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13. STOCK-BASED COMPENSATION | 12 Months Ended
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Sep. 30, 2022
Equity [Abstract] |
STOCK-BASED COMPENSATION | 13. STOCK-BASED COMPENSATION The Company sponsors a stock-based incentive compensation plan known as the 2017 Incentive Plan (the “Plan”), which was established by the Board of Directors of the Company on June 19, 2017. On October 7, 2020, the Company executed a first amendment to the Plan to increase its share pool from 300,000 to 1,500,000 shares of common stock. Effective September 15, 2021, following approval by our stockholders, the Plan was amended to (i) increase the number of shares of common stock authorized for issuance under the Plan by an additional 2,000,000 shares, resulting in an aggregate of 3,500,000 shares of common stock authorized for issuance under the Plan, and (ii) revise Section 19 of the Plan to more closely align with the provisions of Section 422 of the Internal Revenue Code of 1986, as amended, and Section 17.2 of the Plan. As of September 30, 2022, there were 89,889 shares available for issuance under the Plan. The Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, common stock, units of common stock, restricted stock, performance shares and performance units. Other than incentive stock options that are granted to participants who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a “Ten Percent Stockholder”), stock options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted. The incentive stock options are limited to persons who are regular full-time employees of the Company or Ten Percent Stockholders at the date of the grant of the option. Non-qualified stock options and the other types of awards issuable under the Plan may be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Compensation Committee believes have contributed, or will contribute, to the success of the Company. The option vesting schedule for options granted is determined by the Compensation Committee at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is a change in control, as defined in the Plan. The Company grant ed 89,445 n on-qualified options pursuant to the Plan during the year ended September 30, 2022. The Company recognized $31,464,994 and $8,546,712 for the years ended September 30, 2022 and September 30, 2021, respectively, in stock-based compensation. STOCK OPTIONS The following is a summary of stock option activity during the year ended September 30, 2022 and 2021:
|  | Number of Option Shares |  |  | Weighted Average Exercise Price ($) |
Balance, September 30, 2020 |  |  | 277,948 |  |  |  | 6.34 |
Options granted |  |  | 1,469,250 |  |  |  | 19.32 |
Options expired |  |  | (12,975 | ) |  |  | 10.53 |
Options canceled/forfeited |  |  | (45,876 | ) |  |  | 16.31 |
Options exercised |  |  | (141,318 | ) |  |  | 6.14 |
Balance, September 30, 2021 |  |  | 1,547,029 |  |  |  | 18.35 |
Options granted |  |  | 215,750 |  |  |  | 14.47 |
Options canceled/forfeited |  |  | (238,418 | ) |  |  | 15.40 |
Options exercised |  |  | (105,423 | ) |  |  | 7.43 |
Balance, September 30, 2022 |  |  | 1,418,938 |  |  | 19.11 |
As of September 30, 2022, there are options exercisable to purchase 784,785 shares of common stock in the Company and 634,153 unvested options outstanding that cannot be exercised until vesting conditions are met. As of September 30, 2022, the outstanding options have a weighted average remaining term of 3.86 years and an no intrinsic value. Option activity for the year ended September 30, 2022 During the year ended September 30, 2022, a total of 105,423 shares of the Company’s common stock were issued in connection with the exercise of common stock options at exercise prices ranging from $4.65 to $15.10, for net proceeds of $816,602. For the year ended September 30, 2022, the Company also granted 215,750 options with a total fair value of $3,121,350 to purchase shares of common stock to employees. The Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2022:
Fair value assumptions Options: |  | September 30, 2022 |
Risk free interest rate |  | 1.04% - 3.65% |
Expected term (years) |  | 4.99 - 7.35 |
Expected volatility |  | 187.18% - 533.00% |
Expected dividends |  |  | 0 | %
As of September 30, 2022, the Company expects to recognize $14,206,420 of stock-based compensation for the non-vested outstanding options over a weighted-average period of 1.63 years. Option activity for the year ended September 30, 2021 During the year ended September 30, 2021, a total of 141,318 shares of the Company’s common stock were issued in connection with the exercise of 141,318 common stock options at exercise prices ranging from $4.65 to $24.40, for a total consideration of $867,308. During the year ended September 30, 2021, the Company granted 1,469,250 options with a total fair value of $21,582,485 to purchase shares of common stock to employees. The Company offset $953,125 of stock compensation expense against bonuses accrued during the prior year and recognized $7,731,606 during the year. The shares were granted at quoted market prices ranging from $7.55 to $34.67 and were valued at issuance using the Black Scholes model. The Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2021:
Fair value assumptions Options: |  | September 30, 2021 |
Risk free interest rate |  | 0.10% - 0.41% |
Expected term (years) |  | 1.50 - 5.25 |
Expected volatility |  | 140% - 239% |
Expected dividends |  |  | 0 | %
RESTRICTED STOCK UNITS The Company grants restricted stock units ("RSU"s) that contain either a) service conditions, or b) performance conditions, or c) market performance conditions. RSUs containing service conditions vest monthly or annually. RSUs containing performance conditions generally vest over 1 year, and the number of shares earned depends on the achievement of predetermined Company metrics. RSU's that contain market conditions will vest based on the terms of the agreement and generally are either 1 year or over the employee's term of employment. The Company recognizes the expense equal to the total fair value of the common stock price on the grant date. The expense is recorded ratably over the service period. The following table summarizes the performance-based restricted stock units at the maximum award amounts based upon the respective performance share agreements. Actual shares that will vest depend on the attainment of the performance-based criteria.
