Annual report pursuant to Section 13 and 15(d)

Warrants

v3.20.1
Warrants
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Warrants Warrants
Upon its issuance of warrants to purchase shares of common stock, the Company evaluates the terms of the warrant issue to determine the appropriate accounting and classification of the warrant issue pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity, FASB ASC Topic 505, Equity, FASB ASC 815, Derivatives and Hedging, and ASC 718. Warrants are classified as liabilities when the Company may be required to settle a warrant exercise in cash and classified as equity when the Company settles a warrant exercise in shares of its common stock.

Liability classified warrants are valued at fair value at the date of issue and at each reporting date pursuant to FASB ASC 820, Fair Value Measurement, (“ASC 820”) and is reflected as a warrant liability on our consolidated balance sheet with the change in the warrant liability during each reporting period is reflected as a gain (loss) from change in fair value of warrant liability in our consolidated statement of operations.

Equity classified warrants issued to non-employees in exchange for services are accounted for in accordance with ASC 718 which requires all stock-based payments be recognized in the consolidated statements of operations based on their fair value. For further information, see Note 2. Basis of presentation, principles of consolidation and significant accounting policies – Stock-based Compensation.
At December 31, 2019 and 2018, the Company has the following warrants outstanding,

Number of Shares Under Outstanding Warrants at December 31, 2019
Number of Shares Under Outstanding Warrants at December 31, 2018
Weighted Average Exercise Price at December 31, 2019 $
Remaining Contractual Life at December 31, 2019 (No.Years)
Liability Classified Warrants (1)
Issued February 2017
404,002 410,020 $ 1.50    2.13
Issued February 2018
2,273,700 2,273,700 $ 2.80    3.61
Issued June 2018 (2)
742,991 742,991 $ 2.03    3.94
Issued March 2019
1,585,500 —    $ 1.10    4.24
Issued April 2019
5,250,000 —    $ 1.75    4.32
10,256,193 3,426,711 $ 1.89   
Equity Classified Warrants
Issued May 2016 - Bonwick
107,802 107,802 $ 7.50    1.34
Issued July 2017 - Consulting (3)
150,000 150,000 $ 2.61    2.58
Issued April 2018 - Consulting
100,000 100,000 $ 3.00    1.25
Issued August 2019 - Consulting
150,000 —    $ 1.64    2.61
507,802 357,802 $ 3.44   
Balance outstanding and exercisable
10,763,995 3,784,513 $ 1.97   


(1) If the Company subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of its common stock into a smaller number of shares, the warrant exercise price is proportionately reduced and the number of shares under outstanding warrants is proportionately increased. Additionally, if the Company combines (by combination, reverse stock split or otherwise) its outstanding shares of common stock into a smaller number of shares, the warrant exercise price is proportionately increased and the number of shares under outstanding warrants is proportionately decreased. Also, the Company may voluntarily reduce the warrant exercise price for its warrants issued in March 2019 and February 2017 and may voluntarily extend the contractual term of its warrants issued in February 2017.

(2) Includes warrants to purchase 710,212 shares at an exercise price of $2.02, expiring December 22, 2023, and warrants to purchase 32,779 shares at an exercise price of $2.32, expiring June 21, 2023.

(3) Includes warrants to purchase 100,000 shares at an exercise price of $2.41 and warrants to purchase 50,000 shares at an exercise price of $3.00.

Liability Classified Warrants

The Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants.

Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Where appropriate, the Company uses the historical volatility of peer entities combined with our own common stock due to the lack of sufficient historical data of our stock price during the years 2017 to 2019.

The assumptions used in determining the fair value of the Company’s outstanding liability classified warrants are as follows:
Year Ended December 31,
2019
2018
Risk-free interest rate
1.58%   
to
1.67  % 2.46  %
to
2.51  %
Volatility
97.50%   
to
107.50  % 75.00  %
to
80.00  %
Expected life (years)
2.12
to
4.32 3.12
to
4.98
Dividend yield
—%    —%   

A summary of the Company's liability classified warrant activity during the year ended December 31, 2019 and related information follows:
Number of Shares Under Warrant Range of Warrant Exercise Price per Share Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 2018 3,426,711    $ 1.50    to $ 2.80    $ 2.48    4.53
Granted 8,242,500    $ 1.10    to $ 1.75    $ 1.51    —   
Exercised (1,413,018)   $ 1.10    to $ 1.50    $ 1.10    —   
Expired —    $ —    $ —    $ —    —   
Outstanding at December 31, 2019 10,256,193    $ 1.10    to $ 2.80    $ 1.89    4.04
Vested and Exercisable at December 31, 2019 10,256,193    $ 1.10    to $ 2.80    $ 1.89    4.04

In connection with the Company's stock offering that closed on April 25, 2019, the Company issued warrants to purchase 4,687,500 shares of its common stock that are immediately exercisable at a price of $1.75 per share, subject to adjustment in certain circumstances, and expire five years from the date of issuance, and issued Oppenheimer & Co. Inc. a warrant to purchase up to 562,500 shares of its common stock with an exercise price of $1.75 per share, subject to adjustment in certain circumstances, which expires on April 23, 2024.

In connection with the Company's stock offering that closed on March 29, 2019, the Company issued warrants to purchase 2,625,000 shares that are immediately exercisable at a price of $1.10 per share, subject to adjustment in certain circumstances, and expire five years from the date of issuance and issued Oppenheimer & Co. Inc. a warrant to purchase up to 367,500 shares of its common stock with an exercise price at $1.10 per share, subject to adjustment in certain circumstances, which expires on March 27, 2024. For a summary of the changes in fair value associated with our warrant liability for the years ended December 31, 2019 and 2018, see Note 2. Basis of presentation, principles of consolidation and significant accounting policies – Fair Value of Financial Instruments.

Equity Classified Warrants

The Company has entered into a consulting agreement, as amended, in which it has issued warrants in exchange for services. Pursuant to this agreement, in August 2019, the Company issued the consultant a fully vested three-year warrant to purchase 150,000 shares of its common stock at an exercise price of $1.64 per share and expiring August 2022.

Additionally, in April 2018, the Company issued the consultant a three-year warrant to purchase 100,000 shares of its common stock with an exercise price of $3.00 per share, vesting in four equal quarterly installments provided that the consultant is providing advisory services to the Company pursuant to the consulting agreement on each vesting date. Also, in July 2017, the Company issued two warrants to the consultant to purchase 100,000 and 50,000 shares of its common stock at exercise prices of $2.41 and $3.00 per share, respectively. Each of the warrants vested over a 12-month period in equal monthly installments starting upon issuance provided that the consultant is providing services to the Company pursuant to the consulting agreement on each vesting date. The warrants became initially exercisable in August 2017 and expire five years from the initial exercise date.

The Company recorded stock compensation expense for the non-employee consulting agreement of $0.1 million for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019, there was no unrecognized stock compensation expense related to this consulting agreement.