NOTE 6 - STOCK OPTIONS AND WARRANTS

6 Months Ended

Dec. 31, 2012

Shareholders' Equity and Share-based Payments [Text Block]

NOTE 6 - STOCK OPTIONS AND WARRANTS

General Option Information

On July 6, 2011, the Board of Directors cancelled the “2004 Non-Employee Directors’ Stock Incentive Plan” and approved the “Directors’ 2011 Stock Option and Award Plan”.  The Company also maintains the 2005 Stock Option and Award Plan, which was previously approved by shareholders, for the purpose of granting option awards to its employees and consultants.   Under the 2011 Plan, a total of 3,300,000 shares are authorized for issuance.  Each non-executive director was granted options to purchase 300,000 shares at that day’s closing price, $0.17.  The options vest over three years as follows: 100,000 on June 30, 2012, 100,000 on June 30, 2013 and 100,000 on June 30, 2014.  These options expire two years after vesting.  The Director who serves as Audit Chair during the fiscal year will receive an additional 50,000 options per year under the same terms.  CEO Timothy L. Ryan was granted 200,000 options per year under the same terms, under the 2005 Stock Option and Award Plan.

At the August 1, 2012 Board of Directors’ meeting, Brian W. Hesje assumed the role of Audit Committee Chairman. For his service as the Audit Committee Chairman, the Board of Directors approved a grant of 300,000 stock options based on the closing market price on the issuance date of $0.26 per share. Under the Directors’ 2011 Stock Option and Award Plan, 150,000 of the options will vest on June 30, 2013 and 150,000 will vest on June 30, 2014.

We estimated the fair value of the stock options at the grant date based on the following range of weighted average assumptions:

Risk free interest rate	0.41	%	to	0.75	%
Expected life	3.0		to	5.0	years
Expected volatility	72.93	%	to	84.38	%
Dividend yield	0.00	%

A summary of the status of our outstanding stock options as of December 31, 2012 and June 30, 2012 and changes during the periods then ended is presented below:

	December 31,  2012					June 30,  2012
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding beginning of period		2,579,000		$	0.45		675,000		$	1.26
Granted		300,000			0.26		2,554,000			0.18
Expired/Cancelled		(650,000	)		0.83		(350,000	)		0.31
Exercised		-			0.00		(300,000	)		0.17
Outstanding end of period		2,229,000			0.31		2,579,000			0.45
Exercisable		775,000		$	0.43		1,025,000		$	0.76

The following table summarizes the range of outstanding and exercisable options as of December 31, 2012:

		Outstanding						Exercisable
Range of Exercise Prices		Number Outstanding at December 31, 2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at December 31, 2012		Weighted Average Remaining Contractual Life
$	0.17		650,000		1.50	$	0.17		650,000		1.50
$	0.17		500,000		2.50	$	0.17		-		-
$	0.17		500,000		3.50	$	0.17		-		-
$	0.29		154,000		2.50	$	0.29		-		-
$	0.50		300,000		0.52	$	0.50		-		-
$	1.79		125,000		0.36	$	1.79		125,000		0.36
			2,229,000						775,000

General Warrant Information

During the six months ended December 31, 2012, none of the outstanding secured convertible promissory notes (the “Notes”) converted to common stock. As of December 31, 2012, there were 279,715 warrants issued and outstanding.