C. STOCKHOLDERS EQUITY

6 Months Ended

Mar. 31, 2017

Notes to Financial Statements

C. STOCKHOLDERS' EQUITY

Stock options, stock bonuses and compensation granted by the Company as of March 31, 2017 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		138,400		65,959		N/A		60,453
Non-Qualified Stock Option Plans		387,200		261,270		N/A		96,825
Stock Bonus Plans		223,760		N/A		177,939		45,788
Stock Compensation Plan		134,000		N/A		87,590		45,088
Incentive Stock Bonus Plan		640,000		N/A		624,000		16,000

Stock options, stock bonuses and compensation granted by the Company as of September 30, 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 Option Plans		138,400		65,959		N/A		60,453
Non-Qualified Stock Option Plans		387,200		277,613		N/A		82,370
Bonus Plans		223,760		N/A		126,448		97,278
Stock Compensation Plan		134,000		N/A		79,401		53,276
Incentive Stock Bonus Plan		640,000		N/A		624,000		16,000

Stock option activity:

	Six Months Ended March 31,
	2017		2016
Granted		-		8,400
Expired		15,281		-
Forfeited		1,061		2,040

	Three Months Ended March 31,
	2017		2016
Granted		-		2,400
Expired		200		-
Forfeited		1,061		1,121

No shares of restricted stock were forfeited from the Incentive Stock Bonus Plan during the six and three months ended March 31, 2017 and 2016.

Stock-Based Compensation Expense

	Six Months Ended March 31,
	2017		2016
Employees	$	677,755	$	845,100
Non-employees	$	112,778	$	472,061

	Three Months Ended March 31,
	2017		2016
Employees	$	365,380	$	417,190
Non-employees	$	34,225	$	142,866

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 contracts.

Warrants and Non-employee Options

The following chart presents the outstanding warrants and non-employee options, listed by expiration date at March 31, 2017:

Warrant	Issue Date	Shares Issuable upon Exercise of Warrant		Exercise Price		Expiration Date	Reference
Series DD	12/8/16		1,360,960	$	4.50	6/8/17		1
Series N	8/18/08		113,785	$	13.18	8/18/17
Series EE	12/8/16		1,360,960	$	4.50	9/8/17		1
Series U	4/17/14		17,821	$	43.75	10/17/17		1
Series S	10/11/13- 10/24/14		1,037,120	$	31.25	10/11/18		1
Series V	5/28/15		810,127	$	19.75	5/28/20		1
Series W	10/28/15		688,930	$	16.75	10/28/20		1
Series X	1/13/16		120,000	$	9.25	1/13/21
Series Y	2/15/16		26,000	$	12.00	2/15/21
Series ZZ	5/23/16		20,000	$	13.75	5/18/21		1
Series BB	8/26/16		16,000	$	13.75	8/22/21		1
Series Z	5/23/16		264,000	$	13.75	11/23/21		1
Series FF	12/8/16		68,048	$	3.91	12/1/21		1
Series CC	12/8/16		680,480	$	5.00	12/8/21		1
Series HH	2/23/17		20,000	$	3.13	2/16/22		1
Series AA	8/26/16		200,000	$	13.75	2/22/22		1
Series JJ	3/14/17		30,000	$	3.13	3/8/22		1
Series GG	2/23/17		400,000	$	3.00	8/23/22		1
Series II	3/14/17		600,000	$	3.00	9/14/22		1
Consultants	12/28/12- 7/1/16		22,800	$	9.25- $70.00	4/24/17- 6/30/19		2

1. Derivative Liabilities

The table below presents the warrant liabilities and their respective balances at the balance sheet dates:

	March 31, 2017		September 30, 2016
Series S warrants	$	531,525	$	3,111,361
Series U warrants		-		-
Series V warrants		202,532		1,620,253
Series W warrants		190,443		1,799,858
Series Z warrants		142,341		970,604
Series ZZ warrants		9,414		70,609
Series AA warrants		116,996		763,661
Series BB warrants		8,250		58,588
Series CC warrants		630,554		-
Series DD warrants		29,324		-
Series EE warrants		179,169		-
Series FF warrants		73,816		-
Series GG warrants		506,426		-
Series HH warrants		24,290		-
Series II warrants		755,040		-
Series JJ warrants		36,625		-
Total warrant liabilities	$	3,436,745	$	8,394,934

The table below presents the gains on the warrant liabilities for the six months ended March 31:

	2017		2016
Series S warrants	$	2,579,836	$	3,147,660
Series U warrants		-		26,731
Series V warrants		1,417,721		1,822,785
Series W warrants		1,609,415		532,054
Series Z warrants		828,263		-
Series ZZ warrants		61,195		-
Series AA warrants		646,665		-
Series BB warrants		50,338		-
Series CC warrants		429,869		-
Series DD warrants		413,948		-
Series EE warrants		512,238		-
Series FF warrants		47,166		-
Series GG warrants		108,211		-
Series HH warrants		5,340		-
Series II warrants		161,419		-
Series JJ warrants		7,988		-
Net gain on warrant liabilities	$	8,879,612	$	5,529,230

The table below presents the gains and (losses) on the warrant liabilities for the three months ended March 31:

	2017			2016
Series S warrants	$	(41,485	)	$	321,507
Series U warrants		-			(4,455	)
Series V warrants		-			(1,417,721	)
Series W warrants		(58,189	)		(1,493,061	)
Series Z warrants		(40,524	)		-
Series ZZ warrants		(2,689	)		-
Series AA warrants		(32,904	)		-
Series BB warrants		(2,334	)		-
Series CC warrants		(174,623	)		-
Series DD warrants		43,029			-
Series EE warrants		(2,365	)		-
Series FF warrants		(19,574	)		-
Series GG warrants		108,211			-
Series HH warrants		5,340			-
Series II warrants		161,419			-
Series JJ warrants		7,988			-
Net loss on warrant liabilities	$	(48,700	)	$	(2,593,730	)

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 March 14, 2017, the Company sold 600,000 registered shares of common stock and 600,000 Series II warrants to purchase 600,000 unregistered shares of common stock at combined offering price of $2.50 per share.  The Series II warrants have an exercise price of $3.00 per share, are exercisable on September 14, 2017, and expire September 14, 2022. In addition, the Company issued 30,000 Series JJ warrants to purchase 30,000 shares of unregistered common stock to the placement agent. The Series JJ warrants have an exercise price $3.13, are exercisable on September 14, 2017 and expire on March 8, 2022. The net proceeds from this offering were approximately $1.3 million. The fair value of the Series II and JJ warrants of approximately $1.0 million on the date of issuance was recorded as a warrant liability.

On February 23, 2017, the Company sold 400,000 registered shares of common stock and 400,000 Series GG warrants to purchase 400,000 unregistered shares of common stock at a combined price of $2.50 per share.  The Series GG warrants have an exercise price of $3.00 per share, are exercisable on August 23, 2017, and expire August 23, 2022. In addition, the Company issued 20,000 Series HH warrants to purchase 20,000 shares of unregistered common stock to the placement agent. The Series HH warrants have an exercise price $3.13, are exercisable on August 23, 2017 and expire on February 16, 2022. The net proceeds from this offering were approximately $0.8 million. The fair value of the Series GG and HH warrants of approximately $0.6 million on the date of issuance was recorded as a warrant liability.

On December 8, 2016, the Company sold 1,360,960 shares of common stock and warrants to purchase common stock at a price of $3.13 in a public offering. The warrants consist of 680,480 Series CC warrants to purchase 680,480 shares of common stock, 1,360,960 Series DD warrants to purchase 1,360,960 shares of common stock and 1,360,960 Series EE warrants to purchase 1,360,960 shares of common stock. The Series CC warrants are immediately exercisable, expire in five-years from the offering date and have an exercise price of $5.00 per share. The Series DD warrants are immediately exercisable, expire in six-months from the offering date and have an exercise price of $4.50 per share. The Series EE warrants are immediately exercisable, expire in nine-months from the offering date and have an exercise price of $4.50 per share. In addition, the Company issued 68,048 Series FF warrants to purchase 68,048 shares of common stock to the placement agent. The FF warrants are exercisable at any time on or after June 8, 2017 and expire on December 1, 2021 and have an exercise price $3.91. The net proceeds from this offering was approximately $3.7 million. The fair value of the Series CC, DD, EE and FF warrants of approximately $2.3 million on the date of issuance was recorded as a warrant liability.

Expiration of Warrants

On March 16, 2017, 23,600 Series P warrants, with an exercise price of $112.50, expired. The fair value of the Series P warrants was $0 on the date of expiration.

On December 6, 2016, 105,000 Series R warrants, with an exercise price of $100.00, expired. The fair value of the Series R warrants was $0 on the date of expiration.

On December 22, 2015, 48,000 Series Q warrants, with an exercise price of $125.00, expired. The fair value of the Series Q warrants was $0 on the date of expiration.

2. Options and shares issued to Consultants

The Company typically enters into consulting arrangements in exchange for common stock or stock options. During the six and three months ended March 31, 2017, the Company issued 18,999 and 4,100 shares of common stock, respectively, of which 10,800 and 0 were restricted shares. The common stock was issued with stock prices ranging between $2.25 and $7.25 per share. During the six and three months ended March 31, 2016, the Company issued 32,151 and 14,451 shares of common stock, of which 23,200 and 9,600 were restricted shares. The common stock was issued with stock prices ranging between $9.25 and $17.75 per share. Additionally, during the six and three months ended March 31, 2016, the Company issued a consultant 8,400 and 2,400 options, respectively, to purchase common stock at prices between $9.25 and $15.00 per share with fair values ranging between $4.75 and $7.50 per share. These options are fully vested. 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, 2017, the Company recorded total expense of approximately $113,000 and $34,000, respectively, relating to these consulting agreements. During the six and three months ended March 31, 2016, the Company recorded total expense of approximately $472,000 and $143,000, respectively, relating to these consulting agreements. At March 31, 2017 and September 30, 2016, approximately $7,000 and $48,000, respectively, are included in prepaid expenses. As of March 31, 2017, 22,800 options were outstanding, which were issued to consultants as payment for services. Of these 22,800 outstanding options, 18,800 were vested, all of which were issued from the Non-Qualified Stock Option plans.