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Stockholders’ Equity (Deficit)
 6 Months Ended
Jun. 30, 2024
Stockholders’ Equity (Deficit) [Abstract]  
Stockholders’ Equity (Deficit)

Note 9 — Stockholders’ Equity (Deficit)

 

Public Offerings

 

On February 27, 2024, the Company entered into a placement agency agreement (the “Agency Agreement”) with Alexander Capital, LP as placement agent (the “Placement Agent”), pursuant to which the Company agreed to issue and sell an aggregate of 2,760,000 shares of its common stock, and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 3,963,684 shares of its common stock (the “S-1 Offering”). The public offering price for each share of common stock is $0.38, and the offering price for each Pre-Funded Warrant is $0.379, which equals the public offering price per share of the common stock, less the $0.001 per share exercise price of each Pre-Funded Warrant.

 

The Company issued 67,237 warrants to purchase common stock to Alexander Capital, L.P., referred to as the Placement Agents Warrants above. The warrants were classified as equity warrants and recorded under additional paid-in capital in the condensed consolidated balance sheets. The warrants have a five-year term and exercise price of 100% of the offering price, and are subject to adjustment for stock splits, reverse stock splits, stock dividends, and similar transactions. The warrants will be exercisable on a cash basis, unless there is not an effective registration statement covering the issuance of the shares issuable upon exercise of the warrants or if shareholder approval for the full exercise of the warrants are not received, in which case the Modified Warrant will also be exercisable on a cashless exercise basis at Alexander Capital election.

 

The measurement of fair value of the Alexander Capital Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.52, exercise price of $0.38, term of five years, volatility of 128%, risk-free rate of 4.32%, and expected dividend rate of 0%). The grant date fair value of these Alexander Capital Warrants was estimated to be $31,000 on February 27, 2024 and is reflected within additional paid-in capital as of June 30, 2024.

 

Related Party Warrant Issuance

 

On May 21, 2024, in connection with the Consolidated Note Amendment, the Company issued 7,383,053 and 7,876,712 prefunded warrants to GIC Acquisitions and CP Acquisition (the “Pre-Funded Warrants”), respectively, in exchange of notes payable amounting approximately to $2.29 million and $11.5 million, respectively. The Pre-Funded Warrants can be used to purchase Company’s common stocks with par value of $0.001 at an exercise price of $0.001. The Pre-Funded Warrants have been identified as freestanding financial instruments and were determined not to be indexed to the Company’s own stock. Accordingly, the Warrants are precluded from being classified within equity and classified as a liability with subsequent changes in fair value recognized each reporting period in earnings. The fair value of the Pre-Funded Warrants on the issuance date was $5,600,334 determined as the intrinsic value.

 

On June 30, 2024, the Company executed an amendment to the Pre-funded Warrants, pursuant to which the Company revised certain provisions of the Pre-funded Warrants to (i) remove the adjustment to the exercise price of the Pre-funded Warrants when there is a bona fide equity financing with the primary purpose of raising capital and (ii) increase the threshold for a change of control from 50% to greater than 50%. The classification of the Pre-funded Warrants was reassessed upon the modification and the Pre-funded Warrants were determined to meet all of the additional requirements for equity classification. Accordingly, as of June 30, 2024, the Company remeasured the Pre-funded Warrants to its fair value immediately prior to the modification and recognized the change in fair value of approximately $1.2 million in earnings. The Company then reclassified the Pre-funded Warrant liability to stockholders’ equity at its post-modification fair value of $6.8 million.