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Share-Based Compensation
 3 Months Ended
Dec. 31, 2011
Share-Based Compensation [Abstract]  
Share-Based Compensation

12. SHARE-BASED COMPENSATION

Stock Option Plans

At December 31, 2011, the Company had one equity incentive plan, the 2005 Equity Incentive Plan ("2005 Equity Plan"). The 2005 Equity Plan, as amended, authorizes for issuance as stock options, stock appreciation rights, or stock awards an aggregate of 3,250,000 new shares of common stock to employees, directors or consultants. The total plan reserve includes these new shares and shares reserved under prior plans, allowing for the issuance of up to 4,999,564 shares. At December 31, 2011, there were options outstanding covering 4,171,339 shares of common stock under the 2005 Equity Plan and an additional 261,977 shares of common stock available for grant.

Stock Option Activity

The following table summarizes information about stock option activity during the three months ended December 31, 2011:

 

     Number
of Shares		     Weighted Average
Exercise Price		  

Outstanding October 1, 2011

      4,181,339      $ 2.40   

Canceled/expired

      (10,000 )    $ 4.69   
  

 

 

    

Outstanding December 31, 2011

      4,171,339      $ 2.40   
  

 

 

    

Exercisable December 31, 2011

      3,793,061      $ 2.45   
  

 

 

    

Options outstanding are exercisable at prices ranging from $0.46 to $4.81 and expire over the period from 2012 to 2021 with an average life of 1.94 years. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2011 was $955,790 and $922,618, respectively.

 

Share-Based Compensation

The Company recorded share-based compensation expense and classified it in the condensed consolidated statements of operations as follows:

 

    

Three Months Ended

December 31,

  
     2011      2010  

Cost of revenue

    $ 6,881       $ 6,822   

Selling, general and administrative

      118,399         88,186   

Research and development

      14,006         18,295   
  

 

 

     

 

 

  

Total

    $ 139,286       $ 113,303   
  

 

 

     

 

 

  

There were no stock options granted in the three months ended December 31, 2011. The weighted-average estimated fair value of employee stock options granted during the three months ended December 31, 2010 was $1.63 per share, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):

 

     Three Months Ended December 31,
     2011    2010

Volatility

    na    90.0% - 93.0%

Risk-free interest rate

    na    1.0% - 1.5%

Forfeiture rate

    na    10.0%

Dividend yield

    na    0.0%

Expected life in years

    na    3.4 - 4.0

The Company has never paid cash dividends and has no present intention to pay cash dividends. Expected volatility is based on the historical volatility of the Company's common stock over the period commensurate with the expected life of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The expected life is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates or if the Company updates its estimated forfeiture rate. Such amounts will be recorded as a cumulative adjustment in the period in which the estimate is changed.

Since the Company has an NOL carryforward as of December 31, 2011, no excess tax benefit for the tax deductions related to share-based awards was recognized for the three months ended December 31, 2011 and 2010. As of December 31, 2011, there was approximately $600,000 of total unrecognized compensation cost related to non-vested share-based employee compensation arrangements. The cost is expected to be recognized over a weighted-average period of 1.4 years.