Note 8 - Stockholders' Equity:

12 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8.     STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2012, the Company had 450 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 year ended June 30, 2012, the Company offered its Series B Preferred stockholders the ability to participate in a Series B Preferred Stock Conversion Subscription Agreement (“Series B Conversion Agreement”) pursuant to which the Series B Preferred stockholders agreed to convert Series B Preferred shares plus accrued dividends into restricted common stock of the Company at a conversion price of $2.00 per share and receive warrants to purchase restricted common stock of the Company at a price of $3.10 per share until December 31, 2014 at a rate of one warrant per each 10 shares of common stock, (collectively the stock and warrants are the B Conversion Units). A total of 27,220 shares of Series B Preferred stock and accrued dividends of $68,050 were converted into 1,395,031 B Conversion Units, consisting of 1,395,031 shares of common stock and 139,530 warrants, and the Company issued 121,590 warrants to brokers as a cost of the conversion. The Company allocated the value between the restricted common stock and the warrants based upon their relative fair values using the share price of the common stock on the day of the Series B Conversion Agreement closing and the fair value of the warrants, which was determined to be $0.10 per warrant. As a result, $19,402 and $2,410,288 was allocated to the warrants and restricted common stock, respectively, all of which was recorded as additional paid-in capital. The Company paid commissions of $11,234 related to the Series B Conversion Agreement which resulted in a reduction of additional paid-in capital.

During the year ended June 30, 2013 the Company redeemed 250 shares of its Series B Preferred stock plus accrued dividends of $2,500 for $27,500. The remaining 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed as of September 19. 2013.

During the years ended June 30, 2013 and 2012, the Company declared dividends of $2,417 and $72,500 respectively. At June 30, 2013, accrued dividends payable are $4,000.

Series C Preferred stock:

During the year ended June 30, 2012, the Company offered its Series C Preferred stockholders the ability to participate in a Series C Preferred Stock Conversion Subscription Agreement (“Series C Conversion Agreement”) pursuant to which the Series C Preferred stockholders agreed to convert Series C Preferred shares plus accrued dividends into restricted common stock of the Company at a conversion price of $3.00 per share. The conversion price of $3.00 per share represented a $1.00 per share reduction from the original terms of the Series C Preferred stock and due to the limited time in which the Series C stockholders had to subscribe to the Series C Conversion Agreement, the reduction in the conversion price was accounted for as an inducement and resulted in a conversion inducement of $755,258. Pursuant to the Series C Conversion Agreement the Company paid fees to any licensed/registered broker(s)/advisor(s) who assisted in the conversion process andissued one warrant for each 10 shares received by the participating Series C stockholders. Each warrant allows for the purchase of one share of the Company’s restricted common stock at $3.10 per share until expiration on December 31, 2014. During the year ended June 30, 2012, a total of 31,850 shares of Series C Preferred stock and accrued dividends of $79,625 were converted into 1,088,238 shares of common stock and 102,017 warrants were issued to brokers. The Company allocated the value between the restricted common stock and the warrants based upon their relative fair values using the share price of the common stock on the day of the Series C Conversion Agreement closing and the fair value of the warrants, which was determined to be $0.10 per warrant. As a result, $13,498 and $3,592,386 was allocated to the warrants and restricted common stock, respectively, all of which was recorded as additional paid-in capital. The Company also paid cash commissions of $11,122 related to the Series C Conversion Agreement. The $755,258 conversion inducement, which is reflected as part of the value of the Series C Preferred stock with an offset to reduce additional paid-in capital, was included in the determination of net loss applicable to common stockholders.

During the year ended June 30, 2013, one of the Company’s Series C Preferred stockholders asked to convert their shares under the Series C Conversion Agreement. The Company agreed to honor the Series C Conversion Agreement on February 15, 2013, pursuant to which a total of 300 shares of Series C Preferred stock and accrued dividends of $5,000 were converted into 11,667 shares of common stock and 1,167 warrants were issued to a broker. The Company allocated the value between the restricted common stock and the warrants based upon their relative fair value to the total value of the issuances using the share price of the common stock on the day of the conversion and the value of the warrants, which was determined to be $0.075 per warrant. As a result, $155 and $40,591 was allocated to the warrants and restricted common stock, respectively, all of which was recorded as additional paid-in capital. The Company paid commissions of $116 related to the conversion which resulted in a reduction of additional paid-in capital. The Company recorded $5,746 related to the conversion inducement of the Series C stock, which is reflected as part of the value of the Series C Preferred stock with an offset to reduce additional paid-in capital, and is included in the determination of net loss applicable to common stockholders for the year ended June 30, 2013.

During the years ended June 30, 2013 and 2012, the Company declared dividends of $2,000 and $82,625 respectively. At June 30, 2013 dividends payable are nil.

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, 2012, the Company issued 131,918 shares of the Company’s restricted common stock at prices ranging from $2.00 to $3.27 per share for consulting services valued at $331,126, in the aggregate, to various consultants and an employee. The Company also expensed $1,035,300 for fully vested stock bonuses that had been earned but not issued.

