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Note 13 - Share-based Compensation | 6 Months Ended
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Mar. 31, 2018
Notes to Financial Statements |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | 1 3 . SHARE-BASED COMPENSATION Equity Incentive Plans At March 31, 2018, 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 Amended and Restated 2015 Equity Incentive Plan ( “2015 Equity Plan”) was approved by the Company’s Board of Directors on December 6, 2016 and by the Company’s stockholders on March 14, 2017. 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, 2018, there were options outstanding covering 2,193,502 and 2,279,315 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, 2018:
|  | Number |  |  | Weighted Average |
|  | of Shares |  |  | Exercise Price |
Outstanding October 1, 2017 |  |  | 4,663,502 |  |  | $ | 2.16 |
Granted |  |  | 3,500 |  |  | $ | 2.21 |
Forfeited/expired |  |  | (83,333 | ) |  | $ | 2.84 |
Exercised |  |  | (110,852 | ) |  | $ | 1.68 |
Outstanding March 31, 2018 |  |  | 4,472,817 |  |  | $ | 2.15 |
Exercisable March 31, 2018 |  |  | 3,298,533 |  |  | $ | 2.23 |
Options outstanding are exercisable at prices ranging from $0.93 to $3.17 and expire over the period from 2018 to 2024 with an average life of 3.0 years. The aggregate intrinsic value of options outstanding and exercisable at March 31, 2018 was $1,242,236 and $990,806, respectively. During the six months ended March 31, 2017, the Company incurred non-cash share-based compensation expense of $307,324 resulting from the modification of stock options in accordance with a Separation Agreement and General Release related to the June 30, 2016 departure of the Company’s prior chief executive officer (“CEO”). As per the agreement, all unvested options became fully vested on December 31, 2016 and shall remain exercisable for a period of 24 months following the December 31, 2016 separation date as defined in the agreement. The expense is measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified as per ASC 718 - 20 - 35. Performance-Based Stock Options On August 1, 2016, the Company awarded a performance-based stock option (PVO) to purchase 750,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of fiscal 2019 and 2020 ( 375,000 shares for each year) including minimum free cash flow margin and net revenue targets at four different target levels for each of the years. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets. The Company has made the assumption that the lowest performance target level for each of the years will be met, and therefore 187,500 shares of the PVO are assumed to vest. The weighted average grant date fair value for the PVO was $0.81 per share, which was estimated on the date of grant using the Black-Scholes option pricing model. Non-cash share-based compensation expense related to this award is recognized on a straight-line basis over the requisite service periods. The Company will continue to review these targets each quarter and will adjust the expected outcome as needed, recognizing compensation expense cumulatively in such period for the difference in expense. Restricted Stock Units During the quarter ended December 31, 2016, the Board of Directors approved the grant of 25,000 restricted stock units (“RSUs”) to each of the Company’s non-employee directors, subject to stockholder approval of the Amended and Restated 2015 Equity Incentive Plan at the 2017 Annual Meeting of Stockholders. These RSUs were granted as replacements for 20,000 stock options that would have been granted on the date of the 2016 Annual Meeting of Stockholders and vested on the first anniversary of the 2016 Annual Meeting of Stockholders, which was May 17, 2017. As a result of the stockholders approval of the Amended and Restated 2015 Equity Incentive Plan at the 2017 Annual Meeting of Stockholders on March 14, 2017, the RSUs previously granted were made effective at a market value of $197,500 and were expensed on a straight line basis through the May 17, 2017 vest date. On March 14, 2017, the Board of Directors approved an additional grant of 25,000 RSUs to each of the Company’s non-employee directors that will vest on the first anniversary of the grant date. These were also issued at a market value of $197,500, which will be expensed on a straight line basis through the March 14, 2018 vest date. On March 20, 2018, the Board of Directors approved an additional grant of 25,000 RSUs to each of the Company’s non-employee directors that will vest on the first anniversary of the grant date. These were issued at a market value of $278,750, which will be expensed on a straight line basis through the March 20, 2019 vest date. Also during the quarter, 93,330 RSUs were granted to employees that will vest over three years on the anniversary date of the grant. These were issued at a market value of $210,176, which will be expensed on a straight line basis over the three year life of the grants. 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 |  |  | Six months ended |
|  | March 31, |  |  | March 31, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Cost of revenues |  | $ | 5,047 |  |  | $ | 5,874 |  |  | $ | 11,256 |  |  | $ | 11,751 |
Selling, general and administrative |  |  | 120,133 |  |  |  | 148,600 |  |  |  | 229,455 |  |  |  | 584,097 |
Research and development |  |  | 20,609 |  |  |  | 22,928 |  |  |  | 43,539 |  |  |  | 46,303 |
Total |  | $ | 145,789 |  |  | $ | 177,402 |  |  | $ | 284,250 |  |  | $ | 642,151 |
The employee stock options granted in the six months ended March 31, 2018 and 2017 had a weighted-average estimated fair value of $0.89 per share and $0.71 per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):
|  | Six months ended |
|  | March 31, |
|  | 2018 |  |  | 2017 |
Volatility |  | 45.4% |  |  | 47.5% | - | 53.7% |
Risk-free interest rate |  | 2.2% |  |  | 1.7% | - | 2.0% |
Forfeiture rate |  | 10.0% |  |  |  | 10.0% |  |
Dividend yield |  | 0.0% |  |  |  | 0.0% |  |
Expected life in years |  | 4.6 |  |  | 3.8 | - | 4.6 |
The Company did not declare a dividend for the six -month periods ended March 31, 2018 and 2017. 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. As of March 31, 2018, there was approximately $900,000 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 1.9 years.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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