Annual report pursuant to Section 13 and 15(d)

12. Stock-based Compensation

12. Stock-based Compensation

12 Months Ended

Sep. 30, 2018

Note 12: Stock-Based Compensation

From time to time, the Company grants stock options and restricted stock awards to directors, officers and employees. These awards are valued at the grant date by determining the fair value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line basis over the requisite service period.

Stock Options

The following table summarizes stock option activity for the years ended September 30, 2018 and 2017:

			Weighted		Weighted
			Average		Average
	Number of		Exercise		Remaining
	Shares		Price		Contractual Life		Intrinsic Value
Outstanding at September 30, 2016		175,000	$	11.22		3.75	$	346,500
Granted		36,668		15.32		6.89
Exercised		–
Forfeited		–
Outstanding at September 30, 2017		211,668	$	13.19		3.47	$	454,417
Exercisable at September 30, 2017		175,000	$	11.22		2.75	$	428,750

Outstanding at September 30, 2017		211,668	$	13.19		3.47	$	454,417
Granted		20,000		32.24		9.02
Exercised		–
Forfeited		–
Outstanding at September 30, 2018		231,668	$	14.84		3.04	$	162,500
Exercisable at September 30, 2018		190,639	$	11.89		2.08	$	162,500

The Company recognized compensation expense of $226,917 and $203,690 during the years ended September 30, 2018 and 2017, respectively, related to stock option awards granted to certain employees and officers based on the grant date fair value of the awards, net of estimated forfeitures. No forfeitures are estimated.

At September 30, 2018 the Company had $286,805 of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the Company expects will be recognized through December of 2021.

The exercise price for stock options outstanding and exercisable at September 30, 2018 is as follows:

Outstanding				Exercisable
Number of		Exercise		Number of		Exercise
Options		Price		Options		Price
	31,250	$	5.00		31,250	$	5.00
	25,000		7.50		25,000		7.50
	31,250		10.00		31,250		10.00
	4,167		10.86		4,167		10.86
	4,167		10.86		3,472		10.86
	4,167		10.86		–		–
	4,167		10.86		–		–
	6,250		12.50		6,250		12.50
	6,250		15.00		6,250		15.00
	75,000		15.18		75,000		15.18
	8,000		23.41		8,000		23.41
	8,000		27.60		–		–
	8,000		31.74		–		–
	8,000		36.50		–		–
	8,000		41.98		–		–
	231,668				190,639

The following table summarizes information about the Company’s non-vested shares as of September 30, 2018:

					Average
		Number of			Grant-Date
Non-vested Shares		Shares			Fair Value
	Non-vested at September 30, 2017		36,668		$	17.70
	Granted		20,000		$	10.14
	Vested		(15,639	)	$	15.72
	Non-vested at September 30, 2018		41,029		$	12.88

For stock options granted during fiscal 2018 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $10.14, and the weighted-average exercise price of such options was $32.24. For stock options granted during 2017 where the exercise price was above the stock price at the date of the grant, the weighted-average fair value of such options was $21.07, and the weighted-average exercise price for such options was $23.41.

The assumptions used in calculating the fair value of stock options granted use the Black-Scholes option pricing model for options granted in fiscal 2018 and 2017 are as follows:

Risk-free interest rate			1.25%
Expected life of the options			5 and 10 years
Expected volatility			107%
Expected dividend yield			0%