Note 10 - Subsequent Events

6 Months Ended

Dec. 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

10. SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to December 31, 2014 for recognition and disclosure in the financial statements and notes to the financial statements.

From January 1, 2015 through February 9, 2015 the Company has issued 79,210 shares of the Company’s common shares to employees valued at approximately $37,000.

From January 1, 2015 through February 9, 2015, the Company has sold 1,665,001 units of the Company’s restricted securities 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. The proceeds from the sale of the units totalled approximately $832,500 before brokerage commisions and offering expenses (and issuance of 123,044 warrants to certain of the brokers pursuant to the terms of the offering).

From January 1, 2015 through February 9, 2015, the Company granted 257,500 options to purchase the Company’s common stock at an exercise price of $0.60 to various employees and consultants other than Smith, Bassani and Schafer. The options expire 5 years from grant date and 100,000 options vest over two years, while 157,500 of the options vest upon grant date.

From January 1, 2015 through February 9, 2015, Smith has elected to convert approximately $106,000 of his convertible note payable into 235,775 shares of the Company’s common stock and 235,775 warrants to purchase the Company’s common stock.

On February 10, 2015, the Company executed an Extension Agreement with Smith pursuant to which Smith extended his employment with the Company to December 31, 2015 (with the Company having an option to extend his employment an additional six months). As part of the Extension Agreement, the balance of Smith’s existing convertible note payable (Note 7) of $854,316 as of December 31, 2014, adjusted for coversions subsequent to that date, was replaced with a new convertible note with an initial principal amount of $760,519 with terms that i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increases the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit) and v) extends the maturity date to December 31, 2017 (“New Smith Note”). Additionally, pursuant to the Extension Agreement, Smith: i) will continue to defer his cash compensation until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 200,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 150,000 new options which vested immediately and iv) exercise prices of certain outstanding options and warrants owned by Smith (and his donees) have been extended and had the exercise prices reduced to $1.50.

On February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to December 31, 2017, (with the Company having an option to extend the term an additional six months.) As part of the agreement, the Company’s existing loan payable, deferred compensation and convertible note payable to Bassani (Notes 4, 5 and 7), were restructured into two promissory notes as follows: a) The of sum of the cash loaned by Bassani to the Company of $279,000 together with $116,277 of unreimbursed expenses through December 31, 2014 were placed into a new promissory note with initial principal of $395,277 which is due and payable on December 31, 2015 (“Cash Note”). In connection with these sums and the Cash Note, Bassani was issued warrants to purchase 592,916 shares of the Company’s common stock at a price of $1.00 until December 31, 2020; and b) the remaining balances of the Company’s accrued obligations to Bassani ($1,464,545) were replaced with a new convertible promissory note with terms that compared with the largest prior convertible note obligation to Bassani: i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increase the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit) and v) extends the maturity date to December 31, 2017 (“New Bassani Note”). Additionally, pursuant to the Extension Agreement, Bassani i) will continue to defer his cash compensation until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 250,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 450,000 new options which vested immediately and iv) exercise prices of certain outstanding options and warrants owned by Bassani (and his donees) have been extended and had the exercise prices reduced to $1.50.

On February 10, 2015, the Company entered into an agreement with Schafer pursuant to which Schafer will continue to provide services to the Company through December 31, 2015. As part of the agreement, unreimbursed expenses of $15,956 due to Schafer at December 31, 2014 were replaced with a new promissory note with initial principal of $15,956 which is due and payable on December 31, 2015 and Schafer was issued warrants to purchase 7,978 shares of the Company’s common stock at a price of $1.00 until December 31, 2020. Schaefer’s deferred compensation for 2014 (and prior years) in the amount of $394,246 (including a sum of $120,000 for calendar year 2014) was placed in a convertible promissory note with identical terms as the New Smith Note and the New Bassani Note. Additionally, pursuant to the agreement, i) the exercise period of outstanding options and warrants owned by Schafer have been extended, ii) certain of Schafer’s outstanding options and warrants had the exercise prices reduced to $1.50, and iii) 25,000 contingent stock bonuses previously granted to Schafer have been cancelled by the Company.