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Stock Options

6 Months Ended

Dec. 31, 2020

NOTE 8 - Stock Options

The Company follows ASC Topic 718, "Compensation-Stock Compensation", which requires that all share based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. The Company recorded non-cash compensation expense relating to stock-based compensation of $84,000 and $308,000 for the three months ended December 31, 2020 and 2019, respectively ($0.00 and $0.02 per basic and diluted share for each period, respectively) and $188,000 and $325,000 for the six months ended December 31, 2020 and 2019, respectively ($0.01 and $0.02 per basic and diluted share for each period, respectively).

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (" 2012 Employee Plan"). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options ("ISOs"), to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company’s outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2012 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At December 31, 2020, 117,840 stock options were outstanding, 47,800 stock options were exercisable and 731,960 stock options were available for grant under this plan.

No options were granted during the three or six months ended December 31, 2020. The fair value of each option granted during the six months ended December 31, 2019 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2019
Risk-free interest rates	1.80% - 2.10	%
Expected lives	10 years
Expected volatility	45%-46	%
Expected dividend yields	0	%

The following table reflects activity under the 2012 Employee Plan for the six months ended December 31,:


	2020				2019
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		117,840	$	18.84		72,500	$	11.01
Granted		—		—		28,000		30.13
Exercised		—		—		—		—
Outstanding, end of period		117,840	$	18.84		100,500	$	16.34
Exercisable, end of period		47,800	$	14.66		48,400	$	11.10
Weighted average fair value at grant date of options granted		n/a			$	16.57
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	963,000			$	1,359,000
Total intrinsic value of options exercisable	$	590,000			$	895,000

No stock options were exercised during the six or three months ended December 31, 2020 or 2019. No cash was received from option exercises during either of the six or three months ended December 31, 2020 or 2019 and the actual tax benefit realized for the tax deductions from option exercises was $0 for both periods.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at December 31, 2020:


	Options outstanding				Options exercisable
		Weighted average
	Number	remaining	Weighted average		Number	Weighted average
Range of exercise prices	outstanding	contractual life	exercise price		exercisable	exercise price
$4.37‑$33.59	117,840	7.9	$	18.84	47,800	$	14.66
	117,840	7.9	$	18.84	47,800	$	14.66

As of December 31, 2020, there was $748,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. 0 and 28,000 options were granted during the six months ended December 31, 2020 and 2019, respectively. 10,400 and 13,000 options vested during the three months ended December 31, 2020 and 2019, respectively. 12,800 and 14,600 options vested during the six months ended December 31, 2020 and 2019, respectively. The total fair value of the options vesting during the three months ended December 31, 2020 and 2019 under this plan was $106,000 and $133,000, respectively. The total fair value of the options vesting during the six months ended December 31, 2019 and 2018 under this plan was $135,000 and $150,000, respectively.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the “2012 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At December 31 2020, 12,000 stock options were outstanding, 8,520 stock options were exercisable and no further stock options were available for grant under this plan.

The following table reflects activity under the 2012 Non-Employee Plan for the six months ended December 31,:


	2020				2019
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		12,000	$	10.29		10,200	$	7.99
Exercised		—		—		—		—
Outstanding, end of period		12,000	$	10.29		10,200	$	7.99
Exercisable, end of period		8,520	$	9.08		5,400	$	7.35
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	191,000			$	218,000
Total intrinsic value of options exercisable	$	146,000			$	119,000

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at December 31, 2020:


	Options outstanding				Options exercisable
		Weighted average	Weighted			Weighted
	Number	remaining	average exercise		Number	average exercise
Range of exercise prices	outstanding	contractual life	price		exercisable	price
$4.37 - $23.35	12,000	6.7	$	10.29	8,520	$	9.08
	12,000	6.7	$	10.29	8,520	$	9.08

As of December 31, 2020, there was $24,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. No options were granted during the six or three months ended. 2,760 and 2,400 options vested during the six and three months ended December 31, 2020 and 2019, respectively. The total fair value of the options vesting during the six and three months ended December 31, 2020 and 2019 under this plan was $18,000 and $13,000, respectively.

2018 Non-Employee Stock Option Plan

In December 2018, the stockholders approved the 2018 Non-Employee Stock Option Plan (the “2018 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2018 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At December 31, 2020, 48,400 stock options were outstanding, 18,640 stock options were exercisable and 0 stock options were available for grant under this plan.


	2019
Risk-free interest rates	1.80	%
Expected lives	10 years
Expected volatility	45	%
Expected dividend yields	—	%

The following table reflects activity under the 2018 Non-Employee Plan for the six months ended December 31,:


	2020				2019
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		48,400	$	23.48		15,200	$	16.20
Granted		—		—		16,000		30.54
Outstanding, end of period		48,400	$	23.48		31,200	$	23.55
Exercisable, end of period		18,640	$	22.44		8,800	$	21.41
Weighted average fair value at grant date of options granted		n/a			$	17.40
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	202,000			$	200,000
Total intrinsic value of options exercisable	$	98,000			$	74,000

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at December 31, 2020:


	Options outstanding				Options exercisable
		Weighted average	Weighted			Weighted
	Number	remaining	average exercise		Number	average exercise
Range of exercise prices	outstanding	contractual life	price		exercisable	price
$16.20-$30.54	48,400	8.6	$	23.48	12,240	$	22.44
	48,400	8.6	$	23.48	12,240	$	22.44

As of December 31, 2020, there was $344,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. 0 and 16,000 options were granted during the six months ended December 31, 2020 and 2019, respectively. 6,400 options vested during the six and three months ended December 31, 2020 and 2019, respectively. The total fair value of the options vesting during the six and three months ended December 31, 2020 and 2019 under this plan was $88,000.

2020 Non-Employee Stock Option Plan

In May 2020, the stockholders approved the 2020 Non-Employee Stock Option Plan (the “2020 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2020 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At December 31, 5,000 stock options were outstanding, 1,000 stock options were exercisable and 45,000 stock options were available for grant under this plan.

The fair value of each option granted during the six months ended December 31 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2020
Risk-free interest rates	0.62	%
Expected lives	10 years
Expected volatility	45	%
Expected dividend yields	—	%

The following table reflects activity under the 2020 Non-Employee Plan for the six months ended December 31,:


	2020
			Weighted average
	Options		exercise price
Outstanding, beginning of year		—		—
Granted		5,000	$	22.80
Exercised		—		—
Outstanding, end of period		5,000	$	22.80
Exercisable, end of period		1,000	$	22.80
Weighted average fair value at grant date of options granted	$	12.20
Total intrinsic value of options exercised		n/a
Total intrinsic value of options outstanding	$	17,000
Total intrinsic value of options exercisable	$	3,000

The following table summarizes information about stock options outstanding under the 2020 Non-Employee Plan at December 31, 2020:


	Options outstanding				Options exercisable
		Weighted average
	Number	remaining	Weighted average		Number	Weighted average
Range of exercise prices	outstanding	contractual life	exercise price		exercisable	exercise price
$22.80	5,000	9.7	$	22.80	1,000	$	22.80
	5,000	9.7	$	22.80	1,000	$	22.80

As of December 31, 2020, there was $43,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan. 0 options were granted during the three months ended December 31, 2020. 5,000 options were granted during the six months ended December 31, 2020. 1,000 options vested during the six months ended December 31, 2020. 0 options vested during the three months ended December 31, 2020. The total fair value of the options vesting during the six months ended December 31, 2020 under this plan was $12,000.