SALE OF COMMON STOCK, WARRANTS AND PRE-FUNDED WARRANTS

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

SALE OF COMMON STOCK, WARRANTS AND PRE-FUNDED WARRANTS

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

On January 14, 2021, the Company completed a registered direct offering of 6,670,000 shares of its common stock, par value $0.001 per share, pre-funded warrants to purchase up to 2,420,910 shares of common stock and accompanying common warrants to purchase up to 9,090,910 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 $1.10 and for each pre-funded warrant and accompanying warrant was $1.099. 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 $1.20 per share. The warrants are immediately exercisable and will expire five years form 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 warrants to purchase 6.0% of the aggregate number of common stock shares and pre-funded warrants sold in the offering (or warrants to purchase up to 545,455 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 $1.375 per share). The net proceeds to the Company from the offering were $9.2 million, after direct offering expenses of $0.8 million 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 $8.1 million and $0.5 million, respectively. Since the pre-funded warrants did not contain the same cash settlement provision, these warrants were classified as a component of stockholders’ equity within additional paid-in-capital. The pre-funded warrants were equity classified because they met characteristics of the equity classification criteria. The total proceeds from the offering were first allocated to the liability classified warrants, based on their estimated fair values, with the residual $1.4 million allocated to the common stock and pre-funded common stock warrants in equity. Issuance costs allocated to the equity classified pre-funded common stock warrants and common stock of $0.1 million were recorded as a reduction to additional paid-in capital. Issuance costs allocated to the liability classified warrants of $0.7 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 June 30, 2021, using the following inputs:

Accompanying common warrants:

	January 14, 2021			June 30, 2021
Stock price	$	1.21		$	1.02
Exercise price	$	1.20		$	1.20
Risk-free rate		0.49	%		0.78	%
Volatility		100.1	%		102.0	%
Remaining term (years)		5.0			4.5

Placement agent warrants:

	January 14, 2021			June 30, 2021
Stock price	$	1.21		$	1.02
Exercise price	$	1.38		$	1.38
Risk-free rate		0.49	%		0.78	%
Volatility		99.3	%		102.0	%
Remaining term (years)		5.0			4.5

On January 22, 2021, the Company entered into a letter agreement with the holder of warrants to purchase 10,688,043 shares of common stock at an exercise price of $0.624 per share that were issued to the holder in the registered direct offering that closed on December 23, 2020. Under the letter agreement the holder agreed to exercise the 10,688,043 warrants in full and the Company agreed to issue and sell to the holder common warrants to purchase up to 8,016,033 shares of the Company’s common stock, par value $0.001 per share, at a price of $0.125. Each warrant is exercisable for one share of Common Stock at an exercise price of $1.20 per share. The warrants are immediately exercisable and will expire five years from the date of issuance. A holder 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, warrants to purchase 6.0% of the aggregate number of common stock shares and pre-funded warrants sold in the offering (or warrants to purchase up to 480,962 shares of common stock). The placement agent warrants have substantially the same terms as the new warrants. The 10,688,043 warrants issued on December 23, 2020, were exercised on January 22, 2021, and closing of the offering occurred on January 25, 2021. The Company received gross proceeds of approximately $6.7 million from the exercise of the existing warrants and gross proceeds of approximately $1.0 million from the sale of the new warrants.

Immediately prior to the exercise of the existing 10,688,043 liability classified common stock warrants, a remeasurement loss of $3.6 million was recorded. The Company measured the fair value of the common stock warrants using the Monte Carlo simulation model on January 22, 2021, using the following inputs:

	January 22, 2021
Stock price	$	1.05
Exercise price	$	0.62
Risk-free rate		0.43	%
Volatility		99.4	%
Remaining term (years)		4.9

As the new common stock warrants and placement agent common stock warrants could each require cash settlement in certain scenarios, the new common stock warrants and placement agent common stock warrants were classified as liabilities upon issuance and were initially recorded at estimated fair values of $5.8 million and $0.4 million, respectively. Cash issuance costs of $0.1 million were recorded as an expense. The Company measured the fair value of the accompanying common stock warrants and placement agent common stock warrants using the Monte Carlo simulation model at issuance and again at June 30, 2021, using the following inputs:

Accompanying new common stock warrants:

	January 25, 2021			June 30, 2021
Stock price	$	1.02		$	1.02
Exercise price	$	1.20		$	1.20
Risk-free rate		0.42	%		0.78	%
Volatility		99.0	%		102.0	%
Remaining term (years)		5.0			4.6

Placement agent warrants:

	January 22, 2021			June 30, 2021
Stock price	$	1.05		$	1.02
Exercise price	$	1.20		$	1.20
Risk-free rate		0.44	%		0.78	%
Volatility		99.6	%		102.0	%
Remaining term (years)		5.0			4.6

The following table summarizes warrant activity for the six months ended June 30, 2021.

	Outstanding December 31, 2020		Warrants Issued		Warrants Exercised			Outstanding June 30, 2021
Transaction
February 14, 2020 common warrants		565,000		–		(25,500	)		539,500
December 23, 2020 common warrants		10,688,043		–		(10,688,043	)		–
December 23, 2020 placement agent warrants		641,283		–		–			641,283
December 23, 2020 pre-funded warrants		5,238,043		–		(5,238,043	)		–
January 14, 2021 common warrants		–		9,090,910		–			9,090,910
January 14, 2021 placement agent warrants		–		545,455		–			545,455
January 14, 2021 pre-funded warrants		–		2,420,910		(2,420,910	)		–
January 25, 2021 common warrants		–		8,016,033		–			8,016,033
January 22, 2021 placement agent warrants		–		480,962		–			480,962
Total		17,132,369		20,554,270		(18,372,496	)		19,314,143

On March 30, 2021, the Company entered into a sales agreement with Cantor Fitzgerald & Co. to sell shares of common stock having aggregate sales proceeds of up to $50.0 million, from time to time, through an “at the market” equity offering program under which Cantor Fitzgerald & Co. will act as sales agent. As of June 30, 2021, no common stock had been sold.

Pursuant to an Equity Purchase Agreement dated as of December 5, 2019 (the “Purchase Agreement”) that the Company entered into with Keystone Capital Partners, LLC (“Keystone”), Keystone agreed to purchase up to $25.0 million of shares of our common stock, subject to certain limitations, at our direction from time to time during the 36-month term of the Purchase Agreement. In anticipation of the “at the market” equity offering program described above, the Company provided notice to Keystone of its decision to terminate the Purchase Agreement, which was effective on March 26, 2021.