Note 6 - Share-based Compensation

12 Months Ended

Sep. 28, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

SHARE-BASED COMPENSATION

Effective

April 17, 2018,

our stockholders approved the

2018

Equity Incentive Plan (the

“2018

Plan”). The

2018

Plan is administered by the Compensation and Stock Option Committee subject to approval of all grants by the Board of Directors. The

2018

Plan permits the granting of nonqualified stock options and incentive stock options to our employees, officers, and directors in an amount up to an aggregate of

600,000

shares of common stock. Under the

2018

Plan,

plan participant

may

be awarded more than

50,000

stock options during any calendar year, such that a maximum of

more than

150,000

stock options

may

be granted to a plan participant during the

2018

Plan’s term.

Additionally, the aggregate dollar value of awards granted to any non-employee director in any calendar year shall

not

exceed

$50,000.

The

2018

Plan expires on

April 17, 2023.

The

2007

Equity Incentive Plan (the

“2007

Plan”) permitted the granting of nonqualified stock options, incentive stock options, stock appreciation rights (or SARs), restricted stock, restricted stock units, performance units and performance shares to our employees, officers, directors and consultants in an amount up to an aggregate of

1,000,000

shares of common stock. The

2007

Plan expired at the end of

December 2016

and

further grants were made under this plan. However, options granted under the

2007

Plan prior to the expiration of the

2007

Plan, which equal

350,000

options, will continue to be subject to the terms of the

2007

Plan and their award agreement. Option awards have been granted with an exercise price equal to the market price of our stock at the date of grant and generally vest

one

fourth

per year over

four

years (in some instances, subject to achieving certain financial targets in the year with respect to which they are granted) and have

ten

-year contractual terms. The exercise price, vesting schedule and period required for full exercisability of the options is at the discretion of the Compensation and Stock Option Committee of our Board of Directors. In connection with the employment of the Company’s Chief Executive Officer in

2015,

the Compensation and Stock Option Committee, with the approval of our Board, issued

300,000

non-qualified stock options that were

not

part of the

2007

Plan or any other equity incentive plan previously approved by Company stockholders. These non-qualified stock options were granted with an exercise price equal to the market price of our stock at the date of grant and have an equal vesting period over a

four

-year period. We recognize compensation cost for all awards on a straight-line basis (or, on a graded basis for those options with performance conditions) over the requisite service period for the entire award, which is equal to the vesting period. We have a policy of issuing new shares of common stock to satisfy share option exercises.

The fair value of each option award was estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatilities were based on the historical volatility of our stock measured over a period commensurate with the expected life of granted stock options. The expected term of options represented the period of time that options granted were expected to be outstanding and was determined based on the simplified method as discussed in ASC

718,

Compensation-Stock Compensation

, as we do

not

have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate assumption was based on the U.S. Treasury rate at the date of the grant that most closely resembled the expected life of options. The expected dividend yield was

0%.

A summary of option activity under the

2018

Plan, the

2007

Plan and the additional Board-authorized non-qualified option grants during fiscal years

2017

and

2018

is presented below:

Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at September 30, 2016		850,000		$	1.88		8.5	$	0.00
Options granted		0		$	0.00
Options exercised		0		$	0.00
Options forfeited, expired and unearned		(200,000	)	$	3.85			$	0.00
Outstanding at September 29, 2017		650,000		$	1.28		8.0	$	0.00
Options granted		125,000		$	1.35		4.8	$	0.00
Options exercised		0		$	0.00
Options forfeited, expired and unearned		0		$	0.00
Outstanding at September 28, 2018		775,000		$	1.29		6.6	$	0.00
Vested and expected to vest at September 28, 2018		770,653		$	1.28		6.6	$	0.00
Exercisable at September 28, 2018		350,000		$	1.30		6.9	$	0.00

During fiscal year

2018,

the fair value of each option was estimated on the date of grant using the Black-Scholes model that uses the following weighted-average assumptions. There were

option grants during fiscal year

2017.

	201 8
Expected dividend yield	$	0.00
Risk-free interest rate		2.68	%
Expected option term (years)		3.3
Volatility		47.53	%
Weighted-average fair value	$	0.27

Share-based compensation expense related to employee stock options is included in cost of revenues and operating expenses consistent with the respective employee salary costs. These costs totaled

$106

and

$99

for fiscal years

2018

and

2017,

respectively. As share-based compensation expense recognized in the consolidated statements of operations and comprehensive loss is based on awards ultimately expected to vest, it has been reduced for estimated pre-vesting forfeitures.

If the non-vested stock options fully vest, they will result in future expense of

$119

over a weighted-average remaining amortization period of

years. The total income tax benefit relating to stock options and recognized in the consolidated statements of operations and comprehensive loss was

for both fiscal years

2018

and

2017.

Restricted Stock Units

As noted above, our

2007

Plan permitted us to grant restricted stock units (RSUs), which entitle holders to receive shares of common stock upon vesting. During fiscal year

2018,

we did

not

grant any RSUs and there were

RSUs outstanding as of the end of fiscal years

2018

2017.

LEARNING TREE INTERNATIONAL, INC. 10-K