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Stock Options

9 Months Ended

Mar. 31, 2021

NOTE 9 - Stock Option

The Company follows ASC Topic 718, "Compensation-Stock Compensation", which requires that all share-based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. The Company recorded non-cash compensation expense relating to stock-based compensation of $84,000 and $172,000 for the three months ended March 31, 2021 and 2020, respectively ($0.00 and $0.01 per basic and diluted share for each period, respectively) and $272,000 and $497,000 for the nine months ended March 31, 2021 and 2020, respectively ($0.01 and $0.03 per basic and diluted share for each period, respectively).

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (" 2012 Employee Plan"). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options ("ISOs"), to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company’s outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2012 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2021, 112,040 stock options were outstanding, 44,600 stock options were exercisable and 731,960 stock options were available for grant under this plan.

No options were granted during the three or nine months ended March 31, 2021. The fair value of each option granted during the nine months ended March 31, 2020 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2020
Risk-free interest rates	1.30% - 2.10	%
Expected lives	10 years
Expected volatility	44-46	%
Expected dividend yields	0	%

The following table reflects activity under the 2012 Employee Plan for the nine months ended March 31:


	2021				2020
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		117,840	$	18.84		72,500	$	11.01
Granted		—		—		41,000		27.76
Exercised		(1,800)		11.39		(14,100)		7.57
Forfeited		(4,000)		8.15
Outstanding, end of period		112,040	$	19.34		99,400	$	18.41
Exercisable, end of period		44,600	$	15.84		36,900	$	13.27
Weighted average fair value at grant date of options granted		n/a			$	15.28
Total intrinsic value of options exercised	$	42,000				255,000
Total intrinsic value of options outstanding	$	1,735,000			$	241,000
Total intrinsic value of options exercisable	$	847,000			$	172,000

1,800 and 14,100 stock options were exercised during the three months ended March 31, 2021 and March 31, 2020, respectively. $0 and $71,000 cash was received from option exercises during the three months ended March 31, 2021 and 2020, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $3,000 and $8,000, respectively. 1,800 and 14,100 stock options were exercised during the nine months ended March 31, 2021 and 2020, respectively. $0 and $71,000 of cash was received from option exercises during the nine months ended March 31, 2021 and 2020, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $3,000 and $8,000, respectively.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at March 31, 2020:

Options outstanding

Options exercisable

Weighted average

Number

remaining

Weighted average

Number

Weighted average

Range of exercise prices

outstanding

contractual life

exercise price

exercisable

exercise price

$4.37‑$33.59

112,040

7.7

19.34

44,600

15.84

As of March 31, 2021, there was $705,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. 0 and 41,000 options were granted during the nine months ended March 31, 2021 and 2020, respectively. 2,600 and 13,000 options vested during the three months ended March 31, 2021 and 2020, respectively. 15,400 and 17,200 options vested during the nine months ended March 31, 2021 and 2020, respectively. The total fair value of the options vesting during the three months ended March 31, 2021 and 2020 under this plan was $63,000 and $33,000, respectively. The total fair value of the options vesting during the nine months ended March 31, 2020 and 2019 under this plan was $168,000 and $183,000, respectively.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the “2012 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2021, 10,800 stock options were outstanding, 7,320 stock options were exercisable and no further stock options were available for grant under this plan.

The following table reflects activity under the 2012 Non-Employee Plan for the nine months ended March 31:


	2021				2020
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		12,000	$	10.29		10,200	$	7.99
Granted		—		—		1,800		23.35
Exercised		(1,200)		8.70		—		—
Outstanding, end of period		10,800	$	10.47		12,000	$	10.29
Exercisable, end of period		7,320	$	9.15		5,760	$	8.35
Weighted average fair value at grant date of options granted		n/a				12.94
Total intrinsic value of options exercised	$	31,000				n/a
Total intrinsic value of options outstanding	$	263,000			$	73,000
Total intrinsic value of options exercisable	$	188,000			$	42,000

1,200 and 0 stock options were exercised during the three months ended March 31, 2021 and 2020. No cash was received from option exercises during either of the three months ended March 31, 2021 or 2020 and the actual tax benefit realized for the tax deductions from option exercises was $6,000 and $0, respectively. 1,200 and 0 stock options were exercised during the nine months ended March 31,

2021 and 2020, respectively. No cash was received from option exercises during either of the nine months ended March 31, 2021 or 2020 and the actual tax benefit realized for the tax deductions from option exercises was $6,000 and $0, respectively.

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at March 31, 2021:

Options outstanding

Options exercisable

Weighted average

Weighted

Number

remaining

average exercise

Number

average exercise

Range of exercise prices

outstanding

contractual life

price

exercisable

price

$4.37 - $23.35

10,800

6.4

10.47

7,320

9.15

As of March 31, 2021, there was $19,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. 0 and 1,800 options were granted during the three months ended March 31, 2021 and 2020, respectively. 360 options vested during each of the three months ended March 31, 2021 and 2020, respectively. 0 and 1,800 options were granted during the nine months ended March 31, 2021 and 2020, respectively. 2,760 options vested during each of the nine months ended March 31, 2021 and 2020, respectively. The total fair value of the options vesting during the three months ended March 31, 2021 and 2020 under this plan was $5,000 and $3,000, respectively. The total fair value of the options vesting during the nine months ended March 31, 2021 and 2020 under this plan was $18,000 and $18,000, respectively.

2018 Non-Employee Stock Option Plan

In December 2018, the stockholders approved the 2018 Non-Employee Stock Option Plan (the “2018 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2018 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2021, 46,800 stock options were outstanding, 20,480 stock options were exercisable and no further stock options were available for grant under this plan.


	2020
Risk-free interest rates	1.60 - 1.80	%
Expected lives	10 years
Expected volatility	44 - 45	%
Expected dividend yields	—	%

The following table reflects activity under the 2018 Non-Employee Plan for the nine months ended March 31:


	2021				2020
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		48,400	$	23.48		15,200	$	16.20
Granted		—		—		33,200		26.82
Exercised		(1,600)		16.20
Outstanding, end of period		46,800	$	23.73		48,400	$	23.48
Exercisable, end of period		20,480	$	23.08		12,240	$	21.96
Weighted average fair value at grant date of options granted		n/a			$	15.09
Total intrinsic value of options exercised	$	30,000				n/a
Total intrinsic value of options outstanding	$	519,000			$	—
Total intrinsic value of options exercisable	$	241,000			$	—

1,600 and 0 stock options were exercised during the three months ended March 31, 2021 and 2020, respectively. No cash was received from option exercises during either of the three months ended March 31, 2021 or 2020 and the actual tax benefit realized for the tax deductions from option exercises was $6,000 and $0, respectively. 1,600 and 0 stock options were exercised during the nine months ended March 31, 2021 and 2020, respectively. No cash was received from option exercises during either of the nine months ended March 31, 2021 or 2020 and the actual tax benefit realized for the tax deductions from option exercises was $6,000 and $0, respectively.

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at March 31, 2021:

Options outstanding

Options exercisable

Weighted average

Weighted

Number

remaining

average exercise

Number

average exercise

Range of exercise prices

outstanding

contractual life

price

exercisable

price

$16.20-$30.54

46,800

8.4

23.73

20,480

23.08

As of March 31, 2021, there was $311,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan. 0 and 17,200 options were granted during the three months ended March 31, 2021 and 2020, respectively. 3,440 options vested during each of the three months ended March 31, 2021 and 2020. 0 and 33,200 options were granted during the nine months ended March 31, 2021 and 2020, respectively. 9,840 and 24,400 options vested during the nine months ended March 31, 2021 and 2020, respectively. The total fair value of the options vesting during the three months ended March 31, 2021 and 2020 under this plan was $45,000 and $88,000, respectively. The total fair value of the options vesting during the nine months ended March 31, 2020 and 2019 under this plan was $133,000 and $133,000, respectively.

2020 Non-Employee Stock Option Plan

In May 2020, the stockholders approved the 2020 Non-Employee Stock Option Plan (the “2020 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2020 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 5,000 stock options were outstanding, 1,000 stock options were exercisable and 45,000 stock options were available for grant under this plan.

The fair value of each option granted during the nine months ended March 31 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2021
Risk-free interest rates	0.62	%
Expected lives	10
Expected volatility	45	%
Expected dividend yields	0	%

The following table reflects activity under the 2020 Non-Employee Plan for the nine months ended March 31:


	2021
			Weighted average
	Options		exercise price
Outstanding, beginning of year		—		—
Granted		5,000	$	22.80
Exercised		—		—
Outstanding, end of period		5,000	$	22.80
Exercisable, end of period		1,000	$	22.80
Weighted average fair value at grant date of options granted	$	12.20
Total intrinsic value of options exercised		n/a
Total intrinsic value of options outstanding	$	60,000
Total intrinsic value of options exercisable	$	12,000

No stock options were exercised during the three months ended March 31, 2021 or 2020. No cash was received from option exercises during either of the three months ended March 31, 2021 or 2020 and the actual tax benefit realized for the tax deductions from option exercises was $0 for both periods.

The following table summarizes information about stock options outstanding under the 2020 Non-Employee Plan at March 31, 2021:

Options outstanding

Options exercisable

Weighted average

Number

remaining

Weighted average

Number

Weighted average

Range of exercise prices

outstanding

contractual life

exercise price

exercisable

exercise price

$22.80

5,000

9.4

22.80

1,000

22.80

As of March 31, 2021, there was $40,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan. No options were granted during the three months ended March 31, 2021. No options vested during the three months ended March 31, 2021. 5,000 options were granted during the nine months ended March 31, 2021. 1,000 options vested during the nine months ended March 31, 2021. The total fair value of the options vesting during the nine months ended March 31, 2021 under this plan was $12,000.