10.

Share-Based Compensation

We have Stock Incentive Plans providing for the grant of incentive stock options to employees and non-qualified stock options to employees and directors. The Compensation Committee of the Board of Directors (“Compensation Committee”) administers the Stock Incentive Plans. Under the plans, the Compensation Committee may award stock options and shares of common stock on a restricted basis. The plans also specifically provide for stock appreciation rights and authorize the Compensation Committee to provide, either at the time of the grant of an option or otherwise, that the option may be cashed out upon terms and conditions to be determined by the Compensation Committee or the Board of Directors.

Option awards are granted with an exercise price equal to the market price of our stock at the date of grant. We recognize stock compensation expense in accordance with ASC 718-10 over the requisite service period of the individual grantees, which generally equals the vesting period. All of our stock compensation is accounted for as equity instruments.

Our 2011 Stock Incentive Plan became effective November 1, 2011 and replaced the 2001 Stock Option Plan that expired on October 31, 2011. The 2011 Stock Incentive Plan terminates on October 31, 2021. Stockholders have authorized the issuance of up to 1,100,000 shares under this plan, and at June 30, 2017, there were 122,622 shares available for future grants.

During the year ended June 30, 2016, we retroactively rescinded 120,000 restricted stock awards previously granted to our president and Chief Executive Officer (“CEO”) and granted him a total of 100,000 new restricted stock awards under the terms of an amended employment agreement as described Note 16 – Commitments and Contingencies – Shareholder Demand Letter.

We recorded share-based compensation related to the issuance of stock options and restricted stock to employees and board members, as follows:

	Year Ended June 30,
	2017		2016

Share-based compensation expense included in the consolidated statement of operations:
Cost of sales	$	9	$	3
Sales and marketing		125		126
Research and development		35		87
General and administrative		688		492
Total	$	857	$	708

Based on historical experience of restricted stock and option pre-vesting cancellations, we estimated annualized forfeiture rates of 8.5% and 8.0% for unvested restricted stock awards and stock options outstanding as of June 30, 2017 and 2016, respectively. We update our expectation of forfeiture rates quarterly and under the true-up provisions of ASC 718-10, we will record additional expense if the actual forfeiture rate is lower than estimated, and will record a recovery of prior expense if the actual forfeiture is higher than estimated.

During the year ended June 30, 2017, we received $118 from the exercise of stock options. No cash was received from option exercises under any share-based payment arrangements for the fiscal year ended June 30, 2016.

Restricted Share Awards

During fiscal year 2017, we issued 334,000 shares of restricted stock. All of these restricted awards were issued to employees, executives and board members and vest as follows: (1) ratably over a four-year period for employees, (2) in full after three years or ratably over a four-year period for executives and (3) three-year graded vesting period for board members. Vesting is based solely on a service condition, and restrictions generally release ratably over the service period. The weighted-average grant date fair value per share for our restricted stock awards is the closing price on the date of grant. A summary of the activity of our service condition restricted stock awards during fiscal year 2017 is presented below:

			Weighted-
			Average
			Grant Date
Restricted Stock Awards	Shares		Fair Value

Non-vested at July 1, 2016		464,117	$	5.39
Granted		334,000		5.66
Vested		(172,785)		5.65
Forfeited		(184,719)		5.51
Non-vested at June 30, 2017		440,613	$	5.45

In conjunction with the resignation of one of our directors (See Note 16 – Commitments and Contingencies – Board Representation and Standstill Agreement), we accelerated the vesting of 5,400 shares of restricted stock. This acceleration of vesting resulted in incremental stock compensation expense of $9 during the year ended June 30, 2017. Additionally, in conjunction with the sale of our Real-Time business in May 2017 (see Note 4 – Discontinued Operations), we accelerated the vesting of a total of 69,214 shares of restricted stock to two executives representing a portion of each of their unvested restricted stock holdings previously awarded. This acceleration of vesting resulted in incremental stock compensation expense of $12 during the year ended June 30, 2017 in continuing operations. Additionally, we accelerated the vesting of 9,710 shares of restricted stock, representing a portion of the unvested restricted stock holdings previously awarded to one executive of the Company who remained employed with the discontinued operation resulting in incremental stock compensation expense of $4 during the year ended June 30, 2017 in discontinued operations.

During the year ended June 30, 2017, we issued 50,000 performance-based restricted shares (“PSAs”) to senior and executive management. The PSAs issued in fiscal year 2017 will be released only if certain company financial performance criteria are achieved over a cumulative three-year performance period. The weighted-average grant date fair value per share for these PSAs was established on the date the cumulative three-year performance criteria was approved by our Board of Directors. As of June 30, 2017, management determined that the likelihood of achieving the specific three-year performance criteria was not probable and, as a result, no share-based compensation expense associated with these PSAs was recorded for the year ended June 30, 2017.

During the year ended June 30, 2017, 5,387 previously granted performance based restricted shares were forfeited due to a failure to meet performance goals associated with our fiscal year 2016 financial results. A summary of the activity of our PSAs during fiscal year 2017 is presented below:

			Weighted-
			Average
			Grant Date
Performance Stock Awards	Shares		Fair Value

Non-vested at July 1, 2016		5,387	$	5.14
Granted		50,000		5.49
Vested		-		-
Forfeited		(5,387)		5.14
Non-vested at June 30, 2017		50,000	$	5.49

Total compensation cost of restricted stock awards issued, but not yet vested as of June 30, 2017 is $1,425, which is expected to be recognized over the weighted average period of 2.2 years.

Stock Options

We use the Black-Scholes valuation model to estimate the fair value of each option award on: (1) the date of grant for grants to employees and (2) each reporting period-end date for grants to non-employees, until the non-employee shares have vested, at which point the vest date becomes the final measurement date for non-employee grants. We did not grant any stock options in fiscal years 2017 and 2016, and there were no unvested options granted to non-employees as of June 30, 2017.

A summary of our stock option activity as of June 30, 2017 and changes during fiscal year 2017 is presented below:

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
Options	Shares		Price		Term (Years)		Value

Outstanding as of July 1, 2016		84,419	$	11.71
Granted		-		-
Exercised		(20,000)		5.90
Forfeited or expired		(33,538)		13.92
Outstanding as of June 30, 2017		30,881	$	13.06		0.15	$	-
Vested at June 30, 2017		30,881	$	13.06		0.15	$	-
Exercisable at June 30, 2017		30,881	$	13.06		0.15	$	-

The following table summarizes information about stock options outstanding and exercisable at June 30, 2017:

		Outstanding Options						Options Exercisable
		Weighted-
		Average				Weighted-				Weighted-
		Remaining				Average				Average
Range of		Contractual		Number		Exercise		Number		Exercise
Exercise Prices		Life (Years)		Outstanding		Price		Exercisable		Price

	$11.10		0.33		3,000	$	11.10		3,000	$	11.10
	$12.80		0.12		9,000	$	12.80		9,000	$	12.80
	$13.50		0.13		18,881	$	13.50		18,881	$	13.50
	$11.10 - $13.50		0.15		30,881	$	13.06		30,881	$	13.06

The total intrinsic value of options both outstanding and exercisable was nil for both of the fiscal years ended June 30, 2017 and 2016. There is no remaining compensation cost for options granted as all outstanding options have vested as of June 30, 2017. We generally issue new shares to satisfy option exercises.