UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

X		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE ~~QUARTERLY~~QUARTERLY PERIOD ENDED ~~MARCH~~DECEMBER 31, 2017.

		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________.

Commission File No. 0-13375

LSI Industries Inc.

State of Incorporation - Ohio IRS Employer I.D. No. 31-0888951

10000 Alliance Road

Cincinnati, Ohio 45242

(513) 793-3200

Indicate by checkmark whether the ~~registrant:~~Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

YES X NO ____

Indicate by checkmark whether the ~~registrant~~Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to submit and post such files).

YES ~~YES~~ X NO ____

Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [ ]		Accelerated filer [ X ] Emerging growth company [ ]
	Non-accelerated filer [ ]		Smaller reporting company [ ]
	~~Emerging growth company [ ]~~

If an emerging growth company, indicate by check mark if the ~~registrant~~Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ____ NO X

As of ~~May 1, 2017~~January 27, 2018 there were ~~25,399,626~~25,574,457 shares of the Registrant's common stock, no par value per share, outstanding.

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~MARCH~~DECEMBER 31, 2017

INDEX

			Begins on Page
PART I. Financial Information

	ITEM 1.	Financial Statements (Unaudited)

		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Cash Flows	6

		Notes to Condensed Consolidated Financial Statements	7

	ITEM 2.	~~Management’s~~Management’s Discussion and ~~Analysisof~~Analysis of Financial Condition and Results of Operations	2724

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	4236

	ITEM 4.	Controls and Procedures	4236

PART II. Other Information

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4336

	ITEM 6.	Exhibits	4337

Signatures			4438

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This Form 10-Q contains certain forward-looking statements that are subject to numerous assumptions, risks or uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “may,” “will,” “should” or the negative versions of those words and similar expressions, and by the context in which they are used. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Actual results could differ materially from those contained in or implied by such forward-looking statements as a result of a variety of risks and uncertainties over which the Company may have no control. These risks and uncertainties include, but are not limited to, the impact of competitive products and services, product demand and market acceptance risks, potential costs associated with litigation and regulatory compliance, reliance on key customers, financial difficulties experienced by customers, the cyclical and seasonal nature of our business, the adequacy of reserves and allowances for doubtful accounts, fluctuations in operating results or costs whether as a result of uncertainties inherent in tax and accounting matters or otherwise, unexpected difficulties in integrating acquired businesses, the ability to retain key employees of acquired businesses, unfavorable economic and market conditions, the results of asset impairment assessments and the other risk factors that are identified herein. You are cautioned to not place undue reliance on these forward-looking statements. In addition to the factors described in this paragraph, the risk factors identified in our Form 10-K and other filings the Company may make with the SEC constitute risks and uncertainties that may affect the financial performance of the Company and are incorporated herein by reference. The Company does not undertake and hereby disclaims any duty to update any forward-looking statements to reflect subsequent events or circumstances.

Page 2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	March 31						March 31						December 31						December 31
(In thousands, except per share data)	2017			2016			2017			2016			2017			2016			2017			2016

Net sales	$	78,156		$	70,740		$	247,973		$	241,352
Net sales													$	92,305		$	85,658		$	179,771		$	169,817

Cost of products and services sold		59,445			54,191			185,877			177,528			66,998			63,611			130,761			126,432

Restructuring costs		312			--			1,455			--			--			640			--			1,143

Gross profit		18,399			16,549			60,641			63,824			25,307			21,407			49,010			42,242

Impairment of intangible asset		479			--			479			--
Restructuring costs														--			57			--			210

Acquisition Deal Costs		1,480			--			1,480			--

Restructuring costs (gain)		(1,301	)		--			(1,091	)		--
Impairment of goodwill														--			--			28,000			--

Selling and administrative expenses		18,515			15,817			56,663			51,949			20,760			18,532			41,277			38,148

Operating income (loss)		(774	)		732			3,110			11,875			4,547			2,818			(20,267	)		3,884

Interest (income)		(25	)		(28	)		(80	)		(54	)		(8	)		(28	)		(16	)		(55	)

Interest expense		188			9			209			27			425			8			836			21

Income (loss) before income taxes		(937	)		751			2,981			11,902			4,130			2,838			(21,087	)		3,918

Income tax (benefit) expense		(406	)		229			677			3,848
Income tax expense (benefit)														5,598			832			(3,990	)		1,083

Net income (loss)	$	(531	)	$	522		$	2,304		$	8,054
Net (loss) income													$	(1,468	)	$	2,006		$	(17,097	)	$	2,835


Earnings (loss) per common share (see Note 4)
(Loss) Earnings per common share (see Note 4)
Basic	$	(0.02	)	$	0.02		$	0.09		$	0.32		$	(0.06	)	$	0.08		$	(0.66	)	$	0.11
Diluted	$	(0.02	)	$	0.02		$	0.09		$	0.32		$	(0.06	)	$	0.08		$	(0.66	)	$	0.11


Weighted average common shares outstanding
Basic		25,452			25,080			25,346			24,918			25,858			25,314			25,824			25,294
Diluted		25,452			25,700			25,909			25,494			25,858			25,803			25,824			25,859

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial ~~statements.~~statements.

Page 3

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except shares)							December 31,			June 30,
	March 31,			June 30,			2017			2017
(In thousands, except shares)	2017			2016

ASSETS

Current Assets

Cash and cash equivalents	$	4,375		$	33,835		$	3,177		$	3,039

Accounts receivable, less allowance for doubtful accounts of$399 and $226, respectively		48,740			46,975
Accounts receivable, less allowance for doubtful accounts of $475 and $506, respectively								59,740			48,880

Inventories		48,460			44,141			48,662			50,008

Refundable income tax								--			775

Assets held for sale		1,463			--			--			1,463

Other current assets		3,852			2,792			3,712			2,964

Total current assets		106,890			127,743			115,291			107,129

Property, Plant and Equipment, at cost
Land		6,422			6,978			6,469			6,429
Buildings		35,430			39,317			35,855			35,463
Machinery and equipment		82,058			82,628			82,152			78,804
Construction in progress		1,721			838			796			3,805
		125,631			129,761			125,272			124,501
Less accumulated depreciation		(79,511	)		(82,299	)		(80,409	)		(77,147	)
Net property, plant and equipment		46,120			47,462			44,863			47,354

Goodwill		58,376			10,508			30,538			58,538

Other Intangible Assets, net		38,859			5,586			36,789			38,169

Other Long-Term Assets, net		5,671			4,261			10,893			5,490

Total assets	$	255,916		$	195,560		$	238,374		$	256,680

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 4

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31,		June 30,		December 31,		June 30,
(In thousands, except shares)	2017		2016		2017		2017

LIABILITIES & SHAREHOLDERS’ EQUITY
LIABILITIES & SHAREHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	16,003	$	13,892	$	16,828	$	19,356
Accrued expenses		23,880		25,341		25,713		26,069

Total current liabilities		39,883		39,233		42,541		45,425

Long-Term Debt		54,966		--
Long-Term Debt						52,149		49,698

Other Long-Term Liabilities		1,490		807		1,356		1,479

Commitments and Contingencies (Note 12)
Commitments and Contingencies (Note 12)						--		--

Shareholders’ Equity
Preferred shares, without par value;Authorized 1,000,000 shares, none issued		—		—
Common shares, without par value;Authorized 40,000,000 shares;Outstanding 25,375,142 and 24,982,219 shares, respectively		119,178		113,653
Shareholders’ Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued						--		--
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 25,562,003 and 24,429,223 shares, respectively						122,170		120,259
Retained earnings		40,399		41,867		20,158		39,819

Total shareholders’ equity		159,577		155,520
Total shareholders’ equity						142,328		160,078

Total liabilities & shareholders’ equity	$	255,916	$	195,560
Total liabilities & shareholders’ equity					$	238,374	$	256,680

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 5

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)	Nine Months Ended						Six Months Ended
	March 31						December 31
	2017			2016			2017			2016
Cash Flows from Operating Activities
Net income	$	2,304		$	8,054
Non-cash items included in net income:
Depreciation and amortization		5,689			4,903
Intangible asset impairment		479			--
Net (loss) income							$	(17,097	)	$	2,835
Non-cash items included in net income
Depreciation and amortization								5,124			3,605
Deferred income taxes		(947	)		(126	)		(5,667	)		(962	)
Deferred compensation plan		196			328
Impairment of goodwill								28,000			--
Deferred compensation plan								(413	)		237
Stock compensation expense		2,292			2,542			1,463			1,688
Issuance of common shares as compensation		331			168
(Gain) loss on disposition of fixed assets		52			(87	)
(Gain) on sale of building		(1,361	)		--
Issuance of common shares as compensation								156			228
Loss (gain) on disposition of fixed assets								(29	)		53
Fixed asset impairment and accelerated depreciation		354			--			--			354
Allowance for doubtful accounts		248			162
Inventory obsolescence reserve		981			1,351
Allowance for doubtful accounts								115			205
Inventory obsolescence reserve								1,033			758

Changes in certain assets and liabilities, net of acquisition:
Accounts receivable		5,189			5,588
Changes in certain assets and liabilities:
Accounts receivable								(10,975	)		(2,771	)
Inventories		3,190			(4,440	)		313			979
Refundable income taxes		(143	)		(531	)		775			--
Accounts payable		(965	)		(3,176	)		(2,626	)		(176	)
Accrued expenses and other		(5,119	)		812			(742	)		(2,630	)
Customer prepayments		174			(310	)		(221	)		216
Net cash flows provided by operating activities		12,944			15,238
Net cash flows (used in) provided by operating activities								(791	)		4,619

Cash Flows from Investing Activities
Purchases of property, plant and equipment		(3,534	)		(8,410	)		(1,190	)		(2,744	)
Acquisition of business, net of cash received and warrants issued		(95,077	)		--
Proceeds from sale of fixed assets		3,081			124			1,527			1
Net cash flows (used in) investing activities		(95,530	)		(8,286	)
Net cash flows provided by (used in) investing activities								337			(2,743	)

Cash Flows from Financing Activities
Payments of long-term debt		(14,882	)		--			(48,553	)		--
Borrowings of long-term debt		69,649			--			51,004			--
Cash dividends paid		(3,772	)		(2,959	)		(2,564	)		(2,513	)
Exercise of stock options		2,401			3,604			175			171
Purchase of treasury shares		(446	)		(317	)		(107	)		(390	)
Acquisition of common stock for tax withholding related to share based compensation								183			--
Issuance of treasury shares		176			90			454			44
Net cash flows provided by financing activities		53,126			418
Net cash flows provided by (used in) financing activities								592			(2,688	)

Increase (decrease) in cash and cash equivalents		(29,460	)		7,370			138			(812	)

Cash and cash equivalents at beginning of period		33,835			26,409			3,039			33,835

Cash and cash equivalents at end of period	$	4,375		$	33,779		$	3,177		$	33,023

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 6

LSI INDUSTRIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of ~~March~~December 31, 2017, the results of its operations for the three and ~~nine~~six month periods ended ~~March~~December 31, 2017 and 2016, and its cash flows for the ~~nine~~six month periods ended ~~March~~December 31, 2017 and 2016. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal ~~2016~~2017 Annual Report on Form ~~10-K.~~10-K. Financial information as of June 30, ~~2016~~ 2017 has been derived from the Company’s audited consolidated financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

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.

~~Revenue Recognition:~~

Revenue Recognition:

Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectability is reasonably assured. Sales are recorded net of estimated returns, rebates and discounts. Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has ~~five~~multiple sources of revenue: revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting, and commissioning of lighting controls; revenue from the management of media content and digital hardware related to active digital signage; and revenue from shipping and handling.

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment. In certain arrangements with customers, as is the case with the sale of some of our solid-state LED (light emitting diode) video screens, revenue is recognized upon customer acceptance of the video screen at the job site. Product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed. The Company provides product warranties and certain post-shipment service, support and maintenance of certain solid state LED video screens.

Installation revenue is recognized when the products have been fully installed. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is ~~recognized~~recognized when all products at a customer site have been installed.

Revenue from the management of media content and digital hardware related to active digital signage is recognized evenly over the service period with the customer. Media content service periods with most customers range from one month to one year.

Shipping and handling revenue coincides with the recognition of revenue from sale of the ~~product.~~product.

~~Page 7~~

In situations where the Company is responsible for re-imaging programs with multiple sites, each site is viewed as a separate unit of accounting and has stand-alone value to the customer. Revenue is recognized upon the ~~Company’s~~Company’s complete performance at the location, which may include a site survey, graphics products, lighting products, and installation of products. The selling price assigned to each site is based upon an agreed upon price between the Company and its customer and reflects the estimated selling price for that site relative to the selling price for sites with similar image requirements.

Page 7

The Company also evaluates the appropriateness of revenue recognition in accordance with the accounting standards on software revenue recognition. Our solid-state LED video screens and active digital signage contain software elements which the Company has determined are incidental.

Credit and Collections:

~~The~~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, 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 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.

The following table presents the ~~Company’s~~Company’s net accounts receivable at the dates indicated.

(In thousands)	March 31,			June 30,			December 31,			June 30,
	2017			2016			2017			2017

Accounts receivable	$	49,139		$	47,201		$	60,215		$	49,386
Less: Allowance for doubtful accounts		(399	)		(226	)		(475	)		(506	)
Accounts receivable, net	$	48,740		$	46,975		$	59,740		$	48,880

Cash and Cash Equivalents:

The cash balance includes cash and cash equivalents which have original maturities of less than three months. 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. In the United States, the FDIC limit for insurance coverage on non-interest bearing accounts is ~~$250,000.As~~$250,000.As of ~~March~~December 31, 2017 and June 30, ~~2016,~~ 2017, the Company had bank balances of ~~$6,852,000~~$4,827,512 and ~~$37,883,000,~~$4,488,000, respectively, without insurance coverage.

Inventories and Inventory Reserves:

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

The Company maintains an inventory reserve for obsolete and excess inventory. The Company first determines its obsolete inventory reserve by considering specific known obsolete items, and then by applying certain percentages to specific inventory categories based upon inventory turns. The Company uses various tools, in addition to inventory turns, to identify which inventory items have the potential to become obsolete. ~~Judgment is~~A combination of financial modeling and qualitative input factors are used to establish excess and obsolete inventory reserves and management adjusts these reserves as more information becomes available about the ultimate disposition of the inventory item.

Page 8

Property, Plant and Equipment and Related Depreciation:

Property, plant and equipment are stated at cost. Major additions and betterments are capitalized while maintenance and repairs are expensed. For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful lives of the assets as follows:

Buildings (in years)
28 - 40
Machinery and equipment (in years)
3 - 10
Computer software (in years)
3 - 8

Buildings (in years)	28	-	40
Machinery and equipment (in years)	3	-	10
Computer software (in years)	3	-	8

Costs related to the purchase, internal development, and implementation of the ~~Company’s~~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.

The Company recorded ~~$1,725,000~~$1,862,000 and ~~$1,603,000~~$1,669,000 of depreciation expense in the ~~third~~second quarter of fiscal ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$5,122,000~~$3,744,000 and ~~$4,524,000~~$3,397,000 of depreciation expense in the first ~~nine months~~ half of fiscal ~~2017~~2018 and ~~2016,~~2017, respectively.

The Company is in the process of selling its facility in Woonsocket, Rhode Island. This Graphics Segment facility, which is not expected to be sold at a loss, has been separately disclosed on the balance sheet as an asset held for sale as of March 31, 2017. The Company sold its Kansas City facility and certain manufacturing equipment in the third quarter of fiscal 2017. Refer to Note 14 for more information regarding the closure of these facilities.

Goodwill and Intangible Assets:

Intangible assets consisting of customer relationships, trade names and trademarks, patents, technology and software, and non-compete agreements are recorded on the Company's balance sheet. The definite-lived intangible assets are being amortized to expense over periods ranging between seven and twenty years. The Company evaluates definite-lived intangible assets for possible impairment when triggering events are identified. Neither indefinite-lived intangible assets nor the excess of cost over fair value of assets acquired ("goodwill") are amortized, however they are subject to review for impairment. See additional information about goodwill and intangibles in Note 7.

Fair Value:

The Company has financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, accounts receivable, accounts payable, and on occasion, long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates. The Company has no financial instruments with off-balance sheet risk.

Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in goodwill and other intangible asset impairment analyses, long-lived asset impairment analyses, and in the purchase price of acquired companies ~~and in the valuation of the contingent earn-out.~~(if any). The accounting guidance on fair value measurement was used to measure the fair value of these nonfinancial assets and nonfinancial liabilities.

Product Warranties:

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 10ten 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 amounts as necessary.

Page 9

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

	Nine			Nine			Fiscal			Six			Six			Fiscal
	Months Ended			Months Ended			Year Ended			Months Ended			Months Ended			Year Ended
(In thousands)	March 31,			March 31,			June 30,			December 31,			December 31,			June 30,
	2017			2016			2016			2017			2016			2017

Balance at beginning of the period	$	5,069		$	3,408		$	3,408		$	7,560		$	5,069		$	5,069
Additions charged to expense		3,841			4,018			5,069			2,394			2,243			4,956
Addition from acquisition		907			--			--
Deductions for repairs andReplacements		(2,283	)		(2,606	)		(3,408	)
Addition from acquired company											--			--			907
Deductions for repairs and replacements											(3,266	)		(1,351	)		(3,372	)
Balance at end of the period	$	7,534		$	4,820		$	5,069		$	6,688		$	5,961		$	7,560

Research and Development Costs:

Research and development costs are directly attributable to new product development, including the development of new technology for both existing and new products, and consist of salaries, payroll taxes, employee benefits, materials, outside legal costs and filing fees related to obtaining patents, supplies, depreciation and other administrative costs. The Company expenses as research and development all costs associated with development of software used in solid-state LED products. All costs are expensed as incurred and are included in selling and administrative expenses. Research and development costs related to both product and software development totaled ~~$1,447,000~~$1,379,000 and ~~$1,562,000~~$1,269,00 for the three months ended ~~March~~December 31, 2017 and 2016, respectively, and ~~$4,117,000~~$2,941,000 and ~~$4,193,000~~$2,670,000 for the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016, respectively.

Cost of Products and Services Sold:

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacture of products, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity. Cost of services sold is primarily comprised of the internal and external labor costs required to support the Company’s service revenue along with the management of media content.

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~~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 ~~297,000~~756,000 and ~~893,000~~787,000 shares for the three month ended ~~March~~December 31, 2017 and 2016, respectively, and ~~853,000~~686,000 shares and ~~846,000~~852,000 shares for the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016, respectively. See further discussion of earnings per share in Note 4.

Income Taxes:

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.

