Share-Based Compensation

12 Months Ended

Jun. 30, 2018

9.	Share-Based Compensation

We have a stock incentive plan 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 Amended and Restated 2011 Stock Incentive Plan. Under the plan, the Compensation Committee may award stock options and shares of common stock on a restricted basis. The plan also specifically provides for stock appreciation rights and authorizes 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 Amended and Restated 2011 Stock Incentive Plan became effective November 1, 2011 and replaced the 2001 Stock Option Plan that expired on October 31, 2011. The Amended and Restated 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, 2018, there were 12,219 shares available for future grants.

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,
	2018		2017
Share-based compensation expense included in the consolidated statement of operations:
General and administrative	$	2,143	$	686

Based on historical experience with our restricted stock and stock option participants, option pre-vesting cancellations and number of participants, we estimated annualized forfeiture rates of 0.0% and 8.5% for unvested restricted stock awards and stock options outstanding as of June 30, 2018 and 2017, 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.

Restricted Stock Awards

During fiscal year 2018, we issued 117,900 shares of restricted stock. These restricted awards were issued to employees, executives, and board members and vest as follows: (1) ratably over a four-year period for employees and executives, and (2) ratably over three years 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 2018 is presented below:

Restricted Stock Awards	Shares			Weighted- Average Grant Date Fair Value

Non-vested at July 1, 2017		440,613		$	5.45
Granted		117,900			5.72
Vested		(476,013	)		5.46
Forfeited		(22,500	)		5.98
Non-vested at June 30, 2018		60,000		$	5.71

A summary of the activity of our performance-based, service condition restricted stock during fiscal year 2018 is presented below:

Performance Stock Awards	Shares			Weighted- Average Grant Date Fair Value

Non-vested at July 1, 2017		50,000		$	5.49
Vested		(50,000	)		5.49
Non-vested at June 30, 2018		-		$	-

In conjunction with the sale of our Content Delivery business on December 31, 2017 (see Note 4 – Discontinued Operations), substantially all of the previously non-vested restricted stock awards (including 50,000 performance-based restricted stock awards) were accelerated to vest as a result of a change of control as determined by our Board of Directors, resulting in stock-based compensation expense of $1,745 during the second quarter of our fiscal year 2018. In January 2018, we allowed for the net settlement of certain of these awards for the payment of payroll taxes due to certain non-Section 16 employees. Such net settlement resulted in the Company acquiring and retiring 41,566 shares of its common stock.

Additionally, one of our independent directors resigned from the Board of Directors, effective on December 31, 2017 (see Note 13 – Commitments and Contingencies – Resignation of Directors) and we accelerated the vesting of 7,500 shares of previously non-vested restricted stock held by that director. This acceleration of vesting resulted in incremental stock compensation expense of $43 during the year ended June 30, 2018.

In conjunction with the resignation of three of our independent directors in July 2017 (see Note 13 – Commitments and Contingencies – Resignation of Directors), we accelerated the vesting of 5,400 shares of restricted stock held by each of the resigning directors. This acceleration of vesting resulted in incremental stock compensation expense of $37 during fiscal year 2018.

All remaining stock-based compensation expense for the fiscal years ended June 30, 2018 and 2017 resulted from vesting of shares over their respective vesting periods.

Total remaining compensation cost of restricted stock awards issued, but not yet vested as of June 30, 2018 is $244, which is expected to be recognized over the weighted average period of 1.5 years.

Stock Options

We use a Black-Scholes option valuation model to determine the grant date fair value of stock-based compensation. The Black-Scholes model incorporates various assumptions including the expected term of awards, volatility of stock price, risk-free rates of return and dividend yield. The expected term of an award is no less than the option vesting period and is based on our expectations under our current operating environment. Expected volatility is based upon the historical volatility of the Company’s stock price. The risk-free interest rate is approximated using rates available on U.S. Treasury securities with a remaining term similar to the option’s expected life. We use a dividend yield of zero in the Black-Scholes option valuation model as we do not anticipate paying cash dividends in the foreseeable future. Stock-based compensation is recorded net of expected forfeitures.

The fair value of the option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Grant date fair value of options	$	2.43
Expected option life (in years)		10.0
Risk-free interest rate		2.3	%
Expected volatility		31.1	%
Dividend yield		0.0	%

For fiscal year 2018, we made a single grant of 15,000 stock options. A summary of our stock option activity as of June 30, 2018 and changes during fiscal year 2018 is presented below:

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

Outstanding as of July 1, 2017		30,881		$	13.06
Granted		15,000			5.42
Forfeited or expired		(30,881	)		13.06
Outstanding as of June 30, 2018		15,000		$	5.42		9.63	$	-
Vested at June 30, 2018		-		$	-		-	$	-
Exercisable at June 30, 2018		-		$	-		-	$	-

The total intrinsic value of options both outstanding and exercisable was nil for both of the fiscal years ended June 30, 2018 and 2017. Total remaining compensation cost of stock options granted, but not yet vested as June 30, 2018 is $28, which is expected to be recognized over the weighted average remaining period of 2.6 years. We generally issue new shares to satisfy option exercises.

During the years ended June 30, 2018 and 2017, we received $0 and $118, respectively, from the exercise of stock options.