SALE OF COMMON STOCK, WARRANTS AND PRE- FUNDED WARRANTS

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

SALE OF COMMON STOCK, WARRANTS AND PRE- FUNDED WARRANTS

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

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 was $2.80 per share, the warrants were exercisable immediately, and 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 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 was exercisable for one share of the Company’s common stock at an exercise price of $0.624 per share. The warrants were immediately exercisable and expire five years from the date of issuance. The holder of the warrants could 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 could 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.

Transaction	Warrants Issued		Warrants Exercised		Outstanding December 31, 2020
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

The Company measured the fair value of the liability-classified warrants issued during 2020 as of December 31, 2021 using the Monte Carlo simulation model using the following inputs:

February 14, 2020 Warrants	December 31, 2021
Stock price	$	0.59
Exercise price	$	0.10
Risk-free rate		1.27	%
Volatility		102.0	%
Remaining term (years)		5.1

December 23, 2020 Warrants	December 31, 2021
Stock price	$	0.59
Exercise price	$	0.94
Risk-free rate		1.11	%
Volatility		103.9	%
Remaining term (years)		4.0

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 (the “January 14 Warrants”). 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 January 14 Warrant is exercisable for one share of the Company’s common stock at an exercise price of $1.20 per share. The January 14 Warrants are immediately exercisable and will expire five years from the date of issuance. The holder of the January 14 Warrants may not exercise any portion of such 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 January 14 Warrants and placement agent common stock warrants could each require cash settlement in certain scenarios, the January 14 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 are 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 fair values, with the residual $1.4 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 $0.1 million were recorded as a reduction to 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 January 14 Warrants and placement agent warrants using the Monte Carlo simulation model at issuance and at December 31, 2021 using the following inputs:

Accompanying common warrants:

	January 14, 2021			December 31, 2021
Stock price	$	1.21		$	0.59
Exercise price	$	1.20		$	1.20
Risk-free rate		0.49	%		1.12	%
Volatility		100.1	%		103.0	%
Remaining term (years)		5.0			4.0

Placement agent warrants:

	January 14, 2021			December 31, 2021
Stock price	$	1.21		$	0.59
Exercise price	$	1.38		$	1.38
Risk-free rate		0.49	%		1.12	%
Volatility		99.3	%		103.0	%
Remaining term (years)		5.0			4.0

 On January 22, 2021, the Company entered into a letter agreement with the holder of warrants to exercise the warrants and 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 (the “January 25 Warrants”). Each January 25 Warrant is exercisable for one share of Common Stock at an exercise price of $1.20 per share. The January 25 Warrants are immediately exercisable and will expire five years from the date of issuance. A holder may not exercise any portion of the January 25 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 January 25 Warrants and placement agent common stock warrants could each require cash settlement in certain scenarios, the new January 25 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 January 25 Warrants and placement agent common stock warrants using the Monte Carlo simulation model at issuance and at December 31, 2021, using the following inputs:

Accompanying new common stock warrants:

	January 25, 2021			December 31, 2021
Stock price	$	1.02		$	0.59
Exercise price	$	1.20		$	1.20
Risk-free rate		0.42	%		1.13	%
Volatility		99.0	%		103.0	%
Remaining term (years)		5.0			4.1

Placement agent warrants:

	January 22, 2021			December 31, 2021
Stock price	$	1.05		$	0.59
Exercise price	$	1.20		$	1.20
Risk-free rate		0.44	%		1.12	%
Volatility		99.6	%		103.0	%
Remaining term (years)		5.0			4.1

The following table summarizes warrant activity for the year ended December 31, 2021.

	Outstanding December 31, 2020		Warrants Issued		Warrants Exercised			Outstanding December 31, 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

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 below, the Company provided notice to Keystone of its decision to terminate the Purchase Agreement, which was effective on March 26, 2021.

On March 30, 2021, the Company entered into a sales agreement (“Sales Agreement”) with an investment banking firm 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 the investment banking firm would act as sales agent for a fee equal to 4% of gross proceeds sold in the offering with a minimum payment of $400,000 if the Sales Agreement was terminated within one year. As of December 31, 2021, no common stock had been sold. The Sales Agreement continues until the earlier of the date shares having aggregate sales proceeds of $50.0 million are sold or the date either party terminates the Sales Agreement by giving three days’ prior notice to the other party. On February 28, 2022, the Company exercised its right to terminate the Sales Agreement and was obligated to make a one-time payment to the investment banking firm of $400,000. See Note 21 for additional details.