Annual report pursuant to Section 13 and 15(d)

Note 8 - Stock-based Compensation

v3.19.2
Note 8 - Stock-based Compensation
12 Months Ended
Mar. 31, 2019
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
Note
8
Stoc
k-based Compensation
 
The Company has
two
incentive stock plans, the
2006
Omnibus Incentive Plan (the
“2006
Plan”) and the
2014
Omnibus Equity Compensation Plan (the
“2014
Plan”). As a result of the approval of the
2014
Plan by the Company’s stockholders at the Company’s
2014
annual meeting, grants
may
no
longer be issued under the
2006
Plan.
 
The Company believes that awards of long-term, equity-based incentive compensation will attract and retain directors, officers and employees of the Company and will encourage these individuals to contribute to the successful performance of the Company, which will lead to the achievement of the Company’s overall goal of increasing stockholder value. Awards granted under the
2014
Plan
may
be in the form of incentive stock options, non-qualified stock options, shares of restricted or unrestricted stock, stock units, stock appreciation rights, or other stock-based awards. Awards
may
be granted subject to the achievement of performance goals or other conditions, and certain awards
may
be payable in stock or cash, or a combination of the two. The
2014
Plan is administered by the Compensation Committee of the Board, which selects eligible employees, non-employee directors and other individuals to participate in the
2014
Plan and determines the type, amount, duration (such duration
not
to exceed a term of
ten
(
10
) years for grants of options) and other terms of individual awards. At
March 31, 2019,
556,000
shares of the Company’s common stock were available for future issuance under the
2014
Plan, which
may
be issued from authorized and unissued shares of the Company's common stock or treasury shares.
 
Stock-based compensation is calculated according to FASB ASC Topic
718,
Compensation – Stock Compensation
, which requires stock-based compensation to be accounted for using a fair-value-based measurement. During fiscal years
2019
and
2018,
the Company recorded
$377,000
and
$539,000
of stock-based compensation, respectively. The Company records the compensation expense associated with stock-based awards granted to individuals in the same expense classifications as the cash compensation paid to those same individuals.
No
stock-based compensation costs were capitalized as part of the cost of an asset as of
March 31, 2019.
 
St
ock Options:
The following table represents stock option activity for fiscal years
2019
and
2018:
 
   
Fiscal Years Ended
 
   
March 31, 2019
   
April 1, 2018
 
   
Weighted-
   
 
 
 
 
Weighted-
   
 
 
 
   
Average
   
Number of
   
Average
   
Number of
 
   
Exercise
   
Options
   
Exercise
   
Options
 
   
Price
   
Outstanding
   
Price
   
Outstanding
 
Outstanding at Beginning of Period
  $
7.93
     
395,000
    $
8.35
     
322,500
 
Granted
   
5.90
     
110,000
     
7.35
     
140,000
 
Forfeited
   
7.83
     
(47,500
)    
9.05
     
(67,500
)
Outstanding at End of Period
   
7.45
     
457,500
     
7.93
     
395,000
 
Exercisable at End of Period
   
8.03
     
292,500
     
7.94
     
220,000
 
 
There were
no
stock options exercised during either of fiscal years
2019
and
2018.
As of
March 31, 2019,
the intrinsic value of the outstanding and exercisable stock options was each
$2,000
.
 
To determine the estimated fair value of stock options granted, the Company uses the Black-Scholes-Merton valuation formula, which is a closed-form model that uses an equation to estimate fair value. The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options awarded to certain employees during fiscal years
2019
and
2018,
which options vest over a
two
-year period, assuming continued service.
 
