Note 3 - Employee Stock Compensation Plans

6 Months Ended

Dec. 31, 2013

Share-based Arrangements with Employees and Nonemployees [Abstract]

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

3. Employee Stock Compensation Plans

On November 7, 2012, the Company’s stockholders approved the Omnibus Equity Compensation Plan (the “Omnibus Plan”). The Compensation Committee of the Company’s Board of Directors administers the Omnibus Plan and, in that capacity, has the exclusive authority to grant various incentive awards under the Omnibus Plan in the form of stock options, stock awards, stock units, performance units, and other stock-based awards. Up to 2,000,000 shares of the Company’s common stock are available for issuance to participants under the Omnibus Plan. The Omnibus Plan is available to all employees of the Company and its subsidiaries, including employees who are officers or members of the Board, and all non-employee directors and consultants of the Company and its subsidiaries. Prior to the adoption of the Omnibus Plan, the Board of Directors granted options to purchase shares of the Company’s common stock under the Avatech Solutions, Inc. 2002 Stock Option Plan (the “2002 Option Plan”). The 2002 Option Plan, which expired in August 2012, provided for the granting of either incentive or non-qualified stock options to purchase an aggregate of up to 7,800,000 shares of common stock to eligible employees, officers, and directors of the Company and its subsidiaries at an exercise price of not less than the fair market value of the common stock on the date of grant. For the six months ended December 31, 2013 and December 31, 2012, total stock compensation expense recorded in selling, general and administrative expenses was $159,000 and $126,000, respectively.

The following are the assumptions made in computing the fair value of stock-based awards granted for the six months ended December 31, 2013:

Average risk-free interest rate		2.031	%
Dividend yield		0	%
Expected term (years)		10.0
Average expected volatility		0.50
Weighted average per share fair value of granted options	$	0.49

Expected volatilities are based on historical volatility of the Company’s common stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of stock option activity during the six months ended December 31, 2013 and related information is included in the table below:

	Options			Weighted-Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 1, 2013		3,488,629		$	0.77
Granted		966,360			0.98
Exercised		(248,260	)		0.67
Forfeited		(416,006	)		0.83
Expired		(31,108	)		0.30
Outstanding at December 31, 2013		3,759,615		$	0.82	$	241,025
Exercisable at December 31, 2013		1,587,884		$	0.81	$	126,342
Weighted-average remaining contractual life of shares outstanding (years)		7.3
Weighted-average remaining contractual life of shares exercisable (years)		5.5

All options granted have an exercise price equal to the fair market value of the Company’s common stock on the date of grant. Exercise prices for options outstanding as of December 31, 2013 ranged from $0.50 to $1.71 as follows:

Range of Exercise Prices				Options Outstanding		Weighted Average Exercise Prices of Options Outstanding		Weighted Average Remaining Contractual Life of Options Outstanding (years)		Options Exercisable		Weighted Average Exercise Prices of Options Exercisable		Weighted Average Remaining Contractual Life of Options Exercisable (years)
$	0.50	–	0.50		100,000	$	0.50		1.4		100,000	$	0.50		1.4
	0.51	–	0.75		1,552,945		0.70		7.2		794,860		0.69		7.0
	0.76	–	1.00		1,868,170		0.89		8.3		454,521		0.83		5.6
	1.01	–	1.71		238,500		1.29		2.1		238,503		1.29		2.1
					3,759,615		0.82		7.3		1,587,884		0.81		5.5

Assuming that no additional share-based payments are granted after December 31, 2013, $751,000 of compensation expense will be recognized in the consolidated statement of operations over a weighted-average period of 2.4 years.