Note 10 – Stockholders’ Equity

Stock Based Compensation

The Company adopted Stock Incentive Plans in 1996, 1999 and 2010 (the “Plans”) which provide for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares of the Company’s common stock. The Plans also allow eligible persons to be issued shares of the Company’s common stock either through the purchase of such shares or as a bonus for services rendered to the Company. Shares are generally issued at the fair market value on the date of issuance. The maximum number of shares of common stock which may be issued under the 2010 Stock Incentive Plan is 6,000,000, of which 2,962,827 and 3,166,698 shares of common stock are available for future purchases under the plan, at September 30, 2019 and 2018, respectively. Options are generally exercisable at the fair market value or higher on the date of grant over a three to five year period currently expiring through 2020.

The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model. The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The expected term of options granted represents the period of time that the options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant. The dividend yield is expected to be 0.0% because historically the Company has not paid dividends on common stock.

The Company’s Xcede joint venture adopted an Equity Incentive Plan in 2013 which provides for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares in Xcede’s common stock. The options granted generally vest over a 3 year period. The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model using assumptions generally consistent with those used for Company stock options. Because Xcede is not publicly traded, the expected volatility is estimated with reference to the average historical volatility of a group of publicly traded companies that are believed to have similar characteristics to Xcede. As of September 30, 2019, 1,699,044 options remained in this plan.

Stock compensation expense is recorded in general and administrative expenses and is presented below for the years ended September 30, 2019 and 2018:


	2019		2018
Stock Grants	$	282,000	$	287,000
Restricted Stock Grants		34,000		55,000
Option Grants		—		17,000
Employee Stock Purchase Plan		3,000		3,000
Subsidiary Option Grants		43,000		95,000
Total	$	362,000	$	457,000

At September 30, 2019 there was approximately $18,000 in unrecognized stock compensation cost for Dynasil which is expected to be recognized over a period of fifteen months. At September 30, 2019, the Company’s Xcede joint venture had no unrecognized stock compensation.

Restricted Stock Grants

A summary of restricted stock activity for the years ended September 30, 2019 and 2018 is presented below:


Restricted Stock Activity for the Year ended		Weighted-Average
September 30, 2019	Shares	Grant-Date Fair Value
Nonvested at September 30, 2018	60,000	$	1.61

Granted	—
Vested	(35,000)	$	1.68
Cancelled	(10,000)		1.70
Nonvested and expected to vest at September 30, 2019	15,000	$	1.37


Restricted Stock Activity for the Year ended		Weighted-Average
September 30, 2018	Shares	Grant-Date Fair Value
Nonvested at September 30, 2017	70,000	$	1.73

Granted	20,000	$	1.37
Vested	(30,000)	$	1.73
Cancelled	—		—
Nonvested and expected to vest at September 30, 2018	60,000	$	1.61

Stock Option Grants

A summary of stock option activity for the years ended September 30, 2019 and 2018 is presented below:


				Weighted Average
			Weighted Average	Remaining
	Options		Exercise Price per	Contractual Term
	Outstanding		Share	(in Years)
Balance at September 30, 2017	196,769	$	1.98	1.64
Outstanding and exercisable at September 30, 2017	196,769	$	1.98	1.64
Granted	—		—
Exercised	—		—
Cancelled	(36,232)		1.82
Balance at September 30, 2018	160,537	$	2.01	0.93
Outstanding and exercisable at September 30, 2018	160,537	$	2.01	0.93
Granted	—		—
Exercised	—		—
Cancelled	(64,935)		2.33
Balance at September 30, 2019	95,602	$	1.80	0.34
Outstanding and exercisable at September 30, 2019	95,602	$	1.80	0.34

During the years ended September 30, 2019 and 2018, no stock options were granted or exercised.

