26. STOCK OPTIONS

12 Months Ended

Jun. 30, 2015

Notes to Financial Statements

STOCK OPTIONS (IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND NUMBER OF SHARES)

26. STOCK OPTIONS

On September 24, 2007, the Company’s Board of Directors unanimously adopted the 2007 Employee Stock Option Plan (the “2007 Employee Plan”) and the 2007 Directors Equity Incentive Plan (the “2007 Directors Plan”), each of which was approved by the shareholders on December 3, 2007. The Board amended each of those plans in 2010 to increase the number of shares covered thereby, which amendments were approved by the shareholders on December 14, 2010. At present, the 2007 Employee Plan provides for awards of up to 600,000 shares of the Company’s Common Stock to employees, consultants and advisors. The Board also amended the 2007 Directors Plan in November 2013 to further increase the number of shares covered thereby from 400,000 shares to 500,000 shares, which amendment was approved by the shareholders on December 9, 2013. The 2007 Directors Plan provides for awards of up to 500,000 shares of the Company’s Common Stock to the members of the Board of Directors in the form of non-qualified options and restricted stock. These two plans are administered by the Board, which also establishes the terms of the awards.

Assumptions

The fair value for the options granted were estimated using the Black-Scholes option pricing model with the following weighted average assumptions, assuming no expected dividends: 

	For the Year Ended June 30,
	2015	2014
Expected volatility	71.44%  to 104.94%	70.01% to 104.94%
Risk-free interest rate	0.30% to 0.78%	0.30% to 0.78%
Expected life (years)	2.50	2.50 to 3.25

The expected volatilities are based on the historical volatility of the Company’s stock. The observation is made on a weekly basis. The observation period covered is consistent with the expected life of options. The expected life of the options granted to employees has been determined utilizing the “simplified” method as prescribed by ASC Topic 718, which, among other provisions, allowed companies without access to adequate historical data about employee exercise behavior to use a simplified approach for estimating the expected life of a "plain vanilla" option grant. The simplified rule for estimating the expected life of such an option was the average of the time to vesting and the full term of the option. The risk-free rate is consistent with the expected life of the stock options and is based on the United States Treasury yield curve in effect at the time of grant.

2007 Employee Stock Option Plan

The Company’s 2007 Employee Plan permits the grant of stock options to its employees covering up to an aggregate of 600,000 shares of Common Stock. Under the 2007 Employee Plan, all options must be granted with an exercise price of not less than fair value as of the grant date and the options granted must be exercisable within a maximum of ten years after the date of grant, or such lesser period of time as is set forth in the stock option agreements. The options may be exercisable (a) immediately as of the effective date of the stock option agreement granting the option, or (b) in accordance with a schedule related to the date of the grant of the option, the date of first employment, or such other date as may be set by the Compensation Committee. Generally, options granted under the 2007 Employee Plan are exercisable within five years after the date of grant, and vest over the period as follows: 25% vesting on the grant date and the remaining balance vesting in equal installments on the next three succeeding anniversaries of the grant date. The share-based compensation will be recognized in terms of the grade method on a straight-line basis for each separately vesting portion of the award. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2007 Employee Plan).

The Company did not grant any stock options pursuant to the 2007 Employee Plan and no stock options were exercised during the twelve month period ended June 30, 2015. There were no cash proceeds from exercise of stock options during fiscal year 2015. The Company recognized stock-based compensation expenses of $23 in fiscal year ended June 30, 2015 under the 2007 Employee Plan. The balance of unamortized stock-based compensation of $4 based on fair value on the grant date related to options granted under the 2007 Employee Plan is to be recognized over a period of three years. The weighted-average grant date fair-value and weighted-average remaining contractual term for non-vested options were $1.69 and 1.45 years, respectively.

During the twelve months ended June 30, 2014, the Company granted stock options covering 15,000 and 35,000 shares of Common Stock, respectively, to certain employees pursuant to the 2007 Employee Plan. The exercise price of these stock options was equal to the fair value of the Company’s Common Stock (as defined under the 2007 Employee Plan in conformity with Regulation 409A of the Internal Revenue Code of 1986, as amended) on the dates of grant, September 17, 2013 and December 9, 2013, respectively.  The stock options covering 15,000 shares vested as of the grant date, while the stock options covering 35,000 shares vest over the period as follows: 25% vesting on the grant date and the remaining balance vesting in equal installments on the next three succeeding anniversaries of the grant date. The fair values as of June 30, 2014 of the options to purchase 15,000 and 35,000 shares of the Company’s Common Stock were approximately $54 and $109, respectively, based on the fair values of $3.62 and $3.10 per share, respectively, determined by using the Black Scholes option pricing model.

Stock options to purchase 126,500 shares of its Common Stock were exercised during the year ended June 30, 2014. The total proceeds received were $239. The Company recognized stock-based compensation expenses of $41 in fiscal year ended June 30, 2014 under the 2007 Employee Plan. The balance of unamortized stock-based compensation of $43 based on fair value on the grant date related to options granted under the 2007 Employee Plan is to be recognized over a period of three years. The weighted-average grant date fair-value and weighted-average remaining contractual term for non-vested options were $1.69 and 2.45 years, respectively.

As of June 30, 2015, there were vested employee stock options covering a total of 112,500 shares of Common Stock. The weighted-average exercise price was $4.06 and the weighted average contractual term was 1.28 years. The total fair value of vested employee stock options was $457 and remains outstanding as of June 30, 2015.

As of June 30, 2014, there were vested employee stock options covering a total of 103,750 shares of Common Stock. The weighted-average exercise price was $4.14 and the weighted average contractual term was 2.10 years. The total fair value of vested employee stock options was $429 and remains outstanding as of June 30, 2014.

