consisting of 7,500,000 series A warrants and 3,750,000 series B
warrants (collectively, the “Warrants”), to purchase up to
11,250,000 shares of our common stock at an exercise price of $0.30
per share, for aggregate gross proceeds of $3.0 million (the
“Offering”). Each Warrant is exercisable six months from the date
of issuance on April 22, 2020 and has a term expiring five years
after such initial exercise date. The Warrants contain so-called
full-ratchet anti-dilution provisions which may be triggered
upon any future issuance by the Company of shares of its common
stock or common stock equivalents at a per share price below the
then-exercise price of the Warrant, subject to certain
exceptions; provided, however, that with respect to the
Series B warrants, the adjusted exercise price will not be less
than $0.26.
The net proceeds of the Offering were recorded in equity and appear
as a separate line item in the Condensed Consolidated Statements of
Changes in Equity. Total costs for the Offering were approximately
$334,000, including listing fees, legal and other costs, and the
placement agent fee of six percent of aggregate gross proceeds,
however, a reduced fee was accepted with respect to one investor.
All such costs were recorded as a reduction to “Additional paid in capital” on the
Condensed Consolidated Balance Sheets. Using the Black
Scholes model, and assuming no triggering events take place to
reduce the exercise price of the warrants, the fair value of the
combined Series A and Series B warrants issued was approximately
$1.9 million on April 22, 2020, the date of issuance of the
warrants. The Black Scholes inputs included the closing stock price
on April 22, 2020 (the date of issuance of the warrants) of $0.24,
the exercise price and exercise period of the warrants, the
Company’s applicable volatility rate for the period of the Warrants
of 95%, and the applicable risk-free rate of 0.41%.
Registered direct offering
On July 17, 2019, the Company entered into an agreement with
certain institutional investors providing for the issuance and sale
of 8,653,846 shares of the Company’s common stock at a price of
$0.26 per share, and in a concurrent private placement transaction,
the issuance of 8,653,846 Series A warrants to purchase up to
8,653,846 shares of the Company’s common stock at an exercise price
of $0.35 per share, for aggregate gross proceeds of $2.25 million
(the “Offering”). Each Series A warrant became exercisable on
January 17, 2020 and will expire on January 17, 2025, five years
from the initial exercise date. Each of the investors in the
Offering held warrants that were issued by the Company in May 2016
and were exercisable until November 2021 at an exercise price of
$0.75 per share. In connection with the Offering, the Company also
agreed to exchange, on a one-for-one basis, the May 2016 warrants
for Series B warrants to purchase 4,500,000 shares of common stock
at an exercise price of $0.35 per share. Each Series B warrant
became exercisable on January 17, 2020 and will expire on May 20,
2022 but are otherwise subject to the same terms and conditions as
the Series A warrants.
The net proceeds of the Offering were recorded in equity and appear
as a separate line item in the Condensed Consolidated Statements of
Changes in Equity. Total costs for the Offering were approximately
$0.3 million, including the placement agent fee of six percent of
aggregate gross proceeds, listing fees and legal and other costs.
Such costs were recorded as a reduction to “Additional paid in capital” on the
Condensed Consolidated Balance Sheets. Using the Black
Scholes model, the fair value of the Series A warrants issued was
approximately $2.1 million and the incremental fair value of the
Series B warrants, when compared to the warrants that they
replaced, was approximately $0.3 million. The Black Scholes inputs
for the Series A warrants included the closing stock price on July
16, 2019 (the day preceding the date the Company entered into the
agreement to issue the shares) of $0.33, the exercise price and
exercise period of the warrants, the Company’s applicable
volatility rate for the period of the Series A warrants of 95%, and
the applicable risk-free rate of 1.9%. The Black Scholes
inputs for the Series B warrants included the closing stock price
on July 16, 2019 of $0.33, the exercise price and exercise period
of the warrants, the Company’s applicable volatility rate for the
period of the Series B warrants of 88%, and the applicable
risk-free rate of 1.9%.
Commitment purchase agreement
On May 9, 2018, the Company entered into a commitment purchase
agreement (the “Commitment Purchase Agreement”) with LPC, pursuant
to which the Company, at its sole discretion, has the right to sell
up to $10.0 million of the Company’s common stock to LPC, subject
to certain limitations and conditions contained in the Commitment
Purchase Agreement (the “LPC Program”). The Company closed on
the Commitment Purchase Agreement in July 2018, which is currently
set to expire in May 2021.
Subject to the terms of the Commitment Purchase Agreement, the
Company will control the timing and amount of any future sale of
the Company’s common stock to LPC. LPC has no right to require any
sales by the Company under the