9. SHARE-BASED COMPENSATION

12 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

NOTE 9         SHARE-BASED COMPENSATION

2011 Long Term Incentive Plan

In March 2011, shareholders of the Company approved the 2011 Long Term Incentive Plan (the "2011 Plan"), which originally authorized 850,000 shares of common stock for grants of various types of equity awards to officers, directors, employees, consultants, and independent contractors. On February 13, 2018, the shareholders of the Company approved an amendment to the 2011 Plan to increase the aggregate number of shares of the Company's common stock authorized for issuance under the 2011 Plan by 1,000,000 shares of common stock, from 850,000 shares of common stock to 1,850,000 shares of common stock. Forfeited awards are eligible for re-grant under the 2011 Plan. The exercise prices of stock options granted may not be less than the fair market value of the common stock as quoted at the close on the Nasdaq Stock Market on the grant date. The Compensation Committee administers the 2011 Plan. Options generally expire five to ten years after the date of grant. The total shares of common stock available for grants of equity awards under the 2011 Plan was 291,000 as of September 30, 2020.

2007 Equity Incentive Plan

The 2007 Equity Incentive Plan (the "2007 Plan"), which was approved by shareholders of the Company in May 2007, and, as amended in February 2010, expired in accordance with its terms in May 2017. However, there remain 2,500 shares associated with unexercised options as of September 30, 2020. The exercise price of stock options granted may not be less than the fair market value of the common stock as quoted at the close on the Nasdaq Stock Market on the grant date. There are no unvested restricted stock awards related to the 2007 Plan. The Compensation Committee administers the 2007 Plan. Options generally expire ten years after the date of grant.

Stock Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions in the following table. The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the simplified method to develop an estimate of the expected term of “plain vanilla” option grants. The expected volatility used is based on the historical price of the Company’s stock over the most recent period commensurate with the expected term of the award. The risk-free interest rate used is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The Company historically has not paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted. The estimated annual forfeiture rate is based on management’s expectations and will reduce expense ratably over the vesting period. The forfeiture rate will be adjusted periodically based on the extent to which actual option forfeitures differ, or are expected to differ, from the previous estimate, when it is material.

In applying the Black-Scholes option pricing model to options granted, the Company used the following assumptions:

	Fiscal 2020	Fiscal 2019
Expected term (years)	2.5-3.0	2.50-2.75
Expected volatility	65%-79%	82%
Risk free interest rate	0.15%-1.39%	2.53%
Expected dividends	0%	0%
Estimated annual forfeiture rate	0%-10%	0%

In Fiscal 2020, the Company made the following option grants:

· Options to non-employee directors to purchase an aggregate of 248,019 shares of its common stock at an exercise price of $1.13 per share. The options were granted in February 2020, vest one year from the date of grant, expire five years from the date of grant and had an aggregate grant date fair value of $145,000, which is being recognized ratably over the vesting period.

· Options to its Chief Executive Officer to purchase 180,395 shares of its common stock at an exercise price of $1.40 per share. These options were granted in September 2020, vested immediately, expire five years from the date of grant and had an aggregate grant date fair value of $100,000, which was fully recognized on the date of grant.

· Options to an employee to purchase 27,329 shares of its common stock at an exercise price of $1.42 per share. These options were granted in August 2020, vest ratably over two years, expire five years from the date of grant and had an aggregate grant date fair value of $20,000, which is being recognized ratably over the vesting period.

In Fiscal 2019, the Company made the following option grants:

· Options to non-employee directors to purchase an aggregate of 150,021 shares of its common stock at an exercise price of $1.54 per share. The options were granted in February 2019, vested one year from the grant date, expire five years from the date of grant and had an aggregate grant date fair value of $120,000, which is being amortized ratably over the vesting period.

· Options to non-employee directors to purchase an aggregate of 140,460 shares of common stock at an exercise price of $1.54 per share. The options were granted in February 2019, vested immediately, expire five years from the date of grant and had an aggregate grant date fair value of $108,000, which was fully recognized on the date of grant.

The options granted during Fiscal 2020 and Fiscal 2019 had a weighted average grant date value of $0.58 and $0.78 per share, respectively. The Company recognized compensation expense for stock option awards of $245,000 and $212,000 during Fiscal 2020 and Fiscal 2019, respectively, in its consolidated statements of operations.

During Fiscal 2020, the Company issued 50,000 shares of its common stock pursuant to the exercise of stock options at an exercise price of $0.64 per share for aggregate cash proceeds of $32,000. The intrinsic value of the options exercised was $33,000. No options were exercised in Fiscal 2019.

At September 30, 2020, there was $75,000 of unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of 0.6 years.

The following table summarizes stock option activity during Fiscal 2020:

				Weighted		Weighted
				Average		Average		Aggregate
	Number of			Exercise		Remaining		Intrinsic
	Options			Price		Life (Yrs.)		Value
Outstanding, September 30, 2019		813,000		$	1.69
Granted		456,000		$	1.25
Exercised		(50,000	)	$	0.64
Forfeited		(16,000	)	$	2.97
Expired		(65,000	)	$	2.64
Outstanding, September 30, 2020		1,138,000		$	1.49		3.7	$	73,000
Exercisable, September 30, 2020		844,000		$	1.61		3.5	$	8,600

Options outstanding at September 30, 2020 and September 30, 2019 have an exercise price between $0.64 and $3.73 per share.  

Restricted Stock Awards

The Company recognized compensation expense of $0 and $3,000 during Fiscal 2020 and Fiscal 2019, respectively, for restricted stock awards in its consolidated statements of operations. At September 30, 2020, there was no unrecognized compensation expense related to nonvested restricted stock awards.