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C. STOCKHOLDERS EQUITY

6 Months Ended

Mar. 31, 2016

Stock options, stock bonuses and compensation granted by the Company as of March 31, 2016 are as follows:

Name of Plan	Total Shares Reserved Under Plans		Shares Reserved for Outstanding Options		Shares Issued		Remaining Options/Shares Under Plans

Incentive Stock Options Plans		1,960,000		1,685,966		N/A		11,334
Non-Qualified Stock Option Plans		7,680,000		6,010,721		N/A		1,057,861
Stock Bonus Plans		3,594,000		N/A		2,412,153		1,181,020
Stock Compensation Plan		3,350,000		N/A		1,647,777		1,669,172
Incentive Stock Bonus Plan		16,000,000		N/A		15,600,000		400,000

Stock options, stock bonuses and compensation granted by the Company as of September 30, 2015 are as follows:

Name of Plan	Total Shares Reserved Under Plans		Shares Reserved for Outstanding Options		Shares Issued		Remaining Options/Shares Under Plans

Incentive Stock Option Plans		1,960,000		1,690,665		N/A		6,635
Non-Qualified Stock Option Plans		7,680,000		5,849,103		N/A		1,219,479
Bonus Plans		3,594,000		N/A		1,643,714		1,949,459
Stock Compensation Plan		3,350,000		N/A		1,423,999		1,892,950
Incentive Stock Bonus Plan		16,000,000		N/A		15,600,000		400,000

Stock option activity:

	Six Months Ended March 31,
	2016		2015
Granted		210,000		2,000
Forfeited		50,998		109,416

	Three Months Ended March 31,
	2016		2015
Granted		60,000		1,000
Forfeited		28,032		11,916

No shares of restricted stock were forfeited from the Incentive Stock Bonus Plan during the six and three months ended March 31, 2016. During the six and three months ended March 31, 2015, 100,000 shares of non-vested restricted stock were forfeited.

Stock-Based Compensation Expense

	Six Months Ended March 31,
	2016		2015
Employees	$	845,100	$	3,951,854
Non-employees	$	472,061	$	300,129

	Three months Ended March 31,
	2016		2015
Employees	$	417,190	$	892,063
Non-employees	$	142,866	$	110,985

Employee compensation expense includes the expense related to options issued or vested and restricted stock. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of their service contract.

Derivative Liabilities, Warrants and Other Options

The following chart presents the derivative liabilities, warrants and other options outstanding during the quarter ended March 31, 2016:

Warrant	Issue Date	Shares Issuable upon Exercise of Warrant		Exercise Price		Expiration Date	Refer-ence

Series R	12/6/12		2,625,000	$	4.00	12/6/16		1
Series S	10/11/13 -10/24/14		25,928,010	$	1.25	10/11/18		1
Series U	4/17/14		445,514	$	1.75	10/17/17		1
Series V	5/28/15		20,253,164	$	0.79	5/28/20		1
Series W	10/28/15		17,223,248	$	0.67	10/28/20		1
Series X	1/13/16		3,000,000	$	0.37	1/13/21		2
Series Y	2/15/16		650,000	$	0.48	2/15/19		2
Series N	8/18/08		2,844,627	$	0.53	8/18/17
Series P	2/10/12		590,001	$	4.50	3/6/17
Consultants	12/2/11- 1/1/16		440,000	$	0.37- $3.50	10/27/16- 12/31/18		3

The following chart presents the derivative liabilities, warrants and other options outstanding at September 30, 2015:

Warrant	Issue Date	Shares Issuable upon Exercise of Warrants		Exercise Price		Expiration Date	Refer-ence

Series N	8/18/08		2,844,627		0.53	8/18/17
Series Q	6/21/12		1,200,000		5.00	12/22/15		1
Series R	12/6/12		2,625,000		4.00	12/6/16		1
Series S	10/11/13- 10/24/14		25,928,010		1.25	10/11/18		1
Series U	4/17/14		445,514		1.75	10/17/17		1
Series V	5/28/15		20,253,164		0.79	5/28/20		1
Series P	2/10/12		590,001		4.50	3/6/17
Consultants	10/14/05 – 7/1/15		238,000		0.66 – 20.00	10/14/15 - 6/30/18		3

1.	Derivative Liabilities

The table below presents the derivative instruments and their respective balances at the balance sheet dates:

	March 31, 2016		September 30, 2015
Series S warrants	$	4,215,894	$	7,363,555
Series U warrants		17,821		44,551
Series V warrants		4,455,696		6,278,481
Series W warrants		4,528,717		-

Total derivative liabilities	$	13,218,128	$	13,686,587

The gains and (losses) on the derivative instrument are as follows:

	Six Months Ended March 31,
	2016		2015
Series A through E warrants	$	-	$	6,105
Series R warrants		-		26,250
Series S warrants		3,147,660		(2,638,874	)
Series U warrants		26,731		(13,307	)
Series V warrants		1,822,785		-
Series W warrants		532,054		-

Gain (loss) on derivative instruments	$	5,529,230	$	(2,619,826	)

	Three Months Ended March 31,
	2016			2015
Series R warrants	$	-		$	(105,000	)
Series S warrants		321,507			(4,589,257	)
Series U warrants		(4,455	)		(88,539	)
Series V warrants		(1,417,721	)		-
Series W warrants		(1,493,061	)		-

(Loss) on derivative instruments	$	(2,593,730	)	$	(4,782,796	)

The Company reviews all outstanding warrants in accordance with the requirements of ASC 815. This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The warrant agreements provide for adjustments to the exercise price for certain dilutive events. Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.

In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration. Any change in fair value between the respective reporting dates is recognized as a gain or loss.

Issuance of additional Warrants

On October 28, 2015, the Company closed an underwritten public offering of 17,223,248 shares of common stock and 17,223,248 Series W warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.67 for net proceeds of approximately $10.6 million, net of underwriting discounts and commissions and offering expenses. The Series W warrants are immediately exercisable at a price of $0.67 and expire on October 28, 2020. The initial cost of the Series W warrants of $5,060,771 was recorded as warrant liability.

Expiration of Warrants

On December 22, 2015, 1,200,000 Series Q warrants, with an exercise price of $5.00, expired. The fair value of the Series Q warrants was $0 on the date of expiration.

2.	Equity-based warrants

In January 2016, the Company sold 3,000,000 shares of its common stock and 3,000,000 Series X warrants to the de Clara Trust for $1,110,000. The de Clara Trust is controlled by Geert Kersten, the Company's Chief Executive Officer and a director. Each Series X warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021. The Series X warrants qualify for equity treatment in accordance with ASC 815. The relative fair value of the warrants was calculated to be $416,871 and was recorded as a debit and a credit to additional paid-in capital.

In February 2016, the Company sold 1,300,000 shares of its common stock and 650,000 Series Y warrants to a private investor for $624,000. Each Series Y warrant allows the holder to purchase one share of the Company's common stock at a price of $0.48 per share at any time on or before February 15, 2019. The Series Y warrants qualify for equity treatment in accordance with ASC 815. The relative fair value of the warrants was calculated to be $126,361 and was recorded as a debit and a credit to additional paid-in capital.

3.	Options and shares issued to consultants

The Company typically enters into consulting arrangements in exchange for restricted stock or stock options. During the six and three months ended March 31, 2016, the Company issued 803,778 and 361,286 shares of common stock, respectively, of which 580,000 and 240,000 were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $0.37 and $0.71 per share. During the six and three months ended March 31, 2015, the Company issued 423,984 and 127,492 shares of common stock, respectively, of which 69,000 and 25,000 were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $0.57 and $1.11 per share.

Additionally, during the six and three months ended March 31, 2016, the Company issued 210,000 and 60,000 options, respectively, to purchase common stock with a fair value ranging between $0.19 and $0.30 per share. During the six and three months ended March 31, 2015, the Company issued 40,000 options to purchase common stock with a fair value of $0.50 per share. The aggregate values of the issuances of restricted common stock and common stock options are recorded as prepaid expenses and are charged to general and administrative expenses over the periods of service.

During the six and three months ended March 31, 2016, the Company recorded total expense of $472,061 and $142,866, respectively, relating to these consulting agreements. During the six and three months ended March 31, 2015, the Company recorded total expense of $300,129 and $110,986, respectively, relating to these consulting agreements. At March 31, 2016 and September 30, 2015, $85,022 and $30,329, respectively, are included in prepaid expenses. As of March 31, 2016, 440,000 options issued to consultants as payment for services remained outstanding, all of which were issued from the Non-Qualified Stock Option plans.