|  | Number of Shares |  |  | Weighted Average Fair Value Per Share |  |  | Aggregate Intrinsic Value |
Outstanding at September 30, 2020 |  |  | — |  |  | $ | - |  |  | $ | - |
Granted |  |  | 579,302 |  |  |  | 10.53 |  |  |  |
Vested |  |  | (558,475 | ) |  |  | 10.03 |  |  |  |
Forfeited |  |  | (9,832 | ) |  |  | 17.98 |  |  |  |
Outstanding at September 30, 2021 |  |  | 10,995 |  |  | $ | 27.73 |  |  | $ | - |
Granted |  |  | 7,306,250 |  |  |  | 7.18 |  |  |  |
Vested |  |  | (1,757,938 | ) |  |  | 13.37 |  |  |  |
Forfeited |  |  | (110,759 | ) |  |  | 15.27 |  |  |  |
Outstanding at September 30, 2022 |  |  | 5,448,548 |  |  | $ | 4.93 |  |  | $ | 17,326,383 |
During the year ended September 30, 2022, the Company granted 1,176,250 RSUs, which comprised of 120,000 that were service condition based, 146,250 that were performance condition based, and 910,000 that were market condition based awards. The market condition based RSUs consist of 60,000 units that were perpetual in nature, and therefore, are given a derived service period of 5 years. The remaining 810,000 RSUs had a stated service period of 1 year. The fair value of the market based RSUs are determined using the Monte Carlo simulation and is in the following range: $11.03 - $17.89 per unit. The inputs of these market based RSUs are as follows:
Fair value assumptions RSUs: |  | September 30, 2022
Risk free interest rate |  | 0.14% - 1.26%
Expected term (years) |  | 1.00 - 5.00
Expected volatility |  | 111.37% - 172.18%
Cost of equity |  | 20.00% - 21.00%
On September 12, 2022, the Compensation Committee approved to immediately vest the 810,000 market based RSUs that were subject to the 1-year stated service period. Accordingly, the Company recorded an incremental stock-based compensation expense of $3.96 million in the fiscal year September 30, 2022. Additionally, on September 12, 2022, the Compensation Committee approved the following modifications and grants, each of which are pending ratification by shareholders: (1) to grant 2,565,000 service condition based RSUs which will vest over a 3-year period beginning on the grant date, (2) to grant 2,565,000 performance based RSUs which are expected to vest within a 12-month period, (3) to modify the market condition based 60,000 units that were perpetual in nature, and 10,000 unvested service condition RSUs, and were replaced with; (3a) 120,000 service condition based RSUs that vest over a 3-year period, (3b) 120,000 performance based RSUs, which are expected to vest within 12 months from date of modification. (4) to grant 760,000 restricted stock units, which shall vest on the later of the grant date and the Shareholder Approval Date. As of September 30, 2022, the Company had approximately $26 million unrecognized compensation cost related to restricted stock unit awards that will be recognized over a weighted average period of 2 years. The Company recognized stock-based compensation expenses related to restricted stock units, of $23,661,327 and $3,862,679 for fiscal years ended 2022 and 2021. The Company recognized $1,904,520 in stock-based compensation expense for restricted stock units issued in 2021 related to 2020 bonuses.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI https://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI https://asc.fasb.org/topic&trid=2228938 + Details
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