STOCK-BASED COMPENSATION

Stock-based awards were granted under the 2019 Omnibus Incentive Plan (the “2019 Plan”) beginning February 4, 2019 and, prior to that, were granted under the 2018 Omnibus Incentive Plan (the “2018 Plan”). Upon stockholder approval of the 2019 Plan, we ceased granting awards under any prior plan. Shares subject to awards under prior plans that are forfeited, canceled, returned to the Company for failure to satisfy vesting requirements, settled in cash or otherwise terminated without payment also will be available for grant under the 2019 Plan. The authority to grant options under the 2019 Plan and to set other terms and conditions rests with the Compensation Committee of the Board of Directors.

The 2019 Plan authorizes the issuance of up to 1,500,000 common shares in connection with awards of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based full value awards or other stock-based awards. Eligible participants include our employees, our affiliates, non-employee directors of our Company and any consultant or advisor who is a natural person and provides services to us or our affiliates. Options that have been granted under the 2019 Plan typically vest over a four-year period and will expire if unexercised after seven years from the date of grant. Restricted stock unit awards (“RSUs”) that have been granted to directors typically vest in one year. RSUs that have been granted to executives and employees typically vest in January over a four-year period. The 2019 Plan is scheduled to expire on February 3, 2029. Options under the 2019 Plan can be granted as either incentive stock options or non-statutory stock options. The exercise price of options and the grant date price of restricted stock units is determined by our Compensation Committee but will not be less than the fair market value of our common stock based on the closing price as of the date of grant. Upon exercise of options or settlement of vested restricted stock units, we issue new shares of stock. As of June 30, 2019, there were approximately 1,556,370 shares available for future grants under the 2019 Plan.

Our equity plans and corresponding forms of award agreements generally have provisions allowing employees to elect to satisfy tax withholding obligations through the delivery of shares, having us retain a portion of shares issuable under the award or paying cash to us for the withholding. During the nine months ended June 30, 2019 and 2018, our employees forfeited 91,580 shares and 72,918 shares, respectively in order to satisfy $1.1 million and $0.7 million, respectively of withholding tax obligations related to stock-based compensation, pursuant to terms of awards under our board and shareholder-approved compensation plans for each respective period.

Employee contributions to the Employee Stock Purchase Plan (the “Purchase Plan”) were $0.8 million and $0.9 million during the nine month periods ended June 30, 2019 and 2018, respectively. Pursuant to the Purchase Plan, 90,592 and 105,732 common shares were issued to employees during the nine months ended June 30, 2019 and 2018, respectively. Shares are issued under the Purchase Plan from treasury stock. As of June 30, 2019, 224,984 common shares were available for future issuances under the Purchase Plan.

Stock-based compensation expense is included in the consolidated results of operations as follows (in thousands):



	Three months ended June 30,						Nine months ended June 30,
	2019			2018			2019			2018
Cost of sales	$	55		$	49		$	135		$	145
Sales and marketing	453			406			1,272			1,131
Research and development	268			168			737			343
General and administrative	697			597			2,036			1,979
Stock-based compensation before income taxes	1,473			1,220			4,180			3,598
Income tax benefit	(306		)	(249		)	(863		)	(747		)
Stock-based compensation after income taxes	$	1,167		$	971		$	3,317		$	2,851

14. STOCK-BASED COMPENSATION (CONTINUED)

Stock Options

The following table summarizes our stock option activity (in thousands, except per common share amounts):



	Options Outstanding		Weighted Average Exercised Price	Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (1)
Balance at September 30, 2018	3,526		$10.49
Granted	606		11.64
Exercised	(448	)	9.04
Forfeited / Canceled	(346	)	12.52
Balance at June 30, 2019	3,338		$10.68	4.1	$	6,983

Exercisable at June 30, 2019	2,226		$10.34	3.3	$	5,418

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $12.68 as of June 30, 2019, which would have been received by the option holders had all option holders exercised their options as of that date. The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price.

The total intrinsic value of all options exercised during the nine months ended June 30, 2019 was $1.7 million and during the nine months ended June 30, 2018 was $0.7 million.

The table below shows the weighted average fair value, which was determined based upon the fair value of each option on the grant date utilizing the Black-Scholes option-pricing model and the related assumptions:



	Nine months ended June 30,
	2019	2018
Weighted average per option grant date fair value	$4.37	$3.76
Assumptions used for option grants:
Risk free interest rate	2.3% - 2.93%	2.12% - 2.88%
Expected term	6.00 years	6.00 years
Expected volatility	33% - 34%	33% - 34%
Weighted average volatility	33%	31%
Expected dividend yield	0	0

The fair value of each option award granted during the periods presented was estimated using the Black-Scholes option valuation model that uses the assumptions noted in the table above. Expected volatilities are based on the historical volatility of our stock. We use historical data to estimate option exercise and employee termination information within the valuation model. The expected term of options granted is derived from the vesting period and historical information and represents the period of time that options granted are expected to be outstanding. The risk-free rate used is the zero-coupon U.S. Treasury bond rate in effect at the time of the grant whose maturity equals the expected term of the option.

As of June 30, 2019, the total unrecognized compensation cost related to non-vested stock options was $4.2 million and the related weighted average period over which it is expected to be recognized is approximately 2.6 years.

14. STOCK-BASED COMPENSATION (CONTINUED)

Non-vested Restricted Stock Units

A summary of our non-vested restricted stock units as of June 30, 2019 and changes during the nine months then ended is presented below (in thousands, except per common share amounts):



	Number of Awards		Weighted Average Grant Date Fair Value
Nonvested at September 30, 2018	674		$	11.05
Granted	547		$	11.62
Vested	(250	)	$	10.42
Canceled	(131	)	$	12.20
Nonvested at June 30, 2019	840		$	11.43

As of June 30, 2019, the total unrecognized compensation cost related to non-vested restricted stock units was $7.6 million, and the related weighted average period over which it is expected to be recognized is approximately 1.5 years.