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Note 8 - Stockholders' Equity
 3 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Equity [Text Block]

8.    Stockholders’ Equity

 

Under our Certificate of Incorporation, we are authorized, subject to limitations prescribed by Delaware law and our Charter, to issue up to 1,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions. Our Board of Directors can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our Board of Directors  may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock.   

 

Equity Issuances

 

On March 24, 2025, the Company entered into a Securities Purchase Agreement with purchasers, pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $1.50 per share, for aggregate gross proceeds from the offering of approximately $1.5 million before deducting the placement agent fee and related offering expenses. Proceeds after deducting offering expenses was $1.3 million.

 

On March 25, 2025, the Company separately entered into a form of subscription agreement with certain accredited investors relating to a private placement transaction and sale (the “Private Placement”) of 473,979 unregistered shares of the Company’s common stock at an offering price of $1.52 per share, for aggregate gross proceeds from the Private Placement of approximately $720 thousand before deducting related offering expenses. Proceeds after deducting offering expenses was $700 thousand.

 

Series C Convertible Preferred Stock

 

The Company had designated 11,000 shares of its preferred stock as Series C Convertible Preferred Stock (“Series C Preferred Stock”). The shares of Series C Preferred Stock  may be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series C Preferred Stock to be converted, multiplied by the stated value of $1,000 and (ii) divided by the conversion price in effect at the time of conversion. Series C Preferred Stock vote on an as-converted basis along with shares of the Company’s common stock, were not entitled to receive dividends, unless specifically declared by our Board of Directors, and in the event of any liquidation, dissolution or winding up of the Company the holders of Series C Preferred Stock were entitled to receive in preference to the holders of common stock, Series A Preferred Stock, Series B Preferred Stock and any other stock, the amount equal to the stated value per share of Series C Preferred Stock. The Company  may not effect, and a holder will not be entitled to, convert the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

 

On March 5, 2025, the Company entered into a Securities Redemption Agreement (the “Redemption Agreement”) with Michael Taglich and Claudia Taglich (the “Sellers”), pursuant to which the Company agreed to purchase and redeem from the Sellers: (i) all 350 shares of the Company’s Series C Preferred Stock, par value $0.001 per share; (ii) placement agent warrants to purchase an aggregate of 13,000 shares of the Company’s common stock, par value $0.001 per share; and (iii) stock options issued on or before December 31, 2017, to purchase 108 shares of common stock (collectively, the “Securities”). The aggregate purchase price for the Securities was $332.5 thousand which was allocated first amongst the liability classified placement agent warrants based on the purchase date fair value, then no value was allocated to the options as the fair value was deemed to be insignificant and then, the remainder of the purchase price was allocated to the equity classified Series C Preferred Shares.

 

The Company accounted for the redemption of the Series C Preferred Stock as a return to the preferred stockholder measured as the difference between the (1) purchase price allocated to the Series C Preferred Stock of $331 thousand and (2) the carrying value of the Series C Preferred Stock, which was $0.  The difference of $331 thousand was recognized as a reduction in additional paid-in capital, in the absence of retained earnings, and is included as a component of net loss attributable to common shareholders. As of December 31, 2025 and September 30, 2025, the Company had no shares of Series C Preferred Stock outstanding.   

 

Amended and Restated Stock Incentive Plan

 

The Company has granted common stock, common stock warrants, and common stock option awards (the “Equity Awards”) to employees, consultants, advisors and former debt holders of the Company and to former owners and employees of acquired companies that have become employees of the Company.

 

On  September 16, 2025, the stockholders approved a new stock incentive plan, the 2025 Stock Incentive Plan (the “2025 Plan”). The 2025 Plan authorizes the award of incentive stock options, non-statutory stock options, restricted stock, unrestricted stock, performance shares, stock appreciation rights and any combination thereof to employees, officers, directors, consultants, independent contractors and advisors of the Company. The 2025 Plan provides for the issuance in the aggregate of up to 1,500,000 shares of common stock associated with awards granted under the Stock Incentive Plan. As of  December 31, 2025, there were 200,000 options and 169,429 restricted stock outstanding and 1,130,571 shares available for future issuance under the 2025 Plan.

 

Historically, the Company’s Amended and Restated Stock Incentive Plan (the “Plan”) provided for the issuance of up to 5,000 shares of common stock. This Plan expired in  August 2016. On  April 29, 2016, the stockholders approved a new stock incentive plan, the 2016 Stock Incentive Plan (the “2016 Plan”). The 2016 Plan, as amended, provided for the issuance in the aggregate of up to 2,400,000 shares of common stock associated with awards granted under the Stock Incentive Plan. There are no shares available for future issuance under the 2016 Plan.

 

Compensation Expense

 

Compensation expense is generally recognized on a graded accelerated basis over the vesting period of grants. Compensation expense is recorded in the condensed consolidated statements of operations with a portion charged to Cost of revenue and a portion to Operating expenses, depending on the employee’s department.

 

During the three months ended December 31, 2025 and 2024, compensation expense related to share-based payments was as follows:

 

  

Three Months Ended December 31,

 
  

2025

  

2024

 

Operating expenses

 $78   107 

 

As of December 31, 2025, the Company had approximately $0.4 million of unrecognized compensation costs related to unvested options, which is expected to be recognized over a weighted-average period of 2.0 years.

 

Common Stock Warrants

 

The Company typically issues warrants to individual investors and placement agents to purchase shares of the Company’s common stock in connection with public and private placement fund raising activities. Warrants  may also be issued to individuals or companies in exchange for services provided to the Company. The warrants are typically exercisable six months after the issue date, expire in five years, and contain a cashless exercise provision and piggyback registration rights.

