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 10.0 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, 2015 there were awards outstanding, net of awards expired, for the purchase in aggregate of 2.1 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 August 21, 2014, 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 10.5 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, 2015 there were awards outstanding, net of awards expired, for an aggregate of 1.2 million shares of the Company’s common stock.

The Company adopted a Performance Incentive Plan effective July 1, 2013 (the "Fiscal 2014 Performance Plan"). The Fiscal 2014 Performance Plan is intended 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 Fiscal 2014 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 Fiscal 2014 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 the Company's common stock and is remeasured at each reporting period date until settlement. The Company adopted a separate Performance Incentive Plan effective July 1, 2014 (the "Fiscal 2015 Performance Plan"). The Fiscal 2015 Performance Plan is substantially similar to the Fiscal 2014 Performance Plan except that the service-based vesting criteria occurs in a single installment and is achieved at the end of the third fiscal year after the award is granted if the participant has continuously remained in service from the date of the award through the end of the third fiscal year.

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, 2015, 2014, and 2013, stock-based compensation of $1.7 million, $2.6 million and $2.2 million, respectively, was reflected as an increase to additional paid in capital and $0.1 million and 0.3 million was reflected as an increase to other accrued expenses for the fiscal years ended June 30, 2015 and 2014. There were no increases to other accrued expenses related to stock-based compensation for the fiscal year ended June 30, 2013. For the fiscal years ended June 30, 2015, 2014, and 2013, all stock-based compensation was employee related.

At June 30, 2015 there was $2.9 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 1.9 years.

Stock Options

The weighted-average grant-date fair value of stock options granted during the fiscal year ended June 30, 2013 was $2.49. There were no stock option grants during the fiscal years ended June 30, 2015 and 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,
	2015	2014	2013
Risk-free interest rate	N/A	N/A	0.82%
Dividend yield	N/A	N/A	—	%
Expected life in years	N/A	N/A	5.0- 6.08
Expected volatility	N/A	N/A	127%

The following is a summary of stock option activity for the years ended June 30, 2015, 2014, and 2013:



	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
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 Canceled	—		—
Outstanding at June 30, 2013	7,010		1.08

Granted	—		$	—
Exercised	(1,400	)	0.69			$	2,282
Forfeited	(469	)	1.84
Expired or Canceled	—		—
Outstanding at June 30, 2014	5,141		1.18

Granted	—		$	—
Exercised	(155	)	0.72			$	60
Forfeited	(1,756	)	1.31
Expired or Canceled	—		—
Outstanding at June 30, 2015	3,230		1.12		4.87	$	113
Exercisable at June 30, 2015	3,119		$	1.07	4.80	$	113

Restricted Shares

The following is a summary of restricted shares granted during the years ended June 30, 2015, 2014, and 2013:



Nonvested Shares	Shares (in thousands)		Weighted Average Grant Date Fair Value
Nonvested at June 30, 2012	162		—

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	—		—

Granted	1,325		$	0.8
Vested	(531	)	2.37
Forfeited	(770	)	2.22
Nonvested at June 30, 2015	1,748		1.34
Vested at June 30, 2015	—		—

The total vesting date fair value of restricted shares that vested during the years ended June 30, 2015, 2014 and 2013 was $0.6 million, $1.2 million and $0.1 million, respectively.

Performance Stock Units

During the year ended June 30, 2015, the Company awarded performance stock units (the "Performance Stock Units") to its executive officers (the "Recipients). Vesting for the Performance Stock Units occurs over three consecutive annual performance periods and is subject to achievement of both service based and market based performance vesting requirements. Subject generally to the Recipient's continued service with the Company (the serviced based requirement), each Performance Stock Unit represents a contingent right for the Recipient to receive, within thirty days after the end of each of three annual performance periods, a distribution of shares of common stock of the Company equal to 0% to 200% of the target number of Performance Stock Units subject to the award for each performance period. The actual number of shares distributed will be based on the Company's total stockholder return ("TSR") performance during the relevant performance period, subject to acceleration upon a change in control of the Company. The vesting for 50% of the target Performance Stock Units is based upon the Company's absolute TSR for the Performance Period as compared to a matrix of fixed numeric values and the vesting for the other 50% of the target Performance Stock Units is based upon a relative comparison of the Company's TSR to the Vanguard Russell 2000 exchange traded fund. The weighted average grant date fair value of Performance Stock Units granted during the fiscal year ended June 30, 2015 was $1.54, which will be recognized on a straight-line basis over the requisite service period, regardless of when, if ever, the market based performance conditions are satisfied. There were no Performance Stock Units granted during the years ended June 30, 2014 and 2013.

The fair value of Performance Stock Units granted was estimated using a Monte Carlo simulation model which included the following assumptions in order to reflect the performance conditions that must be satisfied for the share units to vest:



	June 30, 2015
Risk-free interest rate	1.07	%
Dividend yield	—	%
Expected volatility - company	54.1	%
Expected volatility - peer company	15.7	%
Total measurement period (years)	3.0

The following is a summary of Performance Stock Units granted during the year ended June 30, 2015:



	Number of Units (in thousands)		Weighted Average Grant Date Fair Value
Nonvested at June 30, 2014	—		—

Granted	1,600		$	1.54
Vested	—		—
Forfeited	(800	)	1.54
Nonvested at June 30, 2015	800		1.54
Vested at June 30, 2015	—		—

Cash-Settled Performance Units

The following is a summary of cash settled performance units granted during the years ended June 30, 2015 and 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	—
Granted	482		1.15
Vested	(353	)	—
Forfeited	(129	)	1.16
Outstanding at June 30, 2015, nonvested	—

The fair value of vested awards under the Performance Plan as of June 30, 2015 was $0.2 million. Payments of $0.3 million were made to settle vested cash settled performance units during the year ended June 30, 2015. No payments were made to settle vested cash-settled performance units during the fiscal year ended June 30, 2014. No cash-settled performance units were granted or outstanding during the fiscal year ended June 30, 2013.

Warrants

As of June 30, 2015, 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, 2015, 2014, and 2013 (in thousands):



	Common Stock Warrants
Outstanding and exercisable, June 30, 2012	12,964

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

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

Issued	—
Canceled	—
Exercised	(3,637	)
Expired	—
Outstanding and exercisable at June 30, 2015	608

As of June 30, 2015, 2014, and 2013, the Company had no warrants classified as derivative liabilities.