Stockholders' Equity

3 Months Ended

Sep. 30, 2011

Stockholders' Equity

Note 6 — Stockholders’ Equity

Stock Options

On December 21, 2007, the Company established the 2007 Equity Compensation Plan (the “Plan”). The Plan was approved by our Board of Directors and security holders holding a majority of the shares of our common stock outstanding. The total amount of shares subject to the Plan is 1,500,000 shares.

For the three months ended September 30, 2011 and 2010, the fair value of options vesting during the period was $37,084 and $20,529 respectively, and has been reflected as compensation cost in the accompanying financial statements.  The fair value was determined based upon a Black-Scholes pricing model with the following assumptions; no dividend yield, risk free interest rate of 4.5%, expected volatility of 73%, and an expected term of the options of 3 to 4 years.

 As of September 30, 2011, the amount of unvested compensation related to these options was $155,803 which will be amortized as an expense as the options vest.

At September 30, 2011 options outstanding are as follows:

	Number of Options		Weighted Average Exercise Price
Balance at June 30, 2011		1,439,000	$	1.23
Granted		—		—
Exercised		—		—
Cancelled		—		—
Balance at September 30, 2011		1,439,000	$	1.23

Additional information regarding options outstanding as of September 30, 2011 is as follows:

	Options Outstanding
	Options Outstanding		Remaining Contractual Life		Options Exercisable
Option Exercise Price	As of 9/30/11		(in years)		as of 9/30/11
$1.50		530,000		6.50		530,000
1.00		492,000		7.92		492,000
1.02		379,000		9.08		157,950
3.00		15,000		9.50		3,333
3.05		10,000		9.625		2,222
1.50		10,000		9.625		5,000
3.65		3,000		9.73		583
Total		1,439,000				1,191,088

As of September 30, 2011, the intrinsic value of the outstanding options was approximately $554,910 based on the trading price of the Company’s common stock of $1.59 per share on September 30, 2011.

Warrants

At September 30, 2011 warrants outstanding are as follows:

	Number of Warrants			Weighted Average Exercise Price
Balance, June 30, 2011		2,894,684		$	1.34
Granted		5,000
Exercised		(462,502	)
Expired
Balance at September 30, 2011		2,437,182		$	2.11

The intrinsic value of the warrants outstanding at September 30, 2011 was approximately $55,950 based on the trading price of the Company’s common stock of $1.59 per share on September 30, 2011.

During the three months ended September 30, 2011, warrants to purchase 457,502 shares of the Company’s common stock were exercised under the cashless exercise provisions of the warrants.  The Company issued 246,928 shares of common stock as a result of those exercises.

On July 1, 2011, the Company issued warrants to acquire up to 5,000 shares of the Company’s common stock to a consultant in exchange for services valued at $8,614.  All of these warrants expire on July 1, 2016 and 2,500 of the warrants have an exercise price of $3.50 and 2,500 of the warrants have an exercise price of $4.00

On July 17, 2011, the Company agreed to extend the expiration date of warrants to acquire 200,009 shares of common stock that were previously issued in connection with a private placement by the Company, to a new expiration date of July 17, 2012. In conjunction with the extension of the warrants, the cashless exercise feature was deleted. On July 17, 2011, the fair value of the warrant extension, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $264,714, and was charged to operations during the three months ended September 30, 2011. The fair value of the warrant extension was calculated using the following assumptions: term of 1 year; expected volatility of 73%; no dividend yield and risk-free interest rate of  0.92%.

In a prior period, the Company issued warrants to purchase an aggregate of 1,000,000 shares of the Company’s common stock to two consultants for services to be rendered under consulting agreements with the Company. All of the consultant warrants have a four-year exercise term. Warrants to purchase 400,000 common shares, exercisable at $1.25 per share, vested immediately. Of the aggregate issuance, warrants to purchase 333,333 shares are exercisable at $1.75 per share and warrants to purchase 266,667 shares are exercisable at $2.25 per share, all of which vest over a one-year period. In the periods prior to July 1, 2011, the Company recorded $1,175,748 of compensation cost relating to the vesting of these options based on their fair value at the reporting date.  At September 30, 2011, the Company determined that the fair value of the unvested warrants was $727,910 as calculated using the Black Scholes option pricing model with the following assumptions; no dividend yield, risk free interest rate of 4.5%, expected volatility of 73%, and an expected term of the warrants of 4 years.  The fair value of $727,910 reflected a decrease of $447,838 from the fair value of $1,175,748 at June 30, 2011, as such the Company recognized a gain of $447,838 during the three months ended September 30, 2011.

In a prior period, the Company issued to three members of the board of directors warrants to purchase an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.25 per share. Each of the warrants is subject to the following vesting schedule: 12,500 shares vested and became exercisable under the warrant on each of December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011. Each warrant expires on November 5, 2015. The fair market value of the warrants upon issuance was $161,304 calculated using a Black-Scholes pricing model with the following assumptions; no dividend yield, risk free interest rate of 4.5%, expected volatility of 73%, and an expected term of the warrants of 4 years.  Stock based compensation cost of $40,326 was recognized during the three months ended September 30, 2011 for warrants vesting during the period.