Note 8 - Stock-Based Compensation and Preferred Stock

12 Months Ended

Sep. 30, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 8 – Stock-Based Compensation and Preferred Stock

Plan Information

The 1998 Incentive Stock Plan (the “Plan”) provides for awards of stock options and restricted stock to officers, directors, key employees and consultants.  The Plan provides that upon any issuance of additional shares of common stock by the Company, other than pursuant to the Plan, the number of shares covered by the Plan will increase to an amount equal to 10% of the then outstanding shares of common stock.  Under the Plan, option prices will be set by the Board of Directors and may be greater than, equal to, or less than fair market value on the grant date.

At September 30, 2011, 1,024,656 million shares of common stock were reserved for the exercise of, or lapse of restrictions on, stock awards under the Plan.  Of these reserved shares, 588,925 shares were available for future grants.

Stock Options

Stock options are accounted for in accordance with the provisions of FASB ASC 718, Stock Compensation.  FASB ASC 718 requires all share-based payments to employees, including grants of employee stock options, be recognized in financial statements based on their grant date fair value over the requisite service period.  Compensation expense for stock-based awards is included in the operating, selling, general and administrative expense section of the consolidated statements of income and comprehensive income.

Stock options are valued at the date of the award, which does not precede the approval date, and compensation cost is recognized on a straight-line basis over the vesting period.  Stock options granted to employees generally become exercisable over a four-year period from the date of grant and generally expire ten years after the date of grant.  Stock options granted to the Board of Directors generally become exercisable on the date of grant and generally expire ten years after the date of grant.

A summary of the status of the Company's stock options at September 30, 2011 and changes during the year then ended is presented below:

	Options			Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at September 30, 2010		136,850		$	3.46
Granted		–		$	–
Exercised		(4,500	)	$	1.50	$	5,670
Expired		–		$	–
Forfeited		(10,350	)	$	2.95
Outstanding at September 30, 2011		122,000		$	3.57	$	4,120
Exercisable at September 30, 2011		104,500		$	3.67	$	4,120

The total intrinsic value of options exercised for the year ended September 30, 2011 was $5,670.  There were no options exercised for the years ended September 30, 2010 and 2009.

Information about the Company’s outstanding and exercisable stock options at September 30, 2011 is as follows:

			Exercisable		Remaining
	Stock Options		Stock Options		Contractual
Exercise Price	Outstanding		Outstanding		Life
$3.001		70,000		52,500	6.9 years
$3.450		15,000		15,000	5.5 years
$5.780		15,000		15,000	4.5 years
$4.620		15,000		15,000	3.5 years
$4.400		3,000		3,000	2.5 years
$1.650		2,000		2,000	1.5 years
$0.810		2,000		2,000	0.5 years
		122,000		104,500

No nonqualified stock options were granted in fiscal year 2011, 2010 or 2009.

Compensation expense related to stock options recorded for the years ended September 30, 2011, 2010 and 2009 is as follows:

	2011		2010		2009
Fiscal year 2006 grant	$	–	$	–	$	3,063
Fiscal year 2008 grant		10,349		20,815		48,771
Total compensation expense	$	10,349	$	20,815	$	51,834

For the options granted in fiscal years 2006 and 2008, the Company is recording compensation expense over the vesting term of the related options.  All of the options granted in fiscal year 2007 were fully vested and, as such, their calculated fair value was expensed on the grant date.

Restricted stock

The Company granted restricted stock in March and May 2011 to its Board of Directors and certain employees totaling 58,920 shares and in March 2010 and 2009 to its Board of Directors totaling 27,150 shares and 46,669 shares, respectively. The restricted stock grants were valued at market value on the date of grant.  The restricted shares are delivered to the directors and employees at the end of the 12 month holding period.  The fair value of the shares upon issuance totaled $170,000, $60,000 and $70,000 for the 2011, 2010 and 2009 fiscal year grants, respectively. The grants are amortized over the 12 month holding period as compensation expense.  Compensation expense related to restricted stock recorded for the years ended September 30, 2011, 2010 and 2009 is as follows:

	2011		2010		2009
Fiscal year 2009 grant	$	–	$	29,169	$	40,831
Fiscal year 2010 grant		25,000		35,000		–
Fiscal year 2011 grant		74,167		–		–
	$	99,167	$	64,169	$	40,831