Note 7 - Stockholders' Equity

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

7.     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 as a liability. The 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed.

During the years ended June 30, 2016 and 2015, the Company declared dividends of $2,000 and $2,000 respectively. During the three months ended September 30, 2016, the Company declared dividends of $500. At September 30, 2016, accrued dividends payable are $10,500. The dividends are classified as a component of operations as the Series B Preferred stock is presented as a liability in these financial statements. For the three months ended September 30, 2015 these amounts were presented differently but the September 30, 2015 financial statements were revised even though such revision previously was and continues to be immaterial to the prior year financial statements.

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, 2016, the Company issued 20,492 shares of the Company’s common stock at prices ranging from $0.75 to $0.83 per share for services valued at $16,556, in the aggregate, to consultants and employees.

During the three months ended September 30, 2016, the Company issued 10,000 shares of the Company’s restricted common stock upon receipt of its subscription receivable of $7,500 for the exercise of 10,000 warrants.

During the three months ended September 30, 2016, the Company entered into subscription agreements to sell units for $0.75 per unit, 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 $1.00 per share until December 31, 2017 and pursuant thereto, the Company issued 120,000 units for total proceeds of $90,000. 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, $2,579 was allocated to the warrants and $87,421 was allocated to the shares, and both were recorded as additional paid in capital.

During the three months ended September 30, 2016, the Company sold 30,467 shares of the Company’s common stock for $0.75 per share for total proceeds of $22,850.

During the three months ended September 30, 2016, a consultant elected to convert $6,008 of deferred compensation into 7,152 shares of the Company’s common stock at a conversion rate of $0.84 per share.

Warrants:

As of September 30, 2016, the Company had approximately 7.4 million warrants outstanding, with exercise prices from $0.75 to $3.00 and expiring on various dates through December 31, 2021. 

The weighted-average exercise price for the outstanding warrants is $1.29, and the weighted-average remaining contractual life as of September 30, 2016 is 4.0 years.

During the three months ended September 30, 2016, warrants to purchase 722,319 shares of common stock of the Company at prices between $0.75 per share expired.

At June 30, 2016 the Company had a subscription agreement for the exercise of 10,000 warrants at an exercise price of $0.75, resulting in a subscription receivable of $7,500. During the three months ended September 30, 2016, the received the subscription receivable of $7,500 and the Company issued 10,000 shares of the Company’s common stock in satisfaction of the warrant exercise.

During the three months ended September 30, 2016, the Company entered into subscription agreements to sell units for $0.75 per unit, 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 $1.00 per share until December 31, 2017 and pursuant thereto, the Company issued 120,000 units for total proceeds of $90,000. 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, $2,579 was allocated to the warrants and $87,421 was allocated to the shares, and both were recorded as additional paid in capital.

Stock options:

The Company’s 2006 Consolidated Incentive Plan, as amended (the “2006 Plan”), 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/securities 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 $20,856 and $15,320 for the three months ended September 30, 2016 and 2015, respectively. The Company granted 35,000 and nil options during the three months ended September 30, 2016 and 2015, respectively.

The fair value of the options granted during the three months ended September 30, 2016 and 2015 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, September 30, 2016			Range, September 30, 2016				Weighted Average, September 30, 2015		Range, September 30, 2015
Volatility		81	%		78%	-	86%		-		-
Dividend yield		-				-			-		-
Risk-free interest rate		0.93	%		0.82%	-	0.97%		-		-
Expected term (years)		3.7			3	-	4		-		-

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, 2016 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2016		4,225,537	$	1.79		4.1	$	158,675
Granted		35,000		1.00
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2016		4,260,537	$	1.78		3.4	$	124,375
Exercisable at September 30, 2016		4,210,537	$	1.80		3.4	$	111,875

The following table presents information relating to nonvested stock options as of September 30, 2016:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2016		50,000		$	0.76
Granted		35,000			0.45
Vested		(35,000	)		(0.45	)
Nonvested at September 30, 2016		50,000		$	0.76

The total fair value of stock options that vested during the three months ended September 30, 2016 and 2015 was $15,900 and nil, respectively. As of September 30, 2016, the Company had $4,957 of 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, 2016 and 2015 are as follows:

	Three months ended September 30, 2016		Three months ended September 30, 2015
General and administrative:
Fair value of stock options expensed	$	16,495	$	1,838
Total	$	16,495	$	1,838
Research and development:
Fair value of stock options expensed	$	4,361	$	13,482
Total	$	4,361	$	13,482