WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

12 Months Ended

Sep. 30, 2023

WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

NOTE H – WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

Warrants

The following table summarizes the changes in warrants outstanding.  These warrants were granted as part of financing transactions, as well as in lieu of cash compensation for Transactions involving warrants (see Note G) are summarized as follows:

		Weighted Average
	Number of	Exercise Price Per
	Shares	Share
Balance at October 1, 2022	7,313,963	$	3.68
Granted	—		—
Exercised	—		—
Cancelled or expired	(2,093,375)		(4.12)
Balance, September 30, 2023	5,220,588	$	3.50

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, 2023, a total of 289,534 shares have been issued and options to purchase 1,656,677 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 H – WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS, 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, 2022	1,063,055	$	20.49
Granted	1,224,421		1.29
Exercised	—		—
Forfeited, cancelled or expired	(83,239)		25.78
Outstanding at September 30, 2023	2,204,237		9.95
Vested at September 30, 2023	1,060,931		19.26	—	7.29
Non-vested at September 30, 2023	1,143,306		1.31	—	9.37

For the twelve-month period ended September 30, 2023, the Company granted 308,333 options to officers of the Company. These options have a ten-year term and vest evenly over four years starting on the first anniversary of the date of grant. Also, during the twelve-month period ended September 30, 2023, the Company granted 694,670 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. The remaining options granted during the fiscal year ended September 30, 2023 were to employees.

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.

The fair value of options granted during the fiscal years ended September 30, 2023 and 2022 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:

	2023			2022
Stock price	$	1.27		$	5.55
Exercise price	$	1.27		$	594
Expected term		5.75			5.16
Dividend yield		—			—
Volatility		157	%		143	%
Risk free rate		3.64	%		1.18	%

The Company recorded $1,033,889 and $2,518,665 as stock compensation expense within selling, general and administrative for fiscal years ended September 30, 2023 and 2022, respectively. As of September 30, 2023, unrecorded compensation cost related to non-vested awards was $716,898 which is expected to be recognized over a weighted average period of approximately 2.16 years. The weighted average grant date fair value per share for options granted during the fiscal years ended September 30, 2023 and 2022 was $1.20 and $0.84, respectively.

Restricted Stock Units

Restricted stock unit awards are valued at the market price of the Company’s common stock on the grant date.

NOTE H – WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS, continued

Stock Options, continued

Activity in our non-vested restricted stock unit awards for the fiscal year ended September 30, 2023 is as follows:

	Number of
	Shares
Outstanding at October 1, 2022	—
Granted	282,640
Exercised	—
Forfeited	—
Cancelled or expired	—
Outstanding at September 30, 2023	282,640
Vested at September 30, 2023	—
Non-vested at September 30, 2023	282,640

During the fiscal year ended September 30, 2023, the Company granted 282,640 restricted stock units (“RSUs”) to certain officers of the Company. These RSUs vest on the first anniversary of the grant date. The fair value of the RSUs granted was the closing stock price on the date of grant.