Note 8 - Stockholders' Equity:

12 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8. STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2012, the Company had 450 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder at $2.00 per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily redeemable at $2.00 per share by the Company three years after issuance and accordingly was classified outside of shareholders’ equity.

During the year ended June 30, 2013 the Company redeemed 250 shares of its Series B Preferred stock plus accrued dividends of $2,500 for $27,500. The remaining 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed as of September 23, 2014.

During the years ended June 30, 2014 and 2013, the Company declared dividends of $2,000 and $2,417 respectively. At June 30, 2014, accrued dividends payable are $6,000.

Series C Preferred stock:

At July 1, 2012 the Company had 300 shares of Series C Preferred stock outstanding, which have a par value of $0.01 per share and were convertible at the option of the holder at any time from the date of issuance, into shares of the Company’s common stock calculated by dividing the sum of the $100 per share purchase price plus any accrued and unpaid dividends by $4.00 (the Conversion Rate), provided the shares have not been redeemed into common shares by the Company at is sole election.

During the year ended June 30, 2012, the Company offered its Series C Preferred stockholders the ability to participate in a Series C Preferred Stock Conversion Subscription Agreement (“Series C Conversion Agreement”) pursuant to which the Series C Preferred stockholders agreed to convert Series C Preferred shares plus accrued dividends into restricted common stock of the Company at a conversion price of $3.00 per share. The conversion price of $3.00 per share represented a $1.00 per share reduction from the original terms of the Series C Preferred stock and due to the limited time in which the Series C stockholders had to subscribe to the Series C Conversion Agreement, the reduction in the conversion price was accounted for as an inducement. Pursuant to the Series C Conversion Agreement the Company paid fees to any licensed/registered broker(s)/advisor(s) who assisted in the conversion process and issued one warrant for each 10 shares received by the participating Series C stockholders. Each warrant allows for the purchase of one share of the Company’s restricted common stock at $3.10 per share until expiration on December 31, 2014.

During the year ended June 30, 2013, one of the Company’s Series C Preferred stockholders asked to convert their shares under the Series C Conversion Agreement. The Company agreed to honor the Series C Conversion Agreement on February 15, 2013, pursuant to which a total of 300 shares of Series C Preferred stock and accrued dividends of $5,000 were converted into 11,667 shares of common stock and 1,167 warrants were issued to a broker. The Company allocated the value between the restricted common stock and the warrants based upon their relative fair value to the total value of the issuances using the share price of the common stock on the day of the conversion and the value of the warrants, which was determined to be $0.075 per warrant. As a result, $155 and $40,591 was allocated to the warrants and restricted common stock, respectively, all of which was recorded as additional paid-in capital. The Company paid commissions of $116 related to the conversion which resulted in a reduction of additional paid-in capital. The Company recorded $5,746 related to the conversion inducement of the Series C stock, which is reflected as part of the value of the Series C Preferred stock with an offset to reduce additional paid-in capital, and is included in the determination of net loss applicable to common stockholders for the year ended June 30, 2013.

During the years ended June 30, 2014 and 2013, the Company declared dividends of nil and $2,000 respectively. At June 30, 2014 dividends payable are nil.

Common stock:

Holders of common stock are entitled to one vote per share on all matters to be voted on by common stockholders. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights of any outstanding preferred stock have been satisfied. Common stock has no preemptive, redemption or conversion rights. The rights of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company may designate in the future.

Centerpoint holds 704,309 shares of the Company’s common stock. These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any beneficial interest. The Company accounts for these shares similar to treasury stock.

During the year ended June 30, 2013, the Company issued 124,157 shares of the Company’s restricted common stock at prices ranging from $1.56 to $2.13 per share for consulting services valued at $148,140, in the aggregate, to consultants and an employee.