The Tax Cuts and Jobs Act was signed into law on December 22nd,2017 and makes numerous changes to the Internal Revenue Code. Among other changes, the Act reduces the US corporate income tax rate to 21% effective January 1, 2018. Because the Act became effective mid-way through the Company’s tax year, the Company will have a US statutory income tax rate of 27.7% for the fiscal 2018, and will have a 21% US statutory income tax rate for fiscal years thereafter. During the quarter ended December 31, 2017, the Company re-valued the deferred tax balances because of the change in US tax rate resulting in a one-time deferred tax expense of $4,676,578.

Page 10

New Accounting Pronouncements:

In June 2014, the Financial Accounting Standards Board issued ASU ~~2014-09, “Revenue~~2014-09, “Revenue from Contracts with Customers.” This amended guidance supersedes and replaces all existing U.S. GAAP revenue recognition guidance. The guidance established a new revenue recognition model, changes the basis for deciding when revenue is recognized, provides new and more detailed guidance on specific revenue topics, and expands and improves disclosures about revenue. In April 2016, the FASB issued ASU ~~2016-10,~~2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing.” In May 2016, the FASB issued ASU ~~2016-12,~~2016-12, “Revenue from Contracts with Customers: Narrow Scope Improvements and Practical Expedients.” In December 2016, the FASB issued ASU ~~2016-20,~~2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” These three standards clarify or improve guidance from ASU ~~2014-09~~2014-09 and are effective for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal ~~year~~ 2019. The Company ~~will~~currently plans to adopt ~~these standards no later than~~ the new revenue guidance for the fiscal year beginning July 1, ~~2018.~~2018 using the modified retrospective approach. The Company is reviewing accounting policies and evaluating disclosures in the financial statements related to the new standard. The Company is also assessing potential changes to the business processes, internal controls, and information systems related to the adoption of the new standard. While the Company is currently assessing the impact of the new ~~standards,~~standard, the Company’s revenue is primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risks, and rewards transfer. The recognition of revenue from most product sales is largely unaffected by the new standard. However, with respect to certain product sales requiring installation, revenue is currently not recognized until the installation is complete. While the Company does not expect this new guidance to have a material impact on the amount of overall sales recognized, the timing of recognition of revenues from sales on certain projects may be affected. ~~The Company has not yet quantified this potential impact.~~Our initial conclusions may change as we finalize our assessment and select a transition method during the next six months.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” which eliminates the current requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts in the statement of financial position. This update requires that deferred tax liabilities and assets be classified as noncurrent. This update is effective for financial statements issued for fiscal years beginning April 1, 2017. This update may be applied either prospectively or retrospectively. However, early adoption is permitted and the Company has chosen to adopt the standard retrospectively as of June 30, 2016. As a result, prior periods have been adjusted to reflect this change. This update affected the presentation, but not the measurement of deferred tax liabilities and assets.

In February 2016, the Financial Accounting Standards Board issued ASU ~~2016-02,~~2016-02, “Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2018, or the ~~Company’s~~Company’s fiscal ~~year~~ 2020, with early adoption permitted. The Company has not yet determined the impact the amended guidance will have on its financial statements.

In March 2016, the Financial Accounting Standards Board issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This amended guidance simplifies several aspects of the accounting for share-based payment award transactions. The amended guidance is effective for financial statements issued for fiscal and interim periods within those years, beginning after December 15, 2016, or the Company’s fiscal 2018. We adopted this standard on July 1, 2017 and recognized excess tax benefits of $87,354 in income tax expense during the six months ended December 31, 2017. The amount may not necessarily be indicative of future amounts that may be recognized as any excess tax benefits recognized would be dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to July 1, 2017, excess tax benefits were recognized in additional paid-in capital. Additionally, excess tax benefits are now included in net cash flows provided by operating activities rather than net cash flows provided by financing activities in the Company’s Consolidated Statement of Cash Flows. The treatment of forfeitures has not changed, as the Company is electing to continue the current process of estimating forfeiture at the time of grant. The Company had no unrecognized excess tax benefits from prior periods to record upon the adoption of this ASU.

In January 2017, the Financial Accounting Standards Board issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, which simplifies the testing for goodwill impairment by eliminating a previously required step. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2019, or the Company’s fiscal 2021. Early adoption of the accounting standard is permitted, and the Company elected to adopt this standard early. (See Footnote 7)

Comprehensive Income:

The Company does not have any comprehensive income items other than net income.

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.No items were identified during this evaluation that required adjustment to or disclosure in the accompanying consolidated financial statements.

~~Reclassifications:~~

Certain prior year balance sheet amounts have been reclassified to conform to new accounting guidance on balance sheet classification of deferred taxes. These reclassifications have no impact on net income, earnings per share, or operating cash flows.

Page 11

Use of Estimates:

The ~~preparation~~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.

~~Page 11~~

NOTE 3 -SEGMENTREPORTINGINFORMATION

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. 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. In the first quarter of fiscal 2018, the Company merged its Technology Segment with the Lighting Segment to be in alignment with the financial information received by the Chief Executive Officer and how the business is managed. The Company’s ~~three~~two operating segments are Lighting ~~Graphics,~~ and ~~Technology,~~Graphics, each of which has a president who is responsible for that business and reports to the CODM. Corporate and Eliminations, which captures the Company’s corporate administrative activities, ~~will~~is also be reported in the segment information.

The Lighting Segment includes outdoor and indoor lighting utilizing both traditional and LED light sources that have been fabricated and assembled for the commercial/industrial market, the petroleum / convenience store market, the automotive dealership market, the quick service restaurant market, along with other markets the Company serves. The Lighting Segment also includes the design, engineering, and manufacturing of electronic circuit boards, assemblies and sub-assemblies used to manufacture certain LED light fixtures and sold directly to customers.

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements such as traditional graphics,interior branding, electrical and architectural signage, active digital signage along with the management of media content related to digital signage, LED video screens, and menu board systems that are either digital or traditional by design. These products are used in visual image programs in several markets including, but not limited to the petroleum / convenience store market, multi-site retail operations, banking, and restaurants. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.

LED video screens that were previously reported in the Technology Segment in prior years’ results have been reclassified to the Graphics Segment. The movement of the LED video screen product line was the result of a change in management responsibility of this product line to the Graphics Segment president during the first quarter of fiscal 2017. This movement aligns the product line with other digital visual image elements sold to graphics customers and is consistent with how the Company’s CODM manages the business. The movement of the video screen product line resulted in a reclassification of $96,000 of operating loss from the Technology Segment to the Graphics Segment in the third quarter of fiscal 2016, and $99,000 of operating loss in the first nine months of fiscal 2016.

The Technology Segment designs, engineers, and manufactures electronic circuit boards, assemblies and sub-assemblies, and various control system products used in other applications (primarily the control of solid-state LED lighting). This operating segment sells its products directly to customers (primarily in the transportation, original equipment manufacturers, sports, and medical markets) and also has significant inter-segment sales to the Lighting Segment.

~~The Company’s~~Company’s corporate administration activities are reported in the Corporate and Eliminations line item. These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

There was no concentration of ~~consolidated~~consolidated net sales in the three and ~~nine~~six months ended ~~March~~December 31, 2017 or ~~March 31,~~ 2016. There was no concentration of accounts receivable at ~~March~~December 31, 2017 or June 30, ~~2016.~~2017.

Page 12

Summarized financial information for the ~~Company’s~~Company’s operating segments is provided for the indicated periods and as of ~~March~~December 31, 2017 and ~~June 30,~~December 31, 2016:

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	March 31						March 31						December 31						December 31
	2017			2016			2017			2016			2017			2016			2017			2016
Net Sales:
Lighting Segment	$	56,039		$	49,331		$	176,578		$	168,007		$	69,174		$	65,076		$	137,602		$	130,341
Graphics Segment		16,463			17,236			55,939			60,772			23,131			20,582			42,169			39,476
Technology Segment		5,654			4,173			15,456			12,573
	$	78,156		$	70,740		$	247,973		$	241,352		$	92,305		$	85,658		$	179,771		$	169,817

Operating Income (Loss):
Lighting Segment	$	2,759		$	1,106		$	8,288		$	11,970		$	5,275		$	3,761		$	(17,655	)	$	6,852
Graphics Segment		(480	)		1,078			1,711			5,271			2,255			1,174			3,731			2,191
Technology Segment		1,386			984			3,038			3,320
Corporate and Eliminations		(4,439	)		(2,436	)		(9,927	)		(8,686	)		(2,983	)		(2,117	)		(6,343	)		(5,159	)
	$	(774	)	$	732		$	3,110		$	11,875		$	4,547		$	2,818		$	(20,267	)	$	3,884

Capital Expenditures:
Lighting Segment	$	251		$	1,074		$	1,518		$	2,923		$	499		$	205		$	760		$	1,301
Graphics Segment		499			2,145			1,324			3,337			157			459			339			825
Technology Segment		48			1,626			82			1,767
Corporate and Eliminations		(8	)		181			610			383			36			120			91			618
	$	790		$	5,026		$	3,534		$	8,410		$	692		$	784		$	1,190		$	2,744

Depreciation and Amortization:
Lighting Segment	$	1,124		$	730		$	2,762		$	2,152		$	1,885		$	1,115		$	3,786		$	2,307
Graphics Segment		357			316			1,093			787			384			376			763			736
Technology Segment		322			369			991			1,045
Corporate and Eliminations		281			314			843			919			283			279			575			562
	$	2,084		$	1,729		$	5,689		$	4,903		$	2,552		$	1,770		$	5,124		$	3,605

	March 31, 2017		June 30, 2016		December 31, 2017		June 30, 2017
Identifiable Assets:
Lighting Segment	$	187,147	$	95,168	$	182,680	$	214,070
Graphics Segment		32,151		33,490		39,394		33,144
Technology Segment		28,734		28,348
Corporate and Eliminations		7,884		38,554		16,300		9,466
	$	255,916	$	195,560	$	238,374	$	256,680

The segment net sales reported above represent sales to external customers. Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses. Identifiable assets are those assets used by each segment in its operations.

~~Page 13~~

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

Three Months Ended

Nine Months Ended

March 31

March 31

(In thousands)

2017

2016

2017

2016

Lighting Segment inter-segmentnet sales
$ 442 $ 715 $ 1,929 $ 2,143

Graphics Segment inter-segmentnet sales
$ 216 $ 275 $ 1,028 $ 1,281

Technology inter-segmentnet sales
$ 8,715 $ 8,920 $ 25,846 $ 27,236

	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2017		2016		2017		2016

Lighting Segment inter-segment net sales	$	992	$	700	$	1,707	$	1,453

Graphics Segment inter-segment net sales	$	1,040	$	680	$	1,071	$	812

The ~~Company’s~~Company’s operations are located solely within the United States. As a result, the geographic distribution of the Company’s net sales and long-lived assets originate within the United States.

Page 1413

NOTE 4 - EARNINGS PER COMMON 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 (in thousands, except per share data):

Three Months Ended

Nine Months Ended

March 31

March 31

2017

2016

2017

2016

BASIC EARNINGS PER SHARE

Net income (loss)
$ (531
)
$ 522 $ 2,304 $ 8,054

Weighted average shares outstandingduring the period, netof treasury shares (a)
25,155 24,807 25,056 24,648
Weighted average vested restrictedstock units outstanding
37 22 37 25
Weighted average shares outstandingin the Deferred Compensation Planduring the period
260 251 253 245
Weighted average shares outstanding
25,452 25,080 25,346 24,918

Basic earnings (loss) per share
$ (0.02
)
$ 0.02 $ 0.09 $ 0.32

DILUTED EARNINGS PER SHARE

Net income (loss)
$ (531
)
$ 522 $ 2,304 $ 8,054

Weighted average shares outstanding

Basic
25,452 25,080 25,346 24,918
Weighted average stock warrants outstanding -- -- 28 --
Effect of dilutive securities (b):Impact of common shares to beissued under stock incentive plans,and contingently issuable shares,if any
-- 620 535 576

Weighted average sharesoutstanding (c)
25,452 25,700 25,909 25,494

Diluted earnings (loss) per share
$ (0.02
)
$ 0.02 $ 0.09 $ 0.32

Three Months Ended

Six Months Ended

December 31

2017

2016

2017

2016

BASIC EARNINGS PER SHARE

Net (loss) income

(1,468

)

2,006

(17,097

)

2,835

Weighted average shares outstanding during the period, net of treasury shares (a)

25,551

25,016

25,528

25,007

Weighted average vested restricted stock units outstanding

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

244

261

244

250

Weighted average shares outstanding

25,858

25,314

25,824

25,294

Basic (loss) earnings per share

(0.06

)

0.08

(0.66

)

0.11

DILUTED EARNINGS PER SHARE

Net (loss) income

(1,468

)

2,006

(17,097

)

2,835

Weighted average shares outstanding

Basic

25,858

25,314

25,824

25,294

Effect of dilutive securities (b):

Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any

489

565

Weighted average shares outstanding (c)

25,858

25,803

25,824

25,859

Diluted (loss) earnings per share

(0.06

)

0.08

(0.66

)

0.11

(a)

Includes shares accounted for like treasury ~~stock included in the Company’s non-qualified deferred compensation plan. (See Note 10.)~~stock.

(b)

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.

(c)

Options to purchase ~~1,032,250~~3,569,762 common shares ~~at March~~and 1,682,270 common shares for the three months ended December 31, 2017 and 2016, respectively, and options to purchase ~~1,683,883~~3,549,705 common shares and ~~1,391,300~~1,626,770 common shares ~~at March~~for the six months ended December 31, 2017 and 2016, respectively were not included in the computation of the three month and ~~nine~~six month ~~periods~~period for diluted earnings per share, respectively, because the exercise price was greater than the average fair market value of the common shares. For the three and six months ended ~~March~~December 31, 2017, the effect of dilutive securities was not included in the calculation of diluted earnings (loss) per share because there was a net operating loss for the period.

Page 1514

NOTE 5 - INVENTORIES

The following information is provided as of the dates indicated:

	March 31,		June 30,		December 31,		June 30,
(In thousands)	2017		2016		2017		2017

Inventories:
Raw materials	$	31,817	$	28,979	$	31,156	$	32,421
Work-in-process		3,323		4,418		2,772		3,527
Finished goods		13,320		10,744		14,734		14,060
Total Inventories	$	48,460	$	44,141	$	48,662	$	50,008

NOTE 6 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	March 31,		June 30,		December 31,		June 30,
(In thousands)	2017		2016		2017		2017

Accrued Expenses:
Compensation and benefits	$	7,540	$	11,983	$	8,667	$	9,759
Customer prepayments		1,227		1,053		840		1,061
Accrued sales commissions		2,275		2,792		2,214		2,314
Accrued warranty		7,534		5,069		6,688		7,560
Other accrued expenses		5,304		4,444		7,304		5,375
Total Accrued Expenses	$	23,880	$	25,341	$	25,713	$	26,069

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

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~~Company’s impairment testing continues with the estimation of the fair value of ~~reporting units~~goodwill and indefinite-lived intangible assets 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 units~~goodwill and intangible assets 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 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 identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of three reporting units that contain goodwill. There are two reporting units within the Lighting Segment and one reporting unit within the Graphics Segment. One reporting unit previously reported in the Technology Segment has been transferred to the Lighting Segment as a result of the merge of the Technology Segment with the Lighting Segment (See Note 3). 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.

AsA sustained and significant decline in the Company’s stock price in the first quarter of ~~March 1, 2017, the Company performed its annual~~fiscal 2018 led management to believe that a triggering event occurred and that an interim goodwill impairment test onwas required for one of the ~~three~~ reporting units in the Lighting Segment that ~~contain~~contains goodwill, ~~(excluding Atlas Lighting Products).~~as of September 30, 2017. Because the Company elected to early adopt ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, the requirement to perform step 2 in the impairment test was not required. The ~~preliminary goodwill~~result of the impairment test on ~~one~~the reporting unit in the Lighting Segment ~~passed with a business enterprise value~~indicated that goodwill was $60.0 million or 80% above the carrying value of this reporting unit including goodwill. The preliminary goodwill impairment test of the one reporting unit with goodwill in the Graphics Segment passed with an estimated business enterprise value that was $4.2 million or 423% above the carrying value of the reporting unit including goodwill. The preliminary goodwill impairment test of the reporting unit in the Technology Segment that contains goodwill passed with an estimated business enterprise value that was $23.2 million or 95% above the carrying value of this reporting unit including goodwill. The impairment test is expected to be completed in the fourth quarter of fiscal 2017. It is anticipated that the results of the test will not change when the test is complete.impaired by $28,000,000.

Page 1615

The Company acquired all of the capital stock of Atlas Lighting Products, Inc., on February 21, 2017 (see Note 16). The total purchase price exceeded the estimated fair value of net assets by approximately $47.9 million, which was allocated to goodwill. A preliminary valuation of the goodwill and intangible assets was completed in March 2017, and preliminary purchase price allocations have been made at February 21, 2017. While identified intangible assets related to the Atlas acquisition are being amortized effective February 21, 2017 over appropriate lives, goodwill will not be amortized on the Company’s financial statements. Goodwill and intangible assets related to Atlas Lighting Products are included in the assets of the Lighting Segment. It is anticipated that the valuation analysis will be fully complete in the fourth quarter of fiscal 2017. Refer to Note 16 for additional information on the intangible assets of Atlas Lighting Products.

In March 2017, a customer relationship intangible asset with a net book value of $479,000 related to the LED video screen product line in the Graphics Segment was determined to be fully impaired. The Company deemed that distribution channels and corresponding projected future cash flows that support the customer list intangible asset are not adequate to support the asset.

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

Goodwill
(In thousands)	Lighting			Graphics			Technology						Lighting			Graphics
	Segment			Segment			Segment			Total			Segment			Segment			Total
Balance as of June 30, 2016
Balance as of June 30, 2017
Goodwill	$	34,913		$	28,690		$	11,621		$	75,224		$	94,564		$	28,690		$	123,254
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		(64,716	)		(37,191	)		(27,525	)		(64,716	)
Goodwill, net as of June 30, 2016	$	135		$	1,165		$	9,208		$	10,508
Goodwill, net as of June 30, 2017													$	57,373		$	1,165		$	58,538

Goodwill acquired	$	47,868		$	--		$	--		$	47,868
Goodwill Impairment														(28,000	)		--			(28,000	)

Balance as of March 31, 2017
Balance as of December 31, 2017
Goodwill	$	82,781			28,690			11,621			123,092		$	94,564			28,690			123,254
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		(64,716	)		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of March 31, 2017	$	48,003		$	1,165		$	9,208		$	58,376
Goodwill, net as of December 31, 2017													$	29,373		$	1,165		$	30,538

The Company performed its annual review of indefinite-lived intangible assets (excluding the intangible assets of Atlas Lighting Products) as of March 1, 2017 and determined there was no impairment. The preliminary indefinite-lived intangible impairment test passed with a fair market value that was $15.2 million or 445% above its carrying value. The impairment test is expected to be completed in the fourth quarter of fiscal 2017. It is anticipated that the results of the test will not change when the test is complete.

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

	March 31, 2017						December 31, 2017
Other Intangible Assets	Gross						Gross
(In thousands)	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	Amount		Amortization		Amount		Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	7,438	$	28,125	$	35,563	$	8,982	$	26,581
Patents		338		180		158		338		201		137
LED technologyfirmware, software		16,066		11,098		4,968
LED technology firmware, software								16,066		11,521		4,545
Trade name		2,658		472		2,186		2,658		554		2,104
Non-compete agreements		710		710		--		710		710		--
Total Amortized Intangible Assets		55,335		19,898		35,437		55,335		21,968		33,367

Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422		3,422		--		3,422

Total Other Intangible Assets	$	58,757	$	19,898	$	38,859	$	58,757	$	21,968	$	36,789

June 30, 2017

Other Intangible Assets

Gross

Carrying

Accumulated

Net

(In thousands)

Amount

Amortization

Amount

Amortized Intangible Assets

Customer relationships

35,563

7,956

27,607

Patents

338

186

152

LED technology firmware, software

16,066

11,237

4,829

Trade name

2,658

499

2,159

Non-compete agreements

710

Total Amortized Intangible Assets

55,335

20,588

34,747

Indefinite-lived Intangible Assets

Trademarks and trade names

3,422

Total Indefinite-lived Intangible Assets

3,422

Total Other Intangible Assets

58,757

20,588

38,169

Page 1716

June 30, 2016

Other Intangible Assets

Gross

Carrying

Accumulated

Net

(In thousands)

Amount

Amortization

Amount

Amortized Intangible Assets

Customer relationships
$ 9,316 $ 7,581 $ 1,735
Patents
338 154 184
LED technologyfirmware, software
11,228 10,989 239
Trade name
460 460 --
Non-compete agreements
710 704 6
Total Amortized Intangible Assets
22,052 19,888 2,164

Indefinite-lived Intangible Assets

Trademarks and trade names
3,422 -- 3,422
Total Indefinite-lived Intangible Assets
3,422 -- 3,422

Total Other Intangible Assets
$ 25,474 $ 19,888 $ 5,586

(In thousands)	Amortization Expense of Other Intangible Assets				Amortization Expense of Other Intangible Assets
	March 31, 2017		March 31, 2016		December 31, 2017		December 31, 2016

Three Months Ended	$	359	$	126	$	690	$	101
Nine Months Ended	$	567	$	379
Six Months Ended					$	1,380	$	208

The Company expects to record annual amortization expense as follows:

(In thousands)
2017	$	1,486
2018	$	2,761
2019	$	2,761

2018			$	2,760
2019			$	2,760
2020	$	2,687	$	2,687
2021	$	2,683	$	2,682
After 2021	$	23,587
2022			$	2,461
After 2022			$	21,397

NOTE 8 - REVOLVING LINE OF CREDIT ~~AND LONG-TERM DEBT~~

In February2017 the Company amended its secured line of credit to ~~increase it to~~ a ~~$100~~$100 million secured revolving line of credit, increased from the $30 million line of credit that was previously in place. The increased credit line was required for the funding of the acquisition of Atlas Lighting Products, Inc.facility. The line of credit expires in the third quarter of fiscal 2022. Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, or at the bank’s base lending rate, at the Company’s option. The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between 125 and 250 basis points depending 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 rate will remain at 175 basis points for the next twelve months. The fee on the unused balance of the ~~$100~~$100 million committed line of credit is 15 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 fixed charge coverage ratio. As of ~~March~~December 31, 2017, there was ~~$55.0~~$52.1 million borrowed against the line of credit, and ~~$45.0~~$47.9 million was available as of that date. Based on the terms of the line of credit and the ~~final principal due~~maturity date, the debt has been classified as long term. ~~The line of credit closing fees and legal fees of $199,000 have been recorded as a long term asset and are being amortized over the term of the line of credit.~~

~~Page 18~~

The Company is in compliance with all of its loan covenants as of ~~March~~December 31, ~~2017.~~2017.

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of ~~$3,772,000~~$2,564,000 and ~~$2,959,000~~$2,513,000 in the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016, respectively. Dividends on restricted stock units in the amount of ~~$24,120~~$38,463 and ~~$7,860~~$19,826 were accrued as of ~~March~~December 31, 2017 and 2016, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In ~~April 2017,~~ January 2018, the Board of Directors declared a regular quarterly cash dividend of ~~$0.05~~$0.05 per share payable ~~May 16, 2017~~ February 13, 2018 to shareholders of record as of ~~May 8, 2017.The~~February 5, 2018. The indicated annual cash dividend rate is ~~$0.20~~$0.20 per share.

NOTE 10- EQUITY COMPENSATION

Stock Based Compensation

The Company ~~has an~~’s equity compensation plan, ~~that~~the 2012 Stock Incentive Plan (“the 2012 Plan”), was approved by shareholders in November 2012. The 2012 ~~and that~~ Plan covers all of its full-time employees, outside directors and certain ~~advisors. This 2012 Stock Incentive Plan~~advisors and replaced all previous equity compensation plans. ~~The~~In November 2016, the Company’s shareholders approved ~~amendments~~an amendment to the 2012 ~~Stock Incentive~~ Plan that added 1,600,000 shares to the plan and implemented the use of a fungible share ratio that consumes 2.5 available shares for every 1 full value share awarded by the Company as stock compensation. The 2012 Plan allows for the grant of incentive stock options, ~~granted~~non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, and other stock awards. Stock option grants or stock awards made pursuant to ~~this plan~~the 2012 Plan are granted at fair market value at the date of option grant or stock award.

Page 17

Stock option grants may be service-based or performance-based. Service-based options granted ~~to non-employee directors become exercisable 25% each ninety days (cumulative) from~~during fiscal 2017 and prior fiscal years generally have a four year ratable vesting period beginning one year after the date of ~~grant and~~grant. Service-based options granted ~~to employees generally become exercisable 25% per~~during fiscal 2018 have a three year ~~(cumulative)~~ratable vesting period beginning one year after the date of grant. Performance-based options ~~granted to employees become exercisable 33.3% per~~have a three year ~~(cumulative)~~ratable vesting period beginning one year after the date of grant. The maximum ~~contractual term~~exercise period of ~~the Company’s~~ stock options granted under the 2012 Plan is ten years. If a stock option holder’s employment with the Company terminates by reason of death, disability or retirement, as defined in the Plan, the Plan generally provides for acceleration of vesting.

The number of shares reserved for issuance under the 2012 Plan is ~~1,669,003~~1,453,356 shares, all of which were available for future grant or award as of ~~March~~December 31, 2017. ~~This plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted~~Service-based and ~~unrestricted stock awards, performance stock awards, stock warrants and other stock awards. Service based and performance based~~performance-based stock options were granted and restricted stock units (“~~RSU’s”~~RSUs”) were awarded during the ~~nine~~six months ended ~~March~~December 31, 2017. As of ~~March~~December 31, 2017, a total of ~~3,631,155~~3,448,677 stock options ~~for common shares~~ were outstanding ~~from this plan as~~under the 2012 Plan (as well as one previous stock option plan ~~(which has~~which was also ~~been~~ approved by shareholders), ~~and~~ of ~~these,~~which, a total of ~~1,423,528~~1,527,651 stock options ~~for common shares~~ were vested and exercisable. As of ~~March~~December 31, 2017, the approximate unvested stock option expense that will be recorded as expense in future periods is ~~$3,508,348.~~$2,563,987. The weighted average time over which this expense will be recorded is approximately 24 months. Additionally, as of ~~March~~December 31, 2017, a total of ~~135,585 RSU’s~~187,150 RSUs were outstanding. The approximate unvested stock compensation expense that will be recorded as expense in future periods for the ~~RSU’s~~RSUs is ~~$752,231.~~$775,144. The weighted average time over which this expense will be recorded is approximately 3730 months.

~~Stock Warrants~~

The Company issued 200,000 fully vested stock warrants in the third quarter of fiscal 2017 in conjunction with the acquisition of Atlas Lighting Products, Inc., with the fair value of the warrants being included in the purchase price of that company rather than being expensed. See further discussion in Note 16. These 200,000 stock warrants were outstanding as of March 31, 2017. The fair value of the warrants on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for the warrants.

	~~Three Months Ended~~
	~~March 31~~
	~~2017~~

~~Dividend yield~~		~~2.01~~	%
~~Expected volatility~~		39	%
~~Risk-free interest rate~~		~~1.80~~	%
~~Expected life (in yrs.)~~		~~4.5~~

The stock warrants issued during the quarter ended March 31, 2017 had an exercise price of $9.95, and a fair value of $2.87. As of March 31, 2017, the warrants had a remaining contractual life of 4.9 years.

~~Page 19~~

Stock Options

The fair value of each option on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for grants in the periods indicated.

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	March 31						March 31						December 31						December 31
	2017			2016			2017			2016			2017			2016			2017			2016

Dividend yield		1.93	%		1.72	%		1.85	%		1.29	%		3.06	%		2.07	%		3.35	%		1.81	%
Expected volatility		41	%		43	%		42	%		44	%		41	%		41	%		41	%		43	%
Risk-free interest rate		1.92	%		1.46	%		1.31	%		1.66	%		1.94	%		2.06	%		1.77	%		1.00	%
Expected life (in yrs.)		6.2			6.0			6.1			6.0
Expected life (in years)													6.0			6.0			6.0			6.0

At ~~March~~December 31, 2017, the ~~1,256,623~~794,537 options granted during the first ~~nine~~six months of fiscal ~~2017~~2018 to employees had exercise prices ranging from ~~$9.48~~$5.92 to ~~$11.06~~$6.54 per share, fair values ranging from of ~~$3.22~~$1.71 to ~~$3.83~~$1.96 per share, and remaining contractual lives of between ~~9.3~~9.5 and 10 years.

At ~~March~~December 31, 2016, the ~~1,026,800~~834,320 options granted during the first ~~nine~~six months of fiscal ~~2016~~2017 to employees had exercise prices ranging from ~~$8.84~~$9.65 to ~~$11.87~~$11.06 per share, fair values ranging from of ~~$3.28~~$3.29 to ~~$4.52~~$3.83 per share, and remaining contractual lives of between ~~9.3~~9.5 and ~~9.9~~10 years.

The Company calculates stock option expense using the Black-Scholes model. Stock option expense is recorded on a straight line basis, or sooner if the grantee is retirement eligible as defined in the 2012 Stock Incentive Plan, with an estimated ~~3.3%~~8.54% forfeiture rate effective ~~January~~October 1, 2017. Previous estimated forfeiture rates were between 2.0% and ~~3.5%~~8.3% between the periods January 1, 2013 through ~~December 31, 2016.~~ September 30, 2017. The expected volatility of the Company’s stock was calculated based upon the historic monthly fluctuation in stock price for a period approximating the expected life of option grants. The risk-free interest rate is the rate of a five year Treasury security at constant, fixed maturity on the approximate date of the stock option grant. The expected life of outstanding options is determined to be less than the contractual term for a period equal to the aggregate group of option holders’ 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.

The Company recorded ~~$510,851 and $360,952~~$367,920 of expense in the three months ended December 31, 2017 and recorded a reduction of expense of $142,434 in the three months ended December 31, 2016, related to stock ~~options in the three months ended March 31, 2017 and 2016, respectively, and recorded $1,806,860 and $2,191,659~~options. The reduction of ~~expense related to stock options in the nine months ended March 31, 2017 and 2016, respectively. The lower~~ stock option expense in ~~fiscal 2017~~ the three months ended December 31, 2016 was the result of expectations that the performance criteria related to ~~performance~~incentive based options will not be met. The Company recorded $1,125,728 and $1,296,009 of expense related to stock options in the six months ended December 31, 2017 and 2016, respectively. As of ~~March~~December 31, 2017, the Company had ~~3,148,352~~3,344,138 stock options that were vested and that were expected to vest, with a weighted average exercise price of ~~$9.20~~$8.13 per share, an aggregate intrinsic value of ~~$4,515,257~~$905,309 and weighted average remaining contractual terms of ~~7.2~~7.4 years.

Page 18

Information related to all stock options for the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016 is shown in the following tables:

	Nine Months Ended March 31, 2017									Six Months Ended December 31, 2017
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value					Weighted		Weighted
													Average		Average		Aggregate
Outstanding at 6/30/16		2,976,490		$	8.97		6.6	$	8,338,974
													Exercise		Remaining		Intrinsic
										Shares			Price		Contractual Term (in years)		Value

Outstanding at 6/30/17											3,119,688		$	9.12		7.4	$	2,332,224

Granted		1,256,623		$	10.67						794,537		$	5.98
Forfeitures		(161,812	)	$	16.17						(438,609	)	$	11.62
Exercised		(440,146	)	$	7.39						(26,939	)	$	6.49

Outstanding at 3/31/17		3,631,155		$	9.43		7.4	$	4,546,991
Outstanding at 12/31/17											3,448,677		$	8.10		7.4	$	971,344

Exercisable at 3/31/17		1,423,528		$	8.99		5.3	$	2,912,714
Exercisable at 12/31/17											1,527,651		$	8.14		5.7	$	218,246

Six Months Ended December 31, 2016

Weighted

Average

Aggregate

Exercise

Remaining

Intrinsic

Price

Contractual Term (in years)

Value

Outstanding at 6/30/16

2,976,490

8.97

6.6

8,338,974

Granted

834,320

11.05

Forfeitures

(147,375

)

16.03

Exercised

(38,063

)

7.75

Outstanding at 12/31/16

3,625,372

9.18

7.1

4,648,729

Exercisable at 12/31/16

1,700,025

8.73

5.1

3,216,899

~~Page 20~~

Nine Months Ended March 31, 2016

Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual Term
(in years)

Aggregate
Intrinsic
Value

Outstanding at 6/30/15
2,677,436 $ 8.85 6.1 $ 4,914,601

Granted
1,026,800 $ 9.39
Forfeitures
(150,800
)
$ 15.73
Exercised
(509,871
)
$ 7.33

Outstanding at 3/31/16
3,043,565 $ 8.95 6.8 $ 10,448,456

Exercisable at 3/31/16
1,362,810 $ 9.67 4.3 $ 4,741,694

The following table presents information related to unvested stock options:

				Weighted-Average		Shares			Weighted-Average Grant Date Fair Value
				Grant Date
	Shares			Fair Value

Unvested at June 30, 2016		1,663,505		$	3.39
Unvested at June 30, 2017							1,842,127		$	3.52
Granted		1,256,623		$	3.71		794,537		$	1.73
Vested		(685,751	)	$	3.30		(513,504	)	$	3.49
Forfeited		(26,750	)	$	3.50		(202,134	)	$	3.46
Unvested at March 31, 2017		2,207,627		$	3.60
Unvested at December 31, 2017							1,921,026		$	2.79

The weighted average grant date fair value of options granted during the ~~nine~~six month periods ended ~~March~~December 31, 2017 and 2016 was ~~$3.71~~$1.73 and ~~$3.64,~~$3.83, respectively. The aggregate intrinsic value of options exercised during the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016 was ~~$1,094,696~~$22,079 and ~~$1,474,444,~~$99,883, respectively. The aggregate grant date fair value of options that vested during the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016 was ~~$2,260,014~~$1,793,086 and ~~$1,149,022,~~$1,779,490, respectively. The Company received ~~$2,612,578~~$174,965 and ~~$3,737,233~~$295,030 of cash from employees who exercised options in the ~~nine~~six month periods ended ~~March~~December 31, 2017 and 2016, respectively.For the nine months ended March 31, 2017, the $2,612,578 cash received from stock options was partially offset by $138,793 related to the tax effect of disqualifying dispositions of stock options along with $72,399 related to the net tax effect of other stock option exercises. For the nine months ended March 31, 2016, the $3,737,233 cash received from stock options was partially offset by $133,172 related to the tax effect of disqualifying dispositions of stock options. respectively. In the first ~~nine~~six months of fiscal ~~2017~~2018 the Company recorded ~~$465,521as~~ a$83,608 reduction of the federal income ~~taxes~~tax payable, ~~$138,793~~$559,474 as ~~a decrease~~an increase in common stock, ~~$109,140~~$87,354 as a reduction of income tax expense, and ~~$495,175~~$170,462 as a reduction of the deferred tax assets. In the firstsix months of fiscal 2017 the Company recorded $95,443 as a reduction of federal income taxes payable, $124,056 as a decrease in common stock, $22,073 as a reduction of income tax expense, and $197,427 as a reduction of the deferred tax asset related to the issuance of ~~RSU’s~~RSUs and the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise. In the first nine months of fiscal 2016 the Company recorded $518,515 as a reduction of federal income taxes payable, $133,172 as a decrease in common stock, $95,543 as a reduction of income tax expense, and $556,144 as a reduction of the deferred tax asset related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise.

Page 19

Restricted Stock Units

A total of ~~96,210 RSU’s~~91,490 RSUs with a ~~weighted average~~ fair value of ~~$10.84~~$5.92 per share were awarded to employees during the ~~nine~~six months ended ~~March~~December 31, 2017.The service-based RSUs awarded during fiscal 2018 have a three year ratable vesting period beginning one year after the date of award. A total of ~~72,000 RSU’s~~71,700 RSUs with a fair value of ~~$9.39~~$11.06 per share were awarded to employees during the ~~nine~~six months ended ~~March~~December 31, 2016.The service-based RSUs awarded during fiscal 2017 and in prior fiscal years have a four year ratable vesting period beginning one year after the date of award. The Company determined the fair value of the awards based on the closing price of the Company stock on the date the ~~RSU’s~~RSUs were awarded. The ~~RSU’s~~RSUs have a four year ratable vesting period. The ~~RSU’s~~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 ~~RSU’s~~RSUs in the amount of ~~$24,120~~$38,463 and ~~$7,860~~$19,826 were accrued as of ~~March~~December 31, 2017 and 2016, respectively. Accrued dividends are paid to the holder upon vesting of the ~~RSU’s~~RSUs and issuance of shares.

