STOCK-BASED COMPENSATION

12 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Long-Term Incentive Plan

On September 5, 2012, the Board of Directors adopted The L.S. Starrett Company 2012 Long Term Incentive Plan (the “2012 Stock Plan”). The 2012 Stock Plan was approved by shareholders on October 17, 2012, and the material terms of its performance goals were re-approved by shareholders at the Company’s Annual Meeting held on October 18, 2017. The 2012 Stock Plan permits the granting of the following types of awards to officers, other employees and non-employee directors: stock options; restricted stock awards; unrestricted stock awards; stock appreciation rights; stock units including restricted stock units; performance awards; cash-based awards; and awards other than previously described that are convertible or otherwise based on stock. The 2012 Stock Plan provides for the issuance of up to 500,000 shares of Class A common stock.

Options granted vest in periods ranging from one year to three years and expire ten years after the grant date. Restricted stock units (“RSU”) granted generally vest from one year to three years. Vested restricted stock units will be settled in Class A shares of common stock. As of June 30, 2021, there were 8,250 stock options and 260,977 restricted stock units outstanding. In addition, there were 10,477 shares available for grant under the 2012 Stock Incentive Plan as of June 30, 2021 and 119,533 were available for grant as of June 30, 2020.

There were no stock options granted during fiscal years 2021, 2020 or 2019.

The weighted average contractual term for stock options outstanding as of June 30, 2021 was 1.5 years. The aggregate intrinsic value of stock options outstanding as of June 30, 2021 was less than $0.1 million. There were 8,250 options exercisable as of June 30, 2021. In recognizing stock compensation expense for the 2012 Stock Incentive Plan management has estimated that there will be no forfeitures of options.

The Company accounts for RSU awards by recognizing the expense of the intrinsic value at the award date ratably over vesting periods generally ranging from one year to three years. The related expense is included in selling, general and administrative expenses. During the year ended June 30, 2021, the Company granted 297,140 RSU awards with fair values of $3.36 per RSU award, and there were 3,834 RSU’s forfeited. During the year ended June 30, 2020, the Company granted 110,500 RSU awards with fair values of $5.34 per RSU award. During the year ended June 30, 2019, the Company granted 67,000 RSU awards with fair values of $6.34 per RSU award.

There were 102,670 and 64,661 RSU awards settled in fiscal years 2021 and 2020 respectively. The aggregate intrinsic value of RSU awards outstanding as of June 30, 2021 was $2.4 million. The aggregate intrinsic value of RSU awards outstanding as of June 30, 2020 was $0.8 million. Compensation expense related to the 2012 Stock Incentive Plan was $675,000, $345,000 and $232,000 for fiscal 2021, 2020 and 2019 respectively. As of June 30, 2021, there was $2.3 million of total unrecognized compensation costs related to outstanding stock-based compensation arrangements. Of this cost, $1.7 million relates to performance based RSU grants that are not expected to be awarded. The remaining $0.6 million is expected to be recognized over a weighted average period of 1.7 years.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plans (ESPP) give eligible employees an opportunity to participate in the success of the Company. The Board of Directors renews each Employee Stock Purchase Plan every five years. Under these plans the purchase price of the optioned stock is 85% of the lower of the market price on the date the option is granted or the date it is exercised. Options become exercisable exactly two years from the date of grant and expire if not exercised on such date. No ESPP options were exercisable at fiscal year ends. The Board of Directors last approved an ESPP renewal in 2017. A summary of option activity is as follows:


	Shares on Options	Weighted Average Exercise Price	Shares Available for Grant
Balance, June 30, 2018	70,515		450,007
Options granted	55,227	5.45	(55,227)
Options exercised	(11,981)	5.72	—
Options canceled	(26,628)		18,087
Balance, June 30, 2019	87,133		412,867
Options granted	86,946	3.63	(86,946)
Options exercised	(20,615)	3.52	—
Options canceled	(54,271)		54,271
Balance, June 30, 2020	99,193		380,192
Options granted	70,985	3.26	(70,985)
Options exercised	(16,196)	4.65	—
Options canceled	(36,022)		36,022
Balance, June 30, 2021	117,960		345,229

The following information relates to outstanding options as of June 30, 2021:


Weighted average remaining life (years)	1.3
Weighted average fair value on grant date of options granted in:
2019	$	2.28
2020	1.63
2021	1.51

The fair value of each option grant was estimated on the date of grant based on the Black-Scholes option pricing model with the following weighted average assumptions: expected stock volatility – 51.73% – 51.93%, risk free interest rate – 0.16%– 0.19%, expected dividend yield - 0% - 0% and expected lives - 2 years. Compensation expense of $0.1 million, $0.1 million and $0.1 million has been recorded for fiscal 2021, 2020 and 2019, respectively.

Employee Stock Ownership Plan

On February 5, 2013, the Board of Directors adopted The L.S. Starrett Company 2013 Employee Stock Ownership Plan (the “2013 ESOP”). The purpose of the plan is to supplement existing Company programs through an employer funded individual account plan dedicated to investment in common stock of the Company, thereby encouraging increased ownership of the Company while providing an additional source of retirement income. The plan is intended as an employee stock ownership plan within the meaning of Section 4975 (e) (7) of the Internal Revenue Code of 1986, as amended. U.S. employees who have completed a year of service as of December 31, 2012 are eligible to participate. There was no compensation expense for the ESOP in 2021, 2020 or 2019.