Note 8 - Stockholders' Equity

6 Months Ended

Dec. 31, 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 six months ended December 31, 2014, the Company declared dividends of $1,000. At December 31, 2014, accrued dividends payable are $7,000.

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 six months ended December 31, 2014, the Company issued 10,083 shares of the Company’s common stock at prices ranging from $0.43 to $1.22 per share for services valued at $7,524, in the aggregate, to a consultant and an employee.

During the six months ended December 31, 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 six months ended December 31, 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.

During the six months ended December 31, 2014, the Company entered into subscription agreements to sell units for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016. During the six months ended December 31, 2014, the Company issued 135,000 units for total proceeds of $67,500. The Company allocated the proceeds from the shares and the 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 warrants, which was determined to be $0.05 per warrant. As a result, $3,592 was allocated to the warrants and $63,908 was allocated to the shares, and both were recorded as additional paid in capital.

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 six months ended December 31, 2014.

Warrants:

As of December 31, 2014, the Company had approximately 7.8 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 $2.15, and the weighted-average remaining contractual life as of December 31, 2014 is 3.26 years.

During the six months ended December 31, 2014, warrants to purchase 67,500 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 $6,750 related to the warrant issuances.

During the six months ended December 31, 2014, the Company issued warrants to purchase 67,500 shares of the Company’s restricted common stock for $0.75 per share until December 31, 2016 in connection with the sale of 135,000 units.

During the six months ended December 31, 2014, the Company agreed to extend the expiration date of 985,833 warrants owned by various individuals which were scheduled to expire on December 31, 2014. The Company recorded expense related to the modification of the warrants of $986 for the six months ended December 31, 2013.

As of December 31, 2014, 5,790,277 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 February 1, 2015, provides for the issuance of options (and/or other securities) to purchase up to 22,000,000 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 November 2014, the Company entered into an agreement with a board member which entitled the board member to modifications of existing stock options resulting in the extension of certain expiration dates and resulting in incremental non-cash compensation expense of $11,783 for the six months ended December 31, 2014.

The Company recorded compensation expense related to employee stock options of $4,000 and $(309,315) for the three months ended December 31, 2014 and 2013, respectively and $4,000 and $(223,457) for the six months ended December 31, 2014 and 2013, respectively. The Company granted 50,000 and 67,725 options during the six months ended December 31, 2014 and 2013, respectively. During the six months ended December 31, 2014, 397,500 options expired, while during the six months ended December 30, 2013, 200,000 options were forfeited.

The fair value of the options granted during the six months ended December 31, 2014 and 2013 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, December 31, 2014		Range, December 31, 2014		Weighted Average, December 31, 2013		Range, December 31, 2013
Volatility		80%		80%		49%		49%-50%
Dividend yield		-		-		-		-
Risk-free interest rate		0.51%		0.51%		0.62%		0.59%-0.68%
Expected term (years)		2		2		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 six months ended December 31, 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		50,000			1.00
Exercised		-			-
Forfeited		-			-
Expired		(397,500	)		3.06
Outstanding at December 31, 2014		3,911,370		$	2.76		3.1	$	-
Exercisable at December 31, 2014		3,911,370		$	2.76		3.1	$	-

The total fair value of stock options that vested during the six months ended December 31, 2014 and 2013 was $4,000 and $34,822, respectively. As of December 31, 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 and six months ended December 31, 2014 and 2013 are as follows:

	Three months ended December 31, 2014		Three months ended December 31, 2013			Six months ended December 31, 2014		Six months ended December 31, 2013
General and administrative:
Fair value of stock issued to an employee	$	-		24,999		$	-		94,998
Change in fair value from modification of option terms		11,783		-			11,783		307,638
Fair value of stock options expensed/(credited)		4,000		(155,728	)		4,000		(87,517	)
Total	$	15,783	$	(130,729	)	$	15,783	$	315,119
Research and development:
Fair value of stock options credited	$	-	$	(153,587	)	$	-	$	(135,939	)
Total	$	-	$	(153,587	)	$	-	$	(135,939	)