Note 6 - Stock Compensation Expense

3 Months Ended

Dec. 31, 2011

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

6. STOCK COMPENSATION EXPENSE

The Company maintains long-term incentive plans that authorize the Board of Directors or its Compensation Committee (the “Committee”) to grant key employees, officers and directors of the Company incentive or nonqualified stock options, stock appreciation rights, performance shares, restricted shares and performance units. The Committee determines the prices and terms at which awards may be granted along with the duration of the restriction periods and performance targets. All issuances are granted out of shares authorized, as the Company has no treasury stock. The Company has the option, in its sole discretion, to settle awards under its 2008 incentive plans in cash, in lieu of issuing shares.

The Company has two Long-Term Incentive Plans under which equity-based awards may be granted. At December 31, 2011, there were an aggregate of 2.0 million shares authorized for issuance under these plans. Approximately 0.4 million and 0.1 million shares remained available for future issuance under the 2008 Employee Long-Term Incentive Plan and the 2008 Directors Long-Term Incentive Plan, respectively.

Stock option awards.  During the first quarter of fiscal 2012 the Company granted performance-based based stock options with separate performance conditions in fiscal years 2012, 2013, and 2014, to named executive officers and other key employees. The Company will recognize compensation expense related to each separate service period during the respective period. The maximum number of performance-based options available to vest subject to certain operating performance targets is 1,158,750.  The number of options available to vest are subject to the performance measures in a given fiscal year.  The Company determined that a grant date, for purposes of measuring compensation expense in accordance with U.S. GAAP, has not been established for a portion of the 2013 and 2014 awards.  The accounting date will be established when a mutual understanding of key terms and conditions is established.  The Company also granted 105,000 stock options with a vesting period through December 2012 to certain key employees.

Annually, options to purchase 7,500 shares of common stock are issued to each director, other than the CEO. In addition, newly elected directors receive options to purchase 7,500 shares of common stock. All such options vest immediately at time of grant. During fiscal 2011, a former director exercised his option on 7,500 shares at an exercise price of $5.47. The Company opted to settle the award in cash in lieu of issuing shares.

The following table summarizes information for options currently outstanding and exercisable at December 31, 2011:

	Options Outstanding					Options Exercisable
Range of Exercise Prices	Number		Wtd. Avg. Remaining Life	Wtd. Avg. Exercise Price		Number		Wtd. Avg. Exercise Price		Intrinsic Value
$ 2.07-5.72		1,295,750	10 years	$	5.71		32,000	$	5.26	$	61,840
8.40-8.60		80,087	3 years		8.53		80,087		8.53		38,700
11.94-24.12		85,000	5 years		16.24		73,750		15.55		-
31.07-36.73		75,000	4 years		33.33		75,000		33.33		-
$ 2.07-36.73		1,535,837					260,837			$	100,540

Presented below is a summary of stock option plans activity for the three months ended December 31, 2011:

	Shares			Weighted Average Exercise Price
Outstanding at September 30, 2011		414,587		$	21.41
Granted		1,263,750			5.72
Exercised		-			-
Cancelled		(142,500	)		29.70
Outstanding at December 31, 2011		1,535,837		$	7.79
Exercisable at December 31, 2011		260,837		$	17.24

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Assumptions	Fiscal 2012			Fiscal 2011			Fiscal 2010			Fiscal 2009			Fiscal 2008
Expected life of option	3-5 years			5 years			3.8 years			3.8 & 4 years			4 & 7.5 years
Risk-free interest rate		0.4%-0.8	%		2.4	%		0.4	%		0.5	%		1.8	%
Volatility of stock		72%-79	%		73	%		77	%		79	%		66	%
Forfeiture rate		0%-16	%		0	%		0	%		0%-25	%		0%-30	%

Volatility, expected term and dividend yield assumptions were based on the Company’s historical experience. The risk-free rate was based on a U.S. treasury note with a maturity similar to the option grant’s expected term. The number of options for performance-based shares is based on the probable established performance target expected to be achieved.

Restricted stock awards. Under the Company’s equity incentive plans, employees and directors may be granted restricted stock awards with participation rights which are valued based upon the fair market value on the date of the grant. The balance of restricted stock shares outstanding was 30,000 shares as of December 31, 2011.

In accordance with ASC 718, the Company determined its practice of settling vested restricted shares in cash resulted in a modification in fiscal 2010 from equity to liability accounting for the remaining unvested restricted shares. The fair value of the modified liability award is measured each reporting date through settlement and any adjustments to increase or decrease the liability are recorded either as compensation cost or a charge to equity. During the first quarter of fiscal 2012, 15,000 shares of restricted stock vested.

The Company recorded into selling and general administrative expense for its corporate/other products segment the cost of employee services received in exchange for equity instruments based on the grant-date fair value of those instruments in accordance with the provisions of ASC 718, which was $0.1 million for the three months ended December 31, 2011, and $0.2 million for the three months ended December 31, 2010. There were no recognized tax benefits during the three months ended December 31, 2011 or 2010, as any benefit is offset by the Company's full valuation allowance on its net deferred tax asset.