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Note 15 - Share-based Compensation | 12 Months Ended
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Sep. 30, 2022
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | 15. SHARE-BASED COMPENSATION Stock Option Plans As of September 30, 2022, the Company had two equity incentive plans. The 2005 Equity Incentive Plan (“2005 Equity Plan”) was terminated with respect to new grants in March 2015 but remains in effect for grants issued prior to that time. The Amended and Restated 2015 Equity Incentive Plan (“2015 Equity Plan”) was adopted by the Company’s Board of Directors on December 6, 2016 and approved by the Company’s stockholders on March 14, 2017. The 2015 Equity Plan was amended by the Company’s Board of Directors on December 8, 2020, to increase the number of shares authorized for issuance from 5,000,000 to 10,000,000. On March 16, 2021, the Company’s stockholders approved a plan amendment. The 2015 Equity Plan authorizes the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, to an aggregate of 10,000,000 new shares of common stock to employees, directors, advisors or consultants. As of September 30, 2022, there were options and restricted stock units outstanding covering 10,000 and 4,274,074 shares of common stock under the 2005 Equity Plan and the 2015 Equity Plan, respectively, and 3,486,565 shares of common stock available for grant, for a total of 7,760,639 shares of common stock authorized and unissued under the two equity plans. Share-Based Compensation The Company’s stock options have various restrictions that reduce option value, including vesting provisions and restrictions on transfer and hedging, among others, and are often exercised prior to their contractual maturity. There were 1,367,000 options granted during the year ended September 30, 2022 and 295,000 granted during the year ended September 30, 2021. The weighted average estimated fair value of stock options granted during the years ended September 30, 2022 and 2021, was calculated using the Black-Scholes option-pricing model with the following weighted average assumptions (annualized percentages):
|  | Years ended |
|  | September 30, |
|  | 2022 |  |  | 2021 |
Volatility |  |  | 50.8 | % |  |  | 48.5 | %
Risk-free interest rate |  |  | 2.6 | % |  |  | 0.7 | %
Dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Expected term in years |  |  | 5.2 |  |  |  | 6.5 |
Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected term of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The contractual term of the options was seven years. The expected term is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates. Such revision adjustments to expense will be recorded as a cumulative adjustment in the period in which the estimate is changed. The Company did not pay a dividend in fiscal 2022 or fiscal 2021. As of September 30, 2022, there was approximately $1,620 of total unrecognized compensation costs related to outstanding stock options. This amount is expected to be recognized over a weighted average period of 1.82 years. To the extent the forfeiture rate is different from what the Company anticipated, stock-based compensation related to these awards will be different from the Company’s expectations. Performance-Based Stock Options On October 4, 2019, the Company awarded a performance-based stock option (PVO) to purchase 800,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of fiscal 2022 and 2023 including a minimum free cash flow margin and net revenue targets. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets. During the year ended September 30, 2022, the Company modified the performance criteria for these PVOs to exclude certain strategic growth initiatives that were not planned at the time of grant. The Company recorded $209 in stock-based compensation expense related to these options in the year ended September 30, 2022. On August 10, 2022, the Company granted PVOs to purchase up to 750,000 shares of the Company’s common stock to a key member of management, with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of fiscal years 2023, 2024, and 2025, including net bookings targets. Additionally, vesting is subject to the grantee being employed by the Company as of the applicable vest date during each fiscal year in which the Company achieves such financial targets. The Company did not record compensation expense related to these options for the year ended September 30, 2022. The Company did not grant any PVO’s during the year ended September 30, 2021. Restricted Stock Units On March 10, 2020, each non-employee member of the Board of Directors received a grant of 30,000 RSUs that vested on the first anniversary of the grant date. These were issued at a market value of $425, which were expensed on a straight-line basis through the March 10, 2021 vest date. Also, in fiscal 2020, 81,270 RSUs were granted to employees that will vest over three years on the anniversary date of the grant. These were issued at a market value of $258, which have and will be expensed on a straight-line basis over the three-year life of the grants. On March 16, 2021, each non-employee member of the Board of Directors received a grant of 27,883 RSUs that vested on the first anniversary of the grant date. These were issued at a market value of $1,100 and were expensed on a straight-line basis through the March 16, 2022 vest