|12 Months Ended|
Sep. 30, 2011
Restricted Stock Awards
The Company maintains its 2003 Amended and Restated 2003 Stock Plan (“2003 Plan”) for the issuance of stock-based compensation awards. As amended, the Company is permitted to issue an aggregate of 50,000 shares of common stock under the plan. All Company personnel and contractors are eligible to participate in the plan.
In September 2011, in an effort to preserve cash, the Board, after consultation with the Compensation Committee, entered into an agreement to compensate the 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 2003 Plan. Under the terms of this agreement, each non-employee director receives a monthly award of fully vested shares of common stock, with the number of shares determined by dividing $3,833 by the closing market price of the Company’s common stock on the grant date. The Company granted an aggregate of 9,184 shares of common stock and recognized expense of $15,333 related to this agreement for services rendered for the month of August 2011. For services rendered for the month of September 2011, the Company recorded $15,333 in accounts payable as of September 30, 2011, which will be paid through the issuance of shares in October 2011. No share issuances for service were made during the year ended September 30, 2010.
As of September 30, 2011, there were 60,332 shares authorized under the 2003 Plan that were granted and remain outstanding, of which 58,990 have vested and 1,342 are in the form of restricted stock. These shares of restricted stock were granted to the Company’s service providers, officers and directors. Of the 1,342 unvested restricted shares, 1,053 shares vest on a cliff basis three years from the date of grant and 289 shares vest on a cliff basis 10 years from the date of grant. Certain market performance criteria may accelerate the vesting of a portion of these awards if the stock price exceeds $50 per share.
The following table sets forth the activity with respect to unvested restricted stock grants (results reported in post-split amounts):
During the years ended September 30, 2011 and 2010 the Company recognized compensation expense of $38,231 and $100,980 respectively, under the 2003 Plan and other restricted stock issuances. Due to the immateriality of the remaining expense, all expense associated with nonvested awards (net of forfeitures of 70% for awards vesting in 2013 and 0% for awards vesting in October 2011) was recognized during the year ended September 30, 2011. No further expense associated with unvested awards is expected unless the Company’s actual forfeiture rate differs from its expected forfeiture rate, in which the Company could incur up to $38,917 of additional expense.
Stock Option Awards:
From time to time, the Company grants stock option awards to officers and employees. Such awards are valued based on the grant date fair value of the instruments, net of estimated forfeitures, using a Black-Scholes option pricing model with the following assumptions:
The volatility used was based on historical volatility of the Company’s common stock, which management considers to be the best indicator of expected future volatility. The risk free interest rate was determined based on treasury securities with maturities equal to the expected term of the underlying award. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110.
On November 23, 2009, the Company granted an aggregate of 26,316 options to Richard Sommer, the Company’s then-current Chief Executive Officer. In connection with Mr. Sommer’s resignation on January 4, 2010, all such options were forfeited. Given this forfeiture, the Company elected not to expense such options because the effects on the financial statements would not have been material. No other options were granted during the year ended September 30, 2010.
As discussed in Note 11, on March 24, 2011, Mr. Hall was granted an option to purchase 13,487 shares of the Company’s common stock at an exercise price of $3.53 per share, which was equal to the closing price of the Company’s common stock on the date of grant. The option was granted pursuant to the Company’s 2003 Stock Plan and will vest according to the following schedule: 25% on March 24, 2012 (the first anniversary of the grant date) and 1/36 of the remainder each month beginning on April 24, 2012. The grant date fair value of this award was $19,833 based on a Black-Scholes option pricing model described above and is being expensed on a straight-line basis over the vesting period.
As discussed in Note 10, on May 20, 2011, Mr. Tomsic was granted an option to purchase 10,526 shares of the Company’s common stock at an exercise price of $3.77 per share, which was equal to the 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 Mr. Tomsic continues to provide services to the Company. The grant date fair value of this award was $21,446 using a Black-Scholes option pricing model described above, with $11,218 expensed on grant date and the remaining amount being expensed on a straight-line basis over the vesting period.
Stock option awards are expensed on a straight-line basis over the requisite service period. During the years ended September 30, 2011 and 2010, the Company recognized expense of $38,231 and $38,448, respectively, associated with stock option awards. At September 30, 2011, future stock compensation expense (net of estimated forfeitures) not yet recognized was $26,401 and will be recognized over a weighted average remaining vesting period of 3.1 years.
The following summarizes stock option activity for the year ended September 30, 2011:
The following table summarizes information about exercise prices for outstanding options at September 30, 2011:
Upon the exercise of stock options, the Company may issue new shares or, if circumstances permit, issue shares held as treasury stock.
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef