OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION | 9 Months Ended |
Mar. 31, 2015 |
OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION: | |
OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION | 8. OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION |
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2011 Equity Incentive Plan |
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On March 4, 2011, the Board of Directors adopted the 2011 Equity Incentive Plan and reserved up to 50,000,000 shares of common stock for issuance to employees, directors and consultants, subject to stockholder approval. On February 17, 2012, the stockholders approved the plan. The plan also provides for automatic annual increases on January 1st of each year (commencing on January 1, 2012 and ending on January 1, 2021), in the aggregate number of shares reserved equal to the lesser of (a) five percent of the total number of shares outstanding on December 31st of the preceding year or (b) 3,000,000 shares. As of January 1, 2013, the number of shares reserved under the plan automatically increased to 56,000,000. Under the plan, the Board may grant stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards. |
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Valuation and amortization method. The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period. |
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Volatility. The Company estimates volatility based on the Company’s historical volatility. |
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Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. |
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Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. The Company applied the simplified method of estimating the expected term of the options, as described in the SEC’s Staff Accounting Bulletins 107 and 110, as the Company has had a significant change in its business operations and the historical experience is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. |
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Forfeitures. Stock-based compensation expense is recorded only for those awards that are expected to vest. FASB ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. An annual forfeiture rate of 0% was applied to all unvested options as of March 31, 2015 which was management’s best estimate. This analysis will be re-evaluated semi-annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest. |
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The following weighted average assumptions were used to estimate the fair value of stock options using the Black-Scholes option pricing model: |
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| | Three Months Ended | | Three Months Ended | | | | | | |
31-Mar-15 | 31-Mar-14 | | | | | | |
Risk-free interest rate | | 0.62% - 0.72% | | 0.90% - 0.96% | | | | | | |
Expected dividend yield | | - | | - | | | | | | |
Expected term | | 3.25 - 5.5 years | | 5.5 years | | | | | | |
Forfeiture rate | | 0% | | 0% | | | | | | |
Expected volatility | | 244.90% - 262.52% | | 122.33% - 124.91% | | | | | | |
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A summary of option activity as of March 31, 2015 and for the three months then ended is presented below. All information is presented pre-split: |
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Options | | Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Outstanding at June 30, 2012 | | 186,760 | | $ | 15 | | 8.84 years | | $ | - |
Granted | | - | | | - | | - | | | - |
Exercised | | - | | | - | | - | | | - |
Forfeited or expired | | - | | | - | | - | | | - |
Outstanding at June 30, 2013 | | 186,760 | | $ | 15 | | 7.84 years | | $ | - |
Granted | | - | | | - | | - | | | - |
Exercised | | - | | | - | | - | | | - |
Forfeited | | - | | | - | | - | | | - |
Exercisable at June 30, 2014 and March 31, 2015 | | 186,760 | | $ | 15 | | 6.84 years | | $ | - |
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On April 6, 2011, the Board of Directors granted stock options to purchase 169,450 shares of common stock at an exercise price of $16.25 per share. On May 13, 2011, the Board of Directors granted stock options to purchase 3,000 shares of common stock at an exercise price of $15.00 per share. The weighted average fair value of the options granted was estimated at $14.60 per share. These options vest over three years and have a term of 10 years. |
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On August 12, 2011, the Board of Directors granted stock options to purchase 480 shares of common stock at an exercise price of $12.50 per share. The weighted average fair value of the options on the date of the grant was estimated at $10.75 per share. These options vest over one year and have a term of 10 years. |
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On December 14, 2011, the Board of Directors granted stock options to purchase 10,000 shares of common stock at an exercise price of $3.75 per share. The weighted average fair value of the options on the date of the grant was estimated at $2.00 per share. These options vest monthly over 10 months and have a term of 10 years. |
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On January 12, 2012, the Board of Directors granted stock options to purchase 480 shares of common stock at an exercise price of $1.25 per share. The weighted average fair value of the options on the date of the grant was estimated at $1.00 per share. These options vest over one year and have a term of 10 years. |
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On June 3, 2012, the Board of Directors granted stock options to purchase 3,400 shares of common stock at an exercise price of $13.60 per share. The weighted average fair value of the options on the date of the grant was estimated at $3.88 per share. These options vest over three year and have a term of 10 years. |
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On March 15, 2012, the Company agreed to issue a restricted stock award of 10,000 shares of common stock to a consultant for services to be rendered with 5,000 shares vesting on June 15, 2012 and 5,000 shares vesting on September 15, 2012. As of March 31, 2015, the shares had not been issued. Consulting expense recorded for the restricted stock award was $29,167 for the year ended June 30, 2012. |
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Warrants |
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The Company’s outstanding warrants remained in place subsequent to the reverse acquisition. No warrants were exercised during the year ended June 30, 2014 or the quarter ended March 31, 2015. On July 17, 2011, warrants to purchase 200,000 shares at $1.89 per share expired. During the year ended June 30, 2012, the Company issued 2,000,000 warrants in connection with convertible notes payable (see Note 8). The warrants have an exercise price of $2.50 per share, are immediately exercisable and expire in five years from issuance. No warrants were issued, exercised or expired in the year ended June 30, 2014. The Company has reserved 2,075,000 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at June 30, 2014 adjusted for the 1:250 stock split which took effect on September 4, 2014: |
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Exercise price | | Number | | Expiration Date | | | | | |
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$ | 2.5 | | 2,000 | | 2/10/17 | | | | | |
$ | 2.5 | | 4,000 | | 2/17/17 | | | | | |
$ | 2.5 | | 1,250 | | 4/18/17 | | | | | |
$ | 2.5 | | 800 | | 8/15/17 | | | | | |
$ | 2.5 | | 200 | | 8/20/17 | | | | | |
$ | 2.5 | | 1,000 | | 9/14/17 | | | | | |
$ | 2.5 | | 1,000 | | 10/2/17 | | | | | |
| | | 10,250 | | | | | | | |
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The weighted average grant date fair value of the warrants granted during the three months ended March 31, 2014 was $0.0095 per share. The warrants were valued using the Black-Scholes option pricing model. The following assumptions were used for warrants issued during the three months ended March 31, 2014; risk free interest rates of 0.60% - 0.72%; expected dividend yield of 0%; expected term of 5 years and expected volatility of 244.07% - 248.52%. The weighted average remaining life of the warrants at March 31, 2015 was 3.86 years. At March 31, 2015, all warrants are exercisable and there is no aggregate intrinsic value for the warrants outstanding. |
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Stock Award Plan |
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Under the 2006 Stock Award Plan the Company may award shares of common stock to employees, officers, directors, consultants and advisors and may make grants subject to such terms and conditions as determined by the Board of Directors. As of March 31, 2014, the Company has 111,845 shares available for future grant under the Plan. |