10. Share-Based Payments

12 Months Ended

Jun. 30, 2012

Share-Based Payments

10. 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 15,000,000 shares of common stock for delivery under the Plan.  Pursuant to the Executive Incentive Plan and the employment agreements, between February 15, 2011 and June 30, 2012 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.

	Shares			Weighted Average Grant Date Fair Value
Nonvested at July 1, 2010		—
Granted		3,937,500			35.02
Vested		—			—
Forfeited and cancelled		—			—
Nonvested at June 30, 2011		3,937,500			35.02
Granted		497,500			12.00
Vested		—			—
Forfeited and cancelled		(1,548,332	)		27.17
Nonvested at June 30, 2012		2,886,668			29.45

The total compensation was $26,576, $10,772 and $0 for the years ended June 30, 2012, 2011 and 2010 respectively. As of June 30, 2012, 2011 and 2010, there was $112,995, $127,134 and $0 respectively in total unrecognized share-based compensation costs.

Stock Options

The following table summarizes the Company's stock option activity for year ended June 30, 2012:

	Number of Options			Weighted average exercise price		Weighted average remaining contractual life (years)		Aggregate intrinsic value
Outstanding at June 30, 2011		—			—		—		—
Granted		3,344,379			6.14				1,885
Exercised		—
Forfeited and cancelled		(276,876	)		5.00		9.14		193
Outstanding at June 30, 2012		3,067,503			6.24		9.16		1,155
Exercisable at June 30, 2012		156,250			5.00		—		78

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 June 30, 2012.  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 year ended June 30, 2012 (none were granted in 2011) was estimated based on the following weighted average assumptions:

	Year Ended June 30, 2012			Year Ended June 30, 2011
Expected volatility		63	%		—
Risk-free interest rate		1.15	%		—
Expected dividend yield		—			—
Expected life (in years)		6.25			—
Estimated fair value per option granted	$	6.82			—

The total compensation expense of $5,916 and $0 was included in the accompanying Statement of Operations in selling, general and administrative expenses for the years ended June 30, 2012 and June 30, 2011, respectively.  No options actually vested during the periods and the grants provide for vesting annually in arrears over the next four years.  As of June 30, 2012, there was approximately $14,958 of total unrecognized stock-based compensation cost which will be recognized over a four year period.

Warrants

In connection with the May 10, 2012 private placement offering  Robert F.X. Sillerman was issued  545,455 three-year warrants with an exercise price of $8.00 per warrant.  Each of the warrants is exercisable for one share of the Company's common stock.  If the Company sells shares of its common stock for the purpose of raising capital at a price below $8.00 per share before the expiration of the exercise period of the warrant, the exercise price of all warrants will be adjusted to the lowest price at which the shares were sold.  The proceeds of the offering, less expenses, are to be used for general corporate purposes, including marketing and product development.

The fair value of the warrants has been determined utilizing the Binomial Lattice Model in accordance with ASC 820-10, Fair Value Measurements. The fair value of these warrants on the date of issue was $2,116 and was accounted for as an expense to selling, general and administrative expenses in the Consolidated Statement of Operations for the year ended June 30, 2012. Mr. Sillerman is an executive officer and his participation in the offering has been accounted for as stock based compensation in accordance with FASB ASC Topic 718 , Share-Based Payments. Due to the "down round" provision of these warrants, the warrants are recorded as liabilities and are being marked to market. The change in fair value from issuance totaled $295 and has been recorded to other expense on the Consolidated Statement of Operations for the year ended June 30, 2012. The liability as of June 30, 2012 was $1,473.

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 270,000 five-year non-callable warrants with an exercise price of $5.00 per warrant, and 192,500 three-year warrants with an exercise price of $8.00 per warrant.  Each of the warrants is exercisable for one share of the Company's common stock.  The fair value of these warrants was $3,949 and was accounted for as a cost of raising equity.

●Robert F.X. Sillerman was issued 1,280,000 three-year warrants with an exercise price of $8.00 per warrant. Each of the warrants is exercisable for one share of the Company's common stock. Mr. Sillerman is an executive officer and his participation in the offering has been accounting for as stock based compensation in accordance with FASB ASC Topic 718 , Share-Based Payments. The fair value of these warrants is $9,216, accounted for as an expense to selling, general and administrative expenses in the Consolidated Statement of Operations for the year ended June 30, 2012.

On February 16, 2011, the Company issued a five year warrant for 50,000 shares with an exercise price of $1.60 per share to Berenson & Company, LLC, financial advisor to Sillerman in connection with the Recapitalization, which vested on issuance. The fair value of the Berenson Warrant was determined to be $2,529 using the Black-Scholes option pricing model considering the contractual life of 5 years; expected volatility of 60%; and risk-free interest rate of 2.37%.  This amount was charged to general and administrative expense at the date of issuance.  On May 9, 2011, Berenson Investments LLC exercised the warrant and paid $80 for 50,000 shares of our common stock.