Note 8 - Director and Employee Stock Compensation Plans

12 Months Ended

Jun. 30, 2014

Share-based Arrangements with Employees and Nonemployees [Abstract]

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

8. Director and Employee Stock Compensation Plans

Employee Stock Option 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 at an exercise price of not less than the fair market value of the common stock on the date of grant, 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. Although the term of the 2002 Option Plan has expired, it will continue to govern all options granted thereunder until such options are exercised, expire or are forfeited in accordance with their terms.

The Company recorded and included in selling, general and administrative expenses, $297,000 and $261,000 of stock compensation expense for the years ended June 30, 2014 and June 30, 2013, respectively.

The following are the assumptions made in computing the fair value of stock-based awards:

	Year Ended June 30			Year Ended June 30
	2014			2013
Average risk-free interest rate		2.031	%		0.72% – 2.22	%
Dividend yield		0	%		0	%
Expected life (in years)		5			5 – 6.25
Expected volatility		.50			.50 – .56
Weighted average fair value of granted options	$	0.51		$	0.60

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 year ended June 30, 2014 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		1,053,360			1.00
Exercised		(491,110	)		0.71
Forfeited		(673,026	)		0.86
Expired		(66,108	)		0.62
Outstanding at June 30, 2014		3,311,745		$	0.83	$	1,227,000
Exercisable at June 30, 2014		1,960,591		$	0.80	$	798,000
Weighted-average remaining contractual life (in years)	6.4

The aggregate intrinsic value of options exercised was $204,000 and $4,000 during the years ended June 30, 2014 and 2013, respectively.

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 June 30, 2014 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 (in years)		Options Exercisable		Weighted Average Exercise Prices of Options Exercisable		Weighted Average Remaining Contractual Life of Options Exercisable (in years)
$ 0.50	–	0.75		1,454,385	$	0.69		6.4		1,115,485	$	0.68		6.3
0.76	–	1.00		1,584,610		0.89		8.2		647,356		0.86		7.5
1.01	–	1.71		272,750		1.22		3.8		197,750		1.24		1.6
				3,311,745						1,960,591

Assuming that no additional share-based payments are granted after June 30, 2014, $556,000 of compensation expense will be recognized in the consolidated statement of operations over a weighted-average period of 2.5 years.