Note 9 - Stockholders' Equity

12 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

9.     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. The 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed as of September 18, 2015.

During the years ended June 30, 2015 and 2014, the Company declared dividends of $2,000 and $2,000 respectively. At June 30, 2015, accrued dividends payable are $8,000.

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 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 notes payable – affiliate into Units at 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.

During the year ended June 30, 2015, the Company issued 45,647 shares of the Company’s common stock at prices ranging from $0.43 to $1.22 per share for services valued at $41,028, in the aggregate, to consultants, a former employee and two employees.    The Company also issued 75,000 shares of fully vested bonus shares granted to Mr. Smith in fiscal year 2013 which were expensed at grant date.

During the year ended June 30, 2015, 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 8).

During the year ended June 30, 2015, 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 year ended June 30, 2015.

During the year ended June 30, 2015, 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 and pursuant thereto, the Company issued 1,800,000 units for total proceeds of $900,000, which included Smith’s purchase of 12,561 units by converting $6,280 of Convertible Notes . During the year ended June 30, 2015 cash commissions of $61,522 were paid to brokers related to the unit offering in addition to the issuance of 123,044 broker’s warrants to purchase the Company’s common stock at $0.75 per share until June 30, 2016. The broker’s warrants were valued at $0.05 per warrant and $6,152 was recorded to interest expense during the year ended June 30, 2015. 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, $34,826 was allocated to the warrants and $865,174 was allocated to the shares, and both were recorded as additional paid in capital.

During the year ended June 30, 2015, the Company entered into subscription agreements to exercise certain warrants with expiry dates on or before December 31, 2015, into restricted shares of the Company’s common stock at a reduced exercise price of $1.05, for the period from May 13, 2015 through June 30, 2015. The Company extended the offering for an additional 15 days to July 15, 2015 and therefore any warrants which would have expired on June 30, 2015 were automatically extended to July 15, 2015. As the $1.05 exercise price was a reduction from the original exercise prices of the warrants, and due to the limited time in which the warrant holders had to subscribe, the reduction in the offering price was accounted for as an inducement and a conversion inducement of $9,593 was recorded. Pursuant to the offering, 71,133 warrants were exercised and 71,133 shares of the Company’s restricted common stock were issued resulting in cash proceeds of $74,690 for the year ended June 30, 2015. The Company had entered into a subscription agreement to exercise 12,500 warrants at $1.05 for which a subscription receivable of $13,125 was recorded at June 30, 2015.

During the year ended June 30, 2015, Smith elected to convert $106,099 of his Convertible Notes at $0.45 per unit into 235,775 units of the Company, consisting of one share of the Company’s common stock and one warrant to purchase the Company’s common stock at a price of $1.50 until December 31, 2020.

During the year ended June 30, 2015, Smith and various consultants elected to convert $80,780 of deferred compensation into 99,523 shares of the Company’s common stock at conversion rates ranging from $0.72 to $1.24 per share.

Warrants:

As of June 30, 2015, the Company had approximately 9.5 million warrants outstanding, with exercise prices from $0.75 to $3.10 and expiring on various dates through December 31, 2020.

The weighted-average exercise price for the outstanding warrants is $1.44, and the weighted-average remaining contractual life as of June 30, 2015 is 4.1 years.

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 9).

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 8).

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

During the year ended June 30, 2015, 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 year ended June 30, 2015, the Company issued warrants to purchase 900,000 shares of the Company’s restricted common stock for $0.75 per share until December 31, 2016 in connection with the sale of 1,800,000 units. The Company also issued 123,044 warrants to purchase shares of the Company’s restricted common stock for $0.75 per share until June 30, 2016 to brokers as commission related to the sale of the units. The warrants were deemed to have a fair value of $0.05 per warrant and the Company recorded interest expense of $6,152 related to the warrant issuances.

