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 and again 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.

The 2010 Plan provides for the awards of shares of common stock, restricted stock units or incentive stock options 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 awarded under the 2010 Plan within 10 years from the effective date of February 18, 2010. A maximum of 2,000,000 shares are issuable under the 2010 Plan and at March 31, 2017, 783,460 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 awards 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.

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 pricing of 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 award 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 because we do not have options that are traded. The expected term calculation for stock options is based on the simplified method as described in the Securities and Exchange Commission Staff Accounting Bulletin No. 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 award for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield rate of 0% 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 nine months ended March 31, 2017 and 2016:

	2017		2016
Number of options awarded	199,618		30,000
Compensation expense recognized	$	146,000	$	280,000
Weighted average award-date fair value of options outstanding	$	4.06	$	5.67

The following table details the significant assumptions used to compute the fair values of employee and director stock options awarded during the nine-month periods ended March 31, 2017 and 2016:

	2017		2016
Risk-free interest rate	1.81	%	1.23	%
Dividend yield	0	%	0	%
Volatility factor	109	%	109	%
Expected life (years)	4.92		2.88

Summary information regarding employee and director stock options issued and outstanding under all plans as of March 31, 2017 is as follows:

	Options		Weighted Average Exercise Price	Weighted average remaining contractual term (years)	Aggregate intrinsic value
Options outstanding at July 1, 2016	1,016,997		5.03	3.19	—
Awarded	199,618		1.06
Exercised	(58,610	)	0.90
Forfeited	—		—
Expired	—		—

Options outstanding at March 31, 2017	1,158,005		4.06	2.29	396,462

Options exercisable at March 31, 2017	938,300		4.70	1.85	304,759

Options outstanding and exercisable as of March 31, 2017
Exercise Price		Outstanding Number of Shares	Remaining Life	Exercisable Number of Shares
$	0.40 – 4.00	245,525	Less than 1 year	225,525
$	0.40 – 4.00	57,916	1 year	57,916
$	0.40 – 4.00	136,296	2 years	136,296
$	0.40 – 4.00	256,720	3 years	256,720
$	0.40 – 4.00	241,110	4 years	41,405
$	4.01 – 10.00	118,188	Less than 1 year	118,188
$	4.01 – 10.00	4,062	1 year	4,062
$	4.01 – 10.00	7,000	3 years	7,000
$	10.00 – 20.00	13,125	Less than 1 year	13,125
$	10.00 – 20.00	17,500	3 years	17,500
$	20.00 – 30.00	2,500	Less than 1 year	2,500
$	20.00 – 30.00	28,500	3 years	28,500
$	30.00 – 40.00	12,500	Less than 1 year	12,500
$	30.00 – 40.00	13,313	3 years	13,313
$	40.00 – 48.72	3,750	3 years	3,750

		1,158,005		938,300

At March 31, 2017, there were $137 thousand of unrecognized compensation costs related to non-vested share based compensation arrangements awarded to employees and directors under the plans. During the nine months ended March 31, 2017, a total of 76,404 options, with a weighted average award date fair value of $0.85 per share, vested in accordance with the underlying agreements. Unvested options March 31, 2017 totaled 219,705 with a weighted average award date fair value of $0.42, an amortization period of one year and a weighted average remaining life of 1 year.

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, 2015, all such awards were forfeited. No new grants have been issued, and none are outstanding at March 31, 2017.