What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-09-09 compared with 2021-09-10 · 475 added, 470 removed, 1343 unchanged (41% of the section changed)

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equity, and cash flows for each of the periods presented in this report.

The Company acquired JSI on May 21, 2021.

Management excluded JSI from its evaluation of the effectiveness of the internal control over financial reporting as of June 30, 2021.

Including goodwill and acquired intangible assets, JSI represented 39% of the Company’s total consolidated assets as of June 30, 2021, and 3% of the Company’s total consolidated sales for the fiscal year ended June 30, 2021.

Management's Report on Internal Control over Financial Reporting appearing on page 29 of this report is incorporated by reference in this Item 9A.

Management's Report on Internal Control over Financial Reporting appearing on page 32 of this report is incorporated by reference in this Item 9A.

Changes in Internal Control

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PRINCIPAL ACCOUNTING FEES AND SERVICES

Information concerning principal accountant fees and services appears in the Proxy Statement under the headings “Ratification of Appointment of Independent Registered Public Accounting Firm”

Information concerning fees and services provided by our principal accountant Grant Thorton LLP (PCAOB ID No.

248 ) appears in the Proxy Statement under the headings “Ratification of Appointment of Independent Registered Public Accounting Firm”

and “Committees of the Board”

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Description of Securities (incorporated by reference to Exhibit 4.1 to LSI’s Annual Report on Form 10-K filed on September 6, 2019).

Warrant Agreement issued by LSI Industries Inc.

(incorporated by reference to Exhibit 4.1 to LSI’s Form 8-K filed on February 21, 2017).

Third Amendment to Loan Documents dated February 21, 2017 between LSI and PNC Bank, National Association (incorporated by reference to Exhibit 4.2 to LSI’s Form 8-K filed on February 21, 2017).

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Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to LSI’s Form 8-K filed on June 23, 2016)

LSI Industries Inc.

Nonqualified Deferred Compensation Plan (Amended and Restated as of December 30, 2019) (incorporated by reference to Exhibit 10.2 to LSI’s Form 10-Q filed on February 6, 2020).

Employment Agreement between LSI and James A.

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Caneris (incorporated by reference to Exhibit 10.1 to LSI’s Form 8-K filed on August 5, 2019).

Employment Offer Letter between LSI and Michael C.

Beck (incorporated by reference to Exhibit 10.1 to LSI’s Form 8-K filed on January 16, 2019).

Form of Change in Control Agreement (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on January 29, 2021).

Form of Restricted Stock Unit Award Agreement – Amended and Restated 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to LSI’s Form 8-K filed on July 6, 2015).

Form of Non-qualified Stock Option Agreement / Inducement Awards – Amended and Restated 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on November 7, 2018).

Form of Nonqualified Stock Option Award Agreement - Service-Based – Amended and Restated 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to LSI’s Form 8-K filed on July 6, 2015).

Form of Nonqualified Stock Option Award Agreement – Performance-Based – Amended and Restated 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to LSI’s Form 8-K filed on July 6, 2015).

Form of Incentive Stock Option Award Agreement – Amended and Restated 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to LSI’s Form 8-K filed on July 6, 2015).

FY20 Long Term Incentive Plan*++ (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on November 7, 2019).

FY20 Short Term Incentive Plan*++ (incorporated by reference to Exhibit 10.2 to LSI’s Form 10-Q filed on November 7, 2019).

Form of Performance Share Unit Award Agreement – Amended and Restated 2012 Stock Incentive Plan*++ (incorporated by reference to Exhibit 10.3 to LSI’s Form 10-Q filed on November 7, 2019).

2019 Omnibus Award Plan (incorporated by reference to Exhibit 10.1 to LSI’s Form S-8 Registration Statement File No.

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Fiscal Year 2021 Long-Term Incentive Plan (LTIP)++ (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on November 5, 2020).

Fiscal Year 2021 Short-Term Incentive Plan (STIP)++ (incorporated by reference to Exhibit 10.2 to LSI’s Form 10-Q filed on November 5, 2020)

Form of 2019 Omnibus Award Plan Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to LSI’s Form 10-Q filed on November 5, 2020).

Form of 2019 Omnibus Award Plan Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to LSI’s Form 10-Q filed on November 5, 2020)

Form of 2019 Omnibus Award Plan Performance Stock Unit Award Agreement++ (incorporated by reference to Exhibit 10.5 to LSI’s Form 10-Q filed on November 5, 2020)

Code of Conduct

Form of 2019 Omnibus Award Plan Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to LSI’s Form 10-Q filed on February 4, 2022).

Form of 2019 Omnibus Award Plan Performance Stock Unit Award Agreement++ (incorporated by reference to Exhibit 10.4 to LSI’s Form 10-Q filed on February 4, 2022).

LSI Industries Inc.

2021 Employee Stock Purchase Plan (incorporated by reference to LSI’s Proxy Statement on Schedule 14A filed on September 15, 2021).

Sixth Amendment to Loan Documents dated as of September 30, 2021, between LSI and PNC Bank National Association (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on November 4, 2021).

Fiscal Year 2022 Long-Term Incentive Plan (LTIP)++ (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on February 4, 2022).

LSI Industries Inc.

Nonqualified Deferred Compensation Plan (Amended and Restated as of December 30, 2019) (incorporated by reference to Exhibit 10.1 to LSI’s Form 10-Q filed on February 6, 2020).

Code of Conduct (incorporated by reference to Exhibit 14 to LSI’s Form 10-K filed on September 10, 2021)

Subsidiaries of the Registrant

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/s/ Robert P.

Director 

September 9, 2022

/s/ Ronald D.

Director  

September 9, 2022

Director  

September 9, 2022

Marshall, Jr.

September 9, 2022

/s/ Chantel E.

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S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s “forward looking statements”

and disclosures as presented earlier in this Form 10-K in the “Safe Harbor”

Statement, as well as the Company’s consolidated financial statements and accompanying notes presented later in this Form 10-K should be referred to when reading Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Microsoft Corporation.

MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K).

This section generally discusses the results of our operations for the year ended June 30, 2022, compared to the year ended June 30, 2021.

For a discussion of the year ended June 30, 2021, compared to the year ended June 30, 2020, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

in our Annual Report on Form 10-K for the year ended June 30, 2021.

LSI is a leading producer of non-residential lighting and retail display solutions.

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LSI’s team of internal specialists also provide comprehensive project management services in support of large-scale rollouts.

COVID-19 Pandemic

The COVID-19 pandemic continues to impact business activity across industries in the U.S.

and worldwide, including, but not limited to, workforce and supply chain disruptions.

We remain committed to taking actions to address the health, safety and welfare of our employees, customers, agents and suppliers.

Future developments, such as the actions taken by governmental authorities in response to future outbreaks that are highly uncertain and unpredictable, will determine the extent to which COVID-19 continues to impact our results of operations and financial conditions.

See the risk factor captioned “Our financial condition and results of operations for future periods may be adversely affected by the COVID-19 outbreak or other outbreaks of infectious disease or similar public health threats and the resulting economic impact”

in Item 1A, Risk Factors, included in Part I of this Annual Report on Form 10-K for an additional discussion of risks related to COVID-19.

Summary of Consolidated Results

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Fiscal 2022 net sales of $455.1 million increased $139.5 million or 44.2% as compared to fiscal 2021 net sales of $315.6 million.

Net sales were favorably influenced by increased net sales in the Display Solutions Segment (up $27.3 million or 27%) and were unfavorably influenced by decreased net sales in the Lighting Segment (down $17.2 million or 8%).

Fiscal 2021 operating income of $8.0 million represents a $5.1 million decrease from fiscal 2020 operating income of $13.1 million.

Net sales were favorably influenced by increased net sales in the Lighting Segment (up $44.4 million or 23.5%) and favorably influenced by increased net sales in the Display Solutions Segment (up $95.1 million or 75.1%).

The growth can be attributed to continued strengthening demand in the Company’s core markets and from the acquisition of JSI.

Fiscal 2022 operating income of $21.2 million represents a $13.2 million increase from fiscal 2021 operating income of $8.0 million.

Current year results include $0.5 million of transaction costs related to the acquisition of JSI.

Prior year results were favorably impacted by the $4.8 million pre-tax gain on the sale of the New Windsor, New York facility and the $3.7 million pre-tax gain on the sale of the North Canton, Ohio facility.

Prior year results were also unfavorably impacted by $2.9 million transaction costs related to the acquisition of JSI.

Non-GAAP adjusted operating income in fiscal 2022 of $25.0 million increased $12.0 million or 93% from adjusted fiscal 2021 operating income of $13.0 million.

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GAAP measures.

The increase in adjusted operating income was the net result of an increase in net sales, higher-value sales mix and lower selling and administrative expenses.

The increase in adjusted operating income was the net result of an increase in net sales, higher-value sales mix resulting from targeted pricing actions, and lower selling and administrative expenses.

Non-GAAP Financial Measures

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Adjusted operating income, net income, and earnings per share, which exclude the impact of acquisition costs, stock compensation expense, severance costs and restructuring and plant closure (gains) costs are Non-GAAP financial measures.

Also included below are Non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow, Net Debt and Organic Sales Growth.

Also included below are Non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow and Net Debt.

We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business.

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Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures.

Below is a reconciliation of these non-GAAP measures to operating income, net income, and earnings per share for the periods indicated along with the calculation of EBITDA and Adjusted EBITDA, Free Cash Flow, Net Debt and Organic Sales Growth. 

Reconciliation of operating income to adjusted operating income:

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Severance costs

 (3) 

Restructuring, plant closure (gain) costs and related inventory write-downs

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Cash Flow from Operations

Proceeds from sale of assets

Capital expenditures

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Cash and cash equivalents as reported

Reconciliation of net sales to organic net sales

(In thousands)

Lighting Segment

Display Solutions Segment

Total net sales

Total organic net sales

Results of Operations

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Operating Income

Lighting Segment net sales of $189.0 million in fiscal 2021 decreased 8% from fiscal 2020 net sales of $206.2 million.

The 8% decrease is due to the impact of COVID-19 disruptions in construction markets.

However, in the fiscal fourth quarter, the Lighting Segment generated sales growth of 30% compared to the prior year fourth quarter, with recovery in the construction market and significant increases in both project business and sales through distributor stock.

Gross profit of $57.0 million in fiscal 2021 remained relatively consistent with the same period of fiscal 2020.