In conjunction with the execution of Bassani and Smith’s extension agreements (Note 13), 3,906,953 and 1,883,324 warrants issued to Bassani and Smith (and their donees), respectively, were extended until December 31, 2020 and certain warrants with an exercise price in excess of $1.50 were reduced to $1.50. The Company recorded non-cash compensation expense related to the modification of the warrants of $223,589 for the year ended June 30, 2015.

During the year ended June 30, 2015, 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 to March 31, 2015. The Company recorded expense related to the modification of the warrants of $986 for the year ended June 30, 2015.

During the year ended June 30, 2015, the Company agreed to extend the expiration date of 1,260,833 warrants owned by various individuals which were scheduled to expire between March 31, 2015 and April 30, 2015 to June 30, 2015. The Company recorded interest expense of $6,061 related to the modification of the warrants for the year ended June 30, 2015.

During the year ended June 30, 2015, the Company entered into subscription agreements to exercise certain warrants with expiry dates on or before December 31, 2015, into restricted shares of the Company’s common stock at a reduced exercise price of $1.05, for the period from May 13, 2015 through June 30, 2015. The Company extended the offering for an additional 15 days to July 15, 2015 and therefore any warrants which would have expired on June 30, 2015 were automatically extended to July 15, 2015. As a result of the offering, 71,133 warrants were exercised and 71,133 shares of the Company’s restricted common stock were issued resulting in cash proceeds of $74,690 for the year ended June 30, 2015.Stock options:

The Company’s 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended effective February 1, 2015, provides for the issuance of options 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 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 13). 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.

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 year ended June 30, 2015.

In February 2015, the Company entered into extension agreements with Bassani, Smith and Schafer (Note 13) which entitled them to modifications of existing stock options resulting in the extension of certain expiration dates and the reduction of certain exercise prices. The option modifications resulted in incremental non-cash compensation expense of $357,500 for the year ended June 30, 2015.

The Company recorded compensation expense/(credits) related to employee stock options of $501,609 and $(204,257) for the years ended June 30, 2015 and 2014, respectively. The Company granted 957,500 and 97,725 options during the years ended June 30, 2015 and 2014, respectively. During the year ended June 30, 2015, 802,500 options expired, while 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, 2015 and 2014 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted average, June 30, 2015		Range, June 30, 2015			Weighted average, June 30, 2014		Range, June 30, 2014
Volatility		76%	74%	-	80%		54%	49%	-	65%
Dividend yield		-		-			-		-
Risk-free interest rate		1.55%	0.51%	-	1.79%		0.95%	0.59%	-	1.69%
Expected term (years)		6.1	2	-	10		3.29	2.63	-	4.67

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, 2015 is as follows:

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 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		-
Granted		957,500			0.74
Exercised		-			-
Forfeited		-			-
Expired		(802,500	)		2.7
Outstanding at June 30, 2015		4,413,870		$	1.88		4.3	$	398,250
Exercisable at June 30, 2015		4,313,870		$	1.91		4.2	$	344,250

The following table presents information relating to nonvested stock options as of June 30, 2015:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2014		-		$	-
Granted		957,500			0.58
Vested		(857,500	)		(0.56	)
Nonvested at June 30, 2015		100,000		$	0.76

The total fair value of stock options that vested during the years ended June 30, 2015 and 2014 was $476,075 and $54,022, respectively. As of June 30, 2015, the Company had $50,466 of 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, 2015 and 2014 are as follows:

	Year ended June 30, 2015		Year ended June 30, 2014
General and administrative:
Fair value of stock options expensed/(credited)	$	378,937	$	(87,517	)
Fair value of stock issued to an employee		-		94,998
Change in fair value from modification of option terms		369,283		307,638
Change in fair value from modification of warrant terms		223,917		-
Total	$	972,137	$	315,119
Research and development:
Fair value of stock options expensed/(credited)	$	122,672	$	(116,739	)
Total	$	122,672	$	(116,739	)