XML 45 R21.htm IDEA: XBRL DOCUMENT v3.23.1
Equity and Warrants
 12 Months Ended
Dec. 31, 2022
Equity and Warrants [Abstract]  
Equity and Warrants
15)
Equity and Warrants


Private Placements of Equity


Q4-22 PIPE Transaction



On November 23, 2022, the Company entered into the Q4-22 Purchase Agreement with the Q4-22 PIPE Investors for the Q4-22 PIPE Transaction, pursuant to which the Company issued to the Q4-22 PIPE Investors an aggregate of  approximately 2,185,000 units, with each unit consisting of (i) one share of common stock and (ii) two Q4-22 Warrants, each exercisable to purchase one share of common stock at an exercise price of $3.28 per, at a purchase price of $3.53 per unit (inclusive of $0.125 per Q4-22 Warrant). The Company received aggregate gross proceeds of approximately $7.7 million, and the Q4-22 PIPE Transaction closed on December 2, 2022. The Company incurred fees of approximately $0.3 million through December 31, 2022 related to the Q4-22 PIPE Transaction.



Each Q4-22 Warrant has an exercise price of $3.28 per share, becomes exercisable six months following the closing of the Q4-22 PIPE Transaction, expires five-and-one-half years from the date of issuance and is subject to customary adjustments. Certain of the Q4-22 Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder.



The Q4-22 Warrants meet the criteria for equity classification.


Q1-22 Private Placement



On March 6, 2022, the Company entered into the Q1-22 Purchase Agreement with the Q1-22 PIPE Investor for the Q1-22 PIPE Transaction, pursuant to which, the Company issued to the Q1-22 PIPE Investor approximately 343,000 units, each unit consisting of (i) one share of the Company’s common stock (or, in lieu thereof, one Q1-22 Pre-Funded Warrant to purchase one share of common stock) and (ii) one warrant Q1-22  Common Warrant to purchase one share of common stock, for an aggregate gross purchase price of approximately $12.0 million (the “Subscription Amount”). The Q1-22 PIPE Transaction closed on March 9, 2022. Pursuant to the Q1-22 Purchase Agreement, the Company was prohibited from issuing equity in variable rate transactions for a period of one-year following consummation of the Q1-22 PIPE Transaction, including issuing equity under the Second Purchase Agreement, which is discussed below.



Each Q1-22 Pre-Funded Warrant had an exercise price of $0.10 per share of common stock, was immediately exercisable, could be exercised at any time, had no expiration date and was subject to customary adjustments. The Q1-22 Pre-Funded Warrants could not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof.  Upon the closing of the Q1-22 PIPE Transaction, the Company issued 275,000 shares of common stock, approximately 68,000 Q1-22 Pre-Funded Warrants and approximately 343,000 Q1-22 Common Warrants.

Each Q1-22 Common Warrant has an exercise price of $38.20 per share, became exercisable six months following the closing of the Q1-22 PIPE Transaction, expires five-and-one-half years from the date of issuance and is subject to customary adjustments. The Q1-22 Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder.

The Q1-22 Common Warrants and Q1-22 Pre-Funded Warrants were accounted for as liabilities under ASC 815-40, as these warrants provide for a cashless settlement provision that does not meet the requirements of the indexation guidance under ASC 815-40.  These warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statement of operations.  (See Note 5 for more information related to changes in fair value.) Upon exercise of the Q1-22 Common Warrants and Q1-22 Pre-Funded Warrants, the fair value on the exercise date is reclassified from warrant liabilities to equity.

The fair values of the Q1-22 Common Warrants and the Q1-22 Pre-Funded Warrants at the issuance date totaled $12.6 million in the aggregate, which was $0.6 million more than the Subscription Amount.  The excess $0.6 million represents an inducement to the Q1-22 PIPE Investor to enter into the Q1-22 PIPE Transaction and was recorded in warrant liabilities expense in the accompanying consolidated statement of operations.



On July 12, 2022, the Q1-22 PIPE Investor exercised its 68,000 Q1-22 Pre-Funded Warrants at an exercise price of $0.10 per share for an aggregate exercise price of approximately $7,000, in cash. The Company issued 68,000 shares of common stock to the Q1-22 PIPE Investor on July 14, 2022 upon receipt of the cash proceeds and reclassified approximately $0.7 million of the fair value of the exercised warrants as of the exercise date from warrant liabilities to equity. Subsequent to the exercise, no Q1-22 Pre-Funded Warrants remained outstanding.

The Company incurred fees of approximately $1.0 million through December 31, 2022 related to the Q1-22 PIPE Transaction, which were allocated to the fair value of the Q1-22 Warrants and the Q1-22 Pre-Funded Warrants and recorded in other expense, net on the accompanying consolidated statement of operations.

