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STOCK-BASED COMPENSATION

12 Months Ended

Sep. 30, 2021

9. STOCK-BASED COMPENSATION

Summary of Equity Plans and Activity

In March 2008, the Company's shareholders approved the 2008 Stock Option Plan (the “Plan”) to replace the 1997 Outside Director Stock Option Plan and the 1997 Employee Stock Option Plan. The purpose of the Plan was to promote the Company’s long-term interests by providing a means of attracting and retaining officers, directors and key employees. The Compensation Committee administered the Plan and approved the particular officers, directors or employees eligible for grants. Under the Plan, employees were granted options to purchase common shares at an exercise price equal to the fair market value of the common shares of the end of the trading day prior to the date of the grant. Generally, options granted vest and become exercisable in three equal installments commencing one year from date of grant and expire upon the earlier of the employee’s termination of employment, or ten years from the date of grant. Restricted shares are valued at the average of the high and low sale prices of the Company’s common shares on the day prior to the date of the grant.

In March 2018, the Company's shareholders approved the amendment and restatement of the Plan in the form of the Amended and Restated 2018 Equity Incentive Plan, and in March 2020, the shareholders approved a further amendment to increase the number of shares issuable under the amended and restated plan by 700,000 and to make corresponding changes to the number of shares issuable as incentive options and as restricted stock or pursuant to restricted stock units (as amended, the "Equity Plan"). The Company currently grants equity awards from the Equity Plan. The maximum number of new common shares that may be granted under the Equity Plan is 307,759 shares plus the remaining shares from the 2008 Stock Option Plan. At September 30, 2021, 430,063 shares remained available for grants under the Plan.

The Company expenses the estimated fair value of stock options over the vesting periods of the grants. The Company recognizes expense for awards subject to graded vesting using the straight-line attribution method. The Company adopted a change in accounting policy effective October 1, 2020 for forfeitures. Prior to October 1, 2020, stock-based compensation expense was reduced for estimated forfeitures, and if necessary, an adjustment was recognized in future periods if actual forfeitures differed from those estimates. The accounting change was made prospectively; therefore, stock-based compensation for equity grants subsequent to October 1, 2020, will not be reduced for estimated forfeitures as expense will be adjusted in the period that a forfeiture occurs. The Company believes that this accounting change will more accurately account for expense relating to forfeitures. The Company has assessed the cumulative effect of this change in accounting policy and has deemed the impact to be immaterial; therefore, an adjustment has not been recorded to beginning retained earnings. Stock based compensation expense for the fiscal years ended September 30, 2021 and 2020 was $1,786 and $540, respectively.

In fiscal 2021, 336,900 options were granted to employees and independent directors. In fiscal 2020, 152,100 options were granted to employees and independent directors. The weighted-average assumptions used to compute the fair value of options granted for the fiscal years ended September 30, 2021 and 2020 were as follows:


	2021		2020
Risk-free interest rate	0.93	%	1.36	%
Dividend yield	—	%	—	%
Volatility of the expected market price of the Company’s common shares	70.30	%	76.56	%
Expected life of the options (years)	5.95		5.95

A summary of the Company’s stock option activity for all options and related information for the year ended September 30, 2021, is as follows (in thousands except for share prices):


				Weighted-
		Weighted-		Average
		Average		Remaining		Aggregate
	Options	Exercise		Contractual		Intrinsic
	(shares)	Price		Life		Value
Outstanding - October 1, 2020	712	$	2.21		7.59	$	1,939
Granted	337	$	22.55
Exercised	(134)	$	1.83
Forfeited	(74)	$	9.98
Expired	(9)	$	1.98
Outstanding - September 30, 2021	831	$	9.82		7.80	$	17,058
Exercisable at September 30, 2021	356	$	2.00		6.29	$	10,075

The aggregate intrinsic value is the product of the total options outstanding and the net positive difference of the Company’s common share price on September 30, 2021 and the options’ exercise price. The total intrinsic value of stock options exercised for fiscal years ended September 30, 2021 and 2020 were $2,503 and $562, respectively. The weighted average estimated fair value of stock options granted for the fiscal years ended September 30, 2021 and 2020 were $13.90 and $3.11 per stock option, respectively. As of September 30, 2021, the total unrecognized compensation cost related to non-vested stock options was $3,813 and is expected to be recognized over a weighted-average service period of 2.5 years.

During the year ended September 30, 2021, the Company granted a total of 150,150 restricted shares to officers, outside directors and employees. A summary of the Company’s restricted share activity for the year ended September 30, 2021 is as follows (in thousands except for share prices):


		Weighted-
		Average
	Restricted	Grant Date
	Shares	Fair Value
Outstanding – September 30, 2020	128	$	3.88
Granted	150	$	10.50
Vested	(20)	$	1.99
Forfeited	(21)	$	6.80
Outstanding – September 30, 2021	237	$	7.96

As of September 30, 2021, the total unrecognized compensation cost related to unvested restricted stock was $1,049 and is expected to be recognized over a weighted-average service period of 1.5 years. The total fair value of the restricted shares granted during the year ended September 30, 2021 was $1,576.

On November 4, 2021, the Company's shareholders approved an amendment to the Company's 2018 Equity Incentive Plan to increase the number of shares available for awards thereunder by 1,500,000 shares and to make certain corresponding changes to the plan as described in Note 16.