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Common Stock, Stock Options and Warrants
 12 Months Ended
Sep. 30, 2021
Stockholders' Equity Note [Abstract]  
COMMON STOCK, STOCK OPTIONS AND WARRANTS

6. COMMON STOCK, STOCK OPTIONS AND WARRANTS

 

Authorized Common Stock

 

On June 21, 2021, our stockholders approved an amendment to our Articles of Incorporation to increase the authorized number of shares of capital stock from 210,000,000 to 410,000,000 and the authorized number of common shares from 200,000,000 to 400,000,000.

 

Common Stock Issued for Services

 

On November 4, 2019, the Company issued 186,566 shares of common stock for strategic consulting and corporate development services and expensed the $100,000 fair value of the common stock issued.

 

On February 10, 2020, the Company issued 150,000 shares of common stock for investor relations services and 136,000 shares of common stock for general advisory and business development advisory services. The Company expensed the $306,020 fair value of the common stock issued.

 

On April 6, 2020, the Company issued 50,000 shares of common stock for strategic consulting and corporate development services and expensed the $22,750 fair value of the common stock issued.

  

On September 8, 2020, the Company issued 101,174 shares of common stock for investor relations services and expensed the $100,000 fair value of the common stock issued.

 

On February 12, 2021, the Company issued 50,000 shares of common stock for investor relations services and expensed the $68,000 fair value of the common stock issued. 

 

Common Stock Offerings

 

On May 18, 2020, the Company closed a registered direct offering with several institutional and accredited investors for the sale of 7,058,824 shares of common stock at $1.0625 per share for gross proceeds of $7,500,001. The Company also issued 3,529,412 unregistered immediately exercisable warrants to the investors with an exercise price of $1.00 per share and a term of five and one-half years. The Company paid the placement agent for the offering a fee of 7% of the gross proceeds totaling $525,000 and issued the placement agent 494,118 immediately exercisable warrants with an exercise price of $1.3281 per share and a term of five years. The Company also reimbursed the placement agent for $85,000 in expenses and incurred $12,901 in other expenses. Net proceeds from the offering were $6,877,100. The estimated fair value of the 3,529,412 warrants issued to the investors was $2,138,998 and the estimated fair value of the 494,118 warrants issued to the placement agent was $275,724.

 

On August 10, 2020, the Company closed an underwritten public offering of 9,159,524 shares of common stock at a price of $1.05 per share for gross proceeds of $9,617,500. The Company paid the underwriter a fee of 7% of the gross proceeds totaling $673,225 and issued the underwriters 641,166 immediately exercisable warrants with an exercise price of $1.3125 per share and a term of five years. The Company also reimbursed the placement agent for $135,000 in expenses and incurred $109,074 in other expenses. Net proceeds from the offering were $8,700,201. The estimated fair value of the 641,166 warrants issued to the underwriter was $569,426.

 

On January 27, 2021, the Company closed a private placement for 15,455,960 common shares and warrants to purchase 7,727,980 common shares, at a purchase price of $1.294 per common share and accompanying warrant, for gross proceeds of $20,000,012. The 7,727,980 warrants are immediately exercisable at $1.231 per common share for a term of five and one-half years. The Company paid the placement agent a fee of 7% of the gross proceeds totaling $1,400,001 and issued the placement agent 1,081,917 immediately exercisable warrants at $1.6175 per common share for a term of five and one-half years. The Company also reimbursed the placement agent for $85,000 in expenses and incurred $64,601 in other expenses. Net proceeds from the offering were $18,450,410. The estimated fair value of the 7,727,980 warrants issued to the investors was approximately $7,582,000 and the estimated fair value of the 1,081,917 warrants issued to the placement agent was approximately $1,025,000.

 

On February 19, 2021, the Company closed a registered direct offering for 50,830,566 common shares and warrants to purchase up to 25,415,283 common shares, at a purchase price of $1.505 per share of common stock and accompanying warrant, for gross proceeds of $76,500,002. The 25,415,283 warrants are immediately exercisable at $1.70 per common share for a term of five years. The Company paid the placement agent a fee of 7% of the gross proceeds totaling $5,355,000 and issued the placement agent 3,558,140 immediately exercisable warrants at $1.881 per common share for a term of five years. The Company also reimbursed the placement agent for $85,000 in expenses and incurred $80,160 in other expenses. Net proceeds from the offering were $70,979,842. The estimated fair value of the 25,415,283 warrants issued to the investors was approximately $42,322,000 and the estimated fair value of the 3,558,140 warrants issued to the placement agent was approximately $5,850,000.

