STOCK BASED COMPENSATION

12 Months Ended

Jun. 30, 2012

NOTE 9. STOCK BASED COMPENSATION

The Entity accounts for stock based compensation awards including employee stock options and warrants issued to external parties for newly issued awards as well as those modified, repurchased, or cancelled after the effective date, and to the unvested portion of awards outstanding as of the effective date. The Entity uses the Black-Scholes option-pricing model to value its stock option and warrant grants.

The estimated fair value of each option or warrant grant is determined on the date of grant using Black-Scholes option pricing model. The Black-Scholes model is dependent upon key inputs estimated by management, including the expected term of an option and the expected volatility of our common stock price over the expected term. The Entity determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The risk-free interest rate is based on the yield on zero-coupon U.S. treasury securities at the time of grant for a period commensurate with the expected term. The expected volatility is calculated based on the historical experience of internet-related companies with a price volatility ranging from 42% to 117%. We estimated our volatility to be 73% to 75%.

Compensation cost arising from non-vested stock granted to employees and from non-employees stock awards is recognized as expense using the graded vesting attribution method over the vesting period. As of June 30, 2011, there was $291,208 of remaining unrecognized compensation cost related to non-vested stock; that cost is expected to be recognized over a weighted average period of 2.3 years.

During the years ended June 30, 2012 and 2011, the Entity issued shares as well as options and warrants for shares of stock in connection with the recruitment of directors, officers and employees as well as for professional service vendors and the conversion of certain debt instruments into Equity of the Entity. Based on these activities, compensation cost of $357,213 and $451,858 was recognized in the years ended June 30, 2012 and 2011, respectively.

The following table summarizes the Entity’s stock options and warrants outstanding as of June 30, 2012 and 2011, as well as option and warrant activity during the year then ended:

	Number of Shares Outstanding Under Options and Warrants		Weighted Average Exercise Price

Balance, June 30, 2010		7,796,048		0.25
Granted		7,211,672		0.05
Forfeited or Expired		(189,995)		0.17

Balance, June 30, 2010		14,817,725	$	0.15

Granted		48,233,803		0.06
Exercised		-		-
Forfeited or expired		(435,348)		0.14

Balance, June 30, 2011		62,616,180	$	0.08
Exercisable, June 30, 2011		55,550,788	$	0..08

The following table is a summary of the Entity’s non-vested stock options

	Number of shares			Weighted-Average Grant-Date Fair Value
Non-vested balance, June 30, 2011		6,452,692		$	0.15

Granted		48,233,803			0.06
Vested		(47,540,310	)		0.07
Forfeited/Expired		(80,793	)		0.14

Non-vested balance, June 30, 2012		7,065,392		$	0.08

The weighted average fair value of options and warrants granted during the years ended June 30, 2012 and 2011 was $0.06 and $0.05 per share, respectively. The total intrinsic value of options exercised during the years ended June 30, 2012 and 2011, was $0. The aggregate intrinsic value of the outstanding options at June 30, 2012 and 2011 was $0.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

+ References+ Details

VIDAROO Corp 10-K/A