Note 13 - Stockholders Equity

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Equity [Text Block]

NOTE 13. STOCKHOLDERS EQUITY

Officers and Directors Stock Compensation

Effective October 2018, the Board of Directors approved the following compensation for directors who are not employed by the Company:

● Annual compensation of $75,000 payable at the rate of $18,750 per quarter. The Company has the right to pay this amount in the form of cash or shares of the Company’s Common Stock.

● Upon appointment, outside independent directors receive a grant of $150,000 payable in shares of the Company’s restricted Common Stock calculated based on the market value of the shares of Common Stock on the date of grant. The shares vest ratably over a five-year period.

● Reimbursement of all travel expense related to performance of Directors’ duties on behalf of the Company.

Officers, Key Employees, Consultants and Directors Stock Compensation

In January 2013, the Board of Directors approved the Second Amended and Restated 2011 Stock Plan (the “Amended 2011 Plan”), which Amended 2011 Plan was approved by shareholders on March 29, 2013. Under the terms of the Amended 2011 Plan, all employees, consultants and directors of the Company are eligible to participate. The maximum aggregate number of shares of Common Stock that may be granted under the Amended 2011 Plan is 675,000 shares.

A Committee of independent members of the Company’s Board of Directors administers the Amended 2011 Plan. The exercise price for each share of Common Stock purchasable under any incentive stock option granted under the Amended 2011 Plan shall be not less than 100% of the fair market value of the Common Stock, as determined by the stock exchange on which the Common Stock trades on the date of grant. If the incentive stock option is granted to a shareholder who possesses more than 10% of the Company’s voting power, then the exercise price shall be not less than 110% of the fair market value on the date of grant. Each option shall be exercisable in whole or in installments as determined by the Committee at the time of the grant of such options. All incentive stock options expire after 10 years. If the incentive stock option is held by a shareholder who possesses more than 10% of the Company’s voting power, then the incentive stock option expires after five years. If the option holder is terminated, then the incentive stock options granted to such holder expire no later than three months after the date of termination. For option holders granted incentive stock options exercisable for the first time during any fiscal year and in excess of $100,000 (determined by the fair market value of the shares of Common Stock as of the grant date), the excess shares of Common Stock shall not be deemed to be purchased pursuant to incentive stock options.

During the years ended June 30, 2023 and 2022 the Company issued 38,291 and 59,988 shares to its directors and 43,523 and 31,890 shares to employees and consultants, respectively, under the Amended 2011 Plan. The Company, under its Share Repurchase Program, repurchased 231,597 and 983,275 shares of its Common Stock during the years ended June 30, 2023 and 2022, respectively. Those shares were cancelled and returned to authorized but unissued shares. The Company holds no treasury stock. Vested and issued shares under the Amended 2011 plan for the fiscal year ending June 30, 2023 and June 30, 2022 totaling 25,995 and 16,480, respectively, are included in the roll-forward of restricted stock units below.

Restricted Stock Units

	Restricted Stock Units			Weighted Average Grant Date Fair Value ($/share)
Outstanding at July 1, 2021		841,316			5.34
Granted		98,192			5.54
Vested and issued		(16,480	)		6.36
Forfeited		(16,873	)		5.35
Outstanding at June 30, 2022		906,155			5.34
Granted		61,859			5.02
Vested and issued		(25,995	)		5.77
Forfeited		(34,568	)		5.52
Outstanding at June 30, 2023		907,451			5.30

The number of restricted stock units outstanding at June 30, 2023 includes 35,054 units that have vested but for which shares of Common Stock had not yet been issued pursuant to the terms of the agreement.

As of June 30, 2023, there was approximately $4.8 million of unrecognized stock-based compensation obligations under our equity compensation plans. The stock-based compensation obligation is in connection with certain employment agreements which have a deferral option at the Board’s discretion. At the end of the deferral period, the stock-based compensation expense associated with the obligation is expected to be recognized on a straight-line basis over a period of three years.

Warrants

Outstanding warrants were issued in connection with private placements of the Company’s Common Stock and with the restructuring of the Series B Preferred that occurred in March of 2018. The following table summarizes information about fixed stock warrants outstanding at June 30, 2023:

Warrants Outstanding at June 30, 2023								Warrants Exercisable at June 30, 2023
Range of exercise prices		Number Outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$	4.00		1,085,068		2.60	$	4.00		1,085,068	$	4.00
$	10.00		23,737		2.57	$	10.00		23,737	$	10.00
			1,108,805		2.60	$	4.13		1,108,805	$	4.13

Preferred Stock

The Company’s articles of incorporation currently authorizes the issuance of up to 30,000,000 shares of ‘blank check’ preferred stock, par value $0.01 (“Preferred Stock”) with designations, rights, and preferences as may be determined from time to time by the Company’s Board of Directors, of which 700,000 shares are currently designated as Series B Preferred Stock (“Series B Preferred”) and 550,000 shares are designated as Series B-1 Preferred Stock (“Series B-1 Preferred”). Both classes of Series B Preferred Stock pay dividends at a rate of 7% per annum if paid by the Company in cash, or 9% if paid by the Company by the issuance of additional shares of Series B Preferred, or Series B-1 Preferred, as applicable.