During the year ended June 30, 2013, the Company granted Bassani and Smith shares of the Company’s common stock as bonuses for signing extensions to their employment agreements. Bassani will be issued 300,000 shares of the Company’s common stock issuable in two tranches of 150,000 shares on each of January 1, 2015 and 2016, respectively. Smith will be issued 150,000 shares of the Company’s common shares in two tranches of 75,000 shares on each of January 15, 2014 (issued) and 2015, respectively. The Company recorded non-cash compensation of $585,000 and $292,500 related to the future stock issuances to Bassani and Smith, respectively, as the bonuses were fully vested upon grant date during the year ended June 30, 2013.

During the year ended June 30, 2013, the Company declared contingent stock bonuses of 25,000 and 100,000 shares to Schafer and Smith, respectively, and recognized $48,750 and $195,000 of non-cash compensation expense, respectively. The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and do not require that Schafer or Smith remain employed by the Company.

During the year ended June 30, 2013, the Company entered into subscription agreements to sell 2012 B UNITS for $2.25 each, with each 2012 B UNIT consisting of one 2012 B share of the Company’s restricted common stock and one 2012 B warrant to purchase one half of a share of the Company’s restricted common stock for $3.10 per share until December 31, 2014 (the “2012 B UNITS”). During the year ended June 30, 2013, the Company issued 177,556 2012 B UNITS for total proceeds of $399,499. The Company allocated the proceeds from the 2012 B shares and the 2012 B warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the 2012 B Warrants, which was determined to be $0.075 per 2012 B Warrant. As a result, $6,905 was allocated to the 2012 B Warrants and $392,594 was allocated to the 2012 B Shares, and both were recorded as additional paid in capital.

During the year ended June 30, 2013, the Company entered into subscription agreements to sell 2013 UNITS for $2.00 each, with each 2013 UNIT consisting of one 2013 Share of the Company’s restricted common stock and one 2013 Warrant to purchase one half of a share of the Company’s restricted common stock for $2.50 per share until December 31, 2014 (the “2013 UNITS”). During the year ended June 30, 2013, the Company issued 330,500 2013 UNITS for total proceeds of approximately $661,000. The Company allocated the proceeds from the 2013 shares and the 2013 warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the 2013 Warrants, which was determined to be $0.075 per 2013 Warrant. As a result, $12,262 was allocated to the 2013 Warrants and $648,738 was allocated to the 2013 Shares, and both were recorded as additional paid in capital.

During the year ended June 30, 2013, the Company sold 216,000 shares of the Company’s restricted common stock for total net proceeds of $292,375 (including subscriptions receivable of $25,000 for 20,000 shares at June 30, 2013, all of which was received in July 2013). 

During the year ended June 30, 2014, the Company issued 360,066 shares of the Company’s common stock at prices ranging from $0.75 to $1.85 per share for consulting services valued at $307,102, in the aggregate, to consultants and employees, including 120,000 shares of fully vested bonus shares granted to Mr. Smith in fiscal years 2012 and 2013 which were expensed at grant date.

During the year ended June 30, 2014, the Company issued 13,369 shares of the Company’s common stock at prices ranging from $1.46 to $1.51 per share for accounts payable of $19,940.

During the year ended June 30, 2014, the Company issued 250,000 shares of the Company’s common stock upon Smith’s and Bassani’s election to convert $187,500 and $110,000, respectively, of their convertible note payable – affiliate into Units at a conversion prices of $0.75 and $0.84 per Unit, respectively (Note 7).

During the year ended June 30, 2014, the Company sold 592,534 shares of the Company’s restricted common stock at $0.75 per share for total proceeds of $474,400, net proceeds of $467,575 (including subscriptions receivable of $30,000 for 40,000 shares at June 30, 2014, all of which was received in July 2014).

During the year ended June 30, 2014, the Company sold 400,000 shares of the Company’s restricted common stock at $1.25 per share for total net proceeds of $500,000. The subscription agreement for the sale of these shares included a provision whereby the subscription agreement would be modified if the Company issued securities on more favorable terms prior to December 31, 2014. As such the Company issued an additional 266,667 common shares to the subscriber during the year ended June 30, 2014 due to the sale of common stock at $0.75 per share.

