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Note 12 - Share-Based Compensation | 12 Months Ended
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Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | 12. SHARE-BASED COMPENSATION Stock Option Plans At September 30, 2014, the Company had one equity incentive plan. The 2005 Equity Incentive Plan (“2005 Equity Plan”), as amended, authorizes for issuance as stock options, stock appreciation rights, or stock awards for an aggregate of 3,250,000 shares of common stock to employees, directors or consultants. The total 2005 Equity Plan reserve includes these shares and shares reserved under other plans prior to the 2005 Equity Plan, allowing for the issuance of up to 4,999,564 shares. At September 30, 2014, there were options outstanding covering 2,530,535 shares of common stock under the 2005 Equity Plan and 763,634 shares of common stock available for grant for a total of 3,294,169 currently available under the 2005 Equity Plan. Share-Based Compensation The Company’s employee stock options have various restrictions that reduce option value, including vesting provisions and restrictions on transfer and hedging, among others, and are often exercised prior to their contractual maturity. The Company recorded $585,753 and $736,378 of stock compensation expense for the years ended September 30, 2014 and 2013, respectively. The weighted average estimated fair value of employee stock options granted during the year ended September 30, 2014 and 2013 was calculated using the Black-Scholes option-pricing model with the following weighted average assumptions (annualized percentages):
|  | 2014 |  |  | 2013 |
Volatility |  |  | 54.0% - 76.0% |  |  |  | 74.0% - 81.0% |
Risk-free interest rate |  |  | 0.6%-2.0% |  |  |  | 0.9%-1.7% |
Forfeiture rate |  |  | 10.0% |  |  |  | 10.0% |
Dividend yield |  |  | 0.0% |  |  |  | 0.0% |
Expected life in years |  |  | 3.2 - 6.5 |  |  |  | 6.4 |
The Company has never paid 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 contractual term of the options was ten years through November 20, 2013 and then changed to seven years. 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. Such revision adjustments to expense will be recorded as a cumulative adjustment in the period in which the estimate is changed. As of September 30, 2014, there was approximately $400,000 of total unrecognized compensation costs related to outstanding employee stock options. This amount is expected to be recognized over a weighted average period of 1.4 years. To the extent the forfeiture rate is different from what the Company anticipated; stock-based compensation related to these awards will be different from the Company’s expectations. Stock Option Summary Information A summary of activity for the Company’s stock option plans as of September 30, 2014 and 2013 is presented below:
|  | Number |  |  | Weighted Average |
|  | of Shares |  |  | Exercise Price |
Outstanding October 1, 2013 |  |  | 2,394,476 |  |  | $ | 1.89 |
Granted |  |  | 786,000 |  |  | $ | 1.77 |
Forfeited/expired |  |  | (37,000 | ) |  | $ | 2.00 |
Exercised |  |  | (612,941 | ) |  | $ | 0.89 |
Outstanding September 30, 2014 |  |  | 2,530,535 |  |  | $ | 2.09 |
Exercisable September 30, 2014 |  |  | 2,004,750 |  |  | $ | 2.18 |
Under the Stipulation of Settlement, Thomas R. Brown, President and Chief Executive Officer of the Company, agreed to increase the exercise price of the option granted to Mr. Brown in May 2012 for 750,000 shares from $1.33 to $3.00 per share, which was effective September 10, 2013. The table above reflects the option modification as an exchange of the original award, by reflecting the forfeiture of the original award at $1.33 and the grant of the modified award at $3.00. The aggregate intrinsic value for options outstanding and options exercisable at September 30, 2014 was $1,791,695 and $1,280,014, respectively. The aggregate intrinsic value represents the difference between the Company’s closing stock price on the last day of trading during the year, which was $2.71 per share, and the exercise price multiplied by the number of applicable options. The total intrinsic value of stock options exercised during the year ended September 30, 2014 was $840,284 and cash received from these exercises was $544,893. The total intrinsic value of stock options exercised during the year ended September 30, 2013 was $391,238 and cash received from these exercises was $340,450. The Company recognized $840,284 and $391,238 as a tax benefit in the income tax provision for the years ended September 30, 2014 and 2013, respectively. The following table summarizes information about stock options outstanding at September 30, 2014:
|  |  |  |  |  | Weighted |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Average |  |  | Weighted |  |  |  |  |  |  | Weighted |
Range of |  |  |  |  |  | Remaining |  |  | Average |  |  |  |  |  |  | Average |
Exercise |  | Number |  |  | Contractual |  |  | Exercise |  |  | Number |  |  | Exercise |
Prices |  | Outstanding |  |  | Life |  |  | Price |  |  | Exercisable |  |  | Price |
$0.93 | - | $1.35 |  |  | 680,282 |  |  |  | 3.81 |  |  | $ | 1.28 |  |  |  | 638,843 |  |  | $ | 1.27 |
$1.36 | - | $1.70 |  |  | 73,750 |  |  |  | 8.15 |  |  | $ | 1.46 |  |  |  | - |  |  | $ | 0.00 |
$1.71 | - | $1.85 |  |  | 564,753 |  |  |  | 6.16 |  |  | $ | 1.76 |  |  |  | 256,532 |  |  | $ | 1.76 |
$1.86 | - | $2.30 |  |  | 350,500 |  |  |  | 6.76 |  |  | $ | 2.20 |  |  |  | 250,000 |  |  | $ | 2.27 |
$2.31 | - | $2.65 |  |  | 110,000 |  |  |  | 1.18 |  |  | $ | 2.63 |  |  |  | 109,375 |  |  | $ | 2.63 |
$2.66 | - | $3.13 |  |  | 751,250 |  |  |  | 7.61 |  |  | $ | 3.00 |  |  |  | 750,000 |  |  | $ | 3.00 |
$0.93 | - | $3.13 |  |  | 2,530,535 |  |  |  | 5.89 |  |  | $ | 2.09 |  |  |  | 2,004,750 |  |  | $ | 2.18 |
Under the Stipulation of Settlement, Thomas R. Brown agreed to increase the exercise price of the option granted to Mr. Brown in May 2012 for 750,000 shares from $1.33 to $3.00 per share. This price change was effective on September 10, 2013. The remaining exercise period and term did not change, and as per ASC 718 “Compensation—Stock Compensation”, the Company is required to recognize compensation cost for an equity award at least equal to the fair value of the award at the grant date. As a result, compensation expense was not reduced as a result of this change. The Company recorded non-cash share-based compensation expense for employees, directors and consultants of $585,753 and $736,378, respectively, for the fiscal years ended September 30, 2014 and 2013. The amounts of share-based compensation expense are classified in the consolidated statements of operations as follows:
Years Ended September 30, |  | 2014 |  |  | 2013 |
Cost of revenue |  | $ | 12,629 |  |  | $ | 7,336 |
Selling, general and administrative |  |  | 500,083 |  |  |  | 681,147 |
Research and development |  |  | 73,041 |  |  |  | 47,895 |
Total |  | $ | 585,753 |  |  | $ | 736,378 |

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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