During the year ended June 30, 2012, the Company granted Bassani and Smith shares of the Company’s common stock as bonuses for signing extensions to their employment agreements. Bassani will be issued 300,000 shares of the Company’s common stock issuable in three tranches of 100,000 shares on each of January 15, 2015, 2016 and 2017, respectively. Smith will be issued 90,000 shares of the Company’s common shares in two tranches of 45,000 shares on each of January 15, 2013 (issued during the year ended June 30, 2013) and 2014, respectively. The Company recorded non-cash compensation of $795,000 and $240,300 related to the future stock issuances to Bassani and Smith, respectively, as the bonuses were fully vested upon grant date during the year ended June 30, 2012.

During the year ended June 30, 2012, the Company entered into subscription agreements to sell 2012 A UNITS. As of June 30, 2013, the Company had issued a total of 556,000 2012 A UNITS, consisting of 140,000 under new subscription agreements in 2012 for total proceeds of $350,000 and 416,000 upon the amendment of previously issued 2011 UNITS. Bassani and Smith each amended their 2011 UNITS subscriptions for 60,000 2012 A UNITS on identical terms with other electing parties.

In June 2012, the Company entered into subscription agreements to sell 2012 B UNITS for $2.25 each, with each 2012 B UNIT consisting of one 2012 B share of the Company’s restricted common stock and one 2012 B warrant to purchase one half of a share of the Company’s restricted common stock for $3.10 per share until December 31, 2014 (the “2012 B UNITS”). As of June 30, 2013, the Company had issued a total of 193,000 2012 B UNITS for total proceeds of $434,250. The Company allocated the proceeds from the 2012 B shares and the 2012 B 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 2012 B Warrants, which was determined to be $0.075 per 2012 B Warrant. As a result, $7,311 was allocated to the 2012 B Warrants and $426,939 was allocated to the 2012 B Shares, and both were recorded as additional paid in capital.

During the year ended June 30, 2013, the Company issued 124,157 shares of the Company’s restricted common stock at prices ranging from $1.56 to $2.13 per share for consulting services valued at $148,140, in the aggregate, to consultants and an employee.

During the year ended June 30, 2013, the Company granted Bassani and Smith shares of the Company’s common stock as bonuses for signing extensions to their employment agreements. Bassani will be issued 300,000 shares of the Company’s common stock issuable in two tranches of 150,000 shares on each of January 1, 2015 and 2016, respectively. Smith will be issued 150,000 shares of the Company’s common shares in two tranches of 75,000 shares on each of January 15, 2014 and 2015, respectively. The Company recorded non-cash compensation of $585,000 and $292,500 related to the future stock issuances to Bassani and Smith, respectively, as the bonuses were fully vested upon grant date during the year ended June 30, 2013.

During the year ended June 30, 2013, the Company declared contingent stock bonuses of 25,000 and 100,000 shares to Schafer and Smith, respectively, and recognized $48,750 and $195,000 of non-cash compensation expense, respectively. The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and do not require that Schafer or Smith remain employed by the Company.

During the year ended June 30, 2013, the Company entered into subscription agreements to sell 2012 B UNITS for $2.25 each, with each 2012 B UNIT consisting of one 2012 B share of the Company’s restricted common stock and one 2012 B warrant to purchase one half of a share of the Company’s restricted common stock for $3.10 per share until December 31, 2014 (the “2012 B UNITS”). During the year ended June 30, 2013, the Company issued 177,556 2012 B UNITS for total proceeds of $399,499. The Company allocated the proceeds from the 2012 B shares and the 2012 B 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 2012 B Warrants, which was determined to be $0.075 per 2012 B Warrant. As a result, $6,905 was allocated to the 2012 B Warrants and $392,594 was allocated to the 2012 B Shares, and both were recorded as additional paid in capital.

During the year ended June 30, 2013, the Company entered into subscription agreements to sell 2013 UNITS for $2.00 each, with each 2013 UNIT consisting of one 2013 Share of the Company’s restricted common stock and one 2013 Warrant to purchase one half of a share of the Company’s restricted common stock for $2.50 per share until December 31, 2014 (the “2013 UNITS”). During the year ended June 30, 2013, the Company issued 330,500 2013 UNITS for total proceeds of approximately $661,000. The Company allocated the proceeds from the 2013 shares and the 2013 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 2013 Warrants, which was determined to be $0.075 per 2013 Warrant. As a result, $12,262 was allocated to the 2013 Warrants and $648,738 was allocated to the 2013 Shares, and both were recorded as additional paid in capital.

During the year ended June 30, 2013, the company sold 216,000 shares of the Company’s restricted common stock for total net proceeds of $293,000 (including subscriptions receivable of $25,000 for 20,000 shares at June 30, 2013, all of which was received in July 2013).

Warrants:

As of June 30, 2013, the Company had approximately 7.1 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 $2.18, and the weighted-average remaining contractual life as of June 30, 2013 is 4.68 years.

During the year ended June 30, 2012, the Company issued warrants to purchase 55,000, 70,000 and 96,500 shares of the Company’s common stock in connection with the sale of 2011 UNITS , 2012 A UNITS and 2012 B UNITS, respectively. The Company also issued warrants in connection with the conversions of its Series B and Series C Preferred stock and the Company issued 208,000 warrants in connection with the amendments of previously issued 2011 UNIT subscription agreements.

