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Note 9 - Share-based Compensation
 3 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

9. SHARE-BASED COMPENSATION


Stock Option Plans


At December 31, 2013, 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, 2013, there were options outstanding covering 2,712,000 shares of common stock under the 2005 Equity Plan and an additional 837,634 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, 2013:


   

Number

of Shares

   

Weighted Average

Exercise Price

 

Outstanding October 1, 2013

    2,394,476     $ 1.89  

Granted

    682,500     $ 1.73  

Forfeited/expired

    (7,500 )   $ 1.93  

Exercised

    (357,476 )   $ .54  

Outstanding December 31, 2013

    2,712,000     $ 2.02  

Exercisable December 31, 2013

    1,957,140     $ 2.08  

Options outstanding are exercisable at prices ranging from $0.93 to $3.13 and expire over the period from 2014 to 2023 with an average life of 6.2 years. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2013 was $643,465 and $497,002, 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,

 
   

2013

   

2012

 

Cost of revenue

  $ 2,058     $ 3,899  

Selling, general and administrative

    131,176       189,831  

Research and development

    16,580       12,248  

Total

  $ 149,814     $ 205,978  

 The employee stock options granted in the three months ended December 31, 2013 and 2012 had a weighted-average estimated fair value of $0.85 per share and $0.70 per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):


   

Three months ended

December 31,

 
   

2013

   

2012

 

Volatility

   65.0% -  76.0%       81.0 %

Risk-free interest rate

   0.6% - 2.0%       0.9 %

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 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, 2013, no excess tax benefit for the tax deductions related to share-based awards was recognized for the three months ended December 31, 2013 and 2012. As of December 31, 2013, there was approximately $800,000 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 1.7 years.