Stock Options and Warrants

6 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Stock Options and Warrants

Stock Incentive Plan

At the annual meeting of shareholders on March 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 six months ended March 31, 2016 and 2015, 78,076 warrants were issued under the 2012 Plan.  As of March 31, 2016, 388,333 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, 2016 and 2015, the Company granted 78,076 and 14,988 warrants to purchase shares of common stock. These warrants vested immediately and expire two years from grant date. Additionally, during the quarter ended March 31, 2015, the Company extended the life of 129,808 warrants which had been granted during 2013 and 2014, and recorded an expense of $39,929.  The Company also recorded $112,519 and $50,054 of expense for the six months ended March 31, 2016 and 2015, respectively, related to the issuance and vesting of outstanding stock options and warrants. 

The option and warrant grants for six months ended March 31, 2016 were valued using the Black-Scholes model with the following weighted-average assumptions:

	2016			2015
Expected stock price volatility		71	%		76	%
Risk-free interest rate		0.86	%		0.54	%
Expected life of options	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, 2016 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		78,076		$	18.09
Expired		(23,027	)	$	23.99
Exercised		-		$	-
Outstanding as of March 31, 2016		436,705		$	11.65	1.11	$	20,798
Exercisable as of March 31, 2016		436,705		$	11.65	1.11	$	20,798

The intrinsic value of options outstanding and exercisable is based on the Company’s share price of $6.50 at March 31, 2016.