Stock Based Compensation

12 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock Based Compensation

Note 12 - Stock Based Compensation

The Company established a 2016 Equity Incentive Plan (the “Plan”) during 2016 and issued stock-based awards to certain employees and non-employees under this plan. The Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units and other stock awards. The number of shares of common stock authorized for issuance under the Plan is 2,097,673.

The Company lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a set of publicly traded peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The fair value of the Company’s common stock was estimated to be $0.29 at September 30, 2019, and $0.65 at September 30, 2018. In order to determine the fair value, the Company considered, among other things, the Company’s business, financial condition and results of operations; the lack of marketability of the Company’s common stock; the market performance of comparable publicly traded companies; and U.S. and global economic and capital market conditions.

The Company used the Black-Scholes option-pricing model to estimate the fair value of options issued using the following assumptions:

	Fiscal 2019		Fiscal 2018
Price of Common Stock	$	0.29	$	0.65
Volatility		60%		55%
Expected term (in years)		5.25 – 7.00		5.50 – 7.00
Risk free rate		1.53% – 2.88%		2.81% – 2.96%

On March 29, 2019, the Board of Directors of AirFox approved the cancellation of 540,046 outstanding stock options held by current employees with an exercise price of $0.65 and the issuance of 540,046 new stock options to the same holders with an exercise price of $0.29. No other changes to the original stock option grant terms were made.

In accordance with ASC 718, cancelled equity award accompanied by the concurrent grant of a replacement award shall be accounted for as a modification of the terms of the cancelled award. The total compensation cost measured at the date of a cancellation and replacement shall be the portion of the grant-date fair value of the original award for which the requisite service is expected to be rendered (or has already been rendered) at that date plus the incremental cost resulting from the cancellation and replacement. The incremental compensation cost shall be measured as the fair value of the award immediately before and immediately after the modification. Incremental compensation cost of $30,656 was measured as the excess of the fair value of the modified award over the fair value of the original award immediately before the terms were modified and will be recorded over the remaining requisite service period.

On June 10, 2019, the Board of Directors of AirFox approved the cancellation of 35,000 outstanding stock options held by a third-party vendor. Separately on June 10, 2019 the Company issued 35,000 shares of common stock, with a fair value of approximately $23,000 to a vendor in exchange for services provided. Approximately $2,100 of unrecognized compensation cost related to the stock options was recognized, and approximately $23,000 was expensed in selling, general and administrative expenses related to the common stock issued in exchange for services provided.

The following table summarizes the Company’s stock option activity and related information for the period indicated:

	Number of Shares			Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price ($)
Outstanding at October 1, 2017		1,191,014			9.54	$	0.09
Granted		847,922			9.76		0.65
Forfeited		(368,472	)		8.84		0.21
Outstanding at September 30, 2018		1,670,464			9.80	$	0.35
Granted		1,885,369			8.73		0.27
Forfeited		(134,836	)		8.90		0.65
Cancelled		(736,280	)		8.48		0.53
Outstanding at September 30, 2019		2,684,717			9.47	$	0.23
Exercisable at September 30, 2019		734,929			7.84	$	0.19

The grant date fair value per share for the stock options grant during Fiscal 2019 and Fiscal 2018 was $0.17 and $0.37. At September 30, 2019, the total unrecognized compensation related to unvested stock option awards granted was $300,066, which the Company expects to recognize over a weighted-average period of approximately 3.30 years. The expense for stock-based compensation awards was $104,343 and $42,559 for the years ended September 30, 2019 and 2018, respectively. Expenses for stock-based compensation is included on the accompanying consolidated statements of operations in selling, general and administrative expense.