SHARE-BASED COMPENSATION

9 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

NOTE 5 SHARE-BASED COMPENSATION

Stock Option Awards

Effective January 15, 2015, in connection with the Company’s former Chief Executive Officer’s voluntary termination, previously outstanding unvested stock options to purchase an aggregate of 83,334 shares of common stock at exercise prices ranging from $1.59 to $5.31 per share that would have been forfeited pursuant to their original terms were modified such that the options vested on January 28, 2015. In connection with the “improbable to probable” modification, the Company recorded a credit of approximately $0 and $(31,000) during the three and nine months ended June 30, 2015, respectively. See Note 7 for additional details in connection with the termination.

On June 25, 2015, the Company granted a ten-year incentive stock option to purchase 50,000 shares of common stock at an exercise price of $0.64 per share to an executive of the Company, pursuant to the 2011 Plan. The option vests as follows: 15,000 shares on the date of grant, 15,000 shares on the two year anniversary of the date of grant and 20,000 shares on the three year anniversary of the date of grant. The option had a grant date value of $19,000.

The fair value of each stock option on the date of grant was estimated using the Black-Scholes option-pricing formula applying the following assumptions:

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2015			2014		2015			2014
Risk free interest rate		1.92	%		n/a		1.92	%		1.86	%
Expected term (years)		5.90			n/a		5.90			6.00
Expected volatility		64.4	%		n/a		64.4	%		63.2	%
Expected dividends		0	%		n/a		0	%		0	%
Estimated annual forfeiture rate		10	%		n/a		10	%		10	%

During the three and nine months ended June 30, 2015, the Company granted 50,000 stock options at a weighted average grant date fair value of $0.38 per share. There were no options granted during the three months ended June 30, 2014. During the nine months ended June 30, 2014, the Company granted 32,500 stock options at a weighted average grant date fair value of $0.90 per share.

The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company based the risk-free interest rate used in its assumptions on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The volatility factor used in the Company’s assumptions is based on the historical price of its stock over the most recent period commensurate with the expected term of the award. The Company historically has not paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted.

The Company recognized compensation expense of approximately $1,000 and $13,000 in continuing operations for stock option awards in its condensed consolidated statements of operations and comprehensive (loss) income for the three months ended June 30, 2015 and 2014, respectively, and $(36,000) and $79,000 for the nine months ended June 30, 2015 and 2014, respectively.

As of June 30, 2015, there was approximately $24,000 of total unrecognized compensation cost related to unvested stock option awards, which is expected to be recognized over the remainder of the weighted average vesting period of 1.5 years.

The following table summarizes stock option activity during the nine months ended June 30, 2015:

						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, September 30, 2014		778,500		$	3.12
Granted		50,000			0.64
Exercised		-			-
Forfeited		(550,000	)		3.17
Outstanding, June 30, 2015		278,500		$	2.59		5.5	$	2,500
Exercisable, June 30, 2015		234,875		$	2.84		4.8	$	750

The table below provides additional information regarding stock option awards that were outstanding and exercisable at June 30, 2015:

Options Outstanding					Options Exercisable
	Weighted				Weighted		Weighted
	Average		Outstanding		Average		Average		Exercisable
Exercise	Exercise		Number of		Exercise		Remaining Life		Number of
Price		Price		Options		Price		In Years		Options
$0.64 to $1.99	$	1.03		90,000	$	1.28		6.7		55,000
$2.00 to $2.99		2.46		96,000		2.46		4.1		95,500
$3.00 to $3.99		3.74		72,500		3.74		5.6		64,375
$4.00 to $6.02		6.02		20,000		6.02		0.8		20,000
				278,500				4.8		234,875

Restricted Stock Awards

On December 5, 2014, the Company granted an aggregate of 30,000 shares of restricted stock to directors of the Company, pursuant to the 2011 Plan. The shares were scheduled to vest on the one-year anniversary from the date of grant.

The aggregate grant date value of $34,800 was scheduled to be recognized proportionate to the vesting period. On January 5, 2015, the aggregate of 30,000 shares of restricted stock were forfeited and retired when the shareholders did not elect these directors.

On February 23, 2015, the Company granted an aggregate of 210,000 shares of restricted stock, of which 175,000 shares went to current directors and 35,000 went to a former officer (see Note 7 – Commitments and Contingencies – Former CFO Agreement) of the Company, of which 140,000 shares and 70,000 shares were pursuant to the 2007 Plan and 2011 Plan, respectively. The shares vest as follows: (i) 35,000 shares vest immediately, and (ii) 175,000 shares vest on the one-year anniversary from the date of grant. The aggregate grant date value of $193,200 will be recognized proportionate to the vesting period.

On June 25, 2015, the Company granted 50,000 shares of restricted stock to an executive of the Company, pursuant to the 2011 Plan. The shares vest as follows: 15,000 shares on the date of grant, 15,000 shares on the two year anniversary of the date of grant and 20,000 shares on the three year anniversary of the date of grant. The grant date value of $32,000 will be recognized proportionate to the vesting period.

The Company recognized compensation expense of approximately $42,000 and $62,000 in continuing operations for restricted stock awards in its condensed consolidated statements of operations and comprehensive (loss) income for the three months ended June 30, 2015 and 2014, respectively, and $39,000 and $124,000 for the nine months ended June 30, 2015 and 2014, respectively.

As of June 30, 2015, there was approximately $143,000 of unrecognized compensation cost related to shares of unvested restricted stock, which is expected to be recognized over the remainder of the weighted average vesting period of 0.9 years.

The following table summarizes restricted stock activity during the nine months ended June 30, 2015:

				Weighted
				Average		Total
	Number of			Grant Date		Grant Date
	Shares			Fair Value		Fair Value
Non-vested, September 30, 2014		257,581		$	1.32	$	340,044
Granted		290,000			0.90		260,000
Vested		(192,958	)		1.21		(234,281	)
Forfeited		(126,291	)		1.26		(159,398	)
Non-vested, June 30, 2015		228,332		$	0.90	$	206,365