A summary of option activities under the 2007 Employee Plan during the twelve-month period ended June 30, 2015 is presented as follows:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2014		130,000	$	3.93		2.57	$	13
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at June 30, 2015		130,000	$	3.93		1.57	$	-
Exercisable at June 30, 2015		112,500	$	4.06		1.28	$	-

A summary of option activities under the 2007 Employee Plan during the twelve month period ended June 30, 2014 is presented as follows:

	Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2013		263,500		$	3.06			1.57	$	-
Granted		50,000			3.26			-		-
Exercised		(126,500	)		(1.89	)		-		-
Forfeited or expired		(57,000	)		(3.81	)		-		-
Outstanding at June 30, 2014		130,000		$	3.93			2.57	$	13
Exercisable at June 30, 2014		103,750		$	4.14			2.10	$	3

The aggregate intrinsic value of the 126,500 shares of common stock upon exercise of options was $175.

A summary of the status of the Company’s non-vested employee stock options during the twelve months ended June 30, 2015 is presented below: 

			Weighted Average Grant-Date
	Options		Fair Value
Non-vested at July 1, 2014		26,250	$	1.69
Granted		-		-
Vested		8,750		-
Forfeited		-		-
Non-vested at June 30, 2015		17,500	$	1.69

A summary of the status of the Company’s non-vested employee stock options during the twelve months ended June 30, 2014 is presented below:

				Weighted Average Grant-Date
	Options			Fair Value
Non-vested at July 1, 2013		20,375		$	3.26
Granted		50,000			1.65
Vested		(44,125	)		(2.33	)
Forfeited		-			-
Non-vested at June 30, 2014		26,250		$	1.69

2007 Directors Equity Incentive Plan

The 2007 Directors Plan permits the grant of options covering up to an aggregate of 500,000 shares of Common Stock to its non-employee directors in the form of non-qualified options and restricted stock. The exercise price of the non-qualified options is 100% of the fair value of the underlying shares on the grant date. The options have five-year contractual terms and are generally exercisable immediately as of the grant date.

During the twelve months ended June 30, 2015, the Company granted options to purchase 50,000 shares of its Common Stock to our directors pursuant to the 2007 Directors Plan with an exercise price equal to the fair market value of our Common Stock (as defined under the 2007 Directors Plan in conformity with Regulation 409A or the Internal Revenue Code of 1986, as amended) on October 21, 2014, the date of grant thereof. The fair value of the options granted to purchase 50,000 shares of the Company's Common Stock was $191 based on the grant date fair value of $3.81 per share determined by the Black Scholes option pricing model.

There were no stock options exercised during the twelve-month period ended June 30, 2015, hence there were no proceeds from exercise of stock options during fiscal year 2015. The Company recognized stock-based compensation expenses of $106 in the twelve-month period ended June 30, 2015 under the 2007 Directors Plan.

Stock options to purchase 65,000 shares of its Common Stock were exercised during the twelve-month period ended June 30, 2014. The total proceeds received were $112. The Company recognized stock-based compensation expenses of $216 in the twelve-month period ended June 30, 2014 under the 2007 Directors Plan.

During the twelve months ended June 30, 2014, the Company granted options to purchase (a) 60,000 shares of its Common Stock to our directors pursuant to the 2007 Directors Plan with an exercise price equal to the fair market value of our Common Stock (as defined under the 2007 Directors Plan in conformity with Regulation 409A or the Internal Revenue Code of 1986, as amended) on September 17, 2013, the date of grant thereof, and (b) 40,000 shares of its Common Stock to our directors pursuant to the 2007 Directors Plan with an exercise price equal to the fair market value of our Common Stock (as defined under the 2007 Directors Plan in conformity with Regulation 409A or the Internal Revenue Code of 1986, as amended) on December 9, 2013, the date of grant thereof. The fair value of the options granted to purchase 60,000 shares of the Company's Common Stock was $217 based on the grant date fair value of $3.62 per share determined by the Black Scholes option pricing model. The fair value of the options granted to purchase 40,000 shares of the Company's Common Stock was $124 based on the grant date fair value of $3.10 per share determined by the Black Scholes option pricing mode.

As of June 30, 2015, there were vested director stock options covering a total of 365,000 shares of Common Stock. The weighted-average exercise price was $3.65 and the weighted average remaining contractual term was 1.99 years. The total fair value of vested directors' stock options as of June 30, 2015 was $24. All of our director stock options vest immediately at the date of grant. There were no unvested director stock options as of June 30, 2015.

As of June 30, 2014, there were vested director stock options covering a total of 315,000 shares of Common Stock. The weighted-average exercise price was $3.62 and the weighted average remaining contractual term was 2.63 years. The total fair value of vested directors' stock options as of June 30, 2014 was $24. All of our director stock options vest immediately at the date of grant. There were no unvested director stock options as of June 30, 2014.

A summary of option activities under the 2007 Directors Plan during the twelve months ended June 30, 2015 is presented as follows:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2014		315,000	$	3.62		2.63	$	24
Granted		50,000		3.81		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at June 30, 2015		365,000	$	3.65		1.99	$	53
Exercisable at June 30, 2015		365,000	$	3.65		1.99	$	53

A summary of option activities under the 2007 Directors Plan during the twelve months ended June 30, 2014 is presented as follows:

	Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2013		350,000		$	3.53			1.96	$	80
Granted		100,000			3.41			4.31		-
Exercised		(65,000	)		1.72			-		98
Forfeited or expired		(70,000	)		(4.81	)		-		-
Outstanding at June 30, 2014		315,000		$	3.62			2.63	$	24
Exercisable at June 30, 2014		315,000		$	3.62			2.63	$	24