On February 18, 2010, at our annual meeting of stockholders, the board of directors and stockholders approved the 2010 Equity Incentive Plan (the "2010 Plan"). Prior to the 2010 stockholder meeting, we had two stock award plans: the Stock and Stock Option Plan, which was adopted in 1997 ("1997 Plan") and the 2008 Restricted Stock Award Plan ("2008 Plan"). In conjunction with the approval of the 2010 Plan at the annual meeting, the 1997 Plan and 2008 Plan were terminated as of February 18, 2010. Subsequently, on February 17, 2012, the 2010 Plan was amended to increase the maximum shares issuable under the 2010 Plan.

The 2010 Plan provides for the grants of shares of common stock, restricted stock or incentive stock options and/or nonqualified stock options to purchase our common stock to selected employees, directors, officers, agents, consultants, attorneys, vendors and advisors of ours' or of any parent or subsidiary thereof. Shares of common stock, options, or restricted stock can only be granted under this plan within 10 years from the effective date of February 18, 2010. A maximum of 10,000,000 shares are issuable under the 2010 Plan and at June 30, 2012, 2,044,019 shares remained available for issuance.

The 2010 Plan provides a means to attract and retain the services of participants and also to provide added incentive to such persons by encouraging stock ownership in the Company. Plan grants are administered by the Compensation Committee, who has substantial discretion to determine which persons, amounts, time, price, exercise terms, and restrictions, if any.

Additionally, from time to time, we issue non-compensatory warrants, such as warrants issued to investors.

The fair value of non-market based options or warrants are estimated using the Black-Scholes valuation model. For market based options, the fair value was estimated using a Black-Scholes option pricing model with inputs adjusted for the probability of the vesting criteria being met and the median expected term for each grant as determined by utilizing a Monte Carlo simulation. Expected volatility is based solely on historical volatility of our common stock over the period commensurate with the expected term of the stock options. We rely solely on historical volatility as we do not have traded options. The expected term calculation for stock options is based on the simplified method as described in the Securities and Exchange Commission Staff Accounting Bulletin number 107. We use this method because we do not have sufficient historical information on exercise patterns to develop a model for expected term. The risk-free interest rate is based on the U. S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield rate of zero is based on the fact that we have never paid cash dividends on our common stock and we do not intend to pay cash dividends on our common stock.

The following table provides information about options during the years ended June 30:

	2012		2011		2010

Number of options granted		4,273,461		2,906,000		7,614,000
Compensation expense recognized	$	5,024,825	$	2,175,625	$	1,578,792
Compensation cost capitalized		1,745,344		973,730		—
Weighted average fair value of options outstanding	$	2.09	$	1.85	$	0.91

The following table details the significant assumptions used to compute the fair market values of employee and director stock options granted during the years ended June 30:



Risk-free interest rate	0.11 - 0.91	%	1.11 - 2.68	%	0.17 - 3.58	%
Dividend yield	0	%	0	%	0	%
Volatility factor	105 - 129	%	91 - 146	%	58 - 178	%
Expected life (years)	0.25 - 3.25		0.9 - 6.0		0.23 - 5.0

Summary information regarding employee stock options issued and outstanding under all plans as of June 30, 2012 is as follows:

			Weighted Average Share Price		Aggregate intrinsic value

Outstanding at year ended June 30, 2009	2,219,707		$	3.27	$	45,375	1.76
Granted	7,614,000			0.83
Exercised	(220,000	)		0.63
Forfeited	(130,000	)		2.05
Expired	(1,434,947	)		4.10

Outstanding at year ended June 30, 2010	8,048,760		$	0.91	$	2,589,600	6.20

Granted	2,906,520			4.15
Exercised	(858,613	)		1.10
Forfeited	(438,053	)		0.90
Expired	(383,760	)		2.24

Outstanding at year ended June 30, 2011	9,274,854		$	1.85	$	23,558,086	5.65

Granted	4,273,461			2.57
Exercised	(804,999	)		0.83
Forfeited	(248,000	)		5.51

Options outstanding at year ended June 30, 2012	12,495,316		$	2.09	$	1,145,800	4.62

Options exercisable at year ended June 30, 2012	4,697,261		$	1.81	$	498,925	4.47

Exercise Price		Remaining Life

$0.01 - 1.00	40,000	1 year or less	40,000
$0.01 - 1.00	3,626,668	2 years	1,640,834
$0.01 - 1.00	1,843,461	5 years	—
$1.01 - 2.00	1,271,000	2 years	1,150,667
$1.01 - 2.00	30,000	5 years	—
$1.01 - 2.00	750,667	8 years	540,667
$2.01 - 3.00	77,000	5 years	—
$2.01 - 3.00	280,000	8 years	195,000
$3.01 - 4.00	990,000	4 years	—
$3.01 - 4.00	511,000	8 years	303,833
$4.01 - 5.00	1,183,000	4 years	—
$4.01 - 5.00	1,562,520	9 years	631,260
$5.01 - 6.00	100,000	1 year or less	100,000
$5.01 - 6.00	110,000	9 years	50,000
$6.01 - 7.00	30,000	9 years	15,000
$7.01 - 8.00	90,000	9 years	30,000

	12,495,316		4,697,261

Exercise Price		Remaining Life

$0.01 - 0.49	85,000	1 year	85,000
$0.01 - 0.49	3,550,000	3 years	1,227,500
$0.50 - 1.00	60,000	1 year	60,000
$0.50 - 1.00	443,334	3 years	216,667
$1.00 - 1.49	720,000	3 years	640,000
$1.00 - 1.49	914,000	9 years	377,000
$1.50 - 1.99	551,000	3 years	260,333
$2.00 - 3.00	120,000	1 year or less	120,000
$2.00 - 3.00	280,000	9 years	140,000
$3.00 - 4.00	536,000	9 years	140,000
$4.00 - 5.00	1,585,520	9 years	—
$5.00 - 6.00	310,000	9 years	—
$6.00 - 7.00	30,000	9 years	—
$7.00 - 8.00	90,000	9 years	—

	9,274,854		3,266,500

At June 30, 2012, there was $6,926,000 of unrecognized compensation costs related to non-vested share based compensation arrangements granted to employees under the plans.

During 2012, a total of 2,235,760 options, with a weighted average grant date fair value of $1.76 per share, vested in accordance with the underlying agreements. Unvested options at June 30, 2012 totaled 7,798,055 with a weighted average grant date fair value of $1.21, an amortization period of two to three years and a weighted average remaining life of 6.31 years.

During the first quarter of 2012, our Board of Directors approved an increase in authorized shares under the 2010 Plan from 5,000,000 to 10,000,000 subject to shareholder approval. Prior to receiving shareholder approval, we reached the limit of shares available under the 2010 Plan during the first quarter of fiscal 2012, at which point we concluded that all additional awards granted should be classified as liabilities until shareholders approved the increase in the maximum shares issuable under the 2010 plan. Pending shareholder approval of the amended 2010 Plan, we granted options to purchase 1,180,520 shares of our common stock to employees. The 2010 Plan was amended by a shareholder vote to increase issuable shares from 5,000,000 to 10,000,000 on February 17, 2012. The fair value on the date of modification was reclassified from a liability classification to equity. As of the modification date, we have recalculated the fair value of the awards and will amortize the unrecognized expense over the remaining vesting period.

The following table details the significant assumptions used to compute the fair market value of awards modified as of February 17, 2012:

As a result of the equity transaction in February 2012, the Company issued warrants to purchase a total of 10,000,000 shares of its common stock to institutional investors. The warrants have an exercise price of $3.50 per share, a term of 14 month from the date they were granted, and are exercisable 6 months following the close of the transaction. The exercise price of the warrants may be adjusted in the case of stock splits, stock dividends or combinations of shares, or in the event the Company issues rights, options or warrants to all holders of the Company's common stock with an exercise or purchase price less than the volume weighted average price of the Company's shares on the record date. The warrants are considered indexed to our common stock and therefore are not considered a derivative. The warrants issued to the investors had a fair value of $7,820,000. The fair value of the 10,000,000 shares issued in the transaction was $22,180,000 based upon the market price on the transaction date. The fair value of the warrants was determined using the Black-Scholes option pricing model. The following table details the significant assumptions used to compute the fair market value of the warrants:

During the fiscal year ended June 30, 2011, holders of warrants exercised an aggregate of 7,106,000 warrants with exercise prices ranging from $0.98 to $1.58 per share for total proceeds to us of $7,709,000, and 100,000 warrants held by former executives with a weighted average price of $4.00 were cancelled during the year. Additionally, YA Global exercised the remaining 702,222 of its warrants on a cashless basis and received 384,848 shares of our common stock.

The holders of all of our Series B preferred stock agreed to the cancellation of warrants to purchase 1,000,000 shares of the Company's common stock.

As a result of the offerings in November and December 2009, outstanding YA Global warrants to purchase 666,666 shares of common stock at an exercise price of $1.65 were amended to increase the number of underlying shares of common stock to 1,222,222 and decrease the exercise price to $0.90 per share. These warrants are included in the warrant derivative liability. The change in value of the warrants as a result of the amendment is reflected in the valuation of the derivative as of June 30, 2010.