~~Page 21~~

The following table presents information ~~related~~related to ~~RSU’s:~~RSUs:

				Weighted-Average		Shares			Weighted-Average Grant Date Fair Value
				Grant Date
	Shares			Fair Value

Unvested at June 30, 2016		62,500		$	9.39
Unvested at June 30, 2017							133,335		$	10.38
Awarded		96,210		$	10.84		91,490		$	5.92
Shares Issued		(23,125	)	$	9.71		(30,675	)	$	10.30
Unvested at March 31, 2017		135,585		$	10.36
Shares Forfeited							(7,000	)	$	10.46
Unvested at December 31, 2017							187,150		$	8.21

As of ~~March~~December 31, 2017, the ~~135,585 RSU’s~~187,150 RSUs had a remaining ~~weighted average~~ contractual life of ~~6.2~~between 2.5 and 3.5 years. Of the ~~135,585 RSU’s~~187,150 RSUs outstanding as of ~~March~~December 31, 2017, ~~130,316~~176,073 RSUs are vested or expected to vest in the future. An estimated forfeiture rate of ~~3.4%~~8.5% was used in the calculation of expense related to the ~~RSU’s.~~RSUs. The Company recorded ~~$93,905~~$81,895 and ~~$486,102~~$337,310 of expense related to ~~RSU’s~~RSUs in the three and ~~nine~~six month periods ended ~~March~~December 31, 2017, respectively.

As of ~~March~~December 31, 2016, ~~the 65,500 outstanding RSU’s~~the 118,575 RSUs had a remaining ~~weighted average~~ contractual life of ~~9.25~~between 2.5 and 3.5 years. Of the ~~65,500 RSU’s~~118,575 RSUs outstanding as of ~~March~~December 31, 2016, ~~63,369 were~~114,531 RSUs are vested or expected to vest in the future. An estimated forfeiture rate of ~~3.3%~~3.4% was used in the calculation of expense related to the ~~RSU’s.~~RSUs. The Company recorded ~~$30,387~~$89,896 and ~~$350,369~~$392,197 of expense related to ~~RSU’s~~RSUs in the three and ~~nine~~six month periods ended ~~March~~December 31, 2016, respectively.

Director and Employee Stock Compensation Awards

The Company awarded a total of ~~31,782~~19,920 and ~~17,240~~21,199 common shares in the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016, respectively, as stock compensation awards. These common shares were valued at their approximate ~~$331,000~~$155,974 and ~~$168,000~~$228,000 fair market values based on their stock price at dates of issuance multiplied by the number of common shares awarded, respectively, pursuant to the compensation programs for non-employee directors who receive a portion of their compensation as an award of Company stock and for employees who received a nominal recognition award in the form of Company stock. Stock compensation awards are made in the form of newly issued common shares of the Company.

Page 20

Deferred Compensation Plan

The Company has a non-qualified deferred compensation plan providing for both Company contributions and participant deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in common shares of the Company. As of ~~March~~December 31, 2017 there were 2938 participants, all with fully vested account balances. A total of ~~255,119~~245,732 common shares with a cost of ~~$2,437,880,~~$2,187,811, and ~~228,103~~257,898 common shares with a cost of ~~$2,167,717~~$2,456,875 were held in the plan as of ~~March~~December 31, 2017 and June 30, ~~2016,~~2017, 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 share purchases and sales on the open stock market for compensation deferred into the plan; shares newly issued for compensation deferred into the plan, and for distributions to terminated employees. The Company ~~does not issue~~issued 42,280 new common shares for purposes of the non-qualified deferred compensation ~~plan.~~plan as of December 31, 2017 and the company did not issue new common shares for plan in fiscal 2017. The Company used approximately ~~$446,251~~$106,537 and ~~$316,900~~$390,288 to purchase ~~45,335~~15,225 and ~~32,696~~39,487 common shares of the Company in the open stock market during the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016, respectively, for either employee salary deferrals or Company contributions into the non-qualified deferred compensation plan. ~~For fiscal year 2017, the~~

The Company ~~estimates the Rabbi Trust for the Nonqualified Deferred Compensation Plan will make net repurchases~~’s non-qualified deferred compensation is no longer funded by purchases in the ~~range~~open market of ~~48,000 to 53,000 common~~LSI stock as of September 30, 2017. This plan is now solely funded by newly issued shares ofthat are authorized from the ~~Company. The Company does not currently repurchase its own common shares for any other purpose.~~Company’s 2012 Stock Incentive Plan.

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

(In thousands)	Nine Months Ended March 31				Six Months Ended December 31
	2017		2016		2017		2016
Cash payments:
Interest	$	66	$	32	$	767	$	21
Income taxes	$	2,484	$	4,863	$	1,232	$	2,381

Non-cash investing and finance activities:
Issuance of common shares as compensation	$	331	$	168	$	156	$	228
Issuance of stock warrants	$	575		--
Issuance of common shares to fund deferred compensation plan					$	261	$	--

~~Page 22~~

NOTE 122- COMMITMENTS AND CONTINGENCIES

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the ~~Company’s~~Company’s financial position, results of operations, cash flows or liquidity.

The Company may occasionally issue a standby letter of credit in favor of ~~third~~third parties. As of ~~March~~December 31, 2017, there were no standby letter of credit agreements.

NOTE 13 – SEVERANCE COSTS

The Company recorded severance expense of ~~$222,000~~$83,000 and ~~$401,000~~$173,000 in the ~~nine~~six months ended ~~March~~December 31, 2017 and 2016, respectively. This severance expense was related to reductions in staffing not related to plant restructuring. See further discussion of restructuring expenses in Note 14.

The activity in the ~~Company’s~~Company’s accrued severance liability is as follows for the periods indicated:

	Nine			Nine			Fiscal			Six			Six			Fiscal
	Months Ended			Months Ended			Year Ended			Months Ended			Months Ended			Year Ended
(In thousands)	March 31,			March 31,			June 30,			December 31,			December 31,			June 30,
	2017			2016			2016			2017			2016			2017

Balance at beginning of the period	$	39		$	379		$	379		$	235		$	39		$	39
Accrual of expense		222			401			469			83			173			523
Payments		(235	)		(544	)		(742	)		(218	)		(205	)		(313	)
Adjustments		--			(67	)		(67	)		(14	)		--			(14	)
Balance at end of the period	$	26		$	169		$	39		$	86		$	7		$	235

NOTE 14 – RESTRUCTURING COSTS

On September 22, 2016, the Company announced plans to close its lighting facility in Kansas City, Kansas. The decision was based upon the market shift away from fluorescent and other technologies and the rapid movement to LED lighting which is produced at other LSI facilities. The Company expects to continue to meet the demand for products containing fluorescent light sources as long as these products are commercially viable. All operations at the Kansas City facility ceased prior to December 31, 2016. ~~Total~~Fiscal 2017 restructuring costs related to the closure of the Kansas City facility were ~~$944,000.~~$944,000. There have been no restructuring costs in fiscal 2018. These costs primarily included employee-related costs (primarily severance), the impairment of manufacturing equipment, plant shut down costs, costs related to the preparation of the facility for sale, legal costs, and other related costs. In addition, there was also an inventory write-down of ~~$432,000~~$485,000 recorded in ~~the first nine months of~~ fiscal 2017. The write-down was related to inventory that was previously realizable until the decision in the first quarter of fiscal 2017 to ~~shut down~~close the Kanas City plant due to the planned curtailment of the manufacturing of fluorescent light fixtures. The Company owned the facility in Kansas City and realized a ~~$1,361,000~~$1,361,000 gain when the facility was sold.

Page 21

~~The~~

The Company also announced the consolidation of the Beaverton, Oregon facility into other LSI facilities. The light assembly of products in the Beaverton facility was moved to the Company’s Columbus, Ohio facility, and administration and engineering functions were moved to the Company’s Cincinnati, Ohio facility. This consolidation was completed September 30, 2016. As a result of this consolidation, restructuring charges of ~~$363,000~~$377,000 were recorded in ~~the first nine months of~~ fiscal 2017, with the majority of this representing the costs related to the remaining period of the facility’s lease and severance costs for employees who formerly worked in the Beaverton facility. There were no restructuring charges in fiscal 2018.

In November 2016, the Company announced the consolidation of the Woonsocket, Rhode Island manufacturing operation into its North Canton, Ohio operation. The manufacturing operations in Woonsocket ceased prior to December 31, 2016. The Company ~~owns~~owned the facility in Woonsocket and ~~expects to realize~~realized a small gain when the facility ~~is sold. The facility is presented on the balance sheet as an asset held for sale.~~ was sold in September 2017. Total restructuring costs related to the consolidation of the Woonsocket facility ~~are expected to be approximately $464,000.~~were $452,000 in fiscal 2017. These costs primarily include employee-related costs (severance), plant shut down costs, costs related to the preparation of the facility for sale, legal costs, and other related costs. There have been no restructuring charges in fiscal 2018.

~~Page 23~~

Management does not expect any significant restructuring charges for fiscal 2018. All previously announced restructuring projects were completed in fiscal 2017 and all restructuring charges were recorded in fiscal 2017.

The following table presents information about restructuring costs for the periods indicated:

	Three			Nine Months			Total Expected		Total			Three		Six Months		Three		Six Months
	Months Ended			Ended			to be Recognized		Fiscal 2017			Months Ended		Ended		Months Ended		Ended
(In thousands)	March 31,			March 31,			in Remainder of		Restructuring			December 31,		December 31,		December 31,		December 31,
	2017			2017			Fiscal 2017		Expenses			2017		2017		2016		2016

Severance and other terminationbenefits	$	120		$	811		$	--	$	811
Severance and other termination benefits												$	--	$	--	$	526	$	691
Lease obligation		--			213			--		213			--		--		--		213
Impairment of fixed assets andaccelerated depreciation		1			354			--		354
Gain on sale of facility		(1,361	)		(1,361	)		--		(1,361	)
Impairment of fixed assets and accelerated depreciation													--		--		80		353
Other		251			347			60		407			--		--		91		96
Total	$	(989	)	$	364		$	60	$	424		$	--	$	--	$	697	$	1,353

Impairment and accelerated depreciation expense of $354,000 was recorded in the first nine months of fiscal 2017 related to machinery and equipment at the Kansas City and Beaverton facilities. There was no impairment expense related to the closure of the Woonsocket facility. Of the $354,000 of impairment and accelerated depreciation expense, $322,000 was recorded in the Lighting Segment and $32,000 was recorded in the Technology Segment. The fair value of the equipment evaluated for impairment was determined by comparing the future undiscounted cash flows to the carrying value of the assets. The future cash flows are from the remaining use of the assets as well as the cash flows expected to result from the future sale of the assets.

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

	Three Months Ended			Nine Months Ended			Three Months Ended		Six Months Ended
(In thousands)	March 31, 2017			March 31, 2017			December 31		December 31
							2016		2016

Cost of Goods Sold	$	312		$	1,455		$	640	$	1,143
Operating Expenses		(1,301	)		(1,091	)		57		210
Total	$	(989	)	$	364		$	697	$	1,353

Page 22

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

	Three			Nine Months			Total Expected		Total			Three		Six Months		Three		Six Months
	Months Ended			Ended			to be Recognized		Fiscal 2017			Months Ended		Ended		Months Ended		Ended
(In thousands)	March 31,			March 31,			In Remainder of		Restructuring			December 31,		December 31,		December 31,		December 31,
	2017			2017			Fiscal 2017		Expenses			2017		2017		2016		2016

Lighting Segment	$	(1,187	)		(417	)	$	--	$	(417	)	$	--	$	--	$	476	$	1,021
Graphics Segment		183			404			60		464			--		--		221		221
Technology Segment		1			252			--		252
Corporate and Eliminations		14			125			--		125			--		--		--		111
Total	$	(989	)		364		$	60	$	424		$	--	$	--	$	697	$	1,353

~~Page 24~~

The above tables ~~include~~exclude the gain on the sale of the Kansas City ~~facility,~~ and ~~exclude the expected gain on the~~ Woonsocket ~~facility.~~facilities. Additionally, the above tables do not include expense of ~~$432,000~~$400,000 recorded during the first ~~nine months~~ quarter of fiscal 2017 related to the write-down of inventory included as cost of sales as part of the Kansas City facility closure.

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

(In thousands)
	Balance as of June 30, 2016		Restructuring Expense		Payments			Adjustments			Balance as of March 31, 2017		Balance as of June 30, 2017		Restructuring Expense		Payments			Adjustments		Balance as of December 31, 2017

Severance and termination benefits	$	--	$	814	$	(748	)	$	(15	)	$	51	$	--	$	--	$	--		$	--	$	--
Lease obligation		--		213		(86	)					127		85		--		(85	)		--		--
Other		--		359		(354	)					5		--		--		--			--		--
Total	$	--	$	1,386	$	(1,188	)	$	(15	)	$	183	$	85	$	--	$	(85	)	$	--	$	--

The above table does not include fixed asset impairment and accelerated depreciation expense of $354,000 recorded in the first nine months of fiscal 2017 or the gain on the sale of the Kansas City facility recorded in the three months ended March 31, 2017.

Refer to Note 13 for information regarding additional severance expenses that are not included in the restructuring costs identified in this footnote.

NOTE 1515–INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income on a periodic basis as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

Three Months Ended

Nine Months Ended

March 31

March 31

2017

2016

2017

2016

Reconciliation to effective tax rate:

Provision for income taxes at the anticipatedannual tax rate
32.0
%
34.4
%
30.4
%
34.5
%
Uncertain tax positions
4.2 (2.9
)
(2.4
)
(0.5
)
Disqualifying dispositions
9.3 (1.4
)
(3.6
)
(0.8
)
Deferred tax asset adjustment
-- -- (2.4
)
--
Other
(2.2
)
0.4 0.7 (0.9
)
Effective tax rate
43.3
%
30.5
%
22.7
%
32.3
%

~~On February 21, 2017,~~’s tax year, the Company ~~acquired all~~will have a US statutory income tax rate of 27.7% for the ~~capital stock~~fiscal 2018, and will have a 21% US statutory income tax rate for fiscal years thereafter. During the quarter ended December 31, 2017, the Company re-valued the deferred tax balances because of ~~Atlas Lighting Products, Inc. (Atlas),~~the change in US tax rate resulting in a ~~Burlington North Carolina manufacturer~~one-time deferred tax expense of high-quality LED lighting products sold into the electrical distribution market. The purchase price of $97.5 million included a cash payment of $96.9 million and 200,000 five year warrants valued at $0.6 million.$4,676,578. The Company ~~funded~~revised its full year projected effective tax rate to incorporate the ~~acquisition with a combination~~fiscal 2018 statutory rate of ~~cash on hand and $66 million from a new $100 million revolving line~~27.7%. The Company completed its accounting for the income tax effects of ~~credit (See note 8).~~the Act during the quarter.

Page 25

The Company has accounted for this transaction as a business combination. Under business combination accounting, the preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of February 21, 2017 is as follows:

(amounts in thousands)

Cash and Cash Equivalents
$ 1,815
Accounts Receivable
7,202
Inventories
8,490
Property, Plant, and Equipment
3,631
Other Assets
248
Intangible Assets
34,319
Liabilities Assumed
(6,106
)
Identifiable net assets acquired
49,599
Goodwill
47,868
Net Purchase Consideration
$ 97,467

As indicated, the allocation of the purchase price and estimated useful lives of the property, plant, and equipment, and intangible assets shown remain preliminary, pending final completion of valuations.

Goodwill recorded from the acquisition of Atlas is attributable to the impact of the positive cash flow from Atlas in addition to the 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, customer relationships, and technology-related assets. The fair value of the intangible assets was determined based upon a combination of the market and income (discounted cash flow) approach. The following table present the details of the identified intangible assets acquired at the date of acquisition (in thousands):

Estimated

Estimate Useful

Fair Value

Life (Years)

Tradename
$ 2,198 20
Technology asset
4,838 10
Customer relationship
27,283 15
Total
$ 34,319

The fair market value write-up of the inventory totaled $228,000, and the fair market value write-up of the property, plant, and equipment totaled $526,000. Transaction costs related to the acquisition totaled $1.48 million in the third quarter and nine months ended March 31, 2017 and are recorded as an operating expense.

Atlas’s post-acquisition results of operations for the period from February 21, 2017 through March 31, 2017 are included in the Company’s Condensed Consolidated Statements of Operations. Since the acquisition date, net sales of Atlas for the period from February 21, 2017 through March 31, 2017 were $6.7 million and operating income was $1.0 million. The operating results of Atlas are included in the Lighting Segment.

~~Pro Forma Impact of the Acquisition of Atlas Lighting Products, Inc.~~~~(unaudited)~~

The following table represents pro forma results of operations and gives effect to the acquisition of Atlas as if the transaction had occurred on July 1, 2015. 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 pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of Atlas.

~~Page 26~~23

(In thousands, unaudited)

Nine Months Ended
March 31

2017

2016

Net Sales
$ 283,122 $ 287,176

Gross Profit
$ 73,802 $ 81,067

Operating Income
$ 6,230 $ 14,694

	Three Months Ended						Six Months Ended
	December 31						December 31
	2017			2016			2017			2016
Reconciliation to effective tax rate:

Provision for income taxes at the anticipated annual tax rate		28.9	%		30.4	%		28.9	%		30.8	%
Enactment of tax law changes		111.2			--			(22.2	)		--
Uncertain tax positions		(4.8	)		(0.6	)		0.5			(0.8	)
Difference between deferred and current tax rate related to the impairment of goodwill		--			--			12.1			--
Other		--			--			--			(1.8	)
Tax impact related to share based compensation		0.3			(0.5	)		(0.4	)		(0.6	)
Effective tax rate		135.6	%		29.3	%		18.9	%		27.6	%

The unaudited pro forma financial information for the nine months ended March 31, 2017 and March 31, 2016 is prepared using the acquisition method of accounting and has been adjusted to effect to the pro forma events that are: (1) directly attributable to the acquisition. (2) factually supportable, and (3) expected to have a continuing impact on the combined results. The pro forma operating income of $6.2 million excludes acquisition-related expenses of $1.48 million.

ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

The Company’s condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Net Sales by Business Segment

(In thousands)

Three Months Ended

Nine Months Ended

March 31

March 31

2017

2016

2017

2016

Lighting Segment
$ 56,039 $ 49,331 $ 176,578 $ 168,007
Graphics Segment
16,463 17,236 55,939 60,772
Technology Segment
5,654 4,173 15,456 12,573
$ 78,156 $ 70,740 $ 247,973 $ 241,352

Operating Income (Loss) by Business Segment
Net Sales by Business Segment
(In thousands)	Three Months Ended						Nine Months Ended						Three Months Ended				Six Months Ended
	March 31						March 31						December 31				December 31
	2017			2016			2017			2016			2017		2016		2017		2016

Lighting Segment	$	2,759		$	1,106		$	8,288		$	11,970		$	69,174	$	65,076	$	137,602	$	130,341
Graphics Segment		(480	)		1,078			1,711			5,271			23,131		20,582		42,169		39,476
Technology Segment		1,386			984			3,038			3,320
Corporate and Eliminations		(4,439	)		(2,436	)		(9,927	)		(8,686	)
	$	(774	)	$	732		$	3,110		$	11,875		$	92,305	$	85,658	$	179,771	$	169,817

Operating Income (Loss) by Business Segment
(In thousands)	Three Months Ended						Six Months Ended
	December 31						December 31
	2017			2016			2017			2016

Lighting Segment	$	5,275		$	3,761		$	(17,655	)	$	6,852
Graphics Segment		2,255			1,174			3,731			2,191
Corporate and Eliminations		(2,983	)		(2,117	)		(6,343	)		(5,159	)
	$	4,547		$	2,818		$	(20,267	)	$	3,884

Summary Comments

The Company acquired Atlas Lighting Products, Inc. on February 21, 2017. Atlas is a manufacturer of high-quality LED lighting products sold in the electrical distribution market. The operating results of Atlas beginning February 21, 2017 have been included in the Company’s consolidated operating results and in the Lighting Segment results.

