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7. STOCK COMPENSATION
 12 Months Ended
Sep. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
7. STOCK COMPENSATION

The Company awarded employees and non-employees with stock compensation as follows:

 

    Fiscal Year Ended September 30,  
    2013     2012     2011  
Employees   $ 2,636,905     $ 2,266,316     $ 1,641,131  
Non-employees   $ 454,855     $ 581,996     $ 244,309  
                         

 

During the years ended September 30, 2013, 2012 and 2011, non-employee compensation expense excluded $57,553, $53,333, and $141,333, respectively, for shares issued to consultants for future services to be performed.  See Note 11 for more detail on non-employee compensation.


The Company recognized expense of $2,636,905 for options issued or vested during the year ended September 30, 2013, expense of $2,229,326 for options issued or vested during the year ended September 30, 2012 and expense of $1,535,329 for options issued or vested during the year ending September 30, 2011.  This expense was recorded as general and administrative expense.  No options were exercised during the years ended September 30, 2013 and 2012.  The Company received $13,056 from the exercise of options during the year ended September 30, 2011.  The total intrinsic value of options exercised during the fiscal year 2011 was $10,944. 

 

During the year ended September 30, 2013, the Company issued 1,809,387 stock options to employees and directors at a fair value of $3,652,630, ($2.02 fair value per option).  During the year ended September 30, 2012, the Company issued 667,937 stock options to employees and directors at a fair value of $1,876,122, ($2.80 fair value per option).  The Company also cancelled 390,047 stock options that were outstanding to employees and directors at a fair value of $265,096, ($0.68 fair value per option).  During the year ended September 30, 2011, the Company issued 237,959 stock options to employees and directors at a fair value of $1,458,764, ($6.13 fair value per option).  On September 30, 2013, the Company had 2,765,144 options that were unvested at a fair value of $7,726,648, which is a weighted average fair value of $2.79 per share with a weighted average remaining vesting life of 2.47 years.   The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions.

 

    2013     2012     2011  
                         
Expected stock price volatility     84.41-92.28 %     87.72-94.93 %     96.5-97 %
Risk-free interest rate     0.75-2.73 %     0.83-1.92 %     2.97-3.68 %
Expected life of options   4.85-9.77 Years     4.82-9.66 Years     9.62-9.63 Years  
Expected dividend yield     -       -       -  

 

Non-Qualified Stock Option Plan--At September 30, 2013, the Company has collectively authorized the issuance of 5,680,000 shares of common stock under its Non-Qualified Stock Option Plan. Options typically vest over a three-year period and expire no later than ten years after the grant date. Terms of the options are to be determined by the Company’s Compensation Committee, which administers the plans. The Company’s employees, directors, officers, and consultants or advisors are eligible to be granted options under the Non-Qualified Stock Option Plans.

 

Incentive Stock Option Plan--At September 30, 2013, the Company had collectively authorized the issuance of 1,960,000 shares of common stock under its Incentive Stock Option Plan.  Options vest over a one-year to three-year period and expire no later than ten years after the grant date.  Terms of the options were determined by the Company’s Compensation Committee, which administers the plans.  Only the Company’s employees are eligible to be granted options under the Incentive Stock Option Plans.

 

Activity in the Company’s Non-Qualified and Incentive Stock Option Plans for the year ended September 30, 2013 is summarized as follows:

 

Non-Qualified and Incentive Stock Option Plans

 

    Outstanding     Exercisable  
                Weighted                       Weighted        
          Weighted     Ave     Aggregate           Weighted     Ave     Aggregate  
    Number of     Average     Remaining Contractual     Intrinsic     Number of     Average     Remaining Contractual     Intrinsic  
    Shares     Exercise Price     Term (Years)     Value     Shares     Exercise Price     Term (Years)     Value  
Outstanding at October 1, 2012     3,747,209     $ 4.00       6.01     $ 1,101,881       2,098,146     $ 3.80       4.71     $ 1,101,881  
Vested                                     729,087     $ 3.78                  
Granted     1,859,387     $ 2.66                                                  
Exercised                                                                
Forfeited     14,219     $ 3.74                                                  
Expired     6,770     $ 5.11                       6,770     $ 5.11                  
Cancelled     397,466     $ 2.63                       397,466     $ 2.63                  
                                                                 
