Stockholders' Equity

12 Months Ended

Sep. 30, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 11 – Stockholders’ Equity

Convertible Preferred Stock

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. Proceeds of the Series C Preferred Stock were primarily used for the acquisition of RMD, for related acquisition costs, and for general working capital. The stock was sold at a price of $1.00 per share and total expenses for the stock placement were $0 and 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. The Company offered the Series C Preferred Stock holders the option to receive dividends in cash or in common stock at $2.50 per share subject to a maximum of 480,000 shares that could be issued under this arrangement, of which 122,308 shares were issued. These shares were callable after two years by Dynasil at a redemption price of $1.05 per share. 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. As of September 30, 2012 and 2011, there was no outstanding preferred stock.

Temporary Equity

As part of the July 1, 2008 RMD Instruments, LLC acquisition, the Company issued one million shares of Dynasil common stock to the members of the seller. Commencing July 1, 2010, the seller's members were able to 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.  As of September 30, 2011, the 1,000,000 shares of redeemable common stock valued at its redemption value of $2.00 per share, or $2,000,000, were included in temporary equity to properly reflect the repurchase requirement that was not within the Company’s control.

See Note 9 for discussion of the redemption of 928,773 shares during the year ended September 30, 2012. There were an additional 71,227 shares of common stock outstanding that were subject to the Put Right, as discussed in Note 9. The notice period for these shares expired on April 2, 2012 and the amount of $142,454 previously recorded as temporary equity associated with these shares was reclassified to equity.

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 4,289,436 and 3,898,719 shares of common stock are available for future purchases under the plan at September 30, 2012 and 2011, 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 2017.

The fair value of the stock options granted is estimated at the date of grant using the Black-Scholes option pricing model. The weighted average assumptions for grants during the years ended September 30, 2012 and 2011 used in the Black-Scholes option pricing model were as follows:

	2012			2011
Expected term in years		5 years			3 years
Risk-free interest rate		2.64	%		3.95	%
Expected volatility		93.62	%		85.21	%
Expected dividend yield		0.00	%		0.00	%

A summary of stock option activity for the years ended September 30, 2012 and 2011 is presented below:

	Options Outstanding			Weighted Average Exercise Price per Share ($)		Weighted Average Remain Contractual Term (in Years)
Balance at September 30, 2011		1,283,997			3.10		2.22
Vested and exercisable at September 30, 2011		924,622			2.73		1.98
Granted		43,960			3.03
Exercised		(138,373	)		1.58
Cancelled		(395,101	)		3.14
Balance at September 30, 2012		794,483			3.34		1.75
Vested and Exercisable at September 30, 2012		794,483			3.34		1.75

Range of Exercise Prices		Options Outstanding		Weighted Average Contractual Life (years)		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
$	2.00 - 2.99		200,000		1.84		2.00		200,000		2.00
	3.00 - 3.99		259,681		1.44		3.24		259,681		3.24
	4.00 - 4.99		295,000		1.91		4.00		295,000		4.00
	5.00 - 5.99		29,528		2.03		5.53		29,528		5.53
	6.00 - 6.65		10,274		2.17		6.65		10,274		6.65
$	2.00 - 6.65		794,483		1.75	$	3.34		794,483	$	3.34

The expected volatility was determined with reference to the historical volatility of the Company's stock. The Company uses historical data to estimate option exercises and employee terminations 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. The dividend yield is expected to be 0.00% because historically the Company has not paid dividends on common stock.

During the year ended September 30, 2012, 43,960 stock options were granted with a weighted average grant date fair value of $1.34 per share. During the year ended September 30, 2012, 138,373 options were exercised in a cashless exercise with an intrinsic value of $92,710, for which the Company recognized no tax benefit. During the year ended September 30, 2012, 192,085 options vested with a fair value of $135,684. The intrinsic value of the options outstanding and the exercisable options at September 30, 2012 was $0 and $0, respectively, as the market price was below the exercise prices.

During the year ended September 30, 2011, 69,802 stock options were granted with a weighted average grant date fair value of $1.62 per share. During the year ended September 30, 2011, 532,750 options were exercised with an intrinsic value of $1,003,886. The Company recognized no tax benefit for options exercised during the year ended September 30, 2011. During the year ended September 30, 2011, 131,468 options vested with a fair value of $93,882.

Stock compensation expense for the years ended September 30, 2012 and 2011 was $935,596 and $563,443, respectively.

At September 30, 2012 there was approximately $301,000 in unrecognized stock compensation cost, which is expected to be recognized over a weighted average period of six months.

A summary of restricted stock activity for the year ended September 30, 2012 and 2011 is presented below:

Restricted Stock Activity for the Year ended September 30, 2012	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2011		403,000		$	4.02
Granted		104,000		$	1.10
Vested		(127,166	)	$	3.72
Cancelled		(252,000	)	$	4.03
Nonvested at September 30, 2012		127,834		$	1.92

Restricted Stock Activity for the Year ended September 30, 2011	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at September 30, 2010		7,500		$	3.75
Granted		423,000		$	4.02
Vested		(27,500	)	$	4.00
Cancelled		-0-			-0-
Nonvested at September 20, 2011		403,000		$	4.02

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 256,236 and 208,796 shares have been issued as of September 30, 2012 and 2011, respectively.

On December 16, 2011, the Company amended the Amended and Restated Employee Stock Purchase Plan to change the maximum dollar amount of stock able to be purchased through the Plan by any employee per calendar year from $5,000 to $20,000 per calendar year. During the years ended September 30, 2012 and 2011, 47,440 shares and 28,758 shares of common stock were issued under the Plan for aggregate purchase prices of $63,122 and $95,290, respectively.