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Share-Based Compensation
 6 Months Ended
Mar. 31, 2012
Share-Based Compensation [Abstract]  
Share-Based Compensation

12. SHARE-BASED COMPENSATION

Stock Option Plans

At March 31, 2012, 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 March 31, 2012, there were options outstanding covering 3,969,714 shares of common stock under the 2005 Equity Plan and an additional 963,602 shares of common stock available for grant.

Stock Option Activity

The following table summarizes information about stock option activity during the six months ended March 31, 2012:

 

     Number
of Shares		     Weighted Average
Exercise Price		  

Outstanding October 1, 2011

      4,181,339      $ 2.40   

Granted

      10,000      $ 1.51   

Canceled/expired

      (721,625 )    $ 4.43   
  

 

 

    

Outstanding March 31, 2012

      3,469,714      $ 1.98   
  

 

 

    

Exercisable March 31, 2012

      3,189,622      $ 1.98   
  

 

 

    

Options outstanding are exercisable at prices ranging from $0.46 to $3.58 and expire over the period from 2012 to 2022 with an average life of 2.07 years. The aggregate intrinsic value of options outstanding and exercisable at March 31, 2012 was $1,029,372 and $1,007,699, 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
March 31,		      Six months ended
March 31,		  
     2012      2011      2012      2011  

Cost of revenue

    $ 6,244       $ 6,330       $ 13,125       $ 13,152   

Selling, general and administrative

      117,803         76,831         236,202         165,017   

Research and development

      14,137         14,206         28,143         32,501   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 138,184       $ 97,367       $ 277,470       $ 210,670   
  

 

 

     

 

 

     

 

 

     

 

 

  

The weighted-average estimated fair value of employee stock options granted during the periods below were calculated using the Black-Scholes option pricing model with the following weighted-average assumptions above (annualized percentages).

 

     Six months ended March 31,
     2012   2011

Volatility

    82.0%   89.0% - 93.0%

Risk-free interest rate

    1.10%   0.99% - 1.77%

Forfeiture rate

    10.0%   10.0%

Dividend yield

    0.0%   0.0%

Expected life in years

    6.4   3.4 - 4.0

Weighted average fair value of options granted during the year

    $1.07   $1.61

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 a NOL carryforward as of March 31, 2012, no excess tax benefit for the tax deductions related to share-based awards was recognized for the six months ended March 31, 2012 and 2011. As of March 31, 2012, there was approximately $500,000 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 1.3 years.