Lighting Segment net sales of $233.4 million in fiscal 2022 increased 23.5% from fiscal 2021 net sales of $189.0 million.

The sales growth was across all key vertical markets, with significant contributions from new and enhanced products.

Gross profit of $70.1 million in fiscal 2022 increased $13.1 million or 23.0% from fiscal 2021.

Gross profit as a percentage of net sales was 30.0% in fiscal 2022 compared to 30.2% in fiscal 2021.

The growth in gross profit as a percentage of net sales reflects our continued focus on the entire lighting model, including higher value applications, price management, new and cost reduced products and supply chain and operations productivity.

Operating expenses of $43.7 million in fiscal 2021 increased $3.0 million or 7% from fiscal 2020 operating expenses of $40.7 million, primarily due to the $4.8 million pre-tax gain on the sale of the New Windsor facility in fiscal 2020 with no comparable event in fiscal 2021.

When the $4.8 million gain is removed from the fiscal 2020 results, operating expenses in fiscal 2021 decreased from the prior year, driven by programs to reduce spending resulting from the pandemic.

The Lighting Segment fiscal 2021 operating income of $13.3 decreased $2.8 million from an operating income of $16.1 million in the same period of fiscal 2020 primarily due to the $4.8 million pre-tax gain on the sale of the New Windsor facility in fiscal 2020.

Fiscal 2021 Non-GAAP adjusted operating income of $13.6 million increased $1.9 million from fiscal 2020 Non-GAAP adjusted operating income of $11.7 million (refer to the Non-GAAP table below for a reconciliation of Lighting Segment operating income to adjusted operating income).

The increase in Non-GAAP adjusted operating income is primarily due to a favorable mix of sales on lower sales volume, improved productivity from manufacturing facility consolidation, and lower operating expenses.

Reconciliation of Lighting Segment operating income to adjusted operating income:

(In thousands)

Operating Income

Stock compensation expense

Restructuring and plant closure (gain) costs

Adjusted operating income

Gross profit as a percentage of sales was relatively flat as selling price increase realization offset the majority of rapid cost increases to material input costs and transportation costs.

Operating expenses of $49.2 million in fiscal 2022 increased $5.5 million or 12.6% from fiscal 2021 operating expenses of $43.7 million, primarily driven by higher commission expense as a result of higher sales.

Fiscal 2022 Lighting Segment operating income of $20.9 million increased $7.6 million or 57.1% from operating income of $13.3 million in fiscal 2021 and operating income as a percentage of sales also increased from 7.1 to 9.0%.

Both increases were primarily driven by sales volume and price realization..

Display Solutions Segment

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Operating Income

Display Solutions Segment net sales of $126.6 million increased $27.2 million or 27% from fiscal 2020 net sales of $99.4 million.

Of the $27.2 million increase, $9.1 million is a result of the acquisition of JSI.

The remaining increase in sales is due to growth in our Quick-Service Restaurants and Grocery verticals partially offset by a reduction in our Petroleum vertical. 

Display Solutions Segment net sales of $221.7 million in fiscal 2022 increased $95.1 million or 75.1% from fiscal 2021 net sales of $126.6 million.

The increase reflects the acquisition of JSI and continued growth in the grocery and quick-service-restaurant markets.

Gross profit of $39.1 million in fiscal 2022 increased $17.1 million or 77.7% from fiscal 2021.

Gross profit as a percentage of net sales increased to 17.4% in fiscal 2021 compared to 16.8% in fiscal 2020, primarily within our Petroleum and Grocery verticals.

Operating expenses of $12.1 million in fiscal 2021 increased $3.7 million or 43% from fiscal 2020.

Operating expenses in fiscal 2020 were impacted by the $3.7 million pre-tax gain on the sale of the North Canton, Ohio facility with no comparable event in fiscal 2021.

Display Solutions Segment fiscal 2021 operating income of $9.9 million increased $1.7 million from operating income of $8.2 million in fiscal 2020.

Non-GAAP adjusted operating income was $10.0 million in fiscal 2021 compared to adjusted operating income of $5.9 million in fiscal 2020 (refer to the Non-GAAP table below for a reconciliation of Display Solutions Segment operating income to adjusted operating income).

The increase is primarily due to improved gross profit margin.

Reconciliation of Display Solutions Segment operating income to adjusted operating income:

(In thousands)

Operating Income

Stock compensation expense

Restructuring and plant closure (gain) costs

Adjusted operating income

Gross profit as a percentage of net sales increased to 17.6% in fiscal 2022 compared from 17.4% in fiscal 2021.

Gross profit as a percentage of net sales reflects both the accretive effect of the JSI acquisition and improvements to core business margins, partially offset by the impact of input costs.

Operating expenses of $21.5 million in fiscal 2022 increased $9.4 million or 77.2% from fiscal 2021, primarily driven by the inclusion of 12 months of results for JSI.

Fiscal 2022 Display Solutions Segment operating income of $17.6 million increased $7.7 or 78.3% million from operating income of $9.9 million in fiscal 2021.

The increase of $7.7 million was primarily driven by an increase in sales.

Corporate and Eliminations

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Operating (Loss)

The gross (loss) profit relates to the intercompany profit in inventory elimination.

The gross profit (loss) relates to the intercompany profit in inventory elimination.

Operating expenses of $17.3 million in fiscal 2022 increased $2.2 million or 14.3% from fiscal 2021.

The increase is primarily due to $2.9 million of transaction costs related to the acquisition of JSI, an increase in stock compensation expense due to prior fiscal year forfeitures and an increase in the employer match related to the deferred compensation plan.

The increase is primarily due an increase in stock compensation expense and incentive plan expenses as the result of improved business performance.

Consolidated Results

We reported $2.0 million net interest expense in fiscal 2022 compared to $0.3 million net interest expense in fiscal 2021.

The decrease in interest expense from fiscal 2020 to fiscal 2021 is the result of reduced average borrowings against our line of credit.

We also recorded other income of $0.1 million in fiscal 2021 and other expense of $0.5 million in fiscal 2020, both of which relate to net foreign currency transaction gains/losses through our Mexican and Canadian subsidiaries.

The $2.0 million of income tax expense represents a consolidated effective tax rate of 25.9%.

The effective tax rate is impacted by non-deductible transaction costs related to the acquisition of JSI.

The $2.1 million income tax expense in fiscal 2020 represents a consolidated effective tax rate of 18.0%.

The effective tax rate was impacted by the following:

1) a tax rate benefit resulting from carryback of a net operating loss (NOL) allowed due to the enactment of the Coronavirus Aid, Relief and Economic Security (CARES) Act, and;

2) the utilization of a capital loss carryforward related to the capital gain on the sale of the North Canton facility.

The increase in interest expense from fiscal 2021 to fiscal 2022 is the result of higher levels of debt outstanding on our credit facility which is the result of partially funding of the JSI acquisition.

We also recorded other expense/(income) $0.1 and ($0.2) in fiscal 2022 and fiscal 2021, respectively, related to net foreign exchange currency transaction losses and gains through our Mexican and Canadian subsidiaries.

The $4.1 million of tax expense in fiscal 2022 reflects a consolidated effective tax rate of 21.2%.

The $2.0 million of income tax expense in fiscal 2021 represents a consolidated effective tax rate of 25.9%.

The effective tax rate in fiscal 2021 was higher as a result of non-deductible transaction costs related to the acquisition of JSI.

We reported net income of $15.0 million in fiscal 2022 compared to net income of $5.9 million in fiscal 2021.

Non-GAAP adjusted net income was $18.0 million in fiscal 2022 compared to adjusted net income of $9.8 million in fiscal 2021 (Refer to the Non-GAAP tables above).

The increase in Non-GAAP adjusted net income is primarily the net result of an increase in net sales, improved gross profit margin and decreased interest expense and other expense.

The increase in Non-GAAP adjusted net income is primarily the result of an increase in net sales.

Diluted earnings per share of $0.54 was reported in fiscal 2022 compared to $0.21 diluted earnings per share in fiscal 2021.

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The ratio of current assets to current liabilities was 2.13 to 1 as of June 30, 2022, compared to a ratio of 1.76 to 1 as of June 30, 2021.

The $2.9 million increase in working capital from June 30, 2020 to June 30, 2021 is primarily driven by a $20.1 million increase in inventory, a $19.8 million increase in accounts receivable, partially offset by a $18.8 million increase in accounts payable and a $17.5 million increase in accrued expenses.

The $30.2 million increase in working capital from June 30, 2021, to June 30, 2022, is primarily driven by a $15.5 million increase in inventory, a $20.1 million increase in accounts receivable offset by a $1.8 million increase in accounts payable and the $3.8 million current portion of the $25.0 million term loan.

Net accounts receivable were $77.8 million and $57.7 million at June 30, 2022, and June 30, 2021, respectively.

Some of the increase in accounts receivable is due to the acquisition of JSI.

DSO was 56 days at both June 30, 2021 and June 30, 2020.

We believe that our receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate.

The increase in accounts receivable is due primarily to an increase in sales.

DSO was 54 days and 56 days as of June 30, 2022, and June 30, 2021, respectively.

We believe that our receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for credit losses are adequate.

Net inventories of $74.4 million at June 30, 2022, increased $15.5 million from $58.9 million at June 30, 2021.

The increase of $20.1 million is the result of an increase in gross inventory of $21.4 million and an increase in obsolescence reserves of $1.2 million.

Lighting Segment net inventory increased $9.0 million, in anticipation of an increase in market demand and ongoing supply chain challenges.

Net inventory in the Display Solutions Segment increased $11.2 million, primarily due to the acquisition of JSI.

Cash generated from operations and borrowing capacity under our line of credit is our primary source of liquidity.

In March 2021, the Company amended its secured line of credit to a $100 million facility from a $75 million facility, with $24 million of the credit line available as of August 26, 2021.

This $100 million five-year credit line expires in the third quarter of fiscal 2026.

We are in compliance with all of our loan covenants.

We believe that our $100 million line of credit plus cash flows from operating activities are adequate for fiscal 2021 operational and capital expenditure needs.

However, as the impact of COVID-19 on the economy and our operations continues to evolve, we will continue to assess our liquidity needs.

The increase of $15.5 million is the primarily the result of an increase in gross inventory of $15.5 million and a negligible increase in obsolescence reserves.

Lighting Segment net inventory increased $12.0 million, in anticipation of an increase in market demand and to mitigate escalating supply chain challenges in the first half of fiscal 2022.

