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Note 8 - Stock Options and Awards
 12 Months Ended
Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
8.    Stock Options and Awards

In 1991, the Company adopted the 1991 Stock Option Plan (the “1991 Plan”), and authorized 332,750 shares of common stock to be reserved for issuance pursuant to the 1991 Plan. The 1991 Plan expired on October 23, 2001. In 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), and authorized 199,650 shares of common stock to be reserved for issuance pursuant to the 1997 Plan. The 1997 plan expired in 2007. Because the 1991 Plan and the 1997 Plan have expired, no further awards will be issued under these plans. In 2003, the Company adopted the 2003 Stock Incentive Plan (the “2003 Plan”) and authorized 200,000 shares of common stock to be reserved for issuance pursuant to the 2003 Plan. As of September 30, 2011, there were 7,500 shares available to be granted under the 2003 Plan. In 2007, the Company adopted the 2007 Stock Incentive Plan (the “2007 Plan”) and authorized 250,000 shares of common stock to be reserved for issuance pursuant to the 2007 Plan. As of September 30, 2011, there were 143,700 shares available to be granted under the 2007 Plan. In 2003, the Company issued non-qualified stock options to non-officer employees hired as part of the Technisource acquisition. These options were granted at their fair value on the date of grant. These options vested over a period of four years and expire ten years from the date of grant. Under all of the stock incentive plans, both incentive stock options and non-qualified stock options may be granted to officers, key employees and other persons providing services to the Company. The 2003 Plan and 2007 Plan also provide for awards of nonvested shares of common stock. All of the Company’s stock incentive plans have a ten year life. The total number of available shares under all plans for future awards was 151,200 as of September 30, 2011.

Options issued under any of the stock option plans are not affected by termination of the plan. The Company issues stock options at their fair market value on the date of grant. Vesting of stock options granted pursuant to the Company’s stock incentive plans is determined by the Company’s compensation committee. Generally, options granted to employees vest over four years and expire ten years from the date of grant. Options granted to non-employee directors, have historically been cliff vesting after six months from the date of grant and expire three years from the date of grant. In fiscal 2009, 2010 and 2011, the Company granted certain officers including its Chief Executive Officer and non-employee directors shares of nonvested common stock instead of stock options. The vesting periods for the officers’, the Chief Executive Officer’s and the directors’ nonvested stock awards are four years, three years and one year, respectively.

We measure and recognize compensation expense for all stock-based payment awards made to employees and directors including employee stock options and awards of nonvested stock based on estimated fair values, as described in note 1. Stock-based compensation expense incurred and recognized for the years ended September 30, 2011 and 2010 related to stock options and nonvested stock granted to employees and non-employee directors under the Company’s stock incentive and employee stock purchase plans totaled approximately $168 thousand and $223 thousand, respectively. The classification of the cost of share-based compensation, in the statements of operations, is consistent with the nature of the services being rendered in exchange for the share based payment. The following table summarizes stock-based compensation expense in the Company’s consolidated statements of operations:

   
Years ended
 
   
September 30,
2011
   
September 30,
2010
 
   
(Amounts in thousands)
 
Cost of sales
  $ 1     $ 1  
Engineering and development
    12       28  
Selling, general and administrative
    156       194  
Total
  $ 169     $ 223  

For the year ended September 30, 2011, the Company granted 1,750 share options to certain key employees, 27,000 nonvested shares to certain officers including the Chief Executive Officer and 10,000 nonvested shares to its non-employee directors. For the year ended September 30, 2010, the Company granted 2,250 share options to certain key employees, 21,000 nonvested shares to certain officers including its Chief Executive Officer and 10,000 nonvested shares to its non-employee directors.

