STOCK OPTIONS - Note 22

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

STOCK OPTIONS - Note 22

NOTE 22 — STOCK OPTIONS

Previous Plan

Prior to the acquisition of Gold Lion, the Company issued stock options to its previous employees, officers and directors. Pursuant to terms of the Share Exchange Agreement, outstanding stock options at the closing of the acquisition remained valid for the full life of the options regardless if the employee, officer and director remained in any capacity with the Company. There were 423,100 shares of options outstanding as of September 22, 2009, the effective date of the reverse merger between Zoom and Gold Lion, with expiration in 3 years from the date of grant and in various stages of vesting. The non-cash compensation charges of these stock options were recorded by the spun-off subsidiary, Zoom Telephonics, and were expensed by the Company.

On the closing of the Merger, 30,000 stock options were granted to four exiting directors of the Company, for their anticipated cooperation with Post-Merger management, including the provision of any historical information about the Company that may be needed in future activities. Such options are exercisable at $10.14 per share, vest in six months from the date of grant and expired two years. The non-cash compensation charges of these 30,000 shares of options will be expensed by the Company. All such options have expired or were exercised.

During 2010, 100,000 options held by employees, executives and directors of the Company prior to the merger transaction on September 22, 2009, were exercised at the weighted average price of $3.24 per share.

During 2011, 23,900 stock options held by the previous employees, executives, and directors of the Company prior to the merger transaction on September 22, 2009, were exercised at the weighted average price of $3.51 per share.

During 2011, 10,500 stock options held by the previous employees, executives and directors of the Company prior to the merger transaction on September 22, 2009, were exercised at the weighted average price of $1.68 per share.

During 2011, 4,800 stock options held by the previous employees, executives and directors of the Company prior to the merger transaction on September 22, 2009, were exercised at the weighted average price of $1.58 per share.

During 2011, 2,000 stock options held by a previous employee of the Company prior to the merger transaction on September 22, 2099, were exercised at the price of $1.18 per share.

The following summary represents options activity for 2011 under the previous plan.

		Weighted
	Under	Average		Aggregate
	Previous	Exercise		Intrinsic
	Plan	Price		Value
Balance, December 31, 2010	211,650	$ 3.25	$	427,612
Granted	-	-
Lapsed	(41,100)	-
Exercised	(41,200)	$ 2.71
Balance, December 31, 2011	129,350	$ 1.80	$	-

The following represents options summary as of December 31, 2011 under the previous plan.

	Options Outstanding				Options Exercisable
		Weighted Average		Weighted			Weighted
		Remaining		Average			Average
	Number	Contractual		Exercise	Number		Exercise
	Outstanding	Life		Price	Exercisable		Price
Options	129,350	0.06 years	$	1.80	129,350	$	1.80

The following summary represents options activity during 2010, under the previous plan.

		Weighted
	Under	Average		Aggregate
	Previous	Exercise		Intrinsic
	Plan	Price		Value
Balance, December 31, 2009	311,650	$ 3.25	$	913,134
Granted	-	-
Lapsed	-	-
Exercised	(100,000)	$ 3.24
Balance, December 31, 2010	211,650	$ 3.25	$	427,612

The following represents options summary as of December 31, 2010 under the previous plan.

	Options Outstanding				Options Exercisable
		Weighted Average		Weighted			Weighted
		Remaining		Average			Average
	Number	Contractual		Exercise	Number		Exercise
	Outstanding	Life		Price	Exercisable		Price
Options	211,650	0.83 years	$	3.25	139,550	$	4.00

THE 2009 EQUITY INCENTIVE COMPENSATION PLAN

On December 10, 2009, the Company's BOD approved and adopted the 2009 Equity Incentive Compensation Plan (the "New Plan"), and 1,100,000 options were granted on the same day to current employees, executives and directors of the Company, with an exercise price of $6.18 per share, expiration between 1 and 3 years, and vesting over the life of the options.

On November 28, 2010, the Company's BOD approved re-pricing of the outstanding options from the exercise price of $6.18 to $3.75 per share.

On December 1, 2010, the Company's BOD approved of the granting of 677,000 options to current employees and executives of the Company, with an exercise price of $3.75 per share, vesting over 3 years and expiration in 3.25 years.

On July 1, 2011, the Company's BOD approved of the granting of 225,000 options to replace options that expired unexercised on June 9, 2011. Such options, issued to outside directors and personnel in management, sales and marketing, have an exercise price of $2.50 per share, vest over 2 quarters and expire in 2 years.

On October 4, 2011, the Company's BOD approved re-pricing of 500,000 outstanding options from the exercise prices between $2.50 and $3.75 per share to $1.75 per share.

On October 11, 2011, the Company's BOD approved of the granting of 1,500,000 options to employees and executives of Portables Unlimited LLC, the Company's newly acquired subsidiary, with the exercise prices of $1.83 and $3.75 per share, with 25% of the options vesting immediately and the balance equally per quarter over three years. These options expire in four years.

On October 26, 2011, the Company's BOD approved of the granting of 10,000 options to its new independent director, with the exercise price of $2.04 per share, vesting over one year and expiring in two years.

On November 29, 2011, the Company's BOD approved of the granting of 300,000 options to a consultant, with the exercise price of $1.00 per share, with 1/3 vesting immediately and the balance equally over two quarters. These options expire in two years.

The following summary represents options activity for the year ended December 31, 2011 under the New Plan.

	Under	Weighted
	the	Average		Aggregate
	New	Exercise		Intrinsic
	Plan	Price		Value
Balance, December 31, 2010	1,757,000	$ 3.75	$	1,265,040
Granted	2,035,000	-
Lapsed	(235,000)	-
Exercised	-	-
Balance, December 31, 2011	3,557,000	$ 3.02	$	-

The following represents options summary as of December 31, 2011 under the New Plan.

	Options Outstanding				Options Exercisable
		Weighted Average		Weighted			Weighted
		Remaining		Average			Average
	Number	Contractual		Exercise	Number		Exercise
	Outstanding	Life		Price	Exercisable		Price
Options	3,557,000	2.55 years	$	3.02	1,492,333	$	2.95

The Company determined the grant date fair value of 865,000 options of $1.80 per share which was calculated using the BSOPM as follows: Stock price of $6.18 per share, exercise price of $6.18 per share, expected life of 3.25 years, volatility of 39.18% and discount rate of 1.26%.

For the re-pricing of the above 865,000 options on November 28, 2010, from the exercise price of $6.18 to $3.75 per share, the Company determined the incremental fair value of $0.48 per share which was calculated by taking the difference between the Black Scholes values of the new exercise price and that of the old exercise price. Other data used in the calculations include: the stock market price of $3.54, expected life of 2.28 years, volatility of 33.59% and discount rate of 0.78%.

The Company determined the grant date fair value of 235,000 options of $1.20 per share which was calculated using the BSOPM as follows: Stock price of $6.18 per share, exercise price of $6.18 per share, expected life of 1.5 years, volatility of 39.18% and discount rate of 0.78%.

For the re-pricing of the above 235,000 options on November 28, 2010, from the exercise price of $6.18 to $3.75 per share, the Company determined the incremental fair value of $0.26 per share which was calculated by taking the difference between the Black Scholes values of the new exercise price and that of the old exercise price. Other data used in the calculations include: the stock market price of $3.54, expected life of 0.53 years, volatility of 33.59% and discount rate of 0.28%.

The Company determined the grant date fair value of 677,000 options of $0.74 per share which was calculated using the BSOPM as follows: Stock price of $3.45 per share, exercise price of $3.75 per share, expected life of 3.25 years, volatility of 33.42% and discount rate of 0.84%.

The Company determined the grant date fair value of 225,000 options of $0.49 per share which was calculated using the BSOPM as follows: Stock price of $2.50 per share, exercise price of $2.50 per share, expected life of 2.0 years, volatility of 34.43% and discount rate of 0.50%.

