Stock Option

12 Months Ended

Jun. 30, 2022

Stock Option

Stock Options

NOTE 9 - Stock Options

The Company follows ASC 718 (“Share-Based Payment”), 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. For the fiscal years ended June 30, 2022, 2021 and 2020, the Company recorded non-cash compensation expense of $1,649,000, $435,000 and $583,000, respectively, relating to stock-based compensation.

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the 2012 Employee Plan). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 1,900,000 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 June 30, 2022, 523,080 stock options were outstanding, 176,752 stock options were exercisable and 1,138,920 stock options were available for grant under this plan. 338,000 options were granted under this plan during the year ended June 30, 2022.

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

	2022		2021		2020
Risk-free interest rates	1.64	%	n/a	%	.6% - 2.10	%
Expected lives	6.18 Years		n/a		10 years
Expected volatility	43	%	n/a	%	44% - 46	%
Expected dividend yields	0	%	n/a	%	0	%

The Company uses a weighted-average expected stock-price volatility assumption that is a combination of both current and historical implied volatilities of the underlying stock. The implied volatilities were obtained from publicly available data sources. For the weighted-average expected option life assumption, the Company considers the exercise behavior of past grants. The average risk-free interest rate is based on the U.S. Treasury Bond rate for the expected term of the options and the average dividend yield is based on historical experience.

The following table reflects activity under the 2012 Plan for the fiscal years ended June 30,:

	2022				2021				2020
			Weighted average				Weighted average				Weighted average
	Options		exercise price		Options		exercise price		Options		exercise price
Outstanding, beginning of year		214,080	$	9.59		235,680	$	9.42		145,000	$	5.51
Granted		338,000	$	23.17		—		—		141,880		12.25
Forfeited/Lapsed		—		—		(13,000)	$	6.91		(20,000)		9.92
Exercised		(29,000)	$	5.45		(8,600)	$	9.04		(31,200)		3.78
Outstanding, end of period		523,080	$	18.59		214,080	$	9.59		235,680	$	9.42
Exercisable, end of period		176,752	$	14.68		98,176	$	8.07		70,000	$	6.57
Weighted average fair value at grant date of options granted	$	12.16				n/a			$	6.72
Total intrinsic value of options exercised	$	502,000			$	65,000			$	278,000
Total intrinsic value of options outstanding	$	1,916,000			$	1,840,000			$	696,000
Total intrinsic value of options exercisable	$	1,218,000			$	993,000			$	389,000

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at June 30, 2022:

	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
$2.19 ‑ $24.75	523,080	8.42	$	18.59	176,752	$	14.68
	523,080	8.42	$	18.59	176,752	$	14.68

As of June 30, 2022, there was $2,489,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. 338,000, 0 and 141,880 options were granted during the fiscal years ended June 30, 2022, 2021 and 2020, respectively. 1,000 of the 29,000 stock options exercised during the fiscal year ended June 30, 2022, were settled by exchanging 153 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 8,600 stock options exercised during the fiscal year ended June 30, 2021 were settled by exchanging 4,604 shares of the Company's common stock which were retired and returned to unissued status upon receipt. 7,200 of the 31,200 stock options exercised during the fiscal year ended June 30, 2020 were settled by exchanging 3,256 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. $155,000, $0 and $79,000 was received from the remaining option exercises for the fiscal years ended June 30, 2022, 2021 and 2020, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods. The total grant date fair value of the options vesting during the fiscal years ended June 30, 2022, 2021 and 2020 under this plan was $1,040,000, $244,000 and $197,000, 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 100,000 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 June 30, 2022, 20,400 stock options were outstanding, 11,280 stock options were exercisable and 0 stock options were available for grant under this plan. 9,600 options were granted under this plan during the year ended June 30, 2022.

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

	2022		2021		2020
Risk-free interest rates	1.68	%	n/a	%	1.6	%
Expected lives	6.18 Years		n/a		10 years
Expected volatility	43	%	n/a	%	44	%
Expected dividend yields	0	%	n/a	%	0	%

The following table reflects activity under the 2012 Non-Employee Plan for the fiscal years ended June 30,:

	2022				2021				2020
			Weighted average				Weighted average				Weighted average
	Options		exercise price		Options		exercise price		Options		exercise price
Outstanding, beginning of year		12,000	$	6.55		24,000	$	5.15		20,400	$	4.00
Granted		9,600	$	22.93		—		—		3,600		11.68
Forfeited/Lapsed		—		—		(9,600)	$	3.59		—		—
Exercised		(1,200)	$	4.35		(2,400)	$	4.35		—		—
Outstanding, end of period		20,400	$	14.39		12,000	$	6.55		24,000	$	5.15
Exercisable, end of period		11,280	$	8.92		6,240	$	6.04		11,520	$	4.18
Weighted average fair value at grant date of options granted	$	12.58				n/a			$	6.47
Total intrinsic value of options exercised	$	19,000			$	31,000				n/a
Total intrinsic value of options outstanding	$	149,000			$	140,000			$	157,000
Total intrinsic value of options exercisable	$	136,000			$	76,000			$	87,000

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at June 30, 2022:

	Options outstanding				Options exercisable
		Weighted average	Weighted			Weighted
	Number	remaining	average exercise		Number	average exercise
Range of exercise prices	outstanding	contractual life	price		exercisable	price
$4.35 - $22.93	20,400	7.65	$	14.39	11,280	$	8.92
	20,400	7.65	$	14.39	11,280	$	8.92

