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Warrants | 6 Months Ended
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Jun. 30, 2023
Warrants and Rights Note Disclosure [Abstract] |
Warrants | Warrants The following table summarizes the activity in the Company’s outstanding warrants during the six months ended June 30, 2023:
| Warrants Outstanding Number of Shares |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price Per Share
Balance at December 31, 2022 | 4,433,593 |  | 3.37 |  | $ | 22.50 |
Granted | 4,784,909 |  | 5.16 |  | $ | 2.50 |
Exercised | (2,311,550) |  | 2.59 |  | $ | 23.70 |
Expired | (4,000) |  | – |  | $ | 30.00 |
Forfeitures | (50,000) |  | 7.69 |  | $ | 13.90 |
Balance at June 30, 2023 | 6,852,952 |  | 4.54 |  | $ | 8.19 |
Exercisable June 30, 2023 | 2,068,043 |  | 3.10 |  | $ | 21.35 |
Exercisable December 31, 2022 | 4,433,593 |  | 4.77 |  | $ | 22.50 |
The warrants to purchase shares of the Company’s common stock outstanding as of June 30, 2023 and December 31, 2022 had a total value of $39.2 million and $73.3 million, respectively. As of June 30, 2023, 89,286 liability classified derivative warrants to purchase shares of the Company’s common stock remained outstanding and are revalued each reporting period. As of June 30, 2023, the warrants were revalued at $0.1 million, resulting in a decrease of $0.2 million in liability as compared to December 31, 2022. The change in value was recorded within Other Income (Expense), Net on the condensed consolidated statements of operations and Gain on Warrant Revaluation within the condensed consolidated statement of cash flows. The fair value of the outstanding derivative warrants was determined by using the Black-Scholes option pricing model (“BSM”) based on the following assumptions:
Exercise Price | $ | 2.10 |
Dividend Yield | 0 | %
Volatility | 151 | %
Risk-free interest rate | 4.71 | %
Expected Life of Warrants | 1.7 years
On February 16, 2023, the Company received a notification of exercise from the holder of the remaining 50,000 warrants with a put option. The put option was exercised for a fixed rate of $250,000. Warrant Exchange On June 26, 2023, the Company entered into warrant exercise inducement offer letters (the “Letter Agreements”) with certain holders of the warrants issued by the Company in January 2021 that had an exercise price of $23.70 per share and were exercisable for an aggregate of 2,311,550 shares of the Company’s common stock (the “2021 Warrants”). Pursuant to the Letter Agreements, the exercising holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the holders would exercise all of their 2021 Warrants for shares of the Company’s common stock at a reduced exercise price of $2.50 per share of common stock in exchange for the issuance of new unregistered warrants (the “Exchange Warrants”) to purchase up to an aggregate of 4,623,100 shares of common stock, equal to 200% of the number of common stock underlying the 2021 Warrants. The aggregate number of shares of common stock issuable pursuant to the Exchange Warrants, together with the shares of common stock issued pursuant to the repriced 2021 Warrants, exceeds 19.99% of the outstanding shares of common stock of the Company (determined as of the date of, and without regard for, the issuance of the Exchange Warrants and the shares issued upon exercise of the repriced 2021 Warrants). In addition, upon issuance of the Exchange Warrants, the Company will not have a sufficient number of underlying common stock that would be required to deliver based on its existing outstanding shares and commitments and the maximum number of shares that would be required to be delivered upon exercise of the Exchange Warrants. The Company is holding its annual shareholder meeting on August 25, 2023, during which the shareholders will be asked to (a) approve an amendment to the articles of incorporation to increase the authorized shares of common stock from 40,000,000 shares to 190,000,000 shares with a corresponding increase in the total number of authorized shares of capital stock of the Company from 50,000,000 shares to 200,000,000 shares (the “Share Increase Proposal”) and (b) approve, in accordance with 713(A) of the NYSE American Company Guide, the issuance of more than 19.99% of the Company’s outstanding common stock upon the exercise of the Warrants (the “Warrant Exercise Proposal” and together with the Share Increase Proposal, the “Proposals” and the “Shareholder Approvals”). Pursuant to the Letter Agreements, the Company filed a registration statement on Form S-3 covering the resale of the shares of common stock issuable upon the exercise of the Warrants on July 26, 2023, which registration statement is currently pending with the Securities and Exchange Commission (“SEC”). The Exchange Warrants have an exercise price of $2.50 per share and a term of five years from the date of the Shareholder Approvals. Consequently, the exercise of the Exchange Warrants in full is subject to Shareholder Approvals. If the Company does not obtain the Shareholder Approvals during the 2023 annual meeting, the Company has agreed to call a meeting of shareholders every 90 days thereafter to seek shareholder approval until the Shareholder Approvals are obtained. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends and stock splits, subsequent equity sales, subsequent rights offerings, pro rata distributions and certain fundamental transactions affecting the shares of common stock. A holder will not have the right to exercise any portion of the Exchange Warrant if the holder would beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%) of the outstanding common stock immediately after exercise, except that upon notice from the holder to the Company, the holder may increase or decrease the beneficial ownership limitation up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Exchange Warrants, provided that any increase in such beneficial ownership limitation shall not be effective until 61 days following notice from the holder to the Company. The Company received approximately $5.8 million in gross proceeds recorded as an increase to Additional Paid-in Capital. The Special Equities Group, a division of Bradley Woods & Co. Ltd. (“SEG”), acted as warrant solicitation agent and received a cash fee of $0.4 million, equal to 7.0% of the total gross proceeds, and warrants with a value of $0.4 million on the issuance date to purchase up to 161,809 of the Company’s common stock at $2.50 per share (the “SEG Warrants”). In addition, through issuance of the Company’s common stock, the Company paid lawyer fees of $0.1 million for costs directly attributable to the warrant re-pricing and exchange. The total issuance costs of $0.9 million were netted against the proceeds received and recorded as a reduction to Additional Paid in Capital on the Company's condensed consolidated balance sheet. As the 2021 Warrants were repriced prior to exercising, the Company utilized ASC 815 to account for the modification. As per ASC 815, an entity shall treat a modification of the terms or conditions or an exchange of a freestanding equity classified written call option as an exchange of the original instrument for a new instrument. The effect of a modification or an exchange shall be measured as the excess, if any, of the fair value of the modified or exchanged instrument over the fair value of that instrument immediately before it is modified or exchanged (the “incremental expense”). The Company calculated the fair value of the 2021 Warrants exercised immediately before the repricing using the Black-Scholes option pricing model (“BSM”). The calculation used the original exercise price of $23.70 per share and the BSM assumptions as of June 26, 2023 to calculate the fair value immediately before the repricing and calculated the fair value of the 2021 Warrants exercised utilizing the modified exercise price of $2.50 per share and the same BSM assumptions as of June 26, 2023. The resulting difference of $3.5 million, was recorded as an incremental expense as a Warrant Incentive Expense within Other Income (Expense), Net on the condensed consolidated statement of operations and as an increase to Additional Paid-in Capital on the condensed consolidated balance sheet as of June 30, 2023. The fair value of the aggregate total of 4,784,909 Exchange Warrants and the SEG Warrants (collectively, the “Warrants”) on the issuance date of June 26, 2023 was determined to be $13.1 million, or $2.74 per share, as calculated using the BSM based on the following assumptions:
| June 26, 2023
Market Price | $ | 3.30 |
Exercise Price | $ | 2.50 |
Dividend Yield | 0 | %
Volatility | 110 | %
Risk-free interest rate | 3.96 | %
Expected Life of Warrants | 5.0 years
The fair value of the Exchange Warrants of $12.7 million was recorded as a Warrant Incentive Expense within Other Income (Expense), Net on the condensed consolidated statement of operations. The fair value of the SEG Warrants was recorded as a reduction to Additional Paid-in Capital on the condensed consolidated balance sheet. Per review of ASC 815 to determine the classification of the Warrants as either assets or liabilities the Company must evaluate whether it has a sufficient number of authorized and unissued shares at the classification assessment date to control settlement by delivering shares. As noted above, when taking into consideration the Company’s existing outstanding common stock and future commitments to issue common stock prior to the issuance of the Warrants, the Company does not have a sufficient number of common stock underlying its commitments, when including the Warrants, with a calculated deficit of 4,240,784 shares as of June 26, 2023. In addition, ASC 815 states that if an entity could be required to obtain shareholder approval to increase the entity’s authorized shares to net share or physically settle a contract, share settlement is not controlled by the entity, therefore would be liability classified. As the Company does not have a sufficient number of authorized and unissued shares required to be delivered upon settlement of equity instruments and is required to obtain the Shareholder Approvals to increase the authorized shares, the settlement is not considered controlled by the Company. Consequently, the Warrants are required to be classified as a liability and revalued at each reporting period end date. The fair value of the Warrants as of June 30, 2023 was determined to be $7.1 million, or $1.48 per share, using the BSM based on the following assumptions:
| June 30, 2023
Market Price | $ | 1.91 |
Exercise Price | $ | 2.50 |
Dividend Yield | 0 | %
Volatility | 110 | %
Risk-free interest rate | 4.13 | %
Expected Life of Warrants | 5.0 years
The value of the Warrants decreased by $6.0 million as of June 30, 2023 compared to the issuance date of June 26, 2023. The change in fair value reduced the initial warrant liability balance to $7.1 million and the change in fair value was recorded as a gain within Other Income (Expense), Net on the condensed consolidated statement of operations.

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