13. Stock Based Incentive Compensation

In 2015, the Company adopted the 2015 Stock Incentive Plan (the "2015 Plan") and authorized 300,000 shares of common stock to be reserved for issuance pursuant to the 2015 Plan. During 2019 an additional 300,000 shares of common stock were authorized to be reserved for issuance pursuant to the 2015 Plan. As of September 30, 2019, there were 320,715 shares available to be granted under the 2015 Plan. Under all of the stock incentive plans, both incentive stock options and non-qualified stock options may be granted to officers, key employees and other persons providing services to the Company. All of the Company’s stock incentive plans have a ten year life.

Awards issued under any of the stock option plans are not affected by termination of the plan. The Company issues stock options at their fair market value on the date of grant. Vesting of stock options granted pursuant to the Company’s stock incentive plans is determined by the Company’s compensation committee. Generally, options granted to employees vest over four years and expire ten years from the date of grant. Options granted to non-employee directors have historically included cliff vesting after six months from the date of grant and expire three years from the date of grant. In fiscal years 2016 through 2019, the Company granted certain officers including its Chief Executive Officer and non-employee directors, and key employees shares of nonvested common stock instead of stock options. The vesting periods for the officers’, the Chief Executive Officer’s and the non-employee directors’ nonvested stock awards are four years, three years and one year, respectively. The vesting period for the key employees’ awards is four years.

We measure and recognize compensation expense for all stock-based payment awards made to employees and directors including employee stock options and awards of nonvested stock based on estimated fair values, as described in Note 1. Stock-based compensation expense incurred and recognized for the years ended September 30, 2019 and 2018 related to stock options and nonvested stock granted to employees and non-employee directors under the Company’s stock incentive and employee stock purchase plans totaled approximately $792 thousand and $691 thousand, respectively. The classification of the cost of stock-based compensation, in the consolidated statements of operations, is consistent with the nature of the services being rendered in exchange for the share based payment.

The following table summarizes stock-based compensation expense in the Company’s consolidated statements of operations:


	Years Ended
	September 30,		September 30,
	2019		2018
	(Amounts in thousands)
Cost of sales	$	7	$	5
Engineering and development		49		32
Selling, general and administrative		736		654
Total	$	792	$	691

For the year ended September 30, 2019, the Company granted 33,000 nonvested shares to certain key employees, 55,000 nonvested shares to certain officers including 35,000 shares granted to the Chief Executive Officer, and 20,000 nonvested shares to its non-employee directors. For the year ended September 30, 2018, the Company granted 12,000 nonvested shares to certain key employees, 40,000 nonvested shares to certain officers including 30,000 to its Chief Executive Officer and 20,000 nonvested shares to its non-employee directors.

The Company measures the fair value of nonvested stock awards based upon the market price of its common stock as of the date of grant. The Company used the Black-Scholes option-pricing model to value stock options. The Black-Scholes model requires the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate and the weighted average expected life of the options, at the time of grant. The expected dividend yield is equal to the divided per share declared, divided by the closing share price on the date the options were granted. All equity compensation awards granted for the years ended September 30, 2019 and September 30, 2018 were nonvested stock awards.

As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, expense for grants beginning upon adoption on October 1, 2005 has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rates for the years ended September 30, 2019 and 2018 were based on actual forfeitures.

No cash was used to settle equity instruments granted under share-base payment arrangements in any of the years in the two-year period ended September 30, 2019.

The following tables provide summary data of stock option award activity:


				Weighted
		Weighted		Average	Aggregate
		average		Remaining	Intrinsic
	Number	exercise		Contractual	Value
	of Shares	price		Term	(in thousands)

Outstanding at September 30, 2017	9,376		4.49	—		—
Granted	—	$	—	—		—
Expired	(1,250)		6.82	—		—
Forfeited	—		—	—		—
Exercised	(4,626)		4.67	—		—
Outstanding at September 30, 2018	3,500	$	3.42	—		—
Granted	—		—	—		—
Expired	(500)	$	2.99	—		—
Forfeited	—		—	—		—
Exercised	(1,000)		2.99	—		—
Outstanding at September 30, 2019	2,000	$	3.75	.98 Years	$	19
Exercisable at September 30, 2019	2,000	$	3.75	.98 Years	$	19
Vested and expected to vest at September 30, 2019	2,000	$	3.75	.98 Years	$	19

There were no stock options granted in the years ended September 30, 2019 and 2018. The aggregate intrinsic value of stock options exercised during the years ended September 30, 2019 and 2018 was $8 thousand and $34 thousand, respectively.The following table provides summary data of nonvested stock award activity:


		Weighted		Weighted
		Average		Average	Aggregate
	Number of	grant date		Remaining	Intrinsic
	nonvested	Fair		Contractual	Value
	shares	Value		Term	(in thousands)

Nonvested shares outstanding at September 30, 2017	179,821	$	8.64	2.23 Years	$	1,987
Activity in 2018:
Granted	72,000	$	11.83	—		—
Vested	(80,969)	$	8.18	—		—
Forfeited	(16,500)	$	8.90	—		—
Nonvested shares outstanding at September 30, 2018	154,352	$	10.34	2.11 Years	$	2,025
Activity in 2019:
Granted	108,000	$	9.98	—		—
Vested	(68,867)	$	10.39	—		—
Forfeited	(2,750)	$	8.91	—		—
Nonvested shares outstanding at September 30, 2019	190,735	$	10.12	2.21 Years	$	2,560
Vested at September 30, 2019	400,700	$	7.17	0.20 Years	$	5,377
Vested and expected to vest at September 30, 2019	591,435	$	8.12	0.85 Years	$	7,937

As of September 30, 2019, there was $1.4 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements (including nonvested stock awards) granted under the Company’s stock incentive plans. This cost is expected to be expensed over a weighted average period of approximately 2.50 years. The total fair value of shares vested during the years ended September 30, 2019 and 2018 was $716 thousand and $662 thousand, respectively.