| Share-based Compensation | 6. Share-based Compensation Employee Stock Option Plans The Companys share-based incentive
plans offering stock options primarily consists of two plans. Under both plans, one new share is issued for each stock option exercised.
The plans are described below. The Companys 1998 Incentive Plan
(the 1998 Plan) was the Companys primary plan through November 2007. Under this plan shares of common stock
was made available for issuance to employees and directors. Through December 1999, 1,066,000 options were granted that would cliff
vest after 9.8 years; however, such vesting was accelerated for 637,089 of these options upon meeting certain earnings per share
goals through the fiscal year ended June 30, 2003. Subsequent to December 1999 and through June 2002, 1,248,250 options were granted
that would cliff vest after 6.0 years; however, such vesting was accelerated for 300,494 of these options upon meeting certain
earnings per share goals through the fiscal year ended June 30, 2005. The Companys 2007 Equity Incentive
Plan (the 2007 Plan) was restated and approved by the shareholders on December 12, 2014. Provisions of the restated
2007 Plan include the granting of up to 2,000,000 incentive and non-qualified stock options, stock appreciation rights, restricted
stock and restricted stock units. Options may be granted to employees, officers, non-employee directors and other service providers
and may be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion. Of the options granted subsequent to
June 2002, all vesting schedules are based on 3 or 4-year vesting schedules, with either one-third or one-fourth vesting on the
first anniversary and the remaining options vesting ratably over the remainder of the vesting term. Generally, directors and officers
have 3-year vesting schedules and all other employees have 4-year vesting schedules. Additionally, in the event of a change in
control or the occurrence of a corporate transaction, the Companys Board of Directors has the authority to elect that all
unvested options shall vest and become exercisable immediately prior to the event or closing of the transaction. All options outstanding
as of June 30, 2016 had contractual lives of ten years. Under the 1998 Plan, 2,500,000 shares were authorized for grant. As
of June 30, 2016, there were 0 options outstanding under the 1998 Plan, which includes the cliff vesting and 3 or 4-year vesting
options discussed above. As of June 30, 2016, there were 837,230 options outstanding under the 2007 Plan. As of June 30,
2016, the 2007 Plan had 906,930 authorized unissued options, while there were no options remaining that could be granted under
the 1998 Plan. A summary of the stock option activity under the Companys
plans for the six months ended June 30, 2016 is as follows:
Number of shares Weighted average exercise price
Options outstanding at beginning of year 1,028,935 $ 6.03
Granted 157,200 11.97
Less:
Exercised (109,151 ) 4.24
Repurchased 225,542 4.37
Canceled or Expired (14,212 ) 11.19
Options outstanding at June 30, 2016 837,230 7.78
Options exercisable at end of June 30, 2016 549,215 $ 6.09 As of June 30, 2016, the total
remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was approximately $1,195, which
will be recognized over a weighted average period of 2.45 years. Stock Option Repurchase: Employee Stock Purchase Plan The Company issues shares to
employees under the Companys 2014 Employee Stock Purchase Plan (the ESPP). The ESPP was approved by the
Companys shareholders on December 12, 2014. As of June 30, 2016, 480,444 of the originally approved 500,000 shares
were available for offerings under the ESPP. Offering periods under the ESPP commence on each January 1 and July 1, and
continue for a duration of six months. The ESPP is available to all employees who do not own, or not are deemed to own,
shares of stock making up an excess of 5% of the combined voting power of the Company, its parent or subsidiary.
During each offering period, each eligible employee may purchase shares under the ESPP after authorizing payroll deductions.
Under the ESPP, each employee may purchase up to the lesser of 2,500 shares or $25 of fair market value (based on the
established purchase price) of the Companys stock for each offering period. Unless the employee has previously
withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase common stock on the last
business day of the period at a price equal to 85% (or a 15% discount) of the fair market value of the common stock
on the first or last day of the offering period, whichever is lower. Share-based compensation expense has been recorded as follows:
Three months ended June 30, Six months ended June 30,
2016 2015 2016 2015
Cost of goods sold $ 7 $ 5 $ 11 $ 11
Sales and marketing 13 39 27 79
Research and product development 39 33 66 66
General and administrative 112 140 215 299
$ 171 $ 217 $ 319 $ 455 |
