Note 7 - Stock Based Compensation

9 Months Ended

Mar. 31, 2012

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

7.     STOCK BASED COMPENSATION

The aggregate noncash stock based compensation expense totaled $269,000 and $299,000 for the three months ended March 31, 2012 and 2011, respectively, and $841,000 and $1,047,000 for the nine months ended March 31, 2012 and 2011, respectively.

Stock Based Plans

The Company's 2011 Equity Incentive Plan, approved by the shareholders in December 2011, provides additional compensation incentives to encourage high levels of performance and employee retention.  Key employees of the Company and directors, as well as persons who render services to the Company as consultants, advisors or independent contractors, are eligible to receive grants under this plan.  The number of shares that may be issued under this plan is 2,000,000.  Shares may be issued as either incentive stock options, nonqualified stock options, or restricted common stock.  Options may be granted for a period of up to ten years.  Restricted common stock awards may be subject to vesting restrictions and may be forfeited if certain performance factors are not maintained.  As of March 31, 2012, there were 1,966,000 shares available for issuance under this plan.

The Company's 2003 Equity Incentive Plan, approved by the shareholders in December 2003, provided additional compensation incentives to encourage high levels of performance and employee retention.  Key employees of the Company and directors, as well as persons who rendered services to the Company as consultants, advisors or independent contractors, were eligible to receive grants under this plan.  The number of shares that could be issued under this plan was 2,000,000 but use of the plan for new awards ceased upon the adoption of the 2011 Equity Incentive Plan.  Awards outstanding under the plan were not affected.  Shares were issued as incentive stock options, nonqualified stock options, or restricted common stock.  Options may have a period of up to ten years.  Restricted common stock awards may be subject to vesting restrictions and may be forfeited if certain performance factors are not maintained.  The plan provided that a maximum of 1,700,000 shares could be issued as any combination of restricted stock, options and restricted stock unit awards.  The additional 300,000 shares of common stock could only be granted as option awards.  As of March 31, 2011 no shares were available for issuance under this Plan.

The Company permits net share exercises of certain awards made to employees and directors.  Shares reacquired under net share exercises are included within treasury stock.

Restricted Common Stock Awards

Beginning in fiscal 2007, the Company entered into agreements to provide long-term incentive compensation opportunities to certain key employees.  Under the terms of these agreements, the Company granted the employees 35,000 restricted shares of common stock (the “Time-Based Shares”).  The Time-Based Shares vested over a three-year period based upon the continued employment of the key employee.  With respect to the Time-Based Shares, the Company recorded compensation expense of $1,000 and $3,000 for the three and nine months ended March 31, 2011, respectively.  There was no compensation expense related to the Time-Based-Shares in the three or nine months ended March 31, 2012, and all compensation expense related to the shares has been recognized.

Beginning in fiscal 2007, each member of the Company’s Board of Directors received an annual grant of $10,000 of restricted common stock (the “Director Shares”) as part of their compensation for serving on the Company’s Board of Directors.  The number of Director Shares granted is determined based upon the fair market value of the Company’s stock on the first trading day of each calendar year.  The Director Shares vest on June 30 of each fiscal year based upon the director’s continued service on the Company’s Board of Directors.  The Company recorded compensation expense related to the Director Shares of $18,000 for each of the three months ended March 31, 2012 and 2011, and $52,000 for each of the nine months ended March 31, 2012 and 2011.  The Director Shares will result in compensation expense in future periods of up to $17,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.

During fiscal 2008, the Company entered into agreements to provide long-term incentive compensation opportunities to certain employees.  Under the terms of these agreements, the Company granted the employees 220,000 restricted shares of common stock (the “2008 Enhanced Performance Shares”).  The 2008 Enhanced Performance Shares vested partially upon continued employment of the key employees and partially upon the achievement of certain performance goals.  The Company recorded no compensation expense related to the 2008 Enhanced Performance Shares for the three months ended March 31, 2011 and compensation expense of $60,000 and for the nine months ended March 31, 2011.  There was no compensation expense related to the 2008 Enhanced Performance Shares in the three or nine months ended March 31, 2012, and all compensation expense related to the shares has been recognized.

During fiscal 2010, the Company entered into agreements to provide long-term incentive compensation opportunities to certain employees.  Under the terms of these agreements, the Company will grant up to a total of 168,750 restricted shares of common stock (the “2010 Enhanced Performance Shares”) in three annual tranches.  The 2010 Enhanced Performance Shares vest upon both continued employment and upon the achievement of certain performance goals.  Each tranche is deemed to be granted upon the annual establishment of the performance criteria.  Through year end June 30, 2011, the Company had granted 75,000 2010 Enhanced Performance Shares. There were no 2010 Enhanced Performance Shares granted in the three months ended March 31, 2012 or 2011, and in each of the nine months ended March 31, 2012 and 2011 the Company granted 37,500 2010 Enhanced Performance Shares.  In the three and nine months ended March 31, 2012 the Company recorded compensation expense related to the 2010 Enhanced Performance Shares of $159,000 and $477,000, respectively.  In the three and nine months ended March 31, 2011 the Company recorded compensation expense related to the 2010 Enhanced Performance Shares of $127,000 and $386,000, respectively.  The Company will continue to assess whether or not the achievement of any performance goals is probable at each reporting period, and will recognize the related expense if and when the performance conditions become probable.At March 31, 2012, the first tranche of 2010 Enhanced Performance Shares had fully vested and all related compensation expense had been recognized. The second tranche of 56,250 shares awarded under the 2010 Enhanced Performance Shares may result in compensation expense in future periods of up to $132,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.  Also under the terms of these agreements, the Company will grant up to a total of 56,250 restricted shares of common stock (the “Market Condition Shares”) in three annual tranches.  The Market Condition Shares vest upon the achievement of certain market condition criteria and the continued employment of the key employees.  Following the grants of the initial tranches, each tranche of the Market Condition Shares is deemed to be granted upon the annual reset of the market condition criteria. There were no Market Condition Shares granted in the three months ended March 31, 2012 or 2011, and in each of the nine months ended March 31, 2012 and 2011 the Company granted 18,750 Market Condition Shares.  For the three and nine months ended March 31, 2012 the Company recorded $21,000 and $62,000, respectively, of compensation expense related to the Market Condition Shares.  For the three and nine months ended March 31, 2011 the Company recorded $21,000 and $60,000, respectively, of compensation expense related to the Market Condition Shares.  At March 31, 2012, the first tranche of Market Condition Shares had fully vested and all related compensation expense had been recognized.  The second tranche of 18,750 shares awarded as Market Condition Shares may result in compensation expense in future periods of up to $17,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.

