11.

SHAREHOLDERS’ EQUITY

Employee and Directors Stock Option Plans—The 2011 Director Stock Option Plan was approved by SunLink’s shareholders at the Annual Meeting of Shareholders on November 7, 2011. This plan permits the grant of options to non-employee directors of SunLink for the purchase of up to 300,000 common shares through November 2021. Options for 72,000 and 30,000 shares were granted during the fiscal years ended June 30, 2017 and 2016, respectively. No options have been exercised under this plan. Options outstanding under the plan were 300,000 at June 30, 2017. No additional awards may be granted under this Plan.

The 2005 Equity Incentive Plan was approved by SunLink’s shareholders at the Annual Meeting of Shareholders on November 7, 2005. This plan permitted the grant of options to employees, non-employee directors and service providers of SunLink for the purchase of up to 800,000 common shares plus the number of unused shares under the 2001 Plans, which is 30,675, by November 2015. This Plan restricted the number of Incentive Stock Options to 700,000 shares and Restricted Stock Awards to 200,000 shares. The combination of Incentive Stock Options and Restricted Stock Awards cannot exceed 800,000 shares plus the number of unused shares under the 2001 Plans. Each award of Restricted Shares reduces the number of share options to be granted by four option shares for each Restricted Share awarded. No options have been exercised under this Plan. Options to purchase 0 and 45,000 shares were granted during the fiscal years ended June 30, 2017 and 2016, respectively. Options outstanding under this Plan were 380,142 at June 30, 2017. No additional awards may be granted under this Plan.

The activity of Company’s share options is shown in the following table:


	Number of Shares			Weighted- Average Exercise Price		Range of Exercise Prices
Options outstanding June 30, 2013		617,499		$	1.92	$	1.22 - $9.63
Granted		21,000			0.71		0.71
Forfeited		(89,500	)		2.15		1.22 - 2.90

Options outstanding June 30, 2014		548,999			2.71		0.71 - 9.63
Granted		90,000			1.49		1.49
Forfeited		(48,857	)		3.50		0.71 - 9.63

Options outstanding June 30, 2015		590,142			2.46		0.71 - 9.63
Granted		75,000			1.79		1.79
Forfeited		(29,500	)		9.15		2.51 - 9.63

Options outstanding June 30, 2016		635,642			2.07		0.71 - 8.00
Granted		72,000			1.21		1.21
Forfeited		(27,500	)		6.55		6.55

Options outstanding June 30, 2017		680,142		$	1.80	$	0.71 - $8.00

Options exercisable June 30, 2015		470,142		$	2.73	$	0.71 - $9.63

Options exercisable June 30, 2016		530,642		$	2.16	$	0.71 - $8.00

Options exercisable June 30, 2017		620,142		$	1.81	$	0.71 - $8.00

The weighted-average fair value of each option granted during the years ended June 30, 2017, 2016 and 2015 was $1.21, $1.79 and $1.49, respectively. The fair value of each stock option grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the year ended June 30, 2017: estimated volatility of 87%; risk-free interest rate of 1.30%; dividend yield of 0%; and an expected life of 5 years. The fair value of each stock option grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the year ended June 30, 2016: estimated volatility of 80%; risk-free interest rate of 1.63%; dividend yield of 0%; and an expected life of 6 years. The fair value of each stock option grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the year ended June 30, 2015: estimated volatility of 84%; risk-free interest rate of 2.03%; dividend yield of 0%; and an expected life of 6 years. The expected life of each stock option grant was determined to be the midpoint between the vesting period and the contractual term of the grants. The estimate of the forfeited options in the compensation expense calculation was determined as the weighted-average forfeitures for the last three years. For the years ended June 30, 2017, 2016, and 2015, the Company recognized $64, $58 and $37, respectively, of compensation expense for share options issued. As of June 30, 2017, there was $9 of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized during the fiscal years ended June 30, 2018 and 2019.

Information with respect to stock options outstanding and exercisable at June 30, 2017 is as follows:


Exercise Prices	Number Outstanding		Weighted-Average Remaining Contractual Life (in years)		Number Exercisable
$0.71		18,000		6.22		18,000
$1.21		72,000		9.21		72,000
$1.22		210,000		5.18		210,000
$1.49		90,000		7.19		60,000
$1.67		60,000		4.37		60,000
$1.79		75,000		8.20		45,000
$2.09		120,000		4.20		120,000
$2.51		6,000		1.23		6,000
$8.00		29,142		0.23		29,142

		680,142		5.74		620,142

No options were exercised during the years ended June 30, 2017, 2016 and 2015. As of June 30, 2017 and 2016, the aggregate intrinsic value of options outstanding and options exercisable were $0 and $0, respectively.

Common Share Purchase Tender Offer—SunLink purchased 280,800 of its common shares at a price of $1.50 per share as a result of a tender offer (the “Offer”) which expired February 24, 2017. The aggregate purchase price of the common shares, including expenses of the Offer was $641. The Offer was subject to a number of terms and conditions described in the Offer to Purchase distributed to shareholders.

Charter Amendments to Protect Net Operating Losses—On November 7, 2016, SunLink’s shareholders approved amendments to the Company’s article of incorporation to restrict certain transfers of common shares in order to protect future use of the Company’s federal and state income tax net operating losses. The amendments generally void transfers of shares that would result in the creation of a new 4.9% shareholder or result in an existing 4.9% shareholder acquiring additional shares. The purpose of the amendments is to assist the Company in protecting the value of its accumulated NOLs by limiting transfers of the Company’s common shares that could ultimately result in an “ownership change” under Section 382 of the Internal Revenue Code. The amendments to the Company’s articles of incorporation are designed to work in tandem with the Tax Benefits Preservation Rights Plan adopted by the company’s board of directors in September 2016.

Tax Benefits Protection Rights Plan—On September 29, 2016, SunLink entered into a Tax Benefits Preservation Rights Plan (the “Tax Benefits Protection Rights Plan”). Effective September 29, 2016, the Board declared a dividend in the form of one preferred stock purchase right for each of the Company’s issued and outstanding common shares. The purpose of the Tax Benefits Protection Rights Plan is to diminish the risk that the Company’s ability to use its net operating losses and certain other tax assets to reduce potential future federal income tax obligations would become subject to limitations by reason of the Company experiencing an “ownership change,” as defined in Section 382 of the Code.

Accumulated Other Comprehensive Loss—Information with respect to the balances of each classification within accumulated other comprehensive loss is as follows:


	Minimum Pension Liability Adjustment			Accumulated Other Comprehensive Loss
June 30, 2014		(334	)		(334	)
Current period change		(40	)		(40	)

June 30, 2015		(374	)		(374	)
Current period change		(46	)		(46	)

June 30, 2016	$	(420	)	$	(420	)
Current period change		93			93

June 30, 2017	$	(327	)	$	(327	)