date. Also, during fiscal 2021, 145,950 RSUs were granted to employees that will vest over three years on the anniversary date of the grant. These were issued at a market value of $989, which have and will be expensed on a straight-line basis over the three-year life of the grants. On June 7, 2021, 5,000 RSUs with immediate vesting were granted to an employee at a market value of $25. These were expensed during the quarter ended June 30, 2021. On September 1, 2021, two new members of the Board of Directors received a grant of 17,500 RSUs which vested on March 16, 2022. These were issued at a market value of $184 and were expensed on a straight-line basis through the March 16, 2022 vest date. On March 15, 2022, each non-employee member of the Board of Directors received a grant of 30,000 RSUs that will vest on the first anniversary of the grant date. These were issued at a market value of $407, which have and will be expensed on a straight-line basis through the March 15, 2023 vest date. On November 1, 2021, 10,000 RSUs were granted to a non-employee advisor that will vest on the first anniversary of the grant date. These were issued at a market value of $51, which have and will be expensed on a straight-line basis though the November 1, 2022 vest date. Also, during the year ended September 30, 2022, there were 100,800 RSUs granted to employees that will vest over three years on the anniversary of the grant date. These were issued at a market value of $348, which have and will be expensed on a straight-line basis over the three-year life of the grants. Compensation expense for RSUs was $1,410 for the year ended September 30, 2022. Compensation expense for RSUs was $1,130 for the year ended September 30, 2021. As of September 30, 2022, there was approximately $918 of total unrecognized compensation costs related to outstanding RSUs. This amount is expected to be recognized over a weighted average period of 1.2 years. Restricted Stock Unit Summary Information A summary of restricted stock units of the Company as of September 30, 2022 is presented below:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding September 30, 2021 |  |  | 399,469 |  |  | $ | 6.27 |
Granted |  |  | 260,800 |  |  | $ | 3.09 |
Released |  |  | (270,262 | ) |  | $ | 6.42 |
Forfeited/cancelled |  |  | (46,832 | ) |  | $ | 3.57 |
Outstanding September 30, 2022 |  |  | 343,175 |  |  | $ | 4.11 |
Stock Option Summary Information A summary of the activity in options to purchase the capital stock of the Company as of September 30, 2022 is presented below:
|  | Number of Shares |  |  | Weighted Average Exercise Price |
Outstanding September 30, 2021 |  |  | 2,745,384 |  |  | $ | 3.02 |
Granted |  |  | 1,367,000 |  |  | $ | 3.78 |
Forfeited/expired |  |  | (26,250 | ) |  | $ | 5.49 |
Exercised |  |  | (145,235 | ) |  | $ | 1.94 |
Outstanding September 30, 2022 |  |  | 3,940,899 |  |  | $ | 3.31 |
Exerciseable September 30, 2022 |  |  | 1,640,310 |  |  | $ | 2.67 |
The aggregate intrinsic value for options outstanding and options exercisable as of September 30, 2022 was $996 and $996, respectively. The aggregate intrinsic value represents the difference between the Company’s closing stock price on the last day of trading during the year, which was $2.77 per share, and the exercise price multiplied by the number of applicable options. The total value of stock options exercised during the year ended September 30, 2022 was $491 and proceeds from these exercises was $282. The total value of stock options exercised during the year ended September 30, 2021 was $725 and proceeds from these exercises was $210. The Company recognized $208 and $514 as a tax benefit in the income tax provision for the years ended September 30, 2022 and 2021, respectively. The following table summarizes information about stock options outstanding as of September 30, 2022:
|  |  |  |  |  | Weighted Average |  |  | Weighted Average |  |  |  |  |  |  | Weighted Average |
Range of |  | Number |  |  | Remaining |  |  | Exercise |  |  | Number |  |  | Exercise |
Exercise Prices |  | Outstanding |  |  | Contractual Term |  |  | Price |  |  | Exercisable |  |  | Price |
$1.31 | - | $1.86 |  |  | 243,922 |  |  |  | 1.29 |  |  | $ | 1.69 |  |  |  | 243,922 |  |  | $ | 1.69 |
$1.99 | - | $1.99 |  |  | 937,500 |  |  |  | 1.44 |  |  | $ | 1.99 |  |  |  | 937,500 |  |  | $ | 1.99 |
$3.21 | - | $3.21 |  |  | 20,000 |  |  |  | 6.60 |  |  | $ | 3.21 |  |  |  | - |  |  | $ | - |
$3.39 | - | $3.39 |  |  | 800,000 |  |  |  | 4.01 |  |  | $ | 3.39 |  |  |  | - |  |  | $ | - |
$3.40 | - | $8.03 |  |  | 1,939,477 |  |  |  | 6.06 |  |  | $ | 4.12 |  |  |  | 458,888 |  |  | $ | 4.59 |
|  |  |  |  | 3,940,899 |  |  |  | 4.25 |  |  | $ | 3.31 |  |  |  | 1,640,310 |  |  | $ | 2.67 |
The Company recorded $817 and $294 of stock option compensation expense for employees, directors and consultants for the years ended September 30, 2022, and 2021, respectively. The amounts of share-based compensation expense for restricted stock units and stock options are classified in the Consolidated Statements of Operations as follows:
|  | Years ended |
|  | September 30, |
|  | 2022 |  |  | 2021 |
Cost of revenues |  | $ | 77 |  |  | $ | 40 |
Selling, general and administrative |  |  | 2,080 |  |  |  | 1,344 |
Research and development |  |  | 70 |  |  |  | 40 |
|  | $ | 2,227 |  |  | $ | 1,424 |

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