Stock Warrants

9 Months Ended

Sep. 30, 2023

Stock Warrants

Stock Warrants

9. Stock Warrants

On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company and sold (i) Class A Units (the “Class A Units”), consisting of an aggregate of 252,000 shares of the Common Stock, warrants to purchase an aggregate of 252,000 shares of Common Stock at an exercise price of $13.80 per share, which subsequently was reduced to $6.90 per share and then again to $1.22 (each a “Warrant” and collectively, the “Warrants”) and (ii) Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), consisting of an aggregate of 15,723 shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $1,000 and convertible into shares of Common Stock at the stated value divided by a conversion price of $11.50 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 1,367,218 shares of Common Stock, and issued with a warrant to purchase an aggregate of 1,367,218 shares of Common Stock.

On November 16, 2020, the exercise price of the Warrants was reduced from $13.80 per Warrant per full share of the Company’s Common Stock, to $6.90 per Warrant per full share of Common Stock in accordance with the antidilution terms of the Warrant. The reduction was the result of the issuance of shares of Common Stock by the Company through its ATM facility. The effect of the change in the exercise price of the Warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $0.9 million during the year ended December 31, 2020, which reduces the income available to common stockholders. In addition, pursuant to the underwriting agreement that the Company had entered into with A.G.P./Alliance Global Partners (the “Underwriters”), as representative of the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an additional 242,883 shares of Common Stock and/or additional Warrants to purchase an additional 242,883 shares of Common Stock. The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 180,783 shares of Common Stock.

9. Stock Warrants – (continued)

If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise. No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of any such fractional shares. The Company has concluded that the Warrants are required to be equity classified. The Warrants were valued on the date of grant using Monte Carlo simulations. During the three months ended March 31, 2021, 1,165,575 Warrants were exercised for cash proceeds of $8.0 million. There were no Warrants exercised during the year ended December 31, 2022, or the nine months ended September 30, 2023. The Warrants have expired in October 2023 and are no longer outstanding.

On August 3, 2022, the Company announced the exercise price of Warrants issued by the Company in October 2018 was reduced from $6.90 per Warrant per full share of the Company’s common stock, $0.001 par value per share to $1.22 per Warrant per full share of Common Stock. The reduction was the result of the issuance of shares of Preferred Stock by the Company in a private placement. The effect of the change in the exercise price of the Warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $340,000 during the year ended December 31, 2022, which reduces the income available to common stockholders.

A summary of all warrant activity for the Company for the nine months ended September 30, 2023 and the year ended December 31, 2022 is as follows:

				Weighted Average
	Number of	Weighted Average		Remaining
	Warrants	Exercise Price		Contractual Life
Balance at December 31, 2021	634,497		1.24	1.78 years
Granted	—		—
Exercised	—		—
Forfeited	(71)		182
Balance at December 31, 2022	634,426	$	1.22	0.78 years
Granted	—		—
Exercised	—		—
Forfeited	—		—
Balance at September 30, 2023	634,426	$	1.22	0.03 years