15. STOCK OPTIONS

6 Months Ended

12 Months Ended

Mar. 31, 2013

Sep. 30, 2012

Notes to Financial Statements

15. STOCK OPTIONS

15. STOCK OPTIONS

Description of Stock Option Plan

On April 29, 2011, the 2011 Stock Incentive Plan was approved at the Annual Stockholder Meeting. The Company was authorized to issue options for, and has reserved for issuance, up to 7,000,000 shares of common stock under the 2011 Stock Incentive Plan. On March 21, 2013, the Company was authorized to issue options up to 14,000,000 shares under the 2011 Stock Incentive Plan at the Annual Stockholder Meeting.

Determining Fair Value Under ASC 505

The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding.  The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.

Stock Option Activity

Stock option grants totaling 5,100,000 shares of common stock have been made to three directors and four employees for services provided during 2012. These options were authorized for issuance under the 2011 Stock Incentive Plan and were effective March 21, 2013, when the Company was authorized to issue options up to 14,000,000 shares under the 2011 Stock Incentive Plan at the Annual Stockholder Meeting.

There are currently 11,005,000 options to purchase common stock at an average exercise price of $0.131 per share outstanding at March 31, 2013 under the 2011 Stock Incentive Plan. The Company recorded $192,356 and $218,166 of compensation expense, net of related tax effects, relative to stock options for the six months ended March 31, 2013 and 2012 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00).

Stock option activity for the six months ended March 31, 2013 and the year ended September 30, 2012:

				Weighted Average
	Options			Exercise Price		$
Outstanding as of September 30, 2011		6,920,000		$	0.296	$	2,050,800
Granted		2,200,000			0.104		229,000
Exercised		-			-		-
Forfeitures		(3,200,000	)		0.470		(1,503,000	)
Outstanding as of September 30, 2012		5,920,000			0.131	$	776,800
Granted		5,100,000			0.130		663,000
Exercised		-			-		-
Forfeitures		(15,000	)		0.240		(3,600	)
Outstanding as of March 31, 2013		11,005,000		$	0.131		1,436,200

The following table summarizes information about stock options outstanding and exercisable at March 31, 2013: 

			Average	Average				Average
Range of	Number		Remaining Life	Exercise Price		Number		Exercise Price
Exercise Prices	Outstanding		In Years	Exerciseable		Exerciseable		Exerciseable
0.090		500,000	7.25 years		0.090		375,000		0.090
0.100		1,900,000	9.00 years		0.100		1,750,000		0.100
0.120		200,000	1.75 years		0.120		83,334		0.120
0.130		5,100,000	7.18 years		0.130		3,208,083		0.130
0.150		3,100,000	7.33 years		0.150		3,100,000		0.150
0.240		205,000	2.75 years		0.240		165,000		0.240
		11,005,000	7.29 years	$	0.131		8,681,417	$	0.136

There is no aggregate intrinsic value of the exercisable options as of March 31, 2013.

Description of Stock Option Plan

On April 29, 2011, the 2011 Stock Incentive Plan was approved at the Annual Stockholder Meeting. The Company has 6,100,000 options to purchase common stock available to issue under the 2011 Stock Incentive Plan.

Determining Fair Value Under ASC 505

The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding.  The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.

Stock Option Activity

On November 9, 2011, Bradley E. Sparks forfeited a grant to purchase 1,000,000 shares of common stock at $0.75 per share.

On November 29, 2011, Jeff Kruse and Steve Waddle, employees of TransTech, were each granted an option to purchase 100,000 shares of common stock at $0.12 per share. The grants vest quarterly over three years and expire November 28, 2014.

On February 15, 2012, Marco Hegyi forfeited a grant to purchase 2,000,000 shares of common stock at $0.50 per share.

On February 24, 2012, the Company issued 400,000 shares of common stock to five directors for services provided during 2011. The shares were issued under the 2011 Stock Incentive Plan.

On February 24, 2012, Marco Hegyi, our Chairman of the Board, was granted an option to purchase 1,900,000 shares of common stock at $0.10 per share. The grant vests 750,000 shares on February 24, 2012 and 250,000 shares per quarter. The grant vests upon a change in control and expires February 23, 2022.

On May 11, 2012, the Company issued a stock option grant for 100,000 shares of common stock to a consultant at $0.15 per share. The stock option grant vested immediately.

On May 11, 2012, a consultant forfeited a stock option grant for 100,000 shares of common stock at $.15 per share.

During 2012, the Company agreed to grant, subject to shareholder approval at the 2013 annual shareholder meeting, of an increase in the number of shares available under the Company’s Stock Incentive Plan, stock option grants totaling 5,000,000 shares of common stock to five directors and three employees for services provided during 2012. The shares were granted under the 2011 Stock Incentive Plan.

There are currently 5,920,000 options to purchase common stock at $0.131 per share outstanding at September 30, 2012 under the 2011 Stock Incentive Plan. The Company recorded $266,172 and $153,227 of compensation expense, net of related tax effects, relative to stock options for the year ended September 30, 2012 and 2011 in accordance with ASC 505. Net loss per share (basic and diluted) associated with this expense was approximately ($0.00). As of September 30, 2012, there is approximately $96,180 of total unrecognized costs related to employee granted stock options that are not vested. These costs are expected to be recognized over a period of approximately two years. 

Stock option activity for the years ended September 30, 2012 and 2011 are summarized as follows:

				Weighted Average
	Options			Exercise Price			$
Outstanding as of September 30, 2010		4,735,000		$	0.289		$	1,366,250
Granted		2,320,000			0.339			785,800
Exercised		-			-			-
Forfeitures		(135,000	)		(0.750	)		(101,250	)
Outstanding as of September 30, 2011		6,920,000			0.296			2,050,800
Granted		2,200,000			0.104			229,000
Exercised		-			-			-
Forfeitures		(3,200,000	)		(0.470	)		(1,503,000	)
Outstanding as of September 30, 2012		5,920,000		$	(0.131	)	$	776,800

The following table summarizes information about stock options outstanding and exercisable at September 30, 2012: 

			Weighted	Weighted				Weighted
			Average	Average				Average
Range of	Number		Remaining Life	Exercise Price		Number		Exercise Price
Exercise Prices	Outstanding		In Years	Exerciseable		Exerciseable		Exerciseable
0.090		500,000	7.75 years	$	0.090		375,000	$	0.090
0.100		1,900,000	9.50 years		0.100		1,250,000		0.100
0.120		200,000	2.25 years		0.120		50,000		0.120
0.150		100,000	2.75 years		0.150		100,000		0.150
0.150		3,000,000	7.75 years		0.150		3,000,000		0.150
0.240		220,000	3.25 years		0.240		128,333		0.240
		5,920,000	7.86 years	$	0.131		4,903,333	$	0.141

There is no aggregate intrinsic value of the exercisable options as of September 30, 2012.