Share-Based Payments

Equity Incentive Plan

The 2011 Executive Incentive Plan (the "Plan") of the Company was approved on February 21, 2011 by the written consent of the holder of a majority of the Company's outstanding common stock. The Plan provides the Company the ability to grant to any officer, director, employee, consultant or other person who provides services to the Company or any related entity, options, stock appreciation rights, restricted stock awards, dividend equivalents and other stock-based awards and performance awards, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. The Company reserved 30,000,000 shares of common stock for delivery under the Plan. Pursuant to the Executive Incentive Plan and the employment agreements, between February 15, 2011 and June 30, 2013, the Compensation Committee of the Company's Board of Directors authorized the grants of restricted stock and stock options described below.

Restricted Stock

The per share fair value of RSUs granted with service conditions was determined on the date of grant using the fair market value of the shares on that date and is recognized as an expense over the requisite service period.



	Shares		Weighted Average Grant Date Fair Value
Nonvested at June 30, 2012	2,886,668		$	29.45
Granted	—		—
Vested	(75,833	)	12.22
Forfeited and canceled	(941,667	)	28.35
Nonvested at June 30, 2013	1,869,168		$	31.11

Compensation expense related to restricted stock was $18,200 and $26,576 for the years ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and 2012, there was $48,576 and $112,995, respectively, in unrecognized share-based compensation costs related to restricted stock.

Stock Options

The following table summarizes the Company's stock option activity for year ended June 30, 2013:



	Number of Options		Weighted average exercise price		Weighted average remaining contractual life (years)	Aggregate intrinsic value
Outstanding at June 30, 2012	3,067,503		$	6.24	9.16	$	1,155
Granted	18,818,547		0.90		—	521
Exercised	—		—		—	—
Forfeited and canceled	(3,981,322	)	1.41		—	1,696
Outstanding at June 30, 2013	17,904,728		1.70		9.09	—
Exercisable at June 30, 2013	5,618,408		$	1.84	8.77	$	—

The Company accounts for stock options based on the fair market value on the date of grant, with the resulting expense recognized over the requisite service period. The fair value of each option award is estimated using the Black-Scholes option valuation model. Expected volatility is based on the historical volatility of the price of the Company's stock. The risk-free interest rate is based on U.S. Treasury Notes with a term equal to the expected life of the option. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. Options generally have an expiration of 10 years and vest over a period of 3 or 4 years. The fair value of options granted during the years ended June 30, 2013 and 2012 were estimated based on the following weighted average assumptions:



	Year Ended June 30, 2013			Year Ended June 30, 2012
Expected volatility	80		%	63		%
Risk-free interest rate	0.93		%	1.15		%
Expected dividend yield	—			—
Expected life (in years)	6.82			6.25
Estimated fair value per option granted	$	0.66		$	6.82

Compensation expense related to stock options of $12,089 and $5,916 is included in the accompanying Statements of Operations in selling, general and administrative expenses for the years ended June 30, 2013 and June 30, 2012, respectively. As of June 30 2013 and 2012, there was approximately $13,675 and $14,958, respectively, of unrecognized stock-based compensation cost related to stock options, which will generally be recognized over a four year period.

Warrants

In connection with the DB Line described in Note 7, repayment of the loan was guaranteed by Mr. Sillerman. In consideration for the guarantee, Mr. Sillerman's designee, SIC II, which is the lender under the Amended and Restated $25,000 Line of Credit, also described in Note 7, received a warrant for 10,000,000 shares of common stock, which may be exercised at any time within 60 months of the issuance date at $1.00 a share, (subject to adjustment in the event of stock splits and combination, reclassification, merger or consolidation). The Company recorded compensation expense during the year ended June 30, 2013 of $5,559 related to the Guarantee Warrant.

In the event of draws which exceed the DB Line maximum of $10,000, the lender (including Mr. Sillerman and his affiliates) under the New Line of Credit will receive 100,000 warrants (which will be in the same form as the Guarantee Warrants) to purchase the Company's common stock for every $100 drawn down and funded to the Company. These warrants shall be exercisable at a price of $1.00 per share and shall expire five (5) years after issuance.

As of June 30, 2013, the Company had drawn down $4,000 on the the New $25,000 Line of Credit. In connection with the draw down, the Company issued 4,000,000 warrants to SIC II and recorded compensation expense of $1,533 during the year ended June 30, 2013.

The Company issued 1,709,091 warrants in connection with the May 10, 2012 PIPE transaction. Each warrant has a sale price of $5.50 and is exercisable into 1 share of common stock at a price of $8.00 over a term of three years. Further, the exercise price of the warrants is subject to "down round" protection, whereby any issuance of shares at a price below the current price resets the exercise price equal to a the price of newly issued shares. The fair value of such warrants has been determined utilizing the Binomial Lattice Model in accordance with ASC 820-10, Fair Value Measurements. The fair value of the warrants when issued was $5,281, and was $443 and $4,626 as of June 30, 2013 and June 30, 2012, respectively. The Company recorded a gain of $4,183 to other income, net in the Consolidated Statements of Operations for the year ended June 30, 2013. The fair value of the warrant is classified as a current liability on the Consolidated Balance Sheet as of June 30, 2013, due to the Company's intention to retire a significant portion of these warrants in its next round of financing.

On August 25, 2011, the Company completed the placement of 7,000,000 units (the “Units”), each Unit consisting of (i) one-half (1/2) share of common stock, $0.001 par value per share, of the Company and (ii) one (1) detachable three (3) year warrant to purchase one-half (1/2) share of common stock of the Company with an exercise price of $8.00 per warrant share, at a purchase price of $5.00 per Unit, for an aggregate purchase price of $35,000 to accredited and institutional investors. The three-year warrants are callable by the Company after February 26, 2012 if a registration statement for the resale of the shares of common stock issuable upon exercise of the warrants has been declared effective for 30 days and the closing bid price of such shares equals at least $8.00 per share for a period of at least 20 consecutive trading days after effectiveness of such registration statement.

In connection with the August 25, 2011 private placement offering, the following warrants were issued to related parties:

Tejas Securities Group, Inc., as partial compensation for placement fees, was issued 270,000 five-year non-callable warrants with an exercise price of $5.00 per warrant, and 192,500 three-year warrants with an exercise price of $8.00 per warrant. Each of the warrants is exercisable for one share of the Company's common stock. The fair value of these warrants was $3,949 and was accounted for as a cost of raising equity.

Mr. Sillerman was issued 1,280,000 three-year warrants with an exercise price of $8.00 per warrant. Each of the warrants is exercisable for one share of the Company's common stock. The fair value of these warrants was $9,216, which was included in selling, general and administrative expenses in the Consolidated Statement of Operations for the year ended June 30, 2012.