Stock-based Compensatin, Equity Grants, and Warrants

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation, Equity Grants, and Warrants

Stock-based Compensation, Equity Grants, and Warrants

Stock-based compensation expense

All grants of equity represented in these financial statements through the period ended March 31, 2016, were made under the 2006 Long Term Incentive Plan. The 2006 plan expired on February 25, 2016, upon shareholders' approval of the 2016 Omnibus Equity Incentive Plan (collectively, the "Plans"). As of March 31, 2017, there were 0.5 million shares available for grant.

Options issued under the Plans were designated as either an incentive stock or a non-statutory stock option. No option was 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.

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

		(in thousands)				(in thousands)
		Three Months Ended				Six Months Ended
	Ref	March 31,				March 31,
		2017		2016		2017		2016
DLH employees		$	56	$	6	$	63	$	14
Non-employee directors	(a)	8		4		486		328
Total stock option expense		$	64	$	10	$	549	$	342

Ref (a): Equity grants of restricted stock, in accordance with DLH compensation policy for non-employee directors. The shares granted in the first quarters of fiscal years 2016 and 2015 vested immediately, and stock expense of approximately $456 thousand and $304 thousand, respectively were recognized accordingly.

Unrecognized stock-based compensation expense

		(in thousands)
		Six Months Ended
		March 31,
	Ref	2017		2016
Unrecognized expense for DLH employees	(a)	$	404	$	30
Unrecognized expense for non-employee directors	(b)	8		71
Total unrecognized expense		$	412	$	101

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.

Ref (b): Unrecognized stock expense related to prior years equity grants of restricted stock to non-employee directors, based on performance criteria, in accordance with DLH compensation policy for non-employee directors. The shares will vest and expense will be recorded upon future satisfaction of specified performance.

Stock option activity for the six months endedMarch 31, 2017

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, 2016		2,226		$1.43	5.8	$	7,581
Canceled		—
Granted	(a)	400		$5.94
Exercised		(10	)	$3.00
Options outstanding, March 31, 2017		2,616		$3.48	6.6	$	9,121

Ref (a): Options granted to DLH employees were valued using a Black Scholes calculation, under the following criteria:

•average yield rate of 2.46% was used

•contractual lives and expected lives were 10 years for all grants

•probability of exercise was based on reaching the market price

•monthly price volatility factor of 12% was used

•no dividend yield was contemplated

The resulting fair values ranged from $0.93 to $1.47, depending on the market measure of the stock price

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

		Number of Shares
		(in thousands)
		March 31,	September 30,
	Ref	2017	2016
Vested and exercisable		1,949	1,909
Unvested	(a)	667	317
Options outstanding		2,616	2,226

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