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Note 10 - Share-based Compensation | 3 Months Ended
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Sep. 30, 2019
Notes to Financial Statements |
Share-based Payment Arrangement [Text Block] |
( 10 ) | Share-Based Compensation
During the three months ended September 30, 2019 and 2018, we recognized total share-based compensation expense of $0.2 million and $0.5 million, respectively. These amounts have been included in the consolidated statements of comprehensive income within selling, general and administrative expenses. As of September 30, 2019, $1.8 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 2.3 years. There was no share-based compensation capitalized for the three months ended September 30, 2019 or 2018. At September 30, 2019, there were 1,470,810 shares of common stock available for future issuance pursuant to the Ethan Allen Interiors Inc. Stock Incentive Plan. Stock options are granted with an exercise price equal to the market price of our common stock at the date of grant, vest ratably over a specified service period, and have a contractual term of 10 years. Equity awards can also include performance vesting conditions. Company policy further requires an additional one year holding period beyond the service vest date for certain executives. Grants to independent directors have a three -year service vesting condition. A summary of stock option activity during the three months ended September 30, 2019 is presented below.
|  |  |  |  |  | Weighted |
|  |  |  |  |  | Average |
|  | Options |  |  | Exercise Price |
Outstanding at June 30, 2019 |  |  | 378,911 |  |  | $ | 21.95 |
Granted |  |  | 34,188 |  |  | $ | 17.55 |
Exercised |  |  | (1,500 | ) |  | $ | 11.74 |
Canceled (forfeited/expired) |  |  | (17,497 | ) |  | $ | 25.61 |
Outstanding at September 30, 2019 |  |  | 394,102 |  |  | $ | 21.45 |
Exercisable at September 30, 2019 |  |  | 322,483 |  |  | $ | 21.36 |
There were no stock option awards granted to employees during each of the periods presented. Non-employee (independent) directors were granted stock options during the first quarter of each fiscal year presented and valued using the Black-Scholes option pricing model with the following assumptions.
|  | Q1 2020 |  |  | Q1 2019 |
Volatility |  |  | 30.8 | % |  |  | 31.3 | %
Risk-free rate of return |  |  | 1.55 | % |  |  | 2.80 | %
Dividend yield |  |  | 3.97 | % |  |  | 3.24 | %
Expected average life (years) |  |  | 5.3 |  |  |  | 5.0 |
A summary of stock unit awards activity during the three months ended September 30, 2019 is presented below.
|  | Units |  |  | Grant Date Fair Value |
Outstanding at June 30, 2019 |  |  | 313,882 |  |  | $ | 22.82 |
Granted |  |  | 99,405 |  |  | $ | 12.72 |
Vested |  |  | - |  |  | $ | - |
Canceled (forfeited/expired) |  |  | - |  |  | $ | - |
Outstanding at September 30, 2019 |  |  | 413,287 |  |  | $ | 20.37 |
We estimate, as of the date of grant, the fair value of performance stock units with a discounted cash flow model, using as model inputs the risk-free rate of return as the discount rate, dividend yield for dividends not paid during the restriction period, and a discount for lack of marketability for a one -year post-vest holding period. The lack of marketability discount used is the present value of a future put option using a Monte-Carlo simulation. The weighted average assumptions used for the stock units granted during the first quarter of fiscal 2020 and 2019, respectively, is presented below.
|  | Q1 2020 |  |  | Q1 2019 |
Volatility |  |  | 30.5 | % |  |  | 32.1 | %
Risk-free rate of return |  |  | 1.72 | % |  |  | 2.72 | %
Dividend yield |  |  | 3.97 | % |  |  | 3.24 | %
Expected average life (years) |  |  | 3.0 |  |  |  | 3.0 |
There was no restricted stock award activity during fiscal 2020. As of September 30, 2019, there were no restricted stock awards outstanding.

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