For the re-pricing of the 500,000 options on October 4, 2011, from the exercise prices of $2.50 and $3.75 per share to $1.75 per share, the Company determined the incremental fair value of $0.06822 and $0.07619 per share respectively which were calculated by taking the difference between the Black Scholes values of the new exercise price and that of the old exercise prices. Other data used in the calculations include: the stock market price of $1.19, expected life of 1.74 and 1.44 years respectively, volatility of 39.34% and discount rate of 0.24% and 0.12% respectively.

The Company determined the grant date fair value of 1,200,000 options of $0.20 per share which was calculated using the BSOPM as follows: Stock price of $1.83 per share, exercise price of $3.75 per share, expected life of 4.0 years, volatility of 39.21% and discount rate of 0.84%.

The Company determined the grant date fair value of 300,000 options of $0.60 per share which was calculated using the BSOPM as follows: Stock price of $1.83 per share, exercise price of $1.83 per share, expected life of 4.0 years, volatility of 39.21% and discount rate of 0.84%.

The Company determined the grant date fair value of 10,000 options of $0.36 per share which was calculated using the BSOPM as follows: Stock price of $2.04 per share, exercise price of $2.04 per share, expected life of 2.0 years, volatility of 30.70% and discount rate of 0.28%.

The Company determined the grant date fair value of 300,000 options of $0.12 per share which was calculated using the BSOPM as follows: Stock price of $0.79 per share, exercise price of $1.00 per share, expected life of 2.0 years, volatility of 41.17% and discount rate of 0.27%.

The following summary represents options activity during the years ended 2010, under the New Plan.

	Under	Weighted
	the	Average		Aggregate
	New	Exercise		Intrinsic
	Plan	Price		Value
Balance, December 31, 2009	1,100,000	$ 6.18	$	-
Granted	677,000	$ 3.75
Lapsed	(20,000)	-
Exercised	-	-
Balance, December 31, 2010	1,757,000	$ 3.75	$	1,265,040

The following represents options summary as of December 31, 2010 under the New Plan.

	Options Outstanding				Options Exercisable
		Weighted Average		Weighted			Weighted
		Remaining		Average			Average
	Number	Contractual		Exercise	Number		Exercise
	Outstanding	Life		Price	Exercisable		Price
Options	1,757,000	2.34 years	$	3.75	510,000	$	3.75

The Company determined the grant date fair value of 865,000 options of $1.80 per share which was calculated using the Black Scholes Options Pricing Model as follows: Stock price of $6.18 per share, exercise price of $6.18 per share, expected life of 3.25 years, volatility of 39.18% and discount rate of 1.26%.

For the re-pricing of the above 865,000 options on November 28, 2010, from the exercise price of $6.18 to $3.75 per share, the Company determined the incremental fair value of $0.48 per share which was calculated by taking the difference between the Black Scholes values of the new exercise price and that of the old exercise price. Other data used in the calculations include: the stock market price of $3.54, expected of 2.28 years, volatility of 33.59% and discount rate of 0.78%.

The Company determined the grant date fair value of 235,000 options of $1.20 per share which was calculated using the Black Scholes Options Pricing Model as follows: Stock price of $6.18 per share, exercise price of $6.18 per share, expected life of 1.5 years, volatility of 39.18% and discount rate of 0.78%.

For the re-pricing of the above 235,000 options on November 28, 2010, from the exercise price of $6.18 to $3.75 per share, the Company determined the incremental fair value of $0.26 per share which was calculated by taking the difference between the Black Scholes values of the new exercise price and that of the old exercise price. Other data used in the calculations include: the stock market price of $3.54, expected of 0.53 years, volatility of 33.59% and discount rate of 0.28%.

The Company determined the grant date fair value of 677,000 options of $0.74 per share which was calculated using the Black Scholes Options Pricing Model as follows: Stock price of $3.45 per share, exercise price of $3.75 per share, expected life of 3.25 years, volatility of 33.42% and discount rate of 0.84%.