Equity

12 Months Ended

Sep. 30, 2023

Equity [Abstract]

Equity

Equity

Tax Preservation Plan

On September 28, 2023, our Board of Directors approved and adopted a Section 382 Tax Benefits Preservation Plan, dated as of September 28, 2023, by and between the Company and Equiniti Trust Company, LLC, as rights agent (the “Rights Agent”) (the “Section 382 Tax Benefits Preservation Plan”). Pursuant to the Section 382 Tax Benefits Preservation Plan, the Board of Directors declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of common stock. The dividend is distributable on October 12, 2023 to shareholders of record as of the close of business on October 12, 2023.

The Board of Directors adopted the Section 382 Tax Benefits Preservation Plan to diminish the risk that the Company could experience an “ownership change” as defined in Section 382 of the Code, which could substantially limit or permanently eliminate the Company’s ability to utilize its net operating loss carryovers (collectively, the “NOLs”) to reduce potential future income tax obligations. Under the Code and the regulations promulgated thereunder by the U.S. Treasury Department, these NOLs may be “carried forward” in certain circumstances to offset any current and future taxable income and thus reduce federal income tax liability, subject to certain requirements and restrictions. While the amount and timing of the Company’s future taxable income cannot be predicted with any certainty and, accordingly, the Company cannot predict the amount of these NOLs that will ultimately be used to reduce its income tax liability, to the extent that the NOLs do not otherwise become limited, these NOLs could be a potentially valuable asset to the Company. As of September 30, 2023 and 2022, the Company had federal net operating loss carryforwards of approximately $391.5 million and $424.9 million, respectively.

In general, under Section 382, an “ownership change” occurs if a shareholder or a group of shareholders who are deemed to own at least 5% of the common stock individually or collectively increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. If an ownership change occurs, Section 382 would impose an annual limit on the amount of the Company’s NOLs that can be used to offset the Company’s federal taxable income equal to the product of the total value of the Company’s outstanding equity immediately prior to the ownership change (reduced by certain items specified in Section 382) and the federal long-term tax-exempt interest rate in effect for the month of the ownership change. A number of complex rules apply to calculating this annual limit and there are several special rules that, depending on the rule involved, may apply to reduce or increase such limit. If an ownership change were to occur, the limitations imposed by Section 382 could result in a substantial delay in the timing of the usage of the NOLs or in a material amount or all of the NOLs expiring unused and, therefore, significantly impair or eliminate the value of such NOLs. While the Company periodically monitors its NOLs and currently believes that an ownership change that would impair the value of its NOLs has not occurred, the complexity of Section 382’s provisions and the limited knowledge any public company has about the ownership of its publicly traded stock make it difficult to determine whether an ownership change has in fact occurred.

The Section 382 Tax Benefits Preservation Plan is intended to act as a deterrent to any person or group acquiring beneficial ownership of 4.99% or more of the outstanding common stock without the approval of the Board of Directors. A person who acquires, without the approval of the Board of Directors, beneficial ownership (other than as a result of repurchases of stock by the Company, dividends or distributions by the Company or certain inadvertent actions by shareholders) of 4.99% or more of the outstanding common stock (including any ownership interest held by that person’s Affiliates and Associates as defined under the Section 382 Tax Benefits Preservation Plan) could be subject to significant dilution. Shareholders who beneficially own 4.99% or more of the outstanding common stock prior to the first public announcement by the Company of the Board of Directors’ adoption of the Section 382 Tax Benefits Preservation Plan will not trigger the Section 382 Tax Benefits Preservation Plan so long as they do not acquire beneficial ownership of additional shares of the common stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of common stock or pursuant to a

split or subdivision of the outstanding shares of common stock) at a time when they still beneficially own 4.99% or more of such stock. In addition, the Board of Directors retains the sole discretion to exempt any person or group from the penalties imposed by the Section 382 Tax Benefits Preservation Plan.

Equity Plans

We provide long-term incentives to eligible officers, directors, and employees in the form of equity-based awards. We maintain four equity incentive compensation plans, collectively described as our “Equity Plans”: (a) the 2010 Equity Incentive Plan (the “2010 Plan”), (b) the 2012 Equity Incentive Plan (the “2012 Plan”), (c) the Amended and Restated 2019 Equity Incentive Plan (the “2019 Plan”), and (d) the 2022 New Employee Inducement Plan.

We issue new shares of common stock to satisfy awards granted under our Equity Plans. In December 2022, our Board of Directors approved an amendment to the 2019 Plan, which, following shareholder approval at our 2023 annual meeting of shareholders, increased the maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2019 Plan by an additional 1.549 million shares.

Stock Options

Most stock options vest and become exercisable over four to five years and have a contractual life of 10 years. Certain stock options awarded are intended to qualify as incentive stock options pursuant to Section 422A of the Code.

The Company has estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The expected volatility assumption is based on the historical daily price data of the Company’s common stock over a period equivalent to the weighted average expected life of the Company’s options. The expected term of options granted is derived using assumed exercise rates based on historical exercise patterns and represents the period of time the options granted are expected to be outstanding. The risk-free interest rate is based on the actual U.S. Treasury zero-coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend yield of zero is based upon the fact that the Company has not historically declared or paid cash dividends, and does not expect to declare or pay dividends in the foreseeable future.

The following table summarizes stock option activity under the Equity Plans for the fiscal year ended September 30, 2023:

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (*) (in thousands)
Outstanding as of September 30, 2022	9,981	$	4.52
Granted	—	—
Exercised	—	—
Forfeited	—	—
Expired	976	3.84
Outstanding as of September 30, 2023	9,005	$	4.59	1.30	$	—
Exercisable as of September 30, 2023	9,005	$	4.59	1.30	$	—
Vested and expected to vest as of September 30, 2023	9,005	$	4.59	1.30	$	—

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(*)    Intrinsic value for stock options represents the “in-the-money” portion or the positive variance between a stock option’s exercise price and the underlying stock price. For the fiscal year ended September 30, 2022, the intrinsic value of options exercised was $0.

As of September 30, 2023, there was no unrecognized stock-based compensation expense related to non-vested stock options granted under the Equity Plans.

Valuation Assumptions

There were no stock option grants for the fiscal years ended September 30, 2023 and 2022.

Time-Based Restricted Stock

Time-based restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) granted to employees under the 2010 Plan, 2012 Plan, the 2019 Plan, or the 2022 New Employee Inducement Plan typically vest over 3 to 4 years and are subject to forfeiture if employment terminates prior to the vesting or lapse of the restrictions, as applicable. RSUs are not considered issued or outstanding common stock until they vest. RSAs are considered issued and outstanding on the grant date and are subject to forfeiture if specified vesting conditions are not satisfied. The value of RSUs is determined by the stock price on the grant date.

The following table summarizes the activity related to RSUs subject to time-based vesting requirements for the fiscal year ended September 30, 2023:

	RSUs
	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2022	2,947,130	$	3.90
Granted	2,896,650	1.00
Vested	(1,314,313)	3.72
Forfeited	(499,391)	2.55
Non-vested as of September 30, 2023	4,030,076	$	2.04

As of September 30, 2023, there was approximately $6.5 million of remaining unamortized stock-based compensation expense associated with RSUs, which will be expensed over a weighted average remaining service period of approximately 3.1 years. The 4.0 million outstanding non-vested and expected to vest RSUs have an aggregate intrinsic value of $1.9 million and a weighted average remaining contractual term of 1.8 years. For the fiscal years ended September 30, 2023 and 2022, the intrinsic value of RSUs vested was approximately $1.3 million and $3.0 million, respectively. The weighted average grant date fair value of RSUs granted during the fiscal years ended September 30, 2023 and 2022 was $1.00 and $3.46 per share, respectively.

For the fiscal year ended September 30, 2022, $27.3 thousand of RSAs vested. As of September 30, 2022, there was no remaining unamortized stock-based compensation expense associated with RSAs.

Performance-Based Restricted Stock

Performance based restricted stock units (“PSUs”) granted to employees under the 2012 Plan or 2019 Plan typically vest over 1 to 3 years and are subject to forfeiture in whole, if employment terminates, or in whole or in part, if specified vesting conditions are not satisfied in each case prior to vesting. PSUs are not considered issued or outstanding common stock until they vest. PSUs that are granted to executive officers and key employees are provided as long-term incentive compensation that is based on relative total shareholder return, which measures performance against the Russell Microcap Index.

PSUs are valued based on a Monte Carlo simulation model to reflect the impact of the PSUs market condition. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for PSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided.

The following table summarizes the activity related to PSUs for the fiscal year ended September 30, 2023:

	PSUs
	Number of Shares (at target)	Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2022	1,809,053	$	4.37
Granted	634,650	0.97
Vested	(291,285)	2.47
Forfeited	(448,000)	3.81
Non-vested as of September 30, 2023	1,704,418	$	3.57

As of September 30, 2023, there was approximately $2.7 million of remaining unamortized stock-based compensation expense associated with PSUs, which will be expensed over a weighted average remaining service period of approximately 1.3 years. The 1.7 million outstanding non-vested and expected to vest PSUs have an aggregate intrinsic value of approximately $0.8

million and a weighted average remaining contractual term of 1.3 years. For each of the fiscal years ended September 30, 2023 and 2022, the intrinsic value of PSUs vested was $0.3 million. The weighted average grant date fair value of PSUs granted during the fiscal years ended September 30, 2023 and 2022 was $0.97 and $4.51 per share, respectively.

Stock-Based Compensation

The following table sets forth stock-based compensation expense by award type:

	Year Ended September 30,
(in thousands)	2023		2022
RSUs and RSAs	$	4,203	$	2,576
PSUs	2,306		2,314
Outside director equity awards and fees in common stock	378		484
Total stock-based compensation expense	$	6,888	$	5,374

The following table sets forth stock-based compensation expense by expense type:

	Year Ended September 30,
(in thousands)	2023		2022
Cost of revenue	$	1,742	$	952
Selling, general, and administrative	1,324		3,591
Research and development	3,823		831
Total stock-based compensation expense	$	6,888	$	5,374

Capital Stock

Authorized capital stock consists of 100 million shares of common stock, no par value, and 5,882,352 shares of preferred stock, $0.0001 par value. No shares of preferred stock were outstanding as of September 30, 2023.

On August 23, 2023, we closed our offering of 22,600,000 shares of our common stock at a price of $0.50 per share, and, to certain investors, pre-funded warrants (each, a “Pre-Funded Warrant”) to purchase 11,900,000 shares of our common stock at a price of $0.49999999 for each pre-funded warrant (which represents the per share public offering price for our common stock in such offering less the $0.00000001 per share exercise price for each such Pre-Funded Warrant), resulting in net proceeds to us from the offering, after deducting the placement agent commissions and other offering expenses, of approximately $15.6 million. The shares were sold by us pursuant to an Underwriting Agreement, dated as of August 17, 2023, between us and the Craig-Hallum Capital Group LLC as the sole managing underwriter.

On February 17, 2023, we closed our offering of 15,454,546 shares of our common stock at a price of $1.10 per share, resulting in net proceeds to us from the offering, after deducting the placement agent commissions and other offering expenses, of $15.4 million. The shares were sold by us pursuant to a Securities Purchase Agreement, dated as of February 17, 2023, between the Company and each purchaser named in the signature pages thereto and a Placement Agency Agreement, dated as of February 15, 2023, by and between the Company and A.G.P./Alliance Global Partners.

As of September 30, 2023 and 2022, we had 84.0 million and 44.5 million shares of common stock issued and outstanding, respectively. There were no shares of preferred stock issued and outstanding as of September 30, 2023 and 2022.

Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share:

	Year Ended September 30,
(in thousands, except per share data)	2023		2022
Numerator
Net loss from continuing operations	$	(49,413)	$	(40,761)
(Loss) income from discontinued operations including loss on disposal of $9.6 million, net of tax benefit of $0	$	(25,946)	$	16,428
Net loss	$	(75,359)	$	(24,333)
Denominator
Weighted average number of shares and preferred warrants outstanding - basic	51,510		37,269
Effect of dilutive securities
Stock options	—		—
PSUs, RSUs, and restricted stock	—		—
Weighted average number of shares and preferred warrants outstanding - diluted	51,510		37,269
Loss from continuing operations per share - basic and diluted	$	(0.96)	$	(1.09)
Loss from discontinued operations per share - basic and diluted	$	(0.50)	$	0.44
Net loss per share - basic and diluted	$	(1.46)	$	(0.65)
Weighted average antidilutive options, unvested RSUs and RSAs, unvested PSUs and ESPP shares excluded from the computation	3,305		858

Basic earnings per share (“EPS”) is computed by dividing net loss for the period by the weighted-average number of common stock and pre-funded warrants outstanding during the period. Diluted EPS is computed by dividing net loss for the period by the weighted average number of common stock and pre-funded warrants outstanding during the period, plus the dilutive effect of outstanding RSUs, PSUs, and stock options, as applicable pursuant to the treasury stock method. Basic and diluted shares outstanding includes the weighted average of the effect of the Company's outstanding pre-funded warrants as the exercise price of such pre-funded warrants requires nominal consideration to be given for the delivery of the corresponding shares of common stock. Certain of the Company's outstanding share-based awards, noted in the table above, were excluded because they were anti-dilutive, but they could become dilutive in the future. The anti-dilutive stock options and shares of outstanding and unvested restricted stock were excluded from the computation of earnings per share for the fiscal years ended September 30, 2023 and 2022 due to the Company incurring a net loss for such periods.

Future Issuances

Common stock reserved for future issuances as of September 30, 2023 was as follows:

	Amount
Exercise of outstanding stock options	9,005
Unvested RSUs	4,030,076
Unvested PSUs (at 100% maximum payout)	1,704,418
Issuance of stock-based awards under the Equity Plans	513,561
Purchases under the officer and director share purchase plan	88,741
Total reserved	6,345,801