SHARE-BASED COMPENSATION

6 Months Ended

Mar. 31, 2014

Equity [Abstract]

Stockholders Equity Note Disclosure [Text Block]

NOTE 7. SHARE-BASED COMPENSATION 

The Company provides its employees, officers, consultants and directors with stock options, restricted stock units and other stock rights for common stock of the Company on a discretionary basis. All option and restricted stock unit grants are subject to the terms and conditions determined by the Compensation and Stock Committee of the Board of Directors, and generally vest over a three-year period beginning three months from the date of grant and expire either seven or ten years from the date of grant depending on the plan. Generally, options and other stock rights are granted at exercise prices not less than the fair market value at the date of grant. Share-based compensation expense for all share-based payment awards is measured based on the grant-date fair value of the award.

The following table presents share-based employee compensation expenses included in our unaudited condensed consolidated statements of operations (in thousands): 

	Three Months Ended March 31,				Six Months Ended March 31,
	2014		2013		2014		2013
Sales and marketing	$	1,259	$	469	$	2,526	$	928
Engineering and product development		482		21		1,357		43
Professional Services		26		—		66		—
General and administrative		333		95		869		191
Total	$	2,100	$	585	$	4,818	$	1,162

 Stock Option Plans

The Company estimates the fair value of each share-based award (except restricted stock units, which are discussed below) using the Black-Scholes option valuation model. The Black-Scholes option valuation model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield. The Company recognizes share-based compensation expense related to stock options on a straight-line basis over the requisite service period of the award. All of the Company’s stock compensation awards are accounted for as equity instruments and there have been no liability awards granted. No options were granted under the stock option plans for the three or six month periods ended March 31, 2014 and 2013. The total intrinsic value of options exercised during the three months ended March 31, 2014 and 2013 was approximately $136,000 and $111,000, respectively. The total intrinsic value of options exercised during the six months ended March 31, 2014 and 2013 was approximately $524,000 and $561,000, respectively. Total cash received from option exercises during the three and six months ended March 31, 2014 was approximately $24,000 and $65,000, respectively. There was no tax benefit realized from stock options exercised during the three and six months ended March 31, 2014 and 2013. As of March 31, 2014, there was approximately $609,000 of total unrecognized compensation cost related to non-vested stock option arrangements, which is expected to be recognized over a weighted-average period of 1.90 years. Many of the assumptions used in the determination of share-based compensation expense are judgmental and highly volatile.

The expected option life is based on historical trends and data. With regard to the expected option life assumption, the Company considers the exercise behavior of past grants and models the pattern of aggregate exercises. Patterns are determined on specific criteria of the aggregate pool of optionees including the reaction to vesting, realizable value and short-time-to-maturity effect. The Company determined the volatility for options granted using the historical volatility of the Company’s common stock. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. Dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. Based on the Company’s historical voluntary turnover rates, an annualized estimated forfeiture rate of 10% has been used in calculating the estimated cost. Additional expense will be recorded if the actual forfeiture rate is lower than estimated, and a recovery of prior expense will be recorded if the actual forfeiture is higher than estimated.  

At March 31, 2014, 1,575,686 shares were authorized and 92,389 shares were available for future issuance under the 2011 Plan.  

The following table is a summary of combined activity for all of the Company’s stock option plans:  

		Weighted-		Weighted-	Aggregate
		Average		Average	Intrinsic
	Number of	Exercise Price		Remaining	Value
	Options	Per Share		Life (years)	(thousands)
Outstanding, September 30, 2013	363,209	$	5.76	4.33	$	8,042
Granted	—		—	—		—
Canceled/Forfeited	—		—	—		—
Exercised	17,375		3.77	—		—
Outstanding, March 31, 2014	345,834	$	5.86	3.99	$	7,353
Vested or expected to vest, March 31, 2014	55,331	$	12.25	5.90	$	823
Exercisable, March 31, 2014	284,354	$	4.48	3.57	$	6,439

Restricted Stock Units

The Company periodically grants awards of restricted stock units (“RSUs”) to each of its non-employee directors and some of its management team and employees on a discretionary basis pursuant to its stock compensation plans. Each RSU entitles the holder to receive, at the end of each vesting period, a specified number of shares of the Company’s common stock. The total number of RSUs unvested at March 31, 2014 was 906,846. Most RSUs vest at the rate of 33.33% on each of the first through third anniversaries of the grant date. Included in the total number of RSUs unvested at March 31, 2014 are certain RSUs that are subject to a further vesting condition that the Company’s common stock must trade at a price greater than the following market prices per share on a national securities exchange for a period of twenty consecutive days on or prior to certain anniversaries of the grant date as follows: 

	Number of
	Unvested RSUs
$10.00 per share prior to five years of the grant date	*	75,681
$10.00 per share prior to four years of the grant date	*	127,311
$17.50 per share prior to five years of the grant date	*	30,000
$17.50 per share prior to four years of the grant date	*	90,339
$17.50 per share prior to three years of the grant date	*	147,334
$20.00 per share prior to four years of the grant date	*	5,668
$22.50 per share prior to four years of the grant date	*	12,667
$22.50 per share prior to three years of the grant date	*	185,500
$22.50 per share prior to two and one-half years of the grant date	*	66,674
No further trading vesting condition		165,672
Unvested RSUs, March 31, 2014		906,846

The Company’s common stock has satisfied the per share market price vesting conditions for the grants denoted with an asterisk above totaling 741,174 RSUs. For such RSUs, the Company performed fair value analysis using the Monte Carlo option-pricing model. The fair value related to the RSUs was calculated based primarily on the average stock price of the Company’s common stock on the date of the grant and is being amortized evenly on a pro-rata basis over the vesting period to sales and marketing, engineering and product development, professional services and general and administrative expense. The fair values of the RSUs granted in the six months ended March 31, 2014 and 2013 were approximately $2,783,000 (or $29.45 weighted average fair value per share) and approximately $2,347,000 (or $18.41 weighted average fair value per share). The Company recorded compensation expense related to RSUs of approximately $1,971,000 and $545,000 for the three months ended March 31, 2014 and 2013, respectively, and approximately $4,602,000 and $1,081,000 for the six months ended March 31, 2014 and 2013, respectively. These amounts are included in the total share-based compensation expense disclosed above. As of March 31, 2014, there was approximately $11,703,000 of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted average period of 1.85 years.

The following table presents nonvested RSU information for the six months ended March 31, 2014:  

	Number of
	RSUs
	Outstanding
Nonvested, September 30, 2013	1,056,696
Granted	94,500
Canceled/Forfeited	(41,000)
Vested	(203,350)
Nonvested, March 31, 2014	906,846