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Warrant Liabilities
6 Months Ended
Jun. 30, 2022
Text Block [Abstract]  
Warrant Liabilities

Note 5. Warrant Liabilities

The Company has issued multiple warrant series, of which the 2018 PIPE Warrants were determined to be liabilities pursuant to the guidance established by ASC 815 Derivatives and Hedging.

 

Warrants Issued as Part of the Units in the 2018 PIPE Offering

The 2018 PIPE Warrants were issued on December 19, 2018 in the 2018 PIPE Offering, pursuant to a Warrant Agreement with each of the investors in the 2018 PIPE Offering, and entitle the holders to purchase 513,617 shares of the Company’s common stock at an exercise price equal to $2.00 per share, subject to adjustment as discussed below, at any time commencing upon issuance of the 2018 PIPE Warrants and terminating on December 21, 2023.  

The exercise price and number of shares of common stock issuable upon exercise of the 2018 PIPE Warrants may be adjusted in certain circumstances, including the event of a stock split, stock dividend, extraordinary dividend, or recapitalization, reorganization, merger or consolidation. However, the exercise price of the 2018 PIPE Warrants will not be reduced below $2.00.

In the event of a change of control of the Company, the holders of unexercised warrants may present their unexercised warrants to the Company, or its successor, to be purchased by the Company, or its successor, in an amount equal to the per share value determined by the Black Scholes methodology.

Since the Company may be obligated to settle the 2018 PIPE Warrants in cash, the Company classified the 2018 PIPE Warrants as long-term liabilities at their fair value and will re-measure the warrants at each balance sheet date until they are exercised or expire. Any change in the fair value is recognized as other income (expense) in the Company’s condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2022, the fair value of the 2018 PIPE Warrants was estimated at approximately $2,000. The approximate $2,000 and $56,000 million decrease in the fair value of the liability for the 2018 PIPE Warrants during the three months ended June 30, 2022 and 2021, respectively, was recorded as other income in the condensed consolidated statements of operations and comprehensive loss. 

The Company has calculated the fair value of the 2018 PIPE Warrants using a Black-Scholes pricing model. The following summarizes certain key assumptions used in estimating the fair value.

 

 

 

June 30,

2022

 

 

December 31,

2021

 

Volatility

 

 

95

%

 

 

95

%

Contractual term (years)

 

 

1.5

 

 

 

2.0

 

Expected dividend yield

 

 

%

 

 

%

Risk-free rate

 

 

2.90

%

 

 

0.72

%

 

The Black-Scholes pricing model requires the use of highly subjective assumptions to estimate the fair value of stock-based awards. These assumptions include the following estimates.

 

Volatility: The Company calculates the estimated volatility rate based its historical volatility over the expected life of the warrants.

 

Contractual term: The expected life of the warrants, which is based on the contractual term of the warrants.

 

Expected dividend yield: The Company has never declared or paid any cash dividends and does not currently plan to pay cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.

 

Risk-free rate: The risk-free interest rate is based on the U.S. Treasury rate for similar periods as the expected life of the warrants.