STOCK OPTIONS

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 4 - STOCK OPTIONS (IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND NUMBER OF SHARES)

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 six months ended December 31, 2012, 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 on a straight-line basis for each separately vesting portion of the award. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2007 Employee Plan).

The Company did not grant any options pursuant to the 2007 Employee Plan during the six months ended December 31, 2012. The Company recognized stock-based compensation expenses of $19 in the six months ended December 31, 2012 under the 2007 Employee Plan. The balance of unamortized stock-based compensation of $17 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.

During the six months ended December 31, 2011, stock options covering a total of 37,500 shares of the Company’s Common Stock were granted to certain employees pursuant to the 2007 Employee Plan, with an exercise price equal to the fair value of the Company’s Common Stock (as defined under the 2007 Employee Plan in conformity with Regulation 409A of the Internal Revenue Code of 1986, as amended) on December 14, 2011, the date of grant. These options vested as of the grant date. The fair value as of December 14, 2011 of the options to purchase 37,500 shares of the Company’s Common Stock was approximately $42 based on the fair value of $1.11 per share determined by using the Black Scholes option pricing model. The Company recognized stock-based compensation expense of approximately $118 in the six months ended December 31, 2011 under the 2007 Employee Plan. Unamortized stock-based compensation of $92 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 December 31, 2012, there were vested employee stock options covering a total of 248,250 shares of Common Stock. The weighted-average exercise price was $2.95 and the weighted average contractual term was 1.90 years. The total fair value of vested and outstanding employee stock options as of December 31, 2012 was $496.

As of December 31, 2011, there were vested employee stock options covering a total of 232,125 shares of Common Stock. The weighted-average exercise price was $4.24 and the weighted average remaining contractual term was 2.71 years. The total fair value of vested employee stock options as of December 31, 2011 was $616.

A summary of option activities under the 2007 Employee Plan during the six month period ended December 31, 2012 is presented as follows:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2012		313,000	$	3.85		2.31	$	-
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		(44,000)		(8.69)		-		-
Outstanding at December 31, 2012		269,000	$	3.05		2.06	$	-
Exercisable at December 31, 2012		248,250	$	2.95		1.90	$	-

A summary of the status of the Company’s non-vested employee stock options during the six months ended December 31, 2012 is presented below:

				Weighted Average Grant-Date
	Options			Fair Value
Non-vested at July 1, 2012		43,250		$	3.29
Granted		-			-
Vested		(21,375	)		3.16
Forfeited		(1,125	)		3.16
Non-vested at December 31, 2012		20,750		$	3.29

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 six months ended December 31, 2012, 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 the six months ended December 31, 2012. The Company did not recognize any stock-based compensation expenses in the six months ended December 31, 2012, under the 2007 Directors Plan.

During the six months ended December 31, 2011, the Company granted options to purchase 50,000 shares of its Common Stock to our directors pursuant to the 2007 Directors Plan with an exercise price equal to the fair market value of our Common Stock (as defined under the 2007 Directors Plan in conformity with Regulation 409A or the Internal Revenue Code of 1986, as amended) at the date of grant. The fair value of the options granted to purchase 50,000 shares of the Company's Common Stock was approximately $56 based on the fair value of $1.11 per share determined by the Black Scholes option pricing model. There were no options exercised during the six month period ended December 31, 2011. The Company recognized stock-based compensation expense of $56 in the six month period ended December 31, 2011 under the 2007 Directors Plan.

As of December 31, 2012, there were vested director stock options covering a total of 325,000 shares of Common Stock. The weighted-average exercise price was $3.59 and the weighted average remaining contractual term was 2.32 years. The total fair value of vested directors' stock options as of December 31, 2012 was $698. All of our director stock options vest immediately at the date of grant. There were no unvested director stock options as of December 31, 2012.

As of December 31, 2011, there were vested director stock options covering a total of 385,000 shares of Common Stock. The weighted-average exercise price was $4.52 and the weighted average remaining contractual term was 2.95 years. The total fair value of vested director’s stock options as of December 31, 2011 was $1,031. All of our director stock options vest immediately at the date of grant. There were no unvested director stock options as of December 31, 2011.

A summary of option activities under the 2007 Directors Plan during the three months ended December 31, 2012 is presented as follows:

	Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2012		385,000		$	4.52			2.45	$	-
Granted		-			-			-		-
Exercised		-			-			-		-
Forfeited or expired		(60,000	)		(4.81	)		-		-
Outstanding at December 31, 2012		325,000		$	3.59			2.32	$	-
Exercisable at December 31, 2012		325,000		$	3.59			2.32	$	-