The Company also issued 20,000 shares of the Company’s restricted common stock upon receipt of its subscription receivable of $25,000 during the year ended June 30, 2014.

Warrants:

As of June 30, 2014, the Company had approximately 7.6 million warrants outstanding, with exercise prices from $0.75 to $4.25 and expiring on various dates through January 15, 2019.

The weighted-average exercise price for the outstanding warrants is $2.18, and the weighted-average remaining contractual life as of June 30, 2014 is 3.75 years.

During the year ended June 30, 2013 warrants to purchase 50,000 and 250,000 shares of the Company’s common stock at $2.10 per share were issued pursuant to extension agreements with Bassani and Smith, respectively (Note 12). These warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018. The Company recorded non-cash compensation expense of $5,000 and $25,000, respectively, related to the warrant issuances.

During the year ended June 30, 2013, the Company issued warrants to purchase 88,779 and 165,250 shares of the Company’s common stock in connection with the sale of 2012 B UNITS and 2013 UNITS, respectively.

During the year ended June 30, 2013 warrants to purchase 68,786 shares of the Company’s common stock at prices ranging from $1.68 to $2.50 per share were issued pursuant to an agreement with a consultant. The warrants were determined to have a fair value of $0.10 per warrant and expire five years from date of issuance. The Company recorded non-cash compensation expense of $6,879 related to the warrant issuances. The Company entered into an agreement with the consultant whereby 38,786 of these warrants carry an exercise bonus equal to 75% of the exercise price to be offset against the exercise price if exercised after 24 months from the issuance of the warrants.

During the year ended June 30, 2013, the Company issued 1,167 warrants in connection with the conversion of Series C Preferred Stock.

During the year ended June 30, 2013 the Company agreed to extend the expiration date of 166,500 warrants owned by Bassani and Smith (and their respective donees) (Note 7 and 13) which were scheduled to expire prior to December 31, 2018 to that date. The company recorded expense related to the modification of the warrants of $8,325 for the year ended June 30, 2013.

As of June 30, 2013, 5,419,324 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani, Smith and Schafer (Note 13). The modification of the warrants under the execution/exercise bonuses for Smith and Bassani resulted in an incremental non-cash compensation expense of approximately $1,885,000 for the year ended June 30, 2013.

During the year ended June 30, 2014 warrants to purchase 35,465 shares of the Company’s common stock at prices ranging from $1.12 to $1.71 per share were issued pursuant to an agreement with a consultant. The warrants were determined to have a fair value of $0.10 per warrant and expire five years from date of issuance. The Company recorded non-cash compensation expense of $3,546 related to the warrant issuances. The Company entered into an agreement with the consultant whereby the 35,465 warrants issued during the year ended June 30, 2014 and 38,786 warrants previously issued carry an exercise bonus equal to 75% of the exercise price to be offset against the exercise price if exercised after 24 months from the issuance of the warrants.

During the year ended June 30, 2014, warrants to purchase 105,000 shares of the Company’s common stock at $0.85 per share were issued pursuant the promissory notes entered into by Bassani and Shareholder (Note 4). The warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018. The Company recorded interest expense of $10,500 related to the warrant issuances.

During the year ended June 30, 2014, the Company issued 250,000 warrants to purchase common stock of the Company at $2.50 per share with December 31, 2018 expiry dates, due to Smith’s election to convert $187,500 of his convertible note payable – affiliate into Units at a conversion price of $0.75 per Unit (Note 7).

During the year ended June 30, 2014, the Company issued 130,953 warrants to purchase common stock of the Company at $2.50 per share with December 31, 2018 expiry dates, due to Bassani’s election to convert $110,000 of his convertible note payable – affiliate into Units at a conversion price of $0.84 per Unit (Note 7).

During the year ended June 30, 2014, warrants to purchase 25,000 common stock of the Company at $2.00 per share expired.

As of June 30, 2014, 5,874,528 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani and Smith (Note 13).

Stock options:

The Company’s 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended effective May 1, 2014, provides for the issuance of options to purchase up to 17,000,000 shares of the Company’s common stock. Terms of exercise and expiration of options granted under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years.

In May 2013, the Company entered into an agreement with an officer of the Company (Notes 7 and 12) which entitled the employee to modifications of existing stock options resulting in the extension of certain expiration dates and resulted in incremental non-cash compensation expense of approximately $49,700 for the year ended June 30, 2013.

The Company entered into agreements with Smith and Bassani, pursuant to which each is entitled to execution/exercise bonuses. The modification of the options for Smith and Bassani under the execution/exercise bonuses resulted in an incremental non-cash compensation expense of approximately $562,000 for the year ended June 30, 2013.

In July 2013, the Company entered into an agreement with a terminated employee which entitled the former employee to modifications of existing stock options resulting in the extension of certain expiration dates and resulting in incremental non-cash compensation expense of $97,125 for the year ended June 30, 2014.

During the year ended June 30, 2014, the Company entered into agreements with Schafer and a board member, pursuant to which each is entitled to execution/exercise bonuses identical to those previously offered to Bassani and Smith (Note 12). The modification of the options for Schafer and the board member resulted in incremental non-cash compensation expense of $210,513 for the year ended June 30, 2014. As of June 30, 2014, 2,295,000 of the outstanding options of the Company are subject to execution/exercise bonuses.

The Company recorded compensation expense/(credits) related to employee stock options of $(204,257) and $455,080 for the years ended June 30, 2014 and 2013, respectively. The Company granted 97,725 and 150,000 options during the years ended June 30, 2014 and 2013, respectively.

During the year ended June 30, 2014, 200,000 options were forfeited and 900,000 options expired.

The fair value of the options granted during the years ended June 30, 2014 and 2013 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted average, June 30, 2014			Range, June 30, 2014			Weighted average, June 30, 2013			Range, June 30, 2013
Volatility		54	%		49%-65	%		66	%		60%-68	%
Dividend yield		-			-			-			-
Risk-free interest rate		0.95	%		0.59%-1.69	%		0.32	%		0.31%-0.34	%
Expected term (years)		3.29			2.63-4.67			3.05			2.66-3.25

The expected volatility was based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected term of the stock options. The U.S. Treasury bill rate for the expected term of the stock options was utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are expected to be outstanding based upon management’s estimates.

A summary of option activity under the 2006 Plan for the two years ended June 30, 2014 is as follows:

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2012		5,111,145		$	2.86		4.6	$	-
Granted		150,000			2.10
Exercised		-			-
Forfeited		-			-
Expired		-			-
Outstanding at June 30, 2013		5,261,145			2.84		4.0		-
Granted		97,725			1.35
Exercised		-			-
Forfeited		(200,000	)		3.00
Expired		(900,000	)		2.84
Outstanding at June 30, 2014		4,258,870		$	2.81		3.2	$	10,500
Exercisable at June 30, 2014		4,258,870		$	2.81		3.2	$	10,500

The following table presents information relating to nonvested stock options as of June 30, 2014:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2013		325,000		$	1.86
Granted		97,725			0.58
Vested		(222,725	)		(1.08	)
Forfeited		(200,000	)		(2.10	)
Nonvested at June 30, 2014		-		$	-

The total fair value of stock options that vested during the years ended June 30, 2014 and 2013 was $54,022 and $599,650, respectively. As of June 30, 2014, the Company had no unrecognized compensation cost related to stock options.

Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the years ended June 30, 2014 and 2013 are as follows:

	Year ended June 30, 2014			Year ended June 30, 2013
General and administrative:
Fair value of stock/warrant bonuses expensed	$	-		$	1,159,575
Fair value of stock issued to an employee		94,998			99,996
Change in fair value from modification of option terms		307,638			2,496,700
Fair value of stock options (credited)/expensed		(87,517	)		416,804
Total	$	315,119		$	4,173,075
Research and development:
Fair value of stock options (credited)/expensed	$	(116,739	)	$	38,276
Total	$	(116,739	)	$	38,276