Note 9 - Stock Based Compensation

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 exercise and employee termination 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 zero 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 of options to purchase shares in Xcede’s common stock to officers, directors, employees and consultants. The options granted generally vest over a three 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 June 30, 2019, DBM owned approximately 63% of Xcede’s outstanding Common Stock and Preferred Stock. No significant change in the Company’s position with respect to the ownership of Xcede’s stock occurred during the three months ended June 30, 2019.

Stock compensation expense for the three and nine months ended June 30, 2019 and 2018 is as follows:


	Three Months Ended		Three Months Ended
	June 30, 2019		June 30, 2018
Stock Grants	$	73,000	$	78,000
Restricted Stock Grants		6,000		14,000
Option Grants		—		—
Employee Stock Purchase Plan		1,000		1,000
Subsidiary Option Grants		10,000		27,000
Total	$	90,000	$	120,000


	Nine Months Ended		Nine Months Ended
	June 30, 2019		June 30, 2018
Stock Grants	$	215,000	$	209,000
Restricted Stock Grants		29,000		40,000
Option Grants		—		17,000
Employee Stock Purchase Plan		3,000		2,000
Subsidiary Option Grants		32,000		83,000
Total	$	279,000	$	351,000

At June 30, 2019, there was approximately $32,000 in unrecognized stock compensation cost for Dynasil, which is expected to be recognized over a weighted average period of approximately thirteen months.

Restricted Stock Grants

A summary of restricted stock activity for the nine months ended June 30, 2019 is presented below:


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

Granted	—		—
Vested	(35,000)		1.68
Cancelled	—		—
Nonvested and expected to vest at June 30, 2019	25,000	$	1.50

Stock Option Grants

During the nine months ended June 30, 2019, no Dynasil stock options were granted. A summary of stock option activity for the nine months ended June 30, 2019 is presented below:


				Weighted Average
		Weighted Average		Remain
	Options	Exercise Price per		Contractual Term
	Outstanding	Share		(in Years)
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 June 30, 2019	95,602	$	1.80	0.59
Outstanding and exercisable at June 30, 2019	95,602	$	1.80	0.59

Subsidiary Stock Option Grants

During the nine months ended June 30, 2019, no Xcede stock options were granted. A summary of Xcede stock option activity for the nine months ended June 30, 2019 is presented below:


				Weighted Average
		Weighted Average		Remain
	Options	Exercise Price per		Contractual Term
	Outstanding	Share		(in Years)
Balance at September 30, 2018	1,300,956	$	1.00	7.10
Outstanding and exercisable at September 30, 2018	1,229,685		1.00	7.11
Granted	—		—
Exercised	—		—
Cancelled	—		—
Balance at June 30, 2019	1,300,956		1.00	6.35
Outstanding and exercisable at June 30, 2019	1,283,768	$	1.00	6.35

At June 30, 2019, the Company’s Xcede joint venture had approximately $10,000 of unrecognized stock compensation expense associated with stock options expected to be recognized over a period of three months.