STOCK OPTIONS

3 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Note 4 - STOCK OPTIONS

On September 24, 2007, the Company’s Board of Directors unanimously adopted the 2007 Employee Stock Option Plan (the “2007 Employee Plan”) and the 2007 Directors Equity Incentive Plan, (the “2007 Directors Plan”) each of which was approved by the shareholders on December 3, 2007. Each of those plans was amended by the Board in 2010 to increase the number of shares covered thereby, which amendments were approved by the shareholders on December 14, 2010. At present, the 2007 Employee Plan provides for awards of up to 600,000 shares of the Company’s Common Stock to employees, consultants and advisors and the 2007 Directors Plan provides for awards of up to 400,000 shares of the Company’s Common Stock to the members of the Board of Directors in the form of non-qualified options and restricted stock. These two plans are administered by the Board, which also establishes the terms of the awards.

Assumptions

No options were granted during the three months ended September 30, 2011 and 2010 however the Company calculates the fair value for option awards on the date of grant using the Black-Scholes option pricing model.

2007 Employee Stock Option Plan

The Company’s 2007 Employee Plan permits the grant of stock options to its employees covering up to an aggregate of 600,000 shares of Common Stock. Under the 2007 Employee Plan, all options must be granted with an exercise price of not less than fair value as of the grant date and the options granted must be exercisable within a maximum of ten years after the date of grant, or such lesser period of time as is set forth in the stock option agreements. The options may be exercisable (a) immediately as of the effective date of the stock option agreement granting the option, or (b) in accordance with a schedule related to the date of the grant of the option, the date of first employment, or such other date as may be set by the Compensation Committee. Generally, options granted under the 2007 Employee Plan are exercisable within five years after the date of grant, and vest over the period as follows: 25% vesting on the grant date and the remaining balance vesting in equal installments on the next three succeeding anniversaries of the grant date. The share-based compensation will be recognized in terms of the grade method over the vesting period.

The Company did not grant any options pursuant to the 2007 Employee Plan during the three months ended September 30, 2011. The Company recognized stock-based compensation expenses of $42 in the three months ended September 30, 2011 under the 2007 Employee Plan. The balance of unamortized stock-based compensation of $127 based on fair value on the grant date related to options granted under the 2007 Employee Plan is expected to be recognized over a period of two years.

The Company did not grant any options pursuant to the 2007 Employee Plan during the three months ended September 30, 2010. The Company recognized stock-based compensation expenses of $19 in the three months ended September 30, 2010 under the 2007 Employee Plan. The balance of unamortized stock-based compensation of $62 based on fair value on the grant date related to options granted under the 2007 Employee Plan is expected to be recognized over a period of two years.

As of September 30, 2011, there were vested employee stock options covering a total of 169,875 shares of Common Stock. The weighted-average exercise price was $4.65 and the weighted average remaining contractual term was 2.28 years. The total intrinsic value of vested employee stock options during the three month period ended September 30, 2011 was $103.

A summary of option activities under the 2007 Employee Plan during the three month period ended September 30, 2011 is presented as follows:

			Weighted- Average		Weighted - Average Remaining		Aggregate
	Options		Exercise Price		Contractual Term (Years)		Intrinsic Value
Outstanding at July 1, 2011		291,875	$	4.10		3.07	$	178
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at September 30, 2011		291,875	$	4.10		2.81	$	178
Exercisable at September 30, 2011		169,875	$	4.65		2.28	$	103

A summary of the status of the Company’s non-vested employee stock options during the three months ended September 30, 2011 is presented below:

			Weighted-Average Grant-Date
	Options		Fair Value
Non-vested at July 1, 2011		132,250	$	5.29
Granted		-		-
Vested		(10,250)		2.56
Forfeited		-		-
Non-vested at September 30, 2011		122,000	$	5.52

2007 Directors Equity Incentive Plan

The 2007 Directors Plan permits the grant of options covering up to an aggregate of 400,000 shares of Common Stock to its non-employee directors in the form of non-qualified options and restricted stock. The exercise price of the non-qualified options is 100% of the fair value of the underlying shares on the grant date. The options have five-year contractual terms and are generally exercisable immediately as of the grant date.

During the first quarter of each of fiscal 2012 and fiscal 2011, the Company did not grant any options pursuant to the 2007 Directors Plan.

There were no options exercised under the 2007 Directors Equity Incentive Plan during either the first quarter of fiscal 2012 or fiscal 2011. The Company did not recognize any stock-based compensation expenses in the three months ended September 30, 2011 and 2010, respectively, under the 2007 Directors Plan.

The total intrinsic value of directors’ stock options during the three months ended September 30, 2011 was $102. A summary of option activities under the 2007 Directors Plan during the three months ended September 30, 2011 is presented as follows:

	Options		Weighted- Average Exercise Price		Weighted - Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2011		335,000	$	4.86		3.16	$	102
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at September 30, 2011		335,000	$	4.86		2.90	$	102
Exercisable at  September 30, 2011		335,000	$	4.86		2.90	$	102