~~Fiscal 2017 third~~Fiscal 2018 second quarter net sales of ~~$78,156,000~~$92,305,000 increased $6.6 million or 7.8% as compared to ~~third~~second quarter fiscal ~~2016~~2017 net sales of ~~$70,740,000.~~$85,658,000. Net sales were favorably influenced by increased net sales of the Lighting Segment (up ~~$6.7~~$4.1 million or ~~13.6%~~6.3%) and increased net sales of the ~~Technology~~Graphics Segment (up ~~$1.5~~$2.5 million or ~~35.5%~~12.4%). ~~Net~~Comparable fiscal 2018 net sales ~~were unfavorably influenced~~excluding net sales from Atlas Lighting Products, Inc. (“Atlas”) decreased by ~~decreased~~$7.3 million or 8.5% compared to fiscal 2017 net sales. The Company acquired Atlas on February 21, 2017.

Fiscal 2018 first half net sales of ~~the Graphics Segment (down $0.8~~$179,771,000 increased $10 million or ~~4.5%). Fiscal 2017 third quarter organic sales of $71,495,000 increased $0.7 million or 1.1%~~5.9% as compared to ~~$70,740,000 in the same period of~~first half fiscal ~~2016.~~

~~Page 27~~

~~Fiscal~~ 2017 ~~nine month~~ net sales of ~~$247,973,000 increased $6.6 million or 2.7% as compared to the same period of fiscal 2016.~~$169,817,000. Net sales were favorably influenced by increased net sales of the Lighting Segment (up ~~$8.6~~$7.3 million or ~~5.1%~~5.5%) and increased net sales of the ~~Technology~~Graphics Segment (up ~~$2.9~~$2.7 million or ~~22.9%~~6.8%). ~~Net sales were unfavorably influenced by decreased~~Comparable fiscal 2018 net sales ~~of the Graphics Segment (down $4.8~~excluding net sales from Atlas decreased by $15.0 million or ~~8.0%). Fiscal 2017 nine month organic sales of $241,312,000 remained fairly constant as~~8.8% compared to fiscal ~~2016 nine month organic sales of $241,352,000.~~2017 net sales.

Page 24

Fiscal ~~2017 third~~2018 second quarter operating income ~~(loss)~~ of ~~$(774,000) decreased $1.5~~$4,547,000 increased $1.7 million or 61.4% from operating income of ~~$732,000~~$2,818,000 in the same period of fiscal 2016. The $1.5 million decrease in operating income was the net result of an increase in gross profit on higher sales year-over-year, higher selling and administrative expenses, acquisition costs of $1,480,000 in the thirdsecond quarter of fiscal ~~2017 with no comparable costs~~2017. The increase in 2016, and the gain on the sale of a facility of $1,361,000 with no comparable gain in the same period of fiscal 2016. Also, contributing to the lower operating income in the third quarter of fiscal 2017 was an impairment expense of $479,000 related to a customer relationship intangible asset that was determined to be fully impaired with no comparable expense in the same period of fiscal 2016.

~~Fiscal 2017 nine month operating income of $3,110,000 decreased $8.8 million or 74% from operating income of $11,875,000 in the same period of fiscal 2016. The $8.8 million decrease in~~adjusted operating income was the net result of increased net sales, ~~decreased~~increased gross profit and increased gross profit as a percentage of sales, and an increase in selling and administrative ~~expenses, acquisition~~expenses. The Company also recorded restructuring costs of ~~$1,480,000~~$697,000 in the second quarter of fiscal 2017 with no ~~comparable costs~~corresponding cost in fiscal ~~2016, restructuring, plant closure costs, related inventory write-downs~~2018.

Fiscal 2018 first half operating loss of ~~$2,157,000 with no comparable costs~~$(20,267,000) represents a $24.2 million change from operating income of $3,884,000 in the first half of fiscal ~~2016, and a gain on the sale of a facility of $1,361,000 in fiscal 2017 with no comparable gain in fiscal 2016.Also, contributing to the lower~~2017. The change from operating income in fiscal 2017 ~~was~~to an operating loss in fiscal 2018 is primarily the result of a $28 million goodwill impairment ~~expense~~in the first quarter of ~~$479,000 related~~fiscal 2018. Also contributing to the year-over-year change in operating income is the net result of increased net sales, increased gross profit and increased gross profit as a ~~customer relationship intangible asset that was determined to be fully impaired~~percentage of sales, and an increase in selling and administrative expenses. The Company also recorded restructuring costs of $1,753,000 in the first half of fiscal 2017 with no ~~comparable expense~~corresponding cost in ~~the same period of~~ fiscal 2016. Fiscal 2017 nine month operating income was favorably impacted by significant adjustments to the Company’s incentive compensation and stock compensation accruals. The adjustments affected fluctuations in employee compensation and benefits expense described below in the discussion of each segment’s results.2018.

Non-GAAP Financial Measures

The Company believes it is appropriate to evaluate its performance after making adjustments to the as-reported U.S. GAAP operating income, net income, and earnings per share. Adjusted operating income, net income and earnings per share, which exclude the impact of a goodwill impairment, a tax charge related to the revaluation of deferred tax assets, restructuring and plant closure costs, ~~along with~~and other severance costs, ~~intangible asset impairment expense, acquisition deal costs, and fair market value inventory adjustments,~~ are non-GAAP financial measures. We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business. These supplemental measures are used by our management, including our chief operating decision maker, to evaluate business results. We exclude these items because they are not representative of the ongoing results of operations of our business. Below is a reconciliation of these non-GAAP measures to operating income, net income, and earnings per share for the periods indicated.

(in thousands, unaudited)

Third Quarter

FY 2017

FY 2016

Reconciliation of operating income (loss) toadjusted operating income:

Operating income (loss) as reported
$ (774 ) $ 732

Impairment of intangible asset
479 --

Adjustment for restructuring and plant closure costs(gain), and related inventory write-downs
(957 ) --

Adjustment for other severance costs
49 178

Adjustment for acquisition deal costs
1,480 --

Fair market value inventory write-up
155 --

Adjusted Operating Income
$ 432 $ 910

(in thousands, unaudited)	Second Quarter
	FY 2018		FY 2017
Reconciliation of operating income to adjusted operating income:

Operating income as reported	$	4,547	$	2,818

Adjustment for restructuring and plant closure costs		--		697

Adjustment for other severance costs		83		28

Adjusted operating income	$	4,630	$	3,543

~~Page 28~~

(in thousands, except per share data; unaudited)

Third Quarter

Diluted

Diluted

FY 2017

EPS

FY 2016

EPS

Reconciliation of net income (loss) toadjusted net income:

Net income (loss) and earnings(loss) per share as reported
$ (531 ) $ (0.02 ) $ 522 $ 0.02

Impairment of intangible asset, inclusive of theincome tax effect
335 ⁽¹⁾ 0.01 -- --

Adjustment for restructuring and plant closurecosts (gain), inclusive of the income tax effect
(629 )⁽²⁾ (0.02 ) -- --

Adjustment for severance costs,inclusive of the income tax effect
44 ⁽³⁾ -- 117 ⁽⁶⁾ --

Adjustment for acquisition deal costs,inclusive of the income tax effect
1,030 ⁽⁴⁾ 0.04 -- --

Fair market value inventory write-up,inclusive of the income tax effect
108 ⁽⁵⁾ -- --

Adjusted net income and earnings per share
$ 357 $ 0.01 $ 639 $ 0.02

(in thousands, except per share data; unaudited)	Second Quarter
				Diluted						Diluted
	FY 2018			EPS			FY 2017			EPS
Reconciliation of net income (loss) to adjusted net income:

Net income (loss) and earnings (loss) per share as reported	$	(1,468	)	$	(0.06	)	$	2,006		$	0.08

Tax impact from the reduction of the deferred tax assets		4,676			0.18			--			--

Adjustment for restructuring and plant closure costs, inclusive of the income tax effect		--			--			448	⁽¹⁾		0.02

Adjustment for severance costs, inclusive of the income tax effect		59	⁽³⁾		--			23	⁽²⁾		--

Adjusted net income and earnings per share	$	3,267		$	0.12		$	2,477		$	0.10

The income tax effects of the adjustments in the tables above were calculated using the estimated U.S. effective income tax rates re-computed after considering non-GAAP adjustments for the periods indicated. The income tax effects were as follows (in thousands):

⁽¹⁾ ~~$144~~249

⁽²⁾~~$(328)~~

⁽³⁾$5

⁽³⁾⁽⁴⁾~~$450~~

⁽⁵⁾~~$47~~

⁽⁶⁾~~$61~~24

(in thousands, unaudited)

Nine Months

FY 2017

FY 2016

Reconciliation of operating income toadjusted operating income:

Operating Income as reported
$ 3,110 $ 11,875

Impairment of intangible asset
479 --

Adjustment for restructuring,plant closure costs, and relatedinventory write-downs
796 --

Adjustment for other severance costs
222 401

Adjustment for acquisition deal costs
1,480 --

Fair market value inventory write-up
155 --

Adjusted Operating Income
$ 6,242 $ 12,276

Page 2925

(in thousands, except per share data; unaudited)

Nine Months

Diluted

Diluted

FY 2017

EPS

FY 2016

EPS

Reconciliation of net income toadjusted net income:

Net income and earningsper share as reported
$ 2,304 $ 0.09 $ 8,054 $ 0.32

Impairment of intangible asset, inclusiveof the income tax effect
335 ⁽¹⁾ 0.01 -- --

Adjustment for restructuring, plant closurecosts, and related inventory write-downsinclusive of the income tax effect
514 ⁽²⁾ 0.02 -- --

Adjustment for other severance costs,inclusive of the income tax effect
164 ⁽³⁾ 0.01 263 ⁽⁶⁾ 0.01

Adjustment for acquisition deal costs
1,030 ⁽⁴⁾ 0.04

Fair market value inventory write-up
108 ⁽⁵⁾ -- -- --

Adjusted net income and earningsper share
$ 4,455 $ 0.17 $ 8,317 $ 0.33

(in thousands, unaudited)	First Half
	FY 2018			FY 2017
Reconciliation of operating income (loss) to adjusted operating income:

Operating income (loss) as reported	$	(20,267	)	$	3,884

Adjustment for goodwill impairment		28,000			--

Adjustment for restructuring, plant closure costs, and related inventory write-downs		--			1,753

Adjustment for other severance costs		83			173

Adjusted operating income	$	7,816		$	5,810

(in thousands, except per share data; unaudited)	First Half
				Diluted						Diluted
	FY 2018			EPS			FY 2017			EPS
Reconciliation of net income (loss) to adjusted net income:

Net income (loss) and earnings (loss) per share as reported	$	(17,097	)	$	(0.66	)	$	2,835		$	0.11

Adjustment for goodwill impairment, inclusive of the income tax effect		17,361	⁽⁴⁾		0.67

Tax impact from the reduction of the deferred tax assets		4,676			0.18			--			--

Adjustment for restructuring and plant closure costs, inclusive of the income tax effect		--			--			1,143	⁽¹⁾		0.04

Adjustment for other severance costs, inclusive of the income tax effect		59	⁽³⁾		--			120	⁽²⁾		--

Adjusted net income and earnings per share	$	5,001		$	0.19		$	4,098		$	0.16

⁽¹⁾~~$144~~610

⁽²⁾~~$282~~53

⁽³⁾~~$58~~24

⁽⁴⁾~~$450~~

⁽⁵⁾~~$47~~

⁽⁶⁾~~$138~~10,639

~~These non-GAAP measures~~The reconciliation of reported net income and earnings per share to adjusted net income and earnings per share may ~~be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are~~ not ~~based on any comprehensive set~~agree due to rounding differences and due to the difference between basic and dilutive weighted average shares outstanding in the computation of accounting rules or principles. Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures.earnings per share.

Page 26

Results of Operations

THREE MONTHS ENDED ~~MARCH~~DECEMBER 31, 2017 COMPARED TO THREE MONTHS ENDED ~~MARCH~~DECEMBER 31, 2016

Lighting Segment

(In thousands)

Three Months Ended

March 31

2017

2016

Net Sales
$ 56,039 $ 49,331
Gross Profit
$ 12,767 $ 10,563
Operating Income
$ 2,759 $ 1,106

Lighting Segment

(In thousands)	Three Months Ended
	December 31
	2017		2016

Net Sales	$	69,174	$	65,076
Gross Profit	$	19,259	$	16,493
Operating Income	$	5,275	$	3,761

Lighting Segment net sales of ~~$56,039,000~~$69,174,000 in the ~~third~~second quarter of fiscal ~~2017~~2018 increased ~~13.7%~~6.3% from fiscal ~~2016~~2017 same period net sales of ~~$49,331,000.~~$65,076,000. Comparable fiscal 2018 net sales excluding net sales from Atlas decreased by $9.8 million or 15.1% from fiscal 2017 second quarter sales. The Lighting Segment’s net sales of light fixtures having solid-state LED technology totaled ~~$45.8~~$57.7 million in the ~~third~~second quarter of fiscal ~~2017,~~2018, representing ~~a $12.1~~an $11.6 million or ~~36.1%~~25.1% increase from fiscal ~~2016 third~~2017 second quarter net sales of solid-state LED light fixtures of ~~$33.7~~$46.1 million. ~~Net sales of light~~Light fixtures having solid-state LED technology ~~accounted for 81.8%~~represent 91.7% of total ~~Lighting Segment~~lighting product net sales in the ~~third~~second quarter of fiscal ~~2017~~2018 compared to ~~68.3%~~78.2% of total ~~Lighting Segment~~lighting product net sales in the ~~third~~second quarter of fiscal ~~2016.~~2017. Total lighting product net sales excludes sales related to installation and shipping and handling. There was a reduction in the Company’s traditional lighting sales (metal halide and fluorescent light sources) from ~~third quarter fiscal 2016 to third quarter~~ fiscal 2017 to fiscal 2018 as customers ~~converted~~continue to convert from traditional lighting to light fixtures having solid-state LED ~~technology~~.technology.

~~Page 30~~

~~Lighting~~Lighting Segment total net sales of solid-state LED technology in light fixtures have been recorded as indicated in the table below.

	LED Net Sales						LED Net Sales
(In thousands)	FY 2017		FY 2016		% Change		FY 2018		FY 2017		% Change

First Quarter	$	43,146	$	37,393		15.4%	$	52,956	$	43,146		22.7	%
Second Quarter		46,137		41,612		10.9%		57,726		46,137		25.1	%
First Half		89,283		79,005		13.0%		110,682		89,283		24.0	%
Third Quarter		45,815		33,670		36.1%				44,946
Nine Months	$	135,098		112,675		19.9%				134,229
Fourth Quarter			$	42,810						52,303
Full Year			$	155,485					$	186,532

Gross profit of ~~$12,767,000~~$19,259,000 in the ~~third~~second quarter of fiscal ~~2017~~2018 increased ~~$2.2~~$2.8 million or ~~20.9%~~16.8% from the same period of fiscal ~~2016,~~2017, and increased from ~~21.1%~~25.1% to ~~22.6%~~27.4% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales). The Company incurred restructuring, plant closure and related inventory write-down costs that were recorded in cost of sales related to the closure of the Kansas City, Kansas manufacturing facility of $158,000 in the third quarter of fiscal 2017 with no comparable costs in the third quarter of fiscal 2016. The remaining change in the amount of gross profit is due to the net effect of increased product sales, improved manufacturing efficiencies as a result of the Company’s lean initiatives, competitive pricing pressures, product mix, and inflationary pressures including the rising cost of steel, aluminum, copper, and other commodities. Also contributing to the change in gross profit is decreased warranty expense ($0.3 million), decreased supplies expense ($0.1 million), decreased utilities expense ($0.1 million) increased rent expense ($0.1 million), increased depreciation expense ($0.1 million), decreased outside services expense ($0.1 million), and increased customer relations expense ($0.1 million).

Selling and administrative expenses of $10,008,000 in the third quarter of fiscal 2017 increased $0.6 million or 5.8% from the same period of fiscal 2016. The increase is primarily the net result of increased sales commission expense ($1.1 million), a gain on the sale of a facility ($1.4 million), increased wage and benefits expense ($0.4 million), increased bad debt expense ($0.1 million), increased travel expense ($0.1 million), and increased intangible asset amortization expense ($0.2 million).

The Lighting Segment third quarter fiscal 2017 operating income of $2,759,000 increased $1.7 million or 150% from operating income of $1,106,000 in the same period of fiscal 2016. This increase of $1.7 million was primarily the net result of increased net sales, increased gross profit, increased selling and administrative expenses, a gain on the sale of a facility of $1,361,000 and restructuring, plant closure, and related inventory write-down costs of $206,000 with no comparable costs in fiscal 2016.

On September 22, 2016, the Company announced plans to close its lighting facility in Kansas City, Kansas. The decision was based upon the market shift away from fluorescent and other technologies and the rapid movement to LED lighting which is produced at other LSI facilities. All operations at the Kansas City facility ceased prior to December 31, 2016. The Company expects closure of this facility to result in annual net operating profit improvement and cost savings of approximately $1.4 million before consideration of the restructuring, inventory write-down costs, and gain on the sale of the facility. Realization of such savings started in the third quarter of fiscal 2017.

~~Page 31~~

Graphics Segment

(In thousands)

Three Months Ended

March 31

2017

2016

Net Sales
$ 16,463 $ 17,236
Gross Profit
$ 3,506 $ 4,308
Operating Income (Loss)
$ (480
)
$ 1,078

Graphics Segment net sales of $16,463,000 in the third quarter of fiscal 2017 decreased $0.8 million or 4.5% from fiscal 2016 same period net sales of $17,236,000. The $0.8 million decrease in Graphics Segment net sales is the net result of sales to the petroleum / convenience store market ($0.3 million net decrease), sales to the retail grocery market ($0.1 million net decrease), sales to the national retail drug store market ($0.7 million decrease), sales to the quick serve restaurant market ($0.1 million net decrease), sales to the retail market ($0.3 million increase), and changes in volume or completion of several other graphics programs ($0.1 million net increase).

