Stock-Based Compensation

6 Months Ended

Dec. 31, 2018

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

Stock-Based Compensation

NOTE 8 – STOCK-BASED COMPENSATION

The Company follows FASB Accounting Standards Codification (“ASC”) 718 “Compensation — Stock Compensation” for share-based payments which requires all stock-based payments, including stock options, to be recognized as an operating expense over the vesting period, based on their grant date fair values.

In October 2009 the Board of Directors authorized the approval of a stock option plan covering 7,500,000 shares of common stock, which was increased to 10,000,000 shares in December 2009 and approved by stockholders in January 2010. The Plan provides for the direct issuance of common stock and the grant of incentive and non-incentive stock options. As of December 31, 2018, 9,200,000 options have been granted, with terms ranging from five to ten years, and 800,000 have been cancelled leaving a balance of 8,400,000 of options outstanding. During the six months ended December 31, 2018, we issued 1,500,000 shares of restricted stock out of the plan, leaving 100,000 options or grants available for grant under the plan.

In March 2012, 3,500,000 stock options, with a term of five years, were granted outside of a stock option plan. In March 2017, the term of these options was extended for an additional five years. In June 2016, and 2017, 6,000,000 and 17,000,000 stock options, with a term of ten years, were granted, respectively, outside of a stock option plan, and 3,000,000 shares were cancelled, leaving a balance of 23,500,000 outstanding outside of a defined option plan.

In January 2013 the Board of Directors authorized the approval of a stock option plan covering 20,000,000 shares of common stock, which was increased to 60,000,000 shares in March 2013 and approved by stockholders in March 2013. The Plan provides for the direct issuance of common stock and the grant of incentive and non-incentive stock options. As of December 31, 2018, 80,153,473 options have been granted, with terms ranging from five to ten years, 3,325,000 have been exercised and 18,886,559 have been cancelled, and 57,941,914 remain outstanding.

On February 17, 2016, the Shareholders approved the 2015 Employee Benefit and Consulting Services Compensation Plan covering 15,000,000 shares. The Plan provides for the direct issuance of common stock and the grant of incentive and non-incentive stock options. As of December 30, 2018, 4,900,000 options have been granted with a term of five years, and 1,625,000 have been cancelled leaving a balance outstanding of 3,275,000 options.

Incentive Stock Options: The Company estimates the fair value of each stock option on the date of grant using the Black-Scholes-Merton valuation model. The volatility is based on expected volatility over the expected life of thirty-six to sixty months. Compensation cost is not reduced by the Company for estimated forfeitures based on historical forfeiture rates for options granted after July 1, 2018. For grants prior to July 1, 2018, compensation cost was recognized based on awards that are ultimately expected to vest, therefore, the Company has reduced the cost for estimated forfeitures based on historical forfeiture rates, which were between 14% and 17%. As the Company has not historically declared dividends, the dividend yield used in the calculation is zero. Actual value realized, if any, is dependent on the future performance of the Company’s common stock and overall stock market conditions. There is no assurance the value realized by an optionee will be at or near the value estimated by the Black-Scholes-Merton model.

The following assumptions were used for the periods indicated:

	Six Months Ended
	December 31,
	2018			2017
	(unaudited)
Expected volatility		122.66	%		136.25	%
Expected dividend yield		-			-
Risk-free interest rates		3.03	%		1.62	%
Expected term (in years)		5.0			5.0

The computation of expected volatility during the six months ended December 31, 2018 and 2017 was based on the historical volatility. Historical volatility was calculated from historical data for the time approximately equal to the expected term of the option award starting from the grant date. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve in effect at the time of grant for the period corresponding with the expected life of the option.

A summary of the activity of the Company’s stock options for the six months ended December 31, 2018 is presented below (unaudited):

						Weighted		Weighted
	Weighted					Average		Average
	Average		Number of			Remaining		Optioned		Aggregate
	Exercise		Optioned			Contractual		Grant Date		Intrinsic
	Price		Shares			Term in Years		Fair Value		Value
Balance as of June 30, 2018	$	0.09		85,616,914			4.00	$	0.11	$	-
Expired		-		-					-
Granted		0.03		7,500,000					0.04
Exercised		-		-					-
Cancelled		0.06		(600,000	)				0.06
Balance as of December 31, 2018	$	0.08		92,516,914			3.54	$	0.10	$	-
Vested and exercisable as of December 31, 2018	$	0.08		81,784,747			3.54	$	0.11	$	-

Outstanding options at December 31, 2018, expire during the period February 2019 to June 2026 and have exercise prices ranging from $0.03 to $0.17.

Compensation expense associated with stock options for the six months ended December 31, 2018 and 2017 was $535,155 and $511,728 respectively and was included in general and administrative expenses in the consolidated statements of operations.

At December 31, 2018, the Company had 10,732,167 shares of nonvested stock option awards. The total cost of nonvested stock option awards which the Company had not yet recognized was $463,807 at December 31, 2018. Such amounts are expected to be recognized over a period of 1.0 years.

Restricted Stock: To encourage retention and performance, the Company granted certain employees restricted shares of common stock with a fair value per share determined in accordance with conventional valuation techniques, including but not limited to, arm’s length transactions, net book value or multiples of comparable company earnings before interest, taxes, depreciation and amortization, as applicable. Generally, the stock vests over a 3-year period. A summary of the activity of the Company’s restricted stock awards for the six months ended December 31, 2018, and year ended June 30, 2018 is presented below (unaudited):

	Number of
	Nonvested,			Weighted
	Unissued			Average
	Restricted			Grant Date
	Share Awards			Fair Value
Nonvested, unissued restricted shares outstanding at June 30, 2017		1,500,000			0.21
Granted		5,500,000			0.06
Vested		(7,000,000	)		0.09
Forfeited		-			-
Nonvested, unissued restricted shares outstanding at June 30, 2018		-		$	-
Granted		-			-
Vested		-			-
Forfeited		-			-
Nonvested, unissued restricted shares outstanding at December 31, 2018		-		$	-

Compensation expense associated with restricted stock awards for the six months ended December 31, 2018 and 2017 was $0 and $99,046, respectively, and was included in general and administrative expenses in the consolidated statements of operations.

The total cost of nonvested stock awards which the Company had not yet recognized was $0 at December 31, 2018.