SHARE-BASED COMPENSATION

9 Months Ended

Mar. 31, 2013

Share-Based Compensation

SHARE-BASED COMPENSATION

NOTE 8. SHARE-BASED COMPENSATION

We have two equity compensation plans, the Second Amended and Restated 2004 Stock Option Plan (the “Employees Stock Option Plan”) and the Amended and Restated 2004 Directors Stock Option Plan (the “Directors Stock Option Plan”) (collectively, the “Stock Option Plans”), pursuant to which (i) options to purchase shares of common stock, or (ii) restricted shares of common stock, may be granted up to an aggregate amount of 1,333,333 common shares, with 1,066,667 and 266,666 shares distributed between the Employees Stock Option Plan and the Directors Stock Option Plan, respectively. The Stock Option Plans are substantially similar, providing for a strike price equal to the closing price for a share of our common stock as of the last business day immediately prior to the grant date, vesting periods (as determined by the Board for the Employees Stock Option Plan and six months for the Directors Stock Option Plan), and terms of up to ten years, subject to forfeit 30 days after the holder ceases to be an employee or 90 days after the holder ceases to be director, as the case may be. At March 31, 2013, 419,966 and 56,667 shares under the Employees Stock Option Plan and the Directors Stock Option Plan, respectively, are available to grant in future years. Share-based compensation expense under the Stock Option Plans for the three months ended March 31, 2013 and 2012 was $42,000 and $40,000, respectively, and for the nine months ended March 31, 2013 and 2012 was $107,000 and $73,000, respectively.

Stock Options

The following assumptions were used in the calculation of share-based compensation expense for options granted during the three months ended March 31, 2013 (no options were granted during the three months ended March 31, 2012), and the nine months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013
Dividend rate	None
Price volatility	92%
Risk-free interest rate	0.8%
Expected life	5.2 years

	Nine Months Ended March 31,
	2013	2012
Dividend rate	None	None
Price volatility	89%	62%
Risk-free interest rate	0.86%	1.0%-1.3%
Expected life	5.7 years	6.0 years

As of March 31, 2013, there was an aggregate of $114,000 of unrecognized compensation cost under the Stock Option Plans related to 130,000 non-vested outstanding stock options with a per share weighted average value of $1.27. The unrecognized expense is anticipated to be recognized on a straight-line basis over a weighted average period of 1.6 years. Following is a summary of stock option activity for the nine months ended March 31, 2013 and 2012:

	2013					2012
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
Outstanding at beginning of period		591,672		$	2.48		320,842		$	2.71
Granted		60,000			1.90		205,000			2.04
Exercised		(33,334	)		1.50		—			—
Forfeited		(213,334	)		2.35		(47,502	)		2.43
Outstanding at end of period		405,004		$	2.34		478,340		$	2.67
Exercisable at end of period		274,726		$	2.88		278,062		$	3.15
Weighted-average fair value per option granted during the period				$	1.34				$	1.16

Following is a summary of information regarding options outstanding and options exercisable at March 31, 2013:

	Options Outstanding							Options Exercisable
Range of Exercise Price	Number Outstanding		Average Contractual Life	Average Exercise Price		Aggregate Intrinsic Value		Number Outstanding		Average Remaining Contractual Life	Average Exercise Price		Aggregate Intrinsic Value
$1.35 to $3.48		340,000	8.3 years	$	1.97	$	58,350		209,722	8.0 years	$	2.03	$	26,669
$3.49 to $5.62		50,003	3.0 years		4.81	$	—		50,003	3.0 years		4.81	$	—
$5.63 to $7.76		10,001	2.5 years		7.34	$	—		10,001	2.5 years		7.34	$	—
$7.77 to $9.90		5,000	2.3 years		9.90	$	—		5,000	2.3 years		9.9	$	—
Total		405,004	6.9 years	$	2.34	$	58,350		274,726	6.8 years	$	2.88	$	26,669

Restricted Stock

The following is a summary of restricted share activity for the nine months ended March 31, 2013:

	Shares		Weighted- Average Grant Date Fair Value
Outstanding at beginning of  year		—		—
Granted		35,000	$	1.73
Vested		—		—
Forfeited		—		—
Outstanding at end of period		35,000	$	1.73

As of March 31, 2013, there was $39,000 in unrecognized compensation cost related to non-vested outstanding restricted shares. The unrecognized expense is anticipated to be amortized over the next 2.5 years.

There was no restricted share activity during the nine months ended March 31, 2012, nor were any restricted shares outstanding during the period.