Quarterly report pursuant to Section 13 or 15(d)

Warrants

v3.20.2
Warrants
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Warrants Warrants
 
At June 30, 2020, and December 31, 2019, respectively, the Company has the following warrants outstanding:

Number of Shares Under Outstanding Warrants at
June 30, 2020
Number of Shares Under Outstanding Warrants at December 31, 2019 Weighted Average Exercise Price at June 30, 2020 Remaining Contractual Life at June 30, 2020 (No. Years)
Liability Classified Warrants (1)
Issued February 2017 404,002 404,002 $ 1.50    1.6
Issued February 2018 2,273,700 2,273,700 2.80    3.1
Issued June 2018 (2)
742,991 742,991 2.03    3.4
Issued March 2019 1,581,000 1,585,500 1.10    3.8
Issued April 2019 5,250,000 5,250,000 1.75    3.8
Issued February 2020 6,150,000 —    1.05    5.1
16,401,693 10,256,193 $ 1.58   
Equity Classified Warrants
Issued May 2016 - Bonwick 107,802 107,802 $ 7.50    0.8
Issued July 2017 - Consulting (3)
150,000 150,000 2.61    2.1
Issued April 2018 - Consulting 100,000 100,000 3.00    0.8
Issued August 2019 - Consulting 150,000 150,000 1.64    2.1
Issued April 2020 - Consulting 100,000 —    1.14    4.8
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:
June 30, 2020 December 31, 2019
Risk-free interest rate 0.2  % to 0.4  % 1.6  % to 1.7  %
Volatility 121.3  % to 144.8  % 97.5  % to 107.5  %
Expected life (years) 1.6 to 5.1 2.1 to 4.3
Dividend yield —% —%

A summary of the Company's liability classified warrant activity during the six months ended June 30, 2020 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)
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    5.1
Exercised (4,500)   1.10    1.10    1.10    —   
Expired —    —    —    —    —   
Balance at June 30, 2020 16,401,693    $ 1.05    $ 2.80    $ 1.58    4.1
Vested and Exercisable at June 30, 2020 10,251,693    $ 1.10    $ 2.80    $ 1.89    3.5

In connection with the Company's stock offering that closed on February 10, 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 on February 6, 2025.

For a summary of the changes in fair value associated with our warrant liability for the six months ended June 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 June 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 stock compensation expense for non-employee consulting agreements of $5,000 and zero for the three months ended June 30, 2020 and 2019, respectively, and $5,000 and $2,000 during the six months ended June 30, 2020 and 2019, respectively. At June 30, 2020, there was $91,000 of unrecognized stock compensation expense related to the Company's equity-classified warrants.