STOCK OPTIONS AND WARRANTS

12 Months Ended

Sep. 30, 2022

STOCK OPTIONS AND WARRANTS

STOCK OPTIONS AND WARRANTS

NOTE I – STOCK OPTIONS AND WARRANTS

Warrants

Transactions involving warrants (see Note H) are summarized as follows:

		Weighted Average
	Number of	Exercise Price Per
	Shares	Share
Balance at October 1, 2021	745,268	$	6.44
Granted	9,142,413		3.31
Exercised	(1,854,200)		(2.00)
Cancelled or expired	(719,518)		(6.16)
Balance, September 30, 2022	7,313,963	$	3.68

Series A Warrants

The Series A warrants are recorded as a liability in the consolidated balance sheet were recorded at fair value and will be marked to market at each period end. The fair value of the Series A Warrants upon issuance and as of September 30, 2022, was $13,414,000 and $2,883,000, respectively, which resulted in an unrealized gain in the change in fair value of Series A Warrants of $10,531,000 for the twelve-month period ended September 30, 2022.

Series B Warrants

The Series B warrants are recorded as a liability in the consolidated balance sheet and were recorded at fair value and will be marked to market at each period end. The fair value of the Series B Warrants upon issuance was $9,174,600. During the twelve-month period ended September 30, 2022, there were 925,000 Series B Warrants exercised, with a fair value upon exercise of $2,802,879. The fair value of the remaining Series B Warrants as of September 30, 2022, was $779,400. These changes in fair value resulted in an unrealized gain in the change in fair value of the Series B Warrants of $5,566,365 for the twelve-month period ended September 30, 2022.

Stock Options

During June 2020, the Board of Directors and subsequently during September 2020, the holders of a majority of the Company’s outstanding shares of common stock approved the 2020 Equity Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan, among other things, reserves an additional 3,500,000 shares of the Company’s common stock for issuance in the form of equity-based awards to employees, directors, consultants, and other service providers, and those of the Company’s affiliates. The maximum total grant date fair value of awards granted under the 2020 Incentive Plan to individuals in their capacity as non-employee directors may not exceed $250,000 in any single calendar year. The 2020 Incentive Plan’s expiration date is September 15, 2030.

The 2020 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 to purchase shares of common stock. As of September 30, 2021, a total of 6,894 shares have been issued and options to purchase 501,240 shares have been granted under the Company’s Incentive Plans.

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, as amended and restated as of January 21, 2015 (the “2005 Incentive Plan”, collectively with the 2020 Incentive Plan, the “Company’s Incentive Plans”). Effective as of September 16, 2020, no further awards will be made under the Company’s 2005 Incentive Stock Plan, as amended and restated.

NOTE I – STOCK OPTIONS AND WARRANTS, continued

Stock Options, continued

Transactions involving stock options issued are summarized as follows:

					Weighted
		Weighted Average		Aggregate	Average
	Number of	Exercise Price Per		Intrinsic	Contractual
	Shares	Share		Value	Life (years)
Outstanding at October 1, 2021	487,377	$	40.26
Granted	588,187		5.94
Exercised	—		—
Cancelled or expired	(12,509)		99.63
Outstanding at September 30, 2022	1,063,055		20.49
Vested at September 30, 2022	840,012		24.57	—	7.67
Non-vested at September 30, 2022	223,043		5.53	—	9.08

For the twelve-month period ended September 30, 2022, the Company granted 361,552 options to officers of the Company. These options have a ten-year term and vest immediately. Also, during the twelve-month period ended September 30, 2022, the Company granted 213,889 options to non-employee board of director members. The options granted to the non-employee board of directors have a ten-year term and vest on the one-year anniversary of the date of grant.

For the fiscal year ended September 30, 2021, the Company issued an aggregate of 203,405 options to employees and non-employee board of director members and consultants.

The fair value of options granted during the fiscal years ended September 30, 2022 and 2021 was determined using the Black Scholes Option Pricing Model. For the purposes of the valuation model, the Company used the simplified method for determining the granted options expected lives. The simplified method is used since the Company does not have adequate historical data to utilize in calculating the expected term of options. The fair value for options granted was calculated using the following weighted average assumptions:

	2022			2021
Stock price	$	5.55		$	6.43
Exercise price	$	594		$	6.43
Expected term		5.16			5.10
Dividend yield		—			—
Volatility		143	%		141	%
Risk free rate		1.18	%		0.47	%

The Company recorded $2,518,665 and $1,668,003 as stock compensation expense within selling, general and administrative for fiscal years ended September 30, 2022 and 2021, respectively. As of September 30, 2022, unrecorded compensation cost related to non-vested awards was $125,118 which is expected to be recognized over a weighted average period of approximately 0.20 years. The weighted average grant date fair value per share for options granted during the fiscal years ended September 30, 2022 and 2021 was $0.84 and $5.72, respectively.