Stock Options

12 Months Ended

Sep. 30, 2011

I.	Stock Options

In 1995, the Company adopted the 1995 Stock Option Plan (the “1995 Plan”) for employees and directors. In August 1999, the Company adopted the 1999 Stock Option Plan (the “1999 Plan”) and in 2010, the Company’s Board of Directors approved the 2010 Stock Option Plan (the “2010 Plan”) (collectively, “the Plans”). The 2010 Plan was approved by the shareholders of the Company at the 2011 Annual Meeting of Shareholders. The options granted under the Plans may be either incentive stock options or non-qualified options. The Plans are administered by the Board of Directors or by a compensation committee of the Board of Directors. The Board of Directors has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price equal to at least 85% of the fair market value of the common stock covered by the option on the grant date and to make all determinations necessary or advisable under the Plans.

Following is a summary of options activity:

(in thousands, except exercise prices and contractual terms)	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value at September 30, 2011
Outstanding at October 1, 2008		420		$	3.86
Granted		60			8.75
Forfeited		(60	)		8.25
Exercised		(300	)		2.49
Outstanding at September 30, 2009		120			7.53
Granted		465			10.25
Forfeited		-
Exercised		(20	)		2.80
Outstanding at September 30, 2010		565			9.94
Granted		35			7.15
Forfeited		(55	)		8.57
Exercised		(25	)		7.55
Outstanding at September 30, 2011		520		$	10.01		1.06	$	-
Exercisable at September 30, 2011		485		$	10.21		1.00	$	-

As of September 30, 2011, the range of exercise prices for outstanding options was $7.15 - $10.25.

In July 2009, the Company issued 10,000 stock options to each Director who is a member of the Company’s Audit Committee, 5,000 options to the Company’s other Directors and 10,000 options to an employee. These options (60,000 in total) became exercisable on July 22, 2010, had a strike price of $8.75 per share and expired in July 2011.

The fair value of options issued for the year ended September 30, 2009 were estimated to be $176,143 at the date of grant using a Black-Scholes option-pricing model using the following weighted average assumptions:

Volatility		90	%
Expected life	1.5 years
Expected dividend yield		-
Risk free rate		1.47	%

In September 2010, the Company issued 465,000 stock options under the 2010 Plan to Directors and certain employees. These options became exercisable immediately, have a strike price of $10.25 per share and expire in September 2012. The fair value of options issued for the year ended September 30, 2011 were estimated to be $258,439 at the date of grant using a Black-Scholes option-pricing model using the following weighted average assumptions:

Volatility		47	%
Expected life	1.0 years
Expected dividend yield		-
Risk free rate		0.27	%

In August 2011, the Company issued 35,000 stock options under the 2010 Plan to Directors and certain employees. These options become exercisable in August 2012, have a strike price of $7.15 per share and expire in August 2013. The fair value of options issued for the year ended September 30, 2011 were estimated to be $49,521 at the date of grant using a Black-Scholes option-pricing model using the following weighted average assumptions:

Volatility		50	%
Expected life	1.5 years
Expected dividend yield		-
Risk free rate		0.19	%

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determined the initial expected life based on a simplified method in accordance with ASC 718 (also formerly SAB No. 110, Shared-Based Payment), giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures. The Company has utilized the simplified method in accordance with ASC 718 for the following reasons. Earlier in the Company’s existence, longer-term options (generally 5-year lives) were issued to employees, Directors and outsiders. In more recent years, option terms have generally become shorter (1-3 year lives) and options were issued principally to management and Directors. Then in 2010, short-term options (2-year lives) were issued to Directors, management and a substantial number of employees. Due to the changes in the terms of the option grants and the type of persons receiving the options, we believe that the historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. Therefore, the Company believes that the use of the simplified method for determining the expected term of the Company’s options has been appropriate.

During the years ended September 30, 2011, 2010 and 2009, the Company recorded $8,254, $405,229 and $96,171 of stock-based compensation, respectively. Unamortized stock compensation expense amounted to $41,267 at September 30, 2011.