(13) Common Stock and Common Stock Equivalents

12 Months Ended

Jun. 30, 2017

Notes

(13) Common Stock and Common Stock Equivalents

(13)  Common Stock and Common Stock Equivalents

On December 16, 2016, the shareholders approved an increase to the aggregate number of shares of common stock that the Company is authorized to issue from 50,000,000 shares to 100,000,000 shares.

For the year ended June 30, 2017, the Company granted 36,122 shares of restricted common stock to directors in connection with compensation arrangements and 106,932 shares to employees. For the year ended June 30, 2016, the Company granted 36,174 shares of restricted common stock to directors in connection with compensation arrangements and 35,422 shares to employees.

For the year ended June 30, 2017, the Company issued 1,559,000 shares of common stock pursuant to the Private Placement with gross proceeds of $7,795,000 used for the Acquisition and 6,173 shares for professional fees in conjunction with the Acquisition.

The Company issued 139,658 shares of common stock during the fiscal year ended June 30, 2017 and 91,295 shares of common stock during the fiscal year ended June 30, 2016 as payment of preferred stock dividends.

The Company maintained a 2005 equity incentive plan for the benefit of employees.  On June 29, 2015 the shareholders approved a new 2015 equity incentive plan setting aside 500,000 shares (“2015 Equity Plan”). The 2015 Equity Plan was filed with the SEC on September 3, 2015. Incentive and nonqualified stock options, restricted common stock, stock appreciation rights, and other share-based awards may be granted under the plan.  Awards granted under the plan may be performance-based. As of June 30, 2017, 299,549 shares of common stock were authorized and reserved for issuance, but were not granted under the terms of the 2015 Equity Plan.

The Company granted 49,500 options under its 2015 Equity Plan during fiscal year 2017 and 95,000 options during fiscal year 2016. The options were granted at not less than 100% of the market price of the stock at the date of grant. Option terms are determined by the board of directors, and exercise dates may range from 6 months to 10 years from the date of grant.

The fair value of each option grant was estimated on the date of grant using the Black Scholes option pricing model with the following assumptions:

	2017	2016
Expected dividend yield	0%	0%
Expected stock price volatility	47% - 54%	63% - 65%
Risk-free interest rate	1.84% - 2.02%	1.83% - 2.04%
Expected life of options	6 - 8 years	8 years

The weighted average fair value of options granted during fiscal year 2017 was $1.33.

The following table summarizes the Company’s stock option activity during the reported fiscal years:

		2017				2016
					Weighted
				Weighted	average			Weighted
		Number		average	remaining	Number		average
		of		exercise	contractual	of		exercise
		shares		price	term	shares		price
Options outstanding at
	beginning of the year	121,557	$	3.33	3.56 years	91,152	$	5.07
Options granted		49,500		2.83	6.51 years	95,000		3.27
Options canceled or expired		(4,067)		4.86		(64,595)		4.74
Options outstanding at end
	of the year	166,990		3.14	4.76 years	121,557		3.84
Options exercisable at end
	of the year	74,473		4.46		63,940		4.75
Range of exercise prices at
	end of the year		$	1.75 – 5.55			$	1.75 – 5.55

The Company recognized $419,925 and $203,889 in stock-based compensation for the years ended June 30, 2017 and 2016, respectively, which is included in selling, general, and administrative expenses in the consolidated statements of operations. The stock-based compensation includes amounts for both restricted stock and stock options. Included in the stock-based compensation for fiscal year 2017 and 2016 was $123,877 and $79,333, respectively, related to severance expenses that were settled with the issuance of common stock.

As of June 30, 2017 there was $259,241 of unrecognized stock-based compensation cost that is expected to be expensed over the next four years.

No options were exercised during fiscal years 2017 and 2016. The aggregate intrinsic value of the outstanding options as of June 30, 2017 and 2016 was $1,646 and $3,816, respectively.