Note 5.

Stockholders’ Equity

Stock Options

In December 2007, we established the 2007 Equity Compensation Plan (the “2007 Plan”) and in November 2017 we established the 2017 Omnibus Incentive Plan (the “2017 Plan”), collectively (the “Plans”). The Plans were approved by our board of directors and stockholders. The purpose of the Plans is to grant stock and options to purchase our common stock, and other incentive awards, to our employees, directors and key consultants. On November 10, 2016, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2007 Plan increased from 5,000,000 to 7,000,000. On November 21, 2017, the Company’s stockholders approved the adoption of the 2017 Plan (previously adopted by our board of directors on September 14, 2017), which authorized a maximum of 1,874,513 shares of common stock that may be issued pursuant to awards granted under the 2017 Plan. Upon adoption of the 2017 Plan we ceased granting incentive awards under the 2007 Plan and commenced granting incentive awards under the 2017 Plan. The shares of our common stock underlying cancelled and forfeited awards issued under the 2017 Plan may again become available for grant under the 2017 Plan. Cancelled and forfeited awards issued under the 2007 Plan that were cancelled or forfeited prior to November 21, 2017 became available for grant under the 2007 Plan. As of March 31, 2018, there were 1,495,991 shares available for grant under the 2017 Plan, and no shares were available for grant under the 2007 Plan. All incentive stock award grants prior to the adoption of the 2017 Plan on November 21, 2017 were made under the 2007 Plan, and all incentive stock award grants after the adoption of the 2017 Plan on November 21, 2017 were made under the 2017 Plan.

The majority of awards issued under the Plans vest immediately or over three years, with a one year cliff vesting period, and have a term of ten years. Stock-based compensation cost is measured at the grant date, based on the fair value of the awards that are ultimately expected to vest, and recognized on a straight-line basis over the requisite service period, which is generally the vesting period.

The following table summarizes vested and unvested stock option activity:

	All Options				Vested Options				Unvested Options
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at June 30, 2017		3,130,310		1.15		2,994,851		1.15		135,459		1.07
Granted		772,000		1.29		750,000		1.30		22,000		1.20
Options vesting		-		-		61,291		1.06		(61,291)		1.06
Exercised		(357,766)		1.11		(357,766)		1.11		-		-
Forfeited/Cancelled		(482,709)		1.31		(471,042)		1.32		(11,667)		1.07
Outstanding at March 31, 2018		3,061,835	$	1.16		2,977,334	$	1.16		84,501	$	1.10

The following table presents the assumptions used to estimate the fair values based upon a Black-Scholes option pricing model of the stock options granted during the nine months ended March 31, 2018 and 2017.

	Nine Months Ended March 31,
	2018			2017
Expected dividend yield		0	%		0	%
Risk-free interest rate		1.45% - 2.60	%		1.27% - 2.06	%
Expected life (in years)		2.6 - 6.0			5.0 - 6.0
Expected volatility		70% - 76	%		78% - 81	%

The weighted average remaining contractual life of all options outstanding as of March 31, 2018 was 6.04 years. The remaining contractual life for options vested and exercisable at March 31, 2018 was 5.98 years. Furthermore, the aggregate intrinsic value of options outstanding as of March 31, 2018 was $434,042, and the aggregate intrinsic value of options vested and exercisable at March 31, 2018 was $421,343, in each case based on the fair value of the Company’s common stock on March 31, 2018.

During the nine months ended March 31, 2018, the Company granted 772,000 options to employees and directors with a fair value of $423,540. The total fair value of options that vested during the nine months ended March 31, 2018 was $438,868 and is included in selling, general and administrative expenses in the accompanying statement of operations. During the nine months ended March 31, 2018, the Company granted 31,805 shares of common stock upon the exercise of 357,766 options on a cashless basis. In addition, on September 30, 2017, options originally issued to an employee to purchase an aggregate of 17,600 shares of the Company’s common stock were modified to extend the exercise period from three months to approximately five years. Stock-based compensation cost of $6,233 was recorded during the nine months ended March 31, 2018 as a result of the modification.

