6. Stockholders’ Equity

Per Share Results

Basic and diluted per share results were based on the following:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Net (loss) income	$	(693)	$	5,819	$	(1,013)	$	5,233

Weighted average shares outstanding for computation of basic per share results		5,125,000		5,067,000		5,100,000		5,066,000
Incremental shares from assumed exercise of Griffin stock options (a)		—		40,000		—		31,000
Adjusted weighted average shares for computation of diluted per share results		5,125,000		5,107,000		5,100,000		5,097,000

(a)

Incremental shares from the assumed exercise of Griffin stock options are not included in periods where the inclusion of such shares would be anti-dilutive. The incremental shares from the assumed exercise of stock options for the 2020 second quarter and 2020 six month period would have been 43,000 and 49,000, respectively.

Sale of Common Stock

On March 3, 2020, Gordon F. DuGan was appointed to serve as a Director of Griffin, effective immediately. Mr. DuGan was also appointed as Chairman of the Board of Directors. Mr. DuGan and Griffin entered into a Chairmanship and Advisory Agreement ( the “Advisory Agreement”), on March 3, 2020, whereby Mr. DuGan agreed to also serve as a non-employee advisor to Griffin on, amongst other things, growth strategy, including identifying markets, acquisitions and other transactions, recruitment of key personnel, potential capital raising efforts and general management advice (collectively the “Advisory Services”). As compensation to Mr. DuGan for providing such Advisory Services, Mr. DuGan received: (i) a non-qualified stock option to acquire 48,000 shares of Griffin Common Stock at an exercise price of $45.98 per share under the 2009 Stock Option Plan (see Griffin Stock Option Plans below) and (ii) a non-qualified stock option (the “Supplemental Advisor Option”) to acquire 52,000 shares of Griffin Common Stock at an exercise price of $46.91 per share under the 2020 Incentive Award (see Griffin Stock Option Plans below).

On March 9, 2020, Griffin completed the sale of 53,293 shares of Griffin’s Common Stock at a price per share of $46.91, for cash proceeds of $2,500, in accordance with the Advisory Agreement and pursuant to a Stock Purchase Agreement, dated as of March 5, 2020, between Mr. DuGan and Griffin.

Universal Shelf Filing/At-the-Market Equity Offering Program

On April 11, 2018, Griffin filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”) with the SEC. Under the Universal Shelf, Griffin may offer and sell up to $50,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, units or any combination of such securities during the three year period that commenced upon the Universal Shelf becoming effective on April 25, 2018. Under the Universal Shelf, Griffin may periodically offer one or more types of securities in amounts, at prices and on terms announced, if and when the securities are ever offered. On May 10, 2018, Griffin filed a prospectus supplement with the SEC under which it may issue and sell, from time to time, up to an aggregate of $30,000 of its common stock (“Common Stock”) under an “at-the-market” equity offering program (the “ATM Program”) through Robert W. Baird & Co. Incorporated (“Baird”), as sales agent. Under a sales agreement with Baird, Griffin will set the parameters for the sales of its Common Stock under the ATM Program, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales of shares may not be made. Sales of Common Stock, if any, under the ATM Program would be made in offerings as defined in Rule 415 of the Securities Act of 1933, as amended. In addition, with the prior consent of Griffin, Baird may also sell shares in privately negotiated transactions. Griffin expects to use net proceeds, if any, from the ATM Program for acquisitions of target properties consistent with Griffin’s investment strategies, repayment of debt and general corporate purposes. If Griffin obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If Griffin incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict Griffin’s operations.

Griffin Stock Option Plans

Through March 3, 2020, stock options were granted by Griffin under the Griffin Industrial Realty, Inc. 2009 Stock Option Plan (as amended, the “2009 Stock Option Plan”). Options granted under the 2009 Stock Option Plan were either incentive stock options or non-qualified stock options issued at an exercise price not less than fair market value on the date approved by Griffin’s Compensation Committee. Vesting of all of Griffin's stock options is solely based upon service requirements and does not contain market or performance conditions.

Stock options issued expire ten years from the grant date. In accordance with the 2009 Stock Option Plan, stock options issued to non-employee directors upon their initial election to the board of directors were fully exercisable immediately upon the date of the option grant. Stock options issued to non-employee directors upon their re-election to the board of directors vest on the second anniversary from the date of grant. Stock options issued to employees vest in equal installments on the third, fourth and fifth anniversaries from the date of grant. None of the stock options outstanding at May 31, 2020 may be exercised as stock appreciation rights.

On March 3, 2020, Griffin’s Board of Directors adopted and approved the Griffin Industrial Realty, Inc. and Griffin Industrial, LLC 2020 Incentive Award Plan (the “2020 Incentive Award Plan”). The 2020 Incentive Award Plan was effective as of the date it was adopted by the Board, subject to stockholder approval, which was received at Griffin’s 2020 Annual Meeting of Stockholders on May 7, 2020. The 2020 Incentive Award Plan replaced the 2009 Stock Option Plan and authorizes for grant a total of 300,000 shares (plus any shares subject to awards under the 2009 Stock Option Plan, as of the date of stockholder approval of the 2020 Incentive Award Plan, that are forfeited, expire, are converted to shares of another person or are settled for cash), subject to certain adjustments in the 2020 Incentive Award Plan. In addition to granting stock options, the 2020 Incentive Award Plan also enables Griffin to grant stock appreciation rights, restricted stock awards, restricted stock unit awards, partnership interests, other equity or cash based awards and dividend equivalents. No new awards will be granted under the 2009 Stock Option Plan; however, all outstanding awards under the 2009 Stock Option Plan remain outstanding in accordance with their terms.

