STOCK OPTIONS AND WARRANTS

6 Months Ended

Mar. 31, 2014

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
$	0.0400		2,000,000		1. 42	$	0.0400		2,000,000	$	0.0400
$	0.0441		510,784		3.29	$	0.0441		510,784	$	0.0441
$	0.0475		3,789,489		4.29	$	0.0475		3,789,489	$	0.0475
$	0.0553		226,081		3.78	$	0.0553		226,081	$	0.0553
$	0.0710		1,000,000		0.82	$	0.0710		1,000,000	$	0.0710
$	0.0900		6,900,000		2.42	$	0.0900		6,900,000	$	0.0900
$	0.1790		100,000		1.60	$	0.1790		100,000	$	0.1790
$	0.2140		100,000		2.10	$	0.2140		100,000	$	0.2140
$	0.2431		22,411,764		4.30	$	0.2431		22,411,764	$	0.2431
			37,038,118		3.67	$	0.1748		37,038,118	$	0.1748

Transactions involving warrants are summarized as follows:

	Number of Shares			Weighted Average Price Per Share
Balance at October 1, 2013		59,033,305		$	0.0196
Granted		—			—
Exercised		(18,695,187	)		(0.2320	)
Cancelled or expired		(3,300,000	)		(0.2330	)
Balance,  March 31, 2014		37,038,118		$	0.1748

Warrants , continued

Transactions involving warrants are summarized as follows:

On December 16, 2013, Crede effected the cashless exercise of 10,695,187 Series A Warrants and 7,000,000 Series B Warrants, and the Company thereupon issued to Crede an aggregate of 18,823,073 shares of its Common Stock.

On February 11, 2014, 746,835 shares of the Company’s Common Stock were issued in connection with the cashless exercise of 1,000,000 warrants to acquire the Company’s common stock.

Employee Stock Options

In 2005, the Board of Directors and holders of a majority of the outstanding shares of Common Stock approved the 2005 Incentive Stock Plan,  In 2007, 2008 and 2012, the Board of Directors and holders of a majority of the outstanding shares of Common Stock approved various increases in the number of shares of Common Stock that can be issued as stock awards and stock options thereunder to an aggregate of 350,000,000 shares 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 shares.

The 2005 Incentive Stock Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to the Company’s success with an award of options to purchase shares of Common Stock.  As of March 31, 2014, a total of 12,675,000 shares have been issued and options to purchase 198,488,972 shares have been granted 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
$	0.0500		24,000,000		1.10	$	0.0500		24,000,000	$	0.0500
$	0.0585		50,000,000		4.29	$	0.0585		50,000,000	$	0.0585
$	0.0600		30,000,000		1.26	$	0.0600		30,000,000	$	0.0600
$	0.0650		634,825		2.68	$	0.0650		634,825	$	0.0650
$	0.0680		4,770,000		2.67	$	0.0680		4,770,000	$	0.0680
$	0.0700		2,850,000		1.17	$	0.0700		2,300,000	$	0.0700
$	0.0866		7,377,000		4.71	$	0.0866		2,000,000	$	0.0866
$	0.0900		1,500,000		1.42	$	0.0900		1,500,000	$	0.0900
$	0.0970		56,777,780		4.71	$	0.0970		3,777,780	$	0.0970
$	0.1100		5,400,000		4.21	$	0.1100		5,400,000	$	0.1100
$	0.1160		250,000		4.73	$	0.1160		—	$	—
$	0.1170		2,000,000		4.73	$	0.1170		—	$	—
$	0.1360		2,126,000		4.74	$	0.1360		2,126,000	$	0.1360
$	0.1600		2,500,000		4.83	$	0.1600		2,500,000	$	0.1600
$	0.1799		2,099,367		3.67	$	0.1799		2,099,367	$	0.1799
$	0.1930		100,000		4.25	$	0.1930		—	$	—
$	0.2000		100,000		4.13	$	0.2000		—	$	—
			192,484,972		3. 45	$	0.0765		131,107,972	$	0.0670

Employee Stock Options , continued

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

	Number of Shares		Weighted Average  Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at October 1, 2013		121,454,192	$	0.0630
Granted		71,030,780		0.0999
Exercised		—		—
Expired		—		—
Outstanding at March 31, 2014		192,484,972	$	0.0765
Vested at March 31, 2014		131,107,972			$	0.0670
Non-vested at March 31, 2014		61,377,000			$	0.036

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

On October 14, 2013, the Company granted an aggregate of 7,377,000 options to purchase the Company’s Common Stock at an exercise price of $0.0886 per share for five years to employees. 5,377,000 of these options vest at 25% each anniversary for the next four years and 2,000,000 of these options vest immediately.

On October 17, 2013, the Company granted Dr. James A. Hayward, Chairman, CEO and President and Dr. Ming-Hwa Liang, Chief Technology Officer and Secretary of the Company options to purchase 50,000,000 and 3,000,000 shares of the Company’s Common Stock, respectively, at an exercise price of $0.0970 per share for five years with vesting at 25% each anniversary for the next four years.  Also on October 17, 2013, the Company granted an aggregate of 3,777,780 options to non-employee board of director members at an exercise price of $0.0970 per share for five years with immediate vesting.

On November 28, 2013, the Company granted 250,000 options to purchase the Company’s Common Stock at an exercise price of $0.1160 per share for five years to an employee with vesting at 25% each anniversary for the next four years.

On December 2, 2013, the Company granted 2,000,000 options to purchase the Company’s Common Stock at an exercise price of $0.1170 per share for five years to an employee with vesting at 25% each anniversary for the next four years.

On December 10, 2013, the Company granted an aggregate of 2,126,000 options to purchase the Company’s Common Stock at an exercise price of $0.1360 per share for five years to employees, with immediate vesting.

On February 6, 2014, the Company granted 2,500,000 options to purchase the Company’s Common Stock at an exercise price of $0.1600 per share for five years to a consultant, with immediate vesting.

The fair value of options granted during the three months ended March 31, 2014 was determined using the Black Scholes Option Pricing Model with the following assumptions: stock price $0.1600, exercise price $0.1600, dividend yield $-0-, volatility of 124.88% and risk free rate of 0.51%.

The Company recorded $547,784 and $455,157 as stock compensation expense for the three month periods ended March 31, 2014  and 2013, respectively, and $1,313,331 and $873,023 for the six month periods ended March 31, 2014 and 2013, respectively, for the vesting portion of all employee options outstanding.   As of March 31, 2014, unrecorded compensation cost related to non-vested awards was $3,808,288, which is expected to be recognized through 2017.