Net inventory in the Display Solutions Segment increased $3.5 million to support several on-going programs.

Cash generated from operations and borrowing capacity under our credit facility is our primary source of liquidity.

In September 2021, we amended our previous $100 million secured line of credit, to a $25 million term loan and the remaining $75 million as a secured revolving line of credit.

Both facilities expire in the third quarter of fiscal 2026.

As of June 30, 2022, $17.7 million of the line of credit was available.

As of June 30, 2022, we are in compliance with all of our loan covenants.

We believe that our $100 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the next 12 months.

We have on file with the SEC a shelf registration statement which allows us to sell any combination of common stock, preferred stock warrants, senior or subordinated debt securities or other securities in one or more offerings if we choose to do so in the future.

We expect to maintain the effectiveness of this shelf registration statement for the foreseeable future.

We generated $28.0 million of cash from operating activities in fiscal 2021 compared to $29.7 million in fiscal 2020.

The $1.7 million decrease in net cash flows from operating activity is the net result of increases in accounts receivable and inventory, partially offset by our improved earnings as well as increases in accounts payable, customer project prepayments and accrued FICA from deferred payroll taxes allowed under the CARES Act.

We used $93.0 million of cash in investing activities in fiscal 2021 compared to a source of cash of $17.4 million in fiscal 2020, resulting in a decrease of $110.4 million.

Capital expenditures decreased from $2.7 million in fiscal 2020 to $2.3 million in fiscal 2021.

We acquired JSI in May 2021 for $90.7 million, net of cash acquired.

In addition, we sold our New Windsor manufacturing facility for $12.3 million and our North Canton facility for $7.7 million in fiscal 2020, which contributed to the source of cash.

The acquisition of JSI and the sale of our two facilities were the primary contributing factors for the change in investing activities from fiscal 2020 to fiscal 2021.

We had a source of $63.6 million of cash related to financing activities in fiscal 2021 compared to use of cash of $44.4 million in fiscal 2020.

The $108.0 million change in cash flow was primarily the net result of borrowings of long-term debt in excess of payments which was primarily driven by the acquisition of JSI.

We used $3.8 million of cash from operating activities in fiscal 2022 compared to a source of cash of $28.0 million in fiscal 2021.

The $31.8 million decrease in net cash flows from operating activity is the result of increases in inventory and accounts receivable and decreases in accrued expense and customer prepayments, partially offset by improved earnings and an increase in accounts payable.

We used $1.6 million of cash from investing activities in fiscal 2022 compared to a use of cash of $93.0 million in fiscal 2021.

Capital expenditures were approximately $2.0 million in both fiscal years.

The primary difference between cash flow from investing activities is the acquisition of JSI. 

We had a source of cash of $5.6 million related to financing activities in fiscal 2022 compared to a source of cash of $63.6 million in fiscal 2021.

The $58.0 million change in cash flow was the net result of an increase in the borrowings on the line of credit to support the growth in working capital and due to the acquisition of JSI.

Most of the growth in working capital can be attributed to the increase in inventory to ensure product availability for critical sales growth initiatives and to mitigate supply chain challenges.

We have on our balance sheet financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and long-term debt.

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Critical Accounting Policies and Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

We believe that such estimates have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the consolidated financial statements.

Actual results could differ from these estimates.

Accounting policies are an integral part of our financial statements.

A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and financial position.

Management believes that the critical accounting policies and estimates involve the most difficult management judgments due to the sensitivity of the methods and assumptions used.

We believe the following accounting topics represent our critical accounting estimates:

warranty reserve, impairment of goodwill, stock-based compensation, income tax valuation allowance, revenue recognition and valuation of acquired intangible assets.

Our significant accounting policies are described in Note 2 in the accompanying consolidated financial statements of this Annual Report on Form 10-K.

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S.

Our significant accounting policies are described in Note 1.

"Summary if Significant accounting Policies" of the Notes to Consolidated Financial Statements.

Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates.

An accounting estimate is considered to be critical if it meets both of the following criteria:

(i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur may have a material impact on our financial condition or results of operations.

The significant accounting policies that management believes are critical to the understanding and evaluating our reported financial results include the following:

income taxes, warranty, goodwill and intangible assets, stock-based compensation, and revenue recognition.

For further information see Note 1.

“Summary of Significant accounting Policies " of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K

Warranty Reserves:

The Company offers a limited warranty that its products are free from defects in workmanship and materials.  The specific terms and conditions vary somewhat by product line, but generally cover defective products returned within one to five years, with some exceptions where the terms extend to 10 years, from the date of shipment. The Company records warranty liabilities to cover the estimated future costs for repair or replacement of defective returned products as well as products that need to be repaired or replaced in the field after installation. The Company calculates its liability for warranty claims by applying estimates based upon historical claims as a percentage of sales to cover unknown claims, as well as estimating the total amount to be incurred for known warranty issues. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amount as necessary.

If actual warranty costs differ significantly from these estimates, adjustments may be required in the future, which could adversely affect our gross profit and results of operations.

Revenue Recognition:

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders.

Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer.

Control is generally transferred at time of shipment when title and risk of ownership passes to the customer.

For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices.

Payment terms are typically within 30 to 90 days from the shipping date, depending on the terms with the customer.

The Company offers standard warranties that do not represent separate performance obligations.

Provisions for discounts, rebates, sales incentives, returns, and other adjustments are generally provided for in the period the related sales are recorded, based on management’s assessment of historical trends and projection of future results.

Goodwill and Intangible Assets:

Goodwill represents the excess of purchase price over the fair value of the net assets of businesses acquired.

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment.

The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired.

If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required.

If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level.

The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data.

There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

Income Tax Valuation Allowances:

The Company accounts for income taxes in accordance with the accounting guidance for income taxes.  Accordingly, deferred income taxes are provided on items that are reported as either income or expense in different time periods for financial reporting purposes than they are for income tax purposes. Deferred income tax assets are reported on the Company’s balance sheet. Significant management judgment is required in developing the Company’s income tax provision, including the estimation of taxable income and the effective income tax rates in the multiple taxing jurisdictions in which the Company operates, the estimation of the liability for uncertain income tax positions, the determination of deferred tax assets and liabilities, and any valuation allowances that might be required against deferred tax assets.

Changes in the expectations regarding the realization of deferred tax assets and any related valuation allowances, the development of the Company’s income tax provision, and the estimation of the liability for uncertain tax positions, could materially impact income tax expense in future periods.

Stock-Based Compensation:

The Company accounts for stock-based compensation to certain employees and its directors in accordance with accounting guidance for stock-based compensation.

The accounting guidance requires companies to measure the cost of employee and director services received in exchange for an award of equity instruments, including stock options, restricted stock units, and performance stock units, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

Equity award forfeitures are recognized at the date of employee termination.

If any of the assumptions used in the Black-Scholes pricing model changes significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period

MANAGEMENT ’

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Grant Thornton LLP has full access to the Audit Committee to discuss the results of their audit work, the adequacy of internal accounting controls, and the quality of financial reporting.

The Company acquired JSI Store Fixtures (JSI) on May 21, 2021.

Management excluded JSI from its evaluation of the effectiveness of the internal control over financial reporting as of June 30, 2021.

Based upon LSI’s evaluation, the Company’s principal executive officer and principal financial officer concluded that internal control over financial reporting was effective as of June 30, 2022.

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of JSI Holding Corp.

(“JSI”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 39 percent and 3 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2021.

As indicated in Management’s Report on Internal Control Over Financial Reporting, JSI was acquired during the fiscal year 2021.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of JSI.

Definition and limitations of internal control over financial reporting

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September 9, 2022

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

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(an Ohio corporation) and subsidiaries (the “Company”) as of June 30, 2022 and 2021, the related consolidated statements of operations, comprehensive income, shareholders’

equity, and cash flows for each of the two years in the period ended June 30, 2021, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”).

equity, and cash flows for each of the two years in the period ended June 30, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2022, based on criteria established in the 2013 Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated September 10, 2021 expressed an unqualified opinion.

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated September 9, 2022 expressed unqualified opinion.

Basis for opinion

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of product warranty reserves

As discussed in Note 1 to the consolidated financial statements, the Company provides warranty terms based upon the type of product sold. 

As described further in note 1 to the financial statements, the Company provides warranty terms based upon the type of product sold.

The Company estimates the amount of warranty costs associated with future product warranty claims, which are accrued at the time revenue is recognized.

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The evaluation of the warranty accrual required a high degree of auditor judgement and an increased effort in assessing the reasonableness of management’s estimates of the likelihood and cost of future claims.

The primary procedures we performed to address this critical audit matter included the following:

Tested management’s internal controls over the Company’s product warranty accrual process including controls over the inputs to the estimate as well as controls over the process of capturing warranty claims

Tested the completeness and accuracy of the underlying claims used to develop the estimate

Evaluated the relevance, reliability, and sufficiency of the sources of claims used by the Company in developing the estimate

Evaluated the methods and assumptions used by management by:

Developing an estimation for the warranty accrual and comparing the results to the Company’s product warranty accrual estimate

Performing a retrospective review comparing management’s prior period assumptions of likelihood of claims and related costs to actual claim rate activity to evaluate management’s ability to estimate the warranty accrual

Business Combination

As discussed in Note 2 to the consolidated financial statements, the Company completed an acquisition agreement wherein the Company acquired 100% ownership of JSI Holdings Corp.

in May 2021 for total consideration of approximately $93.7M resulting in the addition of $45.8M of intangible assets.

The acquisition was accounted for as a business combination.

The principal considerations for our determination that the valuation of acquired intangible assets is a critical audit matter is that the valuation of the acquired intangible assets was considered especially challenging and required significant auditor judgment due to the complex determination by management of the appropriate assumptions, such as discount rates, revenue projections, and projected profit margins, for the valuation of the acquired intangible assets.

The Company, utilizing third-party specialists, used income valuation models including Relief from Royalty Method and the Multi-Period Excess Earning Method (MPEEM) to measure the identified intangible assets.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals having expertise in the valuation of acquired intangible assets, when performing audit procedures to evaluate management’s judgments and conclusions related to the valuation of the intangible assets.

The primary procedures we performed to address this critical audit matter included the following:

Tested management’s process and related internal controls for developing fair value estimates including the development of key assumptions such as discount rates, revenue projections, and projected profit margins

Tested the completeness and accuracy of the underlying data used to develop the fair value estimates

Evaluated the appropriateness of the valuation models and methodologies used by management

Assessed the reasonableness of management’s forecast by comparing the projections to historical results and external sources including industry trends and peer companies’ historical data

Involved professionals with specialized skills and knowledge to assist in the evaluation of the significant assumptions used by management including the discount rates, revenue projections, and projected profit margins

/s/ GRANT THORNTON LLP 

We have served as the Company’s auditor since fiscal 2010.

Our audit procedures related to the estimation of product warranty reserves included the following, among others:

● 

 Tested the completeness and accuracy of the underlying claims used to develop the estimate

● 

 Evaluated the relevance, reliability, and sufficiency of the sources of claims used by the Company in developing the estimate

● 

 Evaluated the methods and assumptions used by management by:

 Developing an estimation for the warranty accrual and comparing the results to the Company’s product warranty accrual estimate

 Utilized retrospective warranty claim and lag data to evaluate the warranty reserve estimated by management

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2009.

Cincinnati, Ohio

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(In thousands, except per share data)

Twelve Months Ended

$ 455,120  

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Severance costs

Restructuring (gains) costs

( 14 )  

Restructuring costs

109,208  

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Severance costs

Restructuring gains

Operating income

1 unchanged sentence

Interest (income)

( 19 )  

Interest expense

Other (income) expense

( 154 )  

Other expense (income)

Income before income taxes

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Current assets

Cash and cash equivalents

$ 2,462  

$ 2,282  

Accounts receivable, less allowance for doubtful accounts of $256 and $273 , respectively

Cash and cash equivalents

Accounts receivable, less allowance for credit losses of $ 499 and $ 256 , respectively

77,750  

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$ 286,821  

$ 172,263  

The accompanying notes are an integral part of these financial statements.

LSI INDUSTRIES INC.

CONSOLIDATED BALANCE SHEETS (continued)

30, 2022, and 2021

(In thousands, except shares)

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities

Current maturities of long-term debt

$ 3,571  

Accounts payable

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76,025  

68,178  

Finance Lease Liabilities

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Deferred compensation plan

Retained (loss)

( 1,405 )  

Accumulated other comprehensive income (loss)

Retained Earnings (Loss)

Accumulated other comprehensive income

Total shareholders' equity

9 unchanged sentences

30, 2022, and 2021

(In thousands, except shares)

(amounts in thousands)

Common Shares

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$ ( 1,920 )  

Other comprehensive loss

$ 125,700  

Other comprehensive income

Stock compensation awards

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Activity of treasury shares, net

Deferred stock compensation

( 166 )  

( 1,329 )  

Deferred stock compensation

Stock-based compensation expense

3 unchanged sentences

( 5,353 )  

Cumulative effect of adoption of accounting guidance

( 428 )  

Balance at June 30, 2021

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15,032  

Other comprehensive income

15,032  

Other comprehensive loss

Stock compensation awards

Restricted stock units issued

( 250 )  

Shares issued for deferred compensation

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Cash Flows from Operating Activities

$ 15,032  

$ 5,868  

Non-cash items included in net income

Depreciation and amortization

10,118  

Deferred income taxes

( 342 )  

Deferred compensation plan

1 unchanged sentence

Issuance of common shares as compensation

Loss (gain) on disposition of fixed assets

Loss on disposition of fixed assets

Allowance for doubtful accounts

Inventory obsolescence reserve

Changes in certain assets and liabilities, net of acquisition

Changes in certain assets and liabilities:

Accounts receivable

( 20,311 )  

( 17,586 )  

Refundable income taxes

Accounts payable

14,442  

Accrued expenses and other

Customer prepayments

Net cash flows provided by operating activities

( 2,413 )  

15,926  

Net cash (used in) from operating activities

$ ( 3,863 )  

$ 28,009  

Cash Flows from Investing Activities

Acquisition of JSI, excluding cash aquired

Acquisition of JSI

Purchases of property, plant, and equipment

( 2,122 )  

Proceeds from the sale of fixed assets

Net cash flows (used in) provided by investing activities

Net cash flows (used in) investing activities

( 1,573 )  

Cash Flows from Financing Activities

Payments of long-term debt

Borrowings of long-term debt

Payments on long-term debt

( 161,627 )  

Borrowings on long-term debt

173,074  

86,757  

Cash dividends paid

Shares withheld for employees' taxes

( 5,322 )  

Shares withheld on employees' taxes

( 250 )  

Payments on financing lease obligations

( 268 )  

Proceeds from stock option exercises

Net cash flows provided by (used in) financing activities

Net cash flows provided by financing activities

63,578  

Change related to Foreign Currency

(Decrease) increase in cash and cash equivalents

( 17 )  

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$ 2,462  

$ 2,282  

The accompanying notes are an integral part of these financial statements.

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The consolidated financial statements include the accounts of LSI Industries Inc.

(an Ohio corporation) and its subsidiaries (collectively, the “Company”), all of which are wholly owned. All intercompany transactions and balances have been eliminated in consolidation.

COVID- 19 Pandemic:

The COVID- 19 pandemic continues to impact business activity across industries in the U.S.

and worldwide, including, but not limited to, workforce and supply chain disruptions.

The Company remains committed to taking actions to address the health, safety and welfare of its employees, customers, agents and suppliers.

Future developments, such as the actions taken by governmental authorities in response to future outbreaks that are highly uncertain and unpredictable, will determine the extent to which COVID- 19 continues to impact the Company’s results of operations and financial conditions.

See the risk factor captioned “Our financial condition and results of operations for future periods may be adversely affected by the COVID- 19 outbreak or other outbreaks of infectious disease or similar public health threats and the resulting economic impact”

in Item 1A, Risk Factors, included in Part I of this Annual Report on Form 10 -K for an additional discussion of risks related to COVID- 19.

(an Ohio corporation) and its subsidiaries (collectively, the “Company”), all of which are wholly owned.

All intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition:

The Company recognizes revenue when it satisfies the performance obligations in its customer contracts or purchase orders.

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders.

Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer.

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For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices.

Payment terms are typically within 30 to 90 days from the shipping date, depending on our terms with the customer.

Payment terms are typically within 30 to 90 days from the shipping date, depending on the terms with the customer.

The Company offers standard warranties that do not represent separate performance obligations.

Installation is a separate performance obligation, except for our digital signage products.

Installation is a separate performance obligation, except for the Company’s digital signage products.

For digital signage products, installation is not a separate performance obligation as the product and installation is the combined item promised in digital signage contracts.

The Company is not always responsible for installation of products it sells and has no post-installation responsibilities other than standard warranties.

A number of the Company's graphics elements and select lighting products are highly customized for specific customers.

A number of the Company's display solutions and select lighting products are customized for specific customers.

As a result, these customized products do not have an alternative use.

For these products, the Company generally has a legal right to payment for performance to date and generally does not accept returns on these items.

For these products, the Company has a legal right to payment for performance to date and generally does not accept returns on these items.

The measurement of performance is based upon cost plus a reasonable profit margin for work completed.

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The Company also offers installation services for its display solutions elements and select lighting products.

Installation revenue is recognized over time as our customer simultaneously receives and consumes the benefits provided through the installation process.

Installation revenue is recognized over time as the customer simultaneously receives and consumes the benefits provided through the installation process.

For these customized products and installation services, revenue is recognized using a cost-based input method:

recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the contract.

recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the performance obligation.

On occasion, the Company enters into bill-and-hold arrangements on a limited basis.

Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met:

( 1 ) the customer has requested delayed delivery and storage of the products by the Company because the customer wants to secure a supply of the products but lacks storage space;

(ii) the risk of ownership has passed to the customer;

(iii) the products are segregated from the Company’s other inventory items held for sale;

(iv) the products are ready for shipment to the customer;

and (v) the Company does not have the ability to use the products or direct them to another customer.

Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because the Company believes it best depicts the nature, amount, and timing of our revenue and cash flows.

The table presents a reconciliation of the disaggregation by reportable segments.

The table below presents a reconciliation of the disaggregation by reportable segments:

Twelve Months Ended

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$ 221,671  

Twelve Months Ended

(In thousands)

June 30, 2021

Timing of revenue recognition

Products and services transferred at a point in time

$ 165,062  

$ 66,123  

Products and services transferred over time

23,938  

60,489  

$ 189,000  

$ 126,612  

Type of Product and Services

LED lighting, digital signage solutions, electronic circuit boards

$ 164,778  

$ 35,976  

Poles and other display solutions elements

22,492  

61,919  

Project management, installation services, shipping and handling

28,717  

$ 189,000  

$ 126,612  

Practical Expedients and Exemptions

The Company’s contracts with customers have an expected duration of one year or less, as such the Company applies the practical expedient to expense sales commissions as incurred, and have omitted disclosures on the amount of remaining performance obligations.

The Company’s contracts with customers have an expected duration of one year or less, as such, the Company applies the practical expedient to expense sales commissions as incurred and has omitted disclosures on the amount of remaining performance obligations.

Shipping costs that are not material in context of the delivery of products are expensed as incurred.

The Company’s accounts receivable balance represents the Company’s unconditional right to receive payment from its customers with contracts.

Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing, therefore, payments do not contain significant financing components.

Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing;

therefore, payments do not contain significant financing components.

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue.

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Credit and Collections:

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income. The Company determines its allowance for doubtful accounts by first considering all known collectability problems of customers’

accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables. The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, the current economic climate and historical trends. Receivables deemed uncollectable are written-off against the allowance for doubtful accounts receivable after all reasonable collection efforts have been exhausted.

The Company maintains allowances for credit losses for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income. The Company determines its allowance for credit losses by first considering all known collectability problems of customers’

accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables. The resulting allowance for credit losses is an estimate based upon the Company’s knowledge of its business and customer base, the current economic climate and historical trends. Receivables deemed uncollectable are written-off against the allowance for credit losses after all reasonable collection efforts have been exhausted.

The Company also establishes allowances, at the time revenue is recognized, for returns, discounts, pricing and other possible customer deductions. These allowances are based upon historical trends.

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$ 57,941  

Allowance for doubtful accounts

Allowance for credit losses

( 499 )  

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Cash and cash equivalents consist primarily of bank deposits and a bank money market account that is stated at cost, which approximates fair value.

The Company maintains balances at financial institutions in the United States, Canada and Mexico. In the United States, the FDIC limit for insurance coverage on non-interest-bearing accounts is $250,000.