 

March 2025 Placement Agent Warrants - In  March 2025, in connection with the Registered Direct offering, the Company issued 70,000 warrants to purchase shares of the Company’s common stock to WestPark Capital, Inc. who acted as the exclusive placement agent for the offering, (the “March 2025 Placement Agent Warrants”). As compensation for their services, the Company paid to WestPark a fee equal to 7% of the aggregate purchase price paid for shares placed by WestPark at closing and reimbursed WestPark for certain expenses incurred in connection with the offering. The March 2025 Placement Agent Warrants were issued  March 26, 2025 with an exercise price of $1.875 per share and expire March 24, 2030. The March 2025 Placement Agent Warrants were determined to be equity-classified awards. 

 

Series A and B and C Preferred Warrants - In  March 2019, in connection with the issuance of the Company’s Series C Preferred Stock, the Company issued warrants to purchase the Company’s common stock. These warrants were designated as (i) Series A Warrants with an initial term of 5.5 years and an exercise price of $4.00; (ii) Series B Warrants, which expired unexercised during the Company’s 2021 fiscal year, with an initial term of 24 months and an exercise price of $4.00; and (iii) Series C Warrants with an initial term of 5.5 years and an exercise price of $0.05 (collectively, hereinafter referred to as the “Series C Preferred Warrants”). The Company also issued warrants with an exercise price of $4.00 to purchase shares of the Company’s common stock to the Placement Agents. The Company  may not effect, and a holder will not be entitled to convert, the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise. In a prior period not presented, all Series A, Series C and Placement Agent Warrants issued in connection with the Series C Preferred Stock and Investor Warrants expired. 

 

Series D Preferred Warrants - In May 2021, in connection with the issuance of the Company’s Series D Preferred Stock, the Company issued warrants to purchase the Company’s common stock. These warrants consisted of (i) warrants issued to investors in Series D Preferred Stock to purchase in the aggregate up to  592,106 shares of common stock with an initial term of  five and a half years which ends on  November 16, 2026 and an initial exercise price of  $2.51 and (ii) Placement Agents warrants to purchase an aggregate of  179,536 shares of common stock with an initial term of  five years which ends on  May 12, 2026 and an initial exercise price of  $2.85. Collectively, these warrants are referred to as the “Series D Preferred Warrants.” The Company  may  not effect, and a holder will  not be entitled to convert, the Series D Preferred Stock or exercise any Series D Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed  4.99% (or, at the election of the holder,  9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

 

The Series A and Series C Preferred Warrants, the Placement Agent Warrants issued in connection with the Series C Preferred Stock, and the Series D Warrants were all determined to be derivative liabilities and are subject to remeasurement each reporting period (see Note 4).

 

During the three months ended December 31, 2025 and 2024, there were no warrants that were exercised. 

 

During the three months ended December 31, 2025, 1,327 warrants expired. There were no warrant expirations during the three months ended  December 31, 2024.

 

Total warrants outstanding as December 31, 2025, were as follows:

 

Type

 

Issue Date

 

Shares

  

Price

 

Expiration

Placement Agent

 

2/4/2021

  31,564  $3.88 

2/4/2026

Investors

 

5/14/2021

  592,106  $2.51 

11/16/2026

Placement Agent

 

5/14/2021

  166,536  $2.85 

5/12/2026

Placement Agent

 

3/26/2025

  70,000  $1.88 

3/24/2030

     860,206      

 

Summary of Option and Warrant Activity and Outstanding Shares

 

During the three months ended December 31, 2025 and 2024, the Company issued no equity awards.

 

During the three months ended December 31, 2025, 1,000 options were exercised. There were no stock options exercised during the three months ended  December 31, 2024.

 

On January 30, 2026, the Company issued 390,000 shares of restricted stock at a grant-date fair value of $0.82, based upon the closing price of the Company's common stock on the grant date, including (a) 300,000 shares of restricted stock which were issued to its Chief Executive Officer, which vest ratably on a quarterly basis over a three-year period, and (b) 90,000 shares of restricted stock which were granted to its directors (22,500 shares to each director) which vest ratably on a quarterly basis over a one-year period. The granted shares were reduced by 14,835 shares withheld to settle tax withholding. On January 30, 2026, the Company also issued 250,000 options to purchase shares to members of management at an exercise price of $0.82, based upon the closing price of the Company's common stock on the grant date, which vest ratably on a quarterly basis over a three-year period.

 

A summary of combined stock option and warrant activity for the three months ended December 31, 2025, is as follows:

 

  

Stock Options

  

Stock Warrants

 
  

Awards

  

Weighted Average Exercise Price

  

Warrants

  

Weighted Average Exercise Price

 

Outstanding, September 30, 2025

  1,988,677  $1.99   861,533  $2.77 

Granted

  -   -   -   - 

Exercised or redeemed

  (1,000)  0.81   -   - 

Forfeited

  -   -   -   - 

Expired

  (25,000)  1.79   (1,327)  132.50 

Outstanding, December 31, 2025

  1,962,677  $2.00   860,206  $2.42 

Options vested and exercisable, December 31, 2025

  1,603,505  $2.19         

 

As of December 31, 2025, the aggregate intrinsic value of options outstanding and exercisable was $5 thousand and $2 thousand, respectively, and the weighted-average remaining contractual term was 6.7 and 6.3 years, respectively.

 

A summary of the status of restricted stock is as follows:

 

      

Weighted Average

 
      

Grant-Date

 
  

Shares

  

Fair Value

 

Unvested at October 1, 2025

  191,210  $1.40 

Granted

  -   - 

Vested

  (16,530)  1.40 

Cancelled/Forfeited

  -   - 

Unvested at December 31, 2025

  174,680  $1.40 

 

The aggregate fair value of restricted stock that vested during the three months ended December 31, 2025 was $23 thousand.