Stock Options and Warrants

6 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Stock Options and Warrants

Stock Incentive Plan

At the annual meeting of shareholders on December 21, 2011, the shareholders approved the 2012 Equity Compensation Plan (the “2012 Plan”).  The 2012 Plan provides for the grant of incentive stock options and nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards and performance-based awards to employees and certain non-employees who have important relationships with the Company. A total of 90,000 shares are authorized for issuance pursuant to awards granted under the 2012 Plan.  During the six months ended March 31, 2015 and 2014, respectively, no options were issued under this 2012 Plan.  As of March 31, 2015, 9,680 shares of common stock were available for future grants under the 2012 Plan.

All Options and Warrants

The fair value of each stock option and warrant grant is estimated on the date of grant using the Black-Scholes option-pricing model. During the six months ended March 31, 2015 and 2014, the Company granted 14,988 and 27,700 shares of common stock. These warrants vested immediately and expire two years from grant date. Additionally, the Company extended the life of 129,808 warrants which had been granted during 2013 and 2014. The Company recorded $150,163 of expense for the six months ended March 31, 2014 and $106,915 of expense for the three months ended March 31, 2014 related to the issuance and vesting of all stock options and warrants. The Company also recorded expense of $39,929 for warrants which were extended during the six months ended March 31, 2015. As of March 31, 2015, $50,054 of compensation expense associated with unvested stock options and warrants issued previously to employees will be recognized over the remaining fiscal year.

The option and warrant grants and warrant extensions for six months ended March 31, 2015 and 2014 were valued using the Black-Scholes model with the following weighted-average assumptions:

	March 31,
	2015			2014
Expected cash dividend yield		-			-
Expected stock price volatility		76	%		77	%
Risk-free interest rate		0.54	%		0.12	%
Expected life of options/warrants	2 Years			2 Years

The expected life of stock options (warrants) represents the period of time that the stock options or warrants are expected to be outstanding based on the simplified method allowed under GAAP. The expected volatility is based on the historical price volatility of the Company’s common stock. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options (warrants). The dividend yield represents the Company’s anticipated cash dividends over the expected life of the stock options (warrants).

A summary of stock option activity for the six months ended March 31, 2015 is presented below:

	Shares Under Option/ Warrant		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding as of September 30, 2014		305,251	$	15.71	1.05 years	$	487,402
Granted		14,988
Expired / Cancelled		(57,636)
Exercised		-
Outstanding as of March 31, 2015		262,603	$	15.08	1.65 years	$	74,365
Exercisable as of March 31, 2015		262,603	$	15.08	1.65 years	$	74,365
	Total Equity
Balance at September 30, 2014	$	19,916,047
Issuance of common stock for acquisition		580,884

The intrinsic value of options outstanding and exercisable is based on the Company’s share price of $10.15 at March 31, 2015.