Stock-based Compensation and Equity Grants

3 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-based Compensation and Equity Grants

Stock-based Compensation and Equity Grants

Stock-based compensation expense

Options issued under equity incentive plans were designated as either an incentive stock or a non-statutory stock option. No option is granted with a term of more than 10 years from the date of grant. Exercisability of option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued shares. As of December 31, 2020, there were 0.5 million shares available for grant.

Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our Consolidated Statements of Operations:

		(in thousands)
		Three Months Ended
	Ref	December 31,
		2020		2019
DLH employees	(a)	$	342	$	116
Non-employee directors	(b)	116		87
Total stock option expense		$	458	$	203

Ref (a): Equity grants of restricted stock units were made in accordance with the DLH long-term incentive compensation policy for Named Executive Officers ("NEO") and totaled 147,431 restricted stock units issued and outstanding at December 31, 2020.

Ref (b): Equity grants of restricted stock units were made in accordance with DLH compensation policy for non-employee directors and totaled 63,177 restricted stock units issued and outstanding at December 31, 2020.

Unrecognized stock-based compensation expense

		(in thousands)
		December 31,
	Ref	2020
Unrecognized expense for DLH employees	(a)	$	3,445
Unrecognized expense for non-employee directors		351
Total unrecognized expense		$	3,796

Ref (a): Compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For options that vest based on the Company's common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo binomial model that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the derived service period determined in the valuation. On a weighted average basis, this expense is expected to be recognized within the next 4.51 years.

Stock option activity for the three months ended December 31, 2020

The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock.

					(in years)
					Weighted
			Weighted		Average	(in thousands)
		(in thousands)	Average		Remaining	Aggregate
		Number of	Exercise		Contractual	Intrinsic
	Ref	Shares	Price		Term	Value
Options outstanding, September 30, 2020		2,129	$	6.14	7.4	$	6,593
Exercised		(62)	$	3.62	—	—
Granted	(a)	220	$	10.05	—	—
Options outstanding, December 31, 2020		2,287	$	6.95	7.7	$	10,261

Ref (a): The options granted in the first quarter of fiscal 2021 occurred at the end of the period and an amount of less than $0.1 million was accrued as stock compensation expense.

Stock options shares outstanding, vested, and unvested for the periods ended

		(in thousands)
		December 31,	September 30,
	Ref	2020	2020
Vested and exercisable	(a)	1,151	1,213
Unvested	(b)	1,136	916
Options outstanding		2,287	2,129

Ref (a): Weighted average exercise price of vested and exercisable shares was $2.18 and $2.25 at December 31, 2020 and September 30, 2020, respectively. Aggregate intrinsic value was approximately $8.2 million and $6.1 million at December 31, 2020 and September 30, 2020, respectively. Weighted average contractual term remaining was 3.8 and 4.6 years at December 31, 2020 and September 30, 2020, respectively.

Ref (b): Certain awards vest upon satisfaction of certain performance criteria.