Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Warrants

v3.20.2
Note 4 - Warrants
9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Warrants Disclosure [Text Block]

4. Warrants

 

At September 30, 2020, and December 31, 2019, respectively, the Company has the following warrants outstanding:

 

   

Number of Shares Under Outstanding Warrants at

   

Number of Shares Under Outstanding Warrants at

   

Weighted Average Exercise Price at

   

Remaining Contractual Life at September 30, 2020

 
   

September 30, 2020

   

December 31, 2019

   

September 30, 2020

   

(No. Years)

 

Liability Classified Warrants (1)

                               

Issued February 2017

    404,002       404,002     $ 1.50       1.4  

Issued February 2018

    2,273,700       2,273,700       2.80       2.9  

Issued June 2018 (2)

    742,991       742,991       2.03       3.2  

Issued March 2019

    1,581,000       1,585,500       1.10       3.5  

Issued April 2019

    5,250,000       5,250,000       1.75       3.6  

Issued February 2020

    6,150,000             1.05       4.8  
      16,401,693       10,256,193     $ 1.58          

Equity Classified Warrants

                               

Issued May 2016 - Bonwick

    107,802       107,802     $ 7.50       0.6  

Issued July 2017 - Consulting (3)

    150,000       150,000       2.61       1.8  

Issued April 2018 - Consulting

    100,000       100,000       3.00       0.5  

Issued August 2019 - Consulting

    150,000       150,000       1.64       1.9  

Issued April 2020 - Consulting

    100,000             1.14       4.6  
      607,802       507,802     $ 3.06          

Balance outstanding

    17,009,495       10,763,995     $ 1.63          

 

(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 (BSM) 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 US 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. Beginning in 2020, only the volatility of the Company's own stock is used in the BSM as it now has sufficient historic data in its stock price. In 2019, the Company used the volatility of its own stock blended with the volatility of peer entities due to the lack of sufficient historical data of its stock price.

 

The assumptions used in determining the fair value of the Company’s outstanding liability classified warrants are as follows:

 

   

September 30, 2020

   

December 31, 2019

 

Risk-free interest rate

  0.1% to 0.3%     1.6% to 1.7%  

Volatility

  112.5% to 124.1%     97.5% to 107.5%  

Expected life (years)

  1.4 to 4.9     2.1 to 4.3  

Dividend yield

  —%     —%  

 

A summary of the Company's liability classified warrant activity during the nine months ended September 30, 2020 and related information follows: 

   

Number of Shares

   

Range of Warrant Exercise

   

Weighted Average

   

Weighted Average Remaining Contractual

 
   

Under Warrant

   

Price per Share

   

Exercise Price

   

Life (Years)

 

Balance at January 1, 2020

    10,256,193     $ 1.10     $ 2.80     $ 1.89       4.0  

Granted

    6,150,000       1.05       1.05       1.05       4.8  

Exercised

    (4,500 )     1.10       1.10       1.10        

Expired

                             

Balance at September 30, 2020

    16,401,693     $ 1.05     $ 2.80     $ 1.58       3.9  
                                         

Vested and Exercisable at September 30, 2020

    16,401,693     $ 1.10     $ 2.80     $ 1.89       3.9  

 

In connection with the Company's stock offering that closed in  February 2020, the Company issued warrants to purchase 5,625,000 shares of its common stock, that are exercisable six months from the date of issuance, at a price of $1.05 per share, subject to adjustment in certain circumstances, and expire five years from the date they are first exercisable, and issued Oppenheimer & Co. Inc. a warrant (Underwriter Warrant) to purchase up to 525,000 shares of its common stock with an exercise price of $1.05 per share, subject to adjustment in certain circumstances, which expires in  February 2025.

 

For a summary of the changes in fair value associated with our warrant liability for the nine months ended September 30, 2020, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

 

Equity Classified Warrants

 

In April 2020, equity warrants to purchase up to 100,000 shares of common stock were issued to a consultant, with vesting contingent on certain conditions focused on generating up to $10 million of approved research and development expenditures on the Company's drug portfolio.

 

At September 30, 2020 the Company had 607,802 equity classified warrants outstanding and 512,802 warrants were exercisable. At December 31, 2019, the Company had 507,802 equity classified warrants outstanding and all were exercisable.

 

The Company recorded zero and $92,000 in stock compensation expense for non-employee consulting agreements for the three months ended September 30, 2020 and 2019, respectively, and $5,000 and $94,000 during the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, there was $91,000 of unrecognized stock compensation expense related to the Company's equity-classified warrants.