Stockholders' equity

9 Months Ended

Mar. 31, 2012

Stockholders' equity [Abstract]

Stockholders' equity

4.

Stockholders' equity

Issuance of common stock and warrants for cash

On March 7, 2012, our Company's Board of Directors approved the sale of up to $1,500,000 of our Company's common stock and warrants to purchase common stock at $2.25 per unit.  Each unit consists of (i) one share of our Company's common stock; and (ii) two-year term warrants to purchase the amount of shares of common stock equal to 80% of the number of units purchased.  Each warrant was issued with a fixed exercise price of $.01 per share.  As of March 31, 2012, our Company raised $607,500 through the sale of 270,000 units and the commensurate exercise of 176,000 warrants for additional cash proceeds totaling $1,760.  

Issuance of common stock for services

In May 2011, we issued 500,000 shares of common stock to an individual as consideration for consulting services.  We recorded a prepaid stock compensation in connection with the shares granted totaling $400,000 based on the estimated value of the underlying shares of stock at the time of their issuance to the consultant.  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 in December 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 at the time of their vesting.  Prepaid stock compensation was originally amortized proportionally over the expected vesting term of the shares at the time the shares were vested, with the difference being recorded as additional paid-in capital.  During the nine months ended March 31, 2012, we recorded noncash charges totaling $1,547,000 in connection with this stock issuance which is included in selling, general and administrative expense in the accompanying statement of operations.  No such expenses were incurred for this issuance for the three months ended March 31, 2012.

On January 19, 2012, our Company issued 36,000 shares of restricted common stock to one of its board members in exchange for additional advisory services in the area of finance and financial reporting.  The shares vest over one year and any unvested shares are subject to repurchase by our Company should the recipient cease to provide for the contracted services.  For the three and nine months ended March 31, 2012, the Company incurred a charge totaling $43,950 related to this issuance.

Stock options

On April 27, 2011, our 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 our Company.   Generally, stock option grants under the 2011 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 March 31, 2012, we have a total of 1,131,462 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 nine months ended March 31, 2012, we recognized share based compensation expense totaling $66,695 and $119,337, respectively, related to stock options 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 and 40,000 outstanding warrants issued in connection with the sale of our common stock during the three months ended March 31, 2012.  

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 March 31, 2012 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
40,000	0.01	40,000	3rd Qtr, 2015
30,000	1.25	30,000	4th Qtr, 2016
1,079,000	1.25	552,015	4th Qtr, 2021
175,000	3.73	-	1st Qtr, 2022
35,000	3.00	-	2nd Qtr, 2022
1,462	3.25	1,462	3rd Qtr, 2022
4,378,562		3,641,577

Stock based compensation

Results of operations for the three and nine months ended March 31, 2012 include share based compensation costs totaling $71,476 and $184,177, 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 March 31, 2012:

Expected life (in years)	4.93 years
Weighted average volatility	101.6%
Forfeiture rate	- %
Risk-free interest rate	2.06%
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. 110/107 as amended, Share-Based Payment (SAB 110/107 as amended). 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 as well as those of a peer group. 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 March 31, 2012, $501,214 of unrecognized compensation cost related to unvested stock based compensation arrangements is expected to be recognized over a weighted-average remaining period of 11.95 months.  The following is required disclosure in connection with stock options and warrants (which resulted in share based compensation charges) as of March 31, 2012: 1) weighted average exercise price - $1.51; 2) weighted average remaining contractual term vested and outstanding options - 57.8 and 77.7 months, respectively; 3) aggregate intrinsic value of outstanding and exercisable options and warrants - $3,477,375 and $2,414,655, respectively; 4) weighted average grant date fair value of options and warrants granted - $2.20 per share; and 5) weighted average fair value of options and warrants vested - $0.18 per share.

The exercise prices for options and warrants granted and outstanding (which resulted in stock based compensation charges) was as follows at March 31, 2012:

Exercise Price	Number of Options or Warrants
$1.25	1,709,000
1.50	20,000
2.00	12,500
3.00	35,000
3.25	1,462
3.73	175,000
	1,952,962

A summary of the status of our non-vested options and warrants as of March 31, 2012 and changes during the three months then ended is as follows:

	Shares
Non-vested outstanding, December 31, 2011	803,695
Granted	236,462
Vested	(303,172)
Non-vested outstanding, March 31, 2012	736,985

Common Shares Reserved for Future Issuance

The following table summarizes shares of our common stock reserved for future issuance at March 31, 2012:

Stock options outstanding	1,131,462
Stock options available for future grant under the 2011 Plan	368,538
Warrants	3,247,100
Total common shares reserved for future issuance	4,747,100