Stock Option

9 Months Ended

Mar. 31, 2024

Stock Option

Stock Option

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 three months ended March 31, 2024 and 2023, the Company recorded non-cash compensation expense of $266,000 ($0.01 per basic and diluted share) and $322,000 ($0.01 per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income. For the nine months ended March 31, 2024 and 2023, the Company recorded non-cash compensation expense of $876,000 ($0.02 per basic and diluted share) and $1,134,000 ($0.03

per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income.

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”) or non-incentive stock options, 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 and a term of 10 years.

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, 2024, 363,036 stock options were outstanding, 178,984 stock options were exercisable and no further stock options were available for grant under this plan.

No stock options were granted during the three and nine months ended March 31, 2024. 0 and 37,500 options were granted during the three and nine months ended March 31, 2023, respectively. No options may be granted under this plan after December 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:

	2024	2023
Risk-free interest rates	n/a	3.03	%
Expected lives	n/a	7.27 Years
Expected volatility	n/a	43	%
Expected dividend yields	n/a	0	%

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

	2024				2023
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		521,580	$	19.37		523,080	$	18.59
Granted		—		—		37,500	$	26.94
Forfeited/Lapsed		(11,000)	$	3.15		—		—
Exercised		(147,544)	$	15.43		(38,000)	$	10.63
Outstanding, end of period		363,036	$	21.47		522,580	$	19.34
Exercisable, end of period		178,984	$	21.59		236,652	$	17.47
Weighted average fair value at grant date of options granted		n/a			$	13.36
Total intrinsic value of options exercised	$	3,972,000			$	787,000
Total intrinsic value of options outstanding	$	6,787,000			$	9,531,000
Total intrinsic value of options exercisable	$	3,323,000			$	4,760,000

A total of 115,944 and 147,544 stock options were exercised during the three and nine months ended March 31, 2024. 77,944 of the  115,944 options that were exercised during the three months ended March 31, 2024 were settled by the Company withholding 26,002 from the shares issuable on exercise of the options. 109,544 of the 147,544 options that were exercised during the nine months ended March 31, 2024 were settled by the Company withholding 46,570 from the shares issuable on exercise of the options. The withheld shares of Common Stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. For the remaining 38,000 shares exercised during the three and nine months ended March 31, 2024, $427,000 cash was received from the option exercises. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2024 was $67,000 and $119,000, respectively. 30,800 and 38,000 stock options were exercised during the three and nine months ended March 31, 2023, respectively. 27,600 of the 30,800 options that were exercised during the three months ended March 31, 2023 were settled by the Company withholding 9,943 from the shares issuable on exercise of the options. 29,600 of the 38,000 options that were exercised during the nine months ended March 31, 2023 were settled by the Company withholding 10,150 from the shares issuable on exercise of the options. The withheld shares of Common Stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. $36,000 and $81,000 cash was received from the option exercises during the three and nine months ended March 31, 2023. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2023 was $0 for both periods.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at March 31, 2024:

	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
$10.02 ‑ $26.94	363,036	7.41	$	21.47	178,984	$	21.59
	363,036	7.41	$	21.47	178,984	$	21.59

As of March 31, 2024, there was $1,306,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. No options were granted during the three and nine months ended March 31, 2024. 0 and 37,500 options were granted during the three and nine months ended March 31, 2023. 5,200 and 89,900 options vested during the three and nine months ended March 31, 2024. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 was $33,000 and $881,000, respectively. 5,200 and 97,900 options vested during the three and nine months ended March 31, 2023, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $33,000 and $916,000, 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 March 31, 2024, 20,400 stock options were outstanding, 16,560 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three and nine months ended March 31, 2024 and 2023. No options may be granted under this plan after December 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:

	2024	2023
Risk-free interest rates	n/a	n/a
Expected lives	n/a	n/a
Expected volatility	n/a	n/a
Expected dividend yields	n/a	n/a

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

	2024				2023
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		20,400	$	14.39		20,400	$	14.39
Granted		—		—		—		—
Forfeited/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		20,400	$	14.39		20,400	$	14.39
Exercisable, end of period		16,560	$	12.41		13,920	$	10.99
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	526,000			$	473,000
Total intrinsic value of options exercisable	$	460,000			$	370,000

No stock options were exercised during the three and nine months ended March 31, 2024 and 2023, respectively. No cash was received from option exercises during the three and nine months ended March 31, 2024 and 2023, respectively, 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 2012 Non-Employee Plan at March 31, 2024:

	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	5.90	$	14.39	16,560	$	12.41
	20,400	5.90	$	14.39	16,560	$	12.41

As of March 31, 2024, there was $29,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. No options were granted during the three and nine months ended March 31, 2024 and 2023, respectively. 720 and 2,640 options vested during the three and nine months ended March 31, 2024 and 2023, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 and 2023 under this plan was $5,000 and 24,000, 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 March 31, 2024, 71,900 stock options were outstanding, 62,500 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three and nine months ended March 31, 2024 and 2023. No options may be granted under this plan after December 2028. 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:

	2024	2023
Risk-free interest rates	n/a	n/a
Expected lives	n/a	n/a
Expected volatility	n/a	n/a
Expected dividend yields	n/a	n/a

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

	2024				2023
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		75,000	$	14.83		89,000	$	14.91
Granted		—		—		—		—
Forfeited/Lapsed		—		—		—		—
Exercised		(3,100)	$	18.98		(11,500)	$	15.14
Outstanding, end of period		71,900	$	14.65		77,500	$	14.88
Exercisable, end of period		62,500	$	13.41		53,220	$	13.03
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised	$	59,000			$	164,000
Total intrinsic value of options outstanding	$	1,834,000			$	1,760,000
Total intrinsic value of options exercisable	$	1,672,000			$	1,307,000

