Stock-Based Compensation and Warrants

6 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Stock-Based Compensation and Warrants

The Company has several employee stock option and officer and director stock option plans that have been approved by the shareholders of the Company. The plans require that options be granted at a price not less than market on the date of grant and are more fully discussed in our Form 10-K for the year ended June 30, 2011.

The Company uses the Black-Scholes option pricing model to estimate fair value of stock-based awards. Valuation assumptions include dividend yield, expected stock volatility, risk free interest rate, and expected life of options.

The following table summarizes the Company’s stock option activity during the first six months of fiscal 2012.

				Weighted
			Weighted	Average
			Average	Remaining		Aggregate		Aggregate
			Exercise Price	Contractual		Fair		Instrinsic
		Shares	Per Share	Term (1)		Value		Value
Outstanding July 1, 2011 (4)		661,800	$1.62	1.78	$	394,100	$	210,700
	Granted	-	-	-		-		-	(2)
	Exercised	(100,800)	$1.50	-		(60,000)		45,600	(3)
	Forfeited or expired	(110,700)	$1.96	-		(65,900)		-
Outstanding December 31, 2011		450,300	$1.56	1.76	$	268,200	$	-
Exercisable December 31, 2011		450,300	$1.56	1.76	$	268,200	$	-
(1)	Remaining contractual term presented in years
(2)	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
	awards and the closing price of the Company's common stock as of December 31, 2011, for those awards that
	have an exercise price below the closing price as of December 31, 2011 of $.62
(3)	This value is calculated as the difference between the exercise price and the market price of the stock on the
	date of exercise.  The Company's common stock as of the various exercise dates ranged from $1.77 to $2.02
(4)	Includes 23,400 options previously excluded

As of December 31, 2011, the Company had 159,400 warrants outstanding with a weighted average exercise price of $6.57. The life of the outstanding warrants extends from January 30, 2012 through July 9, 2013. The following table summarizes the Company’s warrant activity during the first six months of fiscal 2012:

				Weighted
		Number of		Average
		Shares		Exercise Price
Warrants Outstanding, June 30, 2011		201,100	$	5.77
	Granted	-		-
	Exercised	-		-
	Canceled/Expired	(41,700)		2.74
Warrants Outstanding, December 31, 2011		159,400	$	6.57