As a result of the equity transaction in November 2009, the exercise price of 2,424,243 warrants held by Enable and previously granted as part of an equity purchase, was reduced from $2.00 per share to $0.95 subject to no further adjustment other than for stock splits and stock dividends. The modification resulted in a deemed dividend of $322,000 which was calculated as the difference in the fair value of the warrants immediately before and after the modification using the Black-Scholes option pricing model. The following table details the significant assumptions used to compute the fair market value of the warrant modification:



Risk-free interest rate	2.63	%	2.63	%
Dividend yield	0	%	0	%
Volatility factor	127	%	127	%
Remaining term (years)	5.49		5.49

As a result of the equity transaction in November 2009, the exercise price of warrants held by Enable and previously granted as part of the convertible debenture transaction, was reduced from $2.50 to $0.95 per share for 1,111,111 warrants, and from $2.25 to $0.95 per share for 1,111,111 warrants, subject to no further adjustment other than for stock splits and stock dividends. This modification resulted in an increased fair value of $158,000, which has been treated as additional interest expense and which was calculated as the difference in the fair value of the warrants immediately before and after the modification using the Black-Scholes option pricing model. The following table details the significant assumptions used to compute the fair market value of the warrant modification:



Risk-free interest rate	2.63	%	2.63	%
Dividend yield	0	%	0	%
Volatility factor	125	%	125	%
Remaining term (years)	5.80		5.80

During the fiscal year ended June 30, 2010, Enable exercised all 4,646,465 warrants for a total $4,414,142.

As a result of the equity transaction in December 2009, the Company issued warrants to purchase a total of 3,250,000 shares of its common stock to institutional investors. The placement agent in the transaction received 144,444 warrants. The warrants have an exercise price of $0.98 per share a term of four years from the date they become exercisable and are exercisable 181 days following the close of the transaction. The exercise price of the warrants may be adjusted in the case of stock splits, stock dividends or combinations of shares, or in the event the Company issues rights, options or warrants to all holders of the Company's common stock with an exercise or purchase price less than the volume weighted average price of the Company's shares on the record date. The warrants issued to the investors and the placement agent had a relative fair value of $1,572,000 and $70,000, respectively. The relative fair value of the 7,222,223 shares issued in the transaction was $4,403,000 based upon the market price on the transaction date. The fair value of the warrants was determined using the Black-Scholes option pricing model. The following table details the significant assumptions used to compute the fair market value of the warrant modification:

On April 20, 2010, the Company entered into a securities purchase agreement pursuant to which the Company agreed to sell an aggregate of 8,076,925 shares of its common stock and warrants to purchase a total of 2,826,923 shares of its common stock to institutional investors for gross proceeds of approximately $10.5 million. The placement agent in the transaction received 161,539 warrants. The purchase price of a share of common stock and warrant was $1.30. Subject to certain ownership limitations, the warrants are exercisable 181 days following the closing date of the offering. Warrants to purchase 807,692 shares of common stock expire one year following the initial exercise date. Warrants to purchase 2,019,231 shares of common stock expire five years following the initial exercise date. The warrants will have an exercise price of $1.58. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The warrants issued to the investors and the placement agent had a relative fair value of $442,000 and $1,755,000, respectively. The relative fair value of the 8,076,925 shares issued in the transaction was $8,303,000 based upon the market price on the transaction date. The fair value of the warrants was determined using the Black-Scholes option pricing model. The following table details the significant assumptions used to compute the fair market value of the warrant modification:

Summary information regarding common stock warrants issued and outstanding as of June 30, 2012 is as follows:

			Weighted Average Share Price		Aggregate intrinsic value

Outstanding at year ended June 30, 2009	10,343,131		$	1.99	$	45,375	5.59
Granted	6,938,462			1.16
Exercised	(5,166,465	)		0.94
Expired	(1,050,000	)		4.05

Outstanding at year ended June 30, 2010	11,065,128		$	1.25	$	1,168,000	3.93

Granted	—			—
Exercised	(7,106,435	)		1.20
Expired	(100,000	)		4.00

Outstanding at year ended June 30, 2011	3,858,693		$	1.26	$	11,737,345	3.03

Granted	10,000,000			3.50
Exercised	(430,000	)		0.90
Expired	—			—

Outstanding at year ended June 30, 2012	13,428,693		$	2.94		—	1.08

Exercise Price

$0.90	2,810,000	2 years	2,810,000
$0.98	10,833	2 years	10,833
$1.58	207,860	3 years	207,860
$3.50	10,000,000	Less than1 year	—
$4.00	400,000	2 years	400,000

	13,428,693		3,428,693

Exercise Price

$0.90	3,240,000	3 years	3,240,000
$0.98	10,833	3 years	10,833
$1.58	207,860	4 years	207,860
$4.00	400,000	3 years	400,000

	3,858,693		3,858,693