7. STOCK PURCHASE OPTIONS AND WARRANTS

9 Months Ended

Mar. 31, 2013

Notes to Financial Statements

7. STOCK PURCHASE OPTIONS AND WARRANTS

NOTE 7 – STOCK PURCHASE OPTIONS AND WARRANTS

During the nine months ended March 31, 2013, the Company did not issue any stock purchase options. The Company did recognize $14,090 in employee stock option expense and for the amortization of warrants issued in prior periods.

The Company issued warrants to purchase a total of 802,500 shares of the Company’s common stock. As described in Note 6, the Company issued 495,000 warrants attached to Common Stock. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The Company apportioned value to the warrants based on the relative fair market value of the Common Stock and warrants.

An additional 212,500 warrants were issued in conjunction with related party convertible notes payable. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The fair market value of the warrants has been accounted for as debt discount.

An additional 95,000 warrants valued at $19,521, were issued in advance for services to be amortized over the term of the service period. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below.

The following table presents the weighted average assumptions used to estimate the fair values of the stock options granted:

	2012
Expected volatility	106 – 128%
Expected dividends	0%
Expected term	2-5 Years
Risk-free interest rate	0.29 – .78%

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s Common Stock issued to employees and non-employees of the Company during the nine months ended March 31, 2013. These warrants were granted to investors, lenders and, in other instances, in lieu of cash compensation for services performed.

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Outstanding  as of June 30, 2012		6,529,311			2.84		3.55		1.95		4,835,028
Granted		802,500			0.40		0.19		4.20		318,900
Cancelled/Expired		(245,000	)		0.84						(205,000	)
Outstanding  as of March 31, 2013		7,086,811			0.70		2.76		4.20		4,948,928