Stock Based Compensation

3 Months Ended

Sep. 30, 2013

Stock Based Compensation

Stock Based Compensation

11. Stock Based Compensation

Stock options

As of September 30, 2013, we had a total of 1,245,962 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 year ended June 30, 2014 and 2013, we recognized share based compensation expense totaling $0 and $149,692, respectively, related to stock options granted through that date.

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 of the options.

Expected Term	4.96 years
Weighted average volatility	121.93%
Forfeiture rate	20.00%
Risk-free interest rate	2.02%
Expected dividend rate	0

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 September 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.

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

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 September 30, 2013 and June 30, 2013 and changes during the year then ended is as follows:

Non-vested outstanding, June 30, 2012	624,173
Granted	152,000
Vested	(420,518	)
Cancelled	0
Non-vested outstanding, June 30, 2013	355,655
Granted	0
Vested	(3,125	)
Cancelled	(317,529	)
Non-vested outstanding, September 30, 2013	35,000

Common shares reserved for future issuance

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

Stock based compensation:
Stock options outstanding	60,000
Stock warrants outstanding	0
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	65,000
Total common shares reserved for future issuance	1,306,250