7. 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 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 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 2,000,000 shares are issuable under the 2010 Plan and at June 30, 2017, there were 267,912 shares remaining 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, 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 years ended June 30:


	2017		2016
Number of options granted		498,500		183,860
Compensation expense recognized	$	189,880	$	352,653
Compensation cost capitalized		—		—
Weighted average grant-date fair value of options outstanding	$	1.37	$	5.03

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:


	2017		2016
Risk-free interest rate	0.9 - 1.86	%	0.36 - 1.01	%
Dividend yield	0	%	0	%
Volatility factor	109 - 157	%	109 - 148	%
Expected life (years)	2.9 - 4.80		0.5 - 2.875

Summary information regarding employee stock options issued and outstanding under all plans as of June 30, 2017 is as follows:


						Weighted
						average
		Weighted		Aggregate		remaining
		Average Share		intrinsic		contractual life
	Options	Price		value		(years)
Options outstanding at July 1, 2015	1,181,954	$	8.76	$	8,327	3.14
Granted	183,860		1.40
Exercised	—		—
Forfeited	(39,175)		4.21
Expired	(309,642)		10.71
Options outstanding at June 30, 2016	1,016,997	$	7.43	$	—	3.39
Granted	498,500		1.37
Exercised	(183,492)		0.66
Forfeited	—		—
Expired	(221,840)		9.64
Options outstanding at June 30, 2017	1,110,165	$	3.19	$	—	3.56
Options exercisable at June 30, 2017	740,915	$	4.05	$	—	2.94

Options outstanding and exercisable as of June 30, 2017


Options outstanding and exercisable as of June 30, 2017
				Outstanding
				Number of			Exercisable
Exercise Price				Shares	Remaining Life		Number of Shares
$	0.41	-	4.00	57,915	1	year	57,915
$	0.41	-	4.00	136,296	2	years	136,296
$	0.41	-	4.00	226,720	3	years	226,720
$	0.41	-	4.00	112,610	4	years	33,360
$	0.41	-	4.00	478,500	5	years	188,500
$	4.01	-	10.00	24,000	1	year	24,000
$	4.01	-	10.00	4,062	2	years	4,062
$	4.01	-	10.00	7,000	3	years	7,000
$	10.01	-	20.00	17,500	4	years	17,500
$	20.01	-	30.00	28,500	4	years	28,500
$	30.01	-	40.00	13,312	4	years	13,312
$	40.01	-	50.00	3,750	4	years	3,750
				1,110,165			740,915

Options outstanding and exercisable as of June 30, 2016


				Outstanding
				Number of			Exercisable
Exercise Price				Shares	Remaining Life		Number of Shares
$	0.42	-	4.00	71,250	1	year	71,250
$	0.42	-	4.00	78,855	2	years	78,855
$	0.42	-	4.00	197,390	3	years	197,390
$	0.42	-	4.00	348,954	4	years	333,963
$	0.42	-	4.00	82,610	5	year	—
$	4.01	-	10.00	97,938	1	years	97,938
$	4.01	-	10.00	9,000	2	years	9,000
$	4.01	-	10.00	4,062	3	years	4,062
$	4.01	-	10.00	18,250	4	year	18,250
$	10.01	-	20.00	1,875	1	years	1,875
$	10.01	-	20.00	28,750	4	years	28,750
$	20.01	-	30.00	1,250	1	year	1,250
$	20.01	-	30.00	—	2	years	—
$	20.01	-	30.00	31,000	4	years	31,000
$	30.01	-	40.00	16,250	1	year	16,250
$	30.01	-	40.00	25,813	5	years	25,813
$	40.01	-	50.00	—	1	year	—
$	40.01	-	50.00	3,750	5	years	3,750
				1,016,997			919,396

At June 30, 2017, there was $457 thousand of unrecognized compensation costs related to non-vested share based compensation arrangements granted to employees under the plans. During 2017, a total of 226,860 options, with a weighted average grant date fair value of $0.89 per share, vested in accordance with the underlying agreements. Unvested options at June 30, 2017 totaled 369,250 with a weighted average grant date fair value of $4.05, an amortization period of one to two years and a weighted average remaining life of 4.23 years. At June 30, 2016, there was $31 thousand of unrecognized compensation costs related to non-vested share based compensation arrangements granted to employees under the plans. During 2016, a total of 449,904 options, with a weighted average grant date fair value of $1.10 per share, vested in accordance with the underlying agreements. Unvested options at June 30, 2016 totaled 97,601 with a weighted average grant date fair value of $5.50, an amortization period of one to two years and a weighted average remaining life of 4.91 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. Such awards do not grant any rights as a shareholder of the company until a certificate for the vested shares of common stock has been issued. During the year ended June 30, 2017, we granted 401,146 shares of restricted stock awards with a fair value of $0.6 million. There were none outstanding at June 30, 2016. Summary information regarding employee restricted stock issued and outstanding under the 2010 Plan as of June 30, 2017 is as follows:


		Weighted
	Restricted Stock	Average Share
	Shares	Price
Restricted Stock outstanding at June 30, 2016	—	$	—
Granted	401,146		1.51
Vested	—		—
Forfeited	—		—
Restricted Stock outstanding at June 30, 2017	401,146	$	1.51

Warrants

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 not considered to be indexed to our common stock and therefore are considered a derivative. The fair value of the warrants was determined using the Binomial Option Pricing Model.

Summary information regarding common stock warrants issued and outstanding as of June 30, 2017 is as follows:


						Weighted
						average
		Weighted		Aggregate		remaining
		Average		intrinsic		contractual
	Warrants	Share Price		value		life(years)
Outstanding at year ended June 30, 2016	—	$	—	$	—	—
Granted	4,041,951		1.98		—	1.91
Exercised	—		—		—
Expired	—		—		—
Outstanding at year ended June 30, 2017	4,041,951	$	1.98	$	—	1.91

Warrants outstanding and exercisable as of June 30, 2017


		Outstanding			Exercisable
Exercise		Number of			Number of
Price		Shares	Remaining Life		Shares
$	1.83	3,555,228	1.93	years	3,555,228
$	3.00-3.04	486,723	1.71-1.82	years	486,723
		4,041,951			4,041,951