The Company maintains balances at financial institutions in the United States, Canada, and Mexico. In the United States, the FDIC limit for insurance coverage on non-interest-bearing accounts is $250,000 per institution.

As of June 30, 2022, and June 30, 2021, the Company had bank balances of $ 2.7 million and $ 2.3 million, respectively, without insurance coverage.

Inventories, Net and Inventory Reserves:

Inventories, Net:

Inventories are stated at the lower of cost or net realizable value. Cost of inventories includes the cost of purchased raw materials and purchased components, direct labor, as well as manufacturing overhead which is generally applied to inventory based on direct labor and on material content, is determined on the first -in, first -out basis.

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Buildings (in years)

28 - 40  

Machinery and equipment (in years)

3 - 10  

Computer software (in years)

3 -   

Costs related to the purchase, internal development, and implementation of the Company’s fully integrated enterprise resource planning/business operating software system are either capitalized or expensed. Leasehold improvements are depreciated over the shorter of fifteen years or the remaining term of the lease.

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Changes in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, during the periods indicated below were as follows:

Product Warranties

(In thousands)

25 unchanged sentences

Cost of services sold is primarily comprised of the internal and external labor costs required to support the Company’s installation and service revenue along with the management of media content.

Stock-Based Compensation:

The Company accounts for stock-based compensation to certain employees and its directors in accordance with accounting guidance for stock-based compensation.

The accounting guidance requires companies to measure the cost of employee and director services received in exchange for an award of equity instruments, including stock options, restricted stock units, and performance stock unites, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

Equity award forfeitures are recognized at the date of employee termination.

Earnings Per Common Share:

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period net of treasury shares held in the Company’s nonqualified deferred compensation plan.

The computation of diluted earnings per share is based on the weighted average common shares outstanding for the period and includes common share equivalents. Common share equivalents include the dilutive effect of stock options, restricted stock units, stock warrants, contingently issuable shares and common shares to be issued under a deferred compensation plan, all of which totaled 1,029,000 shares and 368,000 shares in fiscal 2021 and 2020, respectively.

The computation of diluted earnings per share is based on the weighted average common shares outstanding for the period and includes common share equivalents. Common share equivalents include the dilutive effect of stock options, restricted stock units, contingently issuable shares and common shares to be issued under a deferred compensation plan, all of which totaled 1,375,000 shares and 1,029,000 shares in fiscal 2022 and 2021, respectively.

See further discussion in Note 4.

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Revenue and expenses are translated using average exchange rates during each period reported.

Translation losses (gains) are reported in accumulated other comprehensive loss (gain) as a component of shareholders equity and were ($ 0.1 ) million and $ 0.1 million as of June 30, 2021 and 2020, respectively.

Translation losses (gains) are reported in accumulated other comprehensive loss (gain) as a component of shareholders equity and was nominal as of June 30, 2022, and ($ 0.1 ) million as of June 30, 2021.

The Company recognizes foreign currency transaction (gains) and losses on certain assets and liabilities that are denominated in the Mexican Peso and Canadian Dollar.

These transaction (gains) and losses are reported in other expense in the consolidated statements of operations and were $ 0.2 million and $ 0.5 million for the twelve months ended June 30, 2021 and 2020, respectively.

These transaction (gains) and losses are reported in other expense in the consolidated statements of operations and were $ 0.1 million and ($ 0.2 ) million for the fiscal year ended June 30, 2022, and 2021, respectively.

New Accounting Pronouncements:

In June 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update (“ASU”) 2016 - 13 (“ASU 2016 - 13 ), "Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments" (ASC 326 or "CECL"), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables.

This may result in the earlier recognition of allowances for losses.

ASU 2016 - 13 is effective for public companies for annual periods beginning after December 13, 2019, including interim periods within those fiscal years.

The Company adopted this guidance in the first quarter of fiscal 2021.

The adoption of ASU 2016 - 13 did not have a material impact on the consolidated financial statements and disclosures.

On July 1, 2019, the Company adopted ASU 2016 - 02, “Leases,”

using a modified-retrospective transition method, under which it elected not to adjust comparative periods.

The Company elected the package of practical expedients permitted under the new guidance.

In addition, the Company adopted an accounting policy to not record short-term leases on the balance sheet and elected the practical expedient to not separate lease and non-lease components.

The Company’s most significant leases are those related to certain manufacturing facilities along with a small office space.

Besides these real estate leases, most other leases are insignificant and consist of leases related to a vehicle, forklifts and various office equipment.

The adoption of the new lease standard resulted in the recognition of right-of-use assets (ROU assets) of $ 10.4 million, lease liabilities of $ 10.8 million which includes the impact of existing deferred rents and tenant improvement allowances and a $ 0.4 million adjustment to retained earnings on the consolidated balance sheets as of July 1, 2019 for the Company’s real estate leases.

The adoption of the standard resulted in no material impact to the consolidated statements of operations or consolidated statements of cash flow.

Refer to Note 11.

In March 2020, the FASB issued ASU No.

2020 - 04,  “Reference Rate Reform”

(Topic 848 ) (“ASU 2020 - 04”

), which provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued.

The amendments are effective for all entities as of March 12, 2020 and expire on December 31, 2022.

The provisions of ASU 2020 - 04 did not have a material effect on the Company’s financial condition, results of operations or cash flows as of 

June 30, 2021.

The Company will continue to monitor any impacts of the standard and reference rate reform on its financial instruments.

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021 - 08, “Business Combinations (Topic 805 ):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,”

creating an exception to the recognition and measurement principles in ASC 805.

The amendment requires that entities apply ASC 606, “Revenue from Contracts with Customers,”

rather than using fair value, to recognize and measure contracts assets and contract liabilities from contracts with customers acquired in a business combination.

The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods therein.

Early adoption is permitted, including adoption in an interim period, regardless of whether a business combination occurs in that period.

The guidance should be applied prospectively;

however, an entity that elects to early adopt in an interim period should apply the amendments to all business combinations that occurred during the fiscal year that includes that interim period.

The Company is evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

On July 1, 2020, the Company adopted ASU 2016 - 13, "Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments" (ASC 326 or "CECL"), which amended the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables.

The adoption of ASU 2016 - 13 did not have a material impact on the consolidated financial statements and related disclosures.

In March 2020 and January 2021, the FASB issued ASU 2020 - 04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”

and ASU 2021 - 01, “Reference Rate Reform:

Scope,”

respectively.

Together, the ASUs provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022.

The adoption of this guidance did not have a material impact on the consolidated financial statements and related disclosures.

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 

2019 - 12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740 )." This guidance removes certain exceptions to the general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intra-period tax allocation and calculating income taxes in interim periods.

The standard also simplifies accounting for income taxes under U.S.

GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

The Company adopted ASC 

2019 - 12  effective July 

1, 2021, which did not have a material impact on its consolidated financial statements or disclosures.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications:

Certain amounts reported in the prior year in Note 6 have been reclassified to conform to the current year’s presentation.

Subsequent Events:

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ACQUISITION OF JSI STORE FIXTURES

On May 21, 2021, the Company acquired 100 % of the issued and outstanding shares of capital stock of JSI Store Fixtures (JSI), a Maine-based provider of retail commercial display solutions, for $ 93.7 million.

The acquisition of JSI will significantly increase the Company’s total addressable markets within the grocery and convenience store verticals.

The Company funded the acquisition with a combination of cash on hand and $ 71.6 million from the $ 100 million revolving line of credit.

May 21, 2021, 

the Company acquired 

100 % of the issued and outstanding shares of capital stock of JSI Store Fixtures (JSI), a Maine-based provider of retail commercial display solutions, for $ 94.3  million.

The acquisition of JSI expands the Company’s total addressable markets within the grocery and refueling and convenience store verticals.

The Company funded the acquisition with a combination of cash on hand and $ 71.6  million from the credit facility

The Company accounted for this transaction as a business combination.

The Company has preliminarily allocated the purchase price of approximately $ 93.7 million which includes an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill.

This preliminary allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2022, as well as potential revision resulting from the finalization of pre-acquisition tax filings.

The Company is in the process of finalizing third party valuations of certain assets.

The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of May 21, 2021, is as follows:

(In thousands)

The Company preliminarily allocated the purchase price of approximately $ 93.7  million, which included an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values was recorded as goodwill.

During the second quarter of fiscal 2022, goodwill increased by $ 0.6 million.

The increase is the net difference between the original estimate of recovery from the pre-funded working capital and the final cash received of $ 0.5 million.

During the fourth quarter of fiscal 2022, goodwill, deferred income taxes, and current tax liabilities were adjusted related to the finalization of pre-acquisition tax filings.

The final allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of 

May 21, 2021, 

is as follows:

Adjustments  

as adjusted  

Cash and Cash Equivalents

$ 4,067  

Accounts receivable

$ 4,067  

Account Receivable

( 280 )  

Property, Plant and Equipment

( 2,062 )  

Intangible Assets

45,760  

Accounts Payable

( 4,199 )  

Accrued Liabilities

( 8,434 )  

( 225 )  

Deferred Tax Liability

Identifiable assets

( 10,583 )  

Identifiable Net Assets

60,277  

( 642 )  

59,635  

33,415  

34,657  

Net Purchase Consideration

$ 93,692  

$ 94,292  

The gross amount of accounts receivable is $ 9.3 million.

Goodwill recorded from the acquisition of JSI is attributable to the impact of the positive cash flow from JSI in addition to expected synergies from the business combination.

The goodwill resulting from the acquisition is deductible for tax purposes.

The intangible assets include amounts recognized for the fair value of the trade name, technology assets, non-compete agreements and customer relationships.

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The fair market value write-up of the property, plant, and equipment totaled $ 1.8 million.

Transaction costs related to the acquisition totaled $ 2.9 million in fiscal 2021 and are recorded in selling and administrative expenses on the consolidated statements of operations.

Transaction costs related to the acquisition totaled $ 2.9 million in the fourth quarter of fiscal 2021.

JSI’s post-acquisition results of operations for the period from May 21, 2021, through June 30, 2021, are included in the Company’s Consolidated Statements of Operations.

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Pro Forma Impact of the Acquisition of JSI  

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of JSI as if the transaction had occurred on July 1, 2019.

The unaudited pro forma results of operations have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that may occur in the future.

Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of JSI .

