Stock Options and Warrants

9 Months Ended

Jun. 30, 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 nine months ended June 30, 2016 and 2015, 14,286 warrants were issued under the 2012 Plan.  As of June 30, 2016, 359,507 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 nine months ended June 30, 2016 and 2015, the Company granted 229,528 and 23,856 warrants to purchase shares of common stock. These warrants vest immediately and expire two years from grant date.  The Company recorded expense of $47,571 and $106,915 for the three months ended June 30, 2016 and 2015 and expense of $160,260 and $341,905 for the nine months ended June 30, 2016 and 2015, respectively, related to the issuance and vesting of outstanding stock options and warrants.

The option and warrant grants for nine months ended June 30, 2016 were valued using the Black-Scholes model with the following weighted-average assumptions:

	2016			2015
Expected stock price volatility		96	%		73	%
Risk-free interest rate		0.98	%		0.53	%
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 nine months ended June 30, 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	1.05 years
Granted		92,362		$	6.82
Expired		(23,027	)	$	9.63
Exercised		-		$	-
Outstanding as of June 30, 2016		450,991		$	11.48	1.15 years	$	-
Exercisable as of June 30, 2016		450,991		$	11.48	1.15 years	$	-

The intrinsic value of options outstanding and exercisable is based on the Company’s share price of $5.00 at June 30, 2016.