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STOCK-BASED COMPENSATION
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Sep. 30, 2011
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| STOCK-BASED COMPENSATION |
Restricted Stock Awards
The
Company maintains its 2003 Amended and Restated 2003 Stock Plan
(“2003 Plan”) for the issuance of stock-based
compensation awards. As amended, the Company is
permitted to issue an aggregate of 50,000 shares of common stock
under the plan. All Company personnel and contractors
are eligible to participate in the plan.
In
September 2011, in an effort to preserve cash, the Board, after
consultation with the Compensation Committee, entered into an
agreement to compensate the members of the Board for their monthly
retainer and other services as directors and/or members of the
Board’s various standing committees through the award of
shares of the Company’s common stock under the 2003
Plan. Under the terms of this agreement, each
non-employee director receives a monthly award of fully vested
shares of common stock, with the number of shares determined by
dividing $3,833 by the closing market price of the Company’s
common stock on the grant date. The Company granted an
aggregate of 9,184 shares of common stock and recognized expense of
$15,333 related to this agreement for services rendered for the
month of August 2011. For services rendered for the month of
September 2011, the Company recorded $15,333 in accounts payable as
of September 30, 2011, which will be paid through the issuance of
shares in October 2011. No share issuances for service were made
during the year ended September 30, 2010.
As
of September 30, 2011, there were 60,332 shares authorized under
the 2003 Plan that were granted and remain outstanding, of which
58,990 have vested and 1,342 are in the form of restricted
stock. These shares of restricted stock were granted to
the Company’s service providers, officers and
directors. Of the 1,342 unvested restricted shares,
1,053 shares vest on a cliff basis three years from the date of
grant and 289 shares vest on a cliff basis 10 years from the date
of grant. Certain market performance criteria may
accelerate the vesting of a portion of these awards if the stock
price exceeds $50 per share.
The following
table sets forth the activity with respect to unvested restricted
stock grants (results reported in post-split amounts):
During
the years ended September 30, 2011 and 2010 the Company recognized
compensation expense of $38,231 and $100,980 respectively, under
the 2003 Plan and other restricted stock issuances. Due to
the immateriality of the remaining expense, all expense associated
with nonvested awards (net of forfeitures of 70% for awards vesting
in 2013 and 0% for awards vesting in October 2011) was recognized
during the year ended September 30, 2011. No further
expense associated with unvested awards is expected unless the
Company’s actual forfeiture rate differs from its expected
forfeiture rate, in which the Company could incur up to $38,917 of
additional expense.
Stock Option Awards:
From
time to time, the Company grants stock option awards to officers
and employees. Such awards are valued based on the grant
date fair value of the instruments, net of estimated forfeitures,
using a Black-Scholes option pricing model with the following
assumptions:
The
volatility used was based on historical volatility of the
Company’s common stock, which management considers to be the
best indicator of expected future volatility. The risk
free interest rate was determined based on treasury securities with
maturities equal to the expected term of the underlying
award. The expected term was determined based on the
simplified method outlined in Staff Accounting Bulletin No.
110.
On
November 23, 2009, the Company granted an aggregate of 26,316
options to Richard Sommer, the Company’s then-current Chief
Executive Officer. In connection with Mr. Sommer’s
resignation on January 4, 2010, all such options were
forfeited. Given this forfeiture, the Company elected
not to expense such options because the effects on the financial
statements would not have been material. No other
options were granted during the year ended September 30,
2010.
As
discussed in Note 11, on March 24, 2011, Mr. Hall was granted
an option to purchase 13,487 shares of the Company’s common
stock at an exercise price of $3.53 per share, which was equal to
the closing price of the Company’s common stock on the date
of grant. The option was granted pursuant to the
Company’s 2003 Stock Plan and will vest according to the
following schedule: 25% on March 24, 2012 (the first
anniversary of the grant date) and 1/36 of the remainder each month
beginning on April 24, 2012. The grant date fair value
of this award was $19,833 based on a Black-Scholes option pricing
model described above and is being expensed on a straight-line
basis over the vesting period.
As
discussed in Note 10, on May 20, 2011, Mr. Tomsic was granted an
option to purchase 10,526 shares of the Company’s common
stock at an exercise price of $3.77 per share, which was equal to
the closing price of the Company’s common stock on the date
of grant. The options will vest and be exercisable
according to the following schedule: 3,728 options vesting
immediately and the remainder shall vest 1/31 at the end of each
month thereafter over the next 31 months so long as Mr. Tomsic
continues to provide services to the Company. The grant
date fair value of this award was $21,446 using a Black-Scholes
option pricing model described above, with $11,218 expensed on
grant date and the remaining amount being expensed on a
straight-line basis over the vesting period.
Stock
option awards are expensed on a straight-line basis over the
requisite service period. During the years ended
September 30, 2011 and 2010, the Company recognized expense of
$38,231 and $38,448, respectively, associated with stock option
awards. At September 30, 2011, future stock compensation expense
(net of estimated forfeitures) not yet recognized was $26,401 and
will be recognized over a weighted average remaining vesting period
of 3.1 years.
The
following summarizes stock option activity for the year ended
September 30, 2011:
The
following table summarizes information about exercise prices for
outstanding options at September 30, 2011:
Upon
the exercise of stock options, the Company may issue new shares or,
if circumstances permit, issue shares held as treasury
stock.
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