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.

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 $1,433 and $1,224 for the nine months ended March 31, 2012 and 2011, respectively.

These two plans are summarized below:

	Award		Award Shares		Available for
	Shares		Outstanding		Issuance
	Authorized		at March 31,		at March 31,
Equity Compensation Arrangement			2012		2012

Amended and Restated Omnibus Incentive Plan		1,715,625		1,177,809		92,423
Employee Stock Purchase Plan		200,000		—		120,024

		1,915,625		1,177,809		212,447

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.

For stock options granted in the nine month period ended March 31, 2012 and 2011, the Company estimated the fair value of each stock option as of the date of grant using the following assumptions:

	Nine Months Ended	Nine Months Ended
	March 31, 2012	March 31, 2011

Expected volatility	121% - 122%	117%
Weighted average expected volatility	121% - 122%	117%
Dividend yields	0%	0%
Risk-free interest rate	1.59% - 2.01%	1.18%
Expected term, in years	3 - 7	3 - 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 nine months ended March 31, 2012 and 49% and 0%, respectively, for the nine months ended March 31, 2011. 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 nine months ended March 31, 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		9.6		160,000		1.1
Exercised		—			—		—		—		—
Cancelled		(7,124	)		—		—		—		—

March 31, 2012		583,109		$	2.61		6.7		594,700		1.1

Awards exercisable/
vested as of
March 31, 2012		384,984		$	2.85		5.6		359,700		—

Awards unexercisable/
unvested as of
March 31, 2012		198,125		$	2.15		8.9		235,000		1.1
		583,109							594,700

The weight average fair value of shares awarded for the nine months ended March 31, 2012 was:

	Stock				All
	Options		RSU		Awards
Weighted average fair value of share awards granted for nine months ended
March 31, 2012	$	1.21	$	1.35	$	1.30

The total intrinsic value of options outstanding and exercisable at March 31, 2012 and 2011 was $19,103 and $68,678, respectively.

The total intrinsic value of RSUs exercised during the nine months ended March 31, 2012 and 2011 was $0 and $0, respectively.

The total intrinsic value of RSUs outstanding and exercisable at March 31, 2012 and 2011 was $608,580 and $492,870, respectively.

The total fair value of RSUs vested during the nine months ended March 31, 2012 and 2011 was $181,250 and $65,000, respectively.

The total fair value of option shares vested during the nine months ended March 31, 2012 and 2011 was $177,279, and $223,706, respectively.

As of March 31, 2012, there was $522,617 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		Share/
	Options		Units		Total

Three months ended June 30, 2012	$	16,641	$	52,601	$	69,242

Year ended June 30, 2013		79,057		168,420		247,477

Year ended June 30, 2014		64,254		94,570		158,824

Year ended June 30, 2015		23,587		18,852		42,439

Year ended June 30, 2016		4,635		-		4,635
	$	188,174	$	334,443	$	522,617

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 March 31, 2012 and changes during the nine months then ended:

	Stock									Weighted-Average
	Options			RSU			Total			Grant Date Fair Values
Unexercisable/unvested awards	Shares			Shares			Shares			(per share)
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
Cancelled/Issued/Forfeited		—			—			—				—
March 31, 2012		198,125			235,000			433,125			$	2.42

Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the nine months ended March 31, 2012 and 2011 included in the consolidated statements of operations:

	Nine Months Ended		Nine Months Ended
	March 31,		March 31,
	2012		2011

Stock options	$	69,455	$	58,221

RSU		133,347		103,439

Total	$	202,802	$	161,660

The amounts above were included in:
General & administrative	$	188,221	$	144,174
Cost of sales		6,661		7,380
New product development		7,920		10,106
	$	202,802	$	161,660