The Company does business with some of the largest retailers and wholesalers in the world. Management believes the Series B-1 Preferred favorably impacts the Company’s overall cost of capital in that it is: (i) perpetual and, therefore, an equity instrument that positively impacts the Company’s coverage ratios; (ii) possesses a below market dividend rate relative to similar instruments; (iii) offers the flexibility of a paid-in-kind (PIK) payment option; and (iv) is without covenants. After exploring alternative options for redeeming the Series B-1 Preferred, management determined that alternative financing options were materially more expensive, or would impair the Company’s net cash position, which management believes could cause customer concerns and negatively impact the Company’s ability to attract new business.

Section 4 of the Company’s First Amended and Restated Certificate of Designation of the Relative Rights, Powers and Preferences of the Series B-1 Preferred Stock, as amended (the “Series B-1 COD”) provides the Company’s Board of Directors with the right to redeem any or all of the outstanding shares of the Company’s Series B-1 Preferred for a cash payment of $10.70 per share at any time upon providing the holders of Series B-1 Preferred at least ten days written notice that sets forth the date on which the redemption will occur (the “Redemption Notice”).

As of June 30, 2023, a total of 625,375 shares of Series B Preferred and 212,402 shares of Series B-1 Preferred were issued and outstanding.

Share Repurchase Program

On May 9, 2019, our Board of Directors approved the repurchase of up to $4.0 million in shares of our Common Stock, which repurchases may be made in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices (the “Share Repurchase Program”). Under the Share Repurchase Program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable laws and regulations, including Rule 10b-18 of the Exchange Act. On March 17, 2020, the Board, given the extreme uncertainty due to COVID-19 at the time, suspended the Share Repurchase Program.

On May 18, 2021, our Board of Directors resumed its Share Repurchase Program, and increased the number of shares of Common Stock available to repurchase under the Share Repurchase Program by an additional $4 million bringing the total number of Common Stock authorized to repurchase under the Share Repurchase Program to $8.0 million.

On August 31, 2021 our Board of Directors approved an increase of $4.0 million in the number of shares of Common Stock available to repurchase under the Share Repurchase Program, and on May 10, 2022, our Board of Directors approved an increase of $9.0 million in the number of shares of Common Stock available to repurchase under the Share Repurchase Program, bringing the total number of Common Stock authorized to repurchase under the Share Repurchase Program as of June 30, 2023 to $21.0 million.

Since inception of the Share Repurchase Program through June 30, 2023, a total of 1,945,666 shares of Common Stock have been repurchased at an average purchase price of $5.91, resulting in $9,507,781 remaining available to repurchase under the current Share Repurchase Program. From time-to-time, our Board of Directors may authorize further increases to our Share Repurchase Program. In addition, the Share Repurchase Program may also be suspended for periods of time or discontinued at any time, at the Board’s discretion.

The following table provides information about repurchases of our Common Stock registered pursuant to Section 12 of the Exchange Act, during the years ended June 30, 2023 and 2022:

Period (1)	Total Number of Shares Purchased by Period		Average Price Paid Per Share		Dollars Expended by Period Under the Plans or Programs		Remaining Amount Available for Future Share Repurchases Under the Plans or Programs
Year Ended June 30, 2022:
July 1, 2021 – September 30, 2021		7,600	$	5.43	$	41,276	$	7,909,609
October 1, 2021 – December 31, 2021		244,552	$	5.85	$	1,429,697	$	6,479,912
January 1, 2022 – March 31, 2022		538,376	$	6.95	$	3,741,477	$	2,738,435
April 1, 2022 – June 30, 2022		192,747	$	4.78	$	921,331	$	10,817,104
Year Ended June 30, 2023:
July 1, 2022 – September 30, 2022		20,859	$	4.97	$	103,657	$	10,713,447
October 1, 2022 – December 31, 2022		88,741	$	5.05	$	448,266	$	10,265,181
January 1, 2023 – March 31, 2023		74,150	$	5.79	$	429,271	$	9,835,910
April 1, 2023 – June 30, 2023		47,847	$	6.86	$	328,129	$	9,507,781

⁽¹⁾ We close our books and records on the last calendar day of each month to align our financial closing with our business processes.