During the year ended June 30, 2012 warrants to purchase 10,000 shares of the Company’s common stock at $2.25 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 on June 30, 2017. The Company recorded non-cash compensation expense of $1,000 related to the warrant issuance.

During the year ended June 30, 2012, 150,000 warrants issued to a consultant to purchase common shares of the Company at $3.00 per share expired. The Company elected to extend the expiry date of 50,000 warrants to December 31, 2014 and recorded expense related to the modification of $5,000. Also during the year ended June 30, 2012, 10,000 warrants issued to a consultant to purchase common shares of the Company at $2.20 per share expired.

During the year ended June 30, 2013 warrants to purchase 50,000 and 250,000 shares of the Company’s common stock at $2.10 per share were issued pursuant to extension agreements with Bassani and Smith, respectively (Note 12). These warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018. The Company recorded non-cash compensation expense of $5,000 and $25,000, respectively, related to the warrant issuances.

During the year ended June 30, 2013, the Company issued warrants to purchase 88,779 and 165,250 shares of the Company’s common stock in connection with the sale of 2012 B UNITS and 2013 UNITS, respectively.

During the year ended June 30, 2013 warrants to purchase 68,786 shares of the Company’s common stock at prices ranging from $1.68 to $2.50 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 $6,879 related to the warrant issuances. The Company entered into an agreement with the consultant whereby 38,786 of these warrants 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, 2013, the Company issued 1,167 warrants in connection with the conversion of Series C Preferred Stock.

During the year ended June 30, 2013 the Company agreed to extend the expiration date of 166,500 warrants owned by Bassani and Smith (and their respective donees) (Note 7 and 12) which were scheduled to expire prior to December 31, 2018 to that date. The company recorded expense related to the modification of the warrants of $8,325 for the year ended June 30, 2013.

As of June 30, 2013, 5,419,324 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani, Smith and Schafer (Note 12). The modification of the warrants under the execution/exercise bonuses for Smith and Bassani resulted in an incremental non-cash compensation expense of approximately $1,885,000 for the year ended June 30, 2013.

Stock options:

The Company’s 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended, provides for the issuance of options to purchase up to 12,000,000 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 May 2013, the Company entered into an agreement with an officer of the Company (Notes 7 and 12) which entitled the employee to modifications of existing stock options resulting in the extension of certain expiration dates and resulted in incremental non-cash compensation expense of approximately $49,700 for the year ended June 30, 2013.

The Company recorded compensation expense related to employee stock options of $455,080 and $2,630,863 for the years ended June 30, 2013 and 2012, respectively. The Company granted 150,000 and 1,475,000 options during the years ended June 30, 2013 and 2012, respectively. The fair value of the options granted during the year ended June 30, 2013 and 2012 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted average, June 30, 2013			Range, June 30, 2013			Weighted average, June 30, 2012			Range, June 30, 2012
Volatility		66	%	60%	-	68%		83	%	61%	-	88%
Dividend yield		-			-			-			-
Risk-free interest rate		0.32	%	0.31%	-	0.34%		1.31	%	0.25%	-	2.02%
Expected term (years)		3.05		2.66	-	3.25		4.02		2	-	4.5

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, 2013 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2011		3,636,145	$	2.83		3.8	$	478,375
Granted		1,475,000		2.97
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at June 30, 2012		5,111,145		2.86		4.6		274,200
Granted		150,000		2.10
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at June 30, 2013		5,261,145	$	2.84		4.0	$	168,750
Exercisable at June 30, 2013		4,936,145	$	2.85		3.9	$	168,750

The following table presents information relating to nonvested stock options as of June 30, 2013:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2012		590,000		$	1.83
Granted		150,000			0.83
Vested		(415,000	)		(1.44	)
Forfeited		-			-
Nonvested at June 30, 2013		325,000		$	1.86

The total fair value of stock options that vested during the years ended June 30, 2013 and 2012 was $599,650 and $2,434,200, respectively. As of June 30, 2013, the Company had $157,210 of unrecognized compensation cost related to stock options that will be recorded over a weighted average period of less than two years.

As of June 30, 2013, 2,025,000 of the outstanding options of the Company are subject to execution/exercise bonuses under agreements with Bassani, Smith and Schafer (Note 12). The modification of the options for Smith and Bassani under the execution/exercise bonuses resulted in an incremental non-cash compensation expense of approximately $562,000 for the year ended June 30, 2013.

Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the years ended June 30, 2013 and 2012 are as follows:

	Year ended June 30, 2013		Year ended June 30, 2012
General and administrative:
Fair value of stock/warrant bonuses expensed	$	1,159,575	$	1,035,300
Fair value of stock issued to an employee		99,996		99,996
Change in fair value from modification of option terms		2,496,700		94,820
Fair value of stock options expensed		416,804		2,485,782
Total	$	4,173,075	$	3,715,898
Research and development:
Fair value of stock options expensed	$	38,276	$	50,251
Total	$	38,276	$	50,251