Gross profit of $3,506,000 in the third quarter of fiscal 2017 decreased $0.8 million or 18.6% from the same period of fiscal 2016. Gross profit as a percentage of Graphics Segment net sales (customer plus inter-segment net sales) decreased from 24.6% in the third quarter of fiscal 2016 to 21.0% in the third quarter of fiscal 2017. The Company incurred restructuring and plant closure costs of $185,000 in the third quarter of fiscal 2017 with no comparable costs in the prior year. The remaining change in the amount of gross profit is due to the net effect of decreased net product sales (customer plus inter-segment net product sales were down $0.5 million or 3.7%), a decrease in installation sales (customer plus inter-segment installation sales were down $0.5 million or 21.4%) an increase in the gross profit margin on installation sales, increased shipping and handling costs as a percentage of shipping and handling sales, decreased employee compensation and benefits expense ($0.1 million), decreased supplies expense ($0.1 million), decreased property taxes ($0.2 million), and decreased outside services expense ($0.1 million).

Selling and administrative expenses of $3,986,000 in the third quarter of fiscal 2017 increased $0.8 million or 23.4% from the same period of fiscal 2016 primarily as the net result of increased employee compensation and benefits expense, ($0.4 million), increased outside services expense ($0.1 million), and small net decreases in expense in other categories. Also contributing to the higher selling and administrative expense in the third quarter of fiscal 2017 was an intangible asset impairment expense of $479,000 related to a customer relationship intangible asset that was determined to be fully impaired with no comparable expense in the prior period of fiscal 2016.

The Graphics Segment third quarter fiscal 2017 operating loss of $(480,000) decreased $1.6 million from operating income of $1,078,000 in the same period of fiscal 2016. The $1.6 million decrease from fiscal 2016 was the net result of decreased net sales, decreased gross profit and decreased gross margin as a percentage of sales, increased selling and administrative expenses, restructuring and plant closure costs of $183,000 with no comparable costs in fiscal 2016, and intangible asset impairment expense of $479,000 with no comparable costs in the same period of fiscal 2016.

In November 2016, the Company announced the consolidation of the Woonsocket, Rhode Island manufacturing operation into its North Canton, Ohio operation. The manufacturing operations in Woonsocket ceased prior to December 31, 2016. The Company expects closure of this facility to result in annual net operating profit improvement and cost savings of approximately $680,000, before consideration of the restructuring costs.

Technology Segment

(In thousands)

Three Months Ended

March 31

2017

2016

Net Sales
$ 5,654 $ 4,173
Gross Profit
$ 2,153 $ 1,852
Operating Income
$ 1,386 $ 984

~~Page 32~~

Technology Segment net sales of $5,654,000 in the third quarter of fiscal 2017 increased $1.5 million or 35.5% from fiscal 2016 same period net sales of $4,173,000. The $1.5 million increase in Technology Segment net sales is primarily the net result of a $0.6 million increase in sales to the transportation market, a $0.7 million increase in sales to the original equipment manufacturing market, and a $0.2 million increase in sales to various other markets. Technology Segment inter-segment sales decreased $0.2 million or 2.3%. While the Technology Segment’sintercompany sales decreased slightly, the support of electronic circuit boards and lighting control systems to the Lighting Segment continues to be core to the strategic growth of the Company.

Gross profit of $2,153,000 in the third quarter of fiscal 2017 increased $0.3 million or 16.3% from the same period in fiscal 2016, and increased from 14.1% to 15.0% as a percentage of net sales (customer plus inter-segment net sales). The $0.3 million increase in gross profit is due to the net effect of increased customer net sales partially offset by decreased inter-segment sales, increased supplies expense ($0.1 million), increased warranty expense ($0.1 million), and other small net increases in expense in other categories.

Selling and administrative expenses of $767,000 in the third quarter of fiscal 2017 decreased $0.1 million or 11.6% from fiscal 2016 selling and administrative expenses of $868,000 primarily as a result of a decrease in research and development expense ($0.1 million), a gain on the sale of assets in fiscal 2016 with no similar costs in fiscal 2017 ($0.1 million increase), and other small net decreases in expense in other categories.

The Technology Segment third quarter fiscal 2017 operating income of $1,386,000 increased $0.4 million or 40.9% from operating income of $984,000 in the same period of fiscal 2016. The $0.4 million increase in operating income was primarily the net result of increased customer net sales, decreased inter-segment sales, increased gross profit, and decreased selling and administrative expenses.

In September 2016, the Company announced the consolidation of the Beaverton, Oregon facility into other LSI facilities. The light assembly of products in the Beaverton facility was moved to the Company’s Columbus, Ohio facility, and administration and engineering functions were moved to the Company’s Cincinnati, Ohio facility. This consolidation was completed September 30, 2016. The consolidation of this facility and net reduction of employment is expected to result in annual cost savings of approximately $450,000. Realization of such savings started in the second quarter of fiscal 2017.

Corporate and Eliminations

(In thousands)

Three Months Ended

March 31

2017

2016

Gross Profit (Loss)
$ (27
)
$ (174
)
Operating (Loss)
$ (4,439
)
$ (2,436
)

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

Administrative expenses of $4,412,000 in the third quarter of fiscal 2017 increased $2.2 million or 95% from the same period of the prior year. The $2.2 million increase in expense is primarily the result of increased employee compensation and benefits expense, ($0.2 million), increased outside service expense ($0.2 million), acquisition costs of $1,480,000 million with no similar expenses in the prior period, and other small net increases in expense in other categories.

~~Consolidated Results~~

The Company reported net interest expense of $163,000 in the third quarter of fiscal 2017 as compared to net interest income of $19,000 in the same period of fiscal 2016. Commitment fees related to the unused portions of the Company’s lines of credit and interest income on invested cash are included in both fiscal years. Interest expense related to outstanding debt is included in fiscal 2017. The Company was in a positive cash position and was debt free during the three months ended March 31, 2016 and generated interest income on invested cash. The Company was in a borrowing position beginning on February 21, 2017 primarily as a result of the Atlas Lighting Products, Inc. acquisition.

The $(406,000) income tax benefit in the third quarter of fiscal 2017 represents a consolidated effective tax rate of 43.3%. This is the net result of an income tax rate of 30.4% influenced by certain permanent book-tax differences, a tax benefit related to disqualifying dispositions, and by a benefit related to uncertain income tax positions.The $229,000 income tax expense in the third quarter of fiscal 2016 represents a consolidated effective tax rate of 30.5%. This is the net result of an income tax rate of 34.5% influenced by certain permanent book-tax differences, a tax benefit related to disqualifying dispositions, and a benefit related to uncertain income tax positions.

~~Page 33~~

The Company reported a net loss of $(531,000) in the third quarter of fiscal 2017 as compared to net income of $522,000 in the same period of the prior year. The change in net income is primarily the net result of increased gross profit on higher sales, increased selling and administrative expenses, and an income tax benefit in fiscal 2017 compared to expense in fiscal 2016. Also contributing to the lower net income are pre-tax restructuring, plant closure, and related inventory write-down costs of $404,000 recorded in the third quarter of fiscal 2017 with no comparable costs in fiscal 2016, a gain on the sale of the Kansas City facility of $1,361,000 recorded in the third quarter of fiscal 2017 with no comparable gain in fiscal 2016, acquisition costs of $1,480,000 recorded in the third quarter of fiscal 2017 with no comparable costs in fiscal 2016, and intangible asset impairment expense of $479,000 with no comparable cost in fiscal 2016. Diluted loss per share of $(0.02) was reported in the third quarter of fiscal 2017 as compared to diluted earnings per share of $0.02 in the same period of fiscal 2016. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the third quarter of fiscal 2017 were 25,452,000 shares as compared to 25,700,000 shares in the same period last year.

~~NINE MONTHS ENDED MARCH 31, 2017 COMPARED TO NINE MONTHS ENDED MARCH 31, 2016~~

Lighting Segment

(In thousands)

Nine Months Ended

March 31

2017

2016

Net Sales
$ 176,578 $ 168,007
Gross Profit
$ 41,928 $ 41,904
Operating Income
$ 8,288 $ 11,970

Lighting Segment net sales of $176,578,000 in the first nine months of fiscal 2017 increased 5.1% from fiscal 2016 same period net sales of $168,007,000. The Lighting Segment’s net sales of light fixtures having solid-state LED technology totaled $135.1 million in the first nine months of fiscal 2017, representing a 19.9% increase from first nine months of fiscal 2016 net sales of solid-state LED light fixtures of $112.7 million. Net sales of light fixtures having solid-state LED technology accounted for 76.5% of total Lighting Segment net sales. (See the LED net sales table on page 31.) There was a reduction in the Company’s traditional lighting sales (metal halide and fluorescent light sources) from fiscal 2016 to fiscal 2017 as customers converted from traditional lighting to light fixtures having solid-state LED technology.

Gross profit of $41,928,000 in the first nine months of fiscal 2017 increased $0.02 million or 0.1% compared to the same period of fiscal 2016, and decreased from 24.6% to 23.5% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales). The Company incurred restructuring and plant closure costs, including the write-down of inventory, that were recorded in cost of sales related to the closure of the Kansas City, Kansas manufacturing facility of $1,272,000 in fiscal 2017 with no comparable costs in fiscal 2016. The Lighting Segment’s gross profit was also favorably influenced by the net effect of increased product net sales, improved manufacturing efficiencies as a result of the Company’s lean initiatives, competitive pricing pressures, product mix, and inflationary pressures including the rising cost of steel, aluminum, copper, and other commodities. Also contributing to the net change in gross profit is decreased employee compensation and benefits expense ($0.7 million), decreased warranty costs ($0.5 million), increased customer relations expense ($0.4 million), increased repairs and maintenance expense ($0.1 million), increased depreciation expense ($0.4 million), increased rent expense ($0.3 million), decreased supplies expense ($0.1 million), and increased outside service expense ($0.1 million).

Selling and administrative expenses of $33,640,000 in the first nine months of fiscal 2017 increased $3.7 million or 12.4% from the same period of fiscal 2016. The $3.7 million increase is primarily the result of increased employee compensation and benefits expense ($0.9 million), increased intangible asset amortization expense ($0.2 million), increased samples expense ($0.1 million), increased outside service expense ($0.1 million), increased sales commission expense ($3.0 million), increased bad debt expense ($0.1 million), increased travel expense ($0.1 million), decreased literature expense ($0.1 million), a loss on the sale of fixed assets ($0.1 million), use tax recorded on current and prior year purchases as a result of a use tax audit ($0.2 million), and small net increases in several other categories. Also contributing to the increase in selling and administrative expenses are restructuring and plant closure costs of $104,000 related to the closure of the Kansas City, Kansas manufacturing facility that were recorded in fiscal 2017 with no comparable costs in fiscal 2016, and a gain on the sale of the Kansas City facility of $1,361,000 with no comparable gain in fiscal 2016.

~~Page 34~~

Lighting Segment nine month fiscal 2017 operating income of $8,288,000 decreased $3.7 million or 30.8% from operating income of $11,970,000 in the same period of fiscal 2016. This decrease of $3.7 million was the net result of increased net sales, a slight increase in gross profit, increased selling and administrative expenses, restructuring and plant closure costs, and related inventory write-downs of $1.4 million with no comparable costs in fiscal 2016, and a gain on the sale of the Kansas City facility of $1.4 million with no comparable gain in fiscal 2016.

Graphics Segment

(In thousands)

Nine Months Ended

March 31

2017

2016

Net Sales
$ 55,939 $ 60,772
Gross Profit
$ 12,864 $ 16,161
Operating Income
$ 1,711 $ 5,271

Graphics Segment net sales of $55,939,000 in the first nine months of fiscal 2017 decreased 8.0% from fiscal 2016 same period net sales of $60,772,000. The $4.8 million decrease in Graphics Segment net sales is primarily the net result of sales to the petroleum / convenience store market ($2.7 million net decrease), sales to the retail grocery market ($0.9 million net decrease), sales to the national retailer drug store market ($2.6 million decrease), sales to the quick-service restaurant market ($0.5 million net increase), sales to the retail market ($0.7 million increase), and changes in volume or completion of several other graphics programs ($0.2 million net increase).

~~Gross profit of $12,864,000 in the first nine months of fiscal 2017 decreased $3.3 million or 20.4% from the same period in fiscal 2016, and decreased from 26.0% to 22.6% as a percentage of Graphics~~ Segment net sales (customer plus inter-segment net sales). The Company incurred restructuring and plant closure costs that were recorded in cost of sales related to the closure of the ~~Woonsocket, Rhode Island~~Kansas City, Kansas manufacturing facility of ~~$396,000.~~$429,000 with no comparable costs in fiscal 2018. The remaining ~~$2.9 million decrease~~increase in ~~the~~ amount of gross profit is due to the net effect of ~~decreased~~improved product mix, net ~~product~~ sales ~~(customer plus inter-segment net product~~from Atlas for which there were no comparable sales ~~were down $3.5 million or 7.3%), a drop~~ in ~~installation sales (customer plus inter-segment installation sales were down $2.3 million or 23.7%) partially offset by higher margins on installation sales, slightly decreased freight expense~~fiscal 2017, manufacturing efficiencies as a ~~percentage~~result of ~~shipping~~the Company’s lean initiatives, continued inflationary pressures in certain commodities, competitive pricing pressures, continued softness in the lighting industry, and handling revenue, increased depreciation expense ($0.3 million), decreased real estate taxes ($0.1 million), decreased supplies expense ($0.1 million), decreased repair and maintenance expense ($0.1 million), decreased outside services ($0.1 million), and decreased compensation and benefits expense ($0.5 million). cost savings related to the closure of the Kansas City manufacturing facility.

Selling and administrative expenses of ~~$11,153,000~~ $13,984,000in the ~~first nine months~~second quarter of fiscal ~~2017~~2018 increased ~~$0.3~~$1.3 million or ~~2.4%~~9.9% from the same period of fiscal ~~2016~~2017, primarily as athe net result of decreased compensation and benefits expense ($0.5 million), increased outside services expense ($0.3 million), increased convention and shows expense ($0.1 million), increased travel expense ($0.1 million), increased supplies expense ($0.1 million), decreased commissions expense ($0.1 million), and other small net decreases in other categories. Also contributing to the higheracquiring Atlas. Our comparable selling and administrative ~~expense in fiscal 2017 was intangible asset impairment expense of $479,000 related to a customer relationship intangible asset that was determined to be fully impaired with no comparable~~ expenses excluding Atlas decreased 16.2% in the ~~prior period~~second quarter of fiscal ~~2016.~~

~~Graphics Segment first nine month fiscal 2017 operating income of $1,711,000 decreased $3.6 million or 67.5%~~2018 from the same period of fiscal ~~2016~~2017. The more notable quarter-over-quarter changes impacting the $1.3 million increase in selling and isadministrative expenses are increased employee compensation and benefits expense ($0.8 million), decreased commission expense ($1.1 million), and increased amortization expense ($0.6 million).

The Lighting Segment second quarter fiscal 2018 operating income of $5,275,000 increased $1.5 million or 40.3% from operating income of $3,761,000 in the same period of fiscal 2017. The $1.5 million increase in operating income was the net result of ~~decreased~~increased net sales, ~~decreased~~an increase in gross profit and ~~decreased~~ gross profit as a percentage of ~~net~~ sales, ~~restructuring~~increased selling and administrative expenses, and plant closure costs ~~of $404,000~~in fiscal 2017 with no comparable ~~costs~~expenses in fiscal ~~2016, and intangible asset impairment expense of $479,000 with no comparable cost in fiscal 2016, and a decrease in other selling and administrative expenses.~~2018.

Page 3527

Technology Segment
(In thousands)	Nine Months Ended				Three Months Ended
	March 31				December 31
	2017		2016		2017		2016

Net Sales	$	15,456	$	12,573	$	23,131	$	20,582
Gross Profit	$	5,704	$	6,029	$	6,046	$	4,918
Operating Income	$	3,038	$	3,320	$	2,255	$	1,174

~~Technology~~Graphics Segment net sales of ~~$15,456,000~~$23,131,000 in the ~~first nine months~~second quarter of fiscal ~~2017~~2018 increased ~~$2.9~~$2.5 million or ~~22.9%~~12.4% from fiscal ~~2016~~2017 same period net sales of ~~$12,573,000. The $2.9 million increase~~$20,582,000. Sales to the Retail and QSR markets increased in ~~Technology Segment net sales is primarily~~ the ~~net result~~second quarter of fiscal 2018 compared the second quarter of fiscal 2017, followed by a ~~$0.2 million~~modest increase in sales to the medical market, a $2.2 million increase in sales to the transportation market, a $0.6 million increase in sales to original equipment manufacturers, and a $0.1 million decrease in sales to the telecommunication market.Technology Segment inter-segment sales decreased $1.4 million or 5.1%. While the Technology Segment’s intercompany sales decreased, the support of electronic circuit boards and lighting control systems to the Lighting Segment continues to be core to the strategic growth of the Company.Petroleum market.

Gross profit of ~~$5,704,000~~$6,046,000 in the ~~first nine months~~second quarter of fiscal ~~2017 decreased $0.3~~2018 increased $1.1 million or ~~5.4%~~23.0% from the same period of fiscal ~~2016, and decreased from 15.1% to 13.8%~~2017. Gross profit as a percentage of ~~Technology Segment~~segment net sales (customer plus inter-segment net sales). increased from 23.1% in the second quarter of fiscal 2017 to 25.0% in the second quarter of fiscal 2018. The Company incurred restructuring charges of $0.2 million related to the consolidation of its Beaverton, Oregon facility into other LSI facilities, with no comparable costs in fiscal 2016. The remaining $0.1 million decreasechange in amount of gross profit is due to the net effect of increased ~~customer~~ net sales ~~partially offset by~~(customer plus inter-segment net sales), improved gross profit margin on shipping and handling sales, and decreased ~~inter-segment sales, increased~~ employee compensation and ~~benefits expense ($0.3 million), increased supplies expense ($0.4 million), increased warranty expense ($0.3 million), decreased rent~~benefit expense ($0.1 million)~~, and decreased outside services~~. The Company incurred $211,000 in the second quarter of fiscal 2017 related to the closure of its Woonsocket, Rhode Island facility with no comparable expense ~~($0.2 million).~~in fiscal 2018.

Selling and administrative expenses of ~~$2,666,000~~$3,791,000 in the ~~first nine months~~second quarter of fiscal ~~2017 decreased $43,000 or 1.6%~~2018 increased slightly from ~~the same period of~~ fiscal ~~2016. The decrease in~~2017 selling and administrative expenses ~~is the net result~~ of ~~an increase~~$3,744,000. There were only modest increases and offsetting decreases in employee compensation and benefits expense ($0.1 million), an increase in outside services expense ($0.1 million), a decrease in research and development expense ($0.3 million), and a gain on the sale of assets in fiscal 2016 with no comparable gain in fiscal 2017 ($0.1 million increase).several cost categories.

