11.	SHAREHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Shelf Registration Statement

The Company has an effective shelf registration statement on Form S-3 on file with the SEC which allows it to periodically offer and sell, individually or in any combination, shares of common stock, shares of preferred stock, warrants to purchase shares of common stock or preferred stock, and units consisting of any combination of the foregoing types of securities, up to a total of $25.00 million, of which approximately $13.99 million remains available after giving effect to the Company’s June 2019 public offering, including the impact of the partial exercise of the underwriters’ over-allotment option, as described below. The Company’s ability to issue equity securities under its effective shelf registration statement is subject to market conditions.

On June 11, 2019, the Company completed an underwritten public offering of 6,250,000 newly issued shares of common stock, at a price to the public of $1.60 per share, pursuant to its effective shelf registration statement on Form S-3. Net proceeds from the offering were approximately $9.06 million, net of the underwriting discount and fees and expenses in the amount of approximately $941,000. Pursuant to the terms of the underwriting agreement entered in connection with this offering, the underwriters were granted a 30-day option to buy up to an additional 937,500 shares of the Company’s common stock to cover over-allotments. Pursuant to the partial exercise of the underwriters’ over-allotment option, on July 3, 2019, the Company issued an additional 630,500 shares of its common stock at a price of $1.60 per share for net proceeds of approximately $932,000, net of the underwriting discount and fees and expenses of approximately $76,000. After giving effect to the partial exercise of the over-allotment option, the Company sold an aggregate of 6,880,500 shares of its common stock at a price of $1.60 per share with total gross proceeds of approximately $11.01 million, before deducting the total underwriting discount and fees and expenses of approximately $1.02 million.

Stock-Based Compensation

The following table summarizes the components of the Company’s stock-based compensation included in net income for the periods presented:

	Three Months Ended September 30,
	2019		2018
Employee stock options	$	63,876	$	58,172
Restricted stock awards		148,504		13,004
Totals	$	212,380	$	71,176

No stock-based compensation was capitalized as a cost of inventory during the three months ended September 30, 2019 or 2018.

Stock Options – The following is a summary of the stock option activity for the three months ended September 30, 2019:

	Shares			Weighted Average Exercise Price
Outstanding, June 30, 2019		2,523,638		$	1.41
Granted		70,000		$	1.33
Expired		(15,600	)	$	0.46
Outstanding, September 30, 2019		2,578,038		$	1.41

The total fair value of stock options that vested during the three months ended September 30, 2019 was approximately $26,132.

The following table summarizes information about stock options outstanding at September 30, 2019:

Options Outstanding						Options Exercisable						Options Vested or Expected to Vest
Balance as of 9/30/2019		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 9/30/2019		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 9/30/2019		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
	2,578,038		6.82	$	1.41		2,081,763		6.35	$	1.49		2,497,408		6.75	$	1.42

As of September 30, 2019, the unrecognized stock-based compensation expense related to unvested stock options was approximately $146,000, which is expected to be recognized over a weighted average period of approximately 23 months.

The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at September 30, 2019 was approximately $1.09 million. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at June 30, 2019 less the grant price, multiplied by the number of stock options that had a grant price that is less than the closing market price. This amount represents the amount that would have been received by the optionees had these stock options been exercised on that date. No stock options were exercised during the three months ended September 30, 2019. During the three months ended September 30, 2018, the aggregate intrinsic value of stock options exercised was approximately $300.

Restricted Stock – The following is a summary of the restricted stock activity for the three months ended September 30, 2019:

	Shares			Weighted Average Grant Date Fair Value
Unvested, June 30, 2019		129,500		$	1.07
Granted		325,000		$	1.57
Vested		(128,341	)	$	1.07
Canceled		(1,159	)	$	1.07
Unvested, September 30, 2019		325,000		$	1.57

The unvested restricted shares as of September 30, 2019 are all performance-based restricted shares that are scheduled to vest, subject to achievement of the underlying performance goals, in July 2020. As of September 30, 2019, the estimated unrecognized stock-based compensation expense related to unvested restricted shares subject to achievement of performance goals was approximately $420,000, all of which is expected to be recognized over a weighted average period of approximately nine months.

Dividends – The Company has paid no cash dividends during the current fiscal year through September 30, 2019.