9. Share-Based Payments

3 Months Ended

Sep. 30, 2012

Share-Based Payments

9. Share-Based Payments

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 30,000,000 shares of common stock for delivery under the Plan.  Pursuant to the Executive Incentive Plan and the employment agreements, between February 15, 2011 and September 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 June 30, 2012	2,886,668	29.45
Granted	—	—
Vested	4,163	12.00
Forfeited and cancelled	—	—
Nonvested at September 30, 2012	2,890,831	29.45

The total compensation was $5,618 and $8,378 for the three months ended September 30, 2012 and 2011 respectively. As of September 30, 2012 and June 30, 2012 there was $68,658 and $112,995 respectively in total unrecognized share-based compensation costs.

Stock Options

The following table summarizes the Company's stock option activity for three months ended September 30, 2012:

	Number of Options			Weighted average exercise price
Outstanding at June 30, 2012		3,067,503		$	6.24
Granted		13,026,100
Exercised		—
Forfeited and cancelled		(159,793	)
Outstanding at September 30, 2012		15,033,810			1.62
Exercisable at September 30, 2012		4,548,267

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. 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 three months ended September 30, 2012 and 2011 were estimated based on the following weighted average assumptions:

	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011
Expected volatility	80		%		60	%
Risk-free interest rate	0.99		%		1.23	%
Expected dividend yield		—			—
Expected life (in years)		6.42			6.13
Estimated fair value per option granted		0.87		$	4.17

The total compensation expense of $6,222 and $1,930 was included in the accompanying Statement of Operations in selling, general and administrative expenses for the three months ended September 30, 2012 and 2011, respectively. 4,392,017 options vested during the period and the grants provide for vesting annually in arrears over the next three years. As of September 30, 2012, there was approximately $20,748 of total unrecognized stock-based compensation cost which will be recognized over a three year period.