10.	Share-Based Compensation

The Company currently provides share-based compensation under

one

equity incentive plan approved by the Board of Directors and the shareholders:

■

2017

Equity Incentive Plan (

2017

Incentive Plan).

The

2006

Director Plan allowed the Board of Directors to grant options to purchase up to

1,000,000

shares of common stock to directors of the Company. The plan expired on

August 16, 2016.

Options granted prior to fiscal

2017

were made pursuant to plans that have expired or were terminated.

The Company’s shareholders approved the

2017

Incentive Plan (

“2017

Plan”) in

June 2017.

The

2017

Plan allows the Board of Directors to grant up to

4,000,000

shares of common stock to directors, officers, employees and consultants in a combination of equity incentive forms including incentive stock options (ISO), non-qualified stock options (NQSO), stock appreciation right (SAR) or restricted shares (RSU) of common stock. Options granted under all of the Plans have a

ten

year maximum term, an exercise price equal to at least the fair market value of the Company’s common stock (based on the trading price on the NYSE American) on the date of the grant, and with varying vesting periods as determined by the Board.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have

vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses the Black-Scholes option valuation model because management believes the model is appropriate for the Company. However, management understands that because changes in the subjective input assumptions can materially affect the fair value estimate, this valuation model does

not

necessarily provide a reliable single measure of the fair value of its stock options. The risk-free interest rate is based on the U.S. treasury security rate with an equivalent term in effect as of the date of grant. The expected option lives and volatility assumptions are based on historical data of the Company.

The weighted average fair value of stock option awards granted and the key assumptions used in the Black-Scholes valuation model to calculate the fair value are as follows:

	For the Year Ended June 30,
	2019			2018			2017
Weighted average fair value		$0.31			$0.34				$0.45
Options issued		1,252,500			1,125,000				2,150,000
Exercise price	$0.37	to	$0.55	$0.44	to	$0.58		$0.55	to	$0.84
Expected term (in years)		5			5			4	to	5
Risk-free rate	1.83%	to	2.91%	1.83%	to	2.85%		1.62%	to	1.83%
Volatility	89%	-	105%	94%	-	101%		101%	-	103%

The following table presents the share-based compensation expense (in thousands):

	For the Year Ended June 30,
	2019		2018		2017
Cost of sales	$	38	$	62	$	86
Research and development expense		84		92		60
Sales and marketing expense		96		92		86
General and administrative expense		202		158		140
Total share-based compensation	$	420	$	404	$	372

The total value of the stock options awards is expensed ratably over the vesting period of the employees receiving the awards. As of

June 30, 2019,

total unrecognized compensation cost related to stock-based options and awards was

$632,000

and the weighted-average period over which it is expected to be recognized is approximately

1.08

years.

A summary of stock option information within the Company’s share-based compensation plans during the fiscal years is presented below:

	Options
	Outstanding			Price (a)		Life (b)		Value (c)
Balance at June 30, 2016		2,925,059		$	1.21		6.93	$	263
Granted (d)		2,150,000			.61
Expired/Forfeited		(509,904	)		2.55
Voided		(1,179,164	)		.94
Exercised		(6,800	)		.26
Balance at June 30, 2017		3,379,191		$	0.78		7.86	$	151
Granted (d)		1,125,000			.47
Expired		(100,000	)		.75
Forfeited		(561,541	)		.77
Exercised		(82,810	)		.61
Balance at June 30, 2018		3,759,840		$	0.69		7.75	$	49
Granted (d)		1,252,500			.44
Expired		(242,000	)		.41
Forfeited		(68,125	)		.54
Exercised		(56,900	)		.26
Balance at June 30, 2019		4,645,315		$	0.64		7.95	$	1

Vested and expected to vest at June 30, 2019		4,645,315		$	0.64		7.95	$	1

Exercisable at June 30, 2019		2,153,645		$	0.81		6.76	$	-

(a)	Weighted average exercise price per share.

(b)	Weighted average remaining contractual life.

(c)	Aggregate intrinsic value (in thousands).

(d)	All options granted had exercise prices equal to or greater than the ending closing market price of the Company’s common stock on the grant date. The options were granted to employees and management by the Compensation Committee and had vesting periods from immediate to five years.

	For the Year Ended June 30,
	2019		2018		2017
Aggregate intrinsic value of options exercised (in thousands)	$	11	$	-	$	3

The Company’s current policy is to issue new shares to satisfy option exercises.