Outstanding at September 30, 2013     5,188,141     $ 3.62       6.53     $ 133       2,422,997     $ 4.00       4.95     $ 133  

 

A summary of the status of the Company’s non-vested options as of September 30, 2013 is presented below: 

 

    Number of    

Weighted Average

Grant Date

  
    Shares     Fair Value  
                 
Unvested at September 30, 2012     1,649,063     $ 3.60  
Vested     (729,087 )        
Granted     1,859,387     $    
Forfeited     (14,219 )        
Unvested at September 30, 2013      2,765,144     $ 2.79  

 

In January 2011, the Company extended the expiration date on 30,650 options from the Stock Option Plans with exercise prices ranging from $10.00 to $18.50.  The options were extended for three years to expiration dates ranging from January 2014 to December 2014.  This extension was considered a new measurement date with respect to the modified options.  At the date of modification, the additional cost of the options was $105,802.   On December 5, 2011, all of these stock options were cancelled.

 

In November 2011, the Company modified the number of options issued to certain employees and directors, as well as the exercise prices and the expiration dates of the options.  This resulted in the cancellation of 390,047 options priced between $5.40 and $19.40 and the issuance of 312,037 options at $3.20.  In accordance with ASC 718, the incremental compensation cost was $409,370.

 

In December 2011, the Company extended the expiration date on 29,167 options from the Stock Option Plans with exercise prices ranging from $1.60 to $3.30.  The options originally would have expired between April 2012 and August 2012 and were extended for three years to expiration dates ranging from April 2015 to August 2015.  This extension was considered a new measurement date with respect to the modified options.  At the date of modification, the additional cost of the options was $36,990.  As of September 30, 2013, all repriced options remained outstanding.

 

In December 2012, the Company offered employees and directors holding options that expire on April 1, 2013 the opportunity to forfeit these options and have new options issued with an expiration date of December 17, 2017.  All twelve employees and directors eligible for this offer accepted the terms.  This resulted in the cancellation of 387,466 options priced at $2.20 per share and the concurrent issuance of the same number of options at $2.80 per share.  At the cancellation date, the incremental compensation cost was $477,879.  As of September 30, 2013, all options remained outstanding.

 

Stock Bonus Plans -- At September 30, 2013, the Company had been authorized to issue up to 1,594,000 shares of common stock under its Stock Bonus Plans.  All employees, directors, officers, consultants, and advisors are eligible to be granted shares. During the year ended September 30, 2013, 74,230 shares were issued to the Company’s 401(k) plan for a cost of $158,856. During the year ended September 30, 2012, 42,627 shares were issued to the Company’s 401(k) plan for a cost of $154,516. During the year ended September 30, 2011, 29,431 shares were issued to the Company’s 401(k) plan for a cost of $150,865.  During the years ended September 30, 2013, 2012 and 2011, the Company also issued -0-, 618 and 7,111 shares, respectively, to consultants for payment of services at a cost of $0, $1,792 and $31,160, respectively.

 

Stock Compensation Plan-- At September 30, 2013, 1,350,000 shares were authorized for use in the Company’s stock compensation plan.  During the year ended September 30, 2013, 50,000 shares were issued from the Stock Compensation Plan to a consultant for payment of services at a cost of $140,000.  During the year ended September 30, 2012, 100,000 shares were issued from the Stock Compensation Plan to a consultant for payment of services at a cost of $320,000.  No shares were issued from the Stock Compensation Plan during the year ended September 30, 2011.