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Stock Based Compensation | 6 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock Based Compensation | Note 4. Stock Based Compensation The Company follows ASC 718 in establishing standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair value of the share-based payment. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans. Total stock-based compensation expense recognized in the statements of comprehensive income for the three-month periods ended December 31, 2021 and 2020 was $41,791 and $33,707, respectively, before income taxes. The amount of this stock-based compensation expense related to non-qualified stock options (“NQSO”) for the three-month periods ended December 31, 2021 and 2020, was $8,757 and $5,143, respectively. The deferred tax benefit related to the NQSO’s as of December 31, 2021 and 2020 was approximately $1,839 and $1,080, respectively. Total stock-based compensation expense recognized in the statements of comprehensive income for the six-month periods ended December 31, 2021 and 2020, was $94,567 and $80,874, respectively, before income taxes. The amount of this stock-based compensation expense related to non-qualified stock options (“NQSO”) for the six-month periods ended December 31, 2021 and 2020, was $16,123 and $18,131, respectively. The deferred tax benefit related to the NQSO’s as of December 31, 2021 and 2020 was approximately $3,386 and $3,808, respectively. The remaining stock option expense in each year related to incentive stock options (“ISO”) which are not deductible by the corporation when exercised, assuming a qualifying disposition and as such no deferred tax benefit was established related to these amounts. As of December 31, 2021, there was approximately $219,311 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next 2 years, of which $179,408 relates to ISO’s and $39,903 relates to NQSO’s. The total deferred tax benefit related to these awards is expected to be $8,380. The Company has one employee stock option plan under which options or stock awards may be granted, the 2017 Stock Option and Restricted Stock Plan (the "2017 Plan"). The Board of Directors may grant options to acquire shares of common stock to employees and non-employee directors of the Company at the fair market value of the common stock on the date of grant. The maximum aggregate number of shares of Common Stock subject to options or awards to non-employee directors is 133,000 and the maximum aggregate number of shares of Common Stock subject to options or awards granted to non-employee directors during any single fiscal year is the lesser of 13,300 and 33 1/3% of the total number of shares subject to options or awards granted in such fiscal year. The maximum number of shares subject to options or awards granted to any individual employee may not exceed 15,000 in a fiscal year. Generally, options granted have a two-year vesting period based on two years of continuous service and have a ten-year contractual life. Option grants provide for accelerated vesting if there is a change in control. The plan allows for cancelled or expired options to be re-granted to participants at a later date. Shares issued upon the exercise of options are from those held in Treasury. Options covering 400,000 shares are authorized for issuance under the 2017 Plan. As of December 31, 2021, 303,904 shares have been granted, of which 228,062 are outstanding, and 171,938 remain available for grant. While no further grants of options may be made under the Company’s 2007 Stock Option and Restricted Stock Plan, as of December 31, 2021, 98,050 options were outstanding under such plan of which all are vested and exercisable. 9 Index ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option valuation model, which incorporates various assumptions including those for dividend yield, volatility, expected life and interest rates. The table below outlines the weighted average assumptions that the Company used to calculate the fair value of each option award for the six months ended December 31, 2021 and 2020.
|  | December 31, 2021 |  | December 31, 2020 |
Dividend yield |  |  | 0% |  |  | 5.54% |
Company’s expected volatility |  |  | 25.56% |  |  | 23.41% |
Risk-free interest rate |  |  | 0.93% |  |  | 0.36% |
Expected term |  |  | 5.4 yrs |  |  | 5.4 yrs |
Weighted average fair value per share of options granted during the period |  |  | $3.72 |  |  | $1.59 |
Effective March 9, 2021, the Company suspended the payment of its regular quarterly dividend. For the six months ended December 31, 2020, the Company declared and paid regular cash dividends of $0.50 per share, and for the six months ended December 31, 2021 the Company paid no cash dividends. Expected stock price volatility is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options. The expected option term (in years) represents the estimated period of time until exercise and is based on actual historical experience. The following table summarizes stock option activity during the six months ended December 31, 2021:
|  | Employee Stock Options Plan |
|  |  |  |  |  | Weighted |  |  |
|  | Number of |  | Weighted |  | Average |  |  |
|  | Shares |  | Average |  | Remaining |  | Aggregate |
|  | Subject |  | Exercise |  | Contractual |  | Intrinsic |
|  | to Option |  | Price |  | Term |  | Value |
Balance at July 1, 2021 |  |  |  | 304,662 |  |  | $ | 23.37 |  |  |  | 6.06 |  |  |  |  |
Granted |  |  |  | 77,550 |  |  | $ | 14.76 |  |  |  | 9.56 |  |  |  |  |
Exercised |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |
Forfeited or expired |  |  |  | (56,100) |  |  | $ | 20.53 |  |  |  | — |  |  |  |  |
Outstanding at December 31, 2021 |  |  |  | 326,112 |  |  | $ | 21.81 |  |  |  | 6.49 |  |  | $ | 2,116 |
Vested or expected to vest at December 31, 2021 |  |  |  | 307,578 |  |  | $ | 22.16 |  |  |  | 6.32 |  |  | $ | 2,029 |
Exercisable at December 31, 2021 |  |  |  | 220,287 |  |  | $ | 24.58 |  |  |  | 5.15 |  |  | $ | 0 |
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common stock as reported on the NYSE American on December 31, 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all option holders had exercised their options on December 31, 2021. This amount changes based on the fair market value of the Company’s common stock. The intrinsic value of options exercised during the six months ended December 31, 2021 and 2020 was $0, resulting from no option exercise activity during those periods. 10 Index The following table summarizes changes in non-vested stock options during the six months ended December 31, 2021:
|  |  | Weighted Number |  |  |  | Average |
|  |  | of Shares Subject to Option |  |  |  | Grant Date Fair Value (per Option) |
Non-vested at July 1, 2021 |  |  | 103,450 |  |  | $ | 2.22 |
Granted |  |  | 77,550 |  |  | $ | 3.72 |
Vested |  |  | (43,025) |  |  | $ | 3.03 |
Forfeited or expired |  |  | (32,150) |  |  | $ | 2.58 |
Non-vested at December 31, 2021 |  |  | 105,825 |  |  | $ | 2.89 |

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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