Stock-based Compensation and Equity Grants

6 Months Ended

Mar. 31, 2021

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 incentive stock or non-statutory stock options. 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 March 31, 2021, there were 2.0 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:

		Three Months Ended				Six Months Ended
	Ref	March 31,				March 31,
(Amounts in thousands)		2021		2020		2021		2020
DLH employees	(a)	$	270	$	95	$	612	$	211
Non-employee directors	(b)	116		87		232		173
Total stock option expense		$	386	$	182	$	844	$	384

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 March 31, 2021.

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 March 31, 2021.

Unrecognized stock-based compensation expense (in thousands)

		March 31,
	Ref	2021
Unrecognized expense for DLH employees	(a)	$	3,888
Unrecognized expense for non-employee directors		234
Total unrecognized expense		$	4,122

Ref (a): The remaining compensation expense 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 4.39 years.

Stock option activity for the six months ended March 31, 2021

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
	Shares	Price		Term	Value
Options outstanding, September 30, 2020	2,129	$	6.14	7.4	$	6,593
Exercised	(63)	$	3.62	—	—
Granted	245	$	10.04	—	—
Cancelled	(25)	$	6.28	—	—
Options outstanding, March 31, 2021	2,286	$	7.03	7.5	$	11,407

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

		(in thousands)
		March 31,	September 30,
	Ref	2021	2020
Vested and exercisable	(a)	1,362	1,213
Unvested	(b)	924	916
Options outstanding		2,286	2,129

Ref (a): Weighted average exercise price of vested and exercisable shares was $2.75 and $2.25 at March 31, 2021 and September 30, 2020, respectively. Aggregate intrinsic value was approximately $9.8 million and $6.1 million at March 31, 2021 and September 30, 2020, respectively. Weighted average contractual term remaining was 4.6 and 4.6 years at March 31, 2021 and September 30, 2020, respectively.

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