   
Stock Options Granted to Employees During Fiscal Years Ended
 
   
2019
   
 
 
 
 
2018
   
 
 
 
Number of options issued
   
110,000
     
10,000
     
20,000
     
110,000
 
Grant date
 
 
June 13, 2018
   
 
December 18, 2017
   
 
August 4, 2017
   
 
June 8, 2017
 
Dividend yield
   
5.42
%    
4.92
%    
5.77
%    
4.13
%
Expected volatility
   
25.00
%    
25.00
%    
25.00
%    
25.00
%
Risk free interest rate
   
2.78
%    
1.94
%    
1.51
%    
1.47
%
Contractual term (years)
   
10.00
     
10.00
     
10.00
     
10.00
 
Expected term (years)
   
4.00
     
3.00
     
3.00
     
3.00
 
Forfeiture rate
   
5.00
%    
5.00
%    
5.00
%    
5.00
%
Exercise price (grant-date closing price) per option
  $
5.90
    $
6.50
    $
5.55
    $
7.75
 
Fair value per option
  $
0.49
    $
0.59
    $
0.50
    $
0.85
 
 
For the fiscal years ended
March 31, 2019
and
April 1, 2018,
the Company recognized compensation expense associated with stock options as follows (in thousands):
 
   
Fiscal Year Ended March 31, 2019
 
   
Cost of
   
Marketing &
   
 
 
 
   
Products
   
Administrative
   
Total
 
Options Granted in Fiscal Year
 
Sold
   
Expenses
   
Expense
 
2017
  $
6
    $
4
    $
10
 
2018
   
17
     
26
     
43
 
2019
   
7
     
13
     
20
 
                         
Total stock option compensation
  $
30
    $
43
    $
73
 
 
   
Fiscal Year Ended April 1, 2018
 
   
Cost of
   
Marketing &
   
 
 
 
   
Products
   
Administrative
   
Total
 
Options Granted in Fiscal Year
 
Sold
   
Expenses
   
Expense
 
2016
  $
6
    $
1
    $
7
 
2017
   
26
     
15
     
41
 
2018
   
17
     
19
     
36
 
                         
Total stock option compensation
  $
49
    $
35
    $
84
 
 
A summary of stock options outstanding and exercisable as of
March 31, 2019
is as follows:
 
   
 
 
 
 
 
 
 
 
 
 
 
Weighted-
   
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
 
 
Weighted-
   
Avg. Exercise
   
 
 
 
 
Avg. Exercise
 
 
 
 
 
 
Number
   
Avg. Remaining
   
Price of
   
Number
   
Price of
 
Exercise
   
of Options
   
Contractual
   
Options
   
of Options
   
Options
 
Price
   
Outstanding
   
Life in Years
   
Outstanding
   
Exercisable
   
Exercisable
 
$4.00
-
4.99
     
5,000
     
2.20
    $
4.81
     
5,000
    $
4.81
 
$5.00
-
5.99
     
140,000
     
8.29
    $
5.81
     
25,000
    $
5.45
 
$6.00
-
6.99
     
30,000
     
5.71
    $
6.26
     
25,000
    $
6.21
 
$7.00
-
7.99
     
142,500
     
7.09
    $
7.81
     
97,500
    $
7.83
 
$8.00
-
8.99
     
60,000
     
6.20
    $
8.38
     
60,000
    $
8.38
 
$9.00
-
9.99
     
80,000
     
7.19
    $
9.60
     
80,000
    $
9.60
 
 
 
 
     
457,500
     
7.21
    $
7.45
     
292,500
    $
8.03
 
 
As of
March 31, 2019,
total unrecognized stock-option compensation costs amounted to
$47,000,
which will be recognized as the underlying stock options vest over a weighted-average period of
6.6
months. The amount of future stock-option compensation expense could be affected by any future stock option grants and by the separation from the Company of any employee or director who has stock options that are unvested as of such individual’s separation date.
 
Non-vested
Stock
Granted to Non-Employee Directors
:
The Board granted the following shares of non-vested stock to the Company’s non-employee directors:
 
Number
   
Fair Value
   
of Shares
   
per Share
 
Grant Date
28,000      
$5.43
 
August 8, 2018
28,000      
5.50
 
August 9, 2017
28,000      
10.08
 
August 10, 2016
28,000      
8.20
 
August 12, 2015
 
These shares vest over a
two
-year period, assuming continued service. The fair value of non-vested stock granted to the Company’s non-employee directors was based on the closing price of the Company’s common stock on the date of each grant. In each of
August 2018
and
2017,
28,000
shares that had been granted to the Company’s non-employee directors vested, having an aggregate value of
$151,000
and
$157,000,
respectively.
 
