Share-Based Compensation

Long-Term Incentive Plans

The Company adopted and the shareholders approved the Company’s 2007 Long-Term Incentive Plan (the “2007 Plan”), effective November 21, 2006, to provide incentives to certain employees, directors and consultants. A maximum of 10 million shares of the Company’s common stock can be issued under the 2007 Plan in connection with the grant of awards. Awards to purchase common stock have been granted pursuant to the 2007 Plan and are outstanding to various employees, officers, directors, Scientific Advisory Board members and independent distributors at prices between $0.21 and $1.50 per share, with initial vesting periods of one to three years. Awards expire in accordance with the terms of each award and the shares subject to the award are added back to the 2007 Plan upon expiration of the award. The contractual term of stock options granted is generally ten years. As of June 30, 2014 there were awards outstanding, net of awards expired, for the purchase in aggregate of 2.2 million shares of the Company’s common stock.

The Company adopted and the shareholders approved the 2010 Long-Term Incentive Plan (the “2010 Plan”), effective September 27, 2010, as amended on January 10, 2012, to provide incentives to certain employees, directors and consultants who contribute to the strategic and long-term performance objectives and growth of the Company. A maximum of 6.9 million shares of the Company’s common stock can be issued under the 2010 Plan in connection with the grant of awards. Awards to purchase common stock have been granted pursuant to the 2010 Plan and are outstanding to various employees, officers and directors. Outstanding stock options awarded under the 2010 Plan have exercise prices between $0.63 and $3.53 per share, and vest over one to four year vesting periods. Awards expire in accordance with the terms of each award and the shares subject to the award are added back to the 2010 Plan upon expiration of the award. The contractual term of stock options granted is generally ten years. As of June 30, 2014 there were awards outstanding, net of awards expired, for an aggregate of 3.0 million shares of the Company’s common stock.

The Company adopted a Performance Incentive Plan (the “Performance Plan”), effective July 1, 2013, to provide selected employees an opportunity to earn performance-based cash bonuses whose value is based upon the Company’s stock value and to encourage such employees to provide services to the Company and to attract new individuals with outstanding qualifications. The Performance Plan seeks to achieve this purpose by providing for awards in the form of performance share units (the “Units”). No shares will be issued under the Performance Plan. Awards may be settled only with cash and will be paid subsequent to award vesting. The fair value of share-based compensation awards, that include performance shares, are accounted for as liabilities. Vesting for the Units is subject to achievement of both service-based and performance-based vesting requirements. Performance-based vesting occurs in three installments if the Company meets certain performance criteria generally set for each year of a three-year performance period. The service-based vesting criteria occurs in three annual installments which are achieved at the end of a given fiscal year only if the participant has continuously remained in service from the date of award through the end of that fiscal year. The fair value of these awards is based on the trading price of our common stock and is remeasured at each reporting period date until settlement.

Stock-Based Compensation

In accordance with accounting guidance on stock-based compensation, payments in equity instruments for goods or services are accounted for by the fair value method. For the fiscal years ended June 30, 2014, 2013, and 2012, stock-based compensation of $2.6 million, $2.2 million and $1.3 million, respectively, was reflected as an increase to additional paid in capital and $0.3 million was reflected as an increase to other accrued expenses for the fiscal year ended June 30, 2014. There were no increases to other accrued expenses related to stock-based compensation for the fiscal years ended June 30, 2013, and 2012. For the fiscal years ended June 30, 2014 and 2013, all stock-based compensation was employee related. Of the $1.3 million stock-based compensation for the fiscal year ended June 30, 2012, $1.2 million was employee related and $0.1 million was non-employee related.

At June 30, 2014 there was $4.1 million of unrecognized compensation cost related to nonvested share-based compensation arrangements under the 2010 Plan, based on management's estimate of the shares that will ultimately vest. The Company expects to recognize such costs over a weighted-average period of 2.5 years.

Stock Options

The weighted-average grant-date fair value of stock options granted during the fiscal years ended June 30, 2013 and 2012 were $2.49 and $1.63, respectively. There were no stock option grants during the fiscal year ended June 30, 2014.

The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair values:



	June 30,
	2014	2013		2012
Risk-free interest rate	N/A	0.82%		0.59% - 1.41%
Dividend yield	N/A	—	%	—	%
Expected life in years	N/A	5.0- 6.08		3.0 - 6.65
Expected volatility	N/A	127%		119% - 137%

The following is a summary of stock option activity for the years ended June 30, 2014, 2013, and 2012:



	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2011	10,498		$	0.64

Granted	2,086		$	1.89
Exercised	(1,612	)	0.45			$	2,038
Forfeited	(27	)	1.36
Expired or Cancelled	—		—
Outstanding at June 30, 2012	10,945		0.91

Granted	152		$	2.82
Exercised	(3,319	)	0.49			$	7,128
Forfeited	(768	)	1.54
Expired or Cancelled	—		—
Outstanding at June 30, 2013	7,010		1.08

Granted	—		$	—
Exercised	(1,400	)	0.69			$	2,282
Forfeited	(469	)	1.84
Expired or Cancelled	—		—
Outstanding at June 30, 2014	5,141		1.18		6.07	$	2,417
Exercisable at June 30, 2014	4,795		$	1.08	6.17	$	2,411

Restricted Shares

The following is a summary of restricted shares granted during the years ended June 30, 2014, 2013, and 2012:



Nonvested Shares	Shares (in thousands)		Weighted Average Grant Date Fair Value
Nonvested at June 30, 2011	—		—

Granted	164		$	3.34
Vested	—		—
Forfeited	(2	)	3.36
Nonvested at June 30, 2012	162		3.34
Vested at June 30, 2012	—		—

Granted	2,808		$	2.62
Vested	(37	)	3.34
Forfeited	(196	)	3.25
Nonvested at June 30, 2013	2,737		2.61
Vested at June 30, 2013	—		—

Granted	225		$	1.79
Vested	(760	)	2.65
Forfeited	(478	)	2.55
Nonvested at June 30, 2014	1,724		2.46
Vested at June 30, 2014	—		—

The total vesting date fair value of restricted shares that vested during the years ended June 30, 2014 and 2013 was $1.2 million and $0.1 million, respectively. There were no restricted shares that vested during the year ended June 30, 2012.

Performance Share Units

The following is a summary of performance share units granted during the year ended June 30, 2014:



	Number of Units (in thousands)		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2013, nonvested	—		$	—
Granted	245		1.48
Vested	(214	)	—
Forfeited	(31	)	1.51
Outstanding at June 30, 2014, nonvested	—

The fair value of vested awards under the Performance Plan as of June 30, 2014 was $0.3 million. No payments were made to settle vested performance share units during the year ended June 30, 2014.

Warrants

As of June 30, 2014, the Company had outstanding warrants which were issued in conjunction with convertible debentures between November 2009 and February 2010.

The following is a summary of the warrant activity for the years ended June 30, 2014, 2013, and 2012 (in thousands):



	Common Stock Warrants
Outstanding and exercisable, June 30, 2011	25,460

Issued	270
Cancelled	—
Exercised	(12,563	)
Expired	(203	)
Outstanding and exercisable at June 30, 2012	12,964

Issued	—
Cancelled	—
Exercised	(4,723	)
Expired	—
Outstanding and exercisable at June 30, 2013	8,241

Issued	—
Cancelled	—
Exercised	(3,996	)
Expired	—
Outstanding and exercisable at June 30, 2014	4,245

As of June 30, 2014, 2013, and 2012, the Company had no warrants classified as derivative liabilities.