Stock Options

9 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

NOTE 7 - Stock Options

The Company follows ASC 718 “Share-Based Payment”, 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 $5,000 and $0 for the three months ended March 31, 2018 and 2017, respectively ($0.00 per basic and diluted share for each period). The Company recorded non-cash compensation expense relating to stock-based compensation of $141,000 and $97,000 for the nine months ended March 31, 2018 and 2017, respectively ($0.01 per basic and diluted share for each period).

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the “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 March 31, 2018, 75,000 stock options were granted, 43,200 stock options were exercisable and 818,900 stock options were available for grant under this plan.

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

	2018				2017
	Options		Weighted average exercise price		Options		Weighted average exercise price
Outstanding, beginning of year		70,600	$	5.84		112,500	$	5.54
Granted		25,000		9.01		5,000		8.15
Terminated/Lapsed		--		--		(10,400)		6.08
Exercised		(20,600)		5.55		(35,500)		5.13
Outstanding, end of period		75,000	$	6.97		71,600	$	5.84
Exercisable, end of period		43,200	$	6.34		38,500	$	5.99
Weighted average fair value at grant date of options granted	$	5.61			$	5.22
Total intrinsic value of options exercised	$	84,000			$	180,000
Total intrinsic value of options outstanding	$	292,000			$	312,000
Total intrinsic value of options exercisable	$	218,000			$	162,000

18,100 and 34,000 stock options were exercised during the three months ended March 31, 2018 and 2017, respectively. $45,000 and $0 was received from option exercises during the three months ended March 31, 2018 and 2017, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods. 20,600 and 35,500 stock options were exercised during the nine months ended March 31, 2018 and 2017, respectively. $61,000 and $49,000 was received from option exercises during the nine months ended March 31, 2018 and 2017, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods. 11,000 of the options exercised during the three and nine months ended March 31, 2018 were settled by exchanging 5,406 shares of the Company’s common stock which were retired and returned to authorized.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at March 31, 2018:

	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable		Weighted average exercise price
$4.29-$9.63		75,000		7.5	$	6.97		43,200	$	6.34
		75,000		7.5	$	6.97		43,200	$	6.34

As of March 31, 2018, there was $156,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. 5,000 and 0 options were granted during the three months ended March 31, 2018 and 2017, respectively. 25,000 and 5,000 options were granted during the nine months ended March 31, 2018 and 2017, respectively. The total fair value of the options vesting during the three months ended March 31, 2018 and 2017 under this plan was $2,000 and $0, respectively. The total fair value of the options vesting during the nine months ended March 31, 2018 and 2017 under this plan was $84,000 and $75,000, 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 March 31, 2018, 29,200 stock options were granted, 15,200 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 nine months ended March 31,:

	2018				2017
	Options		Weighted average exercise price		Options		Weighted average exercise price
Outstanding, beginning of year		14,200	$	4.69		35,000	$	4.73
Granted		15,000		8.70		—		—
Terminated/Lapsed		—		—		—		—
Exercised		—		—		(20,800)		4.76
Outstanding, end of period		29,200	$	6.75		14,200	$	4.69
Exercisable, end of period		15,200	$	5.53		5,200	$	4.76

Weighted average fair value at grant date of options granted	$	8.70				n/a
Total intrinsic value of options exercised		n/a			$	113,000
Total intrinsic value of options outstanding	$	86,000			$	78,000
Total intrinsic value of options exercisable	$	63,000			$	28,000

No stock options were exercised during the three or nine months ended March 31, 2018. No cash was received from option exercises during the three or nine months ended March 31, 2018 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods. 15,600 and 20,800 options were exercised during the three and nine months ended March 31, 2017. All of the 20,800 exercises were settled in cashless exercises by exchanging 9,998 shares of the Company’s common stock which were retired and returned to unissued status. No cash was received from option exercises during the three and nine months ended March 31, 2017 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods.

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at March 31, 2018:

	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable		Weighted average exercise price
$4.37 - $8.70		29,200		7.8	$	6.75		15,200	$	5.53
		29,200		7.8	$	6.75		15,200	$	5.53

As of March 31, 2018, there was $72,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. 0 and 15,000 options were granted during the three and nine months ended March 31, 2018, respectively. No options were granted during the three or nine months ended March 31, 2017. The total fair value of the options vesting during each of the three months ended March 31, 2018 and 2017 under this plan was $0. The total fair value of the options vesting during the nine months ended March 31, 2018 and 2017 under this plan was $39,000 and $22,000, respectively.

2002 Employee Stock Option Plan

In December 2002, the stockholders approved the 2002 Employee Stock Option Plan (the “2002 Employee Plan”). This plan expired in October 2012. This plan authorized the granting of awards, the exercise of which would allow up to an aggregate of 1,836,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may have granted stock options, which were intended to qualify as incentive stock options (ISOs), to key employees. Any plan participant who was granted ISOs and possessed more than 10% of the voting rights of the Company's outstanding common stock must have been granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2002 Employee Plan, stock options have been granted to key employees with a term of 10 years at an exercise price equal to the fair market value on the date of grant and are exercisable in whole or in part at 20% per year from the date of grant. At March 31, 2018, 1,471,480 stock options had been granted and no stock options were exercisable. No further stock options were available for grant under this plan after the plan’s expiration in October 2012.

The following table reflects activity under the 2002 Employee plan for the nine months ended March 31,:

	2018				2017
	Options		Weighted average exercise price		Options		Weighted average exercise price
Outstanding, beginning of year		5,000	$	5.35		102,500	$	6.04
Granted		—		—		—		—
Terminated/Lapsed		—		—		(10,500)		6.02
Exercised		(5,000)		5.35		(87,000)		6.08
Outstanding, end of period		—	$	—		5,000	$	5.35
Exercisable, end of period		—	$	—		5,000	$	5.35

Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised	$	20,000			$	359,000
Total intrinsic value of options outstanding		n/a			$	24,000
Total intrinsic value of options exercisable		n/a			$	24,000

5,000 and 87,000 stock options were exercised during the three and nine months ended March 31, 2018 and 2017, respectively. 80,500 of the 87,000 exercises were settled in cashless exercises by exchanging 18,762 shares of the Company’s common stock which were retired and returned to unissued status. The remaining 6,500 exercises were paid for in cash. No cash was received from option exercises during either of the three or nine months ended March 31, 2018 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods. $40,000 was received from option exercises during the three and nine months ended March 31, 2017 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods.