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Compensatory Equity Incentive Plan and Other Equity Incentives
 12 Months Ended
Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Compensatory Equity Incentive Plan and Other Equity Incentives

9.    Compensatory Equity Incentive Plan and Other Equity Incentives

 

Share-based payment arrangements — The Company’s Amended and Restated Omnibus Incentive Plan (the “Plan”) included several available forms of stock compensation of which incentive stock options, non-qualified stock options and restricted stock units have been granted to date.

These plans are summarized below:

 

      Award Shares  Available for
      Outstanding  Issuance
   Award Shares  at June 30,  at June 30,
Equity Compensation Arrangement  Authorized  2014  2014
Amended and Restated Omnibus Incentive Plan   2,715,625    1,510,458    566,103 
Employee Stock Purchase Plan   200,000    —      101,693 
                
    2,915,625    1,510,458    667,796 

 

The 2004 Employee Stock Purchase Plan (“ESPP”) permits employees to purchase 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 in any calendar year and an employee may purchase no more than 4,000 shares on any purchase date. This discount of $755 and $898 for fiscal 2014 and 2013, respectively, is included in selling, general and administrative expense in the accompanying financial statements.

 

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. The Company uses the Black-Scholes pricing model. The ESPP fair value is the amount of the discount the employee obtains at the date of the purchase transaction.

For stock options and restricted stock units (“RSUs”) granted in the years ended June 30, 2014 and 2013, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions:

 

  Year ended Year ended
  June 30, 2014 June 30, 2013
Expected volatility 105% - 123% 110% - 120%
Weighted average expected volatility 105% - 123% 110% - 120%
Dividend yields 0% 0%
Risk-free interest rate 1.60% - 2.81% 0.67% - 1.72%
Expected term, in years 3 - 7 3 - 7

 

Most awards granted under the Company’s Plan vest ratably over two to four years and generally have three-year to ten-year contract lives. The initial assumed forfeiture rate used in calculating the fair value of option grants with both performance and service conditions was approximately 20% for 2014 and 2013. The forfeiture rate for RSUs was 0% for both 2014 and 2013. The volatility rate is based on historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding awards. The interest rate used is the treasury interest rate for constant maturities. The forfeiture rate for RSUs for directors is 0% because upon termination of service as a director, all outstanding RSUs immediately vest.

 

Information Regarding Current Share-based Payment Awards—A summary of the activity for share-based payment awards in the years ended June 30, 2014 and 2013 is presented below:  

 

   Stock Options  Restricted
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, 2012   576,393   $2.61    6.4    594,700    1.0 
Granted   98,500    0.96    9.4    240,000    2.6 
Exercised   (2,511)   1.05    5.5    —      —   
Cancelled   (87,373)   0.91    7.0    —      —   
                          
June 30, 2013   585,009   $2.38    5.9    834,700    1.1 
Granted   83,000    1.41    9.4    212,760    2.3 
Exercised   —      —      —      (191,160)   —   
Cancelled   (13,851)   2.40    —      —      —   
June 30, 2014   654,158   $2.25    5.5    856,300    0.9 
                          
Awards exercisable/                         
vested as of                         
June 30, 2014   461,158   $2.63    4.3    534,663    —   
                          
                          
Awards unexercisable/                         
unvested as of                         
June 30, 2014   193,000   $1.34    8.5    321,637    0.9 
    654,158              856,300      
                          
         Stock
Options 		    RSU    All
Awards		      
Weighted average fair value                         
of share awards granted for the year ended                         
June 30, 2014       $1.21   $1.41   $1.36      

 

The total intrinsic value of share options exercised for years ended June 30, 2014 and 2013 was $0 and $452, respectively.

The total intrinsic value of shares options outstanding and exercisable at both June 30, 2014 and 2013 was $22,000 and $9,000 respectively.

The total fair value of shares options vested during the years ended June 30, 2014 and 2013 was $122,000 and $123,000, respectively.

The total intrinsic value of RSUs exercised during the years ended June 30, 2014 and 2013 was $289,000 and $0, respectively.

The total intrinsic value of RSUs outstanding and exercisable at June 30, 2014 and 2013 was $683,000 and $508,000, respectively.

The total fair value of RSUs vested during the years ended June 30, 2014 and 2013 was $334,000 and $94,000, respectively.

As of June 30, 2014 there was $380,101 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 cost expected to be recognized as follows:

 

      Restricted   
      Stock   
   Stock  Share/   
   Options  Units  Total
                  
 Year ended June 30, 2015   $41,642   $156,625   $198,267 
                  
 Year ended June 30, 2016    27,299    112,291    139,590 
                  
 Year ended June 30, 2017    17,572    20,865    38,437 
                  
 Year ended June 30, 2018    3,807    —      3,807 
     $90,320   $289,781   $380,101 

 

The table above does not include shares under the Company’s ESPP, which has purchase settlement dates in the second and fourth fiscal quarters. 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.

 

RSU awards vest immediately or from two to four years from the grant date.

The Company issues new shares of 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 our unexercisable/unvested awards as of June 30, 2014 and 2013 and changes during the two years then ended:

 

  Stock
Options		    Total 

Weighted-Average

Grant Date 
Fair Values

Unexercisable/unvested awards  Shares  RSU Shares  Shares  (per share)
June 30, 2012   198,125    235,000    433,125   $2.42 
Granted   98,500    240,000    338,500    0.85 
Vested   (59,875)   (103,330)   (163,205)   1.91 
Cancelled/Forfeited   (53,500)   —      (53,500)   1.64 
June 30, 2013   183,250    371,670    554,920   $1.57 
Granted   83,000    212,760    295,760    1.36 
Vested   (73,250)   (262,793)   (336,043)   1.36 
Cancelled/Forfeited   —      —      —      —   
June 30, 2014   193,000    321,637    514,637   $1.18 

 

Acceleration of Vesting— The Company has not accelerated the vesting of any stock options. The vesting was accelerated on 75,460 RSUs for a former member of our Board of Directors upon his death.

Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the years ended June 30, 2014 and 2013 included in the Consolidated Statement of Operations and Comprehensive Income:

 

  Year ended
  June 30,  June 30,
   2014  2013
 Stock options   68,113    65,286 
 RSU   288,702    203,021 
      Total   356,815    268,307 
 The amounts above were included in:          
 General & administrative   346,119    263,247 
 Cost of sales   —      (4,350)
 New product development   10,696    9,410 
    356,815    268,307