Stock Options and Share-Based Compensation

The Company adopted ASU 2016-9, “Stock Compensation – Improvements to Employee Share-Based Payment Accounting” prospectively effective May 1, 2017. Prior periods were not retrospectively adjusted. The Company elected prospectively to account for forfeitures as they occur rather than apply an estimated rate to share-based compensation expense.

The stockholders approved the 2017 Omnibus Incentive Plan (“2017 Plan”) on August 30, 2017, which enables the Company to grant a broad range of equity, equity-related, and non-equity types of awards, with potential recipients including directors, consultants and employees. This plan replaced the 2010 Stock Option Plan for Directors and the 2008 Key Employee Stock Option Plan. No new awards will be granted under the prior plans. All outstanding options granted under the prior plans will remain subject to the prior plans. At the date of approval of the 2017 Plan there were 280,100 shares available for issuance under the prior plans. These shares and any outstanding awards that subsequently cease to be subject to such awards are available under the 2017 Plan. The 2017 Plan did not increase the total number of shares available for issuance under the Company’s equity compensation plans. At April 30, 2019 there were 272,178 shares available for future issuance.

Under the 2017 Plan, the Company recorded stock-based compensation expense in accordance with ASC 718 of $34,000 and $141,000, and deferred income tax benefit of $8,000 and $34,000, in fiscal years 2019 and 2018, respectively. The RSUs include both a service and performance component vesting over a three year period. The recognized expense is based upon the vesting period for service criteria and estimated attainment of the performance criteria at the end of the three year period based on the ratio of cumulative days incurred to total days over the three year period. The remaining estimated compensation expense of $158,000 will be recorded over the remaining vesting periods.

The fair value of each RSU granted to employees was estimated on the day of grant based on the weighted average price of the Company's stock reduced by the present value of the expected dividend stream during the vesting period using the risk-free interest rate. The Company issued new shares of common stock to satisfy RSUs vested during fiscal year 2019. The following table summarizes the RSUs activities and weighed averages.



	2019				2018
	Number of RSUs		Weighted Average Grant Date Fair Value		Number of RSUs	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	23,907		$	23.74	—
Granted	19,738		$	32.58	23,907	$	23.74
Vested	(2,390	)	$	34.16	—	—
Forfeited	(17,947	)	$	27.07	—
Outstanding at end of year	23,308		$	28.66	23,907	$	23.74

The stockholders approved the 2010 Stock Option Plan for Directors (“2010 Plan”) in fiscal year 2011 which allowed the Company to grant options on an aggregate of 100,000 shares of the Company’s common stock. Under this plan, each eligible director was granted options to purchase 10,000 shares at the fair market value at the date of grant for a term of five years. These options are exercisable in four equal installments, one-fourth becoming exercisable on the next August 1 following the date of grant, and one-fourth becoming exercisable on August 1 of each of the next three years. At April 30, 2019, there were no shares available for future grants under the 2010 Plan.

The stockholders approved the 2008 Key Employee Stock Option Plan (“2008 Plan”) in fiscal year 2009 which allowed the Company to grant options on an aggregate of 300,000 shares of the Company’s common stock. On August 26, 2015, the stockholders approved an amendment to this plan to increase the number of shares available under the 2008 Plan by 300,000. Under the plan, options were granted at not less than the fair market value at the date of grant and options are exercisable in such installments, for such terms (up to 10 years), and at such times, as the Board of Directors may determine at the time of the grant. At April 30, 2019, there were no shares available for future grants under the 2008 Plan.

The Company recorded stock-based compensation expense in accordance with ASC 718. In order to determine the fair value of stock options on the date of grant, the Company applied the Black-Scholes option pricing model. Inherent in the model are assumptions related to expected stock-price volatility, option life, risk-free interest rate, and dividend yield. The Company did not grant any stock options during fiscal years 2019 and 2018. The stock options outstanding have the “plain-vanilla” characteristics as defined in SEC Staff Accounting Bulletin No. 107 (SAB 107). The Company utilized the Safe Harbor option “Simplified Method” to determine the expected term of these options in accordance with the guidance of SAB 107 for options outstanding.

The stock-based compensation expense is recorded over the vesting period (4 years) for the options granted, net of tax. Under the 2010 and 2008 Plans, the Company recorded $115,000 and $172,000 of compensation expense and $27,000 and $42,000 of deferred income tax benefit in fiscal years 2019 and 2018, respectively. The remaining compensation expense of $76,000 and deferred income tax benefit of $18,000 will be recorded over the remaining vesting periods.

The Company issued new shares of common stock to satisfy options exercised during fiscal years 2019 and 2018. Stock option activity and weighted average exercise price are summarized as follows:



	2019				2018
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding at beginning of year	137,250		$	18.01	180,350		$	17.29
Canceled	(13,100	)	21.03		(6,300	)	19.09
Exercised	(19,800	)	14.54		(36,800	)	14.31
Outstanding at end of year	104,350		$	18.28	137,250		$	18.01

Exercisable at end of year	84,550		$	17.63	79,100		$	16.28

The number of options outstanding, exercisable, and their weighted average exercise prices were within the following ranges at April 30, 2019:



	Exercise Price Range
	$8.59-$11.78		$15.85-$23.62
Options outstanding	7,450		96,900
Weighted average exercise price	$	10.76	$	18.86
Weighted average remaining contractual life	2.63 years		5.68 years
Aggregate intrinsic value	$	88,000	$	392,000
Options exercisable	7,450		77,100
Weighted average exercise price	$	10.76	$	18.29
Aggregate intrinsic value	$	88,000	$	350,000