STOCK OPTIONS

In 1990, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company’s 1990 Flexible Incentive Plan (the “1990 Plan”). The 1990 Plan is administered by a committee of the Board of Directors and provides for the granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 225,000 shares of common stock were available in the first year of the 1990 Plan’s existence. Each year thereafter additional shares equal to 0.25% of the shares outstanding as of the first day of the applicable fiscal year were reserved for issuance pursuant to the 1990 Plan. On July 22, 1992, the Board of Directors authorized the reservation of an additional 250,000 shares for the 1990 Plan, which was approved by the stockholders. In 1993, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was approved by the stockholders. In 1997, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was approved by the stockholders. In 2001, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was also approved by the stockholders. As of December 31, 2011, there were 67,420 shares available for future grants. Options vest over a four or five year period, with a maximum term of five to ten years.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the expected term and vesting schedules. The expected volatility is determined based on the Company’s historical stock prices over the most recent period commensurate with the expected term of the award. Beginning with options granted for the six months ended December 31, 2011, volatility was calculated using daily rates, which is a change from previous periods in which volatility was calculated using monthly rates. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based on historical data. The total fair value of options granted during the six months ended December 31, 2011 and 2010 was $886,204 and $582,832, respectively.

A summary of stock option activity under the plan for the six months ended December 31, 2011 is as follows:



	Number of Shares	Stock Options Price Range	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life - Years	Aggregate Intrinsic Value of In-The-Money Options
Shares under option at June 30, 2011	1,334,308	$3.90-$13.09	$	7.61	4.01	$	349,400
Granted	440,000	$5.05-$6.60	$	6.30
Exercised	—	—	—
Expired	—	—	—
Forfeited	160,000	$6.91	—
Shares under option at December 31, 2011	1,614,308	$3.90-$13.09	$	7.32	4.46	$	53,983

Exercisable as of June 30, 2011	603,308	$3.90-$13.09	$	9.39
Exercisable as of December 31, 2011	690,308	$3.90-$13.09	$	8.90

A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the six months ended December 31, 2011 and 2010 is as follows:



	Six Months Ended December 31, 2011		Six Months Ended December 31, 2010
Total intrinsic value of stock options exercised	$	—	$	—
Cash received from stock option exercises	$	—	$	—
Total fair value of stock options vested	$	256,804	$	132,817