A summary of nonvested share activity for the nine months ended March 31, 2012, is presented below (share amounts in thousands):

	Market Condition Shares			Weighted Average Grant Date Fair Value		2010 Enhanced Performance Shares			Weighted Average Grant Date Fair Value		Directors Shares		Weighted Average Grant Date Fair Value
Nonvested at June 30, 2011		25		$	4.72		75		$	9.84		-		-
Granted		13			4.04		37			10.97		6		12.73
Canceled or forfeited		-			-		-			-		-		-
Vested		(19	)		4.55		(56	)		9.11		-		-
Nonvested at March 31, 2012		19		$	4.43		56		$	11.32		6		12.73

The foregoing information does not reflect any shares that are deemed not granted as described above.

The fair value of the restricted shares is determined based on the average trading price of the Company’s shares on the grant date, except for the fair value of the Market Condition Shares which were valued by an outside party to take into account the market condition criteria.

Stock Option Awards

The fair value of stock options is determined at the date of grant and is charged to compensation expense over the vesting period of the options.  The fair value of options at date of grant was estimated using the Black-Scholes option pricing model utilizing the following assumptions:

	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2012			2011		2012			2011
Risk-free interest rates		0.42	%		-		0.42	%		1.70	%
Expected option life in years		3.5			-		3.5			2.5
Expected stock price volatility		41	%		-		41	%		54	%
Expected dividend yield		0	%		-		0	%		0	%

There were no stock options granted in the three months ended March 31, 2011.

The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  The Company uses historical data to estimate option exercise and employee and director termination within the valuation model; separate groups of employees and directors that have similar historical exercise behavior are considered separately for valuation purposes.  The expected term of options granted represents the period of time that options granted are expected to be outstanding.  Expected volatilities are based on historical volatility of the Company’s stock.  The Company has not paid any dividends in the past and does not expect to pay any in the near future.

The following table sets forth summarized information concerning the Company's stock options as of March 31, 2012 (share and aggregate intrinsic value amounts in thousands):

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2011		823		$	8.75
Granted		55			13.28
Exercised		(93	)		7.16
Forfeited or expired		(45	)		8.47
Outstanding at March 31, 2012		740		$	9.31		3.3	$	4,053
Options exercisable at March 31, 2012		443		$	9.16		3.3	$	2,490
Nonvested at March 31, 2012		297		$	9.53		3.4	$	1,563

The exercise price of the options was determined based on the average trading price of the Company’s shares on the grant date for options granted under the Company’s 2003 Equity Incentive Plan.  Under the Company’s 2011 Equity Incentive Plan, the exercise price of the options was determined based on the closing trading price of the Company’s shares on the grant date.

Cash received from the options exercised under all stock-based payment arrangements for the nine months ended March 31, 2012 was $553,000.  In the nine months ended March 31, 2012, 17,000 options were exercised on a net issuance basis so that the number of shares issued to the award recipient was reduced and no cash was received by the Company.  There were no stock options exercised in the nine months ended March 31, 2011.    The aggregate intrinsic value of options exercised during the nine months ended March 31, 2012 was $593,000.  Historically, the Company has issued new shares upon the exercise of stock options.

For the three and nine months ended March 31, 2012 the weighted average fair value at date of grant for options granted was $4.03.  For the nine months ended March 31, 2011 the weighted average fair value at date of grant for options granted was $4.12 per option.  There were no stock options granted in the three months ended March 31, 2011.  The Company recorded $71,000 and $132,000 of compensation expense for stock options for the three months ended March 31, 2012 and 2011, respectively, and $250,000 and $485,000 for the nine months ended March 31, 2012 and 2011, respectively.

Estimated future stock-based compensation expense relating to outstanding stock options is as follows (in thousands):

Fiscal Years Ending June 30,	Future Stock Option Compensation Expense
2012 (remainder)	$	100
2013		245
2014		106
2015		23
2016		5
Total estimated future stock-based compensation expense	$	479

The following table presents information relating to stock options at March 31, 2012 (share amounts in thousands):

Options Outstanding							Options Exercisable
Range of Exercise Prices	Shares		Weighted  Average Exercise Price		Weighted Average Remaining Life in Years		Shares		Weighted  Average Exercise Price
$ 0.00 - $ 4.49		10	$	3.89		1.6		10	$	3.89
$ 5.00 - $ 7.49		221	$	6.51		3.8		182	$	6.65
$ 7.50 - $ 8.99		110	$	8.85		3.0		21	$	8.83
$ 9.00 - $ 10.49		207	$	9.55		3.2		113	$	9.88
$ 10.50 - $11.99		20	$	11.19		4.2		-	$	0.00
$12.00 - $13.49		142	$	12.84		3.3		87	$	12.56
$13.50 - $14.99		30	$	13.73		1.8		30	$	13.73
		740						443