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Stock-Based Compensation
 3 Months Ended
Dec. 31, 2011
Stock-Based Compensation

Note 4.           Stock-Based Compensation

Stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant).

The Company measures the compensation cost associated with share-based payments by estimating the fair value of stock options as of the grant date using the Black-Scholes option pricing model. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted during all years presented. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards.

Our net loss for the three months ended December 31, 2011 and December 31, 2010 each include $15,000 of compensation costs related to our stock-based compensation arrangements.

During the three months ended December 31, 2011, we granted 30,000 non-statutory stock options with an exercise price of $1.31 and a per-share weighted average fair value was $1.07.

In addition to the exercise and grant date prices of the awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants are listed in the following table:

 

Non-Statutory

Stock Options

Expected term (years)

7.5

Expected volatility

95.71%

Risk-free interest rate

1.47%

Expected dividends

0

We estimate expected volatility based on historical weekly price changes of our common stock for a period equal to the current expected term of the options. The risk-free interest rate is based on the United States treasury yields in effect at the time of grant corresponding with the expected term of the options. The expected option term is the number of years we estimate that options will be outstanding prior to exercise considering vesting schedules and our historical exercise patterns.

A summary of stock option activity under our share-based compensation plan for the three months ended December 31, 2011 is presented in the following table: 

 

Options

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (Yrs.)

Aggregate Intrinsic Value

Outstanding-beg of year

166,022

$  6.89

 

 

Granted

30,000

$  1.31

 

 

Exercised

-

 

 

 

Forfeited

-

 

 

 

Expired

(  19,066)

$  5.25

 

 

Outstanding Dec 31, 2011

 176,956

$  6.12

7.1

$  0

 

 

 

 

 

Exercisable Dec 31, 2011

  114,085

$  8.48

6.1

$  0

As of December 31, 2011, the total remaining unrecognized compensation cost related to unvested stock-based arrangements was $71,000 and is expected to be recognized over a period of 1.9 years.

There were no stock options exercised during the three months ended December 31, 2011.