Stock Options

3 Months Ended

Sep. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

NOTE 7 - Stock Options

The Company follows ASC 718 (“Share-Based Payment”), which requires that all share based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. For the three months ended September 30, 2015 and 2014, the Company recorded non-cash compensation expense of $32,000 ($.00 per basic and diluted share) and $33,000 ($.00 per basic and diluted share), respectively, relating to stock-based compensation.

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the 2012 Employee Plan). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (ISOs), to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company's outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2012 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2015, 112,500 stock options were granted, 29,500 stock options were exercisable and 837,500 stock options were available for grant under this plan.

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

The following table reflects activity under the 2012 Plan for the three months ended September 30,:

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		112,500	$	5.30		78,500	$	5.73
Granted		—		—		—		—
Terminated/Lapsed		(15,000)		—		(10,000)		4.88
Exercised		—		—		—		—

Outstanding, end of period		97,500	$	5.46		68,500	$	5.86

Exercisable, end of period		29,500	$	5.33		18,700	$	5.65

Weighted average fair value at grant date of options granted		n/a				n/a

Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	69,000			$	—
Total intrinsic value of options exercisable	$	24,000			$	—

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at September 30, 2015:

		Options outstanding							Options exercisable
				Weighted average
Range of		Number			remaining		Weighted average		Number		Weighted average
exercise prices		outstanding			contractual life		exercise price		exercisable		exercise price

	$4.29-$6.31		97,500			8.4	$	5.46		29,500	$	5.33
			97,500			8.4	$	5.46		29,500	$	5.33

As of September 30, 2015, there was $210,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. No options were granted during the three months ended September 30, 2015. The total fair value of the options vesting during each of the three months ended September 30, 2015 and 2014 under this plan was $16,000.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the 2012 Non-Employee Plan). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2015, 35,000 stock options were granted, 17,000 stock options were exercisable and 15,000 stock options were available for grant under this plan.

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

The following table reflects activity under the 2012 Non-Employee Plan for the three months ended September 30,:

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		35,000	$	4.73		25,000	$	4.88
Granted		—		—		—		—
Terminated/Lapsed		—		—		—		—
Exercised		—		—		—		—

Outstanding, end of period		35,000	$	4.73		25,000	$	4.88

Exercisable, end of period		17,000	$	4.82		10,000	$	4.88

Weighted average fair value at grant date of options granted		n/a				n/a

Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	46,000			$	—
Total intrinsic value of options exercisable	$	21,000			$	—

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at September 30, 2015:

		Options outstanding							Options exercisable
				Weighted average			Weighted				Weighted
Range of		Number			remaining		average exercise		Number		average exercise
exercise prices		outstanding			contractual life		price		exercisable		price

	$4.37 - $4.88		35,000			8.3	$	4.73		17,000	$	4.82

			35,000			8.3	$	4.73		17,000	$	4.82

As of September 30, 2015, there was $56,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. No options were granted during the three months ended September 30, 2015. The total fair value of the options vesting during the three months ended September 30, 2015 and 2014 under this plan was $16,500 and $17,000, respectively.

2002 Employee Stock Option Plan

In December 2002, the stockholders approved the 2002 Employee Stock Option Plan (the 2002 Employee Plan). This plan expired in October 2012. This plan authorized the granting of awards, the exercise of which would allow up to an aggregate of 1,836,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may have granted stock options, which were intended to qualify as incentive stock options (ISOs), to key employees. Any plan participant who was granted ISOs and possessed more than 10% of the voting rights of the Company's outstanding common stock must have been granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2002 Employee Plan, stock options have been granted to key employees with a term of 10 years at an exercise price equal to the fair market value on the date of grant and are exercisable in whole or in part at 20% per year from the date of grant. At September 30, 2015, 1,471,480 stock options had been granted and 264,750 stock options were exercisable. No further stock options were available for grant under this plan after the plans expiration in October 2012.

The following table reflects activity under the 2002 Employee plan for the three months ended September 30,:

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		208,500	$	6.86		265,750	$	6.51
Granted		—		—		—		—
Terminated/Lapsed		—		—		(1,000)		6.02
Exercised		—		—		—		—

Outstanding, end of period		208,500	$	6.86		264,750	$	6.51

Exercisable, end of period		208,500	$	6.86		264,750	$	6.51

Weighted average fair value at grant date of options granted		n/a				n/a

Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	37,000			$	—
Total intrinsic value of options exercisable	$	37,000			$	—

No stock options were exercised during the three months ended September 30, 2015 and 2014. No cash was received from option exercises during the three months ended September 30, 2015 and 2014 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods.

The following table summarizes information about stock options outstanding under the 2002 Employee Plan at September 30, 2015:

		Options outstanding and exercisable
Range of		Number		Weighted average		Weighted average
exercise prices		outstanding		remaining contractual life		exercise price

$	5.22-$6.62		171,000		0.9	$	5.92
$	11.16		37,500		0.5		11.16

			208,500		0.8	$	6.86