Note 4: Stock-based Compensation

From time to time, the Company grants stock options and restricted stock awards to officers, directors, employees and consultants. These 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

The following table summarizes stock option activity for the nine months ended June 30, 2013:

The following assumptions were used to calculate weighted average fair values of the options granted in the nine months ended June 30, 2013:

The risk free interest rate was determined based on treasury securities with maturities that approximate the expected term of the underlying award.

The Company recognized compensation expense of $75,190 and $107,198 during the three and nine months ended June 30, 2013, respectively and $13,154 and $16,942 during the three and nine months ended June 30, 2012, 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. The Company used the estimated forfeiture rate of awards of 10% based on actual forfeiture experience and other factors.

At June 30, 2013, the Company had $333,944 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 1.9 years.

The following table summarizes information about the Company’s s non-vested shares as of June 30, 2013:

Restricted Stock Awards

The Company has previously granted shares of restricted stock to certain individuals. The following table sets forth changes in compensation-related restricted stock awards during the nine months ended June 30, 2013:

Stock Awards Granted to Directors

In September 2011, in an effort to preserve cash, our Board, after consultation with the Compensation Committee, determined to compensate members of the Board for their monthly retainer and other services as directors and/or members of the Board’s various standing committees through the award of shares of the Company’s common stock under the Company’s Amended and Restated 2003 Stock Plan (the “2003 Stock Plan”) in lieu of cash payments to directors. Under the terms of this arrangement, each non-employee director receives a monthly award of a number of fully vested shares of the Company’s common stock equal to their monthly board of director cash fees divided by the closing market price of the Company’s common stock on the grant date. An aggregate of 83,495 shares have been issued to members of the Board of Directors pursuant to such arrangement. Other than as described immediately above, no shares of the Company’s common stock were issued to members of the Board during the three and nine months ended June 30, 2013.