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 (“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.

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 $59,000 and $342,000 in the three and nine months ended March 31, 2019, respectively. We recognized operating expense for non-cash stock-based compensation costs related to stock options in the amount of $78,000 and $275,000 in the three and nine months ended March 31, 2018, respectively. As of March 31, 2019, the total remaining unrecognized compensation cost related to non-vested stock options amounted to approximately $169,000. We expect to recognize this cost over a weighted average vesting period of 1.3 years.

We granted 8,000 stock options in both the three and nine months ended March 31, 2019. We granted zero and 100,000 stock options in the three and nine months ended March 31, 2018, 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 March 31,				Nine Months Ended March 31,
	2019			2018	2019			2018
Weighted average estimated fair value per share of options granted during the period	$	3.91		NA	$	3.91		$	3.96
Assumptions:
Dividend Yield		-		NA		-			-
Common Stock Price Volatility		43.50	%	NA		43.50	%		49.01	%
Risk Free Rate of Return		2.56	%	NA		2.56	%		1.81	%
Expected Option Term (In Years)	6.6			NA	6.6				5.4

We received approximately $124,000 and $318,000 in cash from option exercises under our share-based payment arrangements for the three and nine months ended March 31, 2019, respectively. We received $441,000 cash from option exercises under our share-based payment arrangements for both the three and nine months ended March 31, 2018.

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

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 MDCSOC, 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 and nine months ended March 31, 2019 was $47,000 and $191,000, respectively. The non-cash stock-based compensation expense recorded for restricted stock and restricted stock unit awards for the three and nine months ended March 31, 2018 was $27,000 and $159,000, respectively. As of March 31, 2019, the total remaining unrecognized compensation cost related to the restricted stock and restricted stock unit awards is approximately $334,000. We expect to recognize this cost over a weighted average vesting period of 2.0 years.

A summary of the status of restricted stock and restricted stock unit awards outstanding at March 31, 2019 is presented in the table below.

				Weighted Average
	Nonvested			Grant Date
	Shares			Fair Value
Non-vested at June 30, 2018		77,570		$	7.77
Granted		51,650			7.21
Vested		(24,857	)		7.71
Forfeited or Expired		-			-
Non-vested at March 31, 2019		104,363		$	7.50

During the second quarter of fiscal 2019, our MDCSOC granted certain employees Performance Share Units (“PSUs”) as part of the Fiscal Year 2019 Long-Term Incentive Compensation Plan. The Performance Measures were defined by the Committee as a specific Target level of Revenue and Operating Income Before Incentive Compensation for each of the following: plan year 2019 (October 1, 2018 to September 30, 2019), fiscal year 2020 and fiscal year 2021. Up to one-third of the PSUs can be earned each year, determined based upon actual performance levels achieved in that year. One half of the award earned each year is based upon the achievement of the two Performance Targets in that year, provided that a minimum level of Operating Income Before Incentive Compensation is achieved for that year. The actual award level for each 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 year compared to that year’s target. If Operating Income Before Incentive Compensation is less than 75% of the targeted Operating Income Before Incentive Compensation for the year, then no PSU’s will vest for that year and the PSU’s vesting that year will expire.

During the second quarter of fiscal 2018, our MDCSOC granted certain employees PSUs as part of the Fiscal Year 2018 Long-Term Incentive Compensation Plan. For fiscal 2018, actual Revenue and Operating Income Before Incentive Compensation exceeded the Fiscal Year 2018 Targets, resulting in 161.5% of the target level of PSU’s vesting.

The non-cash stock-based compensation expense recorded for performance share unit awards during the first half of fiscal 2019 was fully reversed in the third quarter of fiscal 2019, because at this time we estimate that the level of actual performance as measured against the Operating Income Before Incentive Compensation target levels will be less than 75% for the fiscal year 2019, the threshold performance level for the vesting of these awards in fiscal 2019. The non-cash stock-based compensation expense recorded for performance share unit awards for the three and nine months ended March 31, 2018 was $33,000 and $100,000, respectively. As of March 31, 2019, the total remaining unrecognized compensation cost related to performance share unit awards is approximately $355,000. We expect to recognize this cost over a weighted average vesting period of 1.6 years.

A summary of the status of the PSUs outstanding at March 31, 2019 is presented in the table below.


				Weighted Average
	Nonvested			Grant Date
	Shares			Fair Value
Non-vested at June 30, 2018		39,350		$	7.95
FY 2018 Performance results		8,054			7.95
Granted		51,650			7.21
Vested		(21,170	)		7.95
Forfeited or Expired		-			-
Non-vested at March 31, 2019		77,884		$	7.46