Stock-based Compensation

6 Months Ended

Dec. 31, 2012

Stock-based Compensation

Note 4 — Stock-based Compensation

The Company 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 10.0 million 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 members at prices between $0.21 and $1.50 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 December 31, 2012, awards for the purchase of an aggregate of 5.9 million shares of our common stock are outstanding under the 2007 Plan.

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 eligible employees, directors and consultants. 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 at prices between $0.63 and $3.53 per share, subject to various vesting periods. As of December 31, 2012, awards with respect to 4.7 million shares of the Company’s common stock were 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. The Company has adjusted the expense for anticipated forfeitures. Compensation based options and restricted stock totaling 464,366 and 698,266 shares were granted for the three and six month periods ended December 31, 2012, respectively. Compensation based options and restricted stock totaling 24,500 and 112,000 shares were granted for the three and six month periods ended December 31, 2011, respectively.

For the three and six months ended December 31, 2012, stock based compensation of $562,000 and $1.1 million, respectively, was reflected as an increase to additional paid in capital. Stock based compensation for the three and six months ended December 31, 2012, was all employee related. For the three and six months ended December 31, 2011, stock based compensation of $218,000 and $573,000, respectively, was reflected as an increase to additional paid in capital. Of the stock based compensation for the three and six months ended December 31, 2011, $190,000 and $440,000, respectively, was employee related and $28,000 and $133,000, respectively, was non-employee related.

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

1. risk-free interest rates of between 0.46 and 1.03 percent for the six months ended December 31, 2012 and between 0.93 and 0.97 percent for the six months ended December 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 113 and 127 percent for the six months ended December 31, 2012 between 129 and 137 percent for the six months ended December 31, 2011.