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Note 10 - Share-based Compensation
 6 Months Ended
Mar. 31, 2016
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
10
. SHARE-BASED COMPENSATION
 
Stock Option Plans
 
At March 31, 2016, the Company had two equity incentive plans. The 2005 Equity Incentive Plan (“2005 Equity Plan”) was terminated with respect to new grants in March 2015, but remains in effect for grants issued prior to that time. The 2015 Equity Incentive Plan (“2015 Equity Plan”) was approved by the Company’s Board of Directors on January 19, 2015 and by the Company’s stockholders on March 18, 2015. The 2015 Equity Plan authorizes for issuance as stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, an aggregate of 5,000,000 new shares of common stock to employees, directors, advisors or consultants. At March 31, 2016, there were options outstanding covering 2,537,836 and 907,500 shares of common stock under the 2005 Equity Plan and 2015 Equity Plan, respectively.
 
Stock Option Activity
 
The following table summarizes information about stock option activity during the six months ended March 31, 2016:
 
 
 
Number
of Shares
 
 
Weighted Average
Exercise Price
 
Outstanding October 1, 2015
     2,852,419     $ 2.35  
Granted
     717,500     $ 1.83  
Forfeited/expired
     (124,583 )   $ 2.56  
Outstanding March 31, 2016
     3,445,336     $ 2.23  
Exercisable March 31, 2016
     2,668,982     $ 2.30  
 
Options outstanding are exercisable at prices ranging from $0.93 to $3.17 and expire over the period from 2020 to 2023 with an average life of 5.9 years. The aggregate intrinsic value of options outstanding and exercisable at March 31, 2016 was $122,360 and $100,482, 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,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
Cost of revenue
   $ 6,101     $ 6,851     $ 11,738     $ 11,671  
Selling, general and administrative
     128,405       125,224       246,360       230,446  
Research and development
     25,811       45,332       50,159       66,737  
Total
   $ 160,317     $ 177,407     $ 308,257     $ 308,854  
 
The employee stock options granted in the six months ended March 31, 2016 and 2015 had a weighted-average estimated fair value of $0.62 per share and $1.13 per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):
 
 
 
 
Six months ended
March 31,
 
 
 
2016
 
 
2015
 
Volatility
    49.0% - 52.0%       51.0% - 62.0%  
Risk-free interest rate
    1.1% - 1.7%       1.0% - 1.6%  
Forfeiture rate
      10.0%           10.0%    
Dividend yield
    2.2% - 2.7%         0.0%    
Expected life in years
    3.2 - 4.6%       3.2 - 4.6%  
 
The Company declared its first dividend in the quarter ended December 31, 2015, so dividend yield assumptions were added to the valuation of options granted based on the expected annual yield. 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 March 31, 2016, no excess tax benefit for the tax deductions related to share-based awards was recognized for the six months ended March 31, 2016 and 2015. As of March 31, 2016, 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 1.8 years.