for stock-based compensation associated with the stock grants. Compensation for non-vested awards was $650 as of June 30, 2012, of which $432 was accrued. The Company also made stock grants totaling 1,275,000 shares to its directors, excluding shares issued to Mr. Avery, all of which had vested as of June 30, 2012.

Stock Options

Effective August 22, 2011, the Board and the shareholders approved both the 2011 Employee Equity Incentive Plan (“Employee Plan”) and 2011 Director and Consultant Equity Incentive Plan (“Director Plan”). The Employee Plan authorizes the Board, or its designated committee, to issue up to an aggregate of 5,000,000 shares, of which 3,200,000 remained available for issuance at June 30, 2012. The Director Plan authorizes the Board, or its designated committee, to issue up to an aggregate of 2,500,000 shares, of which 885,000 remained available for issuance at June 30, 2012. Awards issued under the Plans may include stock options, stock appreciation rights, restricted stock, bonus stock and/or restricted stock. Awards may be settled in cash, stock or a combination thereof, at the discretion of the Board.

Compensation expense for employees is recognized based on the estimated fair value of the awards on their grant date.  The fair value of options issued to non-employees is measured on the earlier of the date the performance is complete or the date the non-employee is committed to perform. In the event that the measurement date occurs after an interim reporting date, the options are measured at their then-current fair value at each interim reporting date.  For both employee and non-employee options, the fair value is estimated using the Black-Scholes option pricing model. Compensation expense is recognized on a straight-line basis over each grant’s respective service period. Key inputs and assumptions used in estimating the fair value include our stock price, the grant price, expected term, volatility and the risk-free rate. The Company uses the opening stock price of its common stock on the grant date. Other assumptions used in estimating the fair value of awards granted through June 30, 2012 included the following:

Expected Term	5.0 to 6.0 years
Volatility*	120.57% to 181.46%	*
Risk-Free Rate	0.71% to 2.00%
Dividend Yield	—

* The Company’s estimates of expected volatility are based on the historic volatility of the Company’s common stock as well as the historic volatility of the Company’s peers due to the limited availability of historical trading information of the Company itself.

A summary of stock option activity under the Plans as of June 30, 2012 and changes during the quarter then ended is presented below.

Stock Options	Shares (000)	Weighted- Average Exercise Price		Aggregate Intrinsic Value ($000)		Weighted- Average Remaining Term (Years)
Outstanding at March 31, 2012	3,415	$	4.25	19,636		9.74
Granted	—	—
Exercised	—	—
Forfeited or expired	—	—
Outstanding at June 30, 2012	3,415	$	4.25	$	—	9.48
Vested at June 30, 2012	2,400	$	4.25	$	—	9.49

The weighted average grant date fair value of the stock options granted through June 30, 2012 and for the period August 5, 2010 (Inception) through June 30, 2012 was $3.33.  No stock options were exercised during the three months ended June 30, 2012 or for the period August 5, 2010 (Inception) to June 30, 2012.

A summary of the status of the non-vested stock options as of June 30, 2012, and changes during the three months ended June 30, 2012 is presented below.

Non-vested Stock Options	Shares (000)	Weighted Average Grant Date Fair Value
Non-vested at March31, 2012	1,015	$	4.77
Granted	—	—
Vested	—	—
Forfeited	—	—
Non-vested at June 30, 2012	1,015	$	3.14

As of June 30, 2012, there was $1,255,267 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted average period of less than one year. The total expense for the fair value of vested grants during the three months ended June 30, 2012 and 2011 was $443,945 and $0, respectively.  For the period August 5, 2010 (Inception) to June 30, 2012 the cumulative expense was $10,159,980.

For the three months ended June 30, 2012, total compensation expense attributable to stock options was $443,945.