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Warrants | 9 Months Ended
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Sep. 30, 2024
Warrants [Abstract] |
Warrants | Warrants The Company issued warrants to purchase 1,596 shares of common stock in 2018 in conjunction with convertible debt financing that have a redemption provision providing the holder the right to have the Company redeem all or any portion of the warrant (or shares it has converted into) at a purchase price equal to the fair market value of the shares as determined by the board of directors or an independent appraiser. As a result of this redemption provision, the warrants have been classified as a liability in the financial statements based on ASC 480 – Distinguishing Liabilities from Equity. These warrants have an exercise price of $14.40 per share and a term of 10 years. The warrants are marked to market each reporting period. The fair value was $457 and $35,453 at September 30, 2024 and December 31, 2023, respectively. The Company issued 2,000 warrants to its underwriters as part of our initial public offering in fiscal 2023. In fiscal 2024, the Company issued an additional 22,223 warrants in February, and 266,600 warrants in July to its underwriters as part of our follow-on offerings in fiscal 2024. The underwriter warrants have a term of 5 years. The Company also issued warrants in fiscal years 2019, 2023, and 2024 which did not meet the criteria under ASC 480 to be classified as a liability, and instead meet the equity classification criteria. Additionally, the Company issued 13,330,000 Class A Warrants to shareholders who participated in the Company's July 2024 follow-on public offering. The Class A Warrants had an initial exercise price of $1.50 per share of Common Stock, however on August 24, 2024 the exercise price was reset to $0.7043. See, Note 7. The number of shares of Common Stock issuable upon exercise of the Class A Warrants were not proportionately adjusted in connection with the reset of the exercise price. The Class A Warrants are exercisable upon issuance and expire five years from the date of issuance. The Class A Warrants contain ownership limitations pursuant to which a holder does not have the right to exercise any portion of their warrants if it would result in the holder (together with its affiliates) beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding Common Stock. The Class A Warrants are issued pursuant to a Warrant Agent Agreement dated July 25, 2024 (“Warrant Agent Agreement”) between the Company and VStock Transfer LLC, as warrant agent. In connection with the July 2024 follow-on public offering, the Company evaluated the Class A Warrants and determined they met the criteria for liability classification as they met the criteria in ASC 815 - Derivatives and Hedging due to the reset provision. The Class A Warrants had an initial fair value of $12.1 million. The gross proceeds of $10.0 million from the July 2024 follow-on public offering was allocated to the Class A Warrants resulting in a loss on issuance of common stock of approximately $2.1 million recorded in Other income (expenses). Upon the reset of the Class A Warrant exercise price, the Class A Warrants no longer met the criteria for liability classification pursuant to ASC 815; at which time the Company recorded a gain in Other income (expenses) - Change in fair value of Class A warrants of $4.0 million, and reclassified $(1.9) million to equity representing the difference between the change in the fair value, and the loss upon issuance of our common stock. The Class A Warrants were valued utilizing a probability weighted scenario method with a Monte Carlo simulation model and Black-Scholes Model. The significant assumptions in the Monte Carlo simulation model include a stay public assumption of 90%, and a fundamental transaction assumption of 10%. The significant assumptions utilized in estimating the fair value of the Class A Warrants at issuance include (i) a per share price of common stock range of $1.14 - $1.40; (ii) a dividend yield of 0%; (iii) a risk-free rate range of 4.13% - 4.14%; (iv) expected volatility of 119%; (v) projected stock price and volume weighted average price as of the Reset Date of $1.14; (vi) a strike price range of $1.50 - $1.40; and (vii) expected term range of 5.00 - 4.92. The following table summarizes information about warrants outstanding at September 30, 2024:
|  |  |  | Warrants Outstanding |  | Warrant Exercisable
Year Granted |  | Exercise Price |  | Number of Warrants at 09/30/2024 |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |  | Number of Warrants at 09/30/2024 |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price
2018 |  | $ | 14.40 |  |  | 1,596 |  |  | 3.5 years |  | $ | 14.40 |  |  | 1,596 |  |  | 3.5 years |  | $ | 14.40 |
2019 |  | $ | 158.40 |  |  | 7,195 |  |  | 1.4 years |  | $ | 158.40 |  |  | 7,195 |  |  | 1.4 years |  | $ | 158.40 |
2023 |  | $ | 187.50 |  |  | 2,000 |  |  | 3.7 years |  | $ | 187.50 |  |  | 2,000 |  |  | 3.7 years |  | $ | 187.50 |
2024 |  | $ | 11.40 |  |  | 22,223 |  |  | 4.4 years |  | $ | 11.40 |  |  | 22,223 |  |  | 4.4 years |  | $ | 11.40 |
2024 |  | $ | 0.70 |  |  | 13,329,000 |  |  | 4.8 years |  | $ | 0.70 |  |  | 13,329,000 |  |  | 4.8 years |  | $ | 0.70 |
2024 |  | $ | 1.88 |  |  | 266,600 |  |  | 4.8 years |  | $ | — |  |  | — |  |  | 0 years |  | $ | — |
|  |  |  | 13,628,614 |  |  |  |  | $ | 0.85 |  |  | — |  |  |  |  | $ | 0.83 |

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