(20) STOCK OPTIONS AND WARRANTS

Stock Incentive Plan

At the annual meeting of stockholders held on April 13, 2022, our stockholders approved the 2022 Omnibus Equity Incentive Plan (the “2022 Plan”), previously approved by the Company’s Board. The 2022 Plan provides for the grant of incentive options and nonqualified options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards and performance-based awards to employees and certain non-employees who provide services to the Company in lieu of cash. A total of 500,000 shares were initially authorized for issuance pursuant to awards granted under the 2022 Plan.

There were no issuances of restricted shares in the nine months ended June 30, 2026 and 2025.

The Company recorded no expense for the nine months ended June 30, 2026 and 2025 related to the 2022 Plan. Currently, 215,000 shares remain available for issuance under the 2022 Plan. On June 26, 2026, our Board approved an amendment to the 2022 Plan (the Plan Amendment) to increase the number of shares of Common Stock authorized for issuance thereunder from 500,000 shares to 6,000,000 shares. On July 7, 2026, the Majority Shareholders approved the Plan Amendment.

All Options and Warrants

The fair value of each stock option and warrant grant is estimated on the date of grant using the Black-Scholes option-pricing model. During the nine months ended June 30, 2026 and 2025, the Company granted no options or warrants under the 2022 Plan. The Company recorded no expense for the nine months ended June 30, 2026 and 2025, respectively, related to the issuance and vesting of outstanding options and warrants.

As of June 30, 2026, no compensation expense associated with unvested stock options and warrants issued previously to members of the Board will be recognized over the next year.

Private Placement

On April 30, 2026, the Company entered into Securities Purchase Agreements (the “Purchase Agreement”) with certain accredited investors (the “Investors”), for the private placement (the “Private Placement”) of (i) 29,471,429 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) (the “PIPE Shares”) at a price per PIPE Share of $0.35, and (ii) 750,000 warrants to purchase shares of Common Stock (the “PIPE Warrants”) for aggregate gross proceeds of approximately $10,315,000. The PIPE Shares and PIPE Warrants sold in the Offering are sometimes hereafter referred to as, the “Securities.” The Company intends to use the proceeds from the Offering for repayment of existing indebtedness, working capital and general corporate purposes.

In connection with the closing of the Private Placement and the entrance into the Credit Facility, the Company, the Investors and the Administrative Agent have entered into a registration rights agreement dated April 30, 2026 (the “Registration Rights Agreement”), pursuant to which the Company filed a registration statement with the Securities and Exchange Commission (the “SEC”) on or prior to the 60th calendar day following the closing date of the Private Placement for purposes of registering the resale of the PIPE Shares, the shares of Common Stock underlying the PIPE Warrants, and the shares of Common Stock underlying the Lender Warrants (the “Registration Statement”), to use commercially reasonable efforts to have such Registration Statement declared effective within the time period set forth in the Registration Rights Agreement, and to keep the Registration Statement effective until the date that all registrable securities covered by the Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

Warrants

On April 30, 2026, the Company issued three warrants to purchase shares of the Company’s common stock (collectively, the “Warrants”), consisting of (i) warrants issued in connection with the Credit Agreement exercisable for 1,079,108 shares of common stock (the “Chatham Warrant”) and (ii) two private placement warrants issued under the Securities Purchase Agreement, each exercisable for 375,000 shares of common stock (the “PIPE Warrants”).

Chatham Warrant (Prefunded)

The Company issued warrants to Chatham Capital Management, LLC in connection with the closing of the Credit Agreement under the Recapitalization Transaction. The warrants entitle the holder to purchase 1,079,108 shares of the Company’s common stock at $0.0001 per share, to be exercised only for a whole number of shares of common stock. The warrants are exercisable at any time prior to their expiration date, ten years after the closing of the Credit Agreement. Any portion not exercised by expiration date will be automatically exercised on a cashless basis.

The Company determined these warrants require liability classification in accordance with ASC 480, Distinguishing Liabilities from Equity, and as a result, the warrants are initially recognized at fair value and subsequently remeasured at fair value at each reporting period, with changes in fair value recognized in earnings. The fair value of the warrants is determined by using valuation techniques consistent with ASC 820, Fair Value Measurement, taking into account the contractual terms, the fair market value of the underlying equity interests, and relevant market inputs. As of April 30, 2026, the Company recorded a warrant liability of $755,268. Transaction costs of $22,539 allocated to the Warrants were expensed as incurred as warrant issuance costs. The fair value of the Chatham Warrants is classified as Level 2 in the fair value hierarchy and valued using quoted market prices, as they are traded in active markets.

PIPE Warrants

On April 30, 2026, the Company issued two private placement warrants in connection with the Securities Purchase Agreement under the Recapitalization Transaction. Each of the PIPE Warrants entitles the holder to purchase 375,000 shares of common stock at $0.35 per share, to be exercised only for a whole number of shares of common stock. The warrants are exercisable at any time prior to their expiration date, ten years after the closing date. Each PIPE Warrant also permits cashless exercise if, after the applicable effectiveness deadline, there is no effective registration statement covering the resale of the underlying shares. In addition, the PIPE Warrants include customary provisions relating to transferability, participation in certain distributions, adjustments upon fundamental transactions, and the Company’s obligation to reserve sufficient authorized shares for issuance upon exercise.

The Company determined that these warrants meet the equity classification guidance in accordance with ASC 815, Derivatives and Hedging. Accordingly, the Securities Purchase Agreement financing proceeds are allocated between the PIPE shares issued and the equity-classified PIPE Warrants based on the appropriate allocation framework applicable to the equity raise, on a relative fair value basis. Any issuance costs associated with the Securities Purchase Agreement are allocated between the common stock and the PIPE Warrants on a reasonable relative fair value basis, with amounts allocated to the PIPE Warrants recognized as a reduction of additional paid-in capital. As of April 30, 2026, the Company recorded $113,908 and $5,575,310 to additional-paid-in capital as net proceeds after offering costs from the Securities Purchase Agreement for the PIPE Warrant and PIPE Shares, respectively. The fair value of the PIPE Warrants is classified as a Level 2 in the fair value hierarchy and is determined using the Black-Scholes valuation method.

As of June 30, 2026, the valuation assumptions include the expected volatility of the Company’s stock 55.0%, the Company’s stock price at valuation date of $0.70, expected dividend yield of 0.0%, expected term of 7.0 years and risk-free interest rate of 4.38%.

The number of warrants and prefunded warrants outstanding as of June 30, 2026, is as follows:

The following table presents the changes in the fair value of the liability-classified Warrants that are recognized in change in fair value of warrant liability in the consolidated statement of income for the periods indicated below:

For the periods presented, the Company recognized $205,031 gain on the statement of operations related to the change in fair value of the Warrant liability.