Accounting for Stock-Based Compensation
The Company adopted the provisions of FASB ASC 718-20, Stock Compensation Awards Classified as Equity, which require companies to expense the estimated fair value of employee stock options and similar awards based on the fair value of the award on the date of grant. The cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. There have been no grants of any stock or other equity as of August 31, 2012.
On July 1, 2011, the Company issued 333,333 shares of common stock valued at $2,100,000 to the Companys On July 1, 2011, the Company issued 333,333 post-split shares of common stock valued at $2,100,000 to the Companys Chairman and CEO, with the shares originally vesting over 5 years on a proportionate basis. As of August 31, 2011, one-fifth or 66,667 shares valued at $420,000 had vested. Mr. Gelmon conveyed two thirds of the original 333,333 post-split shares to two other parties for reasons unrelated to the Company, retaining a total of 111,111 shares. The non-vested balance at August 31, 2011 of 266,667 total shares valued at $1,680,000 had been issued but were being held in escrow for release on an annual basis each July 1. During the year ended August 31, 2012, the Company revised the vesting term to 3 years and released an additional 155,556 shares valued at $980,000. The non-vested balance of at August 31, 2012 was one-third of the original issuance or 111,111 shares valued at $700,000, of which Mr. Gelmon holds 37,037 shares to be received. In accordance with ASC 718, compensation cost related to shares issued is recognized over the vesting period with an off-setting credit to additional paid-in capital. Also, the deferred equity balance of $1,680,000 at August 31, 2011 was reclassified and netted against additional paid-in capital in the 2011 financial statements.
Non-Employee Stock Based Compensation
Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.