As of March 31, 2018, the amount of unvested compensation related to stock options was $54,459 which will be recorded as an expense in future periods as the options vest.

Additional information regarding stock options outstanding and exercisable as of March 31, 2018 is as follows:

Option Exercise Price		Options Outstanding		Remaining Contractual Life (in years)		Options Exercisable
$	0.59		8,150		4.25		8,150
	0.60		5,000		4.25		5,000
	0.65		6,150		4.25		6,150
	0.70		225,000		7.68		225,000
	0.77		59,500		5.51		59,500
	0.80		16,000		7.39		16,000
	0.90		25,667		6.06		25,667
	0.97		6,000		4.25		6,000
	1.00		290,249		2.40		290,247
	1.02		227,000		2.68		227,000
	1.05		447,529		8.38		416,530
	1.07		53,898		4.55		53,898
	1.09		156,165		7.71		124,665
	1.10		105,000		7.25		105,000
	1.14		3,674		4.25		3,674
	1.15		209,400		3.57		209,400
	1.20		353,414		9.32		331,414
	1.25		32,000		4.88		32,000
	1.30		263,000		3.93		263,000
	1.50		380,000		1.00		380,000
	1.75		1,067		4.25		1,067
	1.80		162,550		5.20		162,550
	1.85		24,000		4.84		24,000
	1.97		1,422		4.25		1,422
	Total		3,061,835				2,977,334

Warrants

The following table summarizes warrant activity:

	Number of Warrants		Weighted Average Exercise Price
Outstanding, June 30, 2017		1,985,000		1.25
Granted		-		-
Exercised		-		-
Expired/Cancelled		-		-
Outstanding, March 31, 2018		1,985,000	$	1.25
Exercisable, June 30, 2017		1,985,000	$	1.25
Exercisable, March 31, 2018		1,985,000	$	1.25

The intrinsic value for all warrants outstanding as of March 31, 2018 was $65,550, based on the fair value of the Company’s common stock on March 31, 2018.

Additional information regarding warrants outstanding and exercisable as of March 31, 2018 is as follows:

Warrant Exercise Price	Warrants Outstanding		Remaining Contractual Life (in years)		Warrants Exercisable
$1.19		100,000		3.73		100,000
1.25		1,885,000		3.20		1,885,000
Total		1,985,000				1,985,000

Restricted Common Stock

Prior to July 1, 2017, the Company issued 1,573,197 shares of restricted common stock to employees valued at $1,563,074, of which 1,060,003 shares have vested and $1,150,136 had been recognized as an expense.

During the nine months ended March 31, 2018, the Company issued an additional 386,607 shares of restricted stock to employees. These shares vest over a three year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met. The aggregate fair value of the stock awards was $409,917 based on the market price of our common stock ranging from $1.02 to $1.20 per share on the date of grant, which will be amortized over the three-year vesting period. Restricted common stock grants have been made under the 2007 and 2017 Equity Compensation Plans.

During the nine months ended March 31, 2018, 214,324 shares of unvested restricted stock were forfeited. The aggregate fair value of the unvested forfeited stock awards was $188,203.

The total fair value of restricted common stock vesting during the nine months ended March 31, 2018 was $270,047 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of March 31, 2018, the amount of unvested compensation related to issuances of restricted common stock was $364,605, which will be recognized as an expense in future periods as the shares vest. When calculating basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.

The following table summarizes restricted common stock activity:

	Number of Shares		Fair Value		Weighted Average Grant Date Fair Value
Non-vested, June 30, 2017		513,194		412,938		0.92
Granted		386,607		409,917		1.06
Vested		(251,280)		(270,047)		0.91
Forfeited		(214,324)		(188,203)		1.00
Non-vested, March 31, 2018		434,197	$	364,605	$	1.02

Common Stock Repurchase and Retirement

During the nine months ended March 31, 2018, the Company repurchased 106,850 shares of our common stock from employees at an average market price of approximately $1.20 per share for an aggregate amount of $128,433. The shares of common stock were surrendered by employees to cover tax withholding obligations with respect to the vesting of restricted stock. Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value.