Stock Options and Warrants

3 Months Ended

Dec. 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 provide services to the Company in lieu of cash. A total of 90,000 shares were initially authorized for issuance pursuant to awards granted under the 2012 Plan. At the 2015 annual meeting of shareholders held on May 19, 2015, our stockholders approved a 713,262 share increase to the total number of shares authorized under the 2012 Plan.   During the three months ended December 31, 2015 and 2014, respectively, no options were issued under this 2012 Plan.  As of December 31, 2015, 448,346 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. The Company did not grant options or warrants to purchase common or preferred stock during the three months ended December 31, 2014. During the three months ended December 31, 2015, the Company granted 40,261 warrants to purchase shares of common stock.  These warrants vested immediately and expire two years from grant date.  The Company recorded $95,968 and $75,082 of expense for the three months ended December 31, 2015 and 2014, respectively, related to the issuance and vesting of outstanding stock options and warrants. 

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

	Three Months Ended December 31
	2015		2014
Expected stock price volatility		51%		N/A(1)
Risk-free interest rate		0.64%		N/A(1)
Expected life of options/warrants		2 years		N/A(1)

(1) This information was deemed not applicable (N/A) since no options or warrants to purchase common stock were granted during the three months ended December 31, 2014.

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 three months ended December 31, 2015 is presented below:

	Shares Under Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding as of September 30, 2015		381,656		$	15.71
Granted		40,261		$	11.17
Expired		(10,527	)	$	23.99
Exercised		-		$	-
Outstanding as of December 31, 2015		411,390		$	11.64	1.28 years	$	-
Exercisable as of December 31, 2015		411,390		$	11.64	1.28 years	$	-

The intrinsic value of options outstanding and exercisable is based on the Company’s share price of $5.95 at December 31, 2015.