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Shareholders' Equity and Share-Based Payments

9 Months Ended

Jun. 30, 2025

Shareholders' Equity and Share-Based Payments

Shareholders' Equity and Share-Based Payments

4. Shareholders’ Equity and Share-Based Payments

At June 30, 2024, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock.

Share-Based Compensation

The Company accounts for share-based compensation under the provisions of ASC Topic 718, “Compensation – Stock Compensation”, by using the fair value method for expensing stock options, performance based equity awards and stock awards.

Amended and Restated 2019 Stock-Based Incentive Compensation Plan

The Company’s 2019 Stock-Based Incentive Compensation Plan (as amended, the “2019 Plan”) was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019. The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options, performance based equity awards, and other equity-based awards. Options granted under the 2019 Plan may be either “incentive stock options” as defined in Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, as determined by the Compensation Committee.

Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000, plus 139,691 shares of common stock that were authorized but unissued under the Company’s 2009 Stock-Based Incentive Compensation Plan as of April 2, 2019, the effective date of the 2019 Plan, all of which may be issued pursuant to awards of incentive stock options. On April 18, 2024, the Company amended the 2019 Plan to include an additional 1,950,000 authorized shares available for issuance. As of June 30, 2025, there were 1,375,295 shares of common stock available for awards under the 2019 Plan.

If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, the related shares of common stock subject to such award will again be available for future grant. Any shares tendered by a participant in payment of the exercise price of an option or the tax liability with respect to an award (including, in any case, shares withheld from any such award) will not be available for future grant under the 2019 Plan. If there is any change in the Company’s corporate capitalization, the Compensation Committee must proportionately and equitably adjust the number and kind of shares of common stock which may be issued in connection with future awards, the number and kind of shares of common stock covered by awards then outstanding under the 2019 Plan, the aggregate number and kind of shares of common stock available under the 2019 Plan, any applicable individual limits on the number of shares of common stock available for awards under the 2019 Plan, the exercise or grant price of any award, or if deemed appropriate, make provision for a cash payment with respect to any outstanding award. In addition, the Compensation Committee may make adjustments in the terms and conditions of any awards, including any performance goals, in recognition of unusual or nonrecurring events affecting the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.

The 2019 Plan will terminate on April 2, 2029, unless earlier terminated by the Company’s Board of Directors (the “Board”). Termination will not affect awards outstanding at the time of termination. The Board may amend, alter, suspend, discontinue, or terminate the 2019 Plan without shareholder approval, provided that shareholder approval is required for any amendment which (i) would increase the number of shares subject to the 2019 Plan; (ii) would decrease the price at which awards may be granted; or (iii) would require shareholder approval by law, regulation, or the rules of any stock exchange or automated quotation system.

2024 RSU Bonus Grants

On February 19, 2025, the Board authorized grants of 71,754 in Restricted Stock Units (“2024 RSU Bonus Grants”) to key employees under the terms and conditions of the 2019 Plan as part of the Company’s initiatives to align employee compensation with Total Shareholder Return. The Restricted Stock awards vest 50% on the one year anniversary from date of grant and 50% on the two year anniversary from date of grant, subject to the terms of the 2019 Plan.

Market-Based Restricted Stock Units

During the three months ended December 31, 2024, to better align executive compensation with the Company’s Total Shareholder Return, the Board approved a special one-time grant of 201,000 market-based restricted stock units (“MSUs”) to the Company’s Chief Executive Officer under the terms and conditions of the 2019 Plan. The MSU is a restricted stock unit containing vesting terms conditional upon the attainment of both 1) continued service to vesting and 2) stock price appreciation targets indexed against the Company’s actual stock price performance over a specified measurement period. Under the terms of the 2019 Plan, no MSUs are eligible for vesting prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted under certain conditions subject to the plan provisions. Subject to the terms of the 2019 Plan, under the terms of the grant, the MSU will vest as follows:

1)

an initial one-third (1/3^rd) of the MSUs shall vest on the first trading date after the shares of the Company’s common stock have traded at a price equal to or greater than ten dollars ($10.00) per share for twenty (20) consecutive trading days or as provided in the provisions of the second succeeding paragraph below;

2)

an additional one-third (1/3^rd) of the MSUs shall vest on the first trading date after shares of the Company’s common stock have traded at a price equal to or greater than twelve dollars ($12.00) per share for twenty (20) consecutive trading days; and

3)

the remaining MSUs shall vest on the first trading date after the shares of the Company’s common stock have traded at a price equal to or greater than fourteen dollars ($14.00) per share for twenty (20) consecutive trading days.

