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Compensatory Equity Incentive Plan and Other Equity Incentives
3 Months Ended
Sep. 30, 2011
Compensatory Equity Incentive Plan And Other Equity Incentives 
Compensatory Equity Incentive Plan and Other Equity Incentives
7.  Compensatory Equity Incentive Plan and Other Equity Incentives
 
 
Share-Based Compensation Arrangements—The Company’s Amended and Restated Omnibus Incentive Plan (the “Plan”) included several available forms of stock compensation of which incentive stock options and restricted stock awards have been granted to date.
 
These two plans are summarized below:
 
         
Award Shares
    
Available for
  
   
Award Shares
    
Outstanding
    
Issuance
  
   
Authorized
    
at September 30,
    
at September 30,
  
Equity Compensation Arrangement
        
2011
    
2011
  
Amended and Restated Omnibus Incentive Plan
     1,715,625       934,933       335,299  
Employee Stock Purchase Plan
     200,000       -       126,995  
      1,915,625       934,933       462,294  
 
The 2004 Employee Stock Purchase Plan (“ESPP”) permits employees to purchase shares of Class A 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 of Class A common stock in any calendar year and an employee may purchase no more than 4,000 shares on any purchase date within an offering period of 12 months and 2,000 shares on any purchase date within an offering period of six months. The discount on market value is included in selling, general and administrative expense in the accompanying statements of operations and was $806 and $486 for the three months ended September 30, 2011 and 2010, respectively.

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 using the Black-Scholes-Merton pricing model. The ESPP fair value is the amount of the discounted market value the employee obtains at the date of the purchase transaction.
 
The Company did not grant any stock options in the first quarter of fiscal 2012. For stock options granted in the three month period ended September 30, 2010, the Company estimated the fair value of each stock option as of the date of grant using the following assumptions:
 
Quarter Ended
 
September 30, 2010
Expected volatility
134%
Weighted average expected volatility
134%
Dividend yields
0%
Risk-free interest rate
2.15%
Expected term, in years
7
 
Most options granted under the Plan vest ratably over two to four years and are generally exercisable for ten years.  The assumed forfeiture rates used in calculating the fair value of options and restricted stock unit grants with both performance and service conditions were 20% and 0%, respectively, for the three months ended September 30, 2011 and 42% and 0%, respectively, for the three months ended September 30, 2010.  The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures.  The interest rate used is the U.S. Treasury interest rate for constant maturities.
 
Information Regarding Current Share-Based Compensation Awards—A summary of the activity for share-based compensation awards in the three months ended September 30, 2011 is presented below:  
 
                     
Restricted
  
         
Stock Options
          
Stock Units
  
         
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  
                                         
 
                                        
September 30, 2011
     500,233     $ 3.01       6.6       434,700       0.8  
 
Awards exercisable/
                              
vested as of
                              
September 30, 2011
     323,483     $ 3.19       5.7       234,700       -  
                                         
                                         
Awards unexercisable/
                                        
unvested as of
                                        
September 30, 2011
     176,750     $ 2.69       8.3       200,000       0.8  
      500,233                       434,700          
 
The total intrinsic value of options outstanding and exercisable at September 30, 2011 and 2010 was $21,000 and $140,000, respectively.  
 
The total intrinsic value of RSUs exercised during the three months ended September 30, 2011 and 2010 was $0 and $0, respectively.
 
The total intrinsic value of RSUs outstanding and exercisable at September 30, 2011 and 2010 was $338,000 and $74,000, respectively.
 
The total fair value of RSUs vested during the three months ended September 30, 2011 and 2010 was $0 and $0, respectively.
 
The total fair value of option shares vested during the three months ended September 30, 2011 and 2010 was $18,000, and $3,000, respectively.
 
As of September 30, 2011, there was $341,436 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 compensation cost is expected to be recognized as follows:
 
         
Restricted
        
   
Stock
    
Stock
        
   
Options
    
Units
    
Total
  
Nine months ended June 30, 2012
   $ 34,892     $ 68,126     $ 103,018  
Year ended June 30, 2013
     63,324       96,284       159,608  
Year ended June 30, 2014
     48,522       22,434       70,956  
Year ended June 30, 2015
     7,854       -       7,854  
    $ 154,592     $ 186,844     $ 341,436  
 
The table above does not include shares under the Company’s ESPP, which has purchase settlement dates in the second and fourth fiscal quarters of each year. 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.

Restricted stock unit awards vest immediately or from two to four years from the date of grant.
 
The Company issues new shares of Class A 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 the Company’s unexercisable/unvested awards as of September 30, 2011 and changes during the three months then ended:
 
   
Stock Options Shares
    
RSU Shares
    
Total Shares
  
Weighted-Average
  
Unexercisable/unvested awards                  
Grant Date Fair Values
  
                   
(per share)
  
June 30, 2011
     182,500       200,000       382,500     $ 2.53  
Granted
     -       -       -       -  
Vested
     (5,750 )     -       (5,750 )     3.12  
Cancelled/Issued/Forfeited
     -       -       -       -  
September 30, 2011
     176,750       200,000       376,750     $ 2.53  
 
Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the three months ended September 30, 2011 and 2010 included in the consolidated statements of operations:
 
   
Quarter Ended
    
Quarter Ended
  
   
September 30,
    
September 30,
  
   
2011
    
2010
  
             
Stock options
   $ 22,575     $ 25,196  
                 
RSU
     41,971       25,191  
                 
     Total
   $ 64,546     $ 50,387  
                 
The amounts above were included in:
                
General & administrative
   $ 59,841     $ 44,479  
Cost of sales
     2,125       2,578  
New product development
     2,580       3,330  
    $ 64,546     $ 50,387