~~Technology~~The Graphics Segment ~~nine month~~second quarter fiscal ~~2017~~2018 operating income of ~~$3,038,000 decreased $0.3~~$2,255,000 increased $1.1 million or ~~8.5%~~92.1% from operating income of ~~$3,320,000~~$1,174,000 in the same period of fiscal ~~2016.~~2017. The ~~decrease~~increase of ~~$0.3~~$1.1 million was primarily the net result of increased net ~~customer~~ sales, ~~decreased inter-segment~~increased gross profit and increased gross profit margin as a percentage of sales, ~~restructuring costs~~and a small increase in ~~fiscal 2017 with no comparable costs in fiscal 2016,~~selling and ~~decreased gross profit.~~administrative costs.

In September 2016, the Company announced the consolidation of the Beaverton, Oregon facility into other LSI facilities. The light assembly of products in the Beaverton facility was moved to the Company’s Columbus, Ohio facility,Corporate and administration and engineering functions were moved to the Company’s Cincinnati, Ohio facility. This consolidation was completed September 30, 2016. The consolidation of this facility and net reduction of employment is expected to result in annual cost savings of approximately $450,000. Realization of such savings started in the second quarter of fiscal 2017.Eliminations

Corporate and Eliminations
(In thousands)	Nine Months Ended						Three Months Ended
	March 31
	2017			2016			December 31
							2017			2016
Gross Profit (Loss)	$	145		$	(270	)	$	2		$	(4	)
Operating (Loss)	$	(9,927	)	$	(8,686	)	$	(2,983	)	$	(2,117	)

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

~~Page 36~~

Administrative ~~expenses~~expenses of ~~$10,072,000~~$2,985,000 in the ~~first nine months~~second quarter of fiscal ~~2017~~2018 increased ~~$1.7~~$0.9 million or ~~19.7%~~41.0% from the same period of the prior year. The ~~$1.7~~$0.9 million increase is the result of increased employee compensation and benefit expense ($1.1 million increase) partially offset by a reduction in the cost of outside services expense such as legal expenses ($0.2 million decrease). Most of the increase in employee compensation and benefit expense is the result of the reduction of incentive-based compensation in the second quarter of fiscal 2017 which was driven by the operating results of the Company. There was no similar reduction in incentive-based compensation in fiscal 2018.

Consolidated Results

The Company reported $417,000 net interest expense in the second quarter of fiscal 2018 compared to net interest income of $20,000 in the second quarter of fiscal 2017. The change from interest income in ~~administrative expenses~~fiscal 2017 to interest expense in fiscal 2018 is ~~primarily~~the result of borrowing against the Company’s line of credit. Commitment fees related to the unused portion of the Company’s line of credit and interest income on invested cash are included in both fiscal years.

The $5,598,000 income tax expense in the second quarter of fiscal 2018 was most notably impacted by a $4.7 million tax adjustment related to the revaluation of the Company’s deferred tax assets partially offset by a favorable tax impact related to the re-alignment of the Company’s tax expense to a lower effective tax rate, both related to the recently enacted “Tax Cut and Jobs Act” (“TCJA”) legislation. The $832,000 income tax expense in the second quarter of fiscal 2017 represents a consolidated effective tax rate of 29.3%. This is the net result of an income tax rate of 30.8% influenced by certain permanent book-tax differences and by a benefit related to uncertain income tax positions.

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The Company reported a net loss of $(1,468,000) in the second quarter of fiscal 2018 as compared to net income of $2,006,000 in the same period of the prior year. The change between net income in fiscal 2017 to a net loss in fiscal 2018 is mostly driven by the $4.7 million charge in fiscal 2018 related to the re-valuation of the Company’s deferred tax assets. Also contributing to the quarter-over-quarter net change in net income are increased net sales, increased gross profit and an improvement of gross profit as a percentage of sales, increased selling and administrative expenses, and restructuring and plant closure costs in fiscal 2017 with no comparable costs in fiscal 2018. Diluted loss per share of $(0.06) was reported in the second quarter of fiscal 2018 as compared to $0.08 diluted earnings per share in the same period of fiscal 2017. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the second quarter of fiscal 2018 were 25,858,000 shares as compared to 25,803,000 shares in the same period last year.

SIX MONTHS ENDED DECEMBER 31, 2017 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2016

Lighting Segment
(In thousands)	Six Months Ended
	December 31
	2017			2016

Net Sales	$	137,602		$	130,341
Gross Profit	$	37,932		$	32,383
Operating (Loss) Income	$	(17,655	)	$	6,852

Lighting Segment net sales of $137,602,000 in the first half of fiscal 2018 increased 5.5% from fiscal 2017 same period net sales of $130,341,000. Comparable fiscal 2018 net sales excluding net sales from Atlas decreased by $17.7 million or 13.6% from fiscal 2017 second quarter sales. The Lighting Segment’s net sales of light fixtures having solid-state LED technology totaled $110.7 million in the first half of fiscal 2018, representing a $21.4 million or 24.0% increase from fiscal 2017 first half net sales of solid-state LED light fixtures of $89.3 million. Light fixtures having solid-state LED technology represent 88.3% of total lighting product net sales in the first half of fiscal 2018 compared to 75.2% of total lighting product net sales in the first half of fiscal 2017. Total lighting product net sales excludes sales related to installation and shipping and handling. There was a reduction in the Company’s traditional lighting sales (metal halide and fluorescent light sources) from fiscal 2017 to fiscal 2018 as customers continue to convert from traditional lighting to light fixtures having solid-state LED technology.

Gross profit of $37,932,000 in the first half of fiscal 2018 increased $5.5 million or 17.1% from the same period of fiscal 2017, and increased from 24.6% to 27.2% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales). The Company incurred restructuring and plant closure costs that were recorded in cost of sales related to the closure of the Kansas City, Kansas manufacturing facility and the Beaverton, Oregon facility of $932,000 and plant closure costs related to an inventory write-down of $400,000 as the Company exited the manufacturing of fluorescent lighting fixtures with no comparable costs in fiscal 2018. The remaining increase in amount of gross profit is due to the net effect of improved product mix, net sales from Atlas for which there were no comparable sales in fiscal 2017, manufacturing efficiencies as a result of the Company’s lean initiatives, continued inflationary pressures in certain commodities, competitive pricing pressures, continued softness in the lighting industry, and cost savings related to the closure of the Kansas City and Beaverton facilities.

Selling and administrative expenses of $27,587,000in the first half of fiscal 2018 excluding the $28 million goodwill impairment charge, increased $2.1 million or 8.1% from the same period of fiscal 2017 primarily as the net result of acquiring Atlas. Our comparable selling and administrative expenses excluding Atlas decreased 17.5% in the first half of fiscal 2018 from the same period of fiscal 2017. The more notable year-over-year changes impacting the $2.1 million increase in selling and administrative expenses are increased employee compensation and benefits expense ($~~1.1 million), an increase in legal expense ($0.1 million), decreased depreciation expense ($0.1~~1.3 million), increased research and development expense ($~~0.3 million), increased telephone expense ($0.1 million), increased outside services expense ($~~0.2 million), ~~increased director’s fees~~decreased commission expense ($~~0.2~~1.6 million), and increased amortization expense ($1.2 million). The Company recorded a $28 million goodwill impairment charge in fiscal 2018 with no comparable expense in fiscal 2017. The Company will perform an impairment analysis in the third quarter of fiscal 2018 in conjunction with its annual impairment test.

The Lighting Segment first half fiscal 2018 operating loss of $(17,655,000) represents a $24,507,000 change from operating income of $6,852,000 in the same period of fiscal 2017 primarily due to a $28 million pre-tax goodwill impairment charge. The year-over-year change was also the net result of increased net sales, an increase in gross profit and gross profit as a percentage of sales, increased selling and administrative expenses, and plant closure costs in fiscal 2017 with no comparable expenses in fiscal 2018.

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Graphics Segment
(In thousands)	Six Months Ended
	December 31
	2017		2016

Net Sales	$	42,169	$	39,476
Gross Profit	$	11,109	$	9,358
Operating Income	$	3,731	$	2,191

Graphics Segment net sales of $42,169,000 in the first half of fiscal 2018 increased $2.7 million or 6.8% from fiscal 2017 same period net sales of $39,476,000. Sales to the Retail and QSR markets increased in the first half of fiscal 2018 compared to fiscal 2017 which more than offset a decline in sales to the Petroleum market over the same period.

Gross profit of $11,109,000 in the first half of fiscal 2018 increased $1.8 million or 18.7% from the same period of fiscal 2017. Gross profit as a percentage of segment net sales (customer plus inter-segment net sales) increased from 23.2% in the first half of fiscal 2017 to 25.7% in the first half of fiscal 2018. The change in amount of gross profit is due to the net effect of increased net sales (customer plus inter-segment net sales), an improvement in the gross profit margin of installation and shipping and handling sales, and decreased employee compensation and benefit expense ($0.5 million). The Company incurred $211,000 in the first half of fiscal 2017 related to the closure of its Woonsocket, Rhode Island facility with no comparable expense in fiscal 2018.

Selling and administrative expenses of $7,378,000 in the first half of fiscal 2018 increased 2.9% or $0.2 million from fiscal 2017 selling and administrative expenses of $7,167,000. There were only modest increases and offsetting decreases in several cost categories.

The Graphics Segment first half fiscal 2018 operating income of $3,731,000 increased $1.5 million or 70.3% from operating income of $2,191,000 in the same period of fiscal 2017. The increase of $1.5 million was primarily the net result of increased net sales, increased gross profit and increased gross profit margin as a percentage of sales, and a small increase in selling and administrative costs.

Corporate and Eliminations
(In thousands)	Six Months Ended
	December 31
	2017			2016

Gross Profit (Loss)	$	(31	)	$	501
Operating (Loss)	$	(6,343	)	$	(5,159	)

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

Administrative expenses of ~~corporate~~$6,312,000 in the first half of fiscal 2018 increased $0.7 million or 11.5% from the same period of the prior year. The $0.7 million increase is the result of increased employee compensation and benefit expense to($0.5 million increase) and by a net increase in other cost categories. Most of the increase in employee compensation and benefit expense is the result of the reduction of incentive-based compensation in the second quarter of fiscal 2017 which is driven by the operating ~~units ($0.2 million increase), and several small net increases~~results of the Company. There was no similar reduction in ~~various other expenses.~~incentive-based compensation in fiscal 2018. Also contributing to the ~~increased~~net change in administrative expenses are ~~acquisition costs of $1,480,000 recorded in fiscal 2017 and~~ restructuring costs of $0.1 million recorded in fiscal 2017 related to the consolidation of its Beaverton, Oregon facility into other LSI facilities, with no comparable costs in fiscal 2016. These restructuring expenses were primarily for severance costs for employees located in the Beaverton, Oregon facility that were previously included in corporate research and development expenses.2018.

Consolidated Results

The Company reported $820,000 net interest expense ~~of $129,000~~ in the first ~~nine months~~half of fiscal ~~2017 as~~2018 compared to net interest income of ~~$27,000~~$34,000 in the ~~same period~~first half of fiscal ~~2016.~~2017. The change from interest income in fiscal 2017 to interest expense in fiscal 2018 is the result of borrowing against the Company’s line of credit. Commitment fees related to the unused portion of the Company’s line of credit and interest income on invested cash are included in both fiscal years.

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The ~~Company was~~$3,990,000 tax benefit in the first half of fiscal 2018 represents a positive cash position and was debt free for the nine months ended March 31, 2016 and generated interest income on invested cash. The Company was in a borrowing position beginning on February 21, 2017 primarily asconsolidated overall tax rate of 135.6%. This is a result of an effective tax rate of 58.2% influenced most notably by the ~~Atlas Lighting Products acquisition.~~

first quarter goodwill impairment, and by a $4.7 million tax adjustment related to the revaluation of the Company’s deferred tax assets partially offset by a favorable tax impact related to the re-alignment of the Company’s tax expense to a lower effective tax rate, both related to the recently enacted TCJA legislation. The ~~$677,000~~$1,083,000 income tax expense in the first ~~nine months~~half of fiscal 2017 represents a consolidated effective tax rate of ~~22.7%~~18.9%. This is the net result of an income tax rate of ~~30.4%~~28.9% influenced by certain permanent book-tax differences, by a benefit related to uncertain income tax positions, ~~a tax benefit related to disqualifying dispositions,~~ and by a favorable adjustment to a deferred tax asset. The $3,848,000 income tax expense in the first nine months of fiscal 2016 represents a consolidated effective tax rate of 32.3%. This is the net result of an income tax rate of 34.5% influenced by certain permanent book-tax differences, an $111,000 tax benefit related to the retroactive reinstatement of the R&D tax credit, a tax benefit related to disqualifying dispositions, and by a benefit related to uncertain income tax positions.

The Company reported a net ~~income~~loss of ~~$2,304,000~~$(17,097,000) in the first ~~nine months~~half of fiscal ~~2017~~2018 as compared to net income of ~~$8,054,000~~$2,835,000 in the same period of the prior year. The ~~$5.8~~change between net income in fiscal 2017 to a net loss in fiscal 2018 is mostly driven by the $4.7 million ~~decrease~~charge in fiscal 2018 related to the re-valuation of the Company’s deferred tax assets and by the first quarter goodwill impairment. Also contributing to the quarter-over-quarter net change in net income ~~is primarily the net result of~~are increased net sales, ~~decreased~~increased gross profit and an improvement of gross profit as a percentage of sales, increased ~~operating~~selling and administrative expenses, and restructuring and plant closure costs in fiscal 2017 with no comparable costs in fiscal ~~2016, intangible asset impairment expense in fiscal 2017 with no comparable cost in fiscal 2016, and lower income tax expense in fiscal 2017 compared to fiscal 2016.~~2018. Diluted ~~earnings~~loss per share of ~~$0.09~~$(0.66) was reported in the first ~~nine months~~half of fiscal ~~2017~~2018 as compared to $0.11 diluted earnings per share ~~of $0.32~~ in the same period of fiscal ~~2016.~~2017. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the first ~~nine months~~half of fiscal ~~2017 was 25,909,000~~2018 were 25,824,000 shares as compared to ~~25,494,000~~25,859,000 shares in the same period last year.

Liquidity and Capital Resources

The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and its historical levels of net cash flows from operating activities to be the most important measures.

The March 31, 2017 balance sheet includes the acquisition Atlas Lighting Products, whereas Atlas was not included in the June 30, 2016 balance sheet. With respect to the Consolidated Statement of Cash flows, fiscal 2017 amounts include Atlas’ changes in its balance sheet from the February 21, 2017 acquisition date to March 31, 2017.

At ~~March~~December 31, 2017, the Company had working capital of ~~$67.0~~$72.8 million, compared to ~~$88.5~~$61.7 million at June 30, ~~2016.~~2017. The ratio of current assets to current liabilities was ~~2.68~~2.71 to 1 as compared to a ratio of ~~3.26~~2.36 to 1 at June 30, ~~2016.~~2017. The ~~$21.5~~$11.1 million ~~decrease~~increase in working capital from June 30, ~~2016~~2017 to ~~March~~December 31, 2017 was primarily ~~related to the net effect of decreased cash and cash equivalents ($29.5 million), increased~~driven by an increase in net accounts receivable ($~~1.8~~10.9 million)~~, increased~~. The other offsetting changes to working capital are as follow: decreased net ~~inventory~~inventories ($~~4.3~~1.3 million),; a reduction in the asset held for sale ($1.5 million); a decrease in ~~accrued expenses~~accounts payable ($~~1.5~~2.6 million),; and an increase in ~~other current assets~~accrued expenses ($~~0.9~~0.4 million)~~, an increase in refundable income taxes ($0.1 million), an increase in accounts payable ($2.1 million), and assets held for sale of $1.5 million at March 31, 2017.~~. The Company has a strategy of aggressively managing working capital, including reduction of the accounts receivable days sales outstanding ~~(DSO)~~(“DSO”) and reduction of inventory levels, without reducing service to its customers.

The Company ~~generated $12.9~~used $0.8 million of cash from operating activities in the first ~~nine months~~half of fiscal ~~2017~~2018 as compared to ~~$15.2~~a source of cash of $4.6 million in the same period of the prior year. This ~~$2.3~~$5.4 million decrease in net cash flows from operating activities is primarily the net result of a ~~smaller decrease~~larger increase in ~~net~~ accounts receivable (unfavorable change of ~~$0.3~~$8.2 million), a ~~smaller~~larger decrease in accounts payable ~~(favorable~~(unfavorable change of ~~$2.2 million), an increase rather than a decrease in customer prepayments (favorable change of $0.5~~$2.4 million), a decrease rather than an increase in customer prepayments (unfavorable change of $0.4 million), a smaller decrease in net inventory ~~(favorable~~(unfavorable change of ~~$7.3~~$0.7 million), ana smaller decrease ~~rather than an increase~~ in accrued expenses and other ~~(unfavorable~~(favorable change of ~~$5.9~~$1.9 million), a ~~smaller increase~~decrease in refundable income taxes (favorable change of ~~$0.4 million), a greater increase in net deferred tax assets (unfavorable change of~~ $0.8 million), and a ~~decrease~~change from net income in ~~stock compensation expense (unfavorable change of $0.1 million),~~fiscal 2017 to a ~~decrease~~net loss in ~~the deferred compensation liability (unfavorable change of $0.1 million),~~fiscal 2018 more than offset by an increase in ~~depreciation and amortization expense~~non-cash items (favorable change of ~~$0.8~~$3.7 million), fixed asset impairment and accelerated depreciation with no comparable events in the prior year (favorable change of $0.4 million), intangible asset impairment with no comparable events in the prior year (favorable change of $0.5 million), a gain on the sale of a building in fiscal 2017 with no comparable event in fiscal 2016 (unfavorable change of $1.4 million), a loss compared to a gain on the sale of fixed assets (favorable change of $0.1 million), and a decrease in net income (unfavorable change of $5.8 million).

~~Page 37~~

Net accounts receivable were ~~$48.8~~$59.7 million and ~~$47.0~~$48.9 million at ~~March~~December 31, 2017 and June 30, ~~2016,~~2017, respectively. DSO increased to 5256 days at ~~March~~December 31, 2017 ~~compared to 47~~from 52 days at June 30, ~~2016.~~2017. The Company believes that its receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate.

