WARRANT LIABILITY

12 Months Ended

Sep. 30, 2014

Warrant Liability [Abstract]

WARRANT LIABILITY

NOTE F – WARRANT LIABILITY

On December 16, 2013, Crede CG III, Ltd (“Crede”) effected the cashless exercise of 178,253 Series A Warrants and 116,667 Series B Warrants. At December 16, 2013 (date of exercise), the Company determined the fair value of the Warrants to be $2,455,042 using the Binomial Lattice model with the following assumptions: fair value of the Company’s Common Stock $10.80 per share; dividend yield 0%; expected term: 4.55 years; risk free interest rate: 1.55%; expected volatility of: 118.89%; and an exercise price of $14.59. The change in fair value of the warrant liability on the day of exercise amounted to a loss of $1,288,752 and was included in the other income (expense). Upon exercise, the fair value of the Series A Warrants and 116,667 of the Series B Warrants were reclassified to equity. The Series A and Series B Warrants are classified as liabilities due to certain provisions contained in the warrant agreements, which may cause an adjustment to the conversion rate or the number of warrants outstanding.

As of September 30, 2014 the fair value of the remaining 387,621 Series B Warrants was $1,096,412. The fair value was determined using the Binomial Lattice model with the following assumptions: fair value of the Company’s Common Stock $5.46 per share; dividend yield 0%; expected term 3.80 years; risk free interest rate: 1.43%; expected volatility of: 98.41%; and the expected price at which holders are likely to exercise their Warrants of $14.06 per share.

As of September 30, 2013, the fair value of the Series A and Series B Warrants was determined using the Binomial Lattice model with the following assumptions: fair value of the Company’s common stock: $0.09 per share; dividend yield: 0%; expected terms 4.80 years; risk free interest rate: 1.39%; expected volatility of 121.71%; and the expected price at which holders are likely to exercise their Warrants of $14.59 per share.

The change in fair value of the warrant liability resulted in loss on change in fair value of $908,005 and $7,508,146, respectively, for the fiscal years ended September 30, 2014 and 2013.

On October 28, 2014, the Company entered into a warrant repurchase option agreement with Crede, pursuant to which it had the option to purchase between 50% and 100% of the Crede’s Series B Warrant (currently exercisable for 387,621 shares of common stock) at a purchase price of $10.55 per share underlying such Series B Warrant (up to an aggregate purchase price of $4,091,000 for all of the Series B Warrant). On November 21, 2014, the Company exercised its option and repurchased 100% of Crede’s Series B Warrant for an aggregate purchase price of $4,091,000.