2. Stock-Based Compensation and Warrants

9 Months Ended

Mar. 31, 2013

Equity [Abstract]

STOCK-BASED COMPENSATION

The Company has stock-based compensation plans and reports stock-based compensation expense for all stock-based compensation awards based on the estimated grant date fair value. The value of the compensation cost is amortized on a straight-line basis over the requisite service periods of the award (generally the option vesting term).

The Company estimates fair value using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:

· Expected term is determined under the simplified method using an average of the contractual term and vesting period of the award as appropriate statistical data required to properly estimate the expected term was not available;

· Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of the Company’s common stock over the expected term of the award and contemplation of future activity;

· Risk-free interest rate is the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and,

· Forfeitures are based on the history of cancellations of awards granted by the Company and management’s analysis of potential future forfeitures.

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, 2012.

The following table summarizes the Company’s stock option activity during the first nine months of fiscal 2013:

					Weighted		Grant
			Weighted		Average		Date
			Average		Remaining		Aggregate		Aggregate
			Exercise Price		Contractual		Fair		Instrinsic
		Shares	Per Share		Term (1)		Value		Value
Outstanding July 1, 2012		674,100	$0.80		4.58	$	217,100	$	-
	Granted	-	-		-		-		-
	Exercised	-	-		-		-		-	(2) (3)
	Forfeited or expired	(15,000)	$1.83	-	-		(5,800)		-
Outstanding March 31, 2013		659,100	$0.78		3.92	$	211,300	$	-	(2)
Exercisable March 31, 2013		500,300	$0.79		3.89	$	162,300	$	-	(2)
(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 March 31, 2013, for those awards that
	have an exercise price below the closing price as of March 31, 2013 of $.58.
(3)	This value is calculated as the difference between the exercise price and the market price of the stock on the
	date of exercise.

As of March 31, 2013, the Company had approximately $42,700 of unamortized Black Scholes value related to stock option grants made in the fourth quarter of fiscal year 2012 which is scheduled to be expensed during the remainder of fiscal year 2013.

As of March 31, 2013, the Company had 95,100 warrants outstanding with a weighted average exercise price of $2.64. The life of the outstanding warrants extends through July 9, 2013. The following table summarizes the Company’s warrant activity during the first nine months of fiscal 2013:

				Weighted
		Number of		Average
		Shares		Exercise Price
Warrants Outstanding, June 30, 2012		150,400	$	6.24
	Granted	-		-
	Exercised	-		-
	Canceled/Expired	(55,300)		12.44
Warrants Outstanding, March 31, 2013		95,100	$	2.64