(12) Common Stock and Common Stock Equivalents

12 Months Ended

Jun. 30, 2016

Notes

(12) Common Stock and Common Stock Equivalents

(12)  Common Stock and Common Stock Equivalents

For the year ended June 30, 2016, the Company granted 36,174 shares of restricted common stock to directors in connection with compensation arrangements and 35,422 shares to employees. For the year ended June 30, 2015, the Company granted no restricted common stock to directors or officers in connection with compensation arrangements.

On June 30, 2015, the Company issued 122,000 shares of restricted common stock to the exclusive placement agent and the financial advisor in conjunction with the $4 million capital raise.

The Company maintained a 2005 equity incentive plan for the benefit of employees, on June 29, 2015 the shareholders approved a new 2015 equity incentive plan setting aside 500,000 shares. The 2015 plan was filed with the SEC on September 3, 2015. Incentive and nonqualified stock options, restricted common stock, stock appreciation rights, and other share-based awards may be granted under the plan.  Awards granted under the plan may be performance-based. As of June 30, 2015, 405,404 shares of common stock were authorized and reserved for issuance, but were not granted under the terms of the 2015 equity incentive plan.

The Company granted 95,000 options under its 2015 equity incentive plan during fiscal year 2016. There were no options granted during fiscal year 2015. The options are granted at not less than 100% of the market price of the stock at the date of grant. Option terms are determined by the board, and exercise dates may range from 6 months to 10 years from the date of grant.

The fair value of each option grant was estimated on the date of grant using the Black Scholes option pricing model with the following assumptions:

	2016
Expected dividend yield	0%
Expected stock price volatility	63% - 65%
Risk-free interest rate	1.83% - 2.04%
Expected life of options	10 years

The weighted average fair value of options granted during fiscal year 2016 was $2.10.

The following table summarizes the Company’s stock option activity during the reported fiscal years:

		2016				2015
					Weighted
				Weighted	average			Weighted
		Number		average	remaining	Number		average
		of		exercise	contractual	of		exercise
		shares		price	term	shares		price
Options outstanding at
	beginning of the year	91,152	$	5.07	3.56 years	155,604	$	6.45
Options granted		95,000		3.27		-		-
Options exercised		-		-		-		-
Options canceled or expired		(64,595)		4.74		(64,452)		8.41
Options outstanding at end
	of the year	121,557		3.84	2.80 years	91,152		5.07
Options exercisable at end
	of the year	63,940		4.75		90,520		5.48
Range of exercise prices at
	end of the year		$	1.75 – 5.55			$	1.75 – 7.10

The Company recognized $203,889 and $66,372 in stock-based compensation for the years ended June 30, 2016 and 2015, respectively, which is included in selling, general, and administrative expenses in the consolidated statements of operations. The stock-based compensation includes amounts for both restricted stock and stock options under ASC 718. Included in the $203,889 stock-based compensation was $79,333 which was related to severance payments due to changes in executive management.

As of June 30, 2016 there was $293,564 of unrecognized stock-based compensation cost that is expected to be expensed over periods of four to eight years.

No options were exercised during the fiscal years 2016 and 2015. The aggregate intrinsic value of the outstanding options as of June 30, 2016 and 2015 was $3,816 and $3,289, respectively.