Annual report pursuant to Section 13 and 15(d)

Warrant Liabilities (Tables)

Warrant Liabilities (Tables)

12 Months Ended

Sep. 30, 2018

Schedule of fair value of warrant liabilities using a binomial lattice model

The fair value of the warrant liabilities presented below were measured using either a Binomial (through October 1, 2017) or BSM (as of September 30, 2018) valuation model. Significant inputs into the respective model at the inception and reporting period measurement dates are as follows:

*Binomial Assumptions*	Issuance date ⁽¹⁾ August 26, 2016			Period ended October 1, 2017			Period ended September 30, 2018
Exercise Price⁽¹⁾	$	1.50		$	1.50		$	1.50
Warrant Expiration Date ⁽¹⁾		August 26, 2021			August 26, 2021			August 26, 2021
Stock Price ⁽²⁾	$	0.95		$	0.98		$	1.71
Interest Rate (annual) ⁽³⁾		1.23	%		1.62	%		2.88	%
Volatility (annual) ⁽⁴⁾		246.44	%		179.36	%		64.05	%
Time to Maturity (Years)		5.0			3.9			2.9
Calculated fair value per share	$	0.93		$	0.87		$	0.82

(1) Based on the terms provided in the warrant agreement to purchase common stock of Optex Systems Holdings, Inc. dated August 26, 2016.

(2) Based on the trading value of common stock of Optex Systems Holdings, Inc. as of August 26, 2016 and each presented period ending date.

(3) Interest rate for U.S. Treasury Bonds, as of August 26, 2016 and each presented period ending date, as published by the U.S. Federal Reserve.

(4) Based on the historical daily volatility of Optex Systems Holdings, Inc. as of August 26, 2016 and each presented period ending date.

Schedule of warrants outstanding

The warrants outstanding and fair values at each of the respective valuation dates are summarized below:

Warrant Liability	Warrants Outstanding			Fair Value per Share		Fair Value (000’s)
Fair Value as of period ended 10/2/2016⁽¹⁾		4,323,135		$	0.76	$	3,118
Loss on Change in Fair Value of Warrant Liability							489
Fair Value as of period ended 10/01/2017⁽¹⁾		4,323,135		$	0.87	$	3,607
Reclassification to additional paid in capital for correction to underwriter warrants outstanding ⁽¹⁾		—					41
Reclassification to additional paid in capital upon exercise of warrants ⁽²⁾		(62,350	)				(53	)
(Gain) on Change in Fair Value of Warrant Liability							(95	)
Fair Value as of period ended 09/30/2018		4,260,785		$	0.82	$	3,500

(1)

Correction to Additional Paid in Capital and Warrant Liability for 197,935 outstanding warrants issued to underwriters on August 26, 2016. Total warrants were incorrectly reflected as 4,125,200 and should have been 4,323,135.

(2)

Warrants exercised on September 17, 2018 for gross proceeds of $93.5 thousand. The fair market value of the warrants as of the exercise date was $53 thousand and was reclassed to additional paid in capital.