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 June 30, 2026 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  June 30, 2026, there were 563,907 shares available for future issuance under the 2025 Plan.

On  April 29, 2016, the stockholders approved the prior stock incentive plan, the 2016 Stock Incentive Plan (the “2016 Plan”). While the 2016 Plan expired in April 2026, options issued under the 2016 Plan remain outstanding.

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 and nine months ended June 30, 2026 and 2025, compensation expense related to share-based payments was as follows:

As of June 30, 2026, the Company had approximately $0.6 million of unrecognized compensation costs related to unvested options, which is expected to be recognized over a weighted-average period of 2.1 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. 

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 and nine months ended  June 30, 2026 and  June 30, 2025, there were no warrants that were exercised. There were 13,000 warrants redeemed during the three and nine months ended  June 30, 2025.

During the three and nine months ended June 30, 2026, 166,536 and 199,427 warrants expired, respectively. There were no warrant expirations during the three and nine months ended  June 30, 2025.

Total warrants outstanding as of  June 30, 2026, were as follows:

Summary of Option and Warrant Activity

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.

On April 1, 2026, the Company also issued 10,000 options to purchase shares to a member of management at an exercise price of $0.90, 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.

On July 1, 2026, the Company also issued 25,000 options to purchase shares to a member of management at an exercise price of $1.20, 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.

During the nine months ended June 30, 2026, 1,000 options were exercised. 

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the nine months ended June 30, 2026 is as follows:

A summary of combined stock option and warrant activity for the nine months ended June 30, 2026, is as follows:

As of June 30, 2026, the aggregate intrinsic value of options outstanding and exercisable was $160 and $74, respectively, and the weighted-average remaining contractual term was 6.5 and 6.0 years, respectively.

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

The aggregate grant date fair value of restricted stock that vested during the three and nine months ended June 30, 2026 was $54 thousand and $90 thousand, respectively.

ATM Sales Agreement

On July 14, 2026, the Company entered into a Common Stock Sales Agreement (the “Sales Agreement”) with WestPark Capital, Inc., as sales agent, pursuant to which the Company may offer and sell, from time to time through WestPark, shares of the Company’s common stock subject to the terms and conditions of the Sales Agreement.  Under the Sales Agreement, WestPark may sell the Placement Shares in sales deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company may instruct WestPark not to sell the Placement Shares if the sales cannot be effected at or above the price designated by the Company from time to time.

The Company is not obligated to make any sales of the Placement Shares under the Sales Agreement.  No assurance can be given that the Company will sell Placement Shares under the Sales Agreement, or if such sales occur, no assurance can be given as to the price or number of shares that will be sold, or the dates on which any such sales will take place. Either party may terminate the Sales Agreement in its sole discretion at any time upon written notice to the other party.

The Company will pay WestPark a fixed commission rate of 3.0% of the aggregate gross proceeds from the sale of the Placement Shares pursuant to the Sales Agreement and has agreed to provide WestPark with customary indemnification and contribution rights. The Company also has agreed to reimburse WestPark for its reasonable out-of-pocket expenses (including but not limited to the reasonable and documented fees and expenses of its legal counsel) in an amount not to exceed $50,000 and quarterly disbursements of counsel to WestPark for ongoing diligence procedures in an amount not to exceed $3,500 per calendar quarter.

As of the date of this Quarterly Report on Form 10-Q, no Placement Shares have been sold.