Stock-based Compensation

3 Months Ended

Sep. 30, 2011

Stock-based Compensation [Abstract]

Stock-based Compensation

Note 6 — Stock-based Compensation

We adopted and the shareholders approved the 2007 Long-Term Incentive Plan (the “2007 Plan”), effective November 21, 2006, to provide incentives to certain eligible employees, directors and consultants. A maximum of 10,000,000 shares of our 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, independent distributors and Scientific Advisory Board (“SAB”) members at prices between $0.21 and $0.76 per share, vesting over one- to three-year periods. 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. As of September 30, 2011, awards for the purchase of an aggregate of 8,173,660 shares of our common stock are outstanding under the 2007 Plan.

We adopted and the shareholders approved the 2010 Long-Term Incentive Plan (the “2010 Plan”), effective September 27, 2010, to provide incentives to certain eligible employees, directors and consultants. A maximum of 3,500,000 shares of our common stock can be issued under the 2010 Plan in connection with the grant of awards. As of September 30, 2011 there were 2,412,000 awards outstanding under the 2010 Plan.

Payments in equity instruments for goods or services are accounted for under the guidance of share based payments, which require use of the fair value method. We have adjusted the expense for the anticipated forfeitures. Compensation based options totaling 87,500 and 58,000 were granted for the three month periods ended September 30, 2011 and 2010 respectively.

For the three months ended September 30, 2011, stock based compensation of $355,221 was reflected as an increase to additional paid in capital. Of the stock based compensation for the three months ended September 30, 2011, $250,771 was employee related and $104,450 was non-employee related. For the three months ended September 30, 2010, stock based compensation of $115,157 was reflected as an increase to additional paid in capital. Of the stock based compensation for the three months ended September 30, 2010, $85,560 was employee related and $29,597 was non-employee related.

Compensation expense was calculated using the fair value method during the three month periods ended September 30, 2011 and 2010 using the Black-Scholes option pricing model. The following assumptions were used for options and warrants granted during the three month periods ended September 30, 2011 and 2010:

1. risk-free interest rates of between 0.93 and 0.95 percent for the three months ended September 30, 2011 and 1.33 and 1.62 percent for the three months ended September 30, 2010;

2. dividend yield of -0- percent;

3. expected life of 3 to 6 years; and

4. a volatility factor of the expected market price of our common stock of 137 percent for the three months ended September 30, 2011 and between 128 and 129 percent for the three months ended September 30, 2010.