Stockholders' Equity

12 Months Ended

Sep. 30, 2011

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 9 – Stockholders’ Equity

Convertible Preferred Stock

On October 2, 2006 the Company sold 710,000 shares of a Series B 10% Cumulative Convertible Preferred Stock in a private placement.  The stock was sold at a price of $1.00 per share.  Total expenses for the stock placement were $10,000.  No underwriting discounts or commissions were paid in connection with the sale.  Each share of preferred stock carried a 10% per annum dividend and was convertible to 1.33 shares of common stock at any time by the holders and was callable after two years by Dynasil at a redemption price of $1.00 per share.  Proceeds of the preferred stock sale were primarily used to acquire the capital stock of EMF and for related acquisition costs.  Dynasil called all of these shares for redemption on November 30, 2009 and all of the shares were converted to common stock on November 30, 2009 prior to their redemption.

On July 5, 2008 the Company sold 5,256,000 shares of a Series C 10% Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") in a private placement. The stock was sold at a price of $1.00 per share.  Total expenses for the stock placement were $0.  No underwriting discounts or commissions were paid in connection with the sale.  Each share of preferred stock carried a 10% per annum dividend and was convertible to 0.40 shares of common stock at any time by the holders and was callable after two years by Dynasil at a redemption price of $1.05 per share.  Proceeds of the Series C Preferred Stock were primarily used for the acquisition of RMD, for related acquisition costs, and for general working capital.  On December 21, 2010, Dynasil converted all these shares into its common stock, $0.0005 par value per share at a conversion price of $2.50 per share in a mandatory conversion.  Following the conversion, all 5,256,000 of Series C Preferred Stock that had been outstanding was automatically converted into an aggregate of 2,102,400 shares of common stock. There is currently no outstanding preferred stock.

Temporary Equity

As part of the July 1, 2008 RMD Instruments, LLC acquisition, the Company issued one million Dynasil common stock shares to the members of the Seller. Commencing July 1, 2010, the Seller's members may tender these shares of Dynasil common stock to the Company for repurchase by it at a repurchase price of $2.00 per share during a two year period ending July 1, 2012, upon no less than ninety (90) days prior notice to the Company.  During the quarter ended June 30, 2010, the Company reclassified the 1,000,000 shares of redeemable common stock valued at its redemption value of $2.00 per share, or $2,000,000, from permanent equity to temporary equity to properly reflect the repurchase requirement that is not within the Company’s control. There is no material impact on the Company’s financial position, results of operations or earnings per share.  In addition, there is no material impact on liquidity ratios: debt to equity, debt leverage, and return on equity or working capital.  The reclassification adjustment resulted in a decrease in common stock of $500 and additional paid-in-capital of $1,999,500 and an increase in temporary equity of $2,000,000.  Prior periods presented have been reclassified to conform to the current period financial statement presentation.

Stock Based Compensation

The Company adopted Stock Incentive Plans in 1996, 1999 and 2010 which provide for, among other incentives, the granting to officers, directors, employees and consultants options to purchase shares of the Company’s common stock.  The Plans also allow eligible persons to be issued shares of the Company’s common stock either through the purchase of such shares or as a bonus for services rendered to the Company.  Shares are generally issued at the fair market value on the date of issuance.  The maximum number of shares of common stock which may be issued under the 2010 Stock Incentive Plan is 6,000,000, of which 3,898,719 and 5,819,756 shares of common stock are available for future purchases under the plan at September 30, 2011 and 2010, respectively.  Options are generally exercisable at the fair market value or higher on the date of grant over a three to five year period currently expiring through 2014.

A summary of stock option activity for the years ended September 30, 2011 and 2010 is presented below:

	Shares			Exercise Price per Share
Options outstanding at October 1, 2009		1,350,841		$0.51 - $4.00
Granted in 2010		671,118		$3.19 - $4.06
Exercised in 2010		(121,459	)	$0.51 - $2.00
Cancelled in 2010		(45,000	)	$1.54 - $2.93
Options outstanding at September 30, 2010		1,855,500		$1.40 - $4.06
Granted in 2011		69,802		$5.53 - $7.32
Exercised in 2011		(532,750	)	$1.58 - $4.00
Cancelled in 2011		(108,556	)	$1.66 - $3.58
Options outstanding at September 30, 2011		1,283,997		$1.40 - $7.32
Options exercisable at September 30, 2011		993,372		$1.40 - $6.65

During the year ended September 30, 2011, 69,802 stock options were granted at prices ranging from $5.53 to $7.32 per share.  Of the options granted in 2011, 30,000 of the granted stock options could not be exercised until 2013, therefore, the stock-based compensation expense will be recognized at that time.  During the year ended September 30, 2011, 532,750 options were exercised.  Of the options exercised in the year, 20,000 had an exercise price of $2.00 per share with $40,000 paid in cash.  The remaining 512,750 options exercised had a weighted average exercise price of $2.78 per share with $1,427,299 paid through a reduction in the number of shares of common stock issued by 298,127 shares and $13 paid in cash.  During the year ended September 30, 2011, 26,471 unvested options were cancelled, with a weighted average exercise price of $2.13 and 82,085 vested options expired, with a weighted average exercise price of $3.25.  Additionally, during the year ended September 30, 2011, 423,000 shares of restricted stock were issued, of which 25,000 shares were vested with a compensation expense of $100,500 and 398,000 shares were unvested with deferred compensation values of $1,600,760.  The stock compensation expense for these shares issued within the year ended September 30, 2011 will be recognized when the shares vest in fiscal years 2012 through 2016 according to the following schedule:

Restricted Stock Vesting Schedule
Year of Vesting	2012		2013		2014		2015		2016
Compensation Value	$	450,661	$	420,460	$	227,139	$	201,000	$	301,500

Also, 58,224 shares of unrestricted common stock were granted as compensation, with a total cost of $273,468.  Of those shares, 51,783 were director compensation which will be expensed over the time period of March, 2011 through January, 2012.

For the year ended September 30, 2011, total stock-based compensation charged to operations amounted to $595,247.  At September 30, 2011, there was approximately $1,825,754 of total unrecognized compensation expense related to non-exercisable option-based compensation arrangements under the 2010 Stock Incentive Plan.

During the year ended September 30, 2010, 671,118 stock options were granted at prices ranging from $3.19 to $4.06 per share.  Of the options granted in 2010, 137,500 of the granted stock options cannot be exercised until 2011, 163,971 of the granted stock options cannot be exercised until 2012, 137,500 of the granted stock options cannot be exercised until 2013 and 34,375 of the granted stock options cannot be exercised until 2014, therefore the stock-based compensation expense will be recognized at that time. During the year ended September 30, 2010, 121,459 options were exercised.  Of the exercised options, 2,182 options had an exercise price of $0.51 per share with $1,113 paid in cash, 2,134 options had an exercise price of $0.53 per share with $1,131 paid in cash, 7,143 options had an exercise price of $0.60 per share with $4,286 paid in cash, and 110,000 options had an exercise price of $2.00 per share with $220,000 paid in cash. During the year ending September 30, 2010, 45,000 options were cancelled, with a weighted average exercise price of $2.16.

For the year ended September 30, 2010, total stock-based compensation charged to operations for option-based arrangements amounted to $329,686.  At September 30, 2010, there was approximately $266,785 of total unrecognized compensation expense related to non-exercisable option-based compensation arrangements under the Plan.

The fair value of the stock options granted was estimated at the date of grant using the Black-Scholes options pricing model.  Based on the list of assumptions presented below with numbers shown for the most recent grant, the weighted average fair value of the options granted during the year ended September 30, 2011 is $6.23 per share.

	December 2, 2010 (Date of most recent grant)
Expected term in years	3 years
Risk-free interest rate	3.95%
Expected volatility	85.21%
Expected dividend yield	0.00%

The expected volatility was determined with reference to the historical volatility of the Company's stock.  The Company uses historical data to estimate option exercise and employee termination within the valuation model.  The expected term of options granted represents the period of time that the options granted are expected to be outstanding.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

Employee Stock Purchase Plan

On September 28, 2010, the Company adopted an Amended and Restated Employee Stock Purchase Plan.  The existing plan was amended to extend the termination date to September 28, 2020.  The Employee Stock Purchase Plan permits substantially all employees to purchase common stock at a purchase price of 85% of the fair market value of the shares.  Under the Plan, a total of 450,000 shares have been reserved for issuance of which 208,783 and 180,038 shares have been issued as of September 30, 2011 and 2010, respectively.

During any twelve month period, employees may not purchase more than the number of shares for which the total purchase price exceeds $5,000.  During the years ended September 30, 2011 and 2010, 28,745 shares and 20,546 shares of common stock were issued under the Plan for aggregate purchase prices of $95,290 and $43,828, respectively.