STOCK-BASED COMPENSATION

12 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Long-Term Incentive Plan

The L.S. Starrett Company 2012 Long Term Incentive Plan expired in fiscal 2022 and there are no more available shares. However, the Company continues to expense shares that become vested under that plan. On September 1, 2021, the Board of Directors adopted The L.S. Starrett Company 2021 Long Term Incentive Plan (the “2021 Stock Plan”). The 2021 Stock Plan was approved by shareholders on October 13, 2021.

The 2021 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 2021 Stock Plan provides for the issuance of up to 500,000 shares in each type of common stock.

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, 2023, there were no stock options and 161,007 restricted stock units outstanding. In addition, there were 386,445 shares available for grant under the 2021 Stock Incentive Plan as of June 30, 2023 and 474,401 were available for grant as of June 30, 2022.

There were no stock options granted during fiscal years 2023 and 2022. There were no stock options outstanding as of June 30, 2023. There were no stock options exercisable as of June 30, 2023. Management has estimated that there will be no forfeitures of options.

The Company accounts for RSU awards by recognizing the expense of the fair 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, 2023, the Company granted 95,956 RSU awards with fair values of $8.96 per RSU award, and there were no RSU’s forfeited. During the year ended June 30, 2022, the Company granted 80,500 RSU awards with fair values of $11.35 per RSU award, and there were 11,174 RSU’s forfeited.

There were 98,756 and 133,995 RSU awards settled in fiscal years 2023 and 2022 respectively. The aggregate intrinsic value of RSU awards outstanding as of June 30, 2023 was $1.7 million compared to $1.1 million in fiscal 2022. Compensation expense related to the 2012 and 2021 Stock Incentive Plan was $615,100 and $501,000 for fiscal 2023 and 2022, respectively. As of June 30, 2023, there was $2.9 million of total unrecognized compensation costs related to outstanding stock-based compensation arrangements. Of this cost, $2.1 million relates to performance based RSU grants that will not vest. The performance conditions were tied to achieving fiscal year budgets. The remaining $0.8 million is expected to be recognized over a weighted average period of 1.5 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. The Board of Directors last approved an ESPP renewal in 2022. A summary of option activity is as follows:

The following information relates to outstanding options as of June 30, 2023:


	Shares on Options	Weighted Average Exercise Price	Shares Available for Grant
Balance, June 30, 2021	117,960		345,229
Options granted	26,614	7.94	(26,614)
Options exercised	(43,658)	3.18	—
Options canceled	(30,866)		30,866
Balance, June 30, 2022	70,050		349,481
2017 Plan Expired	—		(349,481)
2022 Plan Authorized	—		500,000
Options granted	35,172	6.97	(35,172)
Options exercised	(39,997)	3.13	—
Options canceled	(14,483)		2,534
Balance, June 30, 2023	50,742		467,362


Weighted average remaining life (years)	1.3
Weighted average fair value on grant date of options granted in:
2022	$	4.00
2023	$	3.66

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 – 56.99% – 58.90%, risk free interest rate – 4.14%– 4.67%, expected dividend yield - 0% - 0% and expected lives - 2 years. Compensation expense of $0.1 million, $0.1 million has been recorded for fiscal 2023 and 2022, 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 2023 and 2022.