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Note 9 - Share-based Compensation
 9 Months Ended
Jun. 30, 2014
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 June 30, 2014, 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 June 30, 2014, there were options outstanding covering 2,787,500 shares of common stock under the 2005 Equity Plan and an additional 762,134 shares of common stock available for grant.


Stock Option Activity  


The following table summarizes information about stock option activity during the nine months ended June 30, 2014:


   

Number

   

Weighted Average

 
   

of Shares

   

Exercise Price

 

Outstanding October 1, 2013

    2,394,476     $ 1.89  

Granted

    785,500     $ 1.77  

Forfeited/expired

    (35,000 )   $ 2.01  

Exercised

    (357,476 )   $ 0.54  

Outstanding June 30, 2014

    2,787,500     $ 2.02  

Exercisable June 30, 2014

    2,204,280     $ 2.10  

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 5.9 years. The aggregate intrinsic value of options outstanding and exercisable at June 30, 2014 was $929,545 and $734,908, 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

   

Nine months ended

 
   

June 30,

   

June 30,

 
   

2014

   

2013

   

2014

   

2013

 

Cost of revenue

  $ 2,702     $ 1,180     $ 9,169     $ 6,385  

Selling, general and administrative

    125,407       178,777       419,968       539,652  

Research and development

    19,427       11,798       59,821       36,021  

Total

  $ 147,536     $ 191,755     $ 488,958     $ 582,058  

The employee stock options granted in the nine months ended June 30, 2014 and 2013 had a weighted-average estimated fair value of $0.85 per share and $0.64 per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):


   

Nine months ended

 
   

June 30,

 
   

2014

   

2013

 

Volatility

    54.0% - 76.0%       77.0% - 81.0%  

Risk-free interest rate

    0.6% - 2.0%       0.93% - 1.08%  

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 June 30, 2014, no excess tax benefit for the tax deductions related to share-based awards was recognized for the nine months ended June 30, 2014 and 2013. As of June 30, 2014, 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 1.6 years.