Net inventories of ~~$48.5~~$48.7 million at ~~March~~December 31, 2017 ~~increased $4.3~~decreased $1.4 million from ~~$44.1~~$50.0 million at June 30, ~~2016.~~2017. The ~~increase~~decrease of ~~$4.3~~$1.4 million is the result of ~~an increase~~a decrease in gross inventory of ~~$4.1~~$1.0 million and an increase ofin obsolescence reserves of ~~$0.2~~$0.4 million. Based on a strategy of balancing inventory reductions with customer service and the timing of shipments, a net inventory ~~decrease~~increases occurred in the first ~~nine months~~half of fiscal ~~2017~~2018 in the Graphics Segment of approximately $0.9 million which was more than offset by a decrease in net inventory in the Lighting Segment of ~~approximately $4.0 million, which was offset by the added inventory from the acquisition of Atlas Lighting Products. Graphics Segment net inventory decreased approximately $0.1~~$2.2 million. ~~Technology Segment inventory remained constant.~~

Cash generated from operations and borrowing capacity under the Company’s line of credit is the Company’s primary source of liquidity. The Company has a secured $100 million revolving line of credit with its bank, with ~~$44.2~~$56.8 million of the credit line available as of ~~April 27, 2017.~~January 25, 2018. This line of credit is a $100 million five year credit line expiring in the third quarter of fiscal 2022. The Company believes that its $100 million line of credit plus cash flows from operating activities are adequate for the Company’s fiscal ~~2017~~2018 operational and capital expenditure needs. The Company is in compliance with all of its loan covenants.

Page 31

The Company ~~used~~generated cash of ~~$95.5~~$0.3 million related to investing activities in the ~~first nine months~~half of fiscal ~~2017~~2018 as compared to a use of ~~$8.3~~$2.7 million in the same period offrom the prior year, resulting in ~~an unfavorable~~a favorable change of ~~$87.2~~$3.1 million. Capital expenditures infor the first ~~nine months~~half of fiscal ~~2017~~2018 decreased ~~$4.9~~$1.6 million to ~~$3.5~~$1.2 million from the same period in fiscal ~~2016.~~2017. The ~~largest components of~~Company sold its Woonsocket manufacturing facility for $1.5 million which contributed to the change in cash flow from investing activities from fiscal 2017 ~~capital expenditures are equipment and building improvements related~~ to ~~the Company’s Lighting and Graphics Segments and computer hardware and software related to Corporate Administration. The Company acquired Atlas Lighting Products in the third quarter of~~ fiscal ~~2017, which used cash of $95.1 million.~~2018.

The Company ~~provided $53.1~~generated $0.6 million of cash related to financing activities in the first ~~nine months~~half of fiscal ~~2017~~2018 compared to a ~~source~~use of cash of ~~$0.4~~$2.7 million in the first ~~nine months~~half of fiscal ~~2016.~~2017. The ~~$52.7~~$3.3 million favorable change in cash flow was the net result of borrowings in excess of payments of long term debt of ~~$54.8~~$2.5 million, ~~an increase in dividends paid to shareholders (unfavorable change of $0.8 million),~~ and a decrease in the ~~exercise~~purchase of ~~stock options~~treasury shares coupled with an increase in the ~~first nine months~~distribution of ~~fiscal 2017 (unfavorable~~treasury shares (favorable change of ~~$1.2~~$0.7 million).

The Company has, or could have, on its balance sheet financial instruments consisting primarily of cash and cash equivalents, short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.

Off-Balance Sheet Arrangements

The Company has no financial instruments with off-balance sheet risk and has no off-balance sheet arrangements, except for various operating leases.

Cash Dividends

In ~~April 2017,~~January 2018, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable ~~May 16, 2017~~February 13, 2018 to shareholders of record as of ~~May 8, 2017.~~February 5, 2018. The indicated annual cash dividend rate for fiscal ~~2017~~2018 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.

~~Page 38~~

Critical Accounting Policies and Estimates

The Company is required to make estimates and judgments in the preparation of its financial statements that affect the reported amounts of assets, liabilities, revenues and expenses, and related footnote disclosures. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The Company continually reviews these estimates and their underlying assumptions to ensure they remain appropriate. The Company believes the items discussed below are among its most significant accounting policies because they utilize estimates about the effect of matters that are inherently uncertain and therefore are based on management’s judgment. Significant changes in the estimates or assumptions related to any of the following critical accounting policies could possibly have a material impact on the financial statements.

Revenue Recognition

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment. In certain arrangements with customers, as is the case with the sale of some of our solid-state LED video screens, revenue is recognized upon customer acceptance of the video screen at the job site. Product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed. The company provides product warranties and certain post-shipment service, support and maintenance of certain ~~solid state~~solid-state LED video screens and billboards.

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Installation revenue is recognized when the products have been fully installed. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products at a customer site have been installed.

Shipping and handling revenue coincides with the recognition of revenue from the sale of the product.

In situations where the Company is responsible for re-imaging programs with multiple sites, each site is viewed as a ~~separate~~separate unit of accounting and has stand-alone value to the customer. Revenue is recognized upon the Company’s complete performance at the location, which may include a site survey, graphics products, lighting products, and installation of products. The selling price assigned to each site is based upon an agreed upon price between the Company and its customer and reflects the estimated selling price for that site relative to the selling price for sites with similar image requirements.

The Company also evaluates the appropriateness of revenue recognition in accordance with the accounting standard on software revenue recognition. Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental.

Income Taxes

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 and liabilities 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. The Company has adopted ASU 2015-17, “Balance Sheet Classification of Deferred Taxes.” As a result of early adoption of this accounting guidance, prior periods have been re-classified, which only affected the financial statement presentation and not the measurement of deferred tax liabilities and assets.

~~Page 39~~

The Company operates in multiple taxing jurisdictions and is subject to audit in these jurisdictions. The Internal Revenue Service and other tax authorities routinely review the Company’s tax returns. These audits can involve complex issues which may require an extended period of time to resolve. In management’s opinion, adequate provision has been made for potential adjustments arising from these audits.

The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Condensed Consolidated Statements of Operations. The reserve for uncertain tax positions is not expected to change significantly in the next twelve months.

The Tax Cuts and Jobs Act was signed into law on December 22nd, 2017 and makes numerous changes to the Internal Revenue Code. Among other changes, the Act reduces the US corporate income tax rate to 21% effective January 1, 2018. Because the Act became effective mid-way through the Company’s tax year, the Company will have a US statutory income tax rate of 27.7% for the fiscal 2018, and will have a 21% US statutory income tax rate for fiscal years thereafter. During the quarter ended December 31, 2017, the Company re-valued the deferred tax balances because of the change in US tax rate resulting in a one-time deferred tax expense of $4,676,578.

Asset Impairment

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with the accounting ~~standard~~guidance on goodwill and intangible assets. The Company may first assess ~~qualitative~~qualitative factors in order to determine if goodwill is impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill is not impaired, no further testing is required. If it is determined that it is more likely than not that goodwill is impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues at the reporting unit level with the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) ~~approach, at the reporting unit level.~~approach. The estimation of the fair value of goodwill and indefinite-lived intangible assets 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 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, a sustained drop in the Company’s stock price, economic factors and technological change or competitive activities may signal that an asset has become impaired.

Page 33

Carrying values for long-lived tangible assets and definite-lived intangible assets, excluding goodwill and indefinite-lived intangible assets, are reviewed for possible impairment as circumstances warrant. Impairment reviews are conducted at the judgment of Company management when it believes that a change in circumstances in the business or external factors warrants a review. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, a history of negative operating cash flow, or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review. The Company’s initial impairment review to determine if a potential impairment charge is required is based on an undiscounted cash flow analysis at the lowest level for which identifiable cash flows exist. The analysis requires judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates, and discount rates.

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, and historical trends. The amount ultimately not collected may differ from the reserve established, particularly in the case where percentages are applied against aging categories. In all cases, it is management’s goal to carry a reserve against the Company’s accounts receivable which is adequate based upon the information available at that time so that net accounts receivable is properly stated. The Company also establishes allowances, at the time revenue is recognized, for returns and allowances, discounts, pricing and other possible customer deductions. These allowances are based upon contractual terms and historical trends.

~~Page 40~~

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 10ten 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 amounts as necessary.

Inventory Reserves

The Company maintains an inventory reserve for probable obsolete and excess inventory. The Company first determines its obsolete inventory reserve by considering specific known obsolete items, and then by applying certain percentages to specific inventory categories based upon inventory turns. The Company uses various tools, in addition to inventory turns, to identify which inventory items have the potential to become obsolete. ~~Judgment is~~A combination of financial modeling and qualitative input factors are used to establish excess and obsolete inventory reserves and management adjusts these reserves as more information becomes available about the ultimate disposition of the inventory item. Management values inventory at lower of cost or market.

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New Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued ASU 2014-09, “Revenue from Contracts with Customers.” This amended guidance supersedes and replaces all existing U.S. GAAP revenue recognition guidance. The guidance established a new revenue recognition model, changes the basis for deciding when revenue is recognized, provides new and more detailed guidance on specific revenue topics, and expands and improves disclosures about revenue. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing.” In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers: Narrow Scope Improvements and Practical Expedients.” In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” These three standards clarify or improve guidance from ASU 2014-09 and are effective for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal ~~year~~ 2019. The Company will adopt these standards no later than July 1, ~~2018.~~2018, using the modified retrospective transition method. The Company is reviewing accounting policies and evaluating disclosures in the financial statements related to the new standard. The Company is also assessing potential changes to the business processes, internal controls, and information systems related to the adoption of the new standard. While the Company is currently assessing the impact of the new standard, the Company’s revenue is primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risks, and rewards transfer. The recognition of revenue from most product sales is largely unaffected by the new standard. However, with respect to certain product sales requiring installation, revenue is currently not recognized until the installation is complete. While the Company does not expect this new guidance to have a material impact on the amount of overall sales recognized, the timing of recognition of revenues from sales on certain projects may be affected. ~~The Company has not yet quantified this potential impact.~~Our initial conclusions may change as we finalize our assessment and select a transition method during the next six months.

In July 2015, the Financial Accounting Standards Board issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amended guidance requires an entity to measure in scope inventory at lower of cost and net realizable value. The amended guidance is effective for fiscal years beginning after December 15, 2016, or the Company’s fiscal ~~year 2018, with early adoption permitted. The Company is evaluating~~2018. We adopted the ~~impact the amended guidance will have on its financial statements.~~

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” which eliminates the current requirement to separate deferred income tax liabilities and assets into current and noncurrent amountsnew accounting standard in the ~~statement~~first quarter of fiscal 2018 and there was no material impact on the Company’s consolidated financial position. This update requires that deferred tax liabilities and assets be classified as noncurrent. This update is effective for financial statements issued for fiscal years beginning April 1, 2017. This update may be applied either prospectively or retrospectively. However, early adoption is permitted and the Company has chosen to adopt the standard retrospectively as of June 30, 2016. As a result, prior periods have been adjusted to reflect this change. This update affected the presentation, but not the measurement of deferred tax liabilities and assets.statements.

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, ~~“Leases.~~“Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2018, or the Company’s fiscal ~~year~~ 2020, with early adoption permitted. The Company has not yet determined the impact the amended guidance will have on its financial statements.

~~Page 41~~

In March 2016, the Financial Accounting Standards Board issued ASU 2016-08, “Principal versus Agent Considerations.” The amendment is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The amended guidance is effective for financial statements issued for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal ~~year~~ 2019, with early adoption permitted in fiscal years beginning after December 15, 2016. The Company has ~~not yet~~ determined ~~the impact~~ the amended guidance will have an immaterial impact on its financial statements.

In March 2016, the Financial Accounting Standards Board issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This amended guidance simplifies several aspects of the accounting for share-based payment award transactions. The amended guidance is effective for financial statements issued for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2016, or the Company’s fiscal ~~year 2018, with early adoption permitted.~~2018. We adopted this standard on July 1, 2017 and recognized excess tax benefits of $81,010 in income tax expense during the three months ended September 30, 2017. The amount may not necessarily be indicative of future amounts that may be recognized as any excess tax benefits recognized would be dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to July 1, 2017, excess tax benefits were recognized in additional paid-in capital. Additionally, excess tax benefits are now included in net cash flows provided by operating activities rather than net cash flows provided by financing activities in the Company’s Consolidated Statement of Cash Flows. The treatment of forfeitures has not changed, as the Company is electing to continue the current process of estimating forfeiture at the time of grant. The Company ~~has not yet determined~~had no unrecognized excess tax benefits from prior periods to record upon the ~~impact the amended guidance will have on its financial statements.~~adoption of this ASU.

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In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, ~~“Measurement~~“Measurement of Credit Losses on Financial Instruments.” This amendment provides additional guidance on the measurement of expected credit losses for financial assets based on historical experience, current conditions, and supportable forecasts. The amended guidance is effective for financial statements issued for fiscal ~~years~~ and interim periods within those years, beginning after December 15, 2019, or the Company’s fiscal ~~year~~ 2021. The Company is evaluating the impact of the amended guidance and the anticipated impact to the financial statements is not material.

In August 2016, the Financial Accounting Standards Board issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments,” which provides cash flow classification guidance for certain cash receipts and cash payments. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, or the ~~Company’s~~Company’s fiscal ~~year~~ 2019. The Company is evaluating the impact the amended guidance will have on its financial statements.

In January 2017, the Financial Accounting Standards Board issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment, which simplifies the testing for goodwill impairment by eliminating a previously required step. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2019, or the Company’s fiscal year 2021. The Company is evaluating the impact the amended guidance will have on its financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk since June 30, ~~2016.~~2017. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 13 of the Annual Report on Form 10-K for the fiscal year ended June 30, ~~2016.~~2017.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~March~~December 31, 2017, our disclosure controls and procedures were effective.Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.

~~Page 42~~

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that control objectives are met. Because of inherent limitations in all control systems, noThe Company acquired Atlas Lighting Products, Inc. (“Atlas”) on February 21, 2017. Management excluded Atlas from its evaluation of controls can provide assurance that all control issues and instances of fraud, if any, within a company will be detected. Additionally, controls can be circumvented by individuals, by collusion of two or more people, or by management override. Over time, controls can become inadequate because of changes in conditions or the degree of compliance may deteriorate. Further, the design of any system of controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Becauseeffectiveness of the ~~inherent limitations in any cost-effective~~internal control ~~system, misstatements due to errors or fraud may occur~~over financial reporting as of December 31, 2017. Atlas represented 31% of the Company’s total consolidated assets as of December 31, 2017, and ~~not be detected.~~14% of the Company’s total consolidated sales for the fiscal year ended December 31, 2017.

Changes in Internal Control

There have been no changes in the ~~Company’s~~Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended ~~March~~December 31, 2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial ~~reporting, except as otherwise described in this Item 4.~~

~~PART II. OTHER INFORMATION~~reporting.

PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c)

The Company does not purchase into treasury its own common shares for general purposes. However, the Company does purchase its own common shares, through a Rabbi Trust, in connection with investments of employee/participants of the LSI Industries Inc. Non-Qualified Deferred Compensation Plan. Purchases of Company common shares for this Plan in the second quarter of fiscal ~~2017~~2018 were as follows:

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ISSUER PURCHASES OF EQUITY SECURITIES

Period

(a) Total
Number of
Shares
Purchased

(b) Average
Price Paid
per Share

(c) Total Number of
Shares Purchased as Part of
Publicly Announced Plans
or Programs

(d) Maximum Number (or
Approximate Dollar Value) of
Shares that May Yet Be
Purchased Under the Plans or
Programs

1/1/17 to 1/31/17
1,835 $8.69 1,835 (1)
2/1/17 to 2/28/17
1,627 $9.85 1,627 (1)
3/1/17 to 3/31/17
2,386 $10.05 2,386 (1)
Total
5,848 $9.57 5,848 (1)

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
10/1/17 to 10/31/17	--	--	--	(1)
11/1/17 to 11/30/17	--	--	--	(1)
12/1/17 to 12/31/17	--	--	--	(1)
Total	--	--	--	(1)

(1)

~~All acquisitions~~In the first half of fiscal 2018, all 575,000 shares ~~reflected above have been made in connection with~~authorized for the ~~Company's~~Company’s Non-Qualified Deferred Compensation Plan ~~which~~have been extinguished by purchase in the open market. Newly issued shares from the Company’s 2012 Stock Incentive Plan will replace shares purchased in the open market to fulfill the obligation the plan has ~~been authorized for 575,000 shares of the Company~~ to ~~be held in and distributed by the Plan. At March 31, 2017, the Plan held 255,119 common shares of the Company and had distributed 299,474 common shares.~~its participants.

ITEM 6. EXHIBITS

Exhibits:

31.1	Certification of Principal Executive Officer required by Rule 13a-14(a)

31.2
~~31.2~~	Certification of Principal Financial Officer required by Rule 13a-14(a)

32.1
~~32.1~~	Section 1350 Certification of Principal Executive Officer

32.2
~~32.2~~	Section 1350 Certification of Principal Financial Officer

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

Page 4337

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LSI Industries Inc.


	By:	/s/ Dennis W. Wells
		Dennis W. Wells
		Chief Executive Officer and President
		(Principal Executive Officer)


	By:	/s/ ~~Ronald S. Stowell~~James E. Galeese
		~~Ronald S. Stowell~~James E. Galeese
		~~Vice~~Executive President and Chief Financial Officer ~~and Treasurer~~
		(~~Principal~~Principal Financial ~~and Accounting~~ Officer)
~~May 8, 2017~~February 7, 2018

Page 4438

	June 30, 2016
Other Intangible Assets	Gross
	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	9,316	$	7,581	$	1,735
Patents		338		154		184
LED technologyfirmware, software		11,228		10,989		239
Trade name		460		460		--
Non-compete agreements		710		704		6
Total Amortized Intangible Assets		22,052		19,888		2,164

Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422

Total Other Intangible Assets	$	25,474	$	19,888	$	5,586

	Nine Months Ended March 31, 2016
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value

Outstanding at 6/30/15		2,677,436		$	8.85		6.1	$	4,914,601

Granted		1,026,800		$	9.39
Forfeitures		(150,800	)	$	15.73
Exercised		(509,871	)	$	7.33

Outstanding at 3/31/16		3,043,565		$	8.95		6.8	$	10,448,456

Exercisable at 3/31/16		1,362,810		$	9.67		4.3	$	4,741,694

(amounts in thousands)
Cash and Cash Equivalents	$	1,815
Accounts Receivable		7,202
Inventories		8,490
Property, Plant, and Equipment		3,631
Other Assets		248
Intangible Assets		34,319
Liabilities Assumed		(6,106	)
Identifiable net assets acquired		49,599
Goodwill		47,868
Net Purchase Consideration	$	97,467

	Estimated		Estimate Useful
	Fair Value		Life (Years)
Tradename	$	2,198		20
Technology asset		4,838		10
Customer relationship		27,283		15
Total	$	34,319

(In thousands, unaudited)	Nine Months Ended March 31
	2017		2016
Net Sales	$	283,122	$	287,176

Gross Profit	$	73,802	$	81,067

Operating Income	$	6,230	$	14,694