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Note 10 - Equity Compensation

12 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Text Block]

NOTE 10 — EQUITY COMPENSATION

In November 2019, the Company’s shareholders approved the 2019 Omnibus Award Plan (“2019 Omnibus Plan”). The purpose of the 2019 Omnibus Plan is to provide a means through which the Company may attract and retain key personnel and to provide a means by which directors, officers, and employees can acquire and maintain an equity interest in the Company. The 2019 Omnibus Plan replaced the 2012 Stock Incentive Plan (“2012 Stock Plan”). The number of shares of common stock authorized for issuance under the 2019 Omnibus Plan is 2,650,000 which were combined with the remaining shares available under the 2012 Stock Plan. The number of shares reserved for issuance under the 2019 Omnibus Plan is 2,573,450 shares all of which are available for future grant or award as of June 30, 2021. The Plan contains a fungible share ratio that consumes 2.5 available shares for every full value share awarded by the Company as stock compensation. The 2019 Omnibus Plan allows for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units and other stock-based awards.

Inducement awards are granted by the Company to attract and retain key executives. Inducement awards are separately registered securities and are not part of the 2019 Omnibus Plan. In fiscal 2021, 75,000 inducement options, 30,626 RSUs and 122,509 PSUs were granted. In fiscal 2020, 280,000 inducement options were granted.

Stock Warrants

The Company has outstanding 200,000 fully exercisable stock warrants with an exercise price of $9.95 as of June 30, 2021. As of June 30, 2021, the warrants had a remaining contractual life of 0.6 years. The fair value of the warrants on the date of grant was estimated using the Black-Scholes option pricing model. The following table summarizes the weighted-average assumptions used in the Black-Scholes option price model to value the warrants in the period indicated:

	February 21, 2017
Dividend yield		2.01	%
Expected volatility		39	%
Risk-free interest rate		1.80	%
Expected life (in years)		4.5
Fair value per share	$	2.87

Stock Options

The fair value of each option on the date of grant was estimated using the Black-Scholes option pricing model. The following table summarizes the weighted-average assumptions used in the Black-Scholes option pricing model to value the stock options granted in the periods indicated:


	2021			2020
Dividend yield		2.9	%		4.7	%
Expected volatility		50	%		43	%
Risk-free interest rate		0.3	%		1.4	%
Expected life (in years)		6.0			6.0
Fair value per share	$	2.40		$	1.22

Stock option expense is recorded on a straight-line basis, or sooner if the grantee is retirement eligible as defined in the 2019 Omnibus Plan, net of forfeitures. The forfeiture rate is based on historical rates and reduces the compensation expense recognized. The expected volatility of the Company’s stock was calculated based upon the historic monthly fluctuation in stock price for a period approximating the expected life of option grants. The risk-free interest rate is the rate of a five-year Treasury security at constant, fixed maturity on the approximate date of the stock option grant. The expected life of outstanding options is determined to be less than the contractual term for a period equal to the aggregate group of option holders’ estimated weighted average time within which options will be exercised. It is the Company’s policy that when stock options are exercised, new common shares shall be issued.

Service-based options have a three-year ratable vesting period beginning one year after the date of grant. Inducement stock options have a term of ten years only if the employee is employed for three years from the date of grant. The maximum exercise period of service-based and performance-based stock options granted under the 2019 Omnibus Plan is ten years.

The Company recorded $0.8 million and $0.4 million of expense related to stock options in fiscal years 2021 and 2020, respectively.

A summary of stock option activity as of June 30, 2021 and changes during the period from July 1, 2020 through June 30, 2021 are as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at June 30, 2020		2,282,938		$	6.20		7.1	$	2,731,949
Granted		318,406		$	6.86
Exercised		(139,367	)	$	7.38
Forfeited		(132,329	)	$	8.84
Expired		(2,500	)	$	7.29
Outstanding at June 30, 2021		2,327,148		$	6.07		6.7	$	5,320,456
Exercisable at June 30, 2021		1,013,157		$	7.58		5.0	$	1,239,663
Vested and expected to vest at June 30, 2021		2,256,565		$	6.08		6.6	$	5,165,389

The aggregate intrinsic value of options exercised during the years ended June 30, 2021 and June 30, 2020 was $0.2 million and $0.1 million, respectively. The Company received $1.0 million and $0.6 million of proceeds from stock options exercises in fiscal 2021 and 2020, respectively.

As of June 30, 2021, there was $0.9 million of unrecognized compensation cost, net of forfeitures, related to stock options, which is expected to be recognized over a weighted-average remaining period of 1.8 years.

