Note 12 - Shareholders' Equity

12 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Shareholders' Equity and Share-Based Payments [Text Block]

NOTE 12. SHAREHOLDERS’ EQUITY

The Company has three classes of common equity: class A, class B, and class C common stock. The Company’s class A common stock is traded over-the-counter and is quoted daily under NASDAQ’s Capital Markets under the symbol “GROW.” There is no established public trading market for the Company’s class B and class C common stock. There are no shares of class B stock issued as of June 30, 2024, or 2023.

The shareholders of class C common stock have voting rights, and the shareholders of class A and class B common stock have no voting rights. Shareholders of class C common stock are allowed to convert to class A common stock. During fiscal year 2024, and 2023, no shares were converted from class C to class A. Conversions are one class A share for one class C share and are recorded at par value. There are no restrictions or requirements to convert.

 

Dividends

Dividends totaling $1.1 million were paid to holders of class A common stock in fiscal years 2024 and 2023. Dividends of $186,000 were paid to holders of class C common stock in fiscal years 2024 and 2023. The dividend rate per share for both classes was $0.0075 per month during fiscal years 2024 and 2023.

As of June 30, 2024, the Board has authorized a monthly dividend of $0.0075 per share through September 2024, at which time it will be considered for continuation by the Board. Payment of cash dividends is within the discretion of the Company’s Board of Directors and is dependent on earnings, operations, capital requirements, general financial condition of the Company and general business conditions. On a per share basis, the holders of the class C common stock and the nonvoting class A common stock participate equally in dividends as declared by the Company’s Board of Directors.

Share Repurchase Plan

The Company has a share repurchase program, approved by the Board of Directors, authorizing the Company to annually purchase up to $5.0 million of its outstanding common shares, as market and business conditions warrant, on the open market in compliance with Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. The repurchase program has been in place since December 2012, and the Board of Directors has annually renewed the repurchase program each calendar year. The Company announced on February 25, 2022, that the Board of Directors of the Company approved an increase to the limit of its annual share buyback program from $2.75 million to $5.0 million. The acquired shares may be used for corporate purposes, including shares issued to employees in the Company’s share-based compensation programs. As of June 30, 2024, approximately $4.0 million remains available for repurchase under this authorization.

During fiscal years 2024 and 2023, the Company repurchased 767,651 and 412,257, respectively, of its class A shares on the open market using cash of $2.2 million and $1.2 million, respectively. To date, the Company has repurchased a total of 1,988,877 class A shares under the repurchase program using cash of $5.6 million.

In August 2022, the Inflation Reduction Act (IRA) was signed into law, which made a number of changes to the Internal Revenue Code, including adding a 1% excise tax on stock buybacks by publicly traded corporations. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the Consolidated Statements of Shareholders' Equity. The impact of these provisions on the Consolidated Financial Statements was $22,000 for the year ended June 30, 2024.

Other Activity

All stock grants vest immediately after issuance. Issuances of treasury stock for grants, bonuses, and the share repurchase plan are accounted for using the weighted-average cost basis of the shares issued. During fiscal years 2024 and 2023, no shares were granted to employees or non-employee directors.

Stock Option Plans

In November 1989, the Board of Directors adopted the 1989 Non-Qualified Stock Option Plan (“1989 Plan”), amended in December 1991, which provides for the granting of options to purchase 1,600,000 shares of the Company’s class A common stock to directors, officers and employees of the Company and its subsidiaries. Options issued under the 1989 Plan vest six months from the grant date or 20 percent on the first, second, third, fourth, and fifth anniversaries of the grant date. Options issued under the 1989 Plan expire ten years after issuance. There were no options granted, forfeited, or exercised during the year ended June 30, 2024. Under the 1989 Plan, there were 2,000 options forfeited during the year ended June 30, 2023, and no options granted or exercised. Under the 1989 Plan, there were 229,000 options outstanding and exercisable as of June 30, 2024, and 2023, with a weighted-average grant date fair value price of $3.36.

The estimated fair value of options granted is amortized to expense over the options’ vesting period. The fair value of options granted is estimated at the date of the grant using a Black-Scholes option pricing model.

The assumptions utilized to estimate the fair value of options outstanding under the 1989 Plan are presented in the following table:

Risk-free interest rate	0.9	%
Expected volatility	70.0	%
Expected life (in years)	5.25
Expected dividend yield	1.0	%

The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. Expected volatility is based on the historical volatility of the Company’s common stock. The Company did not have historical post-vesting activity under the 1989 Plan and utilized the simplified method to calculate expected term for stock options granted in fiscal 2021. The simplified method calculates the expected term as mid-point between the weighted-average time to vest and the contractual maturity. The expected dividend yield is based on the date of the grant.

Stock option transactions under the 1989 Plan for the last two fiscal years are summarized below.

				Weighted Average		Weighted Average Remaining		Aggregate Intrinsic
				Exercise		Contractual		Value
(dollars in thousands, except price data)	Options			Price		Life in Years		(net of tax)
Outstanding June 30, 2022		231,000			6.05
Granted		-			n/a
Exercised		-			n/a
Forfeited		(2,000	)		6.05
Outstanding June 30, 2023		229,000		$	6.05
Granted		-			n/a
Exercised		-			n/a
Forfeited		-			n/a
Outstanding June 30, 2024		229,000		$	6.05		6.97	$	-

In April 1997, the Board of Directors adopted the 1997 Non-Qualified Stock Option Plan (“1997 Plan”), which provides for the granting of stock appreciation rights (SARs) and/or options to purchase 400,000 shares of the Company’s class A common stock to directors, officers, and employees of the Company and its subsidiaries. Options issued under the 1997 Plan expire ten years after issuance. Under the 1997 Plan, there were no options granted, exercised, or forfeited during the years ended June 30, 2024, or 2023. There were 2,000 options outstanding and exercisable under the 1997 Plan as of June 30, 2024, and 2023.

The estimated fair value of options granted is amortized to expense over the options’ vesting period. The fair value of these options is estimated at the date of the grant using a Black-Scholes option pricing model.

Stock option transactions under the 1997 Plan for the past two fiscal years are summarized below:

			Weighted Average		Weighted Average Remaining		Aggregate Intrinsic
			Exercise		Contractual		Value
(dollars in thousands, except price data)	Options		Price		Life in Years		(net of tax)
Outstanding June 30, 2022		2,000	$	2.74
Granted		-		n/a
Exercised		-		n/a
Forfeited		-		n/a
Outstanding June 30, 2023		2,000	$	2.74
Granted		-		n/a
Exercised		-		n/a
Forfeited		-		n/a
Outstanding June 30, 2024		2,000	$	2.74		3.72	$	-