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STOCK-BASED COMPENSATION
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Jun. 30, 2011
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| Compensation Related Costs, Share Based Payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | 8. STOCK-BASED COMPENSATION (1) 2004 Equity Incentive Plan The Company adopted the 2004 Equity Incentive Plan (the “2004 Plan”) on August 24, 2004. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of the participants of the Plan (the "Participants") to those of the Company's stockholders, and by providing the Participants with an incentive for outstanding performance. The Company has reserved 5,000,000 shares of common stock for the options and awards under the Plan. Subject to the terms and provisions of the Plan, the Board of Directors, at any time and from time to time, may grant shares of stock to eligible persons in such amounts and upon such terms and conditions as the Board of Directors shall determine. The Committee appointed by the Board of Directors to administer the Plan shall have the authority to determine all matters relating to the options to be granted under the Plan including selection of the individuals to be granted awards or stock options, the number of stock, the date, the termination of the stock options or awards, the stock option term, vesting schedules and all other terms and conditions thereof. The Company has issued all 5,000,000 shares provided in the Plan in the form of grants of restricted common stock. As of June 30, 2011, 3,440,000 of those shares had vested and no shares have been cancelled. A summary of the status of the Company’s unearned stock compensation under the 2004 Equity Incentive Plan as of June 30, 2011, and changes for the six months ended June 30, 2011, is presented below:
The following table shows the amortization of the unearned stock compensation relating to the 2004 Plan:
As of June 30, 2011, the weighted average period that the unearned compensation cost is expected to be recognized in earnings for the 2004 Plan is 7.5 years. In addition, the compensation cost recorded to additional paid-in capital in relation to shares issued to non-employee consultants under the 2004 Plan in prior years and current period was $469,274. The Company’s contracts with these consultants have terms ranging from 60 months to 120 months. All shares granted were fully vested and nonforfeitable at the date on which the Company entered into the consulting contract with each non-employee. However, following ASC 505-50-30-11 and 505-50-30-12, the Company has determined that the disincentives for nonperformance are not sufficiently large to establish a performance commitment, and that, accordingly, the measurement date for the shares is the date on which performance is complete, which is the date of grant. The Company has continued to account for the shares as a prepaid expense, amortized over the terms of the contracts. The compensation expense relating to shares issued to non-employee consultants for the three and six months ended June 30, 2011 and 2010 was $29,094 and $58,188, respectively. The following table shows the projected amortization of the unearned stock compensation relating to consulting contracts:
(2) 2006 Equity Incentive Plan The Company adopted the 2006 Equity Incentive Plan (the “2006 Plan”) on April 24, 2006. The 2006 Plan became effective on April 18, 2006. The number of shares available for grant under the 2006 Plan shall not exceed 8,000,000 shares and shares of stock and options may be granted to the eligible persons at the discretion of the Company’s Board of Directors or the Committee administering the plan. Incentive stock options (“ISO”), nonqualified stock options (“NQSO”), or a combination thereof may be granted but ISOs can only be granted to the Company’s employees. The Committee can also grant shares of restricted stock or performance shares (a performance share is equivalent in value to a share of stock) to eligible persons from time to time. The exercise price for each ISO awarded under the 2006 Plan shall be equal to 100% of the fair market value of a share on the date the option is granted and be 110% of the fair market value if the eligible person owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporations. The exercise price of a NQSO shall be determined by the Committee in its sole discretion. No option shall be exercisable later than the tenth anniversary date of its grant and each option shall expire at such time as the Committee determines at the time of grant. The eligible person who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporations shall exercise his/her option before the fifth anniversary date of its grant. Options shall vest at such timed and under such terms and conditions as determined by the Committee; provided, however, unless a different vesting period is provided by the Committee at or before the grant of an option, the options will vest on the first anniversary of the grant. Options granted under the 2006 Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each participant. The Company has issued 7,265,711 of the shares provided in the Plan in the form of grants of restricted common stock. As of June 30, 2011, 2,190,475 of those shares had vested and 3,000 shares have been cancelled. A summary of the status of the Company’s unearned stock compensation under the 2006 Equity Incentive Plan as of June 30, 2011 is presented below:
The following table shows the amortization of the unearned stock compensation relating to the 2006 Plan:
As of June 30, 2011, the weighted average period that the unearned compensation cost is expected to be recognized in earnings for the 2006 Plan is 11.2 years. (3) Recent Stock-Based Compensation Activities There were 340,000 shares of stock options outstanding as of June 30, 2011 and December 31, 2010. The fair value of stock options was calculated using a Black-Scholes option-pricing model with the following assumptions:
The risk-free interest rate is based on the U.S. Treasury zero-coupon rate. Expected volatility is estimated based on the Company’s historical stock price using the expected life of the grant. Due to a lack of employee exercise behavior in the past, the expected life is based upon the maximum exercise period. The following table summarizes the stock option activities of the Company:
During the six months ended June 30, 2011 the Company granted a total of 15,795 shares of common stock with an aggregate fair value of $60,000 to two of its independent directors pursuant to their respective Service Agreements for a one year service period. Certificates for the shares were issued in April 2011.Stock based compensation expense totaled $22,500 was recorded during the three and six months ended June 30, 2011. |
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