Stock-based Compensation

12 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Plan Information

The 2015 Incentive Stock Plan (the “Plan”) provides for awards of stock options and restricted stock to officers, directors, key employees and consultants. Under the Plan, option prices will be set by the Compensation Committee and may not be less than the fair market value of the stock on the grant date.

At September 30, 2020, 2,100,415 shares of common stock were reserved for stock award grants under the Plan. Of these reserved shares, 789,630 shares were available for future grants.

Stock Options

All share-based payments to employees, including grants of employee stock options, are recognized in the consolidated financial statements based on their grant date fair value over the requisite service period.

Compensation expense for stock-based awards is included in the operating, selling, general and administrative expense section of the consolidated statements of operations.

Stock options are valued at the date of the award, which does not precede the approval date, and compensation cost is recognized on a straight-line basis over the vesting period. Stock options granted to employees generally become exercisable three, four or five years from the date of grant and generally expire ten years after the date of grant. Stock options granted to the Board of Directors generally become exercisable on the date of grant and generally expire ten years after the date of grant.

A summary of the status of the Company's stock options at September 30, 2020 and changes during the year then ended is presented below in thousands, except share and per share amounts:


	Options (Shares)	Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at September 30, 2019	770,000	$	1.73	$	353
Granted	—	—		—
Exercised	(123,334)	1.67		304
Expired	—	—		—
Forfeited	(546,666)	—		606
Outstanding at September 30, 2020	100,000	$	1.55	$	38
Exercisable at September 30, 2020	66,667	$	1.68	$	16

The intrinsic value of exercised options for the years ended September 30, 2020 and 2019, in thousands:



	2020		2019

Value at exercise date	$	510	$	—
Exercise price	206		—
Intrinsic value	$	304	$	—

Information about the Company’s outstanding and exercisable stock options at September 30, 2020 is as follows, in thousands except share and per share amounts:


Exercise Price		Stock Options Outstanding	Exercisable Stock Options Outstanding	Remaining Contractual Life	Aggregate Intrinsic Value
$	1.28	50,000	16,667	8.25	$	32
$	1.81	50,000	50,000	6.42	6
		100,000	66,667		$	38

The Company granted nonqualified stock options of zero and 480,000 options for the years ended September 30, 2020 and 2019, respectively. The Company estimated the fair value of the options granted using the Black-Scholes option valuation model and the assumptions shown in the table below. The Company estimated the expected term of options granted based on the historical grants and exercises of the Company's options. The Company estimated the volatility of its common stock at the date of the grant based on both the historical volatility as well as the implied volatility on its common stock. The Company based the risk-free rate that was used in the Black-Scholes option valuation model on the implied yield in effect at the time of the option grant on U.S. Treasury zero-coupon issues with equivalent expected terms. The Company has never paid cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero in the Black-Scholes option valuation model. The Company amortizes the resulting fair value of the options ratably over the vesting period of the awards. The Company used historical data to estimate the pre-vesting options forfeitures and records share-based expense only for those awards that are expected to vest.

The estimated fair value at date of grant for stock options utilizing the Black-Scholes option valuation model and the assumptions that were used in the Black-Scholes option valuation model for the fiscal year 2019 stock option grants are as follows:



Estimated fair value of options at grant date						$196,970
Black-Scholes model assumptions:
Average expected life (years)						6
Average expected volatile factor						29%
Average risk-free interest rate						2.8%
Average expected dividend yield						—

The Company realized a net benefit related to the recognition of forfeitures of stock options during the year ended September 30, 2020. Compensation expense related to stock options recorded for the years ended September 30, 2020 and 2019 is as follows:


	2020		2019
Fiscal year 2017 grant	$	(6)	$	18

Fiscal year 2019 grant	—		128


Total compensation expense	$	(6)	$	146

At September 30, 2020, compensation costs related to these unvested stock options not yet recognized in the statements of operations was $2,945 which will be fully amortized by 2022.

Restricted stock awards

In fiscal year 2019, the Company granted restricted share awards to its Chairman of the Board of Directors totaling 55,147 shares, which were valued at market value on the date of grant. The shares will vest 20% per year with the first installment vesting on the first anniversary of the grant date. The fair value of the shares upon issuance totaled $0.1 million.

In fiscal year 2020, the Company granted a total of 298,974 shares to its board members, which were valued at market value on the date of grant. The shares ranged in vesting periods from immediate to three years. The fair value of the shares upon issuance totaled $0.6 million.

In fiscal year 2020, the Company granted a total of 220,937 shares to certain members of management, which were valued at market value on the date of grant. The shares ranged in vesting periods from immediate to three years. The fair value of the shares upon issuance totaled $0.6 million.

A summary of the Company's non-vested restricted share awards (RSA) at September 30, 2020 and changes during the year ended September 30, 2020 is presented in the following table:


	Shares	Fair Value
Non-vested at September 30, 2019	44,118	$	60
Granted	764,184	1,569
Vested	(333,278)	(571)
Forfeited	—	—
Non-vested at September 30, 2020	475,024	$	1,058

In addition, certain outstanding stock options held by two members of management and one director were converted to stock grants based on a fair value calculation of the outstanding stock options. As a result, the options outstanding, which totaled 330,000 options, were forfeited and 244,273 shares of common stock were granted based on the fair value calculation of $0.6 million. Since this was considered a modification of a stock award, the Company recognized the difference between the stock grant fair value and the immediate fair value of the stock option award, before modification which totaled $0.2 million.

Compensation expense related to restricted stock recorded for the years ended September 30, 2020 and 2019 is as follows, in thousands:


	2020		2019
Fiscal year 2019 grant	15		38
Fiscal year 2020 grant	565		15

Total compensation expense	$	580	$	53

Valuation of time vesting restricted stock awards for all periods presented is equal to the quoted market price for the shares on the date of the grant. The Company amortizes the fair value of the restricted share awards, graded, over the vesting period of the awards.