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Equity and Warrants
 12 Months Ended
Dec. 31, 2023
Equity and Warrants [Abstract]  
Equity and Warrants
16)
Equity and Warrants


Private Placements


Q4-22 PIPE Transaction



On November 23, 2022, the Company entered into a purchase agreement with certain investors pursuant to which the Company issued an aggregate of approximately 2.2 million units, with each unit consisting of (i) one share of common stock and (ii) two 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 warrant). The transaction closed on December 2, 2022. The Company received aggregate gross proceeds of approximately $7.7 million. The Company incurred fees of approximately $0.3 million through December 31, 2022 related to the transaction.



Each warrant had an exercise price of $3.28 per share (subject to customary adjustments), became exercisable six months from the date of issuance, and expires five-and-one-half years from the date of issuance. The warrants meet the criteria for equity classification.



As discussed in Note 6, in connection with the December 2023 convertible note financing, the exercise price of the warrants was reduced from $3.28 per share to $1.43 per share.


Q1-22 Private Placement



On March 6, 2022, the Company entered into a purchase agreement with an investor pursuant to which the Company issued approximately 343,000 units, each unit consisting of (i) one share of the Company’s common stock (or, in lieu thereof, one pre-funded warrant to purchase one share of common stock) and (ii) one warrant to purchase one share of common stock, for an aggregate gross purchase price of approximately $12.0 million. The transaction closed on March 9, 2022. The Company issued 275,000 shares of common stock, approximately 68,000 pre-funded warrants and warrants to purchase approximately 343,000 shares of common stock. The Company incurred fees of approximately $1.0 million through December 31, 2022 related to this transaction, which were allocated to the fair value of the pre-funded warrants and warrants and Each pre-funded warrant had an exercise price of $0.10 per share (subject to customary adjustments), was immediately exercisable, could be exercised at any time, and had no expiration date.


Each warrant has an exercise price of $38.20 per share (subject to customary adjustments), became exercisable six months following the date of issuance, and expires five-and-one-half years from the date of issuance.

The pre-funded warrants and 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 9 for more information related to changes in fair value.) Upon exercise, the fair value of the pre-funded warrants and/or warrants on the exercise date is reclassified from warrant liabilities to equity.

The fair values of the pre-funded warrants and warrants at the issuance date totaled $12.6 million in the aggregate, or $0.6 million more than the aggregate gross purchase price of the units sold in the offering. The $0.6 million represents an inducement to the investor to enter into the purchase agreement and was recorded in warrant liabilities expense in the accompanying consolidated statement of operations.



On July 12, 2022, all the pre-funded warrants were exercised. The Company issued approximately 68,000 shares of common stock upon exercise and received approximately $7,000 of proceeds. The fair value of the pre-funded warrants as of the exercise date (approximately $0.7 million) was reclassified from warrant liabilities to equity.



In connection with the transaction, the Company and the investor also entered into a registration rights agreement pursuant to which the Company agreed to prepare and file a registration statement with the SEC to register the resale of the shares of common stock issued in the offering and issuable upon exercise of the pre-funded warrants and warrants. The resale registration statement became effective on May 11, 2022.

Pursuant to the registration rights agreement, the Company is obligated to pay the investor liquidated damages equal to 2% of the purchase price for the units per month, with a maximum aggregate payment of 12 of the purchase price for the units, in the event the 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 investor that the investor was not able to use the registration agreement because the Company had not timely filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 with the SEC, and that the investor could not use the registration statement until the Company filed that quarterly report, which was filed on June 30, 2022. The Company accrued $0.2 million during 2022 for the contingent loss the Company incurred as liquidated damages as a result of the late 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 the $0.2 million liquidated damages to the investor in June 2022.


Note Warrants

As discussed in Note 6, in connection with the July 2023 and December 2023 convertible note financings, the Company issued note warrants to purchase an aggregate of approximately 14.2 million shares of common stock.  The exercise price of all such warrants is currently $1.43 per share (subject to customary adjustments), are expire five years following the date of issuance. All such warrants qualified for equity classification.


The following table shows the Company’s warrant activity for the year ended December 31, 2023 (in thousands except for per-share data):


   
Q1-22 Common
Warrants
    
Q4-22
Warrants
    
July 2023
Warrants
    
December 2023
Warrants
    
Total
Warrants
  
Balance as of January 1, 2023
    
343
      
4,370
       -      
-
      
4,713
  
Granted
    
-
      
-
       6,094      
8,115
      
14,209
  
Balance as of December 31, 2023
    
343
      
4,370
       6,094      
8,115
      
18,922
  


As of December 31, 2023, the weighted average remaining contractual life of the warrants outstanding was 4.68 years and the weighted average exercise price was $2.10 per share.

SEPA



On April 5, 2023, the Company entered into the SEPA with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $10.0 million of the Company’s common stock. Such sales of common stock by the Company, if any, are subject to certain conditions and limitations set forth in the SEPA, including a condition that the Company may not direct Lincoln Park to purchase any shares of common stock under the SEPA if such purchase would result in Lincoln Park beneficially owning more than 4.99% of the Company’s issued and outstanding shares of common stock. Sales under the SEPA may occur from time to time, at the Company’s sole discretion, through April 2025.



In consideration of Lincoln Park’s entry into the SEPA, the Company issued to Lincoln Park approximately 74,000 shares of common stock (the “Commitment Shares”).  The value of the Commitment Shares was recorded as a period expense and included in other expense, net, in the accompanying consolidated statements of operations for year ended December 31, 2023.



The Company evaluated the contract that includes the right to require Lincoln Park to purchase shares of common stock in the future (“put right”) considering the guidance in ASC 815-40, Derivatives and Hedging — Contracts on an Entity’s Own Equity and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting. The Company analyzed the terms of the freestanding put right and concluded that it has an immaterial value as of December 31, 2023.



During the year ended December 31, 2023, the Company issued and sold approximately 214,000 shares of common stock under the SEPA, including the 74,000 Commitment Shares, for gross proceeds of approximately $0.3 million.  As of December 31, 2023, there were approximately 2,860,000 shares remaining to be sold under the SEPA.



In connection with entry into the SEPA, the Company terminated its prior purchase agreements with Lincoln Park entered into during 2021.


Cumulative Convertible Preferred Stock

 

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, 2023.

 

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 years ended December 31, 2023 and 2022.



The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over the Company’s common stock. The holder of shares of Series A Preferred Stock has the right at any time to convert such shares 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, 2023, the conversion rate was 8.8016 and, based on that conversion rate, one share of Series A Preferred Stock would have converted into approximately 0.11 shares of common stock, and all the outstanding shares of the Series A Preferred Stock would have converted into approximately 18,000 shares of common stock in the aggregate. There were no conversions during the years ended December 31, 2023 and 2022. 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 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 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 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 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 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 Preferred Stock.