Stock-based compensation

12 Months Ended

Jun. 30, 2019

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

Stock-based compensation

12. Stock-based compensation

2013 Equity Incentive Plan

On August 14, 2013, our Board of Directors approved the adoption of the 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan was approved by a majority of our shareholders (as determined by shareholdings) on September 4, 2013. The 2013 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan were initially not to exceed in the aggregate 2,600,000 shares of the common stock of our Company. On July 13, 2015, the Company increased the total number of shares that may be issued under the 2013 Plan to 4,000,000. Furthermore, in April 2016, the Company further increased the total number of shares that may be issued under the Plan to 6,000,000.

During the years ended June 30, 2019 and 2018, the Company granted stock options under its 2013 Plan. Stock- based compensation related to these awards is recognized on a straight-line basis over the applicable vesting period and is included in operating expense in the accompanying consolidated statement of operations for the years ended June 30, 2019 and 2018. During the years ended June 30, 2019 and 2018, options issued were valued using a binomial valuation method assuming the following:

	2019			2018
Expected volatility	232.16% - 234.30		%	133% - 234.30		%
Dividend yield		0	%		0	%
Risk-free interest rate	2.33% - 2.44		%	1.59% - 2.44		%
Expected life in years		3.5			3.5

The expected volatility was estimated based on the volatility of a set of companies that management believes are comparable to the Company. The risk-free rate was based on the U.S. Treasury note rate over the expected life of the options. The expected life was determined using the simplified method as we have no historical experience. We recorded stock-based compensation expense of $253,000 and $293,000 for the years ended June 30, 2019, and 2018, respectively.

The following table summarizes the stock option activity:

				Weighted		Weighted
				Average		Average
				Exercise		Remaining
				Price		Contractual		Aggregate
				Per		Term		Intrinsic
	Options			Share		(Years)		Value
Outstanding at June 30, 2017		4,120,074			0.25		5.67		2,397,883
Granted		332,500			1.48
Exercised		(719,448	)		0.22
Forfeited		(591,250	)		0.38
Outstanding at June 30, 2018		3,141,876		$	0.21		5.23		6,168,665
Granted		750,000			0.40
Exercised		(449,500	)		0.44
Forfeited		(610,750	)		0.88
Outstanding at June 30, 2019		2,831,626			0.34		4.38		804,744
Vested options		2,732,876
Remaining options expected to vest		544,000

At June 30, 2019, the total estimated unrecognized compensation cost related to options totaled approximately $260,000.

As of June 30, 2018, there were 3,520,000 warrants outstanding, of which 2,000,000 have an exercise price of $.30 per share and 1,520,000 have an exercise price of $.50 per share. The warrants expire five years from the date of grant.

As of June 30, 2019, there were 3,270,000 warrants outstanding, of which 2,000,000 have an exercise price of $.30 per share and 1,270,000 have an exercise price of $.50 per share. The warrants expire five years from the date of grant.

Non-Qualified Stock Options

For the year ended June 30, 2017, the Company granted non-qualified stock options (outside of the 2013 Plan) aggregating 5,000,000 and 500,000, respectively to its Chairman and CEO. The options vest 50% upon the delivery of 400 robotic soft serve vending kiosks or achieving cumulative revenue of $15 million and 50% upon the delivery of 800 robotic soft serve vending kiosks or achieving cumulative revenue of $30 million.

The estimated fair value of the options was approximately $698,000. Stock-based compensation related to these awards is recognized on a straight-line basis over the expected vesting period (24 months) and is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The options issued were valued using a binomial method assuming the following:

Expected volatility	134.81	%
Dividend yield	0	%
Risk-free interest rate	1.50	%
Expected life in years	3.5

For the years ended June 30, 2019 and 2018, the Company recognized approximately $191,000 and $279,000, respectively. Remaining stock-based compensation to be recognized is approximately $303,000. The chairman vested 2,500,000 during year ending June 30,2019, with 2,000,000 remaining shares expected to vest. None of the CEO’s shares will vest as he stepped down from his position prior to any performance obligations being met.

For the year ended June 30, 2018, the Company granted non-qualified stock options (outside of the 2013 Plan) to the following:

· The Company granted a potential of 1,175,000 options to employees. The options vest based on objective criteria consisting of sales and overall Company goals.

· Furthermore, we granted a potential of 6,375,000 options to the Chairman, CEO and management employees with an exercise price of $0.87 per share. The options vest 50% upon 1,200 units installed or $45 million in cumulative revenue; and 50% upon 2,000 units installed or $75 million in cumulative revenue.

The estimated fair value of the options was approximately $6,464,000. Stock-based compensation related to these awards is recognized on a straight-line basis over the expected vesting period (24 months) and is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The options issued were valued using a binomial method assuming the following:

Expected volatility	232.16% - 233.60
Dividend yield		0	%
Risk-free interest rate	2.37% - 2.67		%
Expected life in years		3.5

For the years ended June 30, 2019 and 2018, the Company recognized approximately $2,089,000 and $1,067,000, respectively. Remaining stock-based compensation to be recognized is approximately $3,327,000. No options have vested, and the remaining options expected to vest is 4,424,000. The average forfeiture rate used for the 2019 calculation was 22.4%. A specific rate is used for each employee grant line item is used in the calculation based on managements’ estimate of the likely amount to be forfeited for each employee grant.

Director Options

In September 2018, the Company granted 660,000 non-qualified stock options with a weighted average exercise price of $1.78 per share to two new Board members.

The estimated fair value of the options was approximately $1,144,000. Stock-based compensation related to these awards is recognized on a straight-line basis over the expected vesting period (36 months) and is included in Stock Compensation expense in the accompanying condensed consolidated statements of operations for the twelve months ended June 30, 2019. The options issued were valued using a binomial method assuming the following:

Expected volatility	232.16	%
Dividend yield	0	%
Risk-free interest rate	2.39	%
Expected life in years	3.5

During the twelve months ended June 30, 2019, the Company recognized stock-based compensation expense of approximately $351,000. Remaining stock-based compensation to be recognized is approximately $793,000. Approximately 165,000 options have vested, and the remaining number of options expected to vest is approximately 396,000.