The unaudited pro forma financial information for the twelve months ended June 30, 2021 and June 30, 2020 is prepared using the acquisition method of accounting and has been adjusted to effect to the pro forma events that are:

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of JSI as if the transaction had occurred on 

July 1, 2019. 

The unaudited pro forma results of operations have been prepared for comparative purposes only and are 

not  necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that 

occur in the future.

Furthermore, the unaudited pro forma financial information does 

not  reflect the impact of any synergies or operating efficiencies resulting from the acquisition of JSI.

The unaudited pro forma financial information for the 

twelve  months ended 

June 30, 2021, 

June 30, 2020, 

is prepared using the acquisition method of accounting and has been adjusted to give effect to the pro forma events that are:

( 1 ) directly attributable to the acquisition;

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and ( 3 ) expected to have a continuing impact on the combined results.

The unaudited pro forma operating income of $ 19.3 million excludes acquisition-related expenses of $ 2.9 million.

The unaudited pro forma operating income of $ 19.3  million for fiscal 2021 excludes acquisition-related expenses of $ 2.9  million.

Twelve Months Ended

(In thousands, unaudited)

$ 391,000  

$ 362,541  

$ 97,947  

$ 86,399  

$          391,000

$            362,541

$            97,947

$              86,399

Operating income

$ 19,312  

$ 13,878  

$            19,312

$              13,878

NOTE 3 —

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Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance.

The Company’s two operating segments are Lighting and Display Solutions (formerly known as the Graphics Segment), with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment.

The Company’s 

two  operating segments are Lighting and Display Solutions (formerly known as the Graphics Segment), with 

one  executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment.

Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

The Lighting Segment includes non-residential outdoor and indoor lighting utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the petroleum/convenience markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports complex market.

The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market.

The Company also offers a variety of lighting controls to complement its lighting fixtures which include sensors, photocontrols, dimmers, motion detection and Bluetooth systems.

The Company also services lighting product customers through the commercial industrial, stock and flow, and renovation channels.

The Company also services lighting product customers through the commercial and industrial project, stock and flow, and renovation channels.

The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

The Company acquired JSI in the fourth quarter of fiscal 2021, and consolidated it into the former Graphics Segment, which has been rebranded as the Display Solutions Segment, to more closely align the Company’s comprehensive product offering with the markets it serves.

The Company acquired JSI in the 

fourth  quarter of fiscal 

2021,  and consolidated it into the former Graphics Segment, which has been rebranded as the Display Solutions Segment, to more closely align the Company’s comprehensive product offering with the markets it serves.

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, display fixtures, refrigerated displays, and custom display elements.

These products are used in visual image programs in several markets including the petroleum/convenience markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports complex market.

The Display Solutions Segment implements, installs and provides program management services related to products sold by the Display Solutions Segment and by the Lighting Segment.

These products are used in visual image programs in several markets including the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market.

The Display Solutions Segment also provides a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage.

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item.

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Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

One customer program in the Display Solutions Segment represents $ 32.4 million or 10.3 % of the Company’s net sales in the fiscal year ended June 

There were no customers or customer programs representing a concentration of 10% or more of the Company’s net sales in the fiscal year ended June 30, 2022.

There was no concentration of accounts receivable at June 

30, 2021 or 2020.

30, 2022, or 2021.One customer program in the Display Solutions Segment represents $ 35.2 million or 11.2 % of the Company’s net sales in the fiscal year ended June 

Summarized financial information for the Company’s reportable business segments is provided for the indicated periods and as of June 

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(In thousands)

Twelve Months Ended

Lighting Segment

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Display Solutions Segment

17,589  

Corporate and Eliminations

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$ 2,122  

$ 2,233  

Depreciation and Amortization:

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$ 286,821  

$ 172,263  

The segment net sales reported above represent sales to external customers.

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Intersegment revenues were eliminated in consolidation as follows:

Twelve Months Ended

(In thousands)

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NOTE 4 —

EARNINGS PER COMMON SHARE

EARNINGS PER SHARE

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding:

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Weighted average vested restricted stock units outstanding

Weighted average shares outstanding in the Deferred Compensation Plan during the period

Weighted average shares outstanding in the Deferred Compensation Plan 

during the period

Weighted average shares outstanding

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Anti-dilutive securities (b)

Calculative using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

Anti-dilutive securities were excluded in the computation of diluted earnings per share for the year ended June 30, 2022, and June 30, 2021, because the exercise price was greater than the fair market price of the common shares or because the assumed proceeds from the award’s exercise or vesting was greater than the average fair market price of the common shares.

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19,755  

13,617  

Total Inventories

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Accrued sales commissions

Accrued Freight

Operating lease liabilities

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The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment.

The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired.

If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required.

If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level.

The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

The Company 

first  assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired.

If through the qualitative assessment it is determined that it is more likely than 

not  that goodwill and indefinite-lived assets are 

not  impaired, 

no  further testing is required.

If it is determined more likely than 

not  that goodwill and indefinite-lived assets are impaired, or if the Company elects 

not  to 

first  assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level.

have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities 

signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing.

Prior to the acquisition of JSI, the Company had two reporting units that contain goodwill.

One reporting unit is within the Lighting Segment and one reporting unit is within the Display Solutions Segment.

The tradename intangible asset has an indefinite life and is also tested separately on an annual basis.

The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data.

Following the acquisition of JSI, the Company has a total of 

three  reporting units that contain goodwill.

One reporting unit is within the Lighting Segment and 

two  reporting units are within the Display Solutions Segment.

The tradename intangible assets have an indefinite life and are also tested separately on an annual basis.

The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but 

not  limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data.

There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

March 1, 2022 ,  the Company performed its annual goodwill impairment test on the three  reporting units that contain goodwill.

The goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $ 31.6  million or 

18 % above the carrying value of the reporting unit including goodwill.

The goodwill impairment test of one reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $ 12.2  million or 

1,316 % above the carrying value of the reporting unit including goodwill.

The goodwill impairment test of the second reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $ 100.4 million or 12 % above the carrying value of the reporting unit including goodwill.

The Company has two indefinite-lived intangible assets.

The Company also performed its annual review of indefinite-lived intangible assets as of 

March 1, 2022 and determined there was 

no  impairment.

The impairment test of the first indefinite-lived intangible asset passed with a fair market value of $ 17.0  million or 

396 % above its carrying value.

The impairment test of the second indefinite-lived intangible asset passed with a fair market value of and $ 10.6 million or 22 % above its carrying value.

As of March 1, 2021, the Company performed its annual goodwill impairment test on the two reporting units that contain goodwill.

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The Company has performed an assessment of its goodwill and intangible assets from the date of the interim test as of March 1, 2022, through the balance sheet date for possible triggering events and has concluded that there were no triggering events that would indicate the assets are impaired.

The Company acquired JSI on May 21, 2021 ( see Note 2 ).

The total purchase price exceeded the estimated fair value of net assets by approximately $ 33.4 million, which was allocated to goodwill.

Goodwill and intangible assets related to JSI are included in the assets of the Display Solutions Segment.

Refer to Note 2 for additional information on the intangible assets of JSI.

Beginning in fiscal 2022, JSI goodwill will be subject to annual impairment testing as a separate reporting unit.

As of March 1, 2020, the Company performed its annual goodwill impairment test on the two reporting units that contain goodwill.

The goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $ 31.6 million or 33 % above the carrying value of this reporting unit including goodwill.

The goodwill impairment test of the reporting unit in the Display Solutions Segment passed with a business enterprise value of $ 4.7 million or 619 % above the carrying value of the reporting unit including goodwill.

The Company also performed its annual review of its indefinite-lived intangible asset as of March 1, 2020 and determined there was no impairment.

The indefinite-lived intangible impairment test passed with a fair market value that was $ 16.8 million or 392 % above its carrying value.

A significant decline in the Company’s stock price during March 2020 related to the COVID- 19 pandemic led management to conclude that a triggering event occurred.

As a result, an interim goodwill impairment test subsequent to the March 1 testing date was required for both reporting units as of March 31, 2020 .

 The result of the impairment test on both reporting units indicated that goodwill was not impaired .

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

(In thousands)

Lighting Segment

Display Solutions Segment

Balance as of June 30, 2021

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$ 99,661  

Goodwill acquired

33,415  

Accumulated impairment losses

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$ 133,076  

Goodwill acquired

33,415  

Measurement period adjustment

Accumulated impairment losses

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The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

June 30, 2021

(In thousands)

June 30, 2022

Gross Carrying Amount

Accumulated Amortization

Amortized Intangible Assets

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$ 47,683  

LED technology firmware, software

LED technology, software

20,966  

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$ 67,964  

June 30, 2020

(In thousands)

June 30, 2021

Gross Carrying

Amortized Intangible Assets

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$ 51,116  

LED technology firmware, software

LED technology, software

20,966  

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Trademarks and trade names

12,102  

Total indefinite-lived Intangible Assets

12,102  

Total Other Intangible Assets

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REVOLVING LINE OF CREDIT AND LONG-TERM DEBT

March 2021 ,  the Company amended its secured line of credit to a $ 100  million facility from a $ 75  million facility that expires in the 

third  quarter of fiscal 

 Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate or a base rate, at the Company’s option.

The base rate is calculated as the highest of (a) the Prime rate, (b) the sum of the Overnight Funding Rate plus 

50  basis points and (c) the sum of the Daily LIBOR Rate plus 

100  basis points as long as a Daily LIBOR rate is offered, ascertainable and 

not  unlawful.

The increment over the LIBOR borrowing rate fluctuates between 

100  and 

200  basis points, and the increment over the Base Rate fluctuates between 

0  and 

100  basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement.

The increment over LIBOR borrowing for the first quarter of fiscal 2022 has not been determined pending the outcome of a further amendment to the line of credit (See below). The fee on the unused balance of the $ 100  million committed line of credit fluctuates between 

15  and 

22.5  basis points.

Under the terms of this line of credit, the Company has agreed to a negative pledge of real estate assets and is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum interest coverage ratio.

June 30, 2021 ,  there were $ 68.2  borrowings against the line of credit, and $ 31.8  million was available as of that date.

Based on the terms of the line of credit and the maturity date, the debt has been classified as long term.

The Company is in the process of amending its secured line of credit as a result of the acquisition of JSI.

One of the changes to the line of credit will allow for the historical EBITDA results of JSI in the computation of the debt covenants.

The Company expects to be in compliance with its debt covenants once the amendments are in place.