Subsidiary Stock Option Grants

A summary of Xcede stock option activity for the years ended September 30, 2019 and 2018 is presented below:


			Weighted Average
		Weighted Average	Remaining
	Options	Exercise Price per	Contractual Term
	Outstanding	Share ($)	(in Years)
Balance,expected to vest,at September 30, 2017	1,375,956	1.00	8.70
Outstanding and exercisable at September 30, 2017	923,617	1.00	8.30
Granted	—	—
Exercised	—	—
Cancelled	(75,000)	1.00
Balance,expected to vest,at September 30, 2018	1,300,956	1.00	7.31
Outstanding and exercisable at September 30, 2018	1,229,685	1.00	7.11
Granted	—	—
Exercised	—	—
Cancelled	—	—
Balance,expected to vest,at September 30, 2019	1,300,956	1.00	6.10
Outstanding and exercisable at September 30, 2019	1,300,956	1.00	6.10

Employee Stock Purchase Plan

On December 13, 2018, the Company adopted a Second Amended and Restated Employee Stock Purchase Plan (the “ESPP”). The existing plan was amended to extend the termination date to September 30, 2030. The ESPP permits substantially all employees to purchase up to $20,000 of common stock per calendar year at a purchase price of 85% of the fair market value of the shares. Under the ESPP, a total of 450,000 shares have been reserved for issuance of which 368,204 and 350,751 shares have been issued as of September 30, 2019 and 2018, respectively.

During the years ended September 30, 2019 and 2018, 17,453 shares and 15,896 shares of common stock were issued under the ESPP for aggregate purchase prices of $14,338 and $17,480, respectively. On May 1, 2019, the Board of Directors voted to suspend the ESPP following the purchases made under the ESPP on June 29, 2019. The ESPP remained suspended as of September 30, 2019.

Reverse and Forward Stock Split Transaction

On August 7, 2019, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the holders of a majority of the Company’s issued and outstanding shares of common stock entitled to vote approved amendments to the Company’s certificate of incorporation, as amended (the “Certificate of Incorporation”), to effect a 1-for-8,000 reverse stock split of the Company’s common stock (the “Reverse Stock Split”), followed immediately by a 8,000-for-1 forward stock split of the Company’s common stock (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Transaction”).

Following the Special Meeting, the Company filed certificates of amendment to the Certificate of Incorporation with the State of Delaware to effect the Reverse Stock Split, followed immediately by the Forward Stock Split, both effective on August 7, 2019 at 5:01 and 5:02 p.m., respectively. As a result of the Transaction, each stockholder owning fewer than 8,000 shares of the Company’s common stock immediately prior to the effective time of the Reverse Stock Split became entitled to receive $1.15 per share, without interest, in cash for each share of the Company’s common stock held by such stockholder at the effective time of the Reverse Stock Split. As a result of the Transaction, based on information provided to the Company by its transfer agent, Continental Stock Transfer & Trust Company, and the Depository Trust Company (DTC), 2,825,268 pre-split shares of common stock were due to be exchanged for cash and returned to the Company’s Treasury Stock. The aggregate amount that was payable by the Company to the former holders of such shares was approximately $3,249,000.

Stockholders who owned 8,000 or more shares of the Company’s common stock immediately prior to the effective time of the Reverse Stock Split were not entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split that immediately followed the Reverse Stock Split reconverted whole shares and fractional share interests held by such stockholders back into the same number of shares of the Company’s common stock held by such stockholders immediately before the effective time of the Reverse Stock Split. As a result, the total number of shares of the Company’s common stock held by such stockholders did not change.

The Company gave notice to The Nasdaq Stock Market (“Nasdaq”) of its intent to voluntarily delist its common stock and to withdraw the registration of its common stock with the Securities and Exchange Commission (SEC). The Company filed a Form 25 Notification of Removal From Listing with the SEC on August 19, 2019. As a result, the Company shares are no longer listed on Nasdaq. The Company intends to file a Form 15 with the SEC on the date of the filing of this Form 10-K to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act.