Stock-based Compensation

9 Months Ended

Mar. 31, 2012

Stock-based Compensation [Abstract]

Stock-based Compensation

Note 5 — 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 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 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 March 31, 2012, awards for the purchase of an aggregate of 6,997,600 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 eligible employees, directors and consultants. As of March 31, 2012 a maximum of 6,900,000 shares of our common stock were available for issuance 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 employees, officers and directors at prices between $0.63 and $1.75 per share, vesting over ten month- to four-year periods. As of March 31, 2012, awards for the purchase of an aggregate of 3,874,003 shares of our common stock are outstanding under the 2010 Plan. At our annual meeting of shareholders in January 2012 our shareholders approved a 3,400,000 share increase in the number of shares available for issuance under the 2010 Plan, increasing the total number of shares reserved from 3,500,000 to 6,900,000 shares.

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 and restricted stock totaling 1,822,003 and 1,935,003 shares were granted for the three and nine month periods ended March 31, 2012, respectively. Compensation based options totaling 44,000 and 102,000 shares were granted for the three and nine month periods ended March 31, 2011, respectively.

For the three and nine months ended March 31, 2012, stock based compensation of $307,840 and $880,891, respectively, was reflected as an increase to additional paid in capital. Of the stock based compensation for the three and nine months ended March 31, 2012, $307,840 and $748,212, respectively, was employee related and none and $132,679, respectively, was non-employee related. For the three and nine months ended March 31, 2011, stock based compensation of $288,665 and $450,780, respectively, was reflected as an increase to additional paid in capital. Of the stock based compensation for the three and nine months ended March 31, 2011, $264,666 and $397,183, respectively, was employee related and $23,999 and $53,597, respectively, was non-employee related.

Compensation expense was calculated using the fair value method during the three and nine month periods ended March 31, 2012 and 2011 using the Black-Scholes option pricing model. The following assumptions were used for options and warrants granted during the nine month periods ended March 31, 2012 and 2011:

1. risk-free interest rates of between 0.93 and 1.55 percent for the nine months ended March 31, 2012 and between 1.33 and 2.64 percent for the nine months ended March 31, 2011;

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 between 127 and 137 percent for the nine months ended March 31, 2012 between 125 and 129 percent for the nine months ended March 31, 2011.