STOCK OPTIONS

In 2012, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company’s 2012 Omnibus Incentive Plan (the “2012 Plan”), which superseded the 1990 Flexible Incentive Plan (the "1990 Plan"). The 2012 Plan is administered by a committee of the Board of Directors and provides for granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 2,000,000 shares of common stock were available under the terms of the 2012 Plan plus shares outstanding under the 1990 Plan which expire or are otherwise forfeited, canceled or terminated after July 25, 2012, the Effective Date of the 2012 Plan. As of June 30, 2014, there were 1,448,308 options available for future grants. Options vest over a three to five year period from the date of grant, with a maximum term of five to ten years.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the expected term and vesting schedules. The expected volatility is determined based on the Company’s historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based on historical data.

As of June 30, 2014, there was approximately $1,119,787 of total unrecognized compensation cost related to stock options granted under the 2012 Plan and 1990 Plan. This cost is expected to be recognized over a weighted average period of 2.58 years. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures. The Company recognized stock-based compensation expense of $684,554 and $583,069 in 2014 and 2013, respectively. These expenses were included in selling, general and administrative expenses.

There was no cash received from stock option exercises during 2014 or 2013.

The per share weighted average fair value of the stock options granted during the years ended June 30, 2014 and 2013 were $1.47 and $1.67, respectively. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. For the options granted in 2014 and 2013, the Company used the following weighted-average assumptions:



	2014		2013
Expected stock price volatility	47	%	58	%
Risk free interest rate	1.27	%	0.52	%
Expected dividend yield	4.00	%	4.00	%
Expected forfeitures	1.50	%	1.50	%
Expected life of options	4.6 years		4.6 years

The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 1990 Plan and the 2012 Plan:



	Number of Shares		Stock Options Price Range	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life - Years	Aggregate Intrinsic Value of In-The- Money Options
Shares under option at July 1, 2012	1,514,308		$3.90 - $13.09	$	6.99	4.36	$	88,352
Granted	430,000		$4.97 - $5.47	$	5.29
Exercised	—		—	—
Expired	(203,308	)	$7.88 - $8.53	8.45
Forfeited	—		—	$	—
Shares under option at June 30, 2013	1,741,000		$3.90 - $13.09	$	6.40	4.39	$	55,160
Granted	445,000		$5.30 - $5.83	$	5.64
Exercised	—		—	—
Expired	(120,000	)	$11.01	$	11.01
Forfeited	—		—	$	—
Shares under option at June 30, 2014	2,066,000		$3.90 - $13.09	$	5.97	4.13	$	—
Exercisable as of June 30, 2013	672,582		$3.90 - $13.09	$	7.52
Exercisable as of June 30, 2014	904,918		$3.90 - $13.09	$	6.39

A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2014 and 2013 is as follows:



	2014		2013
Total intrinsic value of stock options exercised	$	—	$	—
Cash received from stock option exercises	$	—	$	—
Total fair value of stock options vested	$	586,342	$	436,047

During the years ended June 30, 2014 and 2013 total options of 445,000 and 430,000, respectively, were granted during the year at a price equal to or greater than the market value of the common stock on the date of grant. These options had a weighted-average exercise price of $5.64 and $5.29 for the years ended June 30, 2014 and 2013, respectively.