Share-based Compensation |
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| Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Compensation |
Note 11 – Share-based Compensation
We allocate share-based compensation expense to cost of sales, selling, general and administrative expense and research and development expense based on the award holder’s employment function. We recorded income tax benefits for share-based compensation expense of approximately $4.0 million and $2.5 million in fiscal 2023 and 2022, respectively. For fiscal 2023 and 2022, we recorded share-based compensation expenses as follows:
We have issued share-based awards to employees and non-executive directors under the Company’s approved equity plans. Upon the exercise of share-based awards, new shares are issued from authorized common stock.
Equity Plans
In June 2022, the Company’s board of directors adopted the Company’s 2022 Employment Inducement Equity Incentive Plan (the “Inducement Plan”). The Inducement Plan is a non-shareholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. The Inducement Plan is used exclusively for the issuance of equity awards to new hires who satisfy the requirements to be granted inducement grants under Nasdaq listing rules as an inducement material to the individual’s entry into employment with the Company. The terms of the Inducement Plan are substantially similar to the terms of our 2018 Plan. The Company has reserved 4,000,000 shares of common stock under the Inducement Plan and as of September 30, 2023, 3,901,250 shares remain available for issuance.
In March 2018, the Company’s stockholders approved the Company's 2018 Equity Incentive Plan (the “2018 Plan”). On March 29, 2022, the Company’s stockholders approved an increase in the number of shares that may be issued under the 2018 Plan to 18.5 million. As of September 30, 2023, 2,593,491 shares remain available for issuance under the 2018 Plan.
In July 2017, the Company’s stockholders approved the Company's 2017 Equity Incentive Plan (the “2017 Plan”). A total of 4.7 million shares are authorized for issuance under the 2017 Plan. As of September 30, 2023, 398,105 shares remain available for issuance under the 2017 Plan. The 2017 Plan replaced the Company's 2008 Stock Incentive Plan (the “2008 Plan”), and no further awards will be made under the 2008 Plan.
Stock Options
Each option grants the holder the right to purchase from us one share of our common stock at a specified price, which is generally the closing price per share of our common stock on the date the option is issued. Options generally vest on a pro-rata basis on each anniversary of the issuance date within three years of the date the option is issued. Options may be exercised after they have vested and prior to the specified expiry date provided applicable exercise conditions are met, if any. The expiry date can be for periods of up to ten years from the date the option is issued. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions established at that time. The Company accounts for forfeitures as they occur and does not estimate forfeitures as of the option grant date. The Company recognized a reduction in share-based compensation expense of $1.9 million during the year ended September 30, 2023. The reduction in share-based compensation expense during the year ended September 30, 2022 was immaterial.
The following table outlines the weighted average assumptions for options granted during fiscal 2023 and 2022:
During the years ended September 30, 2023 and 2022, the Company used historical volatility of our common stock over a period equal to the expected life of the options to estimate their fair value. The dividend yield assumption is based on the Company’s recent history and expectation of future dividend payouts on the common stock. The risk-free interest rate is based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent remaining term.
The following table summarizes the stock options outstanding and exercisable at September 30, 2023:
The aggregate intrinsic values in the table above are before income taxes and represent the number of in-the-money options outstanding or exercisable multiplied by the closing price per share of the Company’s common stock on the last trading day of the year ended September 30, 2023 of $0.72, less the respective weighted average exercise price per share at period end.
The total intrinsic value of options exercised was approximately $0.5 million and $8.1 million during the years ended September 30, 2023 and 2022, respectively. Cash received from options exercised was $0.4 million and $1.1 million in the years ended September 30, 2023 and 2022, respectively.
As of September 30, 2023, the Company had unrecognized compensation expense of approximately $29.5 million related to unvested stock options. This expense is expected to be recognized over a weighted average period of 1.8 years.
During fiscal 2023 and 2022, the Company modified stock options held by certain optionees upon termination of their employment by the Company. As permitted under the 2018 Plan, the stock options were primarily modified to accelerate vesting or to allow for continued vesting. The aggregate amount of expense recognized in connection with these modifications was approximately $25,000 and $1.0 million during the years ended September 30, 2023 and 2022, respectively.
Stock Appreciation Rights
In fiscal 2017, the Company issued stock appreciation rights based on 50,000 shares of the Company’s common stock to an employee that vested on October 31, 2018. The stock appreciation rights have a term and an exercise price per share of $0.95. Upon exercise, the stock appreciation rights will be settled in common stock issued under the 2017 Plan. As of September 30, 2023 and 2022, vested stock appreciation rights based on 50,000 shares of common stock remain outstanding. |
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