Note 4 - Stock Option Plans

9 Months Ended

Jun. 30, 2013

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

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

Note 4 – Stock Option Plan

Plan Information

The 1998 Incentive Stock Plan (the “Plan”) provides for awards of stock options and restricted stock to officers, directors, key employees and consultants. The Plan provides that upon any issuance of additional shares of common stock by the Company, other than pursuant to the Plan, the number of shares covered by the Plan will increase to an amount equal to 10% of the then outstanding shares of common stock. Under the Plan, option prices will be set by the Board of Directors and may be greater than, equal to, or less than fair market value on the grant date.

At June 30, 2013, 1,024,656 shares of common stock were reserved for the exercise of, or lapse of restrictions on, stock awards under the Plan. Of these reserved shares, 280,141 shares were available for future grants.

Stock Options

Stock options are accounted for in accordance with the provisions of FASB ASC 718, Stock Compensation. FASB ASC 718 requires all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their grant date fair value over the requisite service period. Compensation expense for share-based awards is included in the operating, selling, general and administrative expense section of the Company’s Consolidated Statements of Operations and Comprehensive Income.

Stock options are valued at the date of the award, which does not precede the approval date, and compensation cost is recognized on a straight-line basis over the vesting period. Stock options granted to employees generally become exercisable over a four or five-year period from the date of grant and generally expire ten years after the date of grant. Stock options granted to the Board of Directors generally become exercisable on the date of grant and generally expire ten years after the grant.

A summary of the status of the Company's stock options at June 30, 2013 and changes during the nine months then ended is presented below:

	Shares			Wtd. Avg. Ex. Price
Outstanding at September 30, 2012		370,000		$	2.83
Granted		30,000			2.33
Exercised		(2,000	)	$	1.65
Expired	–			–
Forfeited		(35,000	)	$	2.43
Outstanding at June 30, 2013		363,000		$	2.83
Exercisable at June 30, 2013		163,000		$	3.30

The Company granted nonqualified stock options of 30,000 shares for the nine months ended June 30, 2013. The Company estimated the fair value of the options granted using the Black-Scholes option valuation model. The Company estimated the expected term of options granted based on the historical grants and exercises of the Company’s options. The Company estimated the volatility of its common stock at the date of the grant based on both the historical volatility as well as the implied volatility on its common stock, consistent with FASB ASC 718. The Company based the risk-free rate that is used in the Black-Scholes option valuation model on the implied yield in effect at the time of the option grant on U.S. Treasury zero-coupon issues with equivalent expected term. The Company has never paid cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero in the Black-Scholes option valuation model. The Company amortizes the resulting fair value of the options ratably over the vesting period of the awards. The Company uses historical data to estimate the pre-vesting option forfeitures and records share-based expense only for those awards that are expected to vest.

The estimated fair value at date of grant for stock options utilizing the Black-Scholes option valuation model and the assumptions that were used in the Black-Scholes option valuation model for the nine months ended June 30, 2013 are as follows:

	Nine Months Ended June 30, 2013
Estimated fair value of options at grant date	$	29,040
Black-Scholes model assumptions:
Average expected life (years)		6
Average expected volatility factor		41%
Average risk-free interest rate		2.95%
Average expected dividends yield	–

Compensation expense related to unvested stock options recorded for the nine months ended June 30, 2013 is as follows:

	Nine Months Ended June 30, 2013
Fiscal year 2012 grant	$	71,671
Fiscal year 2013 grant	$	1,479

The Company records compensation expense over the vesting term of the related options. At June 30, 2013, compensation costs related to these unvested stock options not yet recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income was $135,078.

Restricted Stock

The Company granted restricted stock in March 2013 to its Board of Directors totaling 31,815 shares, which were valued at market value on the date of grant. The shares are being held by the Company for 12 months and will be delivered to the directors and employee at the end of the 12 month holding period. The fair value of these shares upon issuance totaled $70,000 and is being amortized over the 12 month holding period as compensation expense. The unamortized portion of the restricted stock is included in prepaid assets on the Company’s Consolidated Balance Sheets.