Stockholders' equity

6 Months Ended

Dec. 31, 2011

Stockholders' equity [Abstract]

Stockholders' equity

4.

Stockholders' equity

Issuance of common stock for services

In May 2011, we issued 500,000 shares of common stock to an individual as consideration for general consulting services.  We recorded a prepaid stock compensation in connection with this stock grant totaling $400,000 based on the estimated value of the underlying shares of stock at the time of issuance.  The grant was originally scheduled to vest evenly on a monthly basis over two years through May 2013, however our Company vested all of the remaining unvested shares during the three months ended December 31, 2011.  The prepaid stock compensation from the grant was charged to operations at the time that shares were vested at the fair market value of the vesting shares.  Prepaid stock compensation was amortized proportionally as the shares were vested with the difference being recorded as additional paid-in capital.  During the three and six months ended December 31, 2011, we recorded noncash charges totaling $1,246,000 and $1,547,000, respectively, in connection with this stock issuance which is included in selling, general and administrative expense in the accompanying statement of operations.  

Stock options

On April 27, 2011, the Company's Board of Directors approved the adoption of the 2011 Stock Option/Stock Issuance Plan (the "2011 Plan") and reserved 1,500,000 shares of common stock for issuance under the 2011 Plan.  The 2011 Plan provides for the issuance of both non-qualified stock options and incentive stock options ("ISOs"), and permitted grants to employees, non-employee directors and consultants of the Company.   Generally, stock option grants under this plan will vest over a period of up to four years and have a term not to exceed 10 years, although the Plan Administrator has the discretion to issue option grants with varying terms and vesting periods.   

Through December 31, 2011, we have a total of 1,130,000 incentive and nonqualified stock options granted and outstanding under the Plan. All of our outstanding options have terms of between five and ten years.  During the three and six months ended December 31, 2011, we recognized share based compensation expense totaling $48,320 and $52,642 respectively, related to stock options granted through that date.   

Consulting and advisory warrants

During the six months ended December 31, 2011, our Company issued a warrant to purchase up to 12,500 shares of our common stock to an individual providing consulting and advisory services.  During the three and six months ended December 31, 2011, we recognized share based compensation expense totaling $4,781 and $60,059, respectively, related to all warrants granted through that date.  

Other outstanding warrants

We have 2,185,600 outstanding warrants issued in connection with the sale of our common stock during the year ended June 30, 2011.  

Outstanding warrants from all sources have terms ranging from two to five years with certain of the warrants carrying registration rights of the underlying shares of common stock.  The number of shares of common stock subject to exercise and the exercise price of all options and warrants outstanding at December 31, 2011 is as follows:  

Shares Outstanding	Weighted Average Exercise Price	Shares Vested	Expiration Fiscal Period
2,805,600	$1.45	2,805,600	4th Qtr, 2013
200,000	1.25	200,000	4th Qtr, 2014
12,500	2.00	12,500	1st Qtr, 2015
30,000	1.25	30,000	4th Qtr, 2016
1,079,000	1.25	485,035	4th Qtr, 2021
175,000	3.73	-	1st Qtr, 2022
35,000	3.00	-	2nd Qtr, 2022
4,337,100		3,533,135

Stock based compensation

Results of operations for the three and six months ended December 31, 2011 include share based compensation costs totaling $53,101 and $112,701, respectively, charged to selling, general and administrative expenses.  For purposes of accounting for stock based compensation, the fair value of each option and warrant award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula.  The following weighted average assumptions were utilized for the calculations during the three months ended December 31, 2011:

Expected life (in years)	6.13 years
Weighted average volatility	94.9%
Forfeiture rate	- %
Risk-free interest rate	2.15%
Expected dividend rate	- %

The weighted average expected option and warrant term for director and employee stock options granted reflects the application of the simplified method set out in SEC Staff Accounting Bulletin No. 107, Share-Based Payment (SAB 107). The simplified method defines the life as the average of the contractual term of the options and the weighted average vesting period for all options. We utilized this approach as our historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term. Expected volatilities are based on the historical volatility of our stock. We estimated the forfeiture rate based on our expectation for future forfeitures and we currently expect substantially all options and warrants to vest. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at or near the time of grant. We have never declared or paid dividends and have no plans to do so in the foreseeable future.

As of December 31, 2011, $543,618 of total unrecognized compensation cost related to unvested stock based compensation arrangements is expected to be recognized over a weighted-average period of 13.69 months.  The following is required disclosure in connection with stock options and warrants (which resulted in share based compensation charges) as of December 31, 2011: 1) weighted average exercise price - $1.516; 2) weighted average remaining contractual term vested and outstanding options - 57.8 and 80.6 months, respectively; 3) aggregate intrinsic value of outstanding and exercisable options and warrants - $5,344,875 and $3,428,230, respectively; 4) weighted average grant date fair value of options and warrants granted $0.16 per share; and 5) weighted average fair value of options and warrants vested - $0.15.

The exercise prices for options and warrants granted and outstanding (which resulted in stock based compensation charges) was as follows at December 31, 2011:

Exercise Price	Number of Options or Warrants
$1.25	1,709,000
1.50	20,000
2.00	12,500
3.00	35,000
3.73	175,000
	1,951,500

A summary of the status of our non-vested options and warrants as of December 31, 2011 and changes during the three and six months then ended is as follows:

	Shares
Non-vested outstanding, June30, 2011	739,695
Granted	222,500
Vested	(158,230)
Non-vested outstanding, December 31, 2011	803,965

Common Shares Reserved for Future Issuance

The following table summarizes shares of our common stock reserved for future issuance at December 31, 2011:

Stock options outstanding	1,130,000
Stock options available for future grant under the 2011 Plan	370,000
Warrants	3,207,100
Total common shares reserved for future issuance	4,707,100