STOCKHOLDERS EQUITY

12 Months Ended

Dec. 31, 2022

STOCKHOLDERS EQUITY

STOCKHOLDERS EQUITY

7. STOCKHOLDERS EQUITY

Preferred Stock

On September 9, 2022, the Company held its 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”). At the 2022 Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to approve the issuance of preferred stock. As of December 31, 2022, the Company had 1,000,000 authorized shares of undesignated preferred stock, $0.00001 par value per share, the rights, preferences and privileges of which may be designated from time to time by our board of directors. No shares of preferred stock have been issued or are outstanding.

Common Stock

At the 2022 Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of shares of authorized common stock from 2,000,000 to 250,000,000. As of December 31, 2022 and 2021, 2,429,446 and 1,370,595 shares were issued and outstanding respectively.

On October 9, 2022, the Company closed a registered offering of shares of its common stock and pre-funded warrants to purchase common stock (the “October 2022 Registered Direct Offering”) and a concurrent private placement of pre-funded warrants and preferred investment options (the “October 2022 Private Placement”), with an institutional investor (together, the “October 2022 Financing”). In the October 2022 Registered Direct Offering, the Company issued (i) an aggregate of 154,000 common shares (“Shares”); and (ii) 369,810 pre-funded warrants (the “October 2022 Pre-Funded Warrants”). In the concurrent October 2022 Private Placement, the Company issued additional October 2022 Pre-Funded Warrants to purchase an aggregate of 1,190,476 shares of its common stock, and (ii) Preferred Investment Options to purchase an aggregate of 1,714,286 shares of its common stock (the “October 2022 Preferred Investment Options”). The purchase price of each Share and associated October 2022 Preferred Investment Option sold in the October 2022 Registered Direct Offering was $5.25 and the purchase price of each October 2022 Pre-Funded Warrant and associated October 2022 Preferred Investment Option sold in each of the October 2022 Registered Direct Offering and October 2022 Private Placement was $5.2499.

In connection with the October 2022 Financing, the Company issued to designees of H.C. Wainwright & Co., LLC (“Wainwright”), the placement agent for the October 2022 Financing, Preferred Investment Options to purchase an aggregate of 111,429 shares of its common stock (the “October 2022 Placement Agent Warrants”). The net proceeds to the Company after deducting Wainwright's placement agent fees and other offering expenses payable by the Company, were approximately $8.0 million. The Company assessed whether the October 2022 Pre-Funded Warrants, October 2022 Placement Agent Warrants and the October 2022 Preferred Investment Options required accounting as derivatives and determined that they were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with ASC Topic 815, Derivatives and Hedging. As such, the Company concluded that the October 2022 Pre-Funded Warrants, October 2022 Placement Agent Warrants and the October 2022 Preferred Investment Options meet the scope exception for determining whether the instruments require accounting as derivatives and accordingly are classified in stockholders’ equity. The fair value of the October 2022 Placement Agent Warrants was estimated at $0.3 million using a Black-Scholes model with the following assumptions: expected volatility of 129.96%, risk free interest rate of 4.14%, expected life of five years and no dividends. The fair value of the October 2022 Preferred Investment Options was estimated at $4.9 million using a Black-Scholes model with the following assumptions: expected volatility of 128.87%, risk free interest rate of 4.12%, expected life of five and a half years and no dividends. The October 2022 Pre-Funded Warrants had an intrinsic value of approximately $8.2 million. During the year ended December 31, 2022, the Company issued an aggregate of 884,286 shares of common stock upon the exercise of the October 2022 Pre-Funded Warrants for an immaterial amount, as they were substantially pre-funded.

Concurrent with the October 2022 Financing, the Company modified certain outstanding warrants, consisting of 29,091 Series A Warrants issued in March 2020, 19,048 Series C Warrants issued in April 2020 and 32,000 Series A Warrants issued in October 2020 (collectively the “Existing Warrants”) held by the institutional investor that participated in the October 2022 Financing to lower the exercise price of these warrants to $5.05 and extend the term through April 2028. The change in the term and exercise price of the Existing Warrants was accounted for as modification of an equity instrument. The Company remeasured the Existing Warrants Fair Value both immediately before and after the modification and the remeasurement resulted in an incremental fair value of $0.1 million. As the modification was executed in an effort to induce the investor to participate in the October 2022 Registered Direct Offering and concurrent October 2022 Private Placement, the incremental fair value was accounted for as an issuance cost.

During the year ended December 31, 2022, as part of the adjustment to reflect the 2022 Reverse Stock Split, the Company issued an aggregate of 20,619 shares of common stock to account for the fractional roundup of shareholders.

During the year ended December 31, 2022, 54 restricted stock shares that were considered issued and outstanding as of December 31, 2021 were forfeited.

During the year ended December 31, 2022, there was no exercise activity related to any warrants that were issued in 2018, 2019 and 2020.

During the year ended December 31, 2021, the Company issued an aggregate of 424,829 and 488 shares of common stock upon the exercise of certain Series A Warrants and placement agent warrants issued in October 2020, respectively, for aggregate proceeds of $8.5 million.

During the year ended December 31, 2021, the Company issued an aggregate of 2 shares of common stock upon vesting of restricted stock units.

Common Stock Reserves

As of December 31, 2022, the Company had the following reserves established for the future issuance of common stock as follows:

	As of December 31, 2022
Reserves for the exercise of warrants	3,064,877
Reserves for the exercise of stock options	136,568
Total reserves	3,201,445