A total of 1,500 and 3,100 stock options were exercised during the three and nine months ended March 31, 2024. The 1,500 options that were exercised during the three months ended March 31, 2024 were settled by the Company withholding 792 from the shares issuable on exercise of the options. The 3,100 options that were exercised during the nine months ended March 31, 2024 were settled by the Company withholding 1,532 from the shares issuable on exercise of the options. The withheld shares of Common Stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. No cash was received from the option exercises during the three and nine months ended March 31, 2024. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2024 was $6,000 and $12,000, respectively. 1,600 and 11,500 options were exercised during the three and nine months ended March 31, 2023, respectively. The 1,600 options that were exercised during the three months ended March 31, 2023, were settled by the Company withholding 395 from the shares issuable on exercise of the options. The 11,500 options that were exercised during the nine months ended March 31, 2023, were settled by the Company withholding 6,052 from the shares issuable on exercise of the options. The withheld shares of Common Stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. No cash was received from option exercises during the three and nine months ended March 31, 2023, and the actual tax benefit realized for the tax deductions from option exercises was $8,000 and $34,000, respectively.

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at March 31, 2024:

	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	71,900	5.99	$	14.65	62,500	$	13.41
	71,900	5.99	$	14.65	62,500	$	13.41

As of March 31, 2024, there was $71,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan. No options were granted during the three and nine months ended March 31, 2024 and 2023, respectively. 5,380 and 14,880 options vested during the three and nine months ended March 31, 2024, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 under this plan was $35,000 and $124,000, respectively. 5,380 and 19,680 options vested during the three and nine months ended March 31, 2023, respectively. The total

grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $35,000 and $149,000, 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 March 31, 2024, 56,900 stock options were outstanding, 30,140 stock options were exercisable and 43,100 stock options were available for grant under this plan.

No options were granted during the three and nine months ended March 31, 2024. 5,000 and 30,000 options were granted during the three and nine months ended March 31, 2023, respectively. No options may be granted under this plan after May 2030. 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:

	2024	2023
Risk-free interest rates	n/a	3.03 - 3.40	%
Expected lives	n/a	7.23 - 7.27 Years
Expected volatility	n/a	43	%
Expected dividend yields	n/a	0	%

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

	2024				2023
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		56,900	$	23.35		26,900	$	18.64
Granted		—		—		30,000	$	27.57
Forfeited/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		56,900	$	23.35		56,900	$	23.35
Exercisable, end of period		30,140	$	21.72		18,760	$	20.73
Weighted average fair value at grant date of options granted		n/a			$	13.74
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	957,000			$	810,000
Total intrinsic value of options exercisable	$	556,000			$	316,000

No stock options were exercised during the three and nine months ended March 31, 2024 and 2023. No cash was received from option exercises during either of the three and nine months ended March 31, 2024 or 2023 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, 2024:

	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 - $30.71	56,900	7.84	$	23.35	30,140	$	21.72
	56,900	7.84	$	23.35	30,140	$	21.72

As of March 31, 2024, there was $248,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan. No stock options were granted during the three and nine months ended March 31, 2024. 5,000 and 30,000 stock options were granted during the three and nine months ended March 31, 2023, respectively.  1,000 and 11,380 options vested during the three and nine months ended March 31, 2024 and 2023, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 and 2023 under this plan was $16,000 and $129,000, respectively.

2022 Employee Stock Option Plan

In December 2022, the stockholders approved the 2022 Employee Stock Option Plan (the “2022 Employee Plan”). The 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”) or non-incentive stock options, 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 2022 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, 2024, 10,000 stock options were outstanding, 2,000 stock options were exercisable and 940,000 stock options were available for grant under this plan.

No stock options were granted during the three months ended March 31, 2024. There were 10,000 options granted during the nine months ended March 31, 2024. No options may be granted under this plan after December 2032. 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:

	2024
Risk-free interest rates	4.66	%
Expected lives	5.76 Years
Expected volatility	48.71	%
Expected dividend yields	1.48	%

The following table reflects activity under the 2022 Employee Plan for the nine months ended March 31:

	2024
			Weighted average
	Options		exercise price
Outstanding, beginning of year		5,000	$	40.01
Granted		10,000	$	21.60
Forfeited/Lapsed		(5,000)	$	(40.01)
Exercised		—		—
Outstanding, end of period		10,000	$	21.60
Exercisable, end of period		2,000	$	21.60
Weighted average fair value at grant date of options granted	$	9.75
Total intrinsic value of options exercised		n/a
Total intrinsic value of options outstanding	$	186,000
Total intrinsic value of options exercisable	$	37,000

No options were exercised during the three and nine months ended March 31, 2024. No cash was received from option exercises during the three and nine months ended March 31, 2024 and the actual tax benefit realized for the tax deductions from option exercises was $0.

The following table summarizes information about stock options outstanding under the 2022 Employee Plan at March 31, 2024:

	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
$21.60	10,000	9.52	$	21.60	2,000	$	21.60
	10,000	9.52	$	21.60	2,000	$	21.60

As of March 31, 2024, there was $68,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2022 Employee Plan. No options were granted during the three months ended March 31, 2024. 10,000 options were granted during the nine months ended March 31, 2024. No options vested during the three months ended March 31, 2024. 2,000 options vested during the nine months ended March 31, 2024, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 under this plan was $0 and $19,500, respectively.