The Company measures the fair value of nonvested stock awards based upon the market price of its common stock as of the date of grant. The Company uses the Black-Scholes option-pricing model to value stock options. The Black-Scholes model requires the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate and the weighted average expected life of the options, at the time of grant. Because the Company had never paid a dividend prior to and including the grant dates in fiscal year 2011, the dividend rate variable in the Black-Scholes model is zero. The table below summarizes the assumptions used to value these options:

   
Years ended
 
   
September 30,
2011
   
September 30,
2010
 
Expected volatility
    57%       59%  
Expected dividend yield
    —       —  
Risk-free interest rate
    2.88%       2.72%-3.08%  
Expected term (in years)
    6.88       6.1-7.6  

The volatility assumption is based on the historical weekly price data of the Company’s stock over a period equivalent to the weighted average expected life of the Company’s options. Management evaluated whether there were factors during those periods which would distort the volatility figures if used to estimate future volatility and concluded that there were no such factors.

The risk-free interest rate assumptions are based on U.S. Treasury rates determined at the date of option grant.

The expected terms of employee stock options represent weighted-average periods that the stock options are expected to remain outstanding. They are based upon the historical average of the actual terms that stock options were outstanding, or are expected to be outstanding. Management believes this historical data is representative of the expected term of options granted for the years ended September 30, 2011 and 2010.

As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, expense for grants beginning upon adoption on October 1, 2005 has been reduced for estimated forfeitures. Forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rates for the years ended September 30, 2011 and 2010 were based on actual forfeitures.

No cash was used to settle equity instruments granted under share-base payment arrangements in any of the years in the two-year period ended September 30, 2011.

The following tables provide summary data of stock option award activity:

   
Number
of Shares
   
Weighted
average
exercise
price
   
Weighted
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
                     
(in thousands)
 
Outstanding at September 30, 2009
    370,962     $ 6.61       —       —  
Granted
    2,250     $ 3.85       —       —  
Expired
    (98,437 )   $ 5.61       —       —  
Forfeited
    —       —       —       —  
Exercised
    —       —       —       —  
Outstanding at September 30, 2010
    274,775     $ 6.95       —       —  
Granted
    1,750     $ 3.85       —       —  
Expired
    (31,100 )   $ 5.05       —       —  
Forfeited
    —       —       —       —  
Exercised
    —       —       —       —  
Outstanding at September 30, 2011
    245,425     $ 7.13    
4.17 Years
    $ 38  
Exercisable at September 30, 2011
    229,298     $ 7.31    
3.96 Years
    $ 35  
Vested and expected to vest at September 30, 2011
    245,425     $ 7.13    
4.17 Years
    $ 38  

The weighted average grant date fair value of share options granted during the years ended September 30, 2011 and 2010 was $2.27 and $2.32, respectively. The aggregate intrinsic value of stock options exercised during the years ended September 30, 2011 and 2010 was zero (there were no stock options exercised in fiscal 2011 and 2010).

The following table provides summary data of nonvested stock award activity:

   
Number of
nonvested
shares
   
Weighted
Average
grant date
Fair
Value
   
Weighted
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
                     
(in thousands)
 
Nonvested shares outstanding at September 30, 2009
    23,300     $ 3.17       —       —  
Activity in 2010:
                               
Granted
    31,000     $ 3.79       —       —  
Vested
    (14,434 )   $ 3.28       —       —  
Forfeited
    —       —       —       —  
Nonvested shares outstanding at September 30, 2010
    39,866     $ 3.61       —       —  
Activity in 2011:
                               
Granted
    37,000     $ 3.97       —       —  
Vested
    (21,017 )   $ 3.58       —       —  
Forfeited
    —       —       —       —  
Nonvested shares outstanding at September 30, 2011
    55,849     $ 3.86    
8.82 Years
    $ 195  
Vested at September 30, 2011
    35,451     $ 3.46    
7.76 Years
    $ 124  
Vested and expected to vest at September 30, 2011
    91,300     $ 3.71    
8.41 Years
    $ 320  

As of September 30, 2011 there was $160 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements (including share option and nonvested share awards) granted under the company’s stock incentive plans. This cost is expected to be expensed over a weighted average period of approximately 2.22 years. The total fair value of shares vested during the years ended September 30, 2011 and 2010 was $154 thousand and $169 thousand, respectively.