Note 8 - Stockholders' Equity

3 Months Ended

Sep. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8.     STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2014, the Company had 200 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 years ended June 30, 2014 and 2013, the Company declared dividends of $2,000 and $2,417 respectively. During the three months ended September 30, 2014, the Company declared dividends of $500. At September 30, 2014, accrued dividends payable are $6,500.

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 three months ended September 30, 2014, the Company issued 4,496 shares of the Company’s common stock at prices ranging from $0.90 to $1.22 per share for services valued at $4,572, in the aggregate, to a consultant and an employee.

During the three months ended September 30, 2014, the Company issued 130,953 shares of the Company’s common stock upon Bassani’s fiscal year 2014 election to convert $110,000, of his convertible notes payable – affiliate into Units at a conversion price of $0.84 per Unit (Note 7).

During the three months ended September 30, 2014, the Company sold 35,000 shares of the Company’s restricted common stock at $0.75 per share for total proceeds of $26,250.

The Company also issued 40,000 shares of the Company’s restricted common stock upon receipt of its subscription receivable of $30,000 during the three months ended September 30, 2014.

Warrants:

As of September 30, 2014, the Company had approximately 7.7 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 $2.17, and the weighted-average remaining contractual life as of September 30, 2014 is 3.5 years.

During the three months ended September 30, 2014, warrants to purchase 33,750 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 $3,375 related to the warrant issuances.

As of September 30, 2014, 5,919,528 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani and Smith (Note 9).

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.

The Company recorded compensation expense related to employee stock options of nil and $85,858 for the three months ended September 30, 2014 and 2013, respectively. The Company granted nil and 67,725 options during the three months ended September 30, 2014 and 2013, respectively.

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

	Weighted average, September 30, 2013		Range, September 30, 2013
Volatility		49%		49%-50%
Dividend yield		-		-
Risk-free interest rate		0.62%		0.59%-0.68%
Expected term (years)		2.68		2.63-2.71

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 three months ended September 30, 2014 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2014		4,258,870		2.81		3.2		-
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2014		4,258,870	$	2.81		2.9	$	-
Exercisable at September 30, 2014		4,258,870	$	2.81		2.9	$	-

The total fair value of stock options that vested during the three months ended September 30, 2014 and 2013 was nil and $34,822, respectively. As of September 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 three months ended September 30, 2014 and 2013 are as follows:

	Three months ended September 30, 2014		Three months ended September 30, 2013
General and administrative:
Fair value of stock issued to an employee	$	-	$	69,999
Change in fair value from modification of option terms		-		307,638
Fair value of stock options expensed		-		68,210
Total	$	-	$	445,847
Research and development:
Fair value of stock options expensed	$	-	$	17,648
Total	$	-	$	17,648