9. Compensatory Equity Incentive Plan and Other Equity Incentives

Share-based payment arrangements — The Company's Amended and Restated Omnibus Incentive Plan (the "Plan") included several available forms of stock compensation of which incentive stock options, non-qualified stock options and restricted stock units have been granted to date.

These plans are summarized below:

			Award Shares		Available for
	Award Shares		Outstanding		Issuance
	Authorized		at June 30,		at June 30,
Equity Compensation Arrangement			2013		2013
Amended and Restated Omnibus Incentive Plan		2,715,625		1,419,709		848,012
Employee Stock Purchase Plan		200,000		—		109,457

		2,915,625		1,419,709		957,469

The 2004 Employee Stock Purchase Plan ("ESPP") permits employees to purchase common stock through payroll deductions, which may not exceed 15% of an employee's compensation, at a price not less than 85% of the market value of the stock on specified dates (June 30 and December 31). In no event may any participant purchase more than $25,000 worth of shares in any calendar year and an employee may purchase no more than 4,000 shares on any purchase date. This discount of $898 and $1,433 for fiscal 2013 and 2012, respectively, is included in selling, general and administrative expense in the accompanying financial statements.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms—The Company estimates the fair value of each stock option as of the date of grant. The Company uses the Black-Scholes pricing model. The ESPP fair value is the amount of the discount the employee obtains at the date of the purchase transaction.

For stock options and restricted stock units ("RSUs") granted in the years ended June 30, 2013 and 2012, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions:

	Year ended			Year ended
	June 30, 2013			June 30, 2012
Expected volatility		110% - 120	%		119% - 122	%
Weighted average expected volatility		110% - 120	%		119% - 122	%
Dividend yields		0	%		0	%
Risk-free interest rate		0.67% - 1.72	%		0.9% - 2.01	%
Expected term, in years		3 - 7			3 - 7

Most awards granted under the Company's Plan vest ratably over two to four years and generally have three-year to ten-year contract lives. The initial assumed forfeiture rate used in calculating the fair value of option grants with both performance and service conditions was 20% for 2013 and 2012. The forfeiture rate for RSUs was 0% for both 2013 and 2012. The volatility rate is based on historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding awards. The interest rate used is the treasury interest rate for constant maturities. The forfeiture rate for RSUs for directors is 0% because upon termination of service as a director, all outstanding RSUs immediately vest.

Information Regarding Current Share-based Payment Awards—A summary of the activity for share-based payment awards in the years ended June 30, 2013 and 2012 is presented below:

								Restricted
	Stock Options							Stock Units (RSUs)
				Weighted		Weighted				Weighted
				Average		Average				Average
				Exercise		Remaining				Remaining
				Price		Contract				Contract
	Shares			(per share)		Life (YRS)		Shares		Life (YRS)
June 30, 2011		500,233		$	3.01		6.9		434,700		0.9

Granted		90,000			1.39		9.3		160,000		1.0
Exercised		—			—		—		—		—
Cancelled		(13,840	)		9.14		3.0		—		—

June 30, 2012		576,393		$	2.61		6.4		594,700		1.0

Granted		98,500			0.96		9.4		240,000		2.6
Exercised		(2,511	)		1.05		5.5		—		—
Cancelled		(87,373	)		2.37		7.0		—		—

June 30, 2013		585,009		$	2.38		5.9		834,700		1.1

Awards exercisable/
vested as of
June 30, 2013		401,759		$	2.76		4.8		463,030		—

Awards unexercisable/
unvested as of
June 30, 2013		183,250		$	1.53		8.5		371,670		1.1
		585,009							834,700

				Stock
				Options		RSU		All Awards
Weighted average fair value
of share awards granted for the year ended
June 30, 2013				$	0.80	$	0.87	$	0.85

The total intrinsic value of share options exercised for years ended June 30, 2013 and 2012 was $452 and $0, respectively.

The total intrinsic value of shares options outstanding and exercisable at both June 30, 2013 and 2012 was $9,000 and $0 respectively.

The total fair value of shares options vested during the years ended June 30, 2013 and 2012 was $123,000 and $177,000, respectively.

The total intrinsic value of RSUs exercised during the years ended June 30, 2013 and 2012 was $0 and $0, respectively.

The total intrinsic value of RSUs outstanding and exercisable at June 30, 2013 and 2012 was $508,000 and $371,000, respectively.

The total fair value of RSUs vested during the years ended June 30, 2013 and 2012 was $94,000 and $275,000, respectively.

As of June 30, 2013 there was $386,656 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share options and restricted stock units) granted under the Plan. The cost expected to be recognized as follows:

			Restricted
			Stock
	Stock		Share/
	Options		Units		Total

Year ended June 30, 2014	$	57,371	$	163,769	$	221,140

Year ended June 30, 2015		27,092		88,056		115,148

Year ended June 30, 2016		12,749		34,597		47,346

Year ended June 30, 2017		3,022		—		3,022
	$	100,234	$	286,422	$	386,656

The table above does not include shares under the Company's ESPP, which has purchase settlement dates in the second and fourth fiscal quarters. The Company's ESPP is not administered with a look back option provision and, as a result, there is not a population of outstanding option grants during the employee contribution period.

RSU awards vest immediately or from two to four years from the grant date.

The Company issues new shares of common stock upon the exercise of stock options. The following table is a summary of the number and weighted average grant date fair values regarding our unexercisable/unvested awards as of June 30, 2013 and 2012 and changes during the two years then ended:

Unexercisable/unvested awards	Stock Options Shares			RSU Shares			Total Shares			Weighted-Average Grant Date Fair Values
June 30, 2011		182,500			200,000			382,500		$	2.53
Granted		90,000			160,000			250,000			1.30
Vested		(74,375	)		(125,000	)		(199,375	)		2.27
June 30, 2012		198,125			235,000			433,125		$	2.42
Granted		98,500			240,000			338,500			0.85
Vested		(59,875	)		(103,330	)		(163,205	)		1.91
Cancelled/Forfeited		(53,500	)		—			(53,500	)		1.64
June 30, 2013		183,250			371,670			554,920		$	1.57

Acceleration of Vesting— The Company has not accelerated the vesting of any stock options or RSUs.

Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the years ended June 30, 2013 and 2012 included in the Consolidated Statement of Operations and Comprehensive Income:

	Year ended			Year ended
	June 30,			June 30,
	2013			2012

Stock options		65,286			86,096
RSU		203,021			185,948
Total		268,307			272,044

The amounts above were included in:
General & administrative		263,247			254,337
Cost of sales		(4,350	)		8,328
New product development		9,410			9,379
		268,307			272,044