Quarterly report pursuant to sections 13 or 15(d)

Stock-based Compensation

v2.3.0.11
Stock-based Compensation
9 Months Ended
Jun. 30, 2011
Stock-based Compensation
Note 6:  Stock-based Compensation

From time to time, the Company grants restricted stock awards and stock options to officers, directors, employees and consultants.  Such awards are valued based on the grant date 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

During the three and nine months ended June 30, 2011, the Company recognized compensation expense of $12,839 and $36,338, respectively, and $15,365 and $22,739 for the three and nine months ending June 30, 2010, respectively, related to stock option awards granted to certain employees and executives based on the grant date fair value of the awards, net of estimated forfeitures. During the three months ended December 31, 2009, the Company changed the estimated forfeiture rate of awards from 40% to 60% based on actual forfeiture experience and other factors, resulting in a net benefit from the expense reversal of $8,160.  There were no changes in the estimated forfeiture rate in the nine months ending June 30, 2011.

On March 24, 2011, pursuant to the Company’s 2003 Stock Plan, the Company issued its CEO options to purchase an aggregate of 13,487 shares of the Company’s common stock at an exercise price equal to $3.53, which was the adjusted closing price of the Company’s common stock on the date of grant.  The option will vest and be exercisable according to the following schedule: one quarter (25%) on the first anniversary of the date of grant and the remainder shall vest 1/36 at the end of each month thereafter over the next 36 months so long as the CEO continues to provide services to the Company.  Notwithstanding the foregoing, all unvested shares shall become immediately vested and exercisable upon a change of control.

The grant date fair value of the award was $19,834 (net of estimated forfeitures of 50%) using a Black-Scholes option pricing model using the following assumptions:  adjusted closing stock price of $3.53, volatility of 108 percent, expected life of 6.1 years,  and risk free rate of 2.82 percent.

On May 20, 2011, pursuant to the Company’s 2003 Stock Plan, the Company issued its CFO options to purchase an aggregate of 10,526 shares of the Company’s common stock at an exercise price equal to $3.77, which was the adjusted closing price of the Company’s common stock on the date of grant. The options will vest and be exercisable according to the following schedule: 3,728 options vesting immediately and the remainder shall vest 1/31 at the end of each month thereafter over the next 31 months so long as the CEO continues to provide services to the Company. Notwithstanding the foregoing, all unvested shares shall become immediately vested and exercisable upon a change of control.

The grant date fair value of the award was $21,447 (net of estimated forfeitures of 50% on the unvested portion) based on a Black-Scholes option pricing model using the following assumptions:  adjusted closing stock price of $3.77, volatility of 107 percent, expected life of 5.4 years,  and risk free rate of 1.82 percent.

The following represents a summary of stock option activity for the nine months ended June 30, 2011:

         
Weighted
   
Weighted
       
         
Average
   
Average
   
Aggregate
 
   
Number of
   
Exercise
   
Remaining
   
Intrinsic
 
   
Shares
   
Price
   
Contractual Life
   
Value
 
Outstanding at September 30, 2010
    5,263                    
Granted at market price
    24,013                    
Exercised
    -                    
Forfeited
    (5,263 )   $ 13.78              
Outstanding at June 30, 2011
    24,013     $ 3.64       9.8     $ -  
Exercisable
    -     $ -       -     $ -  

As of June 30, 2011, the Company has $28,442 of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the Company expects will be recognized over a weighted-average period of 3.3 years.

Restricted Stock Awards

From time to time, the Company also has historically granted shares of restricted stock to certain individuals.  The following table sets forth the activity with respect to compensation-related restricted stock grants during the nine months ended June 30, 2011:

Outstanding (unvested) at September 30, 2010
    4,903  
Granted
    -  
Forfeited
    (8 )
Vested
    (3,553 )
Outstanding (unvested) at June 30, 2011
    1,342  

As the Company’s outstanding unvested stock was reduced to an immaterial amount, the Company recognized all expense associated with unvested awards based on estimated forfeiture rates ranging from 25 percent to 70 percent based on the outstanding duration of the awards during the three months ended December 31, 2010.  As a result of these actions, the Company recognized an aggregate expense of $0 and $17,885 during the three and nine months ended June 30, 2011, respectively.  To the extent that actual forfeiture rates differ from estimates, future expense recognition or reversals could result.