For the period ending June 30, 2021, the Company has obtained a waiver from its bank in relation to its loan covenants until the amended line of credit has been finalized.

The Company’s long-term debt as of June 30, 2022, and June 30, 2021, consisted of the following:

(In thousands)

Secured line of credit

$ 57,275  

$ 68,178  

Term loan, net of debt issuance costs of $30 and $0 , respectively

22,321  

79,596  

68,178  

amounts due within one year

Total amounts due after one year, net

$ 76,025  

$ 68,178  

In September 2021, the Company amended its existing $ 100 million secured line of credit, to a $ 25 million term loan and $ 75 million remaining as a secured revolving line of credit.

Both facilities expire in the third quarter of fiscal 2026.

The principal of the term loan is repaid annually in the amount of $ 3.6 million over a five -year period with a balloon payment of the remaining balance due on the last month.

Interest on both the revolving line of credit and the term loan is charged based upon an increment over the LIBOR rate or a base rate, at the Company’s option.

The base rate is calculated as the highest of (a) the Prime rate, (b) the sum of the Overnight Funding Rate plus 50 basis points and (c) the sum of the Daily LIBOR Rate plus 100 basis points as long as a Daily LIBOR rate is offered, ascertainable and not unlawful.

The increment over the LIBOR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement.

As of June 30, 2022, the Company’s borrowing rate against its revolving line of credit was 3.7 %.

The increment over LIBOR borrowing rate will be 175 basis points for the second quarter of fiscal 2023.

 The fee on the unused balance of the $ 75 million committed line of credit fluctuates between 15 and 25 basis points.

As of June 30, 2022, there was $ 17.7 million available for borrowing under the $ 75 million line of credit.

NOTE 9 —

CASH DIVIDENDS

The Company paid cash dividends of $ 5.3 million in both fiscal years 2021 and 2020.

Dividends on restricted stock units in the amount of $ 0.1 million were accrued as of both June 30, 2021 and 2020.

The Company paid cash dividends of $ 5.3 million in fiscal years 2022 and 2021.

Dividends on restricted stock units in the amount of $ 0.2 million and $ 0.1 million were accrued as of June 30, 2022, and 2021, respectively.

These dividends are paid upon the vesting of the restricted stock units when shares are issued to the award recipients.

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The Plan contains a fungible share ratio that consumes 2.5 available shares for every full value share awarded by the Company as stock compensation.

The 2019 Omnibus Plan allows for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units and other stock-based awards.

Inducement awards are granted by the Company to attract and retain key executives.

The 2019 Omnibus Plan allows for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSU’s), performance stock units (PSU’s), and other stock-based awards.

The Company also awards Inducement awards are granted by the Company to attract and retain key executives.

Inducement awards are separately registered securities and are not part of the 2019 Omnibus Plan.

In fiscal 2022, 146,281 RSUs and 190,980 PSUs were granted.

In fiscal 2021, 75,000 inducement options, 30,626 RSUs and 122,509 PSUs were granted.

In fiscal 2020, 280,000 inducement options were granted.

Stock Warrants

The Company has outstanding 200,000 fully exercisable stock warrants with an exercise price of $ 9.95 as of June 30, 2021.

As of June 30, 2021, the warrants had a remaining contractual life of 0.6 years.

The fair value of the warrants on the date of grant was estimated using the Black-Scholes option pricing model.

The following table summarizes the weighted-average assumptions used in the Black-Scholes option price model to value the warrants in the period indicated:

Dividend yield

Expected volatility

Risk-free interest rate

Expected life (in years)

Fair value per share

$ 2.87  

Stock Options

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The following table summarizes the weighted-average assumptions used in the Black-Scholes option pricing model to value the stock options granted in the periods indicated.

There were no options granted in fiscal 2022.

Stock Options

Dividend yield

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$ 2.40  

$ 1.22  

Stock option expense is recorded on a straight-line basis, or sooner if the grantee is retirement eligible as defined in the 2019 Omnibus Plan, net of forfeitures.

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estimated weighted average time within which options will be exercised. It is the Company’s policy that when stock options are exercised, new common shares shall be issued.    

Service-based options have a three -year ratable vesting period beginning one year after the date of grant.

Servi ce-based options have a three -year ratable vesting period beginning one year after the date of grant.

Inducement stock options have a term of ten years only if the employee is employed for three years from the date of grant.

The maximum exercise period of service-based and performance-based stock options granted under the 2019 Omnibus Plan is ten years. 

There were no service - based or inducement stock options awarded in fiscal 2022.

The Company recorded $ 0.7 million and $ 0.8 million of expense related to stock options in fiscal years 2022 and 2021, respectively.

A summary of stock option activity as of June 30, 2022, and changes during the period from July 1, 2021 through June 30, 2022 are as follows:

Exercise Price

Remaining Contractual

Outstanding at June 30, 2021

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$ 9.27  

( 2,500 )  

$ 7.29  

Outstanding at June 30, 2022

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$ 2,282,521  

The aggregate intrinsic value of options exercised during the years ended June 30, 2021 and June 30, 2020 was $ 0.2 million and $ 0.1 million, respectively.

The Company received $ 1.0 million and $ 0.6 million of proceeds from stock options exercises in fiscal 2021 and 2020, respectively.

The aggregate intrinsic value of options exercised during the years ended June 30, 2022, and June 30, 2021, was nominal as of June 30, 2022, and $ 0.2 million as of June 30, 2021.

The Company received a nominal amount of proceeds from the exercise of stock options in fiscal 2022 and $ 1.0 million of proceeds from stock options exercises in fiscal 2021.

As of June 30, 2022, there was $ 0.7 million of unrecognized compensation cost, net of forfeitures, related to stock options, which is expected to be recognized over a weighted-average remaining period of 1.2 years.

For fiscal year 2021, the Company recognized a current income tax benefit of $ 0.1 million for tax deductions related to equity compensation.

For fiscal year 2022, the Company recognized a current income tax benefit of $ 0.2 million for tax deductions related to equity compensation.

A discrete tax expense of 0.1 million was recognized to reduce deferred tax assets for cancelled awards and detriments in excess of the tax deductions.

For fiscal year 2020, the Company recognized a current income tax benefit of $ 43,000 for tax deductions related to equity compensation.

For fiscal year 2021, the Company recognized a current income tax benefit of $ 0.1 million for tax deductions related to equity compensation.

A discrete tax expense of $ 0.1 million was recognized to reduce deferred tax assets for cancelled awards and detriments in excess of the tax deductions.

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A total of 146,281 RSUs with a weighted average fair value of $ 8.13 per share were awarded to employees during fiscal 2021.

Inducement RSUs awarded during fiscal 2021 vest after three years of service.

All other RSUs awarded during fiscal 2021 have a three -year vesting period, with 50 % vesting on the first anniversary date of the award and 25 % vesting on the second and third anniversary of the award.

The RSUs awarded during fiscal 2022 have a three -year vesting period, with one - third vesting on each of the anniversary dates.

The Company determined the fair value of the awards based on the closing price of the Company stock on the date the RSUs were awarded.

The unvested RSUs are non-voting but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock.

Dividends on RSUs in the amount of $ 42,085 and $ 16,931 were accrued as of June 30, 2021 and 2020, respectively.

Dividends on RSUs in the amount of $ 65,743 were accrued as of June 30, 2022.

Accrued dividends are paid to the holder upon vesting of the RSUs and issuance of shares.

The Company recorded $ 0.6 million and $ 0.1 million of expense related to RSUs during fiscal year 2021 and 2020, respectively.

The Company recorded $ 0.9 million and $ 0.6 million of expense related to RSUs during fiscal years 2022, and 2021, respectively.

A summary of outstanding and unvested RSU activity as of June 30, 2022, and changes during the period from July 1, 2021, through June 30, 2022, are as follows:

34 unchanged sentences

$ 4.94  

( 23,950 )  

$ 7.50  

Unvested at June 30, 2022

12 unchanged sentences

A total of 821,876 common shares with a cost of $ 5.9 million, and 345,875 common shares with a cost of $ 2.5 million, both of which included the Company contributions and the participant deferrals, were held in the plan as of June 

30, 2021 and 2020, respectively, and, accordingly, have been recorded as treasury shares.

30, 2022, and 2021, respectively, and, accordingly, have been recorded as treasury shares. 

The change in the number of shares held by this plan is the net result of newly issued shares as compensation deferred into the plan offset by distributions to terminated employees.

2 unchanged sentences

LEASES AND PURCHASE COMMITMENTS

Purchase commitments of the Company totaled $ 29.0 million and $ 14.3 million as of June 30, 2021 and June 

30, 2020, respectively.

Purchase commitments of the Company totaled $65.6 million as of June 30, 2022.

The Company leases certain manufacturing facilities along with a small office space, a company vehicle, several forklifts, several small tooling items and various items of office equipment.

6 unchanged sentences

The Company elected not to record these leases on the balance sheet.

The rent expense for these leases was immaterial for fiscal 2021.

The rent expense for these leases was immaterial for fiscal years 2022 and 2021.

The Company has certain leases that contain lease and non-lease components and has elected to utilize the practical expedient to account for these components together as a single lease component.

1 unchanged sentence

The Company used its incremental borrowing rate when determining the present value of lease payments.

The adoption of the new lease standard resulted in the recognition of right-of-use (ROU) assets of $ 10.4 million and lease liabilities of $ 10.8 million which includes the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheets as of July 1, 2019 for the Company’s real estate leases.

The adoption of the new standard resulted in no material impact to the consolidated statements of operations or consolidated statements of cash flow.

(In thousands)

7 unchanged sentences

Sublease income

( 43 )  

Total lease cost

4 unchanged sentences

Cash flows from operating leases

Fixed payments - operating cash flows

Fixed payments - operating lease cash flows

$ 3,576  

14 unchanged sentences

$ 1,274  

$ 1,424  

Long-term operating lease liability

9 unchanged sentences

June 30, 2021

Buildings under finance leases

Buldings under finance leases

$ 2,033  

6 unchanged sentences

$ 1,724  

Accrued expenses (Current liabilities)

Accured expenses (Current liabilities)

Long-term finance lease liability

6 unchanged sentences

Maturities of Lease Liability:

Operating Lease  

Finance Lease  

Operating  

Net Lease  

$ 3,558  

Operating Lease Liabilities

Finance Lease Liabilities

Operating Subleases

Net Lease Commitments

$ 3,738  

17 unchanged sentences

(In thousands)

Components of income before income taxes:

Components of income (loss) before income taxes:

United States

1 unchanged sentence

$ 7,117  

( 1,039 )  

Income before income taxes

3 unchanged sentences

$ 3,586  

$ 2,425  

State and local

12 unchanged sentences

Valuation allowance

( 25.9 )  

New York state tax credits

Expiration of capital loss carryforward

Transaction costs

NY State Tax Credits

Transaction cost

Uncertain tax position activity

1 unchanged sentence

Stock-based compensation

Tax rate changes

( 0.3 )  

Tax rate changes

( 1.4 )  

Effective tax rate

The favorable tax rate change for the year ended

June 30, 2020 is due to the enactment of the CARES Act.

