Stockholders' Equity and Warrant Liabilities

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Stockholders' Equity and Warrant Liabilities

8. Stockholders’ Equity and Warrant Liabilities

At-the-Market Offering

In August 2020, the Company entered into a sales agreement with Jefferies as sales agent and underwriter, pursuant to which the Company could issue and sell shares of its common stock with an aggregate maximum offering price of $75 million under an at-the-market offering program, or the ATM program. The Company will pay Jefferies up to 3% of gross proceeds for any common stock sold through the sales agreement. During the six months ended June 30, 2022, the Company sold 61,690 shares under the ATM

program at an average price per share of $11.36, for net proceeds of $0.7 million, and received $0.4 million upon the settlement of trades outstanding at December 31, 2021. As of June 30, 2022, a total of 323,960 shares had been sold under the ATM program.

Public Offering and Warrants

On April 1, 2022, the Company closed an underwritten public offering of 925,925 shares of common stock and accompanying warrants at a combined offering price of $10.80 per share, for $10 million in gross proceeds, resulting in $8.5 million of net proceeds after deducting underwriting discounts and commissions and offering costs. The common stock was accompanied by warrants to purchase 925,925 shares of common stock at an exercise price of $10.80 per share, which are immediately exercisable and will expire 18 months from the date of issuance, or short-term warrants, and warrants to purchase 925,925 shares of common stock at an exercise price of $10.80 per share, which are immediately exercisable and will expire 5 years from the date of issuance, or long-term warrants.

Warrants

The holders of the warrants have the following rights, preferences and privileges:

Cashless Exercise

The warrants entitle the holders to purchase the Company's common stock by paying cash. However, at the time of exercise, if there is no effective registration statement, or the prospectus contained therein is not available for the issuance of the warrant shares, the warrants shall only be exercised in whole or in part, by means of a "cashless exercise" in which the holder shall be entitled to receive a number of shares calculated as defined in the agreement.

Fundamental Transaction Treatment

Short-Term Warrants

In the event of a fundamental transaction, as defined in the agreement, the short-term warrant holders shall have the right to receive, for each warrant share that would have been issuable upon the warrant exercise immediately prior to such transaction, at the option of the holder, the number of shares of common stock of the successor entity and any additional consideration receivable as a result of such transaction by a holder of the number of shares for which the warrant is exercisable immediately prior to the transaction. The Company shall not effect any fundamental transaction in which the Company is not the surviving entity or in which the consideration includes securities of another entity unless (i) the alternate consideration is solely cash and the Company provides for the “cashless exercise” of the warrant at the option of the holder or (ii) the successor entity assumes the Company’s obligations under the warrant. In the event of a fundamental transaction where the per share value of cash, securities, property or alternative consideration is greater than the then effective exercise price, the short-term warrant shall be automatically exercised via cashless exercise and shall immediately terminate upon the consummation of the transaction.

Long-Term Warrants

In the event of a fundamental transaction, as defined in the long-term warrant, the holders shall have the right to receive, for each warrant share that would have been issuable upon the warrant exercise immediately prior to such transaction, at the option of the holder, the number of shares of common stock of the successor entity and any additional consideration (the “alternate consideration”) receivable as a result of such transaction by a holder of the number of shares for which the warrant is exercisable immediately prior to the transaction.

Notwithstanding anything to the contrary, in the event of a fundamental transaction, the Company or any successor entity shall, at the holder’s option, purchase the long-term warrant from the holder for an amount of cash equal to the Black Scholes value (as defined in the warrant) of the remaining unexercised portion of the long-term warrant on the date of such transaction; provided, however, that, if the fundamental transaction is not within the Company's control, including not approved by the Company's board of directors, the holder shall only be entitled to receive the same type or form of consideration (and in the same proportion), at the Black Scholes value of the unexercised portion of the warrant, that is being paid to the holders of the Company’s common stock in connection with the transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of common stock are given the choice of alternative forms of consideration; provided, further, that if the holders of common stock are not paid any consideration in such fundamental transaction, such holders will be deemed to have received common stock of the successor entity.

The Company shall cause any successor entity in a fundamental transaction in which the Company is not the survivor to assume all of the Company’s obligations under the long-term warrants and shall, at the option of the holder, deliver replacement warrants exercisable for a number of shares of capital stock of the successor entity equivalent to the shares of common stock receivable upon

exercise of the warrants prior to such transaction, with a corresponding adjustment to the exercise price (such number of shares and such exercise price being for the purpose of protecting the economic value of the warrants immediately prior to the transaction).

Stock Dividends and Splits

If the Company (i) pays a stock dividend or otherwise makes a distribution on shares of its common stock, (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues by reclassification of shares of the common stock any shares of capital stock of the Company, in each case, the warrant exercise price shall be multiplied by a fraction of which the numerator shall be the number of shares of common stock outstanding immediately before such event and of which the denominator shall be the number of shares of common stock outstanding immediately after such event, and the number of shares issuable upon exercise of the warrant shall be proportionately adjusted such that the aggregate exercise price of the warrants shall remain unchanged.

Pro Rata Distributions

If the Company declares any dividend or other distribution to the holders of common stock (including any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction), the warrant holder shall be entitled to participate in such distribution to the same extent as if the holder had held the number of shares issuable upon complete exercise of the warrant immediately before the date of such distribution.

Voluntary Adjustment by Company

Subject to the rules and regulations of the trading market, the Company may at any time during the term of the warrant, subject to the prior written consent of the holder, reduce the then current exercise price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

Purchase Rights

If the Company grants, issues or sells any common stock equivalents or rights to purchase stock, warrants, securities or other property pro rata to the holders of any class of shares of common stock, or the purchase rights, the warrant holder shall be entitled to acquire, on the terms applicable to such purchase rights, the aggregate purchase rights which the holder would have acquired if the holder had held the number of shares issuable upon complete exercise of the warrant immediately before the grant, issuance or sale of such purchase rights (subject to the beneficial ownership limitation discussed below).

Exercise Limitations

The Company shall not effect any exercise of the warrant, and the holder shall not have the right to exercise any portion of the warrant, if after giving effect to such exercise, the holder (together with its affiliates), would beneficially own more than 4.99% (or, upon election by a holder prior to the issuance of any warrants, 9.99%) of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares upon exercise of the warrant (the “beneficial ownership limitation”).

Automatic Cashless Exercise Upon Expiration

On the expiration date, the short-term warrants shall be automatically exercised via cashless exercise per the terms of the warrants.

Buy-in

If the Company fails to cause its transfer agent to transmit the underlying shares to the holder on exercise before the earliest of (i) two trading days after the delivery of exercise notice to the Company, (ii) the trading day after delivery of the aggregate exercise price or (iii) the standard settlement date as determined by the Company’s trading market (2 business days at the time the warrant was issued), and if after such date the holder is required by its broker to purchase (in an open market transaction or otherwise) or the holder’s brokerage firm otherwise purchases, shares of common stock to deliver in satisfaction of a sale by the holder of the underlying shares which the holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the holder the amount, if any, by which (x) the holder’s total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of underlying shares that the Company was required to deliver upon exercise (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the holder, either reinstate the portion of the warrant and equivalent number of warrant shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the holder the number of shares of common stock that would have been issued had the Company timely complied with its exercise and delivery obligations.

Transferability of the Warrants

The warrants are transferable, in whole or in part, upon surrender of the warrant, together with a written assignment of the warrant duly executed by the holder and funds sufficient to pay any taxes payable upon such transfer.