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14. STOCK OPTIONS
 9 Months Ended 12 Months Ended
Jun. 30, 2012
Sep. 30, 2011
Notes to Financial Statements    
14. STOCK OPTIONS

Description of Stock Option Plan

 

On April 29, 2011, the 2011 Stock Incentive Plan was approved at the Annual Stockholder Meeting. The Company has 6,600,000 options to purchase common stock available to issue under the 2011 Stock Incentive Plan.

  

Determining Fair Value Under ASC 505

 

The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding.  The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.

 

Stock Option Activity

 

On November 9, 2011, Bradley E. Sparks forfeited a grant to purchase 1,000,000 shares of common stock at $0.75 per share.

 

On November 29, 2011, Jeff Kruse and Steve Waddle, employees of TransTech, were each granted an option to purchase 100,000 shares of common stock at $0.12 per share. The grants vest quarterly over three years and expire November 28, 2014.

 

On February 15, 2012, Marco Hegyi forfeited a grant to purchase 2,000,000 shares of common stock at $0.50 per share.

 

On February 24, 2012, the Company issued 400,000 shares of common stock to five directors for services provided during 2011. The shares were issued under the 2011 Stock Incentive Plan.

 

On February 24, 2012, Marco Hegyi, our Chairman of the Board, was granted an option to purchase 1,900,000 shares of common stock at $0.10 per share. The grant vests 750,000 shares on February 24, 2012 and 250,000 shares per quarter. The grant vests upon a change in control and expires February 23, 2022.

 

On May 11, 2012, the Company issued a stock option grant for 100,000 shares of common stock to a consultant at $0.15 per share. The stock option grant vested immediately.

 

On May 11, 2012, a consultant forfeited a stock option grant for 100,000 shares of common stock at $.15 per share.

  

On June 6, 2012, the Company issued, subject to shareholder approval at the 2012 annual shareholder meeting of an increase in the number of shares available under the Company’s Stock Incentive Plan, stock option grants totaling 3,000,000 shares of common stock to five directors for services provided during 2012. The shares were issued under the 2011 Stock Incentive Plan.

 

There are currently 9,020,000 options to purchase common stock at $0.131 per share outstanding at June 30, 2012 under the 2011 Stock Incentive Plan, assuming the shareholder approval at the 2012 annual shareholder meeting. The Company recorded $232,567 and $50,727 of compensation expense, net of related tax effects, relative to stock options for the nine months ended June 30, 2012 and 2011 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00).

 

Description of Stock Option Plan

 

On April 29, 2011, the 2011 Stock Incentive Plan was approved at the Annual Stockholder Meeting. The Company reserved 7,000,000 shares of Common Stock for issuance under the 2011 Stock Incentive Plan.

 

In 2005, our Board of Directors adopted a combined incentive and nonqualified stock option plan for employees, consultants, suppliers and directors (“2005 Stock Option Plan”).   On October 9, 2006 the Board of Directors authorized an increase in shares available for grant from 2 million to 4 million, subject to stockholder approval. The 2005 Stock Option Plan has never been approved by the shareholders and stock option grants are considered non-statutory.

 

Determining Fair Value Under ASC 505

 

The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding.  The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjust share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.

 

Stock Option Activity

 

On November 17, 2010, the Board of Directors authorized to TransTech employees, the grant of non-qualified options to purchase 220,000 shares of the Company’s common stock at $0.24 per share. The non- qualified stock option grants vest quarterly over three years and expire in five (5) years.

 

On May 9, 2011, the Board of Directors authorized to Marco Hegyi, our Chairman of the Board, the grant of qualified and non-qualified options to purchase 2,000,000 shares of the Company’s common stock at $0.50 per share. The stock option grants vest quarterly over two years and expire in five (5) years.

 

On May 18, 2011, the Board of Directors authorized to Lance Gima, a consultant, the grant of qualified options to purchase 100,000 shares of the Company’s common stock at $0.52 per share. The stock option grants vest quarterly over one year and expire in five (5) years.

 

On June 15, 2011, two directors forfeited 135,000 shares from stock option grants granted at $.75 per share that expired June 15, 2011.

 

There are currently 6,920,000 options to purchase common stock at $.296 per share outstanding at September 30, 2011 under the 2011 Stock Incentive Plan. The Company recorded $151,008 and $152,053 of compensation expense, net of related tax effects, relative to stock options for the year ended September 30, 2011 and 2010 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00). As of September, 2011, there is approximately $591,166 of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately two years. 

 

On November 9, 2011, Mr. Bradley Sparks forfeited 1,000,000 options to purchase common stock.

 

Stock option activity for the years ended September 30, 2011, 2010 and 2009 are summarized as follows:

 

          Weighted Average  
    Options     Exercise Price     $  
Outstanding as of September 30, 2008     1,485,000       0.602       894,250  
Granted     75,000       0.150       11,250  
Exercised     -       -       -  
Forfeitures     (250,000 )     0.100       (25,000 )
Outstanding as of September 30, 2009     1,310,000       0.672       880,500  
Granted     3,500,000       0.141       495,000  
Exercised     -       -       -  
Forfeitures     (75,000 )     (0.150 )     (11,250 )
Outstanding as of September 30, 2010     4,735,000     $ 0.288       1,364,250  
Granted     2,320,000       0.339       785,800  
Exercised     -       -       -  
Forfeitures     (135,000 )     (0.750 )     (101,250 )
Outstanding as of September 30, 2011     6,920,000     $ 0.296       2,048,800  

 

The following table summarizes information about stock options outstanding and exercisable at September 30, 2011: 

 

          Weighted   Weighted           Weighted  
          Average   Average           Average  
Range of     Number   Remaining Life   Exercise Price     Number     Exercise Price  
Exercise Prices     Outstanding   In Years   Exerciseable     Exerciseable     Exerciseable  
0.09       500,000   8.75 years   $ 0.090       125,000     $ 0.090  
0.15       3,000,000   8.75 years     0.150       1,875,000       0.150  
0.18       100,000   .5 years     0.180       90,000       0.180  
0.24       220,000   4.25 years     0.240       55,000       0.240  
0.35       2,100,000   4.75 years     0.350       275,000       0.350  
0.75       1,000,000   0.0 years     0.750       1,000,000       0.750  
        6,920,000   7.53 years   $ 0.296       3,420,000     $ 0.553  

 

There is no aggregate intrinsic value of the exercisable options as of September 30, 2011.