Warrants

v3.23.3

Warrants	9 Months Ended
	Sep. 30, 2023
Warrants and Rights Note Disclosure [Abstract]
Warrants	Warrants The following table summarizes the activity in the Company’s outstanding warrants during the nine months ended September 30, 2023: Warrants Outstanding Number of Shares Weighted Average Remaining Contractual Life Weighted Average Exercise Price Per Share Balance at December 31, 2022 4,433,593 3.37 $ 22.50  Granted 4,784,909 4.91 $ 2.50  Exercised (2,311,550) 2.59 $ 23.70  Expired (4,000) – $ 30.00  Forfeitures (50,000) 7.69 $ 13.90  Balance at September 30, 2023 6,852,952 4.29 $ 8.19  Exercisable September 30, 2023 2,068,043 2.85 $ 21.35  Exercisable December 31, 2022 4,433,593 4.77 $ 22.50  The warrants to purchase shares of the Company’s common stock outstanding as of September 30, 2023 and December 31, 2022 had a total value of $36.5 million and $73.3 million, respectively. As of September 30, 2023, 89,286 derivative warrants classified as a liability as issued with convertible notes in 2020 to purchase shares of the Company’s common stock remained outstanding and are revalued each reporting period. As of September 30, 2023, the warrants were revalued at $0.1 million, resulting in a decrease of $0.2 million in liability as compared to December 31, 2022. The change in value was recorded as a Gain on Warrant Revaluation within Other Income (Expense), Net on the condensed consolidated statements of operations and within the Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities on the condensed consolidated statement of cash flows. The fair value of the outstanding derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of September 30, 2023: Market Price $ 1.40  Exercise Price $ 2.10  Dividend Yield 0  % Volatility 141  % Risk-free Interest Rate 5.27  % Expected Life of Warrants 1.5 years On February 16, 2023, the Company received a notification of exercise from the holder of the remaining 50,000 warrants with a put option. The put option was exercised for a fixed rate of $250,000. Warrant Exchange On June 26, 2023, the Company entered into warrant exercise inducement offer letters (the “Letter Agreements”) with certain holders of the warrants issued by the Company in January 2021 that had an exercise price of $23.70 per share and were exercisable for an aggregate of 2,311,550 shares of the Company’s common stock (the “2021 Warrants”). Pursuant to the Letter Agreements, the exercising holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the holders would exercise all of their 2021 Warrants for shares of the Company’s common stock at a reduced exercise price of $2.50 per share of common stock in exchange for the issuance of new unregistered warrants (the “Exchange Warrants”) to purchase up to an aggregate of 4,623,100 shares of common stock, equal to 200% of the number of common stock underlying the 2021 Warrants. Upon issuance of the Exchange Warrants, the Company did not have a sufficient number of underlying common stock that would be required to deliver based on its existing outstanding shares and commitments and the maximum number of shares that would be required to be delivered upon exercise of the Exchange Warrants. The Company held a special meeting of stockholders on November 1, 2023, at which, among other things, a proposal to amend the Company’s Articles of Incorporation to increase the authorized shares of common stock from 40,000,000 shares to 190,000,000 shares with a corresponding increase in the total number of authorized shares of capital stock of the Company from 50,000,000 shares to 200,000,000 shares (the “Share Increase Amendment”) was approved by the stockholders. Pursuant to the Letter Agreements, the Company filed a registration statement on Form S-3 covering the resale of the shares of common stock issuable upon the exercise of the 2021 Warrants on July 26, 2023, which registration statement is currently pending with the Securities and Exchange Commission (“SEC”). The Exchange Warrants have an exercise price of $2.50 per share and a term of exercise of five years from November 1, 2023 (i.e., the date on which the Share Increase Amendment was approved by the stockholders). The Company received approximately $5.8 million in gross proceeds recorded as an increase to Additional Paid-in Capital. The Special Equities Group, a division of Dawson James Securities, Inc. (“SEG”), acted as warrant solicitation agent and received a cash fee of $0.4 million, equal to 7.0% of the total gross proceeds, and warrants with a value of $0.4 million on the issuance date to purchase up to 161,809 of the Company’s common stock at $2.50 per share (the “SEG Warrants”). In addition, through