STOCK OPTIONS AND WARRANTS

9 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE F — STOCK OPTIONS AND WARRANTS

Warrants

During the nine month period ended June 30, 2017, the Company issued warrants to purchase 2,272,727 shares of its common stock as part of the Private Placement (See Note E). In addition, warrants to purchase an aggregate of 68,182 shares of common stock were issued to the Company's placement agents, Maxim Group LLC and Imperial Capital LLC (See Note E).

The following table summarizes the changes in warrants outstanding and the related prices for the shares of common stock issued to non-employees of the Company.

Transactions involving warrants are summarized as follows:

	Number of  Shares		Weighted  Average  Exercise  Price Per  Share
Balance at October 1, 2016		7,208,060	$	3.64
Granted		2,340,909		3.47
Exercised		-		-
Cancelled or expired		-		-
Balance at June 30, 2017		9,548,969	$	3.60

Stock Options

In 2005, the Board of Directors and the holders of a majority of the outstanding shares of common stock approved the 2005 Incentive Stock Plan (the “Incentive Plan”). The number of shares of common stock that can be issued as stock awards and stock options thereunder is an aggregate of 8,833,333 shares and the number of shares of common stock that can be covered by awards made to any participant in any calendar year is 833,334 shares. The Incentive Plan’s expiration date is January 25, 2025.

The Incentive Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to the Company's success with an award of options. As of June 30, 2017, a total of 275,752 shares have been issued and options to purchase 5,798,790 shares have been granted under the Incentive Plan.

Transactions involving stock options issued to employees and consultants are summarized as follows:

	Number of  Shares			Weighted  Average  Exercise  Price Per  Share			Aggregate  Intrinsic  Value		Weighted Average Contractual Life (Years)
Outstanding at October 1, 2016		4,403,234		$	4.08
Granted		1,039,010			2.27
Exercised		-			-
Cancelled or expired		(166,022	)		(4.20	)
Outstanding at June 30, 2017		5,276,222		$	3.72
Vested at June 30, 2017		3,823,720		$	3.93		$	-	4.25
Non-vested at June 30, 2017		1,452,502					$	-	7.64

During the nine month period ended June 30, 2017, the Company issued an aggregate of 1,039,010 options to employees, non-employee board of director members (including award modifications of 119,182 options), a consultant and members of the strategic advisory board. Included in these grants were 300,000 options granted to executives during the nine month period ended June 30, 2017 and 5,000 performance based options granted to a consultant. These performance based options vest when a certain performance condition is met by the consultant. During the three month period ended June 30, 2017, the Company issued an aggregate of 125,001 options (including award modifications of 45,001 options) to employees, non-employee members of the board of directors, and members of the strategic advisory board. Included in these grants were 20,000 options issued to a member of the board of the directors.

The Company uses the Black Scholes Option Pricing Model to determine the fair value of options issued to employees and consultants. The following significant assumptions in the Black Scholes Option Pricing Model were utilized to estimate the fair value of share based payment awards during the three and nine month periods ended June 30, 2017 and 2016:

	Three  Month Period  Ended  June 30, 2017			Nine Month Period  Ended  June 30, 2017
Stock price	$	1.58		$	2.01
Exercise price	$	2.58		$	2.29
Expected term, years		6.93			5.47
Dividend yield		-	%		-	%
Volatility		115	%		112	%
Risk free rate		2.0	%		2.0	%

	Three  Month Period  Ended  June 30, 2016			Nine Month Period  Ended  June 30, 2016
Stock price	$	3.06		$	3.05
Exercise price	$	2.82		$	2.93
Expected term, years		9.66			7.93
Dividend yield		-	%		-	%
Volatility		140	%		135	%
Risk free rate		1.75	%		2.00	%

The Company recorded $566,377 and $515,496 as stock compensation expense for the three month periods ended June 30, 2017 and 2016, respectively. The Company recorded $2,562,300 and $1,444,170 as stock compensation expense for the nine month periods ended June 30, 2017 and 2016, respectively. Included in this amount is $15,414 and $89,951 for the three and nine month period ended June 30, 2017 for stock option modifications primarily to extend the term of options for certain employees and nonemployee board of director members. As of June 30, 2017, unrecorded compensation cost related to non-vested awards was $2,527,059, which is expected to be recognized over a weighted average period of approximately 3.37 years. The weighted average grant date fair value per share for options granted during the three and nine month periods ended June 30, 2017 was $1.17 and $1.57, respectively.