STOCKHOLDERS EQUITY

12 Months Ended

Jun. 30, 2019

Stockholders' equity:

STOCKHOLDERS EQUITY

Officers and Directors Stock Compensation

Effective October 2018, the Board of Directors approved the following compensation for directors who are not employed by the Company:

● Annual cash compensation of $75,000 payable at the rate of $18,750 per quarter. The Company has the right to pay this amount in the form of shares of the Company’s Common Stock.

● Upon appointment, outside independent directors receive a grant of $150,000 payable in shares of the Company’s restricted Common Stock calculated based on the market value of the shares of Common Stock on the date of grant. The shares vest ratably over a five-year period.

● Reimbursement of all travel expense related to performance of Directors’ duties on behalf of the Company.

Officers, Key Employees, Consultants and Directors Stock Compensation. 

In January 2013, the Board of Directors approved the Second Amended and Restated 2011 Stock Plan (the “Amended 2011 Plan”), which Amended 2011 Plan was approved by shareholders on March 29, 2013. Under the terms of the Amended 2011 Plan, all employees, consultants and directors of the Company are eligible to participate. The maximum aggregate number of shares of Common Stock that may be granted under the 2011 Plan was increased from 250,000 shares to 550,000 shares. On November 9, 2017, the Company amended the Amended 2011 Plan to increase the maximum aggregate number of shares from 550,000 shares to 675,000 shares.

A Committee of independent members of the Company’s Board of Directors administers the 2011 Plan. The exercise price for each share of Common Stock purchasable under any incentive stock option granted under the 2011 Plan shall be not less than 100% of the fair market value of the Common Stock, as determined by the stock exchange on which the Common Stock trades on the date of grant. If the incentive stock option is granted to a shareholder who possesses more than 10% of the Company’s voting power, then the exercise price shall be not less than 110% of the fair market value on the date of grant. Each option shall be exercisable in whole or in installments as determined by the Committee at the time of the grant of such options. All incentive stock options expire after 10 years. If the incentive stock option is held by a shareholder who possesses more than 10% of the Company's voting power, then the incentive stock option expires after five years. If the option holder is terminated, then the incentive stock options granted to such holder expire no later than three months after the date of termination. For option holders granted incentive stock options exercisable for the first time during any fiscal year and in excess of $100,000 (determined by the fair market value of the shares of Common Stock as of the grant date), the excess shares of Common Stock shall not be deemed to be purchased pursuant to incentive stock options.

During the years ended June 30, 2019 and 2018 the Company issued 34,382 and 27,880 shares to its directors and 81,842 and 127,161 shares to employees and consultants, respectively under these plans. The Company, under its Common Stock buyback plan purchased 87,600 shares. Those shares were cancelled and returned to authorized but unissued shares. The Company holds no Treasury Stock. 31,078 and 119,597, respectively are included in the rollforward of Restricted Stock units below.

Restricted Stock Units

	Restricted Stock Units			Weighted Average Grant Date Fair Value ($/share)
Outstanding at July 1, 2017		982,613			6.01
Granted		23,085			10.50
Vested and issued		(119,597	)		7.38
Forfeited		(28,487	)		10.96
Outstanding at June 30, 2018		857,614		$	6.46
Granted		62,962			6.05
Vested and issued		(31,078	)		10.77
Forfeited		(23,224	)		10.03
Outstanding at June 30, 2019		866,274			5.47

The number of restricted stock units outstanding at June 30, 2019 included 23,915 units that have vested but for which shares of Common Stock had not yet been issued pursuant to the terms of the agreement.

As of June 30, 2019, there was approximately $4.7 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted average period of 3.51 years.

