|3 Months Ended|
Mar. 31, 2022
Note 10. Equity Offerings
On February 8, 2022, the Company completed a public offering (the “Offering”) in which it issued and sold (i) 9,535,000 shares of common stock, (ii) 24,002,893 warrants to purchase one share of common stock at an exercise price of $0.50 that were immediately exercisable and expire one year from the date of issuance, or Series A Warrants, and (iii) 24,002,893 warrants to purchase one share of common stock at an exercise price of $0.50 that were immediately exercisable and expire seven years from the date of issuance, or Series B Warrants, and (iv) 14,467,893 pre-funded warrants to purchase one share of common stock at an exercise price of $0.0001 per share that were immediately exercisable and expire twenty years from the date of issuance, or Pre-Funded Warrants. In addition, the Company granted the underwriters of the Offering a 45-day option, or Overallotment Option, to purchase up to (i) 3,600,000 additional shares of common stock, (ii) 3,600,000 additional Series A Warrants and/or (iii) 3,600,000 additional Series B Warrants, solely to cover overallotments.
The Series A Warrants and Series B Warrants were valued at approximately $7.0 million using the Black-Scholes option pricing model based on the following assumptions:
On February 10, 2022, the Company issued 1,245,116 shares of common stock pursuant to the partial exercise of the Overallotment Option, resulting in cash proceeds of approximately $0.5 million, net of underwriting discounts. On various dates in February 2022 and March 2022, the Company issued 14,467,893 shares of common stock upon the exercise of all of the Pre-Funded Warrants issued in the Offering. In addition, in March 2022, the Company issued 50,000 shares of common stock in connection with the exercise of 25,000 Series A Warrants and 25,000 Series B Warrants issued in the Offering.
Net proceeds from the Offering were approximately $9.7 million, after deducting underwriter commissions and fees and other offering fees paid or payable by the Company as of March 31, 2022.
At March 31, 2022, the Company had 56,329,950 shares of common stock reserved for issuance pursuant to the warrants issued by the Company at a weighted average exercise price of $0.89.
The Company is contractually obligated to pay a former placement agent a tail fee equal to 7.5% cash compensation for the gross proceeds raised and issue warrants equal to 7% of the number of shares of common stock sold in the Offering to any investor contacted by the former placement agent during the term of its engagement with the Company. Thus, the Company is obligated to pay such placement agent a cash fee which it estimates to be approximately $0.9 million and to issue approximately 1.7 million warrants to purchase common stock at an exercise price of $0.625 per share, which represents 125% of the exercise price in the Offering. Such warrants would be immediately exercisable and expire five years from the date of issuance. These warrants were valued at approximately $0.3 million on February 8, 2022, using the Black-Scholes option pricing model based on the following assumptions: expected volatility of 109.9%, risk-free interest rate of 1.47%, expected dividend yield of 0% and an expected term of 2.5 years. The cash fees of $0.9 million are included in accrued expenses in the balance sheet as of March 31, 2022. The warrants had not been issued by the Company as of March 31, 2022.
Tabular disclosure of equity method investments including, but not limited to, name of each investee or group of investments, percentage ownership, difference between recorded amount of an investment and the value of the underlying equity in the net assets, and summarized financial information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef