NOTE 11 – STOCK-BASED COMPENSATION
The Company maintains a stock-based compensation plan, which provides for the issuance of Company stock to certain directors, officers, key employees and affiliates.
On March 17, 2009, the shareholders of the Company approved the 2009 Incentive Compensation Plan (the “2009 Plan”). The 2009 Plan provides that the total number of shares of Company stock that may be subject to the granting of awards under the 2009 Plan (“Awards”) at any time during the term of the 2009 Plan shall be equal to 800,000 shares of common stock and 160,000 shares of Class B stock. The foregoing limit shall be increased, as provided for in the 2009 Plan. Persons eligible to receive Awards under the 2009 Plan include employees, directors, consultants and other persons who provide services to the Company. The 2009 Plan imposes individual limitations on the amount of certain Awards, in part, to comply with Internal Revenue Code, Section 162(m). The Awards can be in the form of stock options, restricted and deferred stock, performance awards and other stock-based awards, as provided for in the 2009 Plan.
As of September 30, 2019, all outstanding common stock options had been fully vested. These options amounted to 197,492 at September 30, 2019. As long as the employee remains employed by the Company, these options are exercisable through October 1, 2021.
As of September 30, 2019,
45,000
outstanding Class B stock options were fully vested and are exercisable through
October 1, 2021
as long as the employee remains employed by the Company. In addition,
30,000
outstanding Class B
stock
options were
75
% vested and are exercisable through
September 26, 2026
as long as the employee remains employed by the Company.
As of September 30, 2019, 482,000 shares of Company common stock and 100,000 shares of Class B stock are available for granting of Awards under the 2009 Plan.
The following table summarizes option activity under the 2009 Plan:
| | | | | | | | |
| | | Number of
Shares | | | Average
Exercise Price
Per Share | |
Options outstanding at September 30, 2017 | | | 440,000 | | | $ | 5.739 | |
Options exercised during fiscal 2018 | | | (122,508 | ) | | $ | 5.104 | |
| | | | | | | | | |
Options outstanding at September 30, 2018 | | | 317,492 | | | $ | 5.984 | |
Options exercised during fiscal 2019 | | | (45,000 | ) | | $ | 5.126 | |
| | | | | | | | | |
Options outstanding at September 30, 2019 | | | 272,492 | | | $ | 6.126 | |
| | | | | | | | | |
No options were granted, forfeited or cancelled during the year ended September 30, 2019. The weighted average remaining contractual life on the options outstanding as of September 30, 2019 is 2.5 years under the 2009 Plan.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.