The CARES Act allows the Company to carryback a federal net operating loss to prior tax years, offset taxable income in those earlier tax years, and obtain a refund of income taxes that were paid at a higher statutory tax rate. 

The components of deferred income tax assets and (liabilities) at June 

30, 2022, and 2021 are as follows:

Components of deferred income tax assets and liabilities

(In thousands)

16 unchanged sentences

13,215  

Goodwill, acquisition costs and intangible assets

( 3,519 )  

Right of use assets

( 2,205 )  

Goodwill, acquisition costs and intangible assets

Right of Use Asset

( 2,513 )  

6 unchanged sentences

federal net operating loss carry forward deferred tax assets of $ 1.1 million and $ 1.5 million at June 30, 2022, and June 30, 2021, respectively.

The increase of $ 1.4 million for the year is from the acquisition of JSI and has an unlimited carryforward period.

The increase of $ 1.4 million in fiscal 2021 was from the acquisition of JSI which has an unlimited carryforward period.

 The remaining $ 0.1 million will expire over a three -year period beginning June 30, 2029.

1 unchanged sentence

Utilization of the federal net operating losses and research and development credits are limited by Internal Revenue Code Section 382 but are expected to be realized before expiration.

The Company has Canadian net operating loss carry forward deferred tax assets of $ 0.5 million at June 30, 2022.

The $ 0.5 million deferred tax asset was from the acquisition of JSI and has a 20 year carryforward period.

The Company has state net operating loss carryovers and tax credit deferred tax assets of $ 0.3 million and $ 0.6 million at June 30, 2022, and June 30, 2021, respectively.

2 unchanged sentences

The Oregon credits are otherwise expected to expire over a 4 -year period beginning June 30, 2027.

At June 30, 2020, there was $ 2.1 million of New York tax credits and $ 0.1 million of Oregon tax credits. A full valuation allowance existed for both credits not expected to be used of $ 2.2 million.

During fiscal year 2021, the Company eliminated the deferred tax asset and related valuation allowance for the New York tax credits of $ 2.1 million when the entity holding the New York credits was dissolved. There was no impact to the consolidated financial statements.

The Company had a capital loss carry forward of $ 10.7 million at June 30, 2019 that was generated from the sale of a Canadian subsidiary during fiscal 2015.

 During fiscal 2020, the Company sold its North Canton, Ohio and New Windsor, New York facilities, resulting in taxable capital gain;

$ 6.4 million of the capital loss carry forward was used to offset the gain. The remaining capital loss carryforward of $ 4.3 million expired unused in fiscal 2020.

 The Company recognized the tax benefit of utilizing the capital loss of $ 0.6 million in the fiscal year 2020 by releasing the related valuation allowance.

At June 

6 unchanged sentences

The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Consolidated Statements of Operations.

The Company recognized a $ 0.1 million net tax benefit in both fiscal 2021 and fiscal 2020, related to the change in reserves for uncertain tax positions.

The Company recognized a $ 0.1 million net tax (benefit)/expense in both fiscal 2022 and fiscal 2021, related to the change in reserves for uncertain tax positions.

The Company recognized interest net of federal benefit and penalties of ($ 8,000 ) and ($ 10,000 ), respectively, in fiscal 2022 and $ 32,000 and $ 19,000 , respectively, in fiscal 2021.

The reserve for uncertain tax positions is not expected to change significantly in the next twelve months.

The tax activity in the liability for uncertain tax positions was as follows:

6 unchanged sentences

Settlements and payments

Lapse of statute of limitations

Balance at end of the fiscal year

The Company files a consolidated federal income tax return in the United States, and files various combined and separate tax returns in several state and local jurisdictions, and also in Canada and Mexico.

With limited exceptions, the Company is no longer subject to U.S.

In general, the Company is no longer subject to U.S.

Federal, state, and local tax examinations by tax authorities for fiscal years ending prior to June 

Except that US tax years prior to June 30, 2019, are subject to exam to the extent of the US tax refunds generated from the carry back of the June 30, 2019, federal net operating loss. 

The Company received notice that the IRS intends to examine the US tax year ended June 30, 2020, but the exam has not started. 

NOTE 13 —

2 unchanged sentences

Cash Payments:

$ 1,668  

$ 4,965  

Non-cash investing and financing activities

2 unchanged sentences

$ 3,610  

$ 1,534  

NOTE 14 —

6 unchanged sentences

As of June 30, 2022, there were no such standby letters of credit issued.

In August 2020, the Company experienced a cybersecurity incident.

For details regarding this incident, see risk factor on page 8 of this Form 10 -K.

NOTE 15 –

SEVERANCE COSTS

The Company recorded severance charges of less than $ 0.1 million and $ 0.3 million in fiscal 2021 and 2020, respectively.

The Company recorded severance charges of less than $ 0.1 million in fiscal 2022 and 2021, respectively.

This severance expense was related to reductions in staffing not related to plant restructuring.

See further discussion of restructuring expenses in Note 16.

The activity in the Company’s accrued severance liability was as follows for the twelve months ended June 30, 2021, and 2020:

1 unchanged sentence

Balance at beginning of period

$ 1,134  

Accrual of expense

1 unchanged sentence

Balance at end of period

The severance reserve reported as of June 30, 2021 has been classified as a current liability and will be paid out over the next twelve months.

NOTE 16 —

RESTRUCTURING COSTS

In fiscal 2019, the Company announced plans to close its lighting manufacturing facility in New Windsor, New York.

The closure was part of ongoing actions to align the Company’s supply chain to more cost effectively serve the changing requirements of the lighting market.

The sale of the New Windsor facility occurred during the first quarter of fiscal 2020.

The net proceeds were $ 12.3 million resulting in a gain of $ 4.8 million.

In addition, in the third quarter of fiscal 2020, the Company sold its North Canton, Ohio facility.

The net proceeds were $ 7.7 million resulting in a net gain of $ 3.7 million.

The Company relocated the production at the North Canton facility to smaller, leased facility in Akron, Ohio during the fourth quarter of fiscal 2020.

The Company also incurred $ 0.6 million of expense to write-down inventory which is not included in the tables below.

Other restructuring costs incurred in fiscal 2020 related to the realignment of the Company’s manufacturing footprint at its Houston, Texas facility.

The realignment occurred as the result of the movement of equipment related to the closure of the New Windsor facility along with preparations to receive additional equipment resulting from the relocation of the North Canton facility.

The following table presents information about restructuring (gains) costs recorded in fiscal years 2021 and 2020:

(In thousands)

$ ( 14 )  

Impairment of fixed assets and accelerated depreciation

Gain on sale of facility

Manufacturing realignment costs

$ ( 14 )  

The following table presents restructuring (gains) costs incurred by line item in the consolidated statement of operations in which the costs are included:

(In thousands)

Cost of goods sold

$ ( 14 )  

Operating expenses

$ ( 14 )  

The following table presents information about restructuring (gains) costs by segment for the periods indicated:

(In thousands)

Lighting Segment

Display Solutions Segment

( 14 )  

Corporate and Eliminations

$ ( 14 )  

The following table presents a roll forward of the beginning and ending liability balances related to the restructuring costs:

Balance as of

Restructuring

(In thousands)

Severance and termination benefits

Other restructuring costs

( 14 )  

$ ( 14 )  

Refer to Note 15 for information regarding additional severance expenses that are not included in the restructuring costs identified in this footnote.

NOTE 17 —

RELATED PARTY TRANSACTIONS

One of the Company’s former independent outside directors is a director of Wesco International (Wesco).

Wesco purchases lighting fixtures from the Company.

Wesco will no longer be considered a related party after fiscal 2021.

Wesco was no longer be considered a related party after fiscal 2021 because the outside director no longer serves on the Company’s Board of Directors.

The Company has recognized revenue related to the following related party transactions in the fiscal years indicated:

2 unchanged sentences

$ 2,013  

$ 1,575  

As of the balance sheet date indicated, the Company had the following accounts receivable recorded with respect to related party transactions:

15 unchanged sentences

109,208  

15,032  

Earnings per share

3 unchanged sentences

$ 0.19  

$ 0.22  (a)

$ 0.55 (a) 

$ 0.11  

2 unchanged sentences

$ 0.18  

$ 0.21  (a)

$ 0.54 (a) 

Range of share prices

24 unchanged sentences

$ 0.01  

$ 0.37  (a)

$ 0.22 (a) 

$ 0.07  

2 unchanged sentences

$ 0.01  

$ 0.36  (a)

$ 0.21 (a) 

Range of share prices

9 unchanged sentences

$ 5.52  

The total of the earnings per share for each of the four quarters does not equal the total earnings per share for the full year because the calculations are based on the average shares outstanding during each of the individual periods.

There is no difference between basic and diluted shares due to losses.

LSI INDUSTRIES INC.

4 unchanged sentences

(In thousands)

Allowance for Doubtful Accounts:

Allowance for Credit Losses:

Year Ended June 30, 2022

$ ( 60 )  

Year Ended June 30, 2021

$ ( 625 )  

Inventory Obsolescence Reserve:

Year Ended June 30, 2022

$ 3,821  

$ 1,754  

$ ( 905 )  

$ 5,050  

Year Ended June 30, 2021

$ 4,605  

$ 2,454  

$ ( 3,248 )  

$ 3,821  

Deferred Tax Asset Valuation Reserve:

Year Ended June 30, 2022

$ 2,194  

$ ( 2,086 )  

Year Ended June 30, 2021

$ 3,820  

$ ( 1,626 )  

$ 2,194  

For Allowance for Doubtful Accounts, deductions are uncollectible accounts charged off, less recoveries.

For Allowance for credit losses, deductions are uncollectible accounts charged off, less recoveries.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures