STOCK OPTIONS AND WARRANTS

6 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE F - STOCK OPTIONS AND WARRANTS

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of Common Stock issued to non-employees of the Company.  These warrants were granted in lieu of cash compensation for services performed or financing expenses in connection with the sale of Common Stock.

			Warrants
			Outstanding	Weighted			Exercisable
			Remaining	Average		Weighted	Weighted
	Exercise	Number	Contractual	Exercise		Average	Average
	Prices	Outstanding	Life (Years)	Price		Exercisable	Exercise Price
$	0.03088	1,619,171	4.67	$	0.03088	1,619,171	$	0.03088
$	0.03283	355,421	4.64	$	0.03283	355,421	$	0.03283
$	0.04	3,000,000	2.42	$	0.04	3,000,000	$	0.04
$	0.04405	2,009,081	4.29	$	0.04405	2,009,081	$	0.04405
$	0.04750	5,052,652	5.29	$	0.04750	5,052,652	$	0.04750
$	0.05529	904,322	4.78	$	0.05529	904,322	$	0.05529
$	0.06	12,000,000	1.88	$	0.06	12,000,000	$	0.06
$	0.071	1,000,000	1.82	$	0.071	1,000,000	$	0.071
$	0.09	9,900,000	3.42	$	0.09	9,900,000	$	0.09
$	0.176	100,000	2.60	$	0.176	—	$	—
$	0.2232	40,322,580	4.66	$	0.2232	40,322,580	$	0.2232
$	0.50	1,800,000	0.51	$	0.50	1,800,000	$	0.50
		78,063,227	3.88	$	0.1558	77,963,227	$	0.1568

Transactions involving warrants are summarized as follows:

	Number of Shares			Weighted Average Price Per Share
Balance, September 30, 2011		58,205,280		$	0.140
Granted		1,075,000			0.071
Exercised		(5,039,633	)		(0.045	)
Cancelled or expired		(8,400,000	)		(0.161	)
Balance at September 30, 2012		45,840,647		$	0.145
Granted		67,304,300			0.2232
Exercised		(1,500,000	)		(0.10	)
Cancelled or expired		(33,581,720	)		(0.278	)
Balance, March 31, 2013		78,063,227		$	0.1558

Transactions involving warrants are summarized as follows:

On November 7, 2012, 100,000 warrants were issued in connection with services. The warrants are exercisable on or after May 7, 2013 for three years at an exercise price of $0.179 per share. The fair value of the warrants of $13,238 was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 129.56% and risk free rate from 0.36% and were charged to current period operations.

On November 29, 2012, in connection with a securities purchase agreement as described in Note E above, the Company issued an aggregate of 67,304,300 warrants to purchase the Company’s common stock exercisable for one to five years after defined date or events, at an exercise price of $0.2232.

In March 2013, the Company issued an aggregate of 1,500,000 shares of its common stock in connection with the exercise of warrants at an exercise price of $0.10 per share; net proceeds of $150,000.

As described in Note E above, on January 22, 2013, the Company exercised its option to repurchase 26,881,720 Series C Warrants issued to Crede for $50,000.

Employee Stock Options

On January 26, 2005, the Board of Directors, and on February 15, 2005, the holders of a majority of the outstanding shares of Common Stock approved the 2005 Incentive Stock Plan and authorized the issuance of 16,000,000 shares of Common Stock as stock awards and stock options thereunder. On May 16, 2007, at the annual meeting of stockholders, the holders of a majority of the outstanding shares of Common Stock approved an increase in the number of shares subject to the 2005 Incentive Stock Plan to 20,000,000 shares of Common Stock.  On June 17, 2008, the Board of Directors unanimously adopted an amendment to the 2005 Incentive Stock Plan that increased the total number of shares of Common Stock issuable pursuant to the 2005 Incentive Stock Plan from a total of 20,000,000 shares to a total of 100,000,000 shares, which was approved by our stockholders at the 2008 annual meeting of stockholders held on December 16, 2008.  On November 30, 2011, the Board of Directors unanimously adopted an amendment to the 2005 Incentive Stock Plan that increased the total number of shares of Common Stock issuable thereunder to 350,000,000 and the number of shares of Common Stock that can be covered by awards made to any participant in any calendar year to 50,000,000, which was approved by our stockholders at the 2012 annual meeting of stockholders held on January 27, 2012.

The 2005 Incentive Stock Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to our success with an award of options to purchase shares of Common Stock.  As of March 31, 2013, a total of 11,129,000 shares have been issued and options to purchase 126,354,192 shares are outstanding under the 2005 Incentive Stock Plan.

The following table summarizes the changes in options outstanding and the related prices for the shares of Common Stock issued to employees of the Company under the 2005 Incentive Stock Plan:

Options Outstanding				Options Exercisable
Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual  Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	0.05	29,000,000	2.16	$	0.05	29,000,000	$	0.05
$	0.0585	50,000,000	5.29	$	0.0585	31,250,000	$	0.0585
$	0.06	30,100,000	2.25	$	0.06	22,525,000	$	0.06
$	0.065	634,825	3.68	$	0.065	634,825	$	0.065
$	0.068	4,770,000	3.67	$	0.068	4,770,000	$	0.068
$	0.07	2,850,000	2.11	$	0.07	1,837,500	$	0.07
$	0.09	1,500,000	3.42	$	0.09	1,500,000	$	0.09
$	0.11	5,400,000	0.21	$	0.11	5,400,000	$	0.11
$	0.1799	2,099,367	4.67	$	—	—	$	—
		126,354,192	3.46	$	0.06	96,917,325	$	0.06

Transactions involving stock options issued to employees are summarized as follows:

	Number of Shares			Weighted Average Exercise Price Per Share
Outstanding at October 1, 2011		120,650,000		$	0.060
Granted		6,558,825			0.067
Exercised		(500,000	)		(0.08	)
Cancelled or expired		(1,500,000	)		(0.08	)
Outstanding at September 30, 2012		125,208,825		$	0.060
Granted		2,099,367			0.1799
Exercised		(954,000	)		(0.10	)
Canceled or expired		—
Outstanding at March 31, 2013		126,354,192		$	0.06

Transactions involving stock options issued to employees are summarized as follows:

On November 30, 2012, the Company issued an aggregate of 2,099,367 options to non-employee board of director members (except Mr. Catenacci) under the 2005 Incentive Stock Plan. The options are exercisable at $0.1799 per share for five years, vesting one year from the date of issuance. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 146.33% and risk free rate of 0.82%.

During the six months ended March 31, 2012, the Company issued 586,453 shares of its Common Stock in connection with the cashless exercise of 954,000 options to acquire the Company stock at $.068 per share.

The Company recorded $455,157 and $873,023 as stock compensation expense for the three and six month periods ended March 31, 2013, respectively, and $389,059 and $1,174,778 for the three and six month periods ended March 31, 2012, respectively, for the vesting portion of all employee options outstanding.