The Company maintains 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 the Company’s 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 the Company’s stock on the date of grant. The Company uses 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 the Company’s stock price. These factors could change in the future, which would affect the stock-based compensation expense in future periods.

The Company recognized operating expense for non-cash stock-based compensation costs related to stock options in the amount of $22,000 and $56,000 in the three months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, the total remaining unrecognized compensation cost related to non-vested stock options amounted to approximately $29,000. The Company expects to recognize this cost over a weighted average vesting period of 1.9 years.

The Company granted no stock options in each of the three months ended September 30, 2020 and 2019, respectively. The Company received zero in cash from option exercises under its share-based payment arrangements in each of the three months ended September 30, 2020 and 2019, respectively.

The Company’s 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 the Company’s Common Stock on the grant date authorized by the Company’s 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 months ended September 30, 2020 and 2019, was $18,000 and $65,000, respectively. As of September 30, 2020, the total remaining unrecognized compensation cost related to the restricted stock and restricted stock unit awards is approximately $33,000. The Company expects to recognize this cost over a weighted average vesting period of 1.0 years.

A summary of the status of restricted stock and restricted stock unit awards outstanding at September 30, 2020 is presented in the table below.

				Weighted Average
	Nonvested			Grant Date
	Shares			Fair Value
Non-vested at June 30, 2020		27,709		$	7.41
Granted		-			-
Vested		(4,326	)		7.34
Forfeited or Expired		(667	)		7.41
Non-vested at September 30, 2020		22,716		$	7.42

During the second quarter of fiscal 2020, the Company’s MDCSOC granted certain employees Performance Share Units (“PSUs”) as part of the Fiscal Year 2020 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: fiscal year 2020, fiscal year 2021 and fiscal year 2022. 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. For fiscal year 2020, actual Revenue and Operating Income Before Incentive Compensation did not meet the fiscal year 2020 targets, resulting in the forfeiture of PSU’s vesting in fiscal 2020.

During the second quarter of fiscal 2019, the Company’s 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. For plan year 2019 and fiscal 2020, actual Revenue and Operating Income Before Incentive Compensation did not meet the plan year 2019 and fiscal 2020 targets, resulting in the forfeiture of PSU’s vesting in fiscal 2020.

The non-cash stock-based compensation expense recorded for performance share unit awards for the three months ended September 30, 2020 and 2019, was zero and $51,000, respectively. As of September 30, 2020, the total remaining unrecognized compensation cost related to performance share unit awards is approximately $125,000. The Company expects to recognize this cost over a weighted average vesting period of 1.1 years.

During the first quarter of fiscal 2020, the MDCSOC granted PSUs to the Company’s interim President and Chief Executive Officer in lieu of a portion of his cash compensation. During the first quarter of fiscal year 2021, the Company recorded expense related to these PSU’s of $33,000.

A summary of the status of the PSUs outstanding at September 30, 2020 is presented in the table below.


				Weighted Average
	Nonvested			Grant Date
	Shares			Fair Value
Non-vested at June 30, 2020		64,264		$	5.65
Granted		7,854			4.26
Vested		(7,854	)		4.26
Forfeited or Expired		(29,460	)		6.17
Non-vested at September 30, 2020		34,804		$	5.24

The Company’s 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 the Company’s 2004 Plan each director can elect to receive the Company’s stock in lieu of cash on a calendar year election. Each of the Company’s Directors elected a combination of cash and stock for calendar year of 2020. During the first quarter of fiscal year 2021, the Company issued 11,913 shares to the Company’s directors and recorded expense of $51,000.