9. EMPLOYEE/DIRECTOR EQUITY INCENTIVE PLANS

9 Months Ended

Mar. 31, 2013

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

EMPLOYEE/DIRECTOR EQUITY INCENTIVE PLANS

NOTE 9 – EMPLOYEE/DIRECTOR EQUITY INCENTIVE PLANS

During the nine months ended March 31, 2013 and 2012, the Company’s results of operations include compensation expense for stock options granted and restricted shares vested under its various equity incentive plans. The amount recognized in the financial statements related to stock based compensation was $153,248 and $167,940 for the three months ended March 31, 2013 and 2012, respectively.  The amount recognized in the financial statements related to stock-based compensation was $570,604 and $918,080, based on the amortized grant date fair value of options and vesting of restricted shares during the nine months ended March 31, 2013 and 2012, respectively.

At the annual of meeting of shareholders held on November 7, 2012 the Company’s shareholders approved an amendment of the 2010 Omnibus Long-Term Incentive Plan (“Omnibus Plan”) which increased the number of shares of the Company’s common stock available for issuance pursuant to awards under the Omnibus Plan by 4,500,000 shares and the creation of the 2012 Non-employee Director Equity Compensation Plan (“2012 Director Equity Plan”), under which the Company may issue up to 3,500,000 restricted stock unit awards and other equity awards to our non-employee directors pursuant to the Company’s director compensation policy.

During the nine months ended March 31, 2013 options to purchase 713,050 shares were granted to employees exercisable at prices from $0.35 to $0.38 and exercisable at various dates through March 2021 under the Omnibus Plan.  As of March 31, 2013, an additional 3,702,453 shares were available to be issued under the Omnibus Plan.

On January 21, 2011, certain members of management of Tier Electronics LLC were awarded inducement options to purchase a total of 750,000 shares of the Company’s common stock at an exercise price of $1.15.  The options vest as follows: (1) 420,000 vest in three equal annual installments beginning on December 31, 2011 based on achievement of certain performance targets, (2) 330,000 vest in three equal annual installments beginning on the one-year anniversary of the grant date.  As of March 31, 2013, 140,000 of the 420,000 shares had vested and 220,000 of the 330,000 had vested.

In January 2010 the Company’s new President and CEO was awarded two inducement option grants covering a total of 500,000 shares with an exercise price of $1.33 per share.  100,000 of these options vested in two equal installments on June 30, 2010 and December 31, 2010, based on the satisfaction of certain performance targets for each of the six-month periods then ended.   The remaining 400,000 of these options vested over three years with the first one-third vesting on January 7, 2011 and the remaining two-thirds vested in 24 equal monthly installments beginning on January 31, 2011 and ending on December 31, 2012.

In November 2011, the Company’s Chief Operating Officer was awarded two inducement option grants covering a total of 500,000 shares with an exercise price of $0.79 per share which was the closing price of the Company’s common stock on the NYSE MKT on the date of his appointment.  100,000 of these options will vest in two equal installments on September 30, 2012 and June 30, 2013 based on the achievement of certain performance targets.  The remaining 400,000 of these options will vest over three years with the first one-third vesting on November 9, 2012 and the remaining two-thirds vesting in 24 equal monthly installments beginning in on December 9, 2012 and ending November 9, 2014.  As of March 31, 2013, 150,000 of the remaining 400,000 shares had vested.

In aggregate for all plans, at March 31, 2013 the Company had a total of 4,225,414 options outstanding, 5,208,436 RSUs outstanding and 3,702,453 shares available for future grant under the Omnibus Plan.

Information with respect to stock option activity under the employee and director plans is as follows:

	Number of Options			Weighted-Average Exercise Price Per Share
Balance at June 30, 2011		3,322,303		$	1.55
Options granted		1,454,500			0.82
Options forfeited		(537,739	)		1.91
Balance at June 30, 2012		4,239,064			1.25
Options granted		713,050			0.38
Options forfeited		(726,700	)		1.09
Balance at March 31, 2013		4,225,414			1.13

The following table summarizes information relating to the stock options outstanding at March 31, 2013:

		Outstanding						Exercisable
Range of Exercise Prices		Number of Options		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number of Options		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$	0.34 to $0.50		776,050		7.49	$	0.38		42,332		5.16	$	0.48
$	0.51 to $1.00		1,086,500		6.39		0.78		499,671		6.24		0.78
$	1.01 to $1.50		2,062,864		5.21		1.24		1,599,559		5.03		1.26
$	3.50 to $3.82		300,000		1.64		3.59		300,000		1.64		3.59
Balance at March 31, 2013			4,225,414		5.68		1.13		2,441,562		4.86		1.44

During the nine months ended March 31, 2013 options to purchase 713,050 shares were granted to employees exercisable at prices from $0.35 to $0.38 per share based on various service and performance based vesting terms from July 2012 through March 2016 and exercisable at various dates through March 2021. During the nine months ended March 31, 2012 options to purchase 1,447,500 shares were granted to employees exercisable at prices from $0.59 to $1.16 per share based on various service and performance based vesting terms from July 2011 through March 2015 and exercisable at various dates through March 2020.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing method. The Company uses historical data to estimate the expected price volatility, the expected option life and the expected forfeiture rate. The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future. The following assumptions were used to estimate the fair value of options granted during the nine months ended March 31, 2013 and the year ended June 30, 2012 using the Black-Scholes option-pricing model:

	FY 2013	FY 2012
Expected life of option (years)	4	2.5
Risk-free interest rate	.46 - .61%	.24 - .55%
Assumed volatility	96 - 104%	103 - 107%
Expected dividend rate	0%	0%
Expected forfeiture rate	4.19 - 6.66%	4.35 - 6.80%

Time-vested and performance-based stock awards, including stock options, restricted stock and restricted stock units, are accounted for at fair value at date of grant.  Compensation expense is recognized over the requisite service and performance periods.

A summary of the status of unvested employee stock options as of March 31, 2013 and June 30, 2012 and the changes during the periods then ended is presented below:  

	Number of  Options			Weighted-Average Grant Date Fair Value Per Share
Balance at June 30, 2011		1,735,224		$	0.62
Granted		1,454,500			0.38
Vested		(722,837	)		1.01
Forfeited		(226,334	)		0.86
Balance at June 30, 2012		2,240,553			0.71
Granted		713,050			0.38
Vested		(612,584	)		1.01
Forfeited		(557,167	)		0.86
Balance at March 31, 2013		1,783,852			0.71

Total fair value of options granted in the nine months ended March 31, 2013 and 2012 was $167,167 and $707,906, respectively.  At March 31, 2013 there was $225,508 in unrecognized compensation cost related to unvested stock options, which is expected to be recognized over the next three years.

The Company compensates its directors with restricted stock units (“RSUs”) and cash.  On November 9, 2011, 548,051 RSUs were granted to the Company’s directors in payment of directors fees through November 2012 under the Omnibus Plan.  As of November 2012 all 548,051 shares had vested.  On November 7, 2012, an additional 1,100,000 shares were granted to the Company’s directors in payment of directors fees through November 2013 under the 2012 Director Equity Plan.  As of March 31, 2013, 550,002 of the shares had vested and there were $226,497 in directors’ fees expense settled with RSUs for the nine months ended March 31, 2013.

On May 6, 2011 the Company’s President and CEO was awarded 200,000 RSUs that vest ratably over a three year period.  On March 23, 2012, the Company’s Compensation Committee of the Company’s Board of Directors awarded 500,000 RSUs to the Company’s President and CEO which vested based on the satisfaction of certain performance targets for the six-month period ending September 30, 2012.  As of September 30, 2012, 450,000 shares had vested and the remaining shares were cancelled.   

In January of 2013 the Company issued 40,000 shares related to RSUs issued as compensation for services to a consultant in November of 2010.  

As of March 31, 2013 there were 2,458,331 unvested RSUs outstanding which will vest through January 15, 2016 and $740,166 in unrecognized compensation cost related to unvested RSUs which is expected to be recognized through January 15, 2016.  Shares of common stock related to vested RSUs are to be issued six months after the holder’s separation from service with the Company.

The table below summarizes the status of restricted stock unit balances:  

	Number of Restricted Stock Units			Weighted-Average Valuation Price Per Unit
Balance at June 30, 2011		1,400,385		$	0.70
RSUs granted		1,048,051			0.74
RSUs forfeited		-			-
Balance at June 30, 2012		2,448,436			0.72
RSUs granted		2,850,000			0.22
RSUs forfeited		(50,000	)		0.70
Shares issued		(40,000	)		0.34
Balance at March 31, 2013		5,208,436		$	0.33