As of June 30, 2022, there was $70,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. 9,600, 0 and 3,600 options were granted during the fiscal years ended June 30, 2022, 2021 and 2020, respectively. 1,200 stock options exercised during the fiscal year ended June 30, 2022 were settled by exchanging 258 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 2,400 options exercised during the fiscal year ended June 30, 2021 were settled by exchanging 612 shares of the Company common stock which were retired and returned to unissued status upon receipt. No options were exercised during the fiscal year ended June 30, 2020. The actual tax benefit realized for the tax deductions from option exercises was $4,000, $6,000 and $0 in fiscal 2022, 2021 and 2020 respectively. The total grant date fair value of the options vesting during each of the fiscal years ended June 30, 2022, 2021 and 2020 under this plan was $39,000, $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 100,000 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 June 30, 2022, 89,000 stock options were outstanding, 45,040 stock options were exercisable and 0 stock options were available for grant under this plan. 23,500 options were granted under this plan during the year ended June 30, 2022.

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

	2022		2021		2020
Risk-free interest rates	1.68	%	n/a	%	1.60 - 1.80	%
Expected lives	6.18 Years		n/a		10 years
Expected volatility	43	%	n/a	%	44 - 45	%
Expected dividend yields	0	%	n/a	%	—	%

The following table reflects activity under the 2018 Non-Employee plan for the fiscal year ended June 30,:

	2022				2021				2020
			Weighted average				Weighted average				Weighted average
	Options		exercise price		Options		exercise price		Options		exercise price
Outstanding, beginning of year		70,100	$	11.93		96,800	$	11.74		30,400	$	8.10
Granted		23,500	$	22.93		—		—		66,400		13.41
Forfeited/Lapsed		—		—		(23,500)	$	11.68		—		—
Exercised		(4,600)	$	10.43		(3,200)	$	8.10		—		—
Outstanding, end of period		89,000	$	14.91		70,100	$	11.93		96,800	$	11.74
Exercisable, end of period		45,040	$	12.98		29,960	$	11.68		24,480	$	10.98
Weighted average fair value at grant date of options granted	$	12.58				n/a			$	7.55
Total intrinsic value of options exercised	$	58,000			$	29,000				n/a
Total intrinsic value of options outstanding	$	561,000			$	439,000			$	110,000
Total intrinsic value of options exercisable	$	354,000			$	195,000			$	40,000

The following table summarizes information about stock options outstanding under the 2018 Non- Employee Plan at June 30, 2022:

	Options outstanding				Options exercisable
		Weighted average	Weighted			Weighted
	Number	remaining	average exercise		Number	average exercise
Range of exercise prices	outstanding	contractual life	price		exercisable	price
$8.10 - $22.93	89,000	7.75	$	14.91	45,040	$	12.98
	89,000	7.75	$	14.91	45,040	$	12.98

As of June 30, 2022, there was $265,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan. 23,500, 0 and 66,400 options were granted during the fiscal years ended June 30, 2022, 2021 and 2020, respectively. 4,600 stock options exercised during the fiscal year ended June 30, 2022 were settled by exchanging 2,075 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 3,200 stock options exercised during the fiscal year ended June 30, 2021 were settled by exchanging 1,518 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. There were no options exercised during the fiscal year ended June 30, 2020. The actual tax benefit realized for the tax deductions from option exercises was $12,000, $6,000 and $0 in fiscal 2022, 2021 and 2020, respectively. The total grant date fair value of the options vesting during the fiscal year ended June 30, 2022, 2021 and 2020 under this plan was $160,000, $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 100,000 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 June 30, 2022, 26,900 stock options were outstanding, 7,380 stock options were exercisable and 73,100 stock options were available for grant under this plan. 16,900 options were granted under this plan during the year ended June 30, 2022.

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

	2022		2021
Risk-free interest rates	1.68	%	0.62	%
Expected lives	6.18 Years		10
Expected volatility	43	%	45	%
Expected dividend yields	0	%	0	%

The following table reflects activity under the 2020 Non-Employee plan for the fiscal year ended June 30,:

	2022				2021
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		10,000	$	11.40		—		—
Granted		16,900	$	22.93		10,000	$	11.40
Forfeited/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		26,900	$	18.64		10,000	$	11.40
Exercisable, end of period		7,380	$	16.68		2,000	$	11.40
Weighted average fair value at grant date of options granted	$	12.58			$	6.10
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	92,000			$	68,000
Total intrinsic value of options exercisable	$	37,000			$	14,000

The following table summarizes information about stock options outstanding under the 2020 Non- Employee Plan at June 30, 2022:

	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
$11.40 - $22.93	26,900	8.89	$	18.64	7,380	$	16.68
	26,900	8.89	$	18.64	7,380	$	16.68

As of June 30, 2022, there was $135,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan.16,900, 10,000 and 0 options were granted during the fiscal years ended June 30, 2022, 2021 and 2020, respectively. No options were exercised during the fiscal years ended June 30, 2022, 2021 and 2020. The total grant date fair value of the options vesting during the fiscal year ended June 30, 2022, 2021 and 2020 under this plan was $55,000, $12,000 and $0, respectively.