 

Stock Option Plans

 

Pursuant to its 2014 Stock Incentive Plan, we reserved 866,667 shares of common stock for issuance to employees, directors and consultants. As of September 30, 2021, there were options to purchase 855,171 shares outstanding, options to purchase 4,829 shares were exercised, options to purchase 6,667 shares expired, and no shares were available for future grants.

 

On February 7, 2018, our stockholders approved the 2018 Omnibus Stock Incentive Plan and we reserved 2,000,000 shares of common stock for issuance to employees, directors and consultants. As of September 30, 2021, there were options to purchase 1,820,000 shares outstanding, options to purchase 70,000 shares were exercised and the remaining 110,000 shares were transferred to the 2020 Omnibus Stock Incentive Plan (“2020 Plan”).

 

On February 10, 2020, our stockholders approved the 2020 Plan and we reserved 3,110,000 common shares. As of September 30, 2021, there were options to purchase 1,870,000 shares outstanding and the remaining 1,240,000 shares were transferred to the 2021 Omnibus Stock Incentive Plan (“2021 Stock Plan”).

 

On May 24, 2021, our stockholders approved the 2021 Stock Plan and we reserved 8,740,000 shares. The 2021 Stock Plan provides incentives to employees, directors, and consultants through options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights. As of September 30, 2021, options to purchase 1,210,000 shares were outstanding and there were 7,530,000 shares available for future grants.

 

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Volatility is estimated using the trading activity of our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term.

 

The following assumptions were used in determining the fair value of stock option grants for the years ended September 30, 2021 and 2020:

 

    2021    2020   
Risk-free interest rate   0.32 – 0.89%   0.26 – 1.66%  
Expected dividend yield   0.00%   0.00%  
Expected term   6.50 – 10 years   6.50 – 10 years  
Expected volatility   111 – 112%   107 – 117%  

 

A summary of option activity under the plans (excluding the NoveCite Stock Plan) is presented below:

 

    Shares     Weighted-
Average
Exercise
Price		     Weighted-
Average
Remaining
Contractual
Term		     Aggregate
Intrinsic
Value		  
Outstanding at September 30, 2020     3,390,171     $ 2.51     8.00 years     $ 440,336  
Granted     2,435,000       1.57                
Exercised     (70,000 )     1.18            $ 101,866   
Forfeited or expired     —       9.0                
Outstanding at September 30, 2021     5,755,171     $ 2.13     8.02 years     $ 3,589,392  
Exercisable at September 30, 2021     2,499,635     $ 3.10     6.56 years     $ 1,429,358  

 

The weighted average grant date fair value of the options granted during the year ended September 30, 2020 was estimated at $0.76 per share. All of these options vest over terms of 12 to 36 months and have a term of 10 years.

 

The weighted average grant date fair value of the options granted during the year ended September 30, 2021 was estimated at $1.34 per share. All of these options vest over terms of 12 to 36 months and have a term of 10 years.

 

Stock-based compensation expense for the years ended September 30, 2021 and 2020 was $1,454,979 (including $83,555 for the NoveCite Stock Plan) and $803,261, respectively.

 

At September 30, 2021, unrecognized total compensation cost related to unvested awards under the Citius stock plans of $3,012,685 is expected to be recognized over a weighted average period of 2.34 years.

 

On November 5, 2020, the stockholders of NoveCite, Inc., approved NoveCite’s Stock Plan and under which 2,000,000 common shares of NoveCite were reserved. The NoveCite Stock Plan provides incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights. As of September 30, 2021, there were options outstanding to purchase 2,000,000 common shares of NoveCite and no common shares of NoveCite available for future grants.

 

During the year ended September 30, 2021, NoveCite granted options to purchase 2,000,000 common shares to employees at a weighted average exercise price of $0.24 per share, of which none are exercisable as of September 30, 2021. The weighted average grant date fair value of the options granted during the year ended September 30, 2021 was estimated at $0.20 per share. All of these options vest over 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the NoveCite Stock Plan is 9.39 years. At September 30, 2021, unrecognized total compensation cost related to unvested awards under the NoveCite Stock Plan of $316,445 is expected to be recognized over a weighted average period of 2.42 years.

