Note 3. Stock-based Compensation

3 Months Ended

Sep. 30, 2015

Notes

Note 3. Stock-based Compensation

NOTE 3. STOCK-BASED COMPENSATION

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized over the employee’s requisite service period. The Company recognized $15,011 and $17,454 in stock-based compensation expense during the three months ended September 30, 2015 and 2014, respectively. These expenses were recorded as selling, general and administrative expenses in the condensed consolidated statements of operations.

Stock Options.  The Company maintained a 2005 equity incentive plan for the benefit of employees, no further grants will be made under the 2005 equity incentive plan. On June 29, 2015 the shareholders approved a new 2015 equity incentive plan setting aside 500,000 shares. The 2015 plan was filed with the SEC on September 3, 2015.   Incentive and nonqualified stock options, restricted common stock, stock appreciation rights, and other stock-based awards may be granted under the plan.  Awards granted under the plan may be performance-based.  As of September 30, 2015, there were 500,000 shares of common stock authorized and reserved for issuance, but not granted under the terms of the 2015 equity incentive plan.

The Company granted no equity awards under either its 2005 or 2015 equity incentive plan during the three months ended September 30, 2015.

The following table summarizes the Company’s stock option activity for the 2005 equity incentive plan during the three-month period ended September 30, 2015.

	Number of Options		Weighted-Average Exercise Price
Outstanding at beginning of period	91,152	$	5.07
Granted	-		-
Exercised	-		-
Cancelled	(1,200)		5.15
Outstanding at end of period	89,952		5.31
Exercisable at end of period	87,188		5.39

The Black-Scholes option-pricing model is used to estimate the fair value of options granted under the Company’s stock option plan.

Expected option lives and volatilities are based on historical data of the Company. The risk-free interest rate is based on the U.S. Treasury Bills rate on the grant date for constant maturities that correspond with the option life. Historically, the Company has not declared dividends and there are no future plans to do so.

As of September 30, 2015, there was $312,973 of unrecognized stock-based compensation cost related to grants under the stock option plan that is expected to be expensed over a weighted-average period of four to ten years. There was $2,802 of intrinsic value for options outstanding as of September 30, 2015.