SALE OF COMMON STOCK, WARRANTS AND PRE- FUNDED WARRANTS

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

SALE OF COMMON STOCK, WARRANTS AND PRE- FUNDED WARRANTS

11. SALE OF COMMON STOCK, WARRANTS AND PRE- FUNDED WARRANTS

On April 10, 2019, the Company completed an underwritten offering providing for the issuance and sale of 3,418,918 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $8.51 per share, for net proceeds of approximately $27.9 million, after deducting offering expenses payable by the Company.

On December 5, 2019, the Company entered into the Purchase Agreement with Keystone pursuant to which Keystone has agreed to purchase from the Company up to $25.0 million of shares of its common stock, subject to certain limitations including a minimum stock price of $2.00, at the direction of the Company from time to time during the 36-month term of the Purchase Agreement. Concurrently, the Company entered into a Registration Rights Agreement with Keystone, pursuant to which it agreed to register the sales of its common stock pursuant to the Purchase Agreement under the Company’s existing shelf registration statement on Form S-3 or a new registration statement. On December 19, 2019, the Company sold 54,090 shares under the Purchase Agreement at a purchase price of $2.31 per share, for total proceeds of $0.1 million. During the first quarter of 2020, the Company effectuated four additional sales of common stock to Keystone under the Purchase Agreement for a total of 216,412 shares generating total gross proceeds of $0.6 million. The Company agreed not to sell any additional shares under the Purchase Agreement for a period of 90 days after the closing date of the offering.

On February 14, 2020, the Company completed an underwritten offering of 10,638,298 shares of its common stock and warrants to purchase 10,638,298 shares of common stock. Each common share and warrant were sold together for a combined public purchase price of $2.35 before underwriting discount and commission. The exercise price of each warrant is $2.80 per share, the warrants were exercisable immediately, and they will expire February 12, 2027. On November 19, 2020, the Company reduced the exercise price of the warrants from $2.80 per share to $0.10 per share effective November 20, 2020. As of December 31, 2020, 10,073,298 of these warrants were exercised into shares of common stock for proceeds of $1.0 million. As the warrants could require cash settlement in certain scenarios, they were classified as liabilities and were initially recorded at an estimated fair value of $11.7 million upon issuance. The total proceeds from the offering were first allocated to the liability classified warrants, based on their fair values, with the residual $12.0 million allocated to the common stock. Issuance costs allocated to the common stock of $1.3 million were recorded as a reduction to paid-in capital. The Company measured the fair value of the liability classified warrants using the Monte Carlo simulation model at issuance, upon change in exercise price, and again at December 31, 2020 using the following inputs:

	February 14, 2020			November 20, 2020			December 31, 2020
Stock price	$	1.69		$	0.92		$	0.68
Exercise price	$	2.80		$	0.10		$	0.10
Risk-free rate		1.51	%		0.53	%		0.52	%
Volatility		93.4	%		99.4	%		98.9	%
Remaining term (years)		7.0			6.2			6.1

On December 23, 2020, the Company completed a registered direct offering of 5,450,000 shares of its common stock, par value $0.001 per share, pre-funded warrants to purchase up to 5,238,043 shares of common stock and accompanying common warrants to purchase up to 10,688,043 shares of common stock. Each share of common stock and pre-funded warrant was sold together with a warrant. The combined offering price of each common stock share and accompanying warrant was $0.7485 and for each pre-funded warrant and accompanying warrant was $0.7475. The pre-funded warrants had an exercise price of $0.001 each and were exercised in full in January 2021. Each warrant is exercisable for one share of the Company’s common stock at an exercise price of $0.624 per share. The warrants are immediately exercisable and will expire five years from the date of issuance. The holder of the warrants may not exercise any portion of the warrants to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after exercise, which percentage may be changed at the holder’s election to a lower percentage at any time or to a higher percentage not to exceed 9.99% upon 61 days’ notice to the Company. The Company also issued to designees of the placement agent for the registered direct offering warrants to purchase up to 6.0% of the aggregate number of common stock shares and pre-funded warrants sold in the offering (or warrants to purchase up to 641,283 shares of common stock). The placement agent warrants have substantially the same terms as the warrants, except that the placement agent warrants have an exercise price equal to 125% of the purchase price per share (or $0.9356 per share). The net proceeds to the Company from the offering were $7.2 million, after offering expenses payable by the Company.

As the common stock warrants and placement agent common stock warrants could each require cash settlement in certain scenarios, the common stock warrants and placement agent common stock warrants were classified as liabilities upon issuance and were initially recorded at estimated fair values of $5.2 million and $0.3 million, respectively. Since the pre-funded warrants did not contain the same cash settlement provision, these warrants are classified as a component of stockholders’ equity within additional paid-in-capital. The pre-funded warrants are equity classified because they meet characteristics of the equity classification criteria. The total proceeds from the offering were first allocated to the liability classified warrants, based on their fair values, with the residual $2.5 million allocated on a relative fair value basis to the common stock and pre-funded common stock warrants. Issuance costs allocated to the equity classified pre-funded common stock warrants and common stock of $0.3 million were recorded as a reduction to paid-in capital. Issuance costs allocated to the liability classified warrants of $0.5 million were recorded as an expense. The Company measured the fair value of the accompanying common warrants and placement agent warrants using the Monte Carlo simulation model at issuance and again at December 31, 2020 using the following inputs:

Accompanying common warrants:

	December 23, 2020			December 31, 2020
Stock price	$	0.65		$	0.68
Exercise price	$	0.62		$	0.62
Risk-free rate		0.38	%		0.36	%
Volatility		99.7	%		96.2	%
Remaining term (years)		5.0			5.0

Placement agent warrants:

	December 23, 2020			December 31, 2020
Stock price	$	0.65		$	0.68
Exercise price	$	0.94		$	0.94
Risk-free rate		0.38	%		0.36	%
Volatility		99.7	%		96.2	%
Remaining term (years)		5.0			5.0

The following table summarizes warrant activity for the year ended December 31, 2020.

	Warrants Issued		Warrants Exercised		Outstanding December 31, 2020
Transaction
February 14, 2020 common warrants		10,638,298		10,073,298		565,000
December 23, 2020 common warrants		10,688,043		–		10,688,043
December 23, 2020 placement agent warrants		641,283		–		641,283
Total		21,967,624		10,073,298		11,894,326

For information regarding warrants issued or exercised subsequent to December 31, 2020, see Subsequent Events below.