 

Warrants

 

The Company has reserved 40,208,347 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2021:

 

   Exercise
price		   Number   Expiration Dates
LMB Warrants  $7.50    53,110   March 24 – April 29, 2022
2016 Offering Warrants   4.13    140,819   November 23, 2021 – February 27, 2022
2017 Public Offering Investors   4.13    1,622,989   August 2, 2022
2017 Public Offering Underwriter   4.54    65,940   February 2, 2023
December 2017 Registered Direct/Private Placement Offering Investors   4.63    640,180   June 19, 2023
December 2017 Registered Direct/Private Placement Offering Placement Agent   5.87    89,625   December 19, 2022
March 2018 Registered Direct/Private Placement Offering Investors   2.86    218,972   October 2, 2023
March 2018 Registered Direct/Private Placement Offering Placement Agent   3.73    46,866   March 28, 2023
August 2018 Offering Investors   1.15    3,921,569   August 14, 2023
August 2018 Offering Agent   1.59    189,412   August 8, 2023
April 2019 Registered Direct/Private Placement Offering Investors   1.42    1,294,498   April 5, 2024
April 2019 Registered Direct/Private Placement Offering Placement Agent   1.93    240,130   April 5, 2024
September 2019 Offering Investors   0.77    2,793,297   September 27, 2024
September 2019 Offering Underwriter   1.12    194,358   September 27, 2024
February 2020 Exercise Agreement Placement Agent   1.28    138,886   August 19, 2025
May 2020 Registered Direct Offering Investors   1.00    1,670,588   November 18, 2025
May 2020 Registered Direct Offering Placement Agent   1.33    155,647   May 14, 2025
August 2020 Underwriter   1.31    201,967   August 10, 2025
January 2021 Registered Direct Offering Investors   1.23    3,091,192   July 27, 2026
January 2021 Registered Direct Offering Agent   1.62    351,623   July 27, 2026
February 2021 Offering Investors   1.70    20,580,283   February 19, 2026
February 2021 Offering Agent   1.88    2,506,396   February 19, 2026
         40,208,347    

 

In December 2019, 1,060,615 of the September 2019 Offering Pre-Funded Unit Warrants were exercised at $0.0001 per share for net proceeds of $106.

 

In January 2020, 1,315,715 of the September 2019 Offering Investor Warrants were exercised at $0.77 per share for net proceeds of $1,013,101.

 

On February 14, 2020, the Company entered into a warrant exercise agreement for an aggregate of 3,712,218 shares of common stock having an existing exercise price of $0.77 and 2,586,455 shares of common stock at a reduced exercise price of $1.02. In consideration for the exercise of the warrants for cash, the exercising holders received new unregistered warrants to purchase 6,298,673 shares of common stock at an exercise price of $1.02 per share, exercisable six months after issuance and which have a term of exercise equal to five years. The offering closed on February 19, 2020 and net proceeds were $5,013,930 after placement agent fees and offering expenses. The Company also issued warrants to purchase 440,907 shares to the placement agent. The placement agent warrants have identical terms to the investor warrants except that the exercise price is $1.275 per share. The estimated fair value of the 6,298,673 warrants issued to the investors was $5,360,465 and the estimated fair value of the 440,907 warrants issued to the placement agent was $367,022.

 

On June 26, 2020, 1,129,412 of the May 2020 Registered Direct Offering Investor Warrants were exercised at $1.00 per share for net proceeds of $1,129,412.

 

In April 2021, we extended the term by three years to April 5, 2024 for 1,294,498 warrants for common stock with an exercise price of $1.42 per share and 240,130 warrants with an exercise price of $1.93 per share. We recorded a deemed dividend of $1,450,876 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification, the effect of which was an increase in the net loss attributable to common shareholders in the statement of operations for the year ended September 30, 2021.

 

During the year ended September 30, 2021, we received $31,130,134 in proceeds from the exercise of common stock warrants.

 

At September 30, 2021, the weighted average remaining life of all of the outstanding warrants is 3.74 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants outstanding was $19,903,185.

 

Common Stock Reserved

 

A summary of common stock reserved for future issuances as of September 30, 2021 is as follows:

 

Stock plan options outstanding   5,755,171 
Stock plan shares available for future grants   7,530,000 
Warrants outstanding   40,208,347 
Total   53,493,518