Note 8 - Stockholders' Equity:

3 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8.    STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2013, 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, 2013 and 2012, the Company declared dividends of $2,417 and $72,500 respectively. During the three months ended September 30, 2013, the Company declared dividends of $500. At September 30, 2013, accrued dividends payable are $4,500.

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, 2013, the Company issued 118,121 shares of the Company’s restricted common stock at prices ranging from $1.25 to $1.85 per share for consulting services valued at $167,720, in the aggregate, to consultants and employees.

During the three months ended September 30, 2013, the Company sold 400,000 shares of the Company’s restricted common stock for total net proceeds of $500,000. 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 three months ended September 30, 2013.

Warrants:

As of September 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 September 30, 2013 is 4.43 years.

During the three months ended September 30, 2013 warrants to purchase 14,036 shares of the Company’s common stock at $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 $1,404 related to the warrant issuances. The Company entered into an agreement with the consultant whereby the 14,036 warrants issued during the three months ended September 30, 2013 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.

As of September 30, 2013, 5,419,324 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani and Smith (Note 10).

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 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 three months ended September 30, 2013.

During the three months ended September 30, 2013, 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 10). The modification of the options for Schafer and the board member resulted in incremental non-cash compensation expense of $210,513 for the three months ended September 30, 2013. As of September 30, 2013, 2,295,000 of the outstanding options of the Company are subject to execution/exercise bonuses.

The Company recorded compensation expense related to employee stock options of $85,858 and $239,055 for the three months ended September 30, 2013 and 2012, respectively. The Company granted 67,725 and 150,000 options during the three months ended September 30, 2013 and 2012, respectively. The fair value of the options granted during the three months ended September 30, 2013 and 2012 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted average, September 30, 2013		Range, September 30, 2013			Weighted average, September 30, 2012		Range, September 30, 2012
Volatility		49%	49%	-	50%		66%	60%	-	68%
Dividend yield		-		-			-		-
Risk-free interest rate		0.62%	0.59%	-	0.68%		0.32%	0.31%	-	0.34%
Expected term (years)		2.68	2.63	-	2.71		3.05	2.66	-	3.25

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, 2013 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	$	168,750
Granted		67,725		1.51
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2013		5,328,870	$	2.82		3.8	$	52,000
Exercisable at September 30, 2013		5,003,870	$	2.83		3.7	$	52,000

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

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2013		325,000		$	1.86
Granted		67,725			0.51
Vested		(67,725	)		(0.51	)
Forfeited		-			-
Nonvested at September 30, 2013		325,000		$	1.86

The total fair value of stock options that vested during the three months ended September 30, 2013 and 2012 was $34,822 and $125,000, respectively. As of September 30, 2013, the Company had $107,929 of unrecognized compensation cost related to stock options that will be recorded over a weighted average period of less than two years.

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

	Three months ended September 30, 2013		Three months ended September 30, 2012
General and administrative:
Fair value of stock/warrant bonuses expensed	$	-	$	1,151,250
Fair value of stock issued to an employee		69,999		24,999
Change in fair value from modification of option terms		307,638		-
Fair value of stock options expensed		68,210		230,353
Total	$	445,847	$	1,406,602
Research and development:
Fair value of stock options expensed	$	17,648	$	8,702
Total	$	17,648	$	8,702