4. SHARE-BASED COMPENSATION

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 the 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 units 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 the 2010 Plan within 10 years from the effective date of February 18, 2010. A maximum of 1,250,000 shares are issuable under the 2010 Plan and at December 31, 2015, 260,820 shares remained available for issuance.

On January 27, 2016, at our annual meeting of stockholders, the stockholders approved amending the 2010 Plan to increase the number of shares available for issuance by 750,000 shares, increasing the maximum number of shares issuable under the plan from 1,250,000 to 2,000,000.

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, Nominating, and Corporate Governance 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.

Stock Options

The fair value of stock option awards is estimated using the Black-Scholes valuation model. For market based stock option awards, those options where vesting terms are dependent on achieving a specified stock price, 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 expect to pay cash dividends on our common stock during the expected term of the options.

The following table provides information about options during the six months ended December 31, 2015 and 2014:

	2015		2014
Number of options granted	30,000		101,106
Compensation expense recognized	$	189,000	$	247,000
Weighted average grant-date fair value of options outstanding	$	5.67	$	7.02

The following table details the significant assumptions used to compute the fair values of employee and director stock options granted during the six month periods ended December 31, 2015 and 2014:

	2015		2014
Risk-free interest rate	1.74	%	0.05-0.12	%
Dividend yield	0	%	0	%
Volatility factor	109	%	65-216	%
Expected life (years)	2.88		0.5

Summary information regarding employee and director stock options issued and outstanding under all plans as of December 31, 2015 is as follows:

	Options		Weighted Average Exercise Price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Options outstanding at July 1, 2015	1,181,954		$	7.43	$	—	3.39
Granted	30,000		1.18
Exercised	—		—
Forfeited	(6,675	)	1.16
Expired	(247,142	)	13.68

Options outstanding at December 31, 2015	958,137		$	5.67	$	92,242	3.67

Options exercisable at December 31, 2015	692,848		$	7.29	$	46,127	3.44

Options outstanding and exercisable as of December 31, 2015

Exercise Price		Outstanding Number of Shares	Remaining Life	Exercisable Number of Shares
$	1.92-4.00	6,250	Less than1 year	6,250
$	1.92-4.00	86,355	2 years	67,570
$	1.92-4.00	212,390	4 years	182,390
$	1.92-4.00	398,954	5 years	184,481
$	4.01-10.00	102,063	1 year	102,063
$	4.01-10.00	10,875	2 years	10,875
$	4.01-10.00	5,562	3 years	3,531
$	4.01-10.00	22,000	4 years	22,000
$	10.01-20.00	1,875	1 year	1,875
$	10.01-20.00	11,250	4 years	11,250
$	10.01-20.00	17,500	5 years	17,500
$	20.01-30.00	1,250	1 year	1,250
$	20.01-30.00	31,000	5 years	31,000
$	30.01-40.00	21,250	Less than 1 year	21,250
$	30.01-40.00	3,750	5 years	3,750
$	20.01-40.00	25,813	5 years	25,813

		958,137		692,848

At December 31, 2015, there was $0.2 million of unrecognized compensation costs related to non-vested share based compensation arrangements granted to employees and directors under the plans. During the first half of fiscal 2016, a total of 185,856 options, with a weighted average grant date fair value of $0.94 per share, vested in accordance with the underlying agreements. Unvested options at December 31, 2015 totaled 265,297 with a weighted average grant date fair value of $7.29, an amortization period of one to two years and a weighted average remaining life of 3.73 years.

Restricted Stock

The fair value of restricted stock awards classified as equity awards is based on the Company’s stock price as of the date of grant. During the year ended June 30, 2014, we granted 21,030 shares of restricted stock awards with a fair value of $0.1 million. These awards did not grant any rights as a shareholder of the company until a certificate for the vested shares of common stock had been issued. During the year ended June 30, 2015, all such awards were forfeited with compensation expense forfeiture credits of approximately $46 thousand recorded. No new grants have been issued, and none are outstanding at December 31, 2015.