Stock Based Compensation

12 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

9. Stock Based Compensation

Results of operations for the years ended June 30, 2013 and 2012 include share based compensation costs totaling $149,692 and $204,404, 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 used for the calculations during the years ended June 30, 2013 and 2012

	2013	2012
Expected Term	4.96 years	5.09 years
Weighted Average Volatility	121.93%	95.18%
Forfeiture rate	20%	18.82%
Risk-free interest rate	2.02%	2.06%
Expected dividend rate	0.00%	0.00%

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. 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.

The following is required disclosure in connection with stock options and warrants (which resulted in share based compensation charges) as of June 30, 2013: 1) weighted average exercise price - $0.81; 2) weighted average remaining contractual term vested and outstanding options 74 months, respectively; 3) aggregate intrinsic value of outstanding and exercisable options and warrants - $0.00 and $0.00, respectively; 4) weighted average grant date fair value of options and warrants granted - $1.14 per share; and 5) weighted average fair value of options and warrants vested - $1.48 per share.

On September 6, 2012, our Company’s Board of Directors approved the re-pricing of options and warrants granted to employees, active consultants and board members. The re-priced options and warrants had exercise prices ranging from $1.25 to $3.73. A total of 1,245,000 options and warrants were amended to reduce the exercise price to $0.53 per share, based on the most recent closing price for our Company’s common stock, which is deemed the fair market value as of that date. The result of re-pricing was insignificant and had nominal effect on the total compensation expense as of June 30, 2013.

The exercise prices for options and warrants granted and outstanding which resulted in stock based compensation charges was as follows at June 30, 2013:

Exercise Price Range	Number of options or warrants
$0.25 - $0.50	100,000
$0.51 – $0.75	1,297,000
$0.76 - $1.00	-
$1.01 - $1.25	624,000
$1.26 - $2.00	32,500
$2.01 - $3.00	-
$3.01 - $4.00	1,462
$4.01 above	-
	2,054,962

A summary of the status of our non-vested options and warrants as of June 30, 2013 and changes during the year then ended is as follows:

	Shares
Non-vested outstanding, July 1, 2012	624,173
Granted	152,000
Vested	(420,518)
Cancelled	-
Non-vested outstanding, June 30, 2013	355,655

Common Shares Reserved for Future Issuance

The following table summarizes shares of our common stock reserved for future issuance at June 30, 2013:

Stock based compensation:
Stock options outstanding	1,133,462
Stock warrants outstanding	921,500
Common shares to be issued under conversion feature	1,050,000
Common shares to be issued under $0.01 warrants	131,250
Common shares to be issued under $0.50 warrants	78,750
Total common shares reserved for future issuance	3,314,962