For fiscal year 2021, the Company recognized a current income tax benefit of $0.1 million for tax deductions related to equity compensation. A discrete tax expense of $0.1 million was recognized to reduce deferred tax assets for cancelled awards and detriments in excess of the tax deductions.

For fiscal year 2020, the Company recognized a current income tax benefit of $43,000 for tax deductions related to equity compensation. A discrete tax expense of $0.4 million was recognized to reduce deferred tax assets for cancelled awards and detriments in excess of the tax deductions.

Restricted Stock Units

A total of 163,752 RSUs with a weighted average fair value of $7.08 per share were awarded to employees during fiscal 2021. Inducement RSUs awarded during fiscal 2021 vest after three years of service. All other RSUs awarded during fiscal 2021 have a three-year vesting period, with 50% vesting on the first anniversary date of the award and 25% vesting on the second and third anniversary of the award. The Company determined the fair value of the awards based on the closing price of the Company stock on the date the RSUs were awarded. The unvested RSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. Dividends on RSUs in the amount of $42,085 and $16,931 were accrued as of June 30, 2021 and 2020, respectively. Accrued dividends are paid to the holder upon vesting of the RSUs and issuance of shares.

The Company recorded $0.6 million and $0.1 million of expense related to RSUs during fiscal year 2021 and 2020, respectively.

A summary of outstanding and unvested RSU activity as of June 30, 2021 and changes during the period from July 1, 2020 through June 30, 2021 are as follows:

	Shares			Weighted- Average Grant Date Fair Value
Unvested at June 30, 2020		72,820		$	4.03
Granted		163,752		$	7.08
Vested		(28,051	)	$	4.34
Forfeited		(7,800	)	$	5.49
Unvested at June 30, 2021		200,721		$	6.42

As of June 30, 2021, there was $0.6 million of unrecognized compensation cost, net of forfeitures, related to RSUs, which is expected to be recognized over a weighted-average remaining period of 2.2 years. The total fair value of RSUs that became fully vested during fiscal 2021 was $0.2 million.

Performance Stock Units

A total of 256,526 PSUs with a weighted average fair value of $7.50 per share were awarded to employees during fiscal 2021. The Company determined the fair value of the awards based on the closing price of the Company stock on the date the PSUs were awarded. PSUs vest if the Company meets certain financial metrics over a three-year period. The PSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. This applies to PSUs granted under the 2012 Stock Plan only. Dividends on PSUs in the amount of $86,196 and $46,865 were accrued as of June 30, 2021 and 2020, respectively. Accrued dividends are paid to the holder upon vesting of the PSUs and issuance of shares.

The Company recorded $0.6 million and $0.1 million of expense related to PSUs during fiscal years 2021 and 2020, respectively.

A summary of outstanding and unvested PSU activity as of June 30, 2021 and changes during the period from July 1, 2020 through June 30, 2021 are as follows:

	Shares			Weighted- Average Grant Date Fair Value
Unvested at June 30, 2020		206,974		$	3.98
Granted		256,526		$	7.50
Vested		-		$	-
Forfeited		(6,613	)	$	4.48
Unvested at June 30, 2021		456,887		$	5.95

As of June 30, 2021, there was $1.6 million of unrecognized compensation cost, net of forfeitures, related to PSUs, which is expected to be recognized over a weighted-average remaining period of 2.1 years.

Director and Employee Stock Compensation Awards

The Company awarded a total of 43,049 and 71,581 common shares as stock compensation awards in fiscal years 2021 and 2020, respectively. These common shares were valued at their approximate $0.3 million fair market values based on their stock price at dates of issuance multiplied by the number of common shares awarded, pursuant to the compensation programs for non-employee directors who receive a portion of their compensation as an award of Company stock and for employees who received a nominal recognition award in the form of Company stock. Stock compensation awards are made in the form of newly issued common shares of the Company.

Deferred Compensation Plan

The Company has a non-qualified deferred compensation plan providing for both Company matching contributions and participant funded deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in common shares of the Company. As of June 30, 2021, there were 31 participants, all with fully vested account balances. A total of 345,875 common shares with a cost of $2.5 million, and 180,264 common shares with a cost of $1.1 million, both of which included the Company contributions and the participant deferrals, were held in the plan as of June 30, 2021 and 2020, respectively, and, accordingly, have been recorded as treasury shares.

The change in the number of shares held by this plan is the net result of newly issued shares as compensation deferred into the plan offset by distributions to terminated employees. The Company issued 193,510 and 85,560 new common shares for purposes of the non-qualified deferred compensation plan during fiscal 2021 and during fiscal 2020, respectively.