Additionally, if the tranche of MSUs subject to vesting pursuant to (1) above does not vest on or before November 20, 2027, then, with respect to such MSUs, the target trading price for the Company’s common stock will be increased to twelve dollars ($12.00) per share, such that the MSUs subject to (1) above will vest on the first trading date after shares of the Company’s common stock have traded at a price equal to or greater than twelve dollars ($12.00) per share for twenty (20) consecutive trading days.

Any MSUs that have not vested on or before the fourth anniversary of the grant date are immediately forfeited.

With respect to each MSU that becomes vested in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSUs.

The Company estimated both the grant-date fair value of the MSUs and the derived vesting periods using a Monte Carlo simulation with the following input assumptions:


Number of MSUs Granted	201,000
Grant Date	11/20/24
Grant Date Stock Price	$ 7.72
Expected Dividend Rate	0%
Expected Volatility	48%
Weighted average risk-free interest rate	4.27%
Contractual Term	4 years

Utilizing Monte Carlo simulation, the MSUs grant date fair value was estimated to be $1,109,340 with a $5.52 weighted average grant date fair value per award and the derived vesting periods were estimated to be between 1.2 years and 1.7 years.

For the three and nine months ended June 30, 2025, the Company recognized $253,779 and $483,722, respectively of compensation expense related to MSU awards.

As of June 30, 2025, unrecognized compensation expense of $625,618 associated with non-vested MSUs will be recognized in future periods under the 2019 Plan. During the three and nine months ended June 30, 2025, no MSUs vested or were forfeited.

On February 13, 2025, the market performance condition for 67,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met, these shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

Time Based Stock Options with market based exercisability conditions

During the three months ended March 31, 2025, in a continuing effort to more closely correlate executive compensation with the Company’s Total Shareholder Return, the Board approved a grant of 72,062 time vested stock options with a market based exercise price condition (“MSOs”) to the Company’s Chief Executive Officer and 33,259 MSOs to the Company’s Chief Financial Officer under the terms and conditions of the Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

The MSOs are similar to traditional time vested stock options and vest over four years, with 25% vesting on the first anniversary of the grant date (February 19, 2026) and the remaining shares vesting quarterly at 6.25% on the last business day of May, August, November, and February of calendar years two, three and four from date of grant. However, the MSOs only become exercisable if the Company's share price reaches or exceeds the date of grant closing stock price of $8.59 plus a targeted market threshold of 15% ($9.88) for 20 consecutive trading days at any time during the four-year vesting period. Once this market threshold is met, the vested shares can be exercised according to the vesting schedule and the terms and conditions set forth in the 2019 Plan.

On June 16^th, 2025, the Company’s closing share price exceeded the $9.88 MSOs targeted market threshold condition for 20 consecutive trading days for the MSOs granted February 18, 2025, thus meeting the market condition for exercisability subject to the vesting schedule and terms and conditions set for in the 2019 Plan.

No MSOs are eligible for vesting or exercise prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted under certain conditions subject to the plan provisions.

With respect to each MSO that becomes exercised in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSOs.

The Company estimated the grant-date fair value of the MSOs awards using a Monte Carlo simulation with the following input assumptions:


Number of MSOs granted	105,321
Grant Date	02/18/25
Grant Date Stock Price	$ 8.27
Expected Dividend Rate	0%
Expected Volatility	47%
Weighted average risk-free interest rate	4.29%
Exercise price	$ 8.59
Contractual Term	10 years

Utilizing Monte Carlo simulation, the aggregate MSOs grant date fair value was estimated to be $474,998 with a $4.51 weighted average grant date fair value per option and vesting periods were estimated to be between 1 years and 4 years with a 10 year contractual term.

For the three and nine months ended June 30, 2025, the Company recognized $85,111 and $98,757, respectively of compensation expense related to the MSO awards.

As of June 30, 2025, unrecognized compensation expense of $376,243 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan. During the three and nine months ended June 30, 2025, no MSOs vested or were forfeited.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $355,653 and $191,623 for the three months ended June 30, 2025 and 2024, respectively.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $769,304 and $566,952 for the nine months ended June 30, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $137,577 and $59,278 for the three months ended June 30, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $282,040 and $159,003 for the nine months ended June 30, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $832,120 and $250,901 for the three months ended June 30, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $1,633,823 and $725,955 for the nine months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, unrecognized compensation expense of approximately $1,997,084 net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of June 30, 2025, unrecognized compensation expense of approximately $388,346, net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.