14.Stock-Based Compensation

We maintain a 2004 Stock Incentive Plan (“2004 Plan”) covering substantially all company employees, non-employee directors and certain other key persons. The 2004 Plan is administered by a committee of our Board of Directors: The Management Development, Compensation and Stock Option Committee.

Awards under the 2004 Plan may be in the form of stock options, stock appreciation rights, restricted stock or restricted stock units, performance share awards, director stock purchase rights and deferred stock units, or any combination thereof. The terms of the awards are determined by the Management Development, Compensation and Stock Option Committee, except as otherwise specified in the 2004 Plan.

Stock Options

Options outstanding under the 2004 Plan generally become exercisable at 25% or 33.3% per year beginning one year after the date of grant and expire ten years after the date of grant. Option prices from options granted under these plans must not be less than the fair market value of our stock on the date of grant. We use the Black-Scholes model for determining stock option valuations. The Black-Scholes model requires subjective assumptions, including future stock price volatility and expected time to exercise, which affect the calculated values. The expected term of option exercises is derived from historical data regarding employee exercises and post-vesting employment termination behavior. The risk-free rate of return is based on published U.S. Treasury rates in effect for the corresponding expected term. The expected volatility is based on historical volatility of our stock price. These factors could change in the future, which would affect the stock-based compensation expense in future periods.

We recognized operating expense for non-cash stock-based compensation costs related to stock options in the amount of $55,000 and $140,000 in the three months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the total remaining unrecognized compensation cost related to non-vested stock options amounted to approximately $417,000. We expect to recognize this cost over a weighted average vesting period of 1.8 years.

We granted zero and 31,500 stock options during the three months ended September 30, 2017 and 2016, respectively. The estimated fair value as of the date options were granted during the periods presented, using the Black-Scholes option-pricing model, is shown in the table below.



	Three Months Ended September 30,
	2017		2016
Weighted average estimated fair value per
share of options granted during the period	$	N/A	$	2.92
Assumptions:
Dividend Yield		N/A		-
Common Stock Price Volatility		N/A		47.75%
Risk Free Rate of Return		N/A		1.23%
Expected Option Term (In Years)		N/A		5.7

We received approximately zero and $1,400 in cash from option exercises under all share-based payment arrangements for the three months ended September 30, 2017 and 2016, respectively.

Restricted Stock and Restricted Stock Units

Our restricted stock and restricted stock units under the 2004 Plan generally have been awarded by three methods as follows:

(1) Awards that are earned based on an individual’s achievement of performance goals during the initial fiscal year with either a subsequent one-year service vesting period or with a one-third vesting requirement on the first, second and third anniversaries of the issuance, provided the individual’s employment has not terminated prior to the vesting date and are freely transferable after vesting;

(2) Awards that are earned based on achieving certain revenue and operating income results with a subsequent one-third vesting requirement on the first, second and third anniversaries of the issuance provided the individual’s employment has not terminated prior to the vesting date and are freely transferable after vesting; and

(3) Awards to non-management members of our Board of Directors with a subsequent one-third vesting requirement on the first, second and third anniversaries of the issuance provided the service of the non-management member of our Board of Directors has not terminated prior to the vesting date and are freely transferable after vesting.

The grant date fair value associated with granted restricted stock is calculated in accordance with ASC 718 “Compensation – Stock Compensation”. Compensation expense related to restricted stock awards is based on the closing price of our Common Stock on the grant date authorized by our Board of Directors, multiplied by the number of restricted stock and restricted stock unit awards expected to be issued and vested and is amortized over the combined performance and service periods. The non-cash stock-based compensation expense recorded for restricted stock and restricted stock unit awards for the three months ended September 30, 2017 and 2016 was $76,000 and $72,000, respectively. As of September 30, 2017, the total remaining unrecognized compensation cost related to restricted stock and restricted stock unit awards is approximately $138,000. We expect to recognize this cost over a weighted average vesting period of 2.4 years.

A summary of the status of restricted stock and restricted stock unit awards issued at September 30, 2017 is presented in the table below.



			Weighted Average
	Nonvested		Grant Date
	Shares		Fair Value
Non-vested at June 30, 2017		11,776	$	8.08
Granted		38,962		7.34
Vested		(15,992)		6.98
Forfeited or Expired		-		-
Non-vested at September 30, 2017		34,746	$	7.76

Board of Directors Fees

Our Board of Directors’ fees are typically payable in cash on September 1, December 1, March 1, and June 1 of each fiscal year; however, under our 2004 Plan each director can elect to receive our stock in lieu of cash on a calendar year election. Each of our Directors has elected stock for the calendar year 2017. On each payment date, we determine the number of shares of Common Stock each Director has earned by dividing their earned fees by the closing market price of our Common Stock on that date. During first quarter of fiscal year 2018, we issued 17,466 shares and recorded expense of $132,000 to our Directors for their fees.