Stock-based Compensation, Equity Grants, and Warrants

Stock-based compensation expense

Options issued under equity incentive plans are designated as either an incentive stock or a non-statutory stock option. 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 June 30, 2019, there were 1.5 million shares available for grant.

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				Nine Months Ended
	Ref	June 30,				June 30,
		2019		2018		2019		2018
DLH employees		$	67	$	68	$	196	$	199
Non-employee directors	(a)	132		173		395		970
Total stock option expense		$	199	$	241	$	591	$	1,169

Ref (a): Equity grants of restricted stock units, in accordance with DLH compensation policy for non-employee directors were made in the first quarter of fiscal 2019 and in total 90,000 restricted stock units were granted.

Unrecognized stock-based compensation expense



		(in thousands)
		June 30,
	Ref	2019
Unrecognized expense for DLH employees	(a)	$	699
Unrecognized expense for non-employee directors	(b)	132
Total unrecognized expense		$	831

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. For options that vest based on the Company’s common stock achieving and maintaining defined market prices, the Company values the awards with a 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.

Ref (b): Unrecognized stock expense related to current year's equity grants of restricted stock units to non-employee directors in accordance with DLH compensation policy for non-employee directors.

The remaining term for the weighted average expense of all stock-based compensation is 3.60 years.

Stock option activity for the nine months ended June 30, 2019

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, 2018	2,134		$	4.31	6.3	$	6,949
Granted	35		$	5.25	—	—
Exercised	(35	)	$	1.12	—	—
Options outstanding, June 30, 2019	2,134		$	4.36	6.0	$	5,755

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



		(in thousands)
		June 30,	September 30,
	Ref	2019	2018
Vested and exercisable	(a)	1,300	1,335
Unvested		834	799
Options outstanding		2,134	2,134

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