In connection with the Q1-22 PIPE Transaction, the Company and the Q1-22 PIPE Investor also entered into a registration rights agreement, dated March 6, 2022, pursuant to which the Company agreed to prepare and file a registration statement with the SEC no later than 15 days following the filing date of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”) to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Q1-22 Pre-Funded Warrants and the Q1-22 Common Warrants. The Company agreed to use its best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness were not achieved.  The Company filed the 2021 Annual Report on April 15, 2022 and the registration statement on April 29, 2022.  The resale registration statement became effective on May 11, 2022.

Pursuant to the registration rights agreement, the Company is obligated to pay the Q1-22 PIPE Investor liquidated damages equal to 2% of the Subscription Amount per month, with a maximum aggregate payment of 12% of the Subscription Amount, in the event the PIPE Investor is not permitted to use the registration statement to resell the securities registered for resale thereunder for more than a specified period of time.

On May 24, 2022, the Company notified the Q1-22 PIPE Investor that it was not able to use the registration agreement because the Company had not timely filed its Quarterly Report on Form 10-Q (the “Q1 2022 10-Q”) with the SEC, and that the Q1-22 PIPE Investor could not use the registration statement to resell the securities registered thereunder until the Company filed the Q1 2022 10-Q.  Because of the Q1-22 PIPE  Investor’s inability to use the registration statement, the Company accrued $0.2 million during 2022 for the contingent loss the Company incurred as liquidated damages as a result of the late Q1 2022 10Q filing, which is recorded in other expense, net for the year ended December 31, 2022 in the accompanying consolidated statements of operations.  The Company paid such $0.2 million liquidated damages payment in June 2022.



On June 30, 2022, the Company filed its Q1 2022 10-Q along with an amended Annual Report on Form 10-K/A for the year ended December 31, 2021, and on July 1, 2022, the Company provided its notice to the Q1-22 PIPE Investor that it could resume use of the resale registration statement.


The following table shows the Company’s warrant activity for the year ended December 31, 2022 (in thousands except for per-share data):


   
March 2022
Warrants
    
Pre-Funded
Warrants
    
November 2022
Warrants
    
Total
Warrants
  
Balance as of January 1, 2022
    
-
      
-
      
-
      
-
  
Granted
    
343
      
68
      
4,370
      
4,781
  
Exercised
    
-
      
(68
)
    
-
      
(68
)
Balance as of December 31, 2022
    
343
      
-
      
4,370
      
4,713
  


As of December 31, 2022, the weighted average remaining contractual life of the warrants outstanding was 5.37 years and the weighted average exercise price was $5.82.

Equity Line Offerings


On April 26, 2021, the Company entered into a common stock purchase agreement (the “First Purchase Agreement”) an investment group (the “Investment Group”), which provided that the Company could offer to the Investment Group up to an aggregate of $20 million of common stock over a 36-month period commencing after May 10, 2021, the date that a registration statement covering the resale of shares of common stock issued under the First Purchase Agreement was declared effective by the SEC. As of December 31, 2022, the Company had issued and sold an aggregate of approximately 56,000 shares of common stock to the Investment Group pursuant to the First Purchase Agreement, resulting in gross proceeds of $20 million.


On May 26, 2021, the Company entered into a second common stock purchase agreement (the “Second Purchase Agreement”) with the Investment Group, which provides that the Company may offer to the Investment Group up to an aggregate of $40 million of common stock over a 36-month period commencing after June 4, 2021, the date that a registration statement covering the resale of shares of common stock issued under the Second Purchase Agreement was declared effective by the SEC. As of December 31, 2022, the Company had issued and sold an aggregate of approximately 121,000 shares of common stock to the Investment Group pursuant to the Second Purchase Agreement, resulting in gross proceeds of approximately $34 million. As of December 31, 2022, there were approximately 22,000 shares remaining to be sold under the Second Purchase Agreement.


Under the Second Purchase Agreement, the Company may direct the Investment Group to purchase up to 3,000 shares of common stock on any business day (the “Regular Purchase”), which amount may be increased up to 6,000 shares based on the closing price of the common stock, provided that  the Investment Group’s maximum commitment in any single Regular Purchase may not exceed $2.0 million. The purchase price per share for each such Regular Purchase is based off of the common stock’s market immediately preceding the time of sale.


The Second Purchase Agreement also prohibits the Company from directing the Investment Group to purchase any shares of common stock if those shares, when aggregated with all other shares of common stock then beneficially owned by the Investment Group and its affiliates, would result in the Investment Group and its affiliates having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of common stock. The Company has the right to terminate the Second Purchase Agreement at any time, at no cost or penalty.



Actual sales of shares of common stock to the Investment Group under the Second Purchase Agreement depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.


Pursuant to the Q1-22 Purchase Agreement in respect of the Q1-22 PIPE Transaction, the Company was prohibited from issuing additional shares under the Second Purchase Agreement for a period of one-year immediately following the closing of the Q1-22 PIPE Transaction.

Merger


Under the terms of the Merger Agreement (see Notes 1 and 4), on March 25, 2021, the Company issued shares of common stock to the equity holders of Eterna LLC. The 87,000 Class A units of Eterna LLC were converted into approximately 1,114,000 shares of common stock; the 15,000,000 Class B units were converted into approximately 126,000 shares of common stock; the 10,000,000 Class C units were converted into approximately 84,000 shares of common stock; approximately 630,000 shares of common units were converted into approximately 31,000 shares of common stock, and 10,500,000 rights options were converted into approximately 591,000 shares of common stock.  The Company also issued approximately 53,000 shares of common stock to the Financial Advisor pursuant to the Merger Agreement.

Acquisition


Under the terms of the Novellus Acquisition (see Notes 1 and 4), on July 16, 2021, the Company issued approximately 351,000 shares of common stock, of which approximately 182,000 shares are unrestricted and approximately 169,000 shares are subject to a three-year lockup agreement, provided that up to 75% of the shares of common stock subject to the lock-up agreement may be released from the lock-up restrictions earlier if the price of common stock on the principal market for the common stock exceeds specified thresholds.

Cumulative Convertible Preferred Stock

 

As a result of the Merger, the Company has authorized 156,000 shares of preferred stock, all of which is designated as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), and all of which were issued and outstanding as of December 31, 2022.

 

The Series A Preferred Stock provides for a cumulative annual dividend of $0.10 per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. The Company paid approximately $16,000 in cash for payment of dividends during the year ended December 31, 2022. The Company paid approximately $8,000 in cash and issued approximately 10 shares of common stock for payment of dividends during the year ended December 31, 2021.

 

The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate.  At December 31, 2022, the conversion rate was 23.9988 and, based on that conversion rate, one share of Series A Convertible Preferred Stock would have converted into approximately 0.04 shares of common stock, and all the outstanding shares of the Series A Convertible Preferred Stock would have converted into approximately 6,000 shares of common stock in the aggregate. There were no conversions during the years ended December 31, 2022 and 2021. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock. The conversion rate will adjust under the following circumstances:


 1.
If the Company (a) pays a dividend or makes a distribution in shares of its common stock, (b) subdivides its outstanding shares of common stock into a greater number of shares, (c) combines its outstanding shares of common stock into a smaller number of shares, or (d) issues by reclassification of its shares of common stock any shares of its common stock (other than a change in par value, or from par value to no par value, or from no par value to par value), then the conversion rate in effect immediately prior to the applicable event will be adjusted so that the holders of the Series A Convertible Preferred Stock will be entitled to receive the number of shares of common stock which they would have owned or have been entitled to receive immediately following the happening of the event, had the Series A Convertible Preferred Stock been converted immediately prior to the record or effective date of the applicable event.


2.
If the outstanding shares of the Company’s common stock are reclassified (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or stock dividend), or if the Company consolidates with or merge into another corporation and the Company is not the surviving entity, or if the Company sells all or substantially all of its property, assets, business and goodwill, then the holders of the Series A Convertible Preferred Stock will thereafter be entitled upon conversion to the kind and amount of shares of stock or other equity securities, or other property or assets which would have been receivable by such holders upon such reclassification, consolidation, merger or sale, if the Series A Convertible Preferred Stock had been converted immediately prior thereto.


3.
If the Company issues common stock without consideration or for a consideration per share less than the then applicable Equivalent Preference Amount (as defined below), then the Equivalent Preference Amount will immediately be reduced to the amount determined by dividing (A) an amount equal to the sum of (1) the number of shares of common stock outstanding immediately prior to such issuance multiplied by the Equivalent Preference Amount in effect immediately prior to such issuance and (2) the consideration, if any, received by the Company upon such issuance, by (B) the total number of shares of common stock outstanding immediately after such issuance. The “Equivalent Preference Amount” is the value that results when the liquidation preference of one share of Series A Convertible Preferred Stock (which is $1.00) is multiplied by the conversion rate in effect at that time; thus the conversion rate applicable after the adjustment in the Equivalent Preference Amount as described herein will be the figure that results when the adjusted Equivalent Preference Amount is divided by the liquidation preference of one share of Series A Convertible Preferred Stock.