Annual report pursuant to Section 13 and 15(d)

Stock Based Compensation

v2.4.0.6
Stock Based Compensation
 12 Months Ended
Jun. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Based Compensation
Note 7 - Stock Based Compensation
The Stock Plan
On December 8, 2010, shareholders approved an amendment to the Company’s 1998 Stock Incentive Plan (the "Stock Plan") to increase the number of authorized common stock shares reserved for awards under the Stock Plan to a total of 7,205,000 shares. These authorized shares can take the form of non-qualified stock options, stock appreciation rights, restricted share awards, annual awards of stock to directors, and performance based awards ("PBOs").
Stock Option Grants
Stock option grants contain both time based and performance based vesting provisions. The time based options are expensed on a straight-line basis over the vesting period. Performance based options are recognized when the achievement of the performance conditions is considered probable. Management re-assesses whether satisfaction of performance conditions are probable at the end of each reporting period. If changes in the estimated outcome of the performance conditions affect the quantity of the awards expected to vest, the cumulative effect of the change is recognized in the period of change. As of June 30, 2012, management believes the achievement of the performance conditions related to the performance based stock options is probable. Accordingly, the Company has begun to recognize expense on these awards over the period of time the performance condition is expected to be achieved.
As of June 30, 2012, 435,000 shares were available for future issuance under the Stock Plan. Of the 1,675,000 options granted during the current fiscal year, 295,750 were issued as PBOs and 825,000 options were issued outside of the Stock Plan. Options outstanding have expiration dates ranging from November 28, 2015, through January 10, 2022.
The following table summarizes the stock option activity for the years ended:
 
June 30,
 
2012
 
2011
 
2010
 
Number of
Shares
 
WAEPS (1)
 
Number of
Shares
 
WAEPS (1)
 
Number of
Shares
 
WAEPS (1)
Balance at beginning of year
5,200,000

 
$1.49
 
3,880,000

 
$1.26
 
3,242,500

 
$1.25
Granted
1,675,000

 
$1.10
 
1,750,000

 
$2.08
 
637,500

 
$1.33
Exercised
(21,875
)
 
$1.60
 
(30,000
)
 
$1.45
 
—

 
$0.00
Forfeited
(100,000
)
 
$1.72
 
(400,000
)
 
$1.84
 
—

 
$0.00
Options outstanding at year end
6,753,125

 
$1.44
 
5,200,000

 
$1.49
 
3,880,000

 
$1.26
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining contractual term
 
 
6.8 years
 
 
 
7.6 years
 
 
 
8.1 years
(1) Weighted average exercise price per share
At June 30, 2012, there was a total of $0.7 million in unrecognized stock compensation expense related to stock options granted. This cost is expected to be recognized over a weighted-average period of 1.4 years. The amount of unrecognized compensation expense noted above does not necessarily represent the amount that will ultimately be realized by the Company in its consolidated statement of operations. During the fiscal year ending June 30, 2013, it is expected that an additional 1,100,002 stock options will vest.
Cash received from the exercise of stock options for the years ended June 30, 2012, and 2011, was less than $0.1 million. No stock options were exercised during 2010.
The following table summarizes options outstanding and exercisable as of June 30, 2012:
 
 
 
 
Options outstanding and exercisable
Range of
exercise
prices
 
Number
of
shares
 
Weighted average remaining contractual life
 
Weighted average exercise price
$1.01
-
$1.16
 
549,999

 
8.7 years
 
$1.12
$1.20
-
$1.20
 
3,100,000

 
6.5 years
 
$1.20
$1.40
-
$1.60
 
528,125

 
4.5 years
 
$1.54
$1.72
-
$2.41
 
683,330

 
7.9 years
 
$2.18
 
 
 
 
4,861,454

 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value
$
(1,851,313
)
 
 
 
 

The fair value of shares issued under the Stock Plan was estimated using the following weighted-average assumptions for the years ended:
 
June 30,
 
2012
 
2011
 
2010
Number of options
1,675,000
 
1,750,000
 
637,500
Weighted-average grant date fair value per share
$0.66
 
$1.10
 
$0.85
Expected dividend
$0.00
 
$0.00
 
$0.00
Risk free interest rate
1.0
%
-
1.3
%
 
1.6
%
-
2.4
%
 
2.4
%
-
2.6
%
Expected life
5.3

-
6.0
 years
 
5.0

-
6.0
 years
 
5.8

-
5.8
 years
Expected volatility (based on historical price)
61.2
%
-
62.8
%
 
55.2
%
-
61.5
%
 
6.2
%
-
62.5
%

Stock Compensation Expense
The Company recorded $1.6 million, $1.7 million, and $2.3 million of stock compensation expense for the years ended June 30, 2012, 2011, and 2010, respectively. Stock based compensation is included under general and administrative expense in the consolidated statements of operations.
The Company's compensation policy is designed to provide the Company's directors with a portion of their annual Board compensation in the form of equity. The number of shares for each director award is subject to an annual maximum of 15,000 shares. The Company issued 75,000 shares during 2012 pursuant to this policy.