Note 9 - Share Based Stock Option Plans

12 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 9 – Share Based Stock Option Plans

The Company has two share-based compensation plans as described below. During fiscal 2012, 2011 and 2010, the Company recorded share-based compensation associated with outstanding stock option grants of approximately $9,000, $39,000 and $32,000, respectively. No income tax benefit was recognized in the income statement for share-based arrangements in any period presented.

Qualstar adopted the1998 Stock Incentive Plan, (the “1998 Plan”) under which incentive and nonqualified stock options could be granted for an aggregate of no more than 1,215,000 shares of common stock. Under the terms of the 1998 Plan, options could be issued at an exercise price of not less than 100% of the fair market value of common stock on the date of grant. These option awards typically vest based on 4 years of continuous service at a rate of 25% per year and terminate as specified in each option agreement, but terminate no later than ten years after the date of grant. The 1998 Plan expired in 2008 and no additional options may be granted under that plan. However, options previously granted under the 1998 Plan will continue under their terms.

Qualstar adopted the 2008 Stock Incentive Plan (the “2008 Plan”) under which incentive and nonqualified stock options may be granted for an aggregate of no more than 500,000 shares of common stock. Under the terms of the 2008 Plan, options may be issued at an exercise price of not less than 100% of the fair market value of common stock on the date of grant. These option awards typically vest based on 4 years of continuous service at a rate of 25% per year and terminate as specified in each option agreement, but terminate no later than ten years after the date of grant.  There were no option grants under 2008 Plan during fiscal years 2011 and 2010.  The Company granted 224,000 options under the 2008 Plan during fiscal year 2012.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination in determining forfeiture rates and evaluates separate groups of employees by functional area that have similar historical exercise behavior. The expected term of options granted is estimated based on the vesting term of the award, historical employee exercise behavior, expected volatility of the Company’s stock and an employee’s average length of service. The risk-free interest rate used in this model correlates to a U.S. constant rate Treasury security with a contractual life that approximates the expected term of the option award. Weighted-average numbers have been used for fiscal year 2012 grants below as indicated.

Expected dividend yield		0%
Risk-free interest rate	0.71%	–	1.87%
Expected life of options (in years)	5.5	–	6.25
Volatility	29.53%	–	31.24%

The following table summarizes all stock option activity (in thousands, except per share amounts):

Options	Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2011		533		$	3.80		3.51	$	—
Granted		224			1.91
Exercised		—			—
Forfeited or expired		(228	)		4.14
Outstanding at June 30, 2012		529		$	2.85		6.15	$	—
Exercisable at June 30, 2012		305		$	3.55		3.42	$	—

No options were granted during fiscal years 2011 and 2010. The weighted-average grant date fair value per share of options granted during fiscal year 2012 was $0.57.

At June 30, 2012, there was $121,301 of total unrecognized compensation cost related to nonvested share-based compensation awards granted under the 2008 Plan.  The cost is expected to be recognized over a weighted-average period of 2.8 years.  The total fair value of shares vested for fiscal years 2012, 2011 and 2010 was $9,000, $14,000 and $58,000, respectively.