Warrants

Outstanding warrants were issued in connection with private placements of the Company’s Common Stock and with the Series B Preferred Restructure. The following table summarizes information about fixed stock warrants outstanding at June 30, 2019:

		Warrants Outstanding at June 30, 2019						Warrants Exercisable at June 30, 2019
Range of exercise prices		Number Outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$	4.00		1,085,068		0.60	$	4.00		1,085,068	$	4.00
$	10.00		23,737	$	0.57		10.00	$	23,737		10.00
			1,108,805		0.60	$	4.13		1,108,85	$	4.13

Preferred Stock

The Company’s articles of incorporation currently authorizes the issuance of up to 30,000,000 shares of ‘blank check’ preferred stock with designations, rights, and preferences as may be determined from time to time by the Company’s Board of Directors, of which 700,000 shares are currently designated as Series B Preferred Stock (“Series B Preferred”) and 550,000 shares are designated as Series B-1 Preferred Stock (“Series B-1 Preferred”).  Both classes of Series B Preferred Stock pay dividends at a rate of 7% per annum if paid by the Company in cash, or 9% if paid by the Company in PIK Shares; the Company may elect to pay accrued dividends on outstanding shares of Series B Preferred in either cash or by the issuance of additional shares of Series B Preferred (“PIK Shares”).

The Company does business with some of the largest retailers and wholesalers in the World. Management believes the Series B-1 Preferred favorably impacts the Company’s overall cost of capital in that it is: (i) perpetual and, therefore, an equity instrument that positively impacts the Company’s coverage ratios, (ii) possesses a below market dividend rate relative to similar instruments, (iii) offers the flexibility of a paid-in-kind (PIK) payment option, and (iv) is without covenants. After exploring alternative options for redeeming the Series B-1 Preferred, management determined that alternative financing options were materially more expensive, or would impair the Company’s net cash position, which management believes could cause customer concerns and negatively impact the Company’s ability to attract new business.

Section 4 of the Company’s First Amended and Restated Certificate of Designation of the Relative Rights, Powers and Preferences of the Series B-1 Preferred Stock, as amended (the “Series B-1 COD”) provides the Company’s Board of Directors with the right to redeem any or all of the outstanding shares of the Company’s Series B-1 Preferred for a cash payment of $10.70 per share at any time upon providing the holders of Series B-1 Preferred at least ten days written notice that sets forth the date on which the redemption will occur (the “Redemption Notice”).

In July 2017, the Company issued 20,000 shares of Series B-1 Preferred in satisfaction of an accrued bonus payable to the Company’s Chief Executive Officer.

On January 27, 2018, the Company’s Board of Directors approved the redemption of 93,457 of the 305,859 issued and outstanding shares of the Company’s Series B-1 Preferred (the “Redemption Shares”), and on February 6, 2018, the Company delivered a Redemption Notice to the holders of the Series B-1 Preferred notifying the holders of the Company’s intent to redeem the Redemption Shares, on a pro rata basis, on February 7, 2018 (the “Redemption Date”) (the “Series B-1 Redemption”). On the Redemption Date, the Company paid an aggregate total of $1.0 million to the holders of shares of Series B-1 Preferred for the redemption of a total of 93,457 shares of Series B-1 Preferred. Following the Series B-1 Redemption, a total of 212,402 shares of Series B-1 Preferred remain issued and outstanding.

As of June 30, 2019, a total of 625,375 shares of Series B Preferred and 212,402 shares of Series B-1 Preferred were issued and outstanding. 

Share Repurchase Program

As previously disclosed on May 9, 2019, the Board of the Company approved the repurchase of up to $4.0 million of the Company’s stock, par value $0.01 per share, over the next 24 months (the “Share Repurchase Program”). The following table provides information about the repurchases of our Common Stock registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), from the implementation of the Share Repurchase Program for the year ended June 30, 2019.

Period (1)	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Amount Available for Future Share Repurchases Under the Plans or Programs
May 9, 2019 – May 31, 2019:		17,600	$	5.65		17,600	$	3,897,659
June 1, 2019 – June 30, 2019:		70,000	$	5.41		87,600	$	3,517,594
May 9, 2019 – June 30, 2019:		87,600	$	5.53		87,600	$	3,517,594

(1) We close our books and records on the last calendar day of each month to align our financial closing with our business processes.

(2) On May 9, 2019, our Board of Directors approved a Share Repurchase Program pursuant to which we are authorized to repurchase our Common Stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. From time to time, our Board of Directors may authorize increases to our Share Repurchase Program. The total remaining authorization for future common share repurchases under our Share Repurchase Program was $3,517,594 as of June 30, 2019. Under the Share Repurchase Program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable laws and regulations, including Rule 12b-18 of the Exchange Act. The Share Repurchase Program expires 24 months following May 9, 2019, and it may be suspended for periods or discontinued at any time.