17.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. All Options previously granted under a 1998 Global Team Member Stock Option Plan (“1998 Plan”) were exercised, cancelled or expired before March 31, 2017. The 2004 Plan is administered by a committee of our Board of Directors: The Management Development, Compensation and Stock Option Committee (“MDCSOC”).

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 MDCSOC, except as otherwise specified in the 2004 Plan.

Stock Options

Options outstanding under the 2004 Plan generally become exercisable at 25% or 33 1/3 % 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 this plan must not be less than 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 $336,000, $374,000 and $428,000 for the fiscal years ended June 30, 2018, 2017 and 2016, respectively. As of June 30, 2018, the total remaining unrecognized compensation cost related to non-vested stock-based compensation amounted to $292,000. We expect to recognize this cost over a weighted average vesting period of 1.8 years.

We received $458,000 in cash from option exercises under all stock option payment arrangements for the twelve months ended June 30, 2018. The actual tax benefit realized related to tax deductions for non-qualified options exercised and disqualifying dispositions under all stock option payment arrangements totaled approximately $87,000 for fiscal 2018.

Activity under these Plans is shown in the following tables:

	Fiscal Year 2018							Fiscal Year 2017
				Weighted		Aggregate					Weighted		Aggregate
				Average		Intrinsic					Average		Intrinsic
				Exercise		Value (1)					Exercise		Value (1)
Shares subject to option	Shares			Price		($000)		Shares			Price		($000)
Outstanding at beginning of period		622,636		$	7.26				635,158		$	7.53

New Grants (based on fair value of common stock at dates of grant)		100,000		$	7.95				166,500		$	6.63
Exercised		(52,000	)	$	8.81				(28,916	)	$	4.89
Expired		(34,000	)	$	9.99				(115,635	)	$	8.28
Forfeited		(1,600	)	$	10.55				(34,471	)	$	7.69

Outstanding at end of period		635,036		$	7.02	$	2,269		622,636		$	7.26	$	279
Exercisable at end of period		384,805		$	6.87	$	1,445		336,022		$	7.50	$	279

	Fiscal Year 2016
				Weighted		Aggregate
				Average		Intrinsic
				Exercise		Value (1)
Shares subject to option	Shares			Price		($000)
Outstanding at beginning of period		658,641		$	8.53

New Grants (based on fair value of common stock at dates of grant)		511,197		$	7.35
Exercised		(9,748	)	$	5.92
Expired		(123,833	)	$	9.08
Forfeited		(401,099	)	$	8.48

Outstanding at end of period		635,158		$	7.53	$	54
Exercisable at end of period		329,210		$	7.78	$	54

(1)

The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option. The total intrinsic value of stock options exercised during the fiscal years ended June 30, 2018, 2017 and 2016, were $87,000, $58,000 and $24,000, respectively. The total fair value of shares vested during the fiscal years ended June 30, 2018, 2017 and 2016, were $400,000, $409,000 and $323,000, respectively.

The estimated fair value as of the date options were granted during the periods presented using the Black-Scholes option-pricing model, was as follows:

	2018			2017			2016
Weighted average estimated fair value per
share of options granted during the period	$	3.96		$	3.02		$	2.94
Assumptions:
Dividend yield		-			-			-
Common stock price volatility		49.01	%		48.25	%		45.43	%
Risk free rate of return		1.81	%		1.81	%		1.55	%
Expected option term (in years)		5.4			5.5			5.7

The following table summarizes information about stock options at June 30, 2018:

					Options Outstanding						Options Exercisable
							Weighted		Weighted				Weighted
							Average		Average				Average
							Remaining		Exercise				Exercise
Range of Exercise Prices					Shares		Contractual Life		Price		Shares		Price
$	2.80	to	$	4.87		40,400		4.20	$	3.95		33,733	$	3.77
	5.70	to		8.81		555,136		7.31	$	6.94		311,572	$	6.65
	8.94	to		14.01		39,500		5.20	$	11.25		39,500	$	11.25
$	2.80	to	$	14.01		635,036		6.98	$	7.02		384,805	$	6.87

Restricted Stock and Restricted Stock Units

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

(1)

Awards that are earned based on achieving certain individual and financial 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;

(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; and

(4)

Awards that are granted 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, including restricted stock units granted as part of the Fiscal Year 2018 Long-Term Incentive Compensation Plan.

The grant date fair value associated with the 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 MDCSOC, multiplied by the number of restricted stock and restricted stock unit award 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 fiscal years ended June 30, 2018, 2017 and 2016 was $186,000, $145,000 and $221,000, respectively. As of June 30, 2018, the total remaining unrecognized compensation cost related to restricted stock and restricted stock unit awards is approximately $251,000. We expect to recognize this cost over a weighted average vesting period of 2.3 years.

A summary of the status of restricted stock and restricted stock unit awards issued at June 30, 2018 is presented in the table below:

				Weighted Average
	Nonvested			Grant Date
	Shares			Fair Value
Nonvested at June 30, 2017		11,776		$	8.08
Granted		88,112			7.72
Vested		(21,518	)		7.75
Forfeited or expired		(800	)		7.95
Nonvested at June 30, 2018		77,570		$	7.77

Performance Stock Units

During the second quarter of fiscal 2018, the MDCSOC granted certain employees 40,150 shares of Performance Share Units (“PSUs”) as part of the Fiscal Year 2018 Long-Term Incentive Compensation Plan. The Performance Measures were defined by the MDCSOC as a specific Target level of Revenue and Operating Income for each of the following: fiscal year 2018, fiscal year 2019 and fiscal year 2020. Up to one-third of the PSUs can be earned each year based upon actual performance levels achieved in that fiscal year. One half of the award earned each fiscal year is based upon the achievement of the two Performance Targets in that fiscal year, provided that a minimum level of Operating Income is achieved for that fiscal year. The actual award level for each fiscal year can range from 50% to 150% (for Revenue Target) or 75% to 200% (for Operating Income Target) of the target awards depending on actual performance levels achieved in each fiscal year compared to that year’s target. The non-cash stock-based compensation expense recorded for performance share unit awards for the fiscal years ended June 30, 2018 was $165,000. As of June 30, 2018, the total remaining unrecognized compensation cost related to performance share unit awards is approximately $213,000. We expect to recognize this cost over a weighted average vesting period of 1.5 years.

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 elected stock for the calendar year of 2017 and cash for calendar year of 2018. We issued 29,527 shares to our directors and recorded expense of $257,000 related to the portion of our fiscal year 2018 that fell in calendar year 2017.

Available Shares

At June 30, 2018, the 2004 Plan had 883,229 shares available for future grants.