The following options were granted by Griffin under the 2020 Incentive Award Plan and the 2009 Stock Option Plan:


	For the Six Months Ended
	May 31, 2020			May 31, 2019
		Fair Value per			Fair Value per
	Number of	Option at		Number of	Option at
	Shares	Grant Date		Shares	Grant Date
Non-employee directors	111,258	$	11.00 - 14.17	5,946	$	12.87

The fair values of all options granted were estimated as of the grant date using the Black-Scholes option-pricing model. Assumptions used in determining the fair value of the stock options granted were as follows:


	For the Six Months Ended
	May 31, 2020		May 31, 2019
Expected volatility	29.7 - 30.3	%	30.9	%
Risk free interest rates	0.5 - 0.9	%	2.3	%
Expected option term (in years)	8.5		8.5
Annual dividend yield	1.3	%	1.2	%


Number of option holders at May 31, 2020		29

Compensation expense and related tax benefits for stock options were as follows:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Compensation expense	$	203	$	94	$	260	$	184

Related tax benefit	$	34	$	13	$	43	$	26

For all periods presented, the forfeiture rate for directors ranged from 0% to 2%, the forfeiture rate for executives was 17.9% and the forfeiture rate for employees was 38.3%. The rates utilized were based on the historical activity of the grantees.

As of May 31, 2020, the unrecognized compensation expense related to nonvested stock options that will be recognized during future periods is as follows:


Balance of Fiscal 2020	$	249
Fiscal 2021	$	442
Fiscal 2022	$	377
Fiscal 2023	$	244
Fiscal 2024	$	120
Fiscal 2025	$	23

A summary of Griffin’s stock option activity is as follows:


	For the Six Months Ended
	May 31, 2020			May 31, 2019
	Number of		Weighted Avg.	Number of		Weighted Avg.
	Shares		Exercise Price	Shares		Exercise Price
Outstanding at beginning of period	189,822	$	28.23	224,001	$	28.20
Granted	111,258	$	45.72	5,946	$	36.99
Exercised	(2,734)	$	29.25	(29,838)	$	28.71
Forfeited	—	$	—	(2,788)	$	35.86
Outstanding at end of period	298,346	$	34.74	197,321	$	28.28


				Weighted Avg.
				Remaining
Range of Exercise Prices for	Outstanding at	Weighted Avg.		Contractual Life	Total Intrinsic
Vested and Nonvested Options	May 31, 2020	Exercise Price		(in years)	Value
$23.00 - $28.00	112,638	$	26.76	5.7	$	1,536
$28.00 - $32.00	62,478	$	29.21	2.1		698
$32.00 - $47.00	123,230	$	44.84	9.6		61
	298,346	$	34.74	6.6	$	2,295

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive loss, net of tax, comprised of unrealized gains on cash flow hedges is as follows:


	For the Six Months Ended
	May 31, 2020			May 31, 2019
Balance at beginning of period	$	(3,141)	$	2,395
Other comprehensive loss before reclassifications		(5,264)		(4,254)
Amounts reclassified		339		68
Net activity for other comprehensive loss		(4,925)		(4,186)
Balance at end of period	$	(8,066)	$	(1,791)

Changes in accumulated other comprehensive loss are as follows:


	For the Three Months Ended
	May 31, 2020						May 31, 2019
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net (loss) income:
Loss on cash flow hedges (interest expense)	$	304	$	(60)	$	244	$	33	$	(7)	$	26

Change in other comprehensive loss:
Decrease in fair value of Griffin’s cash flow hedges		(3,186)		446		(2,740)		(3,530)		776		(2,754)

Other comprehensive loss	$	(2,882)	$	386	$	(2,496)	$	(3,497)	$	769	$	(2,728)


	For the Six Months Ended
	May 31, 2020						May 31, 2019
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net (loss) income:
Loss on cash flow hedges (interest expense)	$	429	$	(90)	$	339	$	88	$	(20)	$	68

Change in other comprehensive loss:
Decrease in fair value of Griffin’s cash flow hedges		(6,587)		1,323		(5,264)		(5,453)		1,199		(4,254)

Other comprehensive loss	$	(6,158)	$	1,233	$	(4,925)	$	(5,365)	$	1,179	$	(4,186)

Cash Dividend

Griffin did not declare a cash dividend in the 2020 six month period or the 2019 six month period. During the 2020 six month period, Griffin paid $2,538 for the cash dividend declared in the fiscal 2019 fourth quarter. During the 2019 six month period, Griffin paid $2,279 for the cash dividend declared in the fiscal 2018 fourth quarter.