Non-vested Stock Granted to Employees:
     
On
January 18, 2019,
upon the appointment of Donna Sheridan to serve as the President and Chief Executive Officer of NoJo, the Board granted
25,000
shares of non-vested stock to Ms. Sheridan. These shares will vest on
January 18, 2021,
assuming continued service. The fair value of the non-vested stock granted to Ms. Sheridan is
$5.86
per share, which was based on the closing price of the Company’s common stock on the date of the grant.
 
Performance Bonus Plan:
     
The Company maintains a performance bonus plan for certain executive officers that provides for awards of cash or shares of common stock in the event that the aggregate average market value of the common stock during the relevant fiscal year, plus the amount of cash dividends paid in respect of the common stock during such period, increases.  These individuals
may
instead be awarded cash, if and to the extent that an insufficient number of shares of common stock are available for issuance from all shareholder-approved, equity-based plans or programs of the Company in effect. The performance bonus plan also imposes individual limits on awards and provides that shares of common stock that
may
be awarded will vest over a
two
-year period. Thus, compensation expense associated with performance bonus plan awards are recognized over a
three
-year period – the fiscal year in which the award is earned, plus the
two
-year vesting period.
 
In connection with the performance bonus plan, the Company granted shares of common stock and recognized compensation expense as set forth below.
 
   
 
 
 
 
 
 
 
 
Fair
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal
 
 
 
 
 
Fiscal
   
Value
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year
 
Shares
   
Year
   
Per
   
Compensation expense recognized during fiscal year
 
Earned
 
Granted
   
Granted
   
Share
   
2016
   
2017
   
2018
   
2019
 
2016
   
41,205
     
2017
    $
7.865
    $
108,000
    $
108,000
    $
108,000
    $
-
 
2017
   
42,250
     
2018
     
8.271
     
-
     
116,000
     
116,000
     
116,000
 
 
The below table sets forth the vesting of shares issued in connection with the grants of shares set forth in the above table. Each of the individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares. The below table also sets forth the taxes remitted to the appropriate taxing authorities on behalf of such individuals.
 
   
 
 
 
 
Vesting of shares during the
fiscal year
ended
 
Fiscal
 
 
 
 
 
March 31
, 201
9
   
April 1
, 201
8
 
Year
 
Shares
   
Shares
   
Aggregate
   
Taxes
   
Shares
   
Aggregate
   
Taxes
 
Granted
 
Granted
   
Vested
   
Value
   
Remitted
   
Vested
   
Value
   
Remitted
 
2017
   
41,205
     
20,601
    $
122,000
    $
39,000
     
20,604
    $
167,000
    $
56,000
 
2018
   
42,250
     
21,125
     
124,000
     
56,000
     
-
     
-
     
-
 
                                                         
   
 
Total
     
41,726
    $
246,000
    $
95,000
     
20,604
    $
167,000
    $
56,000
 
 
For the fiscal year ended
March 31, 2019,
the Company recognized compensation expense associated with non-vested stock grants, which is included in marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):
 
   
 
 
 
 
Non-employee
   
Total
 
Stock Granted in Fiscal Year
 
Employees
   
Directors
   
Expense
 
2017
  $
-
    $
47
    $
47
 
2018
   
116
     
77
     
193
 
2019
   
13
     
51
     
64
 
                         
Total stock grant compensation
  $
129
    $
175
    $
304
 
 
For the fiscal year ended
April 1, 2018,
the Company recognized compensation expense associated with non-vested stock grants, which is included in marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):
 
   
 
 
 
 
Non-employee
   
Total
 
Stock Granted in Fiscal Year
 
Employees
   
Directors
   
Expense
 
2016
  $
-
    $
38
    $
38
 
2017
   
108
     
141
     
249
 
2018
   
116
     
52
     
168
 
                         
Total stock grant compensation
  $
224
    $
231
    $
455
 
As of
March 31, 2019,
total unrecognized compensation expense related to the Company’s non-vested stock grants was
$261,000,
which will be recognized over the remaining portion of the respective vesting periods associated with each block of grants, such grants having a weighted average vesting term of
10.1
months. The amount of future compensation expense related to non-vested stock grants could be affected by any future non-vested stock grants and by the separation from the Company of any individual who has unvested grants as of such individual’s separation date.