SHARE-BASED COMPENSATION

6 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

NOTE 8. SHARE-BASED COMPENSATION

Through June 2014, we had two equity compensation plans, the Second Amended and Restated 2004 Stock Option Plan (the “Employee Stock Option Plan”) and the Amended and Restated 2004 Directors’ Stock Option Plan (the “Directors’ Stock Option Plan”) (collectively, the “Former Stock Option Plans”). The Employee Stock Option Plan and Directors’ Stock Option Plan were terminated in June 2014 and December 2014, respectively.

In September 2016, our Board approved the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at our 2016 Annual Meeting. The 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of December 31, 2022, 200,000 performance awards and 372,000 non-qualified stock options have been granted under the 2016 Equity Incentive Plan.

Former Stock Option Plans

No options were granted under the Former Stock Option Plans during the three or six months ended December 31, 2022 and 2021.

The last remaining stock options outstanding under the Former Stock Option Plans were exercised during the six months ended December 31, 2022. As such, as of December 31, 2022, there was no unrecognized compensation cost under the Former Stock Option Plans as there are no options outstanding. The following is a summary of stock option activity under the Former Stock Option Plans for the six months ended December 31, 2022 and 2021:

	Six Months Ended December 31,
	2022					2021
	Number of Shares			Weighted-Average Exercise Price		Number of Shares			Weighted-Average Exercise Price
Outstanding at July 1,		6,500		$	1.82		31,500		$	1.81
Options granted		—			—		—			—
Options exercised		(6,500	)		1.82		(25,000	)		1.80
Options forfeited		—			—		—			—
Outstanding at end of period		—		$	—		6,500		$	1.82
Stock Options Exercisable at December 31,		—		$	—		6,500		$	1.82

Performance Awards

In December 2017, the Compensation Committee of our Board of Directors granted 200,000 performance awards to our employees under our 2016 Equity Incentive Plan, which will generally be paid in shares of our common stock. Whether any performance awards vest, and the amount that does vest, is tied to the completion of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. The weighted-average fair value of the performance awards granted was $4.46, calculated using the weighted-average fair market value for each award, using a Monte Carlo simulation. In February 2020, the Compensation Committee reallocated 48,000 previously forfeited awards, having the same remaining terms and conditions, to certain employees. The weighted-average fair value of the performance awards reallocated in 2020 was $16.90, calculated using the weighted-average fair market value for each award, using a Monte Carlo simulation. In December 2021, the Compensation Committee reallocated an additional 17,500 previously forfeited awards, having the same remaining terms and conditions, to other employees. The weighted average fair value of the performance awards reallocated in 2021 was $20.34, calculated using the weighted average fair market value for each award, using a Monte Carlo simulation. During the three months ended December 31, 2022, and 2021, we recorded share-based compensation expense of $30,000 and $21,000, respectively, related to outstanding performance awards. During the six months ended December 31, 2022 and 2021, we recorded share-based compensation expense of $60,000 and $42,000, respectively, related to outstanding performance awards. On December 31, 2022, there was approximately $262,000 of unrecognized compensation cost related to non-vested performance awards, which is expected to be expensed over the weighted-average period of 2.50 years.

On July 1, 2022, it was determined by the Compensation Committee of our Board of Directors that the vesting of performance awards for 37,500 shares of common stock had been achieved. Each participant elected a net issuance to cover their individual withholding taxes and therefore we issued 23,641 shares and paid $223,000 of participant-related payroll tax liabilities.

Non-Qualified Stock Options

In December 2020, the Compensation Committee of our Board of Directors granted 310,000 non-qualified stock options to our directors and certain employees under the 2016 Equity Incentive Plan. The vesting of these stock options is tied to the completion of service periods that range from 18 months to 10.5 years from the date of grant and the achievement of our common stock trading at certain pre-determined prices. In December 2021, the Compensation Committee reallocated 5,000 previously forfeited non-qualified stock options, having the same remaining terms and conditions, to another employee. During the three months ended December 31, 2022 and 2021, we recorded compensation expense of $140,000 and $254,000, respectively, related to these options. During the six months ended December 31, 2022 and 2021, we recorded compensation expense of $312,000 and $527,000, respectively, related to these options. The weighted average fair value of the stock option awards granted was $16.72, calculated using a Monte Carlo simulation. As of December 31, 2022, none of these stock options had vested and there was approximately $2.7 million of unrecognized compensation cost related to these stock options.

In February 2021, the Compensation Committee of our Board of Directors granted 62,000 non-qualified stock options to our directors and certain employees under the 2016 Equity Incentive Plan. The vesting of these stock options is tied to the completion of service periods that range from 4 months to 1.3 years at inception and the achievement of our common stock trading at certain pre-determined prices. Of these 62,000 stock options, 57,750 vested on July 1, 2021, as our common stock met the pre-determined prices set forth in the underlying agreements and the required service periods were already satisfied. The weighted-average fair value of the stock option awards granted was $3.16, calculated using a Monte Carlo simulation.

Employee Stock Purchase Plan

In September 2014, our Board approved the establishment of an Employee Stock Purchase Plan (the “ESPP”). The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per-share purchase price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period. The Board of Directors also approved the provision that shares formerly reserved for issuance under the Former Stock Option Plans in excess of shares issuable pursuant to outstanding options, aggregating 704,715 shares, be reserved for issuance pursuant to the ESPP. The ESPP was approved by our shareholders at our 2014 Annual Meeting.

During the three months ended December 31, 2022 and 2021, we did not record any share-based compensation expense relating to the ESPP, due to the fact that no six-month offering period ended during either quarter. During the six months ended December 31, 2022 and 2021, 2,503 and 1,130 shares of our common stock were purchased under the ESPP, respectively, and allocated to employees based upon their contributions at prices of $13.52 and $26.17, respectively, per share. On a cumulative basis, since the inception of the ESPP, employees have purchased a total of 29,542 shares of our common stock. During the six months ended December 31, 2022 and 2021, we recorded share-based compensation expense in the amount of $6,000 and $5,000, respectively, relating to the ESPP.