issuance of the Company’s common stock, the Company paid lawyer fees of $0.1 million for costs directly attributable to the warrant re-pricing and exchange. The total issuance costs of $0.9 million were netted against the proceeds received and recorded as a reduction to Additional Paid in Capital on the Company's condensed consolidated balance sheet. As the 2021 Warrants were repriced prior to exercising, the Company utilized ASC 815 to account for the modification. As per ASC 815, an entity shall treat a modification of the terms or conditions or an exchange of a freestanding equity classified written call option as an exchange of the original instrument for a new instrument. The effect of a modification or an exchange shall be measured as the excess, if any, of the fair value of the modified or exchanged instrument over the fair value of that instrument immediately before it is modified or exchanged (the “incremental expense”). The Company calculated the fair value of the 2021 Warrants exercised immediately before the repricing using the BSM option pricing model. The calculation used the original exercise price of $23.70 per share and the BSM assumptions as of June 26, 2023 to calculate the fair value immediately before the repricing and calculated the fair value of the 2021 Warrants exercised utilizing the modified exercise price of $2.50 per share and the same BSM assumptions as of June 26, 2023. The resulting incremental expense of $3.5 million, was recorded as a Warrant Incentive Expense within Other Income (Expense), Net on the condensed consolidated statement of operations and as an increase to Additional Paid-in Capital on the condensed consolidated balance sheet as of September 30, 2023. The fair value of the aggregate total of 4,784,909 Exchange Warrants and the SEG Warrants (collectively, the “Warrants”) on the issuance date of June 26, 2023 was determined to be $13.1 million, or $2.74 per share, as calculated using the BSM option pricing model based on the following assumptions: June 26, 2023 Market Price $ 3.30  Exercise Price $ 2.50  Dividend Yield 0  % Volatility 110  % Risk-free interest rate 3.96  % Expected Life of Warrants 5.0 years The fair value of the Exchange Warrants of $12.7 million was recorded as a Warrant Incentive Expense within Other Income (Expense), Net on the condensed consolidated statement of operations. The fair value of the SEG Warrants of $0.4 million was recorded as a reduction to Additional Paid-in Capital on the condensed consolidated balance sheet. Per review of ASC 815 to determine the classification of the Warrants as either assets or liabilities the Company evaluates whether it has a sufficient number of authorized and unissued shares at the classification assessment date to control settlement by delivering shares. As noted above, when taking into consideration the Company’s then existing outstanding common stock and future commitments to issue common stock prior to the issuance of the Warrants, the Company did not have a sufficient number of common stock underlying its commitments, when including the Warrants, with a calculated deficit of 4,201,142 shares as of September 30, 2023. In addition, ASC 815 states that if an entity could be required to obtain stockholder approval to increase the entity’s authorized shares to net share or physically settle a contract, share settlement is not controlled by the entity, therefore would be liability classified. As the Company did not have a sufficient number of authorized and unissued shares required to be delivered upon settlement of equity instruments and was required to obtain the stockholder approval to increase the authorized shares, the settlement was not considered controlled by the Company as of September 30, 2023. Consequently, the Warrants continued to be classified as a liability as of September 30, 2023 and was revalued. As noted above, the Company held a special meeting of stockholders on November 1, 2023, at which, among other things, the Share Increase Amendment was approved by the stockholders. The fair value of the Warrants as of September 30, 2023 was determined to be $4.3 million, or $0.91 per share, using the BSM option pricing model based on the following assumptions: September 30, 2023 Market Price $ 1.40  Exercise Price $ 2.50  Dividend Yield 0  % Volatility 93  % Risk-free interest rate 4.60  % Expected Life of Warrants 5.0 years The change in value was recorded as a Gain on Warrant Revaluation within Other Income (Expense), Net on the